Commercial Law
Mock Exam
Course Introduction
Commercial Law is a branch of legal studies that focuses on the laws and regulations governing business and commercial transactions. This course explores key topics such as contract law, agency, sale of goods, negotiable instruments, partnership, company law, and the legal frameworks that underpin commerce both domestically and internationally. Students will learn about the formation and enforcement of commercial agreements, dispute resolution, and the rights and duties of parties engaged in trade, equipping them with the knowledge necessary to navigate legal issues in the business world.
Recommended Textbook
Business Law and the Legal Environment Standard Edition 6th Edition by Jeffrey F. Beatty
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Page 2
Chapter 1: Introduction To Law
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Q1) Identify and explain the parts of the following case name: Palsgraf v.Long Island Railroad Co.,248 N.Y.339,162 N.E.99,New York Court of Appeals.
Answer: The case name is Palsgraf v.Long Island Railroad Co.Palsgraf and the Long Island Railroad Co.are the parties to the lawsuit.The order of the names does not necessarily identify which party initially brought the lawsuit.The part stating "248 N.Y.339,162 N.E.99" is the legal citation,which indicates where to find the case in a law library.The first part of the citation means the Palsgraf case can be found on page 339 of the 248th volume of the official court reporter of the state of New York.The decision is also reported starting on page 99 of the 162nd volume of the Northeast Reporter,a regional reporter.The reported case was heard by the New York Court of Appeals.
Q2) Common law refers to:
A) law that is the same or similar in all the states.
B) law made when judges decide cases and then follow those decisions in later cases.
C) law made by legislatures in the form of statutes.
D) the legal systems of France, Germany, and Italy.
Answer: B
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Chapter 2: Business Ethics And Social Responsibility
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Q1) Research has shown that the least important motivation for managers in behaving ethically is:
A) they want to feel good about themselves.
B) they want to feel good about the decisions they make.
C) they value their reputation.
D) profitability.
Answer: D
Q2) Kent needed to reduce his workforce by five people.Before notifying them,he thought about how he would feel if he were the one receiving the news and he tried to find ways to help the employees in their transition.Kent was exercising the value of:
A) courage.
B) compassion.
C) fairness.
D) responsibility.
Answer: B
Q3) Unethical behavior is a bar to financial success.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Dispute Resolution
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Q1) Roberto sued Monica for injuries received in a traffic accident.If Monica does not respond to the complaint and summons served by Roberto within the prescribed time limits,Roberto may obtain a:
A) judgment on the pleadings.
B) summary judgment.
C) pretrial conference.
D) default judgment.
Answer: D
Q2) Judge Zellar was asked to decide if a plaintiff could see the interrogatories procured by the defendant.The judge viewed the documents alone and decided that they should be made available to the plaintiff.The judge made:
A) an in camera inspection.
B) a motion to compel answers to interrogatories.
C) a request for admission.
D) a request for the production of documents.
Answer: A
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Chapter 4: Common Law,Statutory Law,And Administrative Law
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Q1) If in 1900 the Minnesota Supreme Court ruled that a minor can void a contract at any time during minority and in 2008 the courts in Minnesota still follow this ruling,this is an example of:
A) stare decisis.
B) the bystander rule.
C) statutory law.
D) enabling legislation.
Q2) Discuss the two federal statutes that give Americans the power to aquire or protect personal information.
Q3) The doctrine of stare decisis,though vital to the creation of the common law when this country was settled,is not important to our modern,complex society.
A)True
B)False
Q4) If the President vetoes a bill and if both the House and Senate repass the bill by a two-thirds margin,the bill becomes law.
A)True
B)False
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Chapter 5: Constitutional Law
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Q1) West Virginia passed a statute regulating working conditions in its mines.If the statute is challenged in court on substantive due process grounds:
A) it would be presumed invalid and would be struck down since it involves a fundamental right to work.
B) it would be presumed invalid but would be struck down only if it is not necessary to achieve a compelling government interest.
C) it would be presumed valid since it regulates economic or social conditions.
D) it carries no presumptions, but must be evaluated based on the procedures involved.
Q2) Misleading commercial speech may be outlawed altogether without violating the Constitution.
A)True
B)False
Q3) The First Amendment to the U.S.Constitution explicitly protects citizens from abridgment of the right of free speech by any level of government.
A)True
B)False
Q4) Discuss the Miller test to determine if a creative work is obscene.
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Chapter 6: Intentional Torts And Business Torts
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Q1) Tracy is an "at will" employee of Zebra Toy Company.One afternoon she has lunch with a friend who works in marketing for her company's biggest competitor,Tiger Toys.Over a period of about three months,Tiger Toy representatives convince Tracy to work with them.Tiger offers a larger base salary with bigger commissions than she had with Zebra.When Tracy leaves Zebra,it sues Tiger Toys claiming it intentionally interfered with a contractual relationship.Will Zebra Toy Company be successful?
Q2) Which of the following statements about torts is correct?
A) A tortious act is always a criminal act.
B) A criminal act is always a tortious act.
C) A tortious act may also be a criminal act.
D) All the above are correct.
Q3) Ahmi was a witness in a lawsuit.When asked why he fired Rana,Ahmi replied,"Rana was fired for willful misconduct." Indeed,Rana had not engaged in any misconduct.Rana will be able to successfully sue Ahmi for defamation based on what Ahmi said in court.
A)True
B)False
Q4) Identify and discuss two specific causes of action a plaintiff can allege that deal specifically with privacy rights.
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Page 8
Chapter 7: Negligence And Strict Liability
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Q1) Phillip was waiting for a bus at a bus stop.Across the street and down the block,a mechanic negligently overinflated a tire he was intending to put onto Marsha's pickup truck.The exploding tire injured Marsha and frightened a neighborhood dog,which ran down the street and knocked Phillip down,injuring his knee.Phillip sued the mechanic.In applying the Palsgraf v.Long Island Railroad Co.decision to this case,Phillip would:
A) win because the mechanic was negligent in overinflating the tire, which led to Phillip's injury.
B) win based on negligence per se.
C) lose because the court would apply the doctrine of res ipsa loquitur.
D) lose because, although the mechanic's conduct was negligent toward Marsha, it was not a wrong in relation to Phillip, who was far away. The mechanic could not have foreseen injury to Phillip and therefore had no duty to him.
Q2) In most states dram acts apply to:
A) liquor stores, bars, and restaurants but not to social hosts.
B) liquor stores, bars, restaurants and to social hosts.
C) social hosts, liquor stores, and bars.
D) None of the above.
Q3) Discuss the concepts of contributory negligence and comparative negligence.
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9
Chapter 8: Crime
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Q1) Sarah,an employee of Amex Corporation,committed a serious criminal act in an attempt to obtain a large sales order for her employer.A court found her guilty of the felony and also found the corporation guilty of criminal conduct.The company was fined $1 million.The court:
A) erred in fining the company since finding both Sarah and the corporation guilty violates the Double Jeopardy Clause of the Constitution.
B) acted properly if this were a federal proceeding; however, it did not act properly if this were a state proceeding.
C) acted properly if this were a state proceeding but not if this were a federal case.
D) acted properly in this case.
Q2) The Sixth Amendment declares that a person cannot be tried twice for the same criminal offense.
A)True
B)False
Q3) Every criminal defendant has a right to a jury trial.
A)True
B)False
Q4) Compare and contrast money laundering and embezzlement.Give an example of each.
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Chapter 9: International Law
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Q1) The primary antitrust law in the United States is the:
A) Wagner Act.
B) Sherman Act.
C) SEC Act of 1933.
D) Robinson-Patman Act.
Q2) Multinational enterprises are companies doing business in several countries simultaneously.
A)True
B)False
Q3) Oxtron,Inc.,a U.S.company,and Leer,an Argentinean company,orally agreed to a contract under which Oxtron is to ship medical devices to Leer.The contract is governed by the CISG.Which statement is correct?
A) The contract is not enforceable because it is oral.
B) Whether the contract is enforceable without a written agreement depends on the value of the medical devices.
C) Whether the contract is enforceable without a written agreement depends on whether the medical devices are a necessity.
D) The contract is enforceable without a written agreement.
Q4) Explain the origin and purpose of the World Trade Organization.
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Chapter 10: Introduction To Contracts
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Q1) Robert,a minor,buys a stereo from Jane for $200.State law allows a minor to disaffirm contracts within a reasonable time after turning 18.Robert disaffirms the contract the day after turning 18 and returns the stereo.
A) This contract was a valid contract, Robert cannot disaffirm.
B) This contract was a voidable contract, Robert can disaffirm.
C) This contract was a void contract.
D) This contract was unenforceable because it needed to be in writing to be enforceable.
Q2) As English judges were developing the common law of contracts in the twelfth and thirteenth centuries:
A) most promises were found to be enforceable.
B) promises were found not binding unless written and sealed.
C) the term "contract" became common.
D) changes in the law occurred rapidly.
Q3) Which of the following represents a unilateral offer?
A) "I will pay you $50 if you mow my lawn."
B) "I will pay you $50 if you promise to trim that tree."
C) "I will pay you $50 for your CD player."
D) "I will pay you $50 for your backpack."
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Chapter 11: Agreement
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Q1) Jack mails an offer to Joan that states,"I offer to sell you my car for $2000.If I don't hear from you in 10 days,I will assume you are willing to buy the car for the stated price."
Jack hears nothing by the deadline and assumes he has a deal.What is the result?
A) Jack has a deal. His offer was intended and contains definite terms.
B) Jack has a deal. Joan should have responded saying she is not interested in the car if she didn't want to be bound to the offer.
C) Joan is not bound. Generally an offeree must say or do something to accept an offer.
D) Joan is not bound. Ten days is not a reasonable amount of time to consider the offer and accept by mail.
Q2) If an offer specifies no time limit in which to accept:
A) the offeree has 30 days to respond.
B) the offeree has 10 days to respond.
C) the offer is not valid and therefore it does not matter when the offeree responds.
D) the offeree has a reasonable period during which to accept.
Q3) What elements are necessary for an offer to be valid? Give two examples of nonoffers.
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Chapter 12: Consideration
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Q1) Douros Realty & Construction Co.had a lead on a "prime" piece of real estate.Although Douros did not have a listing agreement with the seller of the property,he contacted Kelley Properties.Douros knew that Kelley was looking for a location for a commercial development.Douros contacted Kelley stating only that he had the "finest,most outstanding,viable location in the county and it just came on the market." Douros said he would reveal the location of the property and the owner's name if Kelley would sign an agreement which would require Kelley to pay a 10% commission if a sale of the property resulted.The agreement was signed.Four months later,Kelley bought the property after negotiating the deal himself.Kelley claims he does not owe a commission to Douros because there was insufficient consideration to support the payment of commission so large.Kelley claims that all Douros did in the entire transaction was to reveal the location of the property and the owner's name.Was there sufficient consideration to make this promise enforceable?
Q2) What two exceptions did the UCC create for accord and satisfaction check cases?
Q3) An unliquidated debt can be described as:
A) a debt in which both its existence and amount is in dispute.
B) a debt in which the existence or amount is in dispute.
C) a debt disputed by the creditor but not the debtor.
D) a debt undisputed by either party.
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Page 14
Chapter 13: Legality
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Q1) Which of the following is an example of an exculpatory clause?
A) Creditor charges 38% interest on a loan.
B) Seller is not responsible for property damage regardless of the cause of the injury.
C) Buyer agrees to pay any costs of litigation.
D) Employee agrees to never work for a competing company.
Q2) In bailment cases,exculpatory clauses:
A) are very rarely used.
B) are somewhat more likely to be enforced than in other types of cases.
C) ordinarily involve an attempt to limit liability for damage to persons rather than property.
D) None of the above.
Q3) Marcy and Elliot are both sophisticated merchants who deal in diamonds.Marcy contracted to purchase a diamond for $20,000.The day after the purchase,Marcy took the diamond to a jeweler's show but the highest offer for the diamond was only $10,000.Is Marcy's contract for purchase of the diamond for $20,000 unconscionable?
Q4) Discuss the pros and cons of gambling and whether there might be any reason for a court or legislature to treat gambling on credit any differently from gambling itself.
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Chapter 14: Capacity And Consent
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Q1) Marty,a 16-year-old,contracts with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle.Marty agrees to make monthly payments until the purchase price plus interest are paid in full.Which of the following is correct?
A) The contract is voidable by Marty.
B) The contract is void as soon as it is made.
C) The contract is voidable by Cream-of-the-Crop Cycles.
D) The contract is voidable by either Marty or Cream-of-the-Crop Cycles.
Q2) After her 18th birthday Lora may,by words or action,ratify a contract she made during the previous year.
A)True B)False
Q3) Spencer,age 18 and of sound mind,has the legal capacity to contract.
A)True B)False
Q4) A party to a contract has a duty to investigate the other party's factual statements. A)True B)False
Q5) Discuss the concept of a "material fact" in fraud situations.
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Chapter 15: Written Contracts
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Q1) For the purposes of the statute of frauds,an interest in land includes:
A) a house.
B) a real estate mortgage.
C) an easement.
D) All of the above.
Q2) Hannah orally agrees to sell her house to Brett for $175,000.If she delivers the deed to Brett with the expectation of payment in two weeks and he fails to pay,most courts will not enforce the contract since it was not in writing.
A)True
B)False
Q3) Any contract involving a sale of goods of $100 or more must be in writing.
A)True
B)False
Q4) The original statute of frauds is the English law that began the practice of requiring written evidence of certain kinds of contracts,but now the British government has repealed the writing requirement for most contracts.
A)True
B)False
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Chapter 16: Third Parties
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Q1) Which of the following duties can probably be delegated?
A) An agreement to perform an operation.
B) A contract to paint a picture.
C) An agreement by an attorney to draft a contract.
D) An agreement to paint a house.
Q2) An assignment is effective from the moment it is made,regardless of whether the assignor notifies the obligor.
A)True
B)False
Q3) Linda assigns to Ben a right to receive rent payments.The law implies the following warranty on Linda's part:
A) the tenant is solvent.
B) Linda actually has a right to the rental payments.
C) the tenant will actually pay.
D) No warranties are implied by law in an assignment.
Q4) Most types of duties may be delegated.
A)True
B)False
Q5) Briefly discuss the enforceability of contracts by third parties.
Q6) Discuss the potential liability differences between a delegation and a novation.
Page 18
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Chapter 17: Performance And Discharge
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Q1) Buddy was hired to play drums for a rock group scheduled to tour the Midwest.Part way through the tour,Buddy was tragically killed in a plane crash.The tour had to be discontinued until a new drummer could be found.The band lost money on the tour.Is Buddy's estate or agent responsible for the loss to the band?
Q2) In January,All Seasons,Inc.ordered $4000 of fireworks from Kaboom Ltd.with delivery to be on or before June 1.On April 15,Kaboom notifies All Seasons that it will not be able to perform the contract as agreed.How will the law characterize Kaboom's actions? Does All Seasons have to wait until June 1 before buying fireworks from another supplier?
Q3) Sea Rovers,Inc.contracted to sell 1,000 pounds of shrimp to the Seafood Shack with delivery on June 1.On May 1 Sea Rovers advised the Seafood Shack that it would not be able to deliver the shrimp.The Seafood Shack:
A) can sue Sea Rovers immediately for breach of contract.
B) must wait until June 1 to see if Sea Rovers will perform before suing for breach of contract.
C) cannot sue Sea Rovers because Sea Rovers gave adequate notice.
D) must wait until actual damages are determined before it can sue.
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Chapter 18: Remedies
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Q1) Identify the considerations the United States Supreme Court outlined for calculating punitive damages.
Q2) Which of the following statements is incorrect concerning liquidated damages?
A) A liquidated damages clause will be enforced if, when the contract was made, it was difficult to estimate actual damages.
B) The amount of liquidated damages must be a reasonable estimation of the actual harm resulting from a breach.
C) Nominal damages are not the same thing as liquidated damages.
D) Liquidated damages are enforceable even if the amount is considered to be a penalty on the breaching party.
Q3) Damages must be estimated with reasonable certainty.
A)True
B)False
Q4) The remedy of reformation:
A) applies only when money damages are inadequate.
B) can be used to correct mistakes in the original contract
C) is available if fraud is involved.
D) is a commonly used remedy.
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20
Chapter 19: Practical Contracts
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Q1) The legal term for a promise in a contract is "provision."
A)True
B)False
Q2) Outline the parts of a typical contract.
Q3) Lucky,a contractor,enters into a contract with Penny,a homeowner,to remodel her kitchen.The contract provides a specific completion date,but does not specify what will happen if Lucky does not have the job finished by the date.So,Penny may deduct $100 per day from the contract price until the job is finished,because this is the industry norm.
A)True
B)False
Q4) Identify and explain at least four situations where a written contract is either necessary or recommended.
Q5) Because details can always be added later,it's better to not overwhelm a contract with specifics in the beginning.
A)True
B)False
Q6) Compare and contrast the perspectives of a lawyer and a client when approaching the negotiation of a contract.
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Chapter 20: Introduction To Sales
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Q1) Which of the following contracts requires a writing under the UCC,Article 2?
A) Jeremy, a full-time student, sold his snow blower to a friend for $450.
B) Jeremy, a full-time student, purchased a used computer from Office Plus for $300.
C) A toy manufacturer contracted to sell dolls valued at $10,000 to a department store.
D) Tobias Department Store contracted to sell Jenny a $400 doll.
Q2) Oxtren,Inc.is a tools wholesaler.Oxtren sent M&E Tools a purchase order offering to buy 200 Model 308 milling & drilling machines with R-8 spindles.The purchase order stated the credit term to be 2% discount if payment was made in 10 days,with the full amount due in 30 days.It did not include a forum selection clause.M&E responded with an acceptance form accepting the offer.The acceptance form,however,stated that full payment was due on delivery and that disputes under the contract would be settled by arbitration.
(A)Do the parties have an agreement?
(B)What is the payment term?
(C)Is the arbitration clause part of the agreement?
Q3) Patsy is shopping for a used car.She finds a car she likes at Morley Motors.Discuss the standard of conduct the UCC imposes on the parties in performing the sales transaction.
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Chapter 21: Ownership And Risk
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Q1) You leave your watch with Bryte Jewelers for repair.Bryte could not transfer ownership interests in the watch to a customer of the jewelry shop without your permission.
A)True
B)False
Q2) A gun manufacturer in Helena,Montana agrees to sell guns and ammunition to the ATF in Washington,D.C.The terms of the contract specify that the goods are to be shipped "FOB,Chicago." When does the buyer acquire title and risk of loss?
A) When the goods reach Chicago.
B) When the goods are delivered to the carrier in Montana.
C) When the goods are tendered in Washington D.C. by the carrier.
D) When the goods reach Washington D.C.
Q3) A purchaser may acquire better title than the seller had.
A)True
B)False
Q4) Explain the concept and significance of identification of goods.Discuss how identification takes place.
Q5) Discuss the concept of insurable interests.
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Chapter 22: Warranties And Product Liability
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Q1) Which of the following would be a breach of the implied warranty of merchantability?
A) A knife that cuts its user when slicing a bagel.
B) A radio that does not pick up FM signals.
C) A match that burns a spot in the carpet when accidentally dropped.
D) A watch that does not keep accurate time after getting wet.
Q2) To prove an express warranty,courts require evidence that the buyer relied on the seller's statement.
A)True
B)False
Q3) M & E sold a lathe "AS IS" to Brenna.M & E has disclaimed:
A) strict liability.
B) liability for negligence.
C) all implied warranties.
D) all of the above.
Q4) A common problem in cases of express warranty is being able to separate statements that create express warranties from statements that do not.Discuss what type of statements create an express warranty and four indications that a statement is likely to create an express warranty.
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Page 24
Chapter 23: Performance And Remedies
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Q1) "Course of dealing" refers to prior commercial transactions between the same parties.
A)True
B)False
Q2) Tiny Tim Toy Company (TTT)entered into a contract with the manufacturing firm of Charles,Dickens,and Scrooge (C,D&S)to purchase Christmas toys.The shipment was due to arrive on September 1,in time for the Christmas sales.By August 15,after hearing from other toy companies that C,D&S were falling far behind on meeting delivery dates,TTT wrote a letter demanding assurances that the goods would arrive as scheduled.The only response received was a letter on C,D&S letterhead that said,"Bah Humbug! You'll get the shipment by November 1." Discuss TTT's possible remedies at this point.
Q3) If a buyer does not receive goods by the contract deadline,remedies available include:
A) incidental and consequential damages.
B) cover.
C) damages for non-delivery.
D) All of the above.
Q4) Define these terms: usage of trade; course of dealing; and course of performance.
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Page 25
Chapter 24: Secured Transactions
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Q1) Explain the difference between attachment and perfection.
Q2) Fowler Bros.has applied to Gibralter Bank for a $50,000 loan for its business expansion.If Fowler Bros.plans to use its account at Gibralter Bank as collateral,discuss what the bank needs to do for a security interest to attach.
Q3) A PMSI can be created only in goods and software.
A)True
B)False
Q4) Faith owns a copyright in a book she recently wrote.She applies for a $10,000 loan through Cumberland Bank and wants to use the copyright as collateral.Explain if and how the bank can perfect a security interest in such collateral.
Q5) Spicy & Hot,Inc.is interested in expanding its Mexican food restaurant into a Mexican food catering business.Spicy & Hot,Inc.buys a new delivery van from Van World.Spicy & Hot,Inc.is a buyer in the ordinary course of business when purchasing the van.
A)True
B)False
Q6) There is no way to attach a security interest in electronic chattel paper.
A)True
B)False
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Chapter 25: Creating A Negotiable Instrument
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Q1) TriColor purchased an industrial stamping machine from Vicy,Inc.TriColor paid for the machine with a negotiable note.The note was payable to the order of Vicy,Inc.Vicy,Inc.indorsed the note and gave it to CCLoans to satisfy a debt.CCLoans knew nothing about the contract between TriColor and Vicy,Inc.CCLoans indorsed the note and gave it to Great River Youth Club as a charitable donation.When Great River Youth Club presented the note for payment on its due date,TriColor refused to pay,claiming that the stamping machine was defective.
(A)Is Great River Youth Club a holder in due course?
(B)Will TriColor be able to avoid liability to Great River Youth Club on the basis that the machine was defective?
Q2) Maia wrote a check which said,"Pay to the order of Kevin Mathews $10.97." The next line of the check stated,"One thousand ninety-seven Dollars." In applying the rules of interpretation,how much should the drawee pay?
A) Nothing; when the instrument is ambiguous it is declared non-negotiable.
B) Ten dollars and 97 cents. Numbers control over words.
C) One thousand, ninety-seven dollars or $1,097.00. Words control over numbers.
D) Parol evidence would be needed to determine the purpose of the check.
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Chapter 26: Liability For Negotiable Instruments
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Q1) Generally,indorsers are not liable under signature liability if:
A) they write the words "without recourse" next to their signatures on the instrument.
B) they are not the drawee.
C) a check is presented for payment within 30 days after the indorsement.
D) they are an accommodation party.
Q2) To pay for a minor repair,May writes a check for $50 to David,who indorses the check in blank and gives it to his sister,Glenda,for her birthday.She indorses the check in blank and gives it to her trash collector to pay her quarterly bill.Which of the following is correct?
A) David made transfer warranties to Glenda and to her trash collector.
B) David did not make transfer warranties to Glenda because Glenda gave no consideration for the transfer of the check to her.
C) Neither David nor Glenda made any transfer warranties because they indorsed the check with blank indorsements, making the check bearer paper.
D) The trash collector must wait until the check is dishonored before making a transfer warranty claim against Glenda.
Q3) List the warranties a transferor of a negotiable instrument makes.
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Chapter 27: Accountants' Liability
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Q1) Fast Auditors prepared audited financial statements for Mega Company's registration statement in compliance with the 1933 Securities Act.John bought stock in Mega Company.It was discovered that the financial statements prepared for the registration statement contained some important omissions.John sued Fast Auditors to recover his investment when Mega Company turned out to be a bad investment.What must John prove to recover from Fast Auditors?
Q2) GBH,an accounting firm,was hired to prepare financial statements for E-treme.Great State Bank has asked to see GBH's working papers.Great State Bank is thinking about extending a $4 million line of credit to E-treme.GBH:
A) can show the bank the working papers because Great State Bank has a proper purpose.
B) can show the bank the working papers because Great State Bank is a known third party.
C) cannot show the bank the working papers under any circumstances as they are not finalized.
D) cannot show the bank the working papers unless E-treme gives permission.
Q3) Discuss the advantages and disadvantages of using IFRS.
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Chapter 28: Agency Law
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Q1) If apparent authority is present,the principal is liable for even the unauthorized acts of the agent.
A)True B)False
Q2) Tom,the production manager at Esday,was told by his supervisor to hire Elton,a 15year-old,to operate an industrial machine.Hiring the 15-year-old violates the child labor laws.Tom:
A) should hire Elton. Tom has a duty to obey Esday's instructions.
B) should hire Elton. Tom has a duty of care to ensure that the government does not discover that Elton is 15 years old.
C) should not hire Elton. Tom has a duty of care and he would not be caring for Elton.
D) should not hire Elton. Tom has a duty to obey Esday's instructions only if they are legal and ethical.
Q3) Andrew has been hired to do some work for Rossi Enterprises.What factors would a court consider in determining if Andrew is an employee or an independent contractor? Why does the designation matter?
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Chapter 29: Employment Law
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Q1) Which of the following statements is correct?
A) It is much easier for a government employer to test an employee for drugs or alcohol than it is for a private employer.
B) Generally speaking, in most states, it is easier for a private employer than the government to test an employee for drugs or alcohol.
C) Neither may test for drugs or alcohol.
D) Both may test for drugs or alcohol without restriction.
Q2) Betty wants to hire a secretary who is "mature." In particular,she wants to hire a woman with experience and whose children are grown (so she will not have to be staying home with sick children,etc.).She also wants to make sure the woman is of "sound,Christian character,with solid morals."
To find such an employee,she ran the following ad in the newspaper: "Secretary.Excellent Pay.Quiet professional office.Must not have young children.Must not be opposed to Christian work ethic.References required.555-1111 or write to P.O.Box 114,Ourtown,USA."
Discuss the legal issues raised by Betty's ad.
Q3) Explain the Title VII requirements on affirmative action,and identify three sources of affirmative action programs.
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Chapter 30: Labor Law
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Q1) An employer is in the process of negotiating a new contract with its union.During negotiations,the employer changed the workweek from a five-day,eight-hour-per-day week to a four-day,ten-hour-per-day week.Which statement is correct?
A) This is a violation of the National Labor Relations Act.
B) This is not a violation of the NLRA because the employer is bargaining with the union.
C) This is not violation of the NLRA because the total number of work hours per week has not changed.
D) Whether or not this is a violation of the NLRA will depend on the relevant state statutory law.
Q2) The five members of the National Labor Relations Board are appointed by the President.
A)True
B)False
Q3) A "hot cargo" clause,prohibiting an employer from doing business with a specified company in order to increase bargaining pressure,is legal.
A)True
B)False
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Chapter 31: Starting A Business
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Q1) Limited liability is a major advantage of a partnership as compared to a corporation.
A)True
B)False
Q2) Corporations have a distinct advantage over other forms of business organization in the area of taxation.
A)True
B)False
Q3) Jill was a limited partner in a retail business that was sued by a customer who fell in the store.The customer claimed the business was negligent in caring for its floors.Which statement best describes Jill's potential liability?
A) Jill has no potential liability to the customer.
B) Jill can be held personally liable to the customer since she is a partner.
C) Jill can only be liable to the amount of her investment.
D) Jill is personally liable, but the woman must first collect from the general partners before collecting from Jill.
Q4) What is a limited liability company? Explain the advantages and disadvantages of this type of business ownership?
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Chapter 32: Partnerships
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Q1) In the case of Hooper v.Hooper,the court found:
A) when the partnership was dissolved, one partner was entitled to property in kind in an amount by which his services had enhanced the value of the partnership.
B) when one partner unexpectedly became unable to contribute services and time to the partnership, there was an implied agreement that the other partner would be paid for the extra services he performed for the partnership.
C) the fact that one partner contributes greater skill and takes over management of a partnership business does not give rise to a right to extra compensation.
D) although the partners had an express agreement to pay one partner for extra services rendered to the partnership, such an agreement is unenforceable.
Q2) Identify and briefly discuss the management rights and duties of a partner.
Q3) A partnership can only be held liable for the partners' authorized acts.
A)True
B)False
Q4) The dissolution of a partnership means the same as its termination.
A)True
B)False
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Chapter 33: Life And Death Of A Corporation
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Q1) A business corporation can be incorporated under either state law or federal law.
A)True
B)False
Q2) Once a provision is in the corporate charter,it can only be changed by:
A) a vote of the shareholders.
B) filing an amendment with the Secretary of State.
C) Both of the above are necessary to change a corporate charter.
D) Neither a nor b is necessary to change a corporate charter. The board of directors merely needs to file a change of charter form.
Q3) Fashions,Inc.has 12 shareholders.The company is subject to the Model Act.What officers is Fashions,Inc.required to have?
A) A president, secretary, and treasurer.
B) A president and a secretary, and they can be the same person.
C) A president, at least one vice-president, a secretary, and a chief financial officer.
D) Whatever officers are described in the corporate bylaws.
Q4) What are some of the advantages for a business to incorporate in Delaware?
Q5) Discuss how a corporation is terminated.
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Chapter 34: Corporate Management
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Q1) A corporate board's refusal to remove a "poison pill" was held reasonable in:
A) Lippman v. Shaffer.
B) Unocal Corp. v. Mesa Petroleum Co.
C) Moore Corp. Ltd. v. Wallace Computer Services, Inc.
D) Anderson v. Bellino.
Q2) The Williams Act:
A) is designed to regulate the conduct of those attempting to take over a company. B) is designed to regulate the conduct of the target company subject to a takeover.
C) prohibits corporate defensive tactics.
D) None of the above.
Q3) A finding by a court that a manager's decision had a rational business purpose does not necessarily protect the manager from a finding that he breached a duty of care.
A)True
B)False
Q4) List and discuss the three ways to acquire control of a corporation.
Q5) Identify the three types of masters corporate managers serve and discuss the goals of each.
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Chapter 35: Shareholders
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Q1) Matt,a dissident shareholder,can run for director by placing his name on the company's proxy statement.
A)True
B)False
Q2) To be successful in a court challenge regarding an executive's compensation,shareholders must prove that:
A) the board was grossly uninformed before it set the compensation amount.
B) the executive's performance caused the business to become unprofitable.
C) the amount of the executive's compensation was too high in relation to the compensation of the typical employee within the company.
D) the compensation level is not in the company's best interests.
Q3) If directors serve on the boards of multiple corporations,the executives of those corporations are less likely to be overpaid.
A)True
B)False
Q4) A corporation is required to have at least one class of stock with voting rights.
A)True
B)False
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Chapter 36: Securities Regulation
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Q1) Any securities offerings covered by the NSMIA must comply with state securities laws.
A)True
B)False
Q2) Under which of the following exemptions is there no dollar limitation?
A) Rule 504.
B) Rule 505.
C) Rule 506.
D) Regulation A.
Q3) The "tipper" of inside information can be convicted of a crime,the "tippee" cannot.
A)True
B)False
Q4) Felicity brought a lawsuit under Section 11 of the 1933 Act against Mojo Corp.She will have to prove that:
A) she relied on the registration statement.
B) Mojo was negligent in preparing the registration statement.
C) there was a material misstatement or omission in the registration statement and she lost money.
D) All of the above.
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Page 38
Chapter 37: Bankruptcy
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Q1) Ramona has received a discharge in bankruptcy,but wants to reaffirm a debt to her sister.To be valid,the reaffirmation:
A) will be scrutinized by the court to make sure her sister has not unfairly pressured Ramona.
B) will be automatically disallowed because allowing Ramona to promise to pay a discharged debt would be contrary to the goals of the bankruptcy proceedings.
C) will be automatically allowed if Ramona voluntarily chooses to make it.
D) must clearly disclose that Ramona has the right to rescind at any time since the debt was already discharged.
Q2) Generally,filing bankruptcy stops the collection activity of creditors.
A)True
B)False
Q3) The Bankruptcy Code uses the term "bankrupt" to refer to a person who cannot pay his debts.
A)True
B)False
Q4) What are the three main purposes of the federal Bankruptcy Code? How are these purposes supported and fostered in the Code?
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Chapter 38: Antitrust
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Q1) The only defense available to a defendant in a per se violation is that the violation never occurred.
A)True
B)False
Q2) John D.Rockefeller's oil business was the main reason which legislation was enacted?
A) Sherman Act.
B) Robinson-Patman Act.
C) Clayton Act.
D) NLRA.
Q3) Antitrust laws in the United States remained constant through most of the 1900s.
A)True
B)False
Q4) What law prohibits mergers that are anti-competitive?
A) Sherman Act.
B) Clayton Act.
C) Robinson-Patman Act.
D) Radmon Act.
Q5) Explain horizontal price-fixing and vertical minimum and maximum price-fixing.Discuss their status under antitrust laws.
Page 40
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Chapter 39: Consumer Law
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Q1) The issue in the Gray v.American Express Co.case involved:
A) lost credit cards.
B) disputed bills.
C) unfair interest rates.
D) privacy.
Q2) Which of the following statements express the purpose of the Truth-in-Lending Act?
A) To require lenders to charge a "reasonable" rate of interest.
B) To help small business.
C) To provide consumers with information necessary to make the best credit decision.
D) To help lenders limit state laws.
Q3) In 30-year mortgages,the finance charge typically exceeds the amount of the principal.
A)True
B)False
Q4) The Magnuson-Moss Warranty Act covers all consumer products regardless of their cost.
A)True
B)False
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Chapter 40: Environmental Law
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Q1) The Clean Air Act of 1970 directed the EPA to reduce automobile pollution levels by:
A) 50 percent within 10 years.
B) 75 percent within 8 years.
C) 90 percent within 6 years.
D) 80 percent within 20 years.
Q2) Under the prevention of significant deterioration (PSD)program:
A) no one may undertake a building project that will cause a major increase in pollution without first obtaining a permit from the EPA.
B) a successful permit applicant must demonstrate that its emissions will not cause an overall decline in air quality.
C) a successful permit applicant must demonstrate that it has installed the best available control technology for every pollutant.
D) All of the above.
Q3) Foiler Manufacturing,a new corporation,estimates it may generate approximately 200 kilograms of hazardous waste each month.Discuss the EPA requirements it faces in relation to this waste.
Q4) Discuss the four major provisions of the Clean Air Act.
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42
Chapter 41: Cyberlaw
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Q1) Burns Medicine Shop developed a website where customers could ask the pharmacists questions and could refill prescriptions online.What statute requires Burns to have and disclose a privacy policy to anyone using the website?
A) The FTC Act.
B) The Electronic Communications Privacy Act.
C) The Gramm-Leach-Bliley Privacy Act.
D) No statutes presently require Web sites to have or disclose a privacy policy.
Q2) The case of Carafano v.Metrosplash.com,Inc.held:
A) the Fourth Amendment applies to computers.
B) Congress, in enacting the Communications Decency Act, intended that ISPs should not be held liable for information provided by someone else.
C) Congress had weighed free speech interests with protection of the public from offensive or obscene materials and determined that protection of the public was more important in the Internet setting.
D) Matchmaker, because it had provided the questionnaires for collecting information from its users, must be considered an "information content provider" under the Communications Decency Act, and it is therefore liable under the Act.
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Chapter 42: Intellectual Property
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Q1) Intellectual property:
A) producers are likely to be adequately paid in the free market.
B) production is not subsidized by the government.
C) typically is expensive to produce but cheap to reproduce and transmit.
D) typically is expensive to produce, copy, and transmit.
Q2) In a recent case,In re Nuijten,the U.S.appeals court ruled that a method of encoding additional information on electronic signals emitted from digital audio files was not patentable because,although useful,the method was not a mechanical,electrical,or chemical invention,a process,a machine,or the composition of matter.
A)True
B)False
Q3) A design patent protects the appearance of an item and is valid for 14 years.
A)True
B)False
Q4) Briefly discuss a patent,copyright,and trademark.
Q5) A patent is available for an idea as well as a tangible application.
A)True
B)False
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Chapter 43: Real Property And Tenant-landlord Law
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Q1) Tim is buying a farm.A general warranty deed is the best type of deed for Tim.
A)True
B)False
Q2) A tenancy with no fixed duration is a:
A) tenancy from month to month.
B) tenancy at will.
C) periodic tenancy.
D) tenancy for years.
Q3) The right of the tenant to the undisturbed possession of the leased property is known as:
A) quiet enjoyment.
B) habitability.
C) lawful possession.
D) peaceful possession.
Q4) Nancy is a life tenant on a 78-acre farm.The person who owns the future interest in the farm is entitled to enter upon the farm to make sure Nancy is not damaging the property.
A)True
B)False
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Chapter 44: Personal Property And Bailment
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Q1) Charles agrees to store Tuan's car in Charles's garage for the winter months while Tuan visits his grandmother in California.As a bailee,Charles is automatically entitled to use Tuan's car while Tuan is away.
A)True
B)False
Q2) Jody loaned her neighbor,Phil,her snow blower.Phil set it near his driveway,and later accidently ran over and destroyed it.In a suit to recover damages,Jody as plaintiff has the burden of proving that Phil was negligent and caused the destruction of her snow blower.
A)True
B)False
Q3) A bailment relationship can be created with respect to either real or personal property.
A)True
B)False
Q4) Distinguish between a contract and a gift.Give an example of each.
Q5) Discuss a bailor's liability for defects in the bailed property.
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Chapter 45: Planning For The Future: Wills,Trusts,And
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Q1) Myron had two children,Cheryl and Pete,who predeceased him.Cheryl had three children and Pete had one child.Myron died testate.Which of the following is true?
A) If Myron's will indicates that the issue are to inherit per stirpes, Pete's child will receive one half of Myron's estate.
B) If Myron's will indicates that the issue are to inherit per stirpes, Pete's child will receive one fourth of Myron's estate.
C) If Myron's will indicates that the issue are to inherit per capita, Pete's child will receive one half of Myron's estate.
D) If Myron's will indicates the issue are to inherit per capita, each of Cheryl's children will receive one sixth of Myron's estate.
Q2) Insurance policies often contain a covenant of good faith and fair dealing.Even if the clause is not in the policy,often courts will imply it.Explain the covenant of good faith and fair dealing and provide an example illustrating when an insurance company might breach this covenant.
Q3) An executor who is related to the testator is not entitled to compensation.
A)True
B)False
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