Legal Aspects of Business
Chapter Exam Questions
Course Introduction
Legal Aspects of Business introduces students to the fundamental principles and concepts of law as they apply to business environments. The course covers topics such as the structure of the legal system, contracts, agency, employment law, intellectual property, competition law, and corporate governance. Through real-world case studies and practical examples, students learn to identify legal risks, comply with relevant regulations, and make informed decisions that align with ethical and legal standards. By the end of the course, students will have a foundational understanding of how legal frameworks impact business operations, creating a basis for responsible management and entrepreneurship.
Recommended Textbook Business Law and the Legal Environment Standard Edition 6th Edition by Jeffrey F. Beatty
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Chapter 1: Introduction To Law
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Q1) The doctrine of stare decisis:
A) makes the legal process more expensive.
B) is an equitable remedy.
C) makes the law more predictable.
D) is unimportant to the common law.
Answer: C
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) 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
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Chapter 2: Business Ethics And Social Responsibility
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Q1) A company that engages in unethical behavior may suffer severe consequences.
A)True
B)False
Answer: True
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
Q3) In 1919,Henry Ford was sued because:
A) he used corporate profits to support humanitarian and charitable works.
B) he diverted corporate profits for personal gain.
C) the Dodge brothers wanted a bigger role in management.
D) his factory was deemed to be a sweatshop.
Answer: A
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Chapter 3: Dispute Resolution
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Q1) A jury decision in a civil case:
A) must be unanimous.
B) must be reached in the same day the case is heard.
C) depends on whether or not the parties have agreed to have their case decided by less than a unanimous verdict.
D) is achieved by informal deliberations.
Answer: D
Q2) Briefly describe the process of jury selection.
Answer: The process of jury selection is called voir dire.The court's goal is to select an impartial jury.Through a series of questions,attorneys for each side attempt to get the most favorable jury for their position.As potential jurors are questioned,either side may exclude a juror for cause (some reason to think the person may not be impartial)or via a limited number peremptory challenges,in which no reason must be stated for excluding a juror.
Q3) Primary methods of alternative dispute resolution include litigation and mediation.
A)True
B)False
Answer: False
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Chapter 4: Common Law,Statutory Law,And Administrative Law
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Q1) Discuss the two federal statutes that give Americans the power to aquire or protect personal information.
Q2) Assume that in December 2006,the Environmental Protection Agency (EPA)filed an administrative complaint against Marlin Firearms Co.alleging that the company exceeded chromium emissions limits.The EPA proposed a $257,162 fine.Which statement is correct concerning the administrative agency adjudication?
A) A jury decides the matter.
B) The Federal Rules of Criminal Procedure govern the admissibility of evidence.
C) The losing party has a right to appeal.
D) The parties are not represented by attorneys.
Q3) While at the park,Tasha saw a small child fall into the lake.Tasha did not know the child.Under the common law of most states,Tasha has a legal duty to take reasonable steps to assist the child if Tasha is able to help and such help will not jeopardize Tasha's well being.
A)True
B)False
Q4) Define the common law.Discuss its conflicting goals and the doctrine created to serve one of these goals.
Page 6
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Chapter 5: Constitutional Law
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Q1) Obscene speech is protected by the First Amendment.
A)True
B)False
Q2) 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
Q3) Congress passed the federal OSHA establishing job safety standards.Illinois passed its own statute,which had slightly more lenient standards.Illinois workers are only held to the state standards unless they are involved in interstate commerce.
A)True
B)False
Q4) Discuss the Miller test to determine if a creative work is obscene.
Q5) Misleading commercial speech may be outlawed altogether without violating the Constitution.
A)True
B)False
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Chapter 6: Intentional Torts And Business Torts
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Q1) Angela sued Tom for battery.Angela was awarded $30,000 for future medical expenses.Five years after the award,Angela realizes that her medical expenses will far exceed $30,000.Under the single recovery principle:
A) Angela will be able to submit the additional medical bills to the court for payment.
B) Tom will have to pay the additional medical bills.
C) Tom will have a qualified privilege and only have to pay a portion of the additional medical expenses.
D) Angela will have no recourse against Tom or the court for the medical expenses as long as the original award was reasonable.
Q2) A company that makes a commercial with a person who does an excellent,realistic job of pretending to be a famous movie star could be sued by the real actor for the tort of:
A) intrusion.
B) defamation.
C) commercial exploitation.
D) none of the above, since public figures are often imitated by other actors.
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Chapter 7: Negligence And Strict Liability
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Q1) Kenneth was exposed to radiation on his job in an environmental cleanup.In a lawsuit against his employer,the court must decide the full extent of both present and future damages rather than allowing Kenneth to return to court years later if medical problems develop at that time.
A)True
B)False
Q2) A contractor used dynamite to loosen a rocky hillside.The blast from the dynamite caused a house foundation to crack.The house was located over a half-mile away from the dynamite site.The contractor was careful when using the dynamite and no allegation of negligence is made.However,the house owner claims the contractor is liable for damage to the foundation.Is the house owner correct? Explain.
Q3) 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.
Q4) List and discuss the elements necessary to establish negligence.
Q5) Discuss the concepts of contributory negligence and comparative negligence.
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Chapter 8: Crime
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Q1) 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.
Q2) A misdemeanor is distinguished from a felony based upon:
A) the rules of evidence.
B) the length and place of possible imprisonment.
C) the burden of proof.
D) the type of intent.
Q3) 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.
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Chapter 9: International Law
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Q1) Identify the term for and discuss the legality of a government's taking of property owned by foreign investors.Discuss what action a company might take if it wants to do business abroad but is concerned about losing its property to a foreign government.
Q2) With respect to United States patents and copyrights,GATT:
A) expressly excludes controversies involving patent and copyright violations.
B) will allow the United States to assess tariffs against a country that refuses to honor U.S. copyrights or patents.
C) imposes sanctions against any country refusing to honor another signatory country's patents or copyrights.
D) requires retribution to be paid to the United States by any country ignoring U.S. patents or copyrights.
Q3) Yount,Inc.is interested in expanding its business to include exporting its products to several other countries.Discuss two federal statutes that should be considered before making the decision to export.
Q4) The United States is the world's largest exporter of agricultural products.
A)True
B)False
Q5) Explain the origin and purpose of the World Trade Organization.
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Chapter 10: Introduction To Contracts
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Q1) Larry goes to his barber who has cut his hair for the past several years.The barber proceeds to cut his hair as they talk about the most recent snow storm to hit the area.This is an example of a:
A) unilateral, implied contract.
B) bilateral, implied contract.
C) unilateral, express contract.
D) bilateral, express contract.
Q2) What is not required to establish promissory estoppel?
A) A promise made by the defendant.
B) A promise made by the plaintiff in response to the defendant's promise.
C) Reliance on the defendant's promise.
D) Enforcing the promise is the only way to avoid injustice.
Q3) One purpose of contract law is to make business matters more predictable. A)True
B)False
Q4) 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."
Page 12
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Chapter 11: Agreement
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Q1) Regency Construction placed an order for two hundred 2 x 4s from Lumber Jack.If the place of delivery and time for shipping the goods are not specified,the UCC provides:
A) the place of delivery is Lumber Jack's and the time for delivering the lumber is a reasonable time based on normal trade practice.
B) the place of delivery is Regency Construction and the time for shipping is within 30 days.
C) the place of delivery is Lumber Jack's and the time for delivering the lumber is within 30 days.
D) there is no contract because having more than one open term made the offer too indefinite.
Q2) In seeking to determine whether there is a meeting of the minds,the courts look to how a reasonable person would objectively view the language or actions of the parties.
A)True B)False
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) Jamie is building a house on her lot.She invites Earnie of Earnie's Excavation to bid on the excavation job.Earnie observes that the lot next to Jamie's is also under excavation and the soil in that lot is normal and not excessively rocky.Based on the assumption that the soil in Jamie's lot will be similar,he and Jamie agree that the excavation will cost $3,000.When Earnie starts digging,he learns there is solid rock under Jamie's lot.Earnie says it will cost an extra $2,500 for the excavation work.Jamie agrees just to get the job done but later refuses to pay a dime more than $3,000.If Earnie sues,the most likely result would be:
A) Jamie wins, as Earnie was under a preexisting duty to dig the basement.
B) Earnie wins as this modification is governed by the UCC and consideration is not required to enforce a modification of the agreement.
C) Jamie wins as Earnie was not acting in good faith and just wanted to put Jamie in a situation where she didn't have a choice but to agree to more money.
D) Earnie wins, as the modification was due to unforeseen difficulties.
Q2) Agreeing not to open a competing business could be consideration.
A)True
B)False
Q3) What two exceptions did the UCC create for accord and satisfaction check cases?
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Chapter 13: Legality
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Q1) Virginia borrowed money from G & L Lending at 35% interest per year.The state maximum interest rate is 20% per year.Virginia defaulted on the loan.What amount can G& L collect from Virginia?
A) G & L will be able to collect the principal plus 20% interest per year.
B) G & L will be able to collect the principal but not any interest.
C) G & L will not be able to collect either the principal or interest.
D) Any one of the above may be correct. The answer depends on the particular state law.
Q2) L & M loaned Joan $400 so that she could buy her textbooks for the current semester.L & M's terms for repayment of the loan (including interest)are,$200 in two months,$200 in four months,and another $100 at the end of the fifth month.The legal maximum rate of interest on this type of loan is six percent per annum.L & M's loan is usurious.
A)True
B)False
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?
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Chapter 14: Capacity And Consent
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Q1) Pushy Pat,a persuasive salesman,talked Nice Nancy into purchasing something she didn't really need or want.Nice Nancy may rescind the contract because of undue influence.
A)True
B)False
Q2) All states allow the remedy of rescinding a contract for the sale of goods while still allowing the remedy of suing for damages.
A)True
B)False
Q3) Discuss the concept of a "material fact" in fraud situations.
Q4) Which of the following is least likely to be regarded as a necessary?
A) Rent.
B) Food.
C) Medical expenses.
D) Educational expenses.
Q5) Fraudulent,but not innocent,misrepresentation permits the injured party to rescind a contract.
A)True
B)False
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Chapter 15: Written Contracts
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Q1) Parol evidence refers to anything (other than the written contract itself)that was said,done,or written before or as the parties signed the contract.
A)True
B)False
Q2) Sweet Plantation,Inc.made a written contract with Candy,Inc.whereby Sweet Plantation agreed to supply all of Candy's sugar requirements for the next year at $.25 per pound.A dispute arose as to how much sugar Sweet is to supply.The parol evidence rule will bar Sweet's introduction of evidence concerning the intent of the requirements of Candy.
A)True
B)False
Q3) In order to satisfy the statute of frauds,a writing must:
A) be a formal written document drafted by an attorney.
B) be signed by the defendant and contain the name of each party, the subject matter of the agreement, and the essential terms and promises.
C) be notarized.
D) All of the above.
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Chapter 16: Third Parties
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Q1) If Velma,as a birthday present,assigns to Jim her contractual right to collect $50 from Wood Co.,this would be a gratuitous assignment.
A)True
B)False
Q2) 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.
Q3) Generally,in comparison to a donee beneficiary,a creditor beneficiary has:
A) about the same legal rights.
B) substantially greater rights.
C) substantially fewer legal rights.
D) virtually no legal rights.
Q4) A party may make either an assignment or a delegation,but cannot make both an assignment and a delegation simultaneously.
A)True
B)False
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Chapter 17: Performance And Discharge
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Q1) The UCC recognizes commercial impracticability as a ground for discharge of a contract.
A)True
B)False
Q2) A wholesaler of coffee notifies a retailer that it cannot fulfill its contractual obligation to deliver 1,000 pounds of coffee at the agreed upon price of $2.00 per pound next month because of recent price increases in coffee.The retailer may treat the wholesaler as having breached the contract and sue for damages even though the wholesaler's performance is not due until next month.
A)True
B)False
Q3) Jackie hires Charles to lay new carpet in her bedroom.Charles does such a bad job,that the only way to fix the carpet is to start over and relay the carpet.Which of the following best describes this situation?
A) This is substantial performance. Jackie must still pay something to Charles.
B) This is a material breach. Jackie must still pay something to Charles.
C) This is substantial performance. Jackie owes nothing to Charles.
D) This is a material breach. Jackie owes nothing to Charles.
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Chapter 18: Remedies
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Q1) Specific performance is available when the subject matter of the contract is unique.
A)True
B)False
Q2) Larry purchased a Leisure Lawnmower because the company salesperson intentionally misled him by assuring him that the mower was self-propelled,had a mulching feature,and had a five-year unlimited manufacturer's warranty.When Fred finds out that his new Leisure Lawnmower is not self-propelled,does not mulch,and has a 90-day warranty,he may successfully sue for:
A) reformation of the contract only.
B) restitution only.
C) restitution and possibly punitive damages.
D) compensatory damages only.
Q3) Generally,reasonable liquidated damage clauses will be enforced:
A) when actual damages are easily determined.
B) when actual damages are difficult to determine.
C) almost always.
D) only in real estate sales contracts.
Q4) Identify the considerations the United States Supreme Court outlined for calculating punitive damages.
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Chapter 19: Practical Contracts
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Q1) Bob,a house builder,contracts with Ollie to build a house on Ollie's lot.Bob hires Rob to take his place as the builder on this contract.What has Bob done?
A) Subcontracted Rob.
B) Breached the contract.
C) Delegated his duties.
D) Assigned his rights.
Q2) Ambiguities in contracts are always interpreted in favor of the side that wrote the contract,since they are the ones who know what the provision is supposed to mean.
A)True
B)False
Q3) Statements of facts about the past and present are called:
A) provisions and terms.
B) promises and covenants.
C) representations and warranties.
D) damages and remedies.
Q4) Outline the parts of a typical contract.
Q5) 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) A requirements contract is a contract:
A) in restraint of trade.
B) in which the seller provides all of the goods that the buyer needs.
C) in which the buyer purchases all of the goods that the seller produces.
D) in which a party must buy a product it does not want in order to be allowed to buy a product it requires.
Q2) Long's Department Store contracted to buy 1,000 drop-waist velour dresses in heather gray from Durham.Subsequently,Durham called and asked to ship mink-colored dresses instead of heather gray.Long agreed,in writing,to the change.Which statement is correct?
A) The modification is not enforceable since there was no consideration for the change. B) The modification is not enforceable since the parties are merchants.
C) The modification is enforceable.
D) Whether the modification is enforceable depends on the gap-filler rule.
Q3) Jones contracts to buy a computer from Martin for $1500.The contract calls for Martin to service the computer quarterly for the first year and to tutor Jones on how to use the software.Is this contract covered by the UCC or common law?
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Chapter 21: Ownership And Risk
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Q1) In a shipment contract,title and risk of loss pass to the buyer when the goods are properly tendered at the destination point.
A)True
B)False
Q2) 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.
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Page 23
Chapter 22: Warranties And Product Liability
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Q1) 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.
Q2) In order to disclaim a warranty of fitness for a particular purpose,a merchant: A) need do nothing; such a warranty will not exist unless the merchant intends to create the warranty.
B) must make the disclaimer orally and directly to the buyer.
C) may disclaim the warranty with any language that is clear and conspicuous.
D) None of the above. Implied warranties cannot be disclaimed.
Q3) Generally,a contract may include language that limits or alters the damages recoverable for a breach of warranty,as long as the restrictions are not unconscionable.
A)True
B)False
Q4) The UCC requires sellers to give written warranties.
A)True
B)False
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Chapter 23: Performance And Remedies
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Q1) 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
Q2) The common law requirement that the seller make a tender of delivery that conforms in all respects to the contract requirements was retained by drafters of the UCC,although the Code includes sections that limit the rule's effect.
A)True
B)False
Q3) Precision had a contract to supply Higgins,Co.with 500 medical instruments for delivery in three months.Several weeks later Higgins reads in the Wall Street Journal that Precision has been sued for selling defective instruments.Higgins could:
A) require written assurances from Precision.
B) sue Precision for damages immediately.
C) "cover."
D) declare the contract is breached.
Q4) Discuss the UCC rules on the limitation of damages in a contract.
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Page 25
Chapter 24: Secured Transactions
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Q1) Great State Bank loans money to Seth,securing the loan with property owned by Seth.Great State Bank is advised by its attorney to file a financing statement.Great State Bank doesn't understand why it should spend the extra money for this filing,since Seth has told them that he has no other creditors.Why should Great State Bank file a financing statement?
A) There are criminal penalties for failing to file.
B) The financing statement allows Great State Bank to repossess the collateral on default without a court order.
C) The financing statement will protect Great State's priority rights with other creditors by giving notice to other creditors that it claims a security interest in the collateral.
D) Filing the financing statement is necessary to complete the attachment requirement in order to create a security interest.
Q2) Revised Article 9 of the UCC only applies to goods and does not include intangibles such as accounts or chattel paper.
A)True
B)False
Q3) Explain the difference between attachment and perfection.
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Page 26
Chapter 25: Creating A Negotiable Instrument
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Q1) In good faith,Clinton gave Jane $500 for a negotiable promissory note made out to Jane for $550.She needed some money before the due date on the note,and Clinton had no notice of outstanding claims or other defects of the note.Clinton:
A) has more rights than Jane.
B) has the same rights as Jane.
C) has only conditional rights because they depend on Jane's rights.
D) cannot transfer the note to anyone else.
Q2) The term "issuer":
A) is not used in relation to commercial paper.
B) is an all-purpose term that means both maker and drawer.
C) is synonymous with drawee.
D) is used in relation to commercial paper only to indicate the bank which creates a certificate of deposit.
Q3) Commercial paper is a contract to pay money.
A)True
B)False
Q4) A draft is always a check,but a check is not always a draft.
A)True
B)False
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Chapter 26: Liability For Negotiable Instruments
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Q1) Which of the following parties has primary liability on a draft?
A) The drawee.
B) The acceptor.
C) The drawer.
D) Any accommodation parties.
Q2) A check was indorsed as follows:
Jessica Hall
without recourse
Paul Samuels
Collection guaranteed
Melissa Liston
Which of the following will discharge all of the indorsers?
A) Notice of dishonor.
B) The without recourse indorsement within the chain.
C) Insolvency of drawer.
D) Certification of the check.
Q3) Explain when presentment warranties apply.Identify the presentment warranties on a check and a promissory note.
Q4) List the warranties a transferor of a negotiable instrument makes.
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Chapter 27: Accountants' Liability
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Q1) An auditor for Ralco Accounting firm was auditing the financial statements of E-prise.The auditor suspected that E-prise was engaged in conduct that violated FCPA,a federal law.Under Section 10A of the 1934 Act,the auditor is required to notify E-prise's board of directors of the suspicions.
A)True
B)False
Q2) To verify transactions,accountants use two mirror-image processes: vouching and tracing.Tracing is a process where the accountant begins with an item of original data and checks out all the activity that has occurred from beginning to end to make sure it has been properly recorded throughout the bookkeeping process.
A)True
B)False
Q3) A CPA's duty of care to a client most likely will be breached when the CPA:
A) gives a client an oral report instead of a written report.
B) gives a client incorrect advice based on an honest error in judgment.
C) fails to give tax advice that would save the client money.
D) fails to follow generally accepted auditing standards (GAAS).
Q4) Discuss the advantages and disadvantages of using IFRS.
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Page 29
Chapter 28: Agency Law
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Q1) Barnett was orally hired by Paula to locate desirable real estate that she could use for rental property.She stated she wanted to find a four-plex that could be purchased for under $200,000 that could be rented for at least $1,000 per month per unit (which equates to $4,000 rental per month for the property).Barnett located a four-plex that could be purchased for $160,000 and was renting for $1,200 per unit.It was such a good deal that he purchased it for himself.About two months later he found a second property that was listed for $199,000 and rented for $1,000 per unit.Paula purchased the property.Afterwards,she learned that Barnett had bought the $160,000 four-plex for himself without telling her about it.Paula believes that Barnett has acted improperly.Barnett claims that he did what she asked -- he found a property for under $200,000 that rented for $1,000 per unit.He also claims that since their agreement was oral,he has a legal defense if she pursues the matter in court.Does Paula have any legal recourse against Barnett? Explain.
Q2) An agency relationship can be created:
A) by the conduct of the parties.
B) by an oral agreement in all circumstances.
C) only by a written agreement.
D) only by the meeting of all the standards of contract law.
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Page 30
Chapter 29: Employment Law
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Q1) The Teresa Harris v.Forklift Systems,Inc.case held:
A) for there to be sexual harassment, the conduct must affect an employee's psychological well-being.
B) conduct need not affect an employee's psychological well-being to constitute sexual harassment.
C) Title VII does not apply to sexual harassment cases.
D) Title VII does not apply to same-sex harassment.
Q2) It is legal for a private employer to use lie detector tests as part of its usual hiring process.
A)True
B)False
Q3) Heather applied for a promotion,but her manager promoted a co-worker because the manager knew Heather was seven months pregnant.The manager did not want to promote someone who would probably be taking time off of work for childbirth and child care.The manager has acted legally and reasonably to protect her company's interests.
A)True
B)False
Q4) Discuss the requirements of the Family and Medical Leave Act.
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Chapter 30: Labor Law
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Q1) Kelly is upset with her supervisor and believes his conduct violates the terms of her union's collective bargaining agreement (CBA).The union filed a grievance on Kelly's behalf.Who will conduct the grievance hearing?
A) The U.S. Court of Appeals.
B) The National Labor Relations Board.
C) A member of the company's management team.
D) A replacement worker.
Q2) The duty of fair representation created by the NLRA and the LMRDA requires that:
A) a union represent all members impartially and in good faith.
B) a union must pursue any member's grievance against the employer.
C) an employer, in communications with employees during a union organizing effort, must fairly represent the effects it believes a union will have on the company.
D) the NLRB certify only proposed bargaining units that it thinks the union can properly represent.
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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32
Chapter 31: Starting A Business
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Q1) Seventy farmers in Morgan County joined together to gain the advantages of purchasing seed and fertilizer in bulk and of obtaining better prices when distributing and selling their crops.These farmers have formed a:
A) business trust.
B) cooperative.
C) franchise.
D) joint venture.
Q2) Corporations have perpetual existence.
A)True
B)False
Q3) Briefly discuss the limitations on a corporation electing Subchapter "S" status.
Q4) Harold and Zack have pooled their money together to buy real estate but have filed no formal papers to form a business.Harold,a lawyer,handles all the legal matters and Zack,a real estate broker,finds buyers for the property they have subdivided.Harold and Zack are engaged in a:
A) partnership.
B) close corporation.
C) limited liability company.
D) business trust.
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Chapter 32: Partnerships
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Q1) Astrid and Razi formed a partnership in which they agree to share profits 60 percent to Astrid and 40 percent to Razi.Losses will be shared:
A) equally, unless otherwise agreed.
B) 60 percent to Astrid and 40 percent to Razi, unless otherwise agreed.
C) according to their capital contributions to the partnership.
D) in whatever proportion provides the greatest tax advantage for the partners that year.
Q2) Which of the following events occurs first with respect to the ending of a partnership?
A) Termination.
B) Winding up.
C) Dissolution.
D) Distribution of proceeds.
Q3) Kyle,Pedro,and Madeline form a partnership.There is no agreement as to the duration of the partnership.The partnership is a partnership at will.
A)True
B)False
Q4) Identify and briefly discuss the management rights and duties of a partner.
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34
Chapter 33: Life And Death Of A Corporation
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Q1) MegaCorp is incorporated under Delaware law.It is registered to do business in New York.Legally,in New York MegaCorp is known as what kind of corporation?
A) Domestic.
B) Foreign.
C) Alien.
D) Cumulative.
Q2) What are some of the advantages for a business to incorporate in Delaware?
Q3) The officers of a corporation are:
A) chosen by the board of directors.
B) appointed by the president of the company.
C) elected by shareholders.
D) appointed by the Secretary of State.
Q4) TriColor,Inc.is doing business in Minnesota,West Virginia,and Oklahoma.TriColor must register in all three of these states.
A)True
B)False
Q5) Owners of preferred stock typically have a preference in liquidation.
A)True
B)False
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Chapter 34: Corporate Management
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Q1) RayCorp offers to buy out MegaCorp by paying $69 per share.LandCo,who also wants to buy MegaCorp,offers to pay $75 per share.When the bidding process is finally over,RayCorp has offered $85 per share and LandCo has offered to pay $90 per share.MegaCorp agrees to sell to RayCorp on grounds that,all things considered,the takeover by RayCorp would be better for the business.LandCo claims that MegaCorp should have sold the company to it since it was the highest bidder.Is LandCo correct?
A) Yes. This is a breach of duty. MegaCorp must sell the company to the highest bidder; it cannot give preferential treatment to a lower bidder.
B) No. This is covered by the Williams Act.
C) No. The directors have broad discretion in deciding to whom to sell the company.
D) None of the above.
Q2) Tender offers are regulated on the federal level by the National Labor Relations Act. A)True B)False
Q3) Identify the three types of masters corporate managers serve and discuss the goals of each.
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Page 36
Chapter 35: Shareholders
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Q1) Frank is a controlling shareholder in E-prise,Inc.Frank:
A) may not enter into unfair business transactions with the corporation.
B) has a fiduciary duty to minority shareholders.
C) may not exclude minority shareholders from beneficial arrangements involving stock.
D) All of the above are correct.
Q2) If directors serve on the boards of multiple corporations,the executives of those corporations are less likely to be overpaid.
A)True
B)False
Q3) Under the Model Act,who has the right to call a special meeting of the shareholders to vote on an emergency issue that cannot wait until the next annual meeting?
A) Shareholders who own at least 10 percent of a company's stock.
B) The board of directors.
C) Both of the above.
D) None of the above.
Q4) A shareholder proxy is generally revocable at any time.
A)True
B)False
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Chapter 36: Securities Regulation
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Q1) To recover for an alleged violation of SEC Rule 10(b)-5,a plaintiff is required to prove reliance on a misstatement or omission relative to the purchase of the security.
A)True
B)False
Q2) The Fallwater Partnership wants to incorporate and is considering using a DPO.Explain what a DPO is and discuss the advantages and disadvantages of this course of action.
Q3) 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
Q4) 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.
Q5) What information must be contained in a registration statement?
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Chapter 37: Bankruptcy
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Q1) Which of the following would not be considered a fraudulent conveyance or a voidable preference under the provisions of the Code? Immediately prior to filing bankruptcy:
A) debtor sells assets well below fair market price to Freddie, a friend.
B) debtor sells his car at a public auction, thinking that it would bring a decent price, but the car brings an amount well below fair market value.
C) debtor's corporation transfers assets to stockholders in lieu of cash dividends.
D) debtor pays $650 to "Nation on Line" for the past ten months of Internet service.
Q2) Francesca cannot serve as a trustee in a bankruptcy case because she is not a lawyer.
A)True
B)False
Q3) The start of the bankruptcy process is:
A) the submission of a plan of repayment.
B) the bankruptcy court's issuance of an order for relief.
C) a meeting of creditors.
D) the appointment of a trustee.
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Page 39
Chapter 38: Antitrust
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Q1) 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.
Q2) Both per se and rule of reason violations of the Sherman Act are automatically illegal.
A)True
B)False
Q3) A marketing representative who is tempted to engage in price-fixing due to heavy competition and similar prices for competitors' products should:
A) emphasize factors of her product that do not involve price.
B) emphasize service, reliability, and other factors of her company.
C) understand the serious criminal and civil penalties of engaging in price-fixing.
D) All the above.
Q4) Explain the overall purposes of the Sherman Antitrust Act,the Clayton Act,and the Robinson-Patman Act.How do each of these Acts relate to each other?
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Chapter 39: Consumer Law
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Q1) The Equal Credit Opportunity Act makes it illegal for a lender to discriminate against a potential borrower because of race,national origin,religion,or sex,but it is permissible to treat a borrower differently if he or she is on welfare.
A)True
B)False
Q2) The Fair Debt Collection Practices Act prohibits which of the following practices?
A) A debt collector falsely representing himself as a lawyer.
B) A debt collector telephoning the debtor at 8:00 a.m.
C) Visiting a debtor at work if the employer permits personal visits.
D) Using neighbors to locate the debtor.
Q3) The Federal Trade Commission Act considers the terms "deceptive" and "unfair" to be synonymous when determining what practices should be prohibited.
A)True
B)False
Q4) Employers must have written permission from job applicants to request a credit report.
A)True
B)False
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Chapter 40: Environmental Law
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Q1) Under the Endangered Species Act,what federal agency is responsible for preparing a list of species that are in danger of becoming extinct?
A) Department of Commerce.
B) Department of the Interior.
C) Department of Labor.
D) Both a and b are correct.
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) Truan,Inc.has decided to market a new pesticide.Truan must register the pesticide with the EPA.
A)True
B)False
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Chapter 41: Cyberlaw
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Q1) If a program is on your computer monitors your activities without your permission,you may be able to get protection through state legislation which makes spyware illegal.
A)True
B)False
Q2) "Hacking" is:
A) gaining unauthorized access to a computer system.
B) a major crime.
C) illegal under the federal Computer Fraud and Abuse Act, which applies to any computer attached to the Internet.
D) All of the above are correct.
Q3) Bidding on one's own goods at an online auction may subject the bidder to liability under anti-fraud statutes as well as liability under state statutes explicitly prohibiting shilling.
A)True
B)False
Q4) Spam is illegal per se.
A)True
B)False
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Chapter 42: Intellectual Property
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Q1) The advantages of trademark registration include all EXCEPT:
A) potential damages are higher.
B) after five years the mark becomes almost impossible to challenge.
C) it allows the trademark owner to use the TM symbol to put others on notice of the protection.
D) the mark is valid nationally.
Q2) Janice wrote a song called "Feelings of Love." She wrote the piano score and lyrics for a class she was taking at college and turned it into her professor.
A) Janice's song was automatically copyrighted when she wrote it down on paper.
B) If Janice wishes to enforce her copyright, she must first register her song with the Copyright Office.
C) Both of the above are correct.
D) Neither a nor b
Q3) If a trademarked name acquires a generic meaning,the owner of the trademark loses protection.
A)True
B)False
Q4) Briefly discuss a patent,copyright,and trademark.
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Page 44
Chapter 43: Real Property And Tenant-landlord Law
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Q1) Juan has the right to walk (or drive)across his neighbor's property to reach the highway.Juan's right is referred to an easement appurtenant which runs with the land.
A)True
B)False
Q2) Landlords have the right,and may have a duty,to evict tenants who seriously disturb others.
A)True B)False
Q3) Tom rented an apartment from Margaret on a month-to-month basis,with rent due on the first of the month.This type of tenancy is known as a "tenancy at will."
A)True B)False
Q4) Lauren and Hayden own residential houses side by side.Between the houses,is one driveway which provides mutual access to both back yards.Lauren actually owns the property where the driveway sits.However,Hayden has the right to use the driveway to access his back yard.What type of easement does this situation describe,an easement appurtenant or an easement in gross? What are the differences between the two types of easements?
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Page 45
Chapter 44: Personal Property And Bailment
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Q1) Jerry enters a restaurant and hangs his coat in an unattended cloakroom near the entrance of the restaurant.Even though no employee of the restaurant is present,the provision of the cloakroom makes Jerry think it will be safe.In this situation,the restaurant is a bailee of Jerry's coat.
A)True
B)False
Q2) Farmer Fred is leasing pasture land from Wealthy Warren.Farmer Fred is working the soil to turn the pasture land into land that will be able to grow crops.As Farmer Fred is preparing the field,he discovers a treasure chest full of gold and silver coins.The coins are all dated before 1810.A finder of treasure trove under common law:
A) was entitled to keep the treasure trove.
B) was required to turn the property over to the owner. Here, under common law, Farmer Fred is required to turn the treasure trove over to Wealthy Warren. C) was required to turn the treasure trove over to the State.
D) was required to turn the treasure trove over to the federal government who will give the treasure trove to the closest Native American reservation.
Q3) 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) Sarah has car insurance.While driving her automobile,Sarah negligently ran a red light and hit Vi's car.Which type of coverage will pay for the damage done to Vi's car?
A) Liability insurance.
B) Comprehensive insurance.
C) Collision insurance.
D) Uninsured motorist insurance.
Q2) If Walter becomes incompetent to manage his affairs:
A) his chosen attorney-in-fact can make decisions for him if he appointed the person in a durable power of attorney with a springing power to become effective upon Walter's incompetence.
B) a court will appoint a guardian if Walter had no power of attorney.
C) his will becomes effective, and his executor or executrix will manage his business and personal decisions.
D) Both a and b are correct.
Q3) The Uniform Probate Code has been adopted in all states.
A)True
B)False
Q4) Identify four ways a trust can be terminated.
Q5) Discuss the differences between a will and a trust.
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