Law for Managers
Exam Answer Key
Course Introduction
Law for Managers equips students with a foundational understanding of the legal concepts and frameworks that impact managerial decisions in business settings. The course covers essential topics such as contract law, employment law, intellectual property, business organization structures, and dispute resolution. Through real-world case studies and practical scenarios, students learn how to identify legal risks, comply with relevant regulations, and make informed decisions that protect their organizations interests. This knowledge empowers future managers to navigate the complex legal environment confidently and ethically in both national and international business contexts.
Recommended Textbook
Business Law and the Legal Environment Standard Edition 6th Edition by Jeffrey
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F. Beatty
Chapter 1: Introduction To Law
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Q1) If Milan asks a court to order Pamela to stop reprinting his copyrighted material,he is seeking a legal,rather than an equitable,remedy.
A)True
B)False
Answer: False
Q2) The Minnesota legislature passed a law requiring that employers allow each employee adequate time within each four consecutive hours of work to utilize the nearest convenient restroom.This law is:
A) an executive order.
B) an ordinance.
C) a statute.
D) a stare decisis.
Answer: C
Q3) The case citation Pereda v.Parajon,957 So.2d 1194 (2007)reveals that Pereda is the plaintiff.
A)True
B)False
Answer: False
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Chapter 2: Business Ethics And Social Responsibility
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Q1) Which of the following are alternatives in dealing with issues of ethics in advertising?
A) Try, in a general way, to minimize racism, sexism, and other exploitation.
B) Include, as part of the development process, a systematic, focused review of the underlying messages contained in advertisements.
C) Refuse to create ads that are potentially demeaning, insensitive, or dangerous, recognizing that such a stand may lead to a loss of clients.
D) All of the above are alternatives in dealing with issues of ethics in advertising.
Answer: D
Q2) Why do many major corporations actively encourage ethical behavior?
A) Unethical behavior always damages a business.
B) Unethical behavior can quickly destroy a business.
C) Unethical acts are always illegal.
D) All of the above are reasons that corporations actively encourage ethical behavior. Answer: B
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4
Chapter 3: Dispute Resolution
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Q1) The fastest growing method of dispute resolution in the United States is:
A) arbitration.
B) negotiation.
C) mediation.
D) litigation.
Answer: C
Q2) In Jones v.Clinton,the court held:
A) Paula Jones did not demonstrate the essential elements for her claim.
B) Paula Jones was entitled to a summary judgment.
C) public policy required that the case be dismissed because of the President's governmental position.
D) President Clinton failed to comply with a discovery order.
Answer: A
Q3) The biggest change in litigation in the last decade is:
A) an explosive rise of electronic discovery.
B) a decrease in the use of discovery.
C) the replacement of interrogatories with depositions.
D) the use of juries in appellate courts.
Answer: A
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Page 5
Chapter 4: Common Law,Statutory Law,And Administrative Law
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Q1) Define the common law.Discuss its conflicting goals and the doctrine created to serve one of these goals.
Q2) The Consumer Product Safety Commission (CPSC)is an independent federal administrative agency.Which statement is correct about the chairperson?
A) The chairperson serves at the whim of the President and can be fired at any time.
B) The chairperson can only be fired by the President for good cause.
C) The chairperson cannot be fired by the President since the CPSC is an independent agency.
D) The chairperson has a lifetime appointment and cannot be fired.
Q3) The U.S.Supreme Court's holding in Ward's Cove Packing v.Atonio:
A) differed from the holding in Griggs v. Duke Power Co. partly because the Court was more conservative at the time Ward's Cove was decided.
B) upheld the ruling in Griggs v. Duke Power Co.
C) found that overt racial discrimination existed.
D) set forth a "business necessity" requirement for employment hiring practices.
Q4) Discuss the two federal statutes that give Americans the power to aquire or protect personal information.
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Chapter 5: Constitutional Law
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Q1) Hall was arrested for burning the United States' flag in a protest of governmental policy.His action is protected under the First Amendment's guarantee of free speech because the flag burning is considered symbolic speech.
A)True
B)False
Q2) The Pines,a small motel in central Georgia,may be subject to federal regulation even though it is not close enough to the state borders to have many guests from other states.
A)True
B)False
Q3) Identify the basic job of a President of the United States,the source of executive power,and three key powers associated with the position of President.
Q4) Fundamental rights include all EXCEPT the right to:
A) drive.
B) vote.
C) free speech.
D) travel.
Q5) 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) Opinion is generally a valid defense in a defamation lawsuit because it is not meant to be a factual statement.
A)True
B)False
Q2) Shortly after Brian started to work at Trevit,Inc.,a co-worker,Ann,began asking him out.Brian said no.Nevertheless,Ann persisted.One day Ann playfully,but intentionally touched Brian "below the belt." Which statement is correct?
A) Ann defamed Brian.
B) Ann committed the tort of trespass.
C) Ann committed the tort of interference with a prospective advantage.
D) Ann committed the tort of battery.
Q3) In awarding punitive damages,a court must consider:
A) the reprehensibility of the defendant's conduct.
B) the ratio between the harm suffered and the award.
C) the difference between the punitive award and any civil penalties used in similar cases.
D) All of the above.
Q4) Identify and discuss two specific causes of action a plaintiff can allege that deal specifically with privacy rights.
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Chapter 7: Negligence And Strict Liability
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Q1) Most state legislatures have passed legislation to reimburse crime victims directly through the state government.
A)True
B)False
Q2) Negligence concerns harm that:
A) is unforeseeable.
B) arises intentionally.
C) arises by accident.
D) is always substantial.
Q3) On Monday,Travis took his four-wheeler to Reppart's Equipment & Service for repair because the steering was not working properly.On Friday he called Reppart's to see if his four-wheeler was ready because he wanted it for a weekend trip.Reppart's said they had done the major repairs but that the steering system still needed some work and they needed another few days to finish the repairs.Travis told them he would pick the four-wheeler up and use it for the weekend and then bring it back to have them finish their work.While riding with friends on the weekend,Travis ran into someone because the steering stuck and he couldn't swerve to avoid them.Discuss how a court would determine causation in a negligence suit against Travis.
Q4) List and discuss the elements necessary to establish negligence.
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Chapter 8: Crime
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Q1) Entrapment can be a valid defense to a criminal act.
A)True
B)False
Q2) General deterrence is intended to teach a specific defendant not to repeat criminal conduct.
A)True
B)False
Q3) Which of the following statements is correct?
A) Violent street crime results in a greater monetary loss to society than white-collar crime.
B) White-collar crime results in a greater monetary loss to society than violent street crime.
C) Studies are not able to calculate the estimated value of white-collar crime since most white-collar crime is never publicly disclosed.
D) Studies are not able to accurately calculate the estimated value of either violent street crime or white-collar crime.
Q4) Discuss the growing problem of identity theft,including how thieves get personal information,what they do with this information,and how a victim should respond.
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Chapter 9: International Law
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Questions
Q1) Axle Corporation imports goods into the United States.Who is required to pay the duty on the imported goods?
A) The importer, Axle Corporation.
B) The World Trade Organization.
C) Each party pays one-half the duty.
D) The exporter of the goods.
Q2) The United States and Argentina have signed the Convention on Contracts for the International Sale of Goods (CISG).Oxtron,Inc.,a U.S.company,and Leer,an Argentinean company,have entered into a contract under which Oxtron is to ship medical devices to Leer.The contract does not include a choice of law provision.The contract will be governed by:
A) the CISG.
B) the UCC.
C) the domestic contract law of Argentina.
D) the domestic contract law of the United States.
Q3) The United States is the world's largest exporter of agricultural products.
A)True
B)False
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) Valerie promises Teresa that she will pay Teresa $75 if Teresa will clean Valerie's house by noon on Saturday.If Teresa cleans the house by noon on Saturday and Valerie pays the $75,then this is an implied,bilateral,executory contract.
A)True
B)False
Q2) Mary goes into Honest Harry's Electronics and purchases a TV.Mary agrees to pay for the TV in 30 days on the store's "30 days same as cash" plan.This is an executory contract.
A)True
B)False
Q3) Walter enters a dentist office and points to a damaged tooth.The dentist,Matt,treats the tooth.If Walter refused to pay and Matt sued:
A) Walter would win as there was no contract.
B) Walter would win because of the UCC.
C) Matt would win; this is an implied contract.
D) Matt would win in quantum meruit.
Q4) A valid contract can legally be voided by either party.
A)True
B)False
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Chapter 11: Agreement
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Q1) The Johnsons decided to sell their summer cabin on Beech Lake.They sent flyers out to all who previously had expressed an interest in buying the cabin stating that they were planning on selling their cabin.The flyer described the location of the property,the size of the lot,and the price.If one of the recipients responds by sending a letter accepting,an agreement:
A) will not be formed because the flyer was sent out as an invitation to make an offer.
B) will be formed because the first to respond gets the property.
C) will be formed because the price is included.
D) will not be formed because of the parol evidence rule.
Q2) Which of the following are generally considered to be legal offers?
A) Placing an item up for auction.
B) Catalog advertisements.
C) Price lists.
D) A note scribbled on a restaurant napkin that includes the details of the offer.
Q3) Briefly discuss how an offer can be accepted.Include offers for both bilateral and unilateral contracts.
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Chapter 12: Consideration
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Q1) Hilda owes Lex $3,000,which is an undisputed amount.If she offers him her car in full settlement of the debt and he accepts,the agreement is binding and he can no longer claim she owes him anything on the original debt.
A)True
B)False
Q2) "I'll sell you my car if I decide to sell it" is an example of:
A) a conditional offer.
B) an unliquidated offer.
C) a unilateral contract.
D) an illusory promise.
Q3) Marco agrees to sell Clowns R Us some balloons.The contract states that Clowns may buy as many balloons as it wishes.This agreement is:
A) a requirements contract.
B) an output contract.
C) an illusory contract.
D) an enforceable contract.
Q4) Discuss the concept of consideration.
Q5) What two exceptions did the UCC create for accord and satisfaction check cases?
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Page 14
Chapter 13: Legality
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Q1) Which of the following relationships will ordinarily not create an insurable interest?
A) Husband and wife.
B) Doctor and patient.
C) Debtor and creditor.
D) Chief executive officer and corporation.
Q2) When Mohammed was hired by Pomico,Inc.,he signed the following agreement,"Upon termination of my employment with Pomico,I agree not to work for a competing company within 30 miles of Pomico's headquarters for one year." This agreement,important to protecting secret information developed in the employer's business,is:
A) an unenforceable exculpatory agreement.
B) an unenforceable usurious agreement.
C) an enforceable bailment agreement.
D) an enforceable agreement not to compete.
Q3) An agreement may violate public policy even if the agreement does not require a party to commit a crime,tort,or violate a statute.
A)True
B)False
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Chapter 14: Capacity And Consent
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Q1) A party injured by fraud generally has the choice of suing for damages or rescinding the contract.
A)True
B)False
Q2) Marty,a 16-year-old,contracted with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle.He agreed to make monthly payments until the purchase price plus interest were paid in full.It is three years later and Marty has not disaffirmed the contract and has made regular payments on the cycle since turning 18.Which of the following is correct?
A) The contract is void and Marty has no obligation.
B) The contract is now voidable by Cream-of-the-Crop Cycles.
C) Marty has ratified the contract and is now bound by its terms.
D) Marty has ratified the contract but can still get a return of the payments made while he was a minor.
Q3) Contract rescission can sometimes be based upon a unilateral mistake.
A)True
B)False
Q4) Discuss the concept of a "material fact" in fraud situations.
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Page 16
Chapter 15: Written Contracts
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Q1) Alfred orally promised to pay Robert a salary of $30,000 per year for five years and his moving expenses up to $10,000 if Robert would quit his job and come to work for him at his manufacturing plant.Robert agreed to do so,but requested a written contract.Alfred assured him that the company attorney would prepare such a contract as soon as possible,but Alfred needed Robert to start at once.Accordingly,Robert sold his house,moved his family,and commenced to work for Alfred.He was fired without cause two months later.No written contract was ever executed.Can Robert enforce Alfred's oral promise?
A) No. This was a contract for longer than one year. Without a writing it violates the statute of frauds and is not enforceable.
B) Maybe. Robert should go to court under the theory of promissory estoppel. Alfred made an oral promise that Robert relied upon, and the way to avoid injustice is to enforce the promise.
C) Yes. This is a personal satisfaction contract, and Alfred gave no reason for dissatisfaction. Robert can recoup the loss he took on the sale of his house.
D) Yes. This is a partial performance of the sale of goods. Robert can recoup the loss he took on the sale of his house.
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Chapter 16: Third Parties
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Q1) Ted and Alice own their recreational vehicle subject to a security agreement to Third U.S.Bank to secure the repayment of the purchase money loan.Ted and Alice sell their RV to Bob and Carol,who agree to take over the loan payments to the bank.There is no novation with the bank.Under these facts,if Bob and Carol do not make the loan payments,Third U.S.Bank:
A) can sue Bob and Carol only.
B) can sue Ted and Alice only.
C) can sue Bob, Carol, Ted, and Alice.
D) cannot sue anyone but can repossess the RV.
Q2) The status of a third party is determined by:
A) the type of contract.
B) whether the third party gave consideration.
C) the reasonable expectations of the third party.
D) the intent of the contracting parties.
Q3) A party may make either an assignment or a delegation,but cannot make both an assignment and a delegation simultaneously.
A)True
B)False
Q4) Briefly discuss the enforceability of contracts by third parties.
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Chapter 17: Performance And Discharge
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Q1) Most contracts are discharged by mutual agreement of the parties.
A)True
B)False
Q2) Identify four factors courts consider in deciding the validity of commercial impracticability and frustration of purpose claims.
Q3) The statement,"You will have a job with Snelling & Snelling as long as you complete your degree in business administration this May" does not create a condition because it does not include the phrase "provided that."
A)True
B)False
Q4) A court may,at times,discharge a party who has not performed.
A)True
B)False
Q5) 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?
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Page 19
Chapter 18: Remedies
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Q1) In a promissory estoppel case,a court will generally award:
A) only reliance damages.
B) specific performance.
C) both reliance and punitive damages.
D) only nominal damages.
Q2) If a court orders rescission and restitution of a contract under which Nala sold a baseball card to Shirley in exchange for $450:
A) Shirley must return the baseball card.
B) Nala must return the $450.
C) Both a and c
Q3) The concept that an injured party may recover consequential damages only if the breaching party should have foreseen them was established in:
A) Bi-Economy Market, Inc. v. Harleysville Ins. Co. of New York.
B) Putnam Construction & Realty Co. v. Byrd.
C) Hadley v. Baxendale.
D) Toscano v. Greene Music.
Q4) Identify the considerations the United States Supreme Court outlined for calculating punitive damages.
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Page 20
Chapter 19: Practical Contracts
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Q1) 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
Q2) A letter of intent is not likely to be enforceable unless:
A) there is a clearly stated start date for the contract.
B) both parties agree on compensation.
C) it is clear that both parties intended to be bound by the letter.
D) conditions in the letter are met.
Q3) The legal term for a promise in a contract is "provision."
A)True
B)False
Q4) Which of the following is NOT one of the three ways to amend a written contract?
A) write and sign an amendment document.
B) verbally agreeing to the changes and shaking hands on the deal.
C) crossing out the mistakes and writing in the corrections.
D) writing a totally new contract with the correct provisions.
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Chapter 20: Introduction To Sales
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Q1) UCC Section 2-204 provides three important rules that enable parties to make a contract quickly and informally.These include all but which of the following?
A) The parties may make a contract in any manner sufficient to show that they reached an agreement.
B) A writing sufficient under the statute of frauds may be a simple memo, a letter, or informal note, but need not itself be a contract.
C) The UCC will enforce a deal even though it is difficult to say exactly when it was formed.
D) A court may enforce a bargain even though one or more terms were left open.
Q2) Megan agrees to sell Nancy her Rolex watch but they do not specify a price.In such a case,the court would not enforce the agreement because all of the essential terms are not present.
A)True
B)False
Q3) Discuss the importance of the UCC to the law of sales.Include who created the UCC,how it becomes law,and the stated purposes of the statute.
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Chapter 21: Ownership And Risk
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Q1) Imogene takes her diamond solitaire ring to Sparkle Jewelry Shop to have the prongs holding the diamond retipped and have the ring cleaned.The clerk at Sparkle says she will have to leave the ring and that it should be ready in about a week.When Imogene returns in a week to get her ring,she finds out that the ring has been sold.Which of the following is true?
A) Sparkle Jewelry Shop had the power to transfer all of Imogene's rights in the ring to a good faith buyer in the ordinary course of business.
B) This situation was a theft of the ring by Sparkle, and Sparkle must retrieve the ring and return it to Imogene.
C) The buyer of the ring must return it to Imogene since the buyer did not fully investigate whether Sparkle had good title to the ring.
D) Imogene has lost title to her ring and has no recourse since she is responsible for investigating the merchant's integrity before leaving her property.
Q2) A purchaser may acquire better title than the seller had.
A)True
B)False
Q3) Discuss the concept of insurable interests.
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Page 23
Chapter 22: Warranties And Product Liability
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Q1) Inez contracted with Filippo Furnaces Co.for the installation of a new furnace.Inez selected the furnace she wanted,accepting no suggestions from Filippo Furnaces' heating engineer.The furnace operated fine,but it did not heat the entire house.The size of the blower on the furnace was too small to accommodate the third floor of the house.Inez sued Filippo Furnaces Co.for the breach of the implied warranties of merchantability and fitness.What result?
Q2) Strict liability is based on contract law.
A)True
B)False
Q3) In a breach of warranty case,the buyer must:
A) notify the seller of defects within a reasonable time.
B) bring any lawsuit no later than three years after the defect was discovered.
C) extend the statute of limitations in writing rather than orally if they choose to allow a longer time for bringing suit.
D) notify the seller of defects within six months of their discovery or they cannot bring a lawsuit.
Q4) Under the UCC,no warranty of title arises unless the contract is in writing.
A)True B)False
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Chapter 23: Performance And Remedies
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Q1) Define these terms: usage of trade; course of dealing; and course of performance.
Q2) A homeowner has a contract with a firewood supplier to bring a rick of hardwood at the beginning of each month from October through March.If the supplier has brought a mixture of hard and soft woods for the first three deliveries,the homeowner cannot reject a delivery in January just because it includes some soft wood.
A)True
B)False
Q3) A seller may not make repairs or adjustments after the goods have been tendered,even if that action will bring the goods into conformity in order to "cure" nonconforming goods.
A)True
B)False
Q4) A buyer who accepts nonconforming goods may revoke the acceptance under limited circumstances.
A)True
B)False
Q5) Discuss the UCC rules on the limitation of damages in a contract.
Q6) Identify six possible remedies for a seller when the buyer breaches a contract.
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Chapter 24: Secured Transactions
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Q1) A security interest in money may be perfected by:
A) filing a financing statement.
B) creating a PMSI.
C) possession only.
D) redemption.
Q2) The initial term for which a financing statement will be effective is:
A) one year.
B) five years.
C) ten years.
D) two years.
Q3) 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.
Q4) To perfect a security interest in a negotiable instrument,Second State Savings and Loan should:
A) file a financing statement.
B) take possession of the instrument.
C) do nothing. Perfection is automatic.
D) secure a court order.
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Chapter 25: Creating A Negotiable Instrument
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Q1) Tim wrote a negotiable note.Subsequently,Tim's debts were discharged in bankruptcy.If a holder in due course presents the note for payment,Tim does not have to pay.
A)True
B)False
Q2) Laurel Speckle received a check from State University.She indorsed the check as follows: "For Deposit only,/s/ Laurel Speckle." Laurel's indorsement is a:
A) blank indorsement.
B) special indorsement.
C) restrictive indorsement.
D) None of the above is correct.
Q3) A claim in recoupment can be used against a holder in due course.
A)True
B)False
Q4) Personal and real defenses are valid against an ordinary holder,only real defenses can be used against a holder in due course.
A)True
B)False
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Chapter 26: Liability For Negotiable Instruments
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Q1) When a negotiable instrument is transferred,the transferor warrants all EXCEPT:
A) that the transferor is a holder in due course of the instrument.
B) all signatures are authentic.
C) as far as she knows the issuer is solvent.
D) the instrument has not been altered.
Q2) Warranty liability is the liability of someone who gives payment on a negotiable instrument.
A)True
B)False
Q3) List the warranties a transferor of a negotiable instrument makes.
Q4) Check kiting is defined as:
A) indorsing a check while knowing that the check is a stolen check.
B) carelessly paying an unauthorized instrument.
C) a scheme of overdrawing account A by depositing a check in account B, then overdrawing account B to cover the insufficient funds in account A.
D) issuing an instrument to an impostor who negotiates the instrument to a bank that is unaware of the fraud.
Q5) Explain when presentment warranties apply.Identify the presentment warranties on a check and a promissory note.
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Chapter 27: Accountants' Liability
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Q1) After completing an audit,the most unfavorable opinion an auditor can issue is a disclaimer of opinion.
A)True
B)False
Q2) In January,E-treme Inc.entered into an oral contract with Ralco,LLC,an accounting firm,for the preparation of its tax return.The contract is:
A) unenforceable under the statute of frauds since it is not in writing.
B) unenforceable under the UCC since it is not in writing.
C) enforceable, but only up to a value of $10,000.
D) enforceable even though it is oral.
Q3) Adam claimed that N & A,its accounting firm,negligently prepared an audit.To hold the accounting firm liable,which of the following elements must be established?
A) Scienter or guilty knowledge.
B) A fiduciary relationship.
C) Failure to exercise due care.
D) An executed engagement letter.
Q4) Discuss the advantages and disadvantages of using IFRS.
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Chapter 28: Agency Law
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Q1) Pamela hired Lena to sell her business.Lena:
A) can buy the business as long as the price is fair.
B) can buy the business as long as she qualifies for financing.
C) can buy the business only with Pamela's permission.
D) cannot buy the business under any circumstances.
Q2) As a general rule,an agent is liable on contracts entered into on behalf of a fully disclosed principal.
A)True
B)False
Q3) If apparent authority is present,the principal is liable for even the unauthorized acts of the agent.
A)True
B)False
Q4) Generally,either party to an agency relationship has the power to terminate it at any time.
A)True
B)False
Q5) The bankruptcy of an agent automatically terminates an agency relationship. A)True
B)False
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Chapter 29: Employment Law
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Q1) Prior to the Industrial Revolution,the primary law of employment was that,absent an agreement otherwise,a worker was hired for a year at a time.
A)True
B)False
Q2) Under the Americans with Disabilities Act,a person with a disabling illness:
A) is not considered disabled once the illness is being managed with medicines.
B) is not considered disabled unless there is no known cure.
C) is considered disabled, but only at times when hospitalization is required for treatment.
D) is considered disabled, even if the illness is under control.
Q3) The Family and Medical Leave Act applies to:
A) companies with 15 or more full-time workers.
B) companies with 50 or more employees.
C) companies with 100 or more employees.
D) any company engaged in interstate commerce.
Q4) Whistleblowers are employees who disclose illegal behavior on the part of their employers.
A)True B)False
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Chapter 30: Labor Law
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Q1) Jenna works for Mega Corp as a production employee.She is paid an hourly wage.She wishes to negotiate her own employment contract with management since she does not agree with the terms of her union's collective bargaining agreement.Can Jenna negotiate her own contract? Explain.
Q2) The NLRA requires the union and the employer to reach an agreement through good-faith collective bargaining.
A)True
B)False
Q3) The management of Northeastern Manufacturing may not close one of its manufacturing plants without bargaining that issue with the union if its workers are represented by a collective bargaining unit.
A)True
B)False
Q4) Valley Mart told its employees that they would be fired if they actively supported a unionizing effort.Valley Mart has committed an unfair labor practice.
A)True
B)False
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Chapter 31: Starting A Business
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Q1) Cooperatives may be either incorporated or unincorporated businesses.
A)True
B)False
Q2) Franchise fees can be costly,but they are usually payable over a number of years,after profits are generated from the business.
A)True
B)False
Q3) Corporations have perpetual existence.
A)True
B)False
Q4) 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.
Q5) Briefly discuss the limitations on a corporation electing Subchapter "S" status.
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Chapter 32: Partnerships
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Q1) Doyle contributed $10,000 when he became a general partner in the existing partnership of R & Z Heating.If Albert wins a judgment for $25,000 against R & Z on a claim that was incurred before Doyle became a partner,Doyle shares joint and several liability with his new partners for the whole obligation.
A)True
B)False
Q2) Jack and Jill were living together.Jack wanted to start a small retail store,but did not have good credit.Jill,whose credit was excellent,signed loan agreements with Jack so he could borrow the money to start the business.Jack used business cards that stated he was the "owner" of the business.He and Jill filed separate tax returns.Jack stated he was self-employed and claimed the business was a sole proprietorship.The money that was earned from the store was placed into a joint checking account owned and used by Jack and Jill.When there were significant decisions to be made about the business,such as deciding to franchise the business,the decision was made jointly by Jack and Jill. Five years after the business was started,Jill left Jack.She claimed she was entitled to one-half the business's profits since she and Jack were partners.Jack disagreed and claimed they never had a partnership.Discuss Jill's claim.
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Chapter 33: Life And Death Of A Corporation
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Q1) A corporation is not allowed to issue dividends to shareholders unless it is solvent.
A)True
B)False
Q2) Defining a corporation with such information as the corporate name,the number and type of authorized shares of stock,identification of the purpose and the agent,is done through the:
A) charter.
B) articles of incorporation.
C) certificate of organization.
D) All of the above. All of these terms are used to identify the same document.
Q3) Isabel,Wesley,Gina,and Lucas worked together intensively to form and become the only shareholders of a corporation that is environmentally conscious.Is there anything they can do to avoid having shares of stock in their company sold to someone who does not share their vision for the environment?
Q4) Terminating a corporation is a three-step process: dissolution,winding up,and termination.
A)True
B)False
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Chapter 34: Corporate Management
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Q1) 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.
Q2) Amy is on the board of directors of Computers Plus.Computers Plus is looking for a warehouse to purchase.Amy owns a warehouse.In order for Amy to sell her warehouse to Computers Plus:
A) the transaction must be fair to both Amy and Computers Plus.
B) the disinterested members of the board of directors may approve the transaction.
C) she must resign her position on the board of directors of Computers Plus before any negotiations for the warehouse begin.
D) a court must review the opportunity to determine its favorability.
Q3) Discuss the purposes of the "business judgment rule."
Q4) Corporate responses to takeover attempts are largely governed by federal law.
A)True B)False
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Chapter 35: Shareholders
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Q1) Jan is a controlling shareholder in E-treme,Inc.Under the law,controlling shareholders must include minority shareholders in any favorable arrangements that they make for their own stock.
A)True
B)False
Q2) Matt,a dissident shareholder,can run for director by placing his name on the company's proxy statement.
A)True
B)False
Q3) The proceeds,if any,of a derivative lawsuit go to:
A) the shareholders of the corporation.
B) the shareholders who actually filed the lawsuit.
C) the board of directors.
D) the corporation.
Q4) In a derivative lawsuit,the named plaintiff:
A) is the corporation on whose behalf the lawsuit is filed.
B) is the particular class of shareholders primarily injured by the wrong.
C) consists of all the corporation's shareholders.
D) is the board of directors for the corporation.
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Chapter 36: Securities Regulation
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Q1) When a stock underwriter acts as the company's agent in selling stock,it is called a:
A) company underwriting.
B) express underwriting.
C) firm commitment underwriting.
D) best efforts underwriting.
Q2) Under the 1934 Act,an issuer must register with the SEC if:
A) it completes a public offering under the 1933 Act.
B) its securities are traded on a national exchange.
C) it has at least 500 shareholdres and total assets that exceed $10 million.
D) All of the above.
Q3) The SEC creates law in all but which of the following ways?
A) Bringing cease and desist orders.
B) Issuing releases.
C) Promulgating rules.
D) Writing no-action letters.
Q4) The SEC has enforcement powers,including the power to issue cease and desist orders,to levy fines,and to confiscate profits from illegal transactions.
A)True
B)False
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Chapter 37: Bankruptcy
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Q1) In a Chapter 13 bankruptcy,creditors cannot force a debtor into bankruptcy; nor can they vote to confirm or reject a plan of reorganization.
A)True
B)False
Q2) Link negligently ran his car into John,causing $50,000 in injuries.Link was intoxicated at the time of the accident.Can Link discharge this debt in bankruptcy?
A) Yes, claims based on negligence are dischargeable.
B) Yes, as long as he didn't intend to hit John's car.
C) No, such claims are not dischargeable in bankruptcy.
D) No, because Link breached a fiduciary duty.
Q3) Francesca cannot serve as a trustee in a bankruptcy case because she is not a lawyer.
A)True B)False
Q4) Alimony and child support obligations are considered priority claims. A)True B)False
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Chapter 38: Antitrust
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Q1) What law prohibits mergers that are anti-competitive?
A) Sherman Act.
B) Clayton Act.
C) Robinson-Patman Act.
D) Radmon Act.
Q2) A monopoly is illegal:
A) under any circumstances, under Section 2 of the Sherman Act.
B) only if it is gained or maintained by using wrongful tactics.
C) if you have greater than 50 percent of market share.
D) any time there are no interchangeable products.
Q3) Gary,Louise,and Brian,who own competing gas stations in town,happen to see each other at a restaurant one morning and have breakfast together.While talking,they decide to set their gas prices at the same amount.They have committed an illegal act only if the agreed price is unfair to consumers.
A)True
B)False
Q4) Both the Justice Department and the Federal Trade Commission enforce antitrust laws.
A)True
B)False
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Chapter 39: Consumer Law
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Q1) The Magnuson-Moss Warranty Act only covers face-to-face sales,not catalog or Internet sales.
A)True
B)False
Q2) Victoria has a MasterCard with a credit limit of $9,000.This is:
A) open-end credit.
B) closed-end credit.
C) an installment loan.
D) a secured debt.
Q3) Employers must have written permission from job applicants to request a credit report.
A)True
B)False
Q4) Commonground Collections has been hired to collect past-due medical bills for Lakeview Physicians.List some activities that Commonground may not do pursuant to the FDCPA.
Q5) In 30-year mortgages,the finance charge typically exceeds the amount of the principal.
A)True
B)False
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Chapter 40: Environmental Law
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Q1) Which of the following options are available to power plants for meeting emissions standards?
A) Installing scrubbers.
B) Switching to alternative fuels.
C) Trading emissions allowances.
D) All of the above are options that power plants can use in meeting emissions standards.
Q2) Discuss the purpose of and problems with the Kyoto Protocol from the perspective of the United States.
Q3) Weste,Inc.decided to expand by building a $50 million manufacturing facility.The expansion is not regulated or approved by the government.Nevertheless,Weste must prepare an environmental impact statement.
A)True
B)False
Q4) The cost-benefit trade-off is particularly complex in environmental issues because those who pay the cost often are not the ones who receive the benefit.
A)True
B)False
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Chapter 41: Cyberlaw
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Q1) The European Union prohibits the transfer of personal customer information to countries that lack adequate privacy protection.
A)True
B)False
Q2) What statute requires banks and other financial institutions to disclose to consumers any non-public information they wish to reveal to third parties?
A) Banking and Financial Institution Privacy Act.
B) Gramm-Leach-Bliley Privacy Act.
C) Electronic Communications Privacy Act.
D) Communications Privacy and Decency Act.
Q3) The CAN-SPAM Act:
A) applies to virtually all promotional e-mails, whether or not the sender has a pre-existing relationship with the recipient.
B) provides unavoidable requirements for senders of promotional e-mails.
C) requires recipients of unsolicited, pornographic e-mails to notify the Justice Department.
D) requires senders of promotional e-mails to provide a valid return address, which may be a post office box or a specific physical location.
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Chapter 42: Intellectual Property
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Q1) Christy and Sylvester trade movies by downloading each other's movie files.If the copyrighted material has a retail value greater than $1,000,Christy and Sylvester are subject to criminal penalties under the No Electronic Theft Act,even if they had no profit motive in reproducing the movies.
A)True
B)False
Q2) The Basic Books,Inc.v.Kinko's Graphic Corp.case held:
A) professors could print and sell lengthy course packets of copyrighted material under the "fair use" doctrine.
B) professors could not print and sell lengthy course packets of copyrighted material under the "fair use" doctrine.
C) professors could not use commercial printing companies under the "fair use" doctrine.
D) None of the above.
Q3) A color cannot be trademarked since it cannot be kept from use by other businesses.
A)True
B)False
Q4) Briefly discuss a patent,copyright,and trademark.
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Chapter 43: Real Property And Tenant-landlord Law
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Q1) Future interests in land:
A) are presently existing nonpossessory rights that may or may not develop later.
B) are possessory interests because they permit the holder to take possession at some point.
C) must create a right to, not merely the possibility of, possession at some time in the future or they would be merely illusory.
D) cannot be bought and sold.
Q2) A landlord's substantial interference with a tenant's use of the property is considered:
A) a constructive eviction.
B) a tort.
C) a violation of federal housing law.
D) permissible in a periodic tenancy.
Q3) In many states today a landlord must use reasonable care to maintain safe premises and is liable for foreseeable harm.
A)True
B)False
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Chapter 44: Personal Property And Bailment
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Q1) Personal property means all property other than:
A) soil, plants, and trees removed from the land.
B) minerals and crops removed from the land.
C) land and all things permanently attached to the land.
D) intangible property.
Q2) Distinguish between a contract and a gift.Give an example of each.
Q3) A bailment is different from a gift because:
A) a gift requires consideration, but a bailment does not.
B) a gift requires delivery, but a bailment does not.
C) in a bailment, only possession of the property is transferred to the bailee, whereas with a gift, both possession and ownership must pass to the donee.
D) a gift is always a contract, but a bailment is generally not a contract.
Q4) A bailment was created for the parties' mutual benefit.This means that the bailee must use ordinary care with the property.
A)True
B)False
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 Insurance
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Q1) A trust created in a will is:
A) an inter vivos trust.
B) a constructive trust.
C) a testamentary trust.
D) a probate trust.
Q2) Which of the following property is not affected by a will?
A) Life insurance.
B) Joint tenancy property.
C) Retirement benefits.
D) All of the above.
Q3) The percentage of people dying without a will is approximately:
A) 5%.
B) 25%.
C) 60%.
D) 90%.
Q4) Property of a person who dies without a will is distributed according to intestacy laws.
A)True
B)False
Q5) Discuss the differences between a will and a trust.
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