Legal Environment of Business
Midterm Exam
Course Introduction
This course explores the fundamental principles and frameworks that shape the legal environment in which businesses operate. Students will examine key aspects of contract law, agency, torts, regulatory compliance, and the structure of the American legal system as it pertains to commerce. Emphasis is placed on understanding how legal rules and institutions affect business decision-making, ethical responsibilities, and risk management. Through case studies and analysis of current legal issues, students will develop the ability to identify legal challenges, anticipate their impact, and apply legal reasoning to everyday business situations.
Recommended Textbook
Dynamic Business Law The Essentials 4th Edition by Nancy Kubasek
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25 Chapters
2450 Verified Questions
2450 Flashcards
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Page 2
Chapter 1: An Introduction to the Fundamentals of Dynamic Business Law
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Sample Questions
Q1) Which of the following involves remedies available to an individual when his or her rights are violated?
A)Civil law
B)Criminal law
C)Procedural law
D)Civil law and procedural law,but not criminal law
E)Civil law,criminal law,and procedural law
Answer: A
Q2) Explain the function of administrative agencies and why they are necessary.List five independent agencies and five executive agencies.
Answer: Constitutions and statutes are not complete in the sense of covering all the detailed rules that affect government and business relations.The task of administrative agencies is to perform particular governmental functions.For independent and executive agencies,students may choose from agencies listed in the textbook.
Q3) Many market transactions occur without legal guidelines.
A)True
B)False
Answer: False
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Chapter 2: Business Ethics and Social Responsibility
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Sample Questions
Q1) The social responsibility of business consists of the expectations the community imposes on firms doing business within its borders.
A)True
B)False
Answer: True
Q2) The social responsibility of business consists of the expectations ________ impose(s)on firms.
A)the community
B)future generations
C)management
D)employees
E)shareholders
Answer: A
Q3) Employees are not stakeholders of a business.
A)True
B)False
Answer: False
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Page 4
Chapter 3: The Uslegal System and Alternative Dispute Resolution
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Sample Questions
Q1) A federal district court established a "sliding-scale" standard for determining whether a business with Internet connections satisfies the minimum-contacts standard.
A)True
B)False
Answer: True
Q2) ADR gives businesses less control over the resolution of a dispute.
A)True
B)False Answer: False
Q3) A person who has the legal right to bring an action in court has what is known as a conditional privilege.
A)True
B)False Answer: False
Q4) In most states,a party has a certain,limited number of peremptory challenges.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Administrative Law
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Sample Questions
Q1) Administrative agencies are created by the judicial branch to carry out specific duties.
A)True
B)False
Q2) Which type of agency is generally defined as any body created by the legislative branch to carry out specific duties?
A)An administrative agency
B)An authoritarian agency
C)A quasi-legal agency
D)A procedural agency
E)A ministerial agency
Q3) The United States Congress has the power to create,but not dissolve,an administrative agency.
A)True
B)False
Q4) The Environmental Protection Agency (EPA)is an example of a hybrid administrative agency.
A)True
B)False
Q5) List and describe the steps involved in formal rule making.
Page 6
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Chapter 5: Constitutional Law
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Sample Questions
Q1) What does the Fifth Amendment's protection against self-incrimination mean?
A)That a person only has to be a witness against himself or herself if a felony is involved.
B)That a person does not have to be a witness against himself or herself if a first offense is involved.
C)That a person does not have to be a witness against himself or herself if prison time is involved as opposed to a mere fine.
D)That a person does not have to be a witness against himself or herself in a criminal case.
E)That a person has to be a witness against himself or herself in a criminal case.
Q2) When may government agents search without a search warrant?
A)When law enforcement officials believe it likely that the items sought will be removed before they can obtain a warrant
B)Outside of normal working hours for a judge
C)When they can show that the suspect who lives in the residence at issue has been in jail previously
D)When they can show that a felony is involved
E)All of these
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Page 7
Chapter 6: Criminal Law and Business
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Sample Questions
Q1) Ordinarily,to obtain an arrest warrant,a law enforcement agent must demonstrate that there is ________ that a suspect committed or is planning to commit a crime.
A)proof beyond a reasonable doubt
B)articulable suspicion
C)certainty
D)probable cause
E)reasonable suspicion
Q2) A ________ is a hacker whose intention is the exploitation of a target computer or network to create a serious impact,such as the crippling of a communications network.
A)computer offender
B)data obstructer
C)control obstructer
D)cyber terrorist
E)network thief
Q3) White-collar crimes are nonviolent acts against society that occur most frequently in the non-business content.
A)True
B)False
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8
Chapter 7: Tort Law
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Sample Questions
Q1) Discuss what is needed in order to establish damages in defamation actions.Address whether special proof of damages is needed and,if so,under what circumstances.
Q2) A person who commits a tort is often referred to as the ________.
A)tortfeasor
B)misdemeanant
C)felon
D)criminal
E)malefactor
Q3) When a(n)________ privilege exists,one cannot be sued for defamation for any false statements made,regardless of intent or knowledge of the falsity of the claim.
A)per se
B)res ipsa loquitur
C)comparative
D)absolute
E)conditional
Q4) The use of deadly force in defense of property is usually justified.
A)True
B)False
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Chapter 8: Real, Personal, and Intellectual Property
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Sample Questions
Q1) Most websites have ________ domain(s).
A)unprotected
B)one
C)two
D)three
E)real property
Q2) With a life estate,the future owner has an interest in seeing that the life tenant does not ________ the property.
A)possess
B)utilize
C)improve
D)waste
E)repair
Q3) A landowner cannot be required to involuntarily transfer his or her property to the government,because compelling the landowner to do so would violate the Due Process Clause of the United States Constitution.
A)True
B)False
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Chapter 9: Introduction to Contracts and Agreement
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Sample Questions
Q1) Which of the following is recognized by a court to prevent one party from being unjustly enriched at the expense of another party?
A)An express contract
B)A quasi-contract
C)An implied contract
D)An implied-in-fact contract
E)A bilateral contract
Q2) Which of the following is the reason the Uniform Commercial Code was drafted?
A)Different states had different laws governing contracts that did not allow interstate commerce to flow smoothly.
B)Many states had no law governing contracts.
C)Federal law governing contracts was difficult to apply.
D)The Uniform Contracts Code had already been successfully adopted by the states.
E)The Restatement of the Law Second,Contracts was not being evenly and fairly applied.
Q3) Courts interpret contracts using a subjective standard.
A)True
B)False
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Chapter 10: Consideration
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Sample Questions
Q1) A promise to do something that you are already obligated to do is not valid consideration.
A)True
B)False
Q2) When an accord and satisfaction is at issue,the ________ is the payment,by the debtor,of the reduced amount.
A)satisfaction
B)accord
C)both satisfaction and accord
D)fund transfer
E)bond
Q3) Define and discuss promissory estoppel,and give an example of when it would be applied.
Q4) Promissory estoppel is an exception to the rule requiring consideration.
A)True
B)False
Q5) An illusory promise is not consideration.
A)True
B)False
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Chapter 11: Capacity and Legality
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Sample Questions
Q1) If a person's mental deficiencies have resulted in his being adjudicated insane and a guardian has been appointed for him,any contract he enters into is voidable at his election.
A)True
B)False
Q2) In most states,a minor is someone under the age of ________.
A)21
B)18
C)19
D)23
E)25
Q3) Which of the following is some sort of mental or physical defect that prevents a person from being able to enter into a legally binding contract?
A)Undue influence
B)Subjugation
C)Duress
D)Incapacity
E)Insubordination
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Chapter 12: Reality of Assent
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Sample Questions
Q1) Which of the following involve(s)the active hiding of the truth about a material fact?
A)Concealment
B)Nondisclosure
C)Negligence
D)Concealment,nondisclosure,or negligence
E)Concealment and nondisclosure,but not negligence
Q2) European courts permit contract rescission for a mistake of value when the mistake involves more than 50 percent of the value at the time of the contract.
A)True
B)False
Q3) The Peerless ship case referenced in the textbook is a classic example of a ________ mistake.
A)unilateral
B)mutual
C)conditional
D)secondary
E)non-material
Q4) What is the result of a contract being voidable?
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Chapter 13: Contracts in Writing and Third-Party Contracts
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Sample Questions
Q1) Whenever a written agreement under the statute of frauds contains a serious and obvious typographical error,parol evidence is inadmissible to correct the error.
A)True
B)False
Q2) When may a court rule that parol evidence might be admissible to further the court's understanding of an agreement?
A)When a court determines that a written agreement represents a complete and final version of the agreement.
B)When a court determines that a written agreement does not represent a complete and final version of the agreement.
C)When a court determines that there is disagreement between the parties over performance of the agreement.
D)When a court determines that the plaintiff failed to do sufficient research to determine if signing the agreement was advisable.
E)When a court determines that neither party failed to obtain counsel to determine if signing the agreement was advisable.
Q3) Define "donee beneficiary," and give an example of a donee beneficiary contract.
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Chapter 14: Discharge and Remedies
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Sample Questions
Q1) A party's contractual obligations are terminated through ________.
A)performance
B)the failure of a condition to occur
C)operation of law
D)performance,the failure of a condition to occur,or operation of law
E)performance and the failure of a condition to occur,but not by operation of law
Q2) Express conditions are usually preceded by words such as conditioned on,if,provided that,or when.
A)True
B)False
Q3) If a contract does not clearly specify that the satisfaction is to be personal,the ________ standard applies.
A)implied
B)subjective
C)objective
D)absolute
E)implied-in-law
Q4) List the ways by which a party's contractual obligations can be terminated.
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Chapter 15: Formation and Performance of Sales and Lease Contracts
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Sample Questions
Q1) Belinda purchases a couch from Good Furniture Store.She pays for the couch,and the store agrees to deliver it.Unfortunately,on the way to her house,the vehicle overheats and burns,destroying the truck and the couch inside.Belinda asks for a refund or another couch.The storeowner refuses on the basis that risk of loss had passed to Belinda before the couch was destroyed.Who will win the dispute and why? What would have happened if Belinda had purchased the couch at a yard sale and the loss occurred while the seller was delivering it?
Q2) With a ________ contract,the buyer and seller typically execute an agreement,and the buyer leaves with the goods.
A)sale-or-return
B)sale-on-approval
C)simple delivery
D)FAS
E)CIF
Q3) A contract is a sale-or-return contract if the seller allows the buyer to take possession of the goods before deciding whether to complete the contract by making the purchase.
A)True
B)False
Page 17
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Chapter 16: Sales and Lease Contracts: Performance, Warranties,
and Remedies
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Sample Questions
Q1) Unless the parties have agreed otherwise,the buyer or lessee typically inspects the goods after paying for them.
A)True
B)False
Q2) Which of the following is true regarding express warranties?
A)They may be part of a brochure.
B)They may arise from a salesperson's oral promise.
C)A sample or model may provide an express warranty.
D)They may be part of a brochure,they may arise from a salesperson's oral promise,and a sample or model may provide an express warranty.
E)They may be part of a brochure and they may arise from a salesperson's oral promise,but a sample or model may not provide an express warranty.
Q3) According to the Uniform Commercial Code,in transit means that the seller has delivered the goods to a carrier,and the carrier has turned the goods over to the buyer.
A)True
B)False
Q4) List the exceptions to title warranties.
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Chapter 17: Negotiable Instruments: Negotiability and Transferability
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Q1) Which of the following is an incorrect statement regarding the Uniform Commercial Code's signature requirement for a negotiable instrument?
A)An "X" will suffice if the party intended that the mark be placed on the instrument and uses that mark to identify himself.
B)A signature may be made by means of a device or machine.
C)A signature may be made manually.
D)The signature of an agent on behalf of the principal binds the principal and satisfies the signature requirement.
E)The Uniform Commercial Code is fairly strict in interpreting what constitutes a signature.
Q2) Which of the following is an incorrect statement regarding the requirements for an instrument to be negotiable?
A)The instrument must be a written document.
B)The instrument must be payable at a fixed future time,not on demand.
C)The instrument must have an unconditional promise or order to pay.
D)The amount to be paid in the instrument must be a sum certain in money.
E)The document must contain either the words of negotiability-"to the order of"-or words indicating that it is a bearer instrument.
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Chapter 18: Holder in Due Course, Liability, and Defenses
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Sample Questions
Q1) Which of the following sections of the Uniform Commercial Code establishes the four requirements for becoming a holder in due course?
A)1-202
B)2-302
C)2A-302
D)3-302
E)4-202
Q2) When a party signs a negotiable instrument without knowing that it is,in fact,a negotiable instrument,the party can claim ________.
A)negligence
B)recklessness
C)malice
D)fraud in the factum
E)fraud in the factum and fraud in the inducement
Q3) A party who is conditionally liable on an instrument must pay the stated amount when it is presented for payment and make the payment without resorting to any other party.
A)True
B)False
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Page 20
Chapter 19: Secured Transactions and Bankruptcy
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Sample Questions
Q1) Which of the following can be considered after-acquired property?
A)Inventory
B)Livestock
C)Equipment
D)Inventory,livestock,or equipment
E)Inventory and equipment,but not livestock
Q2) Once a financing statement has been filed with the correct agency,how long is the statement valid without renewal?
A)180 days
B)1 year
C)3 years
D)5 years
E)7 years
Q3) Which of the following are a type of indispensable paper?
A)Fixtures
B)Documents of title
C)Accounts
D)Fixtures,documents of title,and accounts
E)Fixtures and documents of title,but not accounts
Q4) What are the two general goals of bankruptcy laws?
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Chapter 20: Agency and Liability to Third Parties
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Q1) Which of the following is true in situations in which a principal was undisclosed and the third party comes to know of the undisclosed principal's identity but proceeds to obtain a judgment against the agent?
A)The principal is liable to the third party anyway.
B)The principal is liable to the third party,but only if the agent does not pay.
C)The principal is liable to the third party,but only if the agent files for bankruptcy.
D)The principal is released from liability to the third party.
E)The principal is released from liability unless a contract for personal service was involved.
Q2) If an agent makes authorized expenditures in the course of working on behalf of the principal,the principal has a duty to reimburse the agent for the amount of money spent.This is known as the duty of subrogation.
A)True
B)False
Q3) An agent's obligation to act in the interest of the principal is known as the duty of performance.
A)True
B)False
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Chapter 21: Forms of Business Organization
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Sample Questions
Q1) Which of the following is true regarding joint ventures?
A)Generally,joint ventures are taxed like corporations.
B)If one of the members of a joint venture dies,the joint venture is automatically terminated.
C)Members of a joint venture are agents of the other members.
D)A joint venture may be formed without drawing up a formal agreement.
E)Courts frequently apply sole proprietorship law to joint ventures.
Q2) Under the Uniform Limited Liability Company Act,a limited liability company will dissolve after the passage of ________ consecutive days during which the company has no members.
A)30
B)60
C)90
D)121
E)180
Q3) A voluntary association between two or more people who co-own a business for profit is called a corporation.
A)True
B)False
Q4) Set forth the advantages and disadvantages of forming a corporation.
Page 23
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Chapter 22: Corporations: Formation and Organization
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Q1) When the government or private parties get a court order to dissolve a corporation,it is a(n)________.
A)consolidation
B)voluntary dissolution
C)involuntary dissolution
D)hostile takeover
E)leveraged buyout
Q2) A corporation is a ________ corporation in the state in which it is incorporated.
A)domestic
B)foreign
C)multinational
D)closely held
E)public
Q3) Because a stock certificate is a negotiable instrument similar to currency,if a stock certificate is destroyed (for example,by fire),the shareholder's ownership in the corporation terminates.
A)True
B)False
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24
Chapter 23: Securities Regulation
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Sample Questions
Q1) Which of the following is true regarding the Securities Exchange Act of 1934?
A)It regulates the subsequent trading of securities.
B)It requires that certain issuers file periodic reports with the Securities and Exchange Commission.
C)It permits the Securities and Exchange Commission to monitor securities markets for fraud and market manipulation.
D)It regulates the subsequent trading of securities,it requires that certain issuers file periodic reports with the Securities and Exchange Commission,and it permits the Securities and Exchange Commission to monitor securities markets for fraud and market manipulation.
E)It regulates the subsequent trading of securities and requires that certain issuers file periodic reports with the Securities and Exchange Commission,but it does not permit monitoring by the Securities and Exchange Commission.
Q2) Under the due diligence defense,the defendant must show that he or she investigated the registration statement and had reasonable grounds to believe that the statement was accurate.
A)True
B)False
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25
Chapter 24: Employment and Discrimination Law
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Q1) Under at-will employment,an employee may quit at any time.
A)True
B)False
Q2) The Age Discrimination in Employment Act (ADEA)was enacted to prohibit employers from ________ older workers.
A)refusing to hire
B)discharging
C)discriminating in the terms and conditions of employment against
D)refusing to hire or discharging,but not discriminating in the terms and conditions of employment against,
E)refusing to hire,discharging,or discriminating in the terms and conditions of employment against
Q3) Under Title VII of the Civil Rights Act of 1964,a successful plaintiff may be awarded which of the following type(s)of remedies?
A)Punitive damages
B)Remedial seniority
C)Compensatory damages
D)Remedial seniority and/or compensatory damages,but not punitive damages
E)Punitive damages,remedial seniority,and/or compensatory damages
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Page 26
Chapter 25: Consumer Law
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Q1) ________ laws are statutes or administrative rules serving to protect consumer interests.
A)Civil rights
B)Consumer
C)Labor
D)Employment
E)Environmental
Q2) ________ credit permits repeated transactions and assesses a finance charge on unpaid balances.
A)Open-end
B)Closed-end
C)Debt-based
D)Uncollateralized
E)Collateralized
Q3) If a credit bureau issues a consumer credit report for a reason not specified by the Fair Credit Reporting Act,the credit bureau may be subject to a "cease-and desist" order; however,it may not be held liable for damages.
A)True
B)False
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Page 27