Risk Management and Legal Environment
Exam Answer Key
Course Introduction
This course offers a comprehensive exploration of risk management principles and the intricacies of the legal environment affecting businesses today. Students will examine frameworks for identifying, evaluating, and mitigating various types of risks financial, operational, strategic, and hazard-related while also gaining foundational knowledge of legal structures, regulations, and compliance issues. Emphasis is placed on the intersection of risk management and legal obligations, such as contracts, negligence, liability, and insurance. Through case studies and real-world scenarios, the course prepares students to navigate and manage organizational risks within a dynamic legal context.
Recommended Textbook
The Legal and Regulatory Environment of Business 16th Edition by O. Lee Reed
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Chapter 1: Law As a Foundation for Business
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Sample Questions
Q1) What is civil and criminal law?
Answer: For administrative purposes, courts usually separate criminal actions from all other lawsuits. Civil cases may include suits for breach of contract or tort cases, such as suits for personal injuries. Typically, they involve a request for damages or other appropriate relief that does not involve punishment of the wrongdoer. Criminal cases involve a representative of government attempting to prove the wrong committed against society and seeking to have the wrongdoer punished by the court system.
Q2) Explain conflicts of law.
Answer: In some cases, a question arises as to what state's law applies to a situation. Courts resolve such problems by applying conflicts of law rules, but even these rules may vary from state to state. In a tort case, the usual conflicts of law rule applies the law of the state where the injury occurred, no matter where the injury occurred. If a contract specifies no particular state's law for the parties to a dispute to follow, a court interpreting the contract will usually apply the law of the state where the contract was made.
Q3) What are acts, statutes and codes?
Answer: In federal law, the legislation passed by the congress is called an act or statute. A collection of legislations on the same subject are codes.
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Chapter 2: The Role of Ethics in Decision Making
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Sample Questions
Q1) Formalism is primarily a duty-based view of ethics that creates moral obligations that one must satisfy in order to be ethical.
A)True
B)False
Answer: True
Q2) It is appropriate for those engaged in international business to assume that all countries have the same ethical and moral values.
A)True
B)False
Answer: False
Q3) Ethical formalists maintain that:
A) harm to an individual is allowable as long as it serves a greater good.
B) values are situational and change based on circumstance.
C) harm to individual rights is never justified by an increase in organizational or common good.
D) the good of the many always supersedes the good of the few.
E) right and wrong are unknowable.
Answer: C
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Chapter 3: The Court System
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Sample Questions
Q1) In addition to the state in which it is incorporated, a corporation's "citizenship" is recognized by the courts as:
A) any state where it conducts even a minor amount of business.
B) the state in which it maintains its principal place of business.
C) the state where its CEO lives.
D) the state where most of its employees live.
E) any state that the corporation declares as being its hometown.
Answer: B
Q2) The primary issue in Citizens United was the significance of:
A) the First Amendment.
B) the Seventh Amendment.
C) the Confrontation Clause.
D) the War Powers Act.
E) the Fourteenth Amendment.
Answer: A
Q3) A lawyer cannot be actively involved in the personal decisions of clients.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Litigation
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Sample Questions
Q1) Which of the following parties would have standing to sue in a case to stop the merger of two companies?
A) The CEO of the two companies' biggest competitor
B) A competitor of either of the two companies
C) The board of the two companies' competitors
D) A concerned third party
E) A shareholder of one of the two companies
Q2) Which of the following statements is false concerning peremptory challenges?
A) The number of peremptory challenges allowed varies from state to state.
B) The number of challenges may vary between the parties.
C) One can be used to strike a juror from the jury because he is a man.
D) No reason needs to be given to use a peremptory challenge.
E) The number may vary depending on the type of case being tried.
Q3) The verdict is the final decision of the case entered by the judge.
A)True
B)False
Q4) Personal jurisdiction over the defendant is automatically obtained when the plaintiff files the complaint.
A)True
B)False
Page 6
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Chapter 5: Alternative Dispute Resolution
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Q1) The federal system and all state systems require arbitration hearings to comply with established rules of evidence.
A)True
B)False
Q2) Individual states are not limited by the Constitution when they make laws that deny arbitration of certain disputes
A)True
B)False
Q3) Which of the following is true of a caucus in the process of mediation?
A) It constitutes misconduct on the part of the arbitrator.
B) Once the mediator uses a caucus, the parties cannot meet face-to-face.
C) A caucus is only allowable if both parties are present at all times.
D) The presence of a mediator is not essential to the conduct of a caucus.
E) A caucus involves the mediator, and only one of the disputing parties.
Q4) In most state statutes authorizing voluntary arbitration, the agreement to submit to arbitration may be written or oral.
A)True
B)False
Q5) Compare and contrast voluntary and mandatory arbitration.
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Chapter 6: The Constitution
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Sample Questions
Q1) The contract clause restricts the federal government's power to impact contractual relationships.
A)True
B)False
Q2) Which approach should be used to cases involving classifications directed at fundamental rights?
Q3) Luke, Rocky, Nelly, and Mario are graffiti artists who belong to a minority community. They spray paints on a public wall in their city. They create designs and paintings on the wall depicting political and social issues that affect their community. This way, they protest against unfair practices. Which form of first amendment protection are these artists engaging themselves in?
A) Freedom of the press
B) Freedom of religion
C) Freedom of speech
D) Establishment clause
E) Free exercise clause
Q4) Describe the two clauses included in the concept of freedom of religion.
Q5) When may a state law limit picketing?
Q6) Explain the aspects of the freedom of the press.
Page 8
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Chapter 7: The Property System
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Sample Questions
Q1) A _____ deed promises the grantee (usually, the buyer) that the grantor (seller) has good ownership and the full power to convey it.
A) special warranty
B) pass title
C) quitclaim
D) freehold
E) warranty
Q2) Wallace buys a television from Dotty, but a week later, a clerk from Conduit City, an electronics store, contacts Wallace to inform him that the store will be repossessing his television. Wallace calmly expresses his confusion, stating that he bought the television free and clear from Dotty. The clerk explains that Conduit City has a purchase money security interest in the television, which permits them to repossess the TV. Fully explain who is right.
Q3) What is the difference between a public and a private nuisance?
Q4) Sidney Carton, owner in fee simple of Cartonacre, makes the following grant of his land: "to Lucie Manette for life, then at the death of Lucie Manette, to her children in equal share." At the time of the grant, Sidney Carton has no children or heirs of his own. What interests have been created by this land grant?
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Page 9
Chapter 8: Contract Formation
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Sample Questions
Q1) Sam goes to a supermarket and fills his cart with food items, pushing it up to a checkout line. Discuss the type of contract Sam and the supermarket have.
Q2) In case an offeror withdraws his/her offer, it is called _____.
A) rejection
B) reversion
C) novation
D) revocation
E) triangulation
Q3) The ultimate purpose of a contract is the creation of an agreement that courts will order parties to perform or to pay consequences for the failure of performance. When courts uphold the validity of such promises, the resulting agreement is a(n) "_____ contract."
A) absolute
B) differentiated
C) void
D) relative
E) enforceable
Q4) Without permission, a duty that involves skill, character, or training cannot be delegated. Explain why.
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Chapter 9: Contractual Performance and Breach
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Sample Questions
Q1) A contracting party has no duty to perform prior to a condition precedent being satisfied.
A)True
B)False
Q2) Homer hired Bob Builders Pvt. Ltd to construct his house. They signed a contract, which stated that Bob Builders wouldill complete the work by April 4th 2012, and Homer wouldill pay them in full. Homer has the right to deny them payments if they miss the date.
A)True
B)False
Q3) If performance of a party to a contract only slightly deviates from contract requirements, this will be considered:
A) complete performance.
B) substantial performance.
C) breach of contract.
D) waiver of performance.
E) divisibility of performance
Q4) What is trading and nontrading partnership?
Q5) Mention the most common ways to achieve a discharge.
Q6) Discuss the parol evidence rule?
Page 11
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Chapter 10: Torts Affecting Business
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Sample Questions
Q1) The tort of trespass arises only when a defendant damages the property of the plaintiff.
A)True
B)False
Q2) _____ is usually defined as the desire to bring about certain results.
A) Tort
B) Crime
C) Intent
D) Negligence
E) Duty
Q3) What is the dram shops act?
Q4) Peter was riding his motorcycle when he ran into a pothole on the highway and met with an accident. He decided to sue the contractor and the department responsible for building roads for the harm caused to him. Discuss the case.
Q5) A defendant can be found liable for a strict liability tort even though the defendant neither intentionally nor negligently caused the harm.
A)True
B)False
Q6) What must the plaintiff prove in a negligence case?
Page 12
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Chapter 11: Intellectual Property
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Sample Questions
Q1) Which is not an allowable "fair use" of material?
A) Teaching
B) Research
C) Profits
D) Reporting
E) Criticism
Q2) Copyright deals with original invention, like patents.
A)True
B)False
Q3) Design patents apply to the appearance of an article of manufacture, unrelated to its function.
A)True
B)False
Q4) What is a colored design or shape associated with a product or service called?
A) Patent
B) Trade dress
C) Copyright
D) Trademark
E) Product design
Q5) What is an injunction?
Page 13
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Chapter 12: International Law
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Sample Questions
Q1) To sue a foreign firm in the United States, the plaintiff must:
A) establish maximum contacts between the foreign defendant and the forum court.
B) demonstrate that exercise of personal jurisdiction over the defendant will be ineffective.
C) comply with the terms of the Hague Service Convention when serving notice of the lawsuit.
D) comply with the terms of the Convention of International Sale of Goods when filing a lawsuit.
E) establish legal representation in the area of personal jurisdiction.
Q2) The Charter of the United Nations sets forth as its primary goal:
A) combating corruption and corrupt practices in other countries.
B) providing individual measures for the prevention and removal of threats to peace.
C) ensuring that justice is delivered at all levels in all member countries.
D) implementing a just and fair international law that guides international commercial transactions.
E) eradicating cyber-squatting and criminal practices involving the Internet, in all member countries.
Q3) What are some of the advantages of the arbitration of international disputes?
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Chapter 13: Criminal Law and Business
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Sample Questions
Q1) Yen is almost bankrupt, and decides to change the situation. He accesses his boss's laptop and extracts the company's plans for the launch of a new product. Yen sells these plans to a competitor for a huge sum of money. Discuss the crimes Yen can be prosecuted for.
Q2) What are accessories before a crime and accessories after a fact?
Q3) The Sixth Amendment gives the right to a speedy jury trial in a criminal matter.
A)True
B)False
Q4) A defendant might plead nolo contender to avoid a criminal conviction being used as a basis for a civil suit.
A)True
B)False
Q5) Discuss the provisions of fraud under the U.S. Code.
Q6) Give some examples of typical types of federal investigations in the cyber law area.
Q7) A conspiracy is a formal agreement for criminal purposes.
A)True
B)False
Q8) Discuss good faith as a defense to accusations of fraud.
Q9) Explain the difference between larceny, burglary, and robbery.
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Chapter 14: Business Organizations
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Sample Questions
Q1) Jonathan wants to start a business. Which form of business organization will give him the most complete and exclusive control over business decisions?
A) Sole proprietorship
B) Partnership
C) Corporation
D) S corporation
E) Limited liability company
Q2) The failure to consider how to overcome disputes involving managerial control can cause business activities to suffer and the organization to fail.
A)True
B)False
Q3) Limited partners:
A) are personally responsible for debts of the business.
B) control operations of the limited partnership.
C) may dissolve the limited partnership by assigning their interest in a business to another person.
D) may have their surnames used in the partnership's name.
E) may act as a guarantor of the partnership's obligations.
Q4) How is control decided in publicly held and closely held corporations?
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Chapter 15: The Regulatory Process
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Sample Questions
Q1) When a federal statute preempts a particular area of regulation, the state regulation related to the same subject is void.
A)True
B)False
Q2) As the member of an agency, a secretary:
A) signs orders and official correspondence.
B) is the presiding officer at agency meetings.
C) represents the agency in court and often makes the decision to file suit or pursue other remedies.
D) supervises usual administrative functions such as accounting, budgeting, and personnel.
E) provide for interaction between regulators and those being regulated.
Q3) The internal matters where uniformity on a nationwide basis is essential are exclusively the concern of the state.
A)True
B)False
Q4) Regulation decreases the cost of government.
A)True
B)False
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Chapter 16: Regulating Competition_Antitrust Laws
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Sample Questions
Q1) What necessitated the Robinson-Patman amendment to the Clayton Act?
Q2) A vertical territorial agreement is one between a manufacturer and a dealer or distributor.
A)True
B)False
Q3) Joshua owns orange groves. He enters into a contract with the local food processing plant whereby he would sell oranges only to that particular food processing plant. Joshua has entered into a contract which would be termed as a(n):
A) instalment contract
B) exclusive dealing contract
C) reciprocal dealing contract
D) tying contract
E) franchise contract
Q4) Horizontal price fixing occurs when manufacturers attempt to set the ultimate retail price for their products.
A)True
B)False
Q5) "For purposes of the rule of reason, Sherman Act violations may be divided into two categories." Explain.
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Chapter 17: Financial and Securities Regulations
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Sample Questions
Q1) A(n) _____ is one who controls or is controlled by the issuer, such as a major stockholder of a corporation.
A) seller
B) bailee
C) underwriter
D) guarantor
E) controlling person
Q2) Under the Sarbanes-Oxley Act, whistleblowers that suffer retaliation are able to recover civil damages and can be reinstated if terminated improperly.
A)True
B)False
Q3) State the new or proposed rules issued by the SEC post the revitalization process initiated by the Sarbanes-Oxley Act of 2002.
Q4) Liability traditionally has been imposed against violators even though they lacked any wrongful intent.
A)True
B)False
Q5) What are tombstone ads and when do they occur?
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Chapter 18: Privacy and Consumer Protection
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Sample Questions
Q1) The Truth-in-Lending Act gives consumers the right to rescind certain transactions for a period of:
A) seven business days from the date of the transaction or from the date that notice of the right to rescind is given, whichever comes first.
B) three business days from the date of the transaction or from the date that notice of the right to rescind is given, whichever comes first.
C) three business days from the date of the transaction or from the date that notice of the right to rescind is given, whichever is later.
D) seven business days from the date of the transaction or from the date that notice of the right to rescind is given, whichever is later.
E) five business days from the date of the transaction or from the date that notice of the right to rescind is given, whichever is later.
Q2) Explain the concept of "user" provisions as mentioned in the Fair Credit Reporting Act.
Q3) What are the areas encompassed by the authority of the Consumer Financial Protection Bureau?
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Chapter 19: Environmental Regulation and Resource Sustainability
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Q1) Under the Resource Conservation and Recovery Act, what are the obligations of a generator of wastes?
Q2) What are the responsibilities of the Environmental Protection Agency?
Q3) It is not within the rights or authority of shareholders to file global warming related resolutions directing board members or officers to analyze and/or report on environmental issues.
A)True
B)False
Q4) _____ refers to an act that causes inconvenience or damage to the public in the exercise of rights common to everyone.
A) Direct interference
B) Negligence
C) Trespassing
D) Private nuisance
E) Public nuisance
Q5) What is the manifest system that is used by the RCRA for the disposal of hazardous wastes?
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Q6) Who are the responsible parties recognized under the Superfund?
Q7) What reforms have been proposed to the Superfund law by the business community?
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Page 22
Chapter 20: Discrimination in Employment
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Sample Questions
Q1) Which of the following is an example of "race norming"?
A) Setting a quota designed to balance the black/white percentage of an employer's workforce.
B) Conducting lessons in the English language for non-English-speaking employees to further effective communications.
C) Designing an employment test and setting the passing score for white job applicants at 75 percent and the passing score for the minority job applicants at 65 percent.
D) Firing white employees to make room for new African-American hires.
E) Providing more promotion opportunities to members of a particular race at the expense of the others.
Q2) What protections are afforded to employees under the Age Discrimination in Employment Act (ADEA)?
Q3) Undue hardship can be a reason for an employer not making reasonable accommodation for disabled employees.
A)True
B)False
Q4) What is the difference between affirmative action and the setting of quotas?
Q5) To win a Title VII case, what must a plaintiff prove?
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Chapter 21: Employment Laws
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Sample Questions
Q1) Which of the following statements is true of the Uniformed Services Employment and Reemployment Rights Act?
A) Employers may retaliate against anyone assisting in the enforcement of USERRA rights, provided that person has no service connection.
B) It contains health insurance provisions.
C) Covered individuals who leave a job to perform military service are barred from continuing any existing employer-based health plan coverage.
D) For individuals who elect to continue coverage, they have the right to be reinstated in the employer's health plan when reemployed.
E) It applies to all individuals released from service irrespective of whether it was under "honorable conditions" or "dishonorable conditions"
Q2) If a bonus is based on the amount of sales, the FMLA requires the employer to award sales that the employee would have made if not on family medical leave.
A)True
B)False
Q3) What is the employment-at-will doctrine and how is it being limited?
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Chapter 22: Labor-Management Relationship
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Q1) After a valid election to certify a union has been conducted by the NLRB, another election is:
A) permitted within six months regardless of whether the union wins the certification vote.
B) permitted within six months regardless of whether the union wins or loses the certification vote.
C) is not permitted for three years regardless whether the union wins or loses the certification vote.
D) is not permitted for one year regardless whether the union wins or loses the certification vote.
E) is not permitted for five years regardless whether the union wins or loses the certification vote.
Q2) The Taft-Hartley Act provides injunction power against:
A) all strikes and lockouts.
B) strikes and lockouts that create a national emergency.
C) strikes and lockouts that involve interstate sale of goods.
D) shutdown of companies in cases involving natural disasters.
E) mass layoffs by companies in cases involving right sizing
Q3) Under the Wagner Act, what are the five unfair labor practices by management?
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