Business Law Final Exam Sophia

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1

In which scenario do the different court systems in the U.S. interact properly?



A Colorado man is a defendant in a personal injury lawsuit for an incident that occurred in New Mexico when he was under the influence of marijuana. When hearing the case, the New Mexico judge applies the laws of Colorado, where marijuana is legal, rather than New Mexico law, which criminalizes it.



A New Jersey resident is sued by an Iowa resident. After a trial in which the New Jersey resident vigorously defends himself, the Iowa state court finds in favor of the defendant. The Iowa resident then files the same claim in a New Jersey state court, which dismisses the case.



A convict on death row in Texas sues, claiming that the death penalty violates the prohibition in the Constitution of cruel and unusual punishment. The federal courts refuse to hear the case, because the complaint includes questions of Texas state law.



A West Virginia woman was driving across the country on vacation and caused a traffic accident in Nebraska that resulted in a personal injury tort claim. The case is tried in Nebraska, but the state court judge applies West Virginia law, since that's where the defendant is from.

 

The Courts and the Legal Process

2

Compared to traditional litigation, arbitration and mediation are both __________.



quicker and more cost-effective



rarely used as forms of dispute resolution



more formal and complex



not favored or supported by courts

 

Alternative Dispute Resolution

3

If a breach of contract case is filed in federal court, the court __________.



has no subject matter jurisdiction, but can hear the case at its own discretion



has subject matter jurisdiction if the claim is for less than $75,000 and no plaintiff lives in the same state as any defendant



has no subject matter jurisdiction and cannot hear the case



has subject matter jurisdiction if the claim is for more than $75,000 and no plaintiff lives in the same state as any defendant

 

Subject Matter Jurisdiction

4

Select the true statement about statutory law.



Congress may enact statutory law in any area it so chooses.



Statutes at the state level are binding on all states.



Statutes are formed by democratically elected legislative bodies, subject to a system of checks and balances.



At the federal level, the President has no power whatsoever over the creation of statutory law.

 

Legislation and Other Sources of Law

5

Which level of state court would reverse the decision of a lower court for procedural missteps?



District court



General jurisdiction court



Limited jurisdiction court



Intermediate appellate court

 

State Courts in the U.S.

6

Select the true statement about primary sources of law in the U.S.



Public law governs the citizenry, but not the lawmakers themselves.



Substantive laws are necessary to determine how procedural laws will be enforced.



Procedural laws govern the rights and obligations of people.



A contract between two parties is an example of private law.

 

Origins of Law

7

ABC Corporation is one of the largest energy companies in the United States, with over $50 million in publicly traded shares. The corporation's unusual accounting practices have disguised the fact that the company has accumulated significant losses over the past five years, making it appear far more profitable than it is. The CEO of ABC Corporation has decided to continue misleading investors by hiding its mounting debt in order to support the company's current market valuation.

 

How would a deontologist evaluate this decision?



ABC Corporation is acting unethically because it is not striving for truthfulness or high-mindedness.



ABC Corporation is acting unethically because the results of its dishonesty are likely to be negative for its employees, for its shareholders, and for society as a whole.



ABC Corporation is acting unethically because it sees the investors' interests as unequal to the interests of the CEO and the corporation.



ABC Corporation is acting unethically because it has certain rights as a corporation, and therefore has a corresponding duty to consider the public good.

 

Major Ethical Perspectives

8

The CEO of a multinational retail corporation has decided to raise the minimum wage for its U.S. employees to three times the current federal minimum wage. The CEO explains that the company needs to provide its employees a living wage, regardless of what the law requires.

 

According to Milton Friedman, did the corporation fulfill its duty?



No, because the CEO's salary is still hundreds of times what the corporation's employees will be paid.



Yes, because employees will now be able to afford to purchase more of the company's products.



No, because the wage hike will drastically increase the corporation's liabilities and likely harm its stock price.



Yes, because the corporation is going beyond what the government requires it to do, in order to advance the public good.

 

Corporate Governance

9

Select the example where the court has established personal jurisdiction over the defendant.



Aisha, a resident of New York, is visited by a process officer at her workplace in New York City and delivered a summons to appear in court in Maryland. The lawsuit against her relates to property damage that occurred in a home she rented in New Jersey, which is owned by a woman from Maryland.



Miguel is being sued by an acquaintance of his over unpaid debts. Both Miguel and the plaintiff are residents of Colorado. Miguel has not been personally visited by a process server with a summons to appear in court, but he did receive one in the mail at his home.



Frank, an accountant, is suing a client for unpaid bills. The client is located in Mississippi, and Frank lives and works in Virginia. Frank initiates his lawsuit in his home state, because he knows many of the state judges.



Drew is being sued by a man who claims that Drew committed slander by speaking ill of him. Drew lives in Oregon, but the man is from Texas. Drew has received a summons ordering him to appear in court in Texas to respond to the complaint.

 

Personal Jurisdiction

10

The CEO of Oil Company X is dismayed to learn that oil has been leaking from one of its off-shore rigs into the Gulf of Mexico for the last five years. In deciding how to proceed, the company identifies a range of stakeholders, considers how different courses of action would impact each stakeholder, and determines which core values each decision would satisfy.

 

According to the Josephson's core values model for ethical decision-making, what should Company X do next?



Decide which stakeholders are most important and whose needs should be prioritized.



Determine which course of action will be easiest to implement.



Choose the course of action that is most likely to promote the greatest number of core values.



Weigh the financial cost of each possible course of action against the core values that it promotes.

 

An Ethical Decision Model

11

Select the example in which a corporation is making use of a safe harbor provision.



A corporation that hosts user-uploaded videos online reports a copyright infringement to federal authorities and removes the copyrighted video from its website in order to reduce liability.



A corporation that manufactures commercial exercise equipment establishes a thorough inspection process to ensure compliance with safety standards to reduce liability.



A software corporation promotes a whistleblower who exposed patent violations within the company.



A corporation that operates a chain of restaurants establishes an ethics hotline so that employees can report legal or company policy violations to the corporate office to reduce liability.

 

Minimizing Corporate Criminal Liability

12

What is the purpose of the Bill of Rights in the U.S. Constitution?



To clearly organize the branches of government



To define the relationship between the states



To create and establish a basic foundation of individual liberties



To establish a division of power between the branches of government

 

U.S. Constitution as a Source of Law

13

Knowledge of the __________ Act minimizes a business's liability exposure when making decisions related to accounting practices.



Sarbanes-Oxley



Civil Rights



Truth in Lending



Federal Trade Commission

 

Law in Business

14

Which of the following accurately characterizes the function of the U.S. Supreme Court?



In some years, the Court does not hear any cases whatsoever.



The Court is required to hear all of the cases that are sent to it by the U.S. Circuit Courts.



The Court selects only a small number of cases to hear on an annual basis.



The Court only hears cases sent to it by the District Courts.

 

Federal Courts in the U.S.

15

Which of the following is true of LLCs and their members?



Each member of an LLC can choose how he or she wishes to be taxed.



An LLC should have at least two members to be effective.



The members of an LLC can only be persons, and not other business entities.



There is no requirement regarding how many members an LLC must have.

 

Limited Liability Entities

16

Which of the following is an example of a general partnership?



Jonathan and Craig's catering business is going through a rough patch wherein the debts exceed the income. Jonathan is worried because he is personally liable for the whole of the company's debts, but Craig is only liable for the initial $50,000 that he invested.



Ken and Paul start a graphic design business together. When Ken fails to deliver on a contract with a customer, Ken and Paul are held equally responsible when the customer sues for damages.



Yvonne opens her first business selling sporting goods. She hires a marketing manager, an accountant, and several sales staff to help her manage the demand for her goods. When she files her annual taxes, she claims 100% of the profits of the business on her individual tax return.



Stefanie's photography business has grown so quickly that she needs to invest in more equipment. She brings in a partner who provides the capital to purchase the new equipment, but who has no control over the day-to-day operations of the business.

 

Sole Proprietorships and Partnerships

17

The new CEO of a large coffee corporation makes fighting sexual harassment a cornerstone of the company's culture after a series of embarrassing incidents involving several of the company's managers are leaked to the media. The corporation drafts a new code of ethics with an expanded set of policies related to sexual harassment, creates a series of mandatory workshops for its workforce, and fires the managers involved in the incidents.

 

Consider what you have learned about the factors that impact corporate culture. What is the ethical strength of the corporation in the example?



Strong, because the corporation must show that it has an ongoing process to discourage wrongdoing in order to avoid legal action.



Weak, because the CEO should have cracked down on the employees who were leaking information to the media as well.



Strong, because the CEO is setting expectations for ethical behavior and holding violators accountable.



Weak, because this focus on matters of social justice has no place in capitalism.

 

Corporate Culture and Codes of Ethics

18

A 32-year-old woman accuses her business partner of embezzlement, and the case goes to trial. The trial results in a directed verdict.

 

When in the trial process did this occur?



Immediately following jury selection



Before the jury retired to deliberate the facts of the case



Before jury selection began



After the jury issued its unanimous verdict

 

The Trial

19

Select the true statement about the relationship between law, ethics, and business.



Ethical business practices and conduct have value only to the owners and managers of a business.



Ethical business practices and conduct are more important to the short-term success of a business than the long-term.



Ethical business practices and conduct generate goodwill that can be measured in the monetary value of a business.



Ethical business practices and conduct increase employee and customer satisfaction, but do not affect a business' bottom line.

 

What Is Ethics?

20

Although shareholders may receive profits from a corporation's business, __________.



they are only liable for the corporation's debts if they are also a member of the board of directors



they share responsibility for the corporation's debts with the directors and officers



they are generally not liable for the debts of the corporation



they are liable for corporate debts if the assets of the corporation are insufficient

 

Corporations

21

Which of the following do legal positivists believe?



All laws are good, provided they are made by legitimate authorities.



Law and ethics are intertwined, and one cannot be considered in isolation from the other.



The only human rights are those that have been created by human-made law.



It is legitimate to disobey a law that you disagree with, even if it comes from a valid source.

 

What Is Law?

22

Which of the following is true of civil law?



Possible remedies include monetary damages.



Defendants retain the right to remain silent.



Evidence of guilt beyond a reasonable doubt is necessary for conviction.



Cases are always prosecuted by the government.

 

U.S. Positive Law

23

Which of the following is a consideration when choosing a form of business organization?



Whether the business organization will turn a profit



Whether it is a service business or a manufacturing business



The level of difficulty and cost associated with establishing the business entity



The level of motivation among the founders for the business to succeed

 

1

In which scenario do the different court systems in the U.S. interact properly?



An Indiana court hears a case related to an auto accident that happened in the state between residents of Ohio and Illinois. When trying the case, the Indiana state court judge considers the laws of Indiana, since that's where the accident occurred.



When a waitress in Virginia sues her employer over unsafe working conditions, the state court judge applies the laws of Virginia, even though federal regulations governing workplace safety are more stringent than those of the state.



A Montana state court refuses to hear a civil lawsuit with a false imprisonment claim, because the complaint references both Montana law and federal law.



When a landlord tries to file a complaint against a tenant in Oregon after he loses in a Washington state court, the Oregon state court allows the second case to proceed.

 

The Courts and the Legal Process

2

If a breach of contract case is filed in federal court, the court __________.



has no subject matter jurisdiction, but can hear the case at its own discretion



has subject matter jurisdiction if the claim is for less than $75,000 and no plaintiff lives in the same state as any defendant



has no subject matter jurisdiction and cannot hear the case



has subject matter jurisdiction if the claim is for more than $75,000 and no plaintiff lives in the same state as any defendant

 

Subject Matter Jurisdiction

3

An energy corporation is worried about its exposure to criminal liability after a rival company is indicted for violating environmental laws.

Select the strategy that would be least effective in reducing the company's criminal liability.



Its leadership could establish a culture of respect for legal compliance through example.



It could hold annual training seminars on the current state of environmental law, using the investigation as an example.



It could cooperate with authorities in their investigation of the rival company.



It could develop an anonymous internal reporting system for employees who suspect illegal or unauthorized behavior.

 

Minimizing Corporate Criminal Liability

4

A 33-year-old business owner is put on trial for negligence.

 

When in his trial process does voir dire occur?



At the beginning, as part of jury selection



In the appeals stage



After the closing arguments



After a witness has given testimony, as part of the cross-examination

 

The Trial

5

Which level of state court would most likely decide a case related to running a red traffic light?



Intermediate appellate court



Supreme court



General jurisdiction court



Limited jurisdiction court

 

State Courts in the U.S.

6

ABC Corporation is one of the largest energy companies in the United States, with over $50 million in publicly traded shares. The corporation's unusual accounting practices have disguised the fact that the company has accumulated significant losses over the past five years, making it appear far more profitable than it is. The CEO of ABC Corporation has decided to continue misleading investors by hiding its mounting debt in order to support the company's current market valuation.

 

How would a deontologist evaluate this decision?



ABC Corporation is acting unethically because it has certain rights as a corporation, and therefore has a corresponding duty to consider the public good.



ABC Corporation is acting unethically because it is not striving for truthfulness or high-mindedness.



ABC Corporation is acting unethically because the results of its dishonesty are likely to be negative for its employees, for its shareholders, and for society as a whole.



ABC Corporation is acting unethically because it sees the investors' interests as unequal to the interests of the CEO and the corporation.

 

Major Ethical Perspectives

7

The CEO of a multinational retail corporation has decided to raise the minimum wage for its U.S. employees to three times the current federal minimum wage. The CEO explains that the company needs to provide its employees a living wage, regardless of what the law requires.

 

According to Milton Friedman, did the corporation fulfill its duty?



No, because the wage hike will drastically increase the corporation's liabilities and likely harm its stock price.



Yes, because the corporation is going beyond what the government requires it to do, in order to advance the public good.



Yes, because employees will now be able to afford to purchase more of the company's products.



No, because the CEO's salary is still hundreds of times what the corporation's employees will be paid.

 

Corporate Governance

8

What is the purpose of the Bill of Rights in the U.S. Constitution?



To create and establish a basic foundation of individual liberties



To establish a division of power between the branches of government



To clearly organize the branches of government



To define the relationship between the states

 

U.S. Constitution as a Source of Law

9

Arbitration is a __________ form of alternative dispute resolution.



sometimes involuntary, non-binding



voluntary, non-binding



sometimes involuntary, binding



voluntary, binding

 

Alternative Dispute Resolution

10

Select the example where the court has established personal jurisdiction over the defendant.



Lillian, Min, and Carmen were once friends, but Min is now suing Lillian and Carmen for defamation. Min and Carmen live in Michigan, but Lillian lives in Iowa. Lillian receives a summons to appear in court in Michigan, since that's where both Min and Carmen live.



Oleg is being sued for failing to deliver goods sold to Abe. Oleg is a resident of Arizona, and Abe lives across the country in West Virginia. Abe has filed the lawsuit in West Virginia and a summons has been delivered to Oleg's home.



Betsy receives a summons at her home in Utah, informing her that she is a defendant in a lawsuit filed in Nevada. She is being sued by Frank, a resident of Nevada, for unpaid medical bills stemming from when Betsy hit his car while driving through Nevada.



Fatima is being sued by her former landlord who claims that Fatima owes three months of unpaid rent. Both Fatima and her former landlord are residents of Minnesota, but the court has not yet been able to find Fatima to deliver her a summons, and she has no forwarding address or known location.

 

Personal Jurisdiction

11

Knowledge of the __________ Act minimizes a business's liability exposure when making decisions related to accounting practices.



Civil Rights



Truth in Lending



Sarbanes-Oxley



Federal Trade Commission

 

Law in Business

12

Select the true statement about primary sources of law in the U.S.



Public law is typically only binding on specific parties.



Substantive laws specify the right of all citizens to due process.



Private law applies to everyone within a lawmaking body's jurisdiction.



Procedural laws must provide for efficiency, but not fairness.

 

Origins of Law

13

Which of the following is true of corporations and their shareholders?



State law determines how many shares a corporation can have.



A corporation can have as many shares as it wishes to sell.



The number of shareholders is limited to the number of corporate officers.



A corporation cannot have a single shareholder.

 

Corporations

14

The CEO of Oil Company X is dismayed to learn that oil has been leaking from one of its off-shore rigs into the Gulf of Mexico for the last five years. In deciding how to proceed, the company identifies a range of stakeholders, considers how different courses of action would impact each stakeholder, and determines which core values each decision would satisfy.

 

According to the Josephson's core values model for ethical decision-making, what should Company X do next?



Decide which stakeholders are most important and whose needs should be prioritized.



Determine which course of action will be easiest to implement.



Weigh the financial cost of each possible course of action against the core values that it promotes.



Choose the course of action that is most likely to promote the greatest number of core values.

 

An Ethical Decision Model

15

Which of the following correctly pairs the levels of the federal court system with the types of cases each decides?



U.S. Circuit Court - appeals; U.S. District Court - trials



U.S. Supreme Court - trials; U.S. Circuit Court - appeals



U.S. Circuit Court - trials; U.S. District Court - trials



U.S. Supreme Court - appeals; U.S. Circuit Court - trials

 

Federal Courts in the U.S.

16

Select the true statement about statutory law.



Statutes at the state level are binding on all states.



Statutes are formed by democratically elected legislative bodies, subject to a system of checks and balances.



Congress may enact statutory law in any area it so chooses.



At the federal level, the President has no power whatsoever over the creation of statutory law.

 

Legislation and Other Sources of Law

17

Which of the following is an example of a sole proprietorship?



Issa and Raymond start a t-shirt printing company that earns a small profit in its first year of operation. They both invested capital in the business to get it up and running, so they are both glad to share in the small profit.



Gabrielle started a dog-walking company. She sometimes worries about the fact that she has no one to share the potential liabilities of the company with, but she does enjoy retaining 100% of the profits.



Matt and Carlene are both owners of a business that sells hand-crafted home goods via the Internet. Although they both own the business, Matt is solely responsible for the business operations.



Shawn is a partner in a successful downtown law firm. He has a number of clients that he is exclusively responsible for, so he works very hard to make sure they're happy with his services.

 

Sole Proprietorships and Partnerships

18

Which of the following is a belief held by the theory of natural law?



Humans require laws issued by sovereigns to distinguish right from wrong.



Laws must be enforced even if they are considered "bad."



There are rights that are intrinsic to humankind.



There is no higher law than human-made law.

 

What Is Law?

19

A corporation that manufactures home security systems has been doing well for several years, selling 30% more of such systems than its competitors. Unfortunately, a company sales representative brings it to the attention of upper management that sales teams have been lying to potential customers about the shortcomings of competitors’ products. The corporation fires the members of the dishonest sales teams after an internal investigation, and promotes the sales representative who called attention to the problem.

 

Consider what you have learned about the factors that impact corporate culture. What is the ethical strength of the corporation in the example?



Weak, because the company is not practicing conscious capitalism.



Strong, because the company is not just saying it supports employees who report legal or ethical violations, it is showing it.



Weak, because the dishonest sales tactics could never have happened in an ethically strong corporate culture.



Strong, because the corporation is "managing by the numbers."

 

Corporate Culture and Codes of Ethics

20

Which of the following is true of LLCs and their members?



Each member of an LLC can choose how he or she wishes to be taxed.



The members of an LLC can only be persons, and not other business entities.



There is no requirement regarding how many members an LLC must have.



An LLC should have at least two members to be effective.

 

Limited Liability Entities

21

Which of the following is true of U.S. positive law?



It includes common law and state statutory law, but not federal statutory law.



It includes statutory law, but not common law.



It includes common law, but not statutory law.



It includes common law, as well as federal and state statutory law.

 

U.S. Positive Law

22

Which of the following is a consideration when choosing a form of business organization?



The type of product manufactured by the business



The time of year that the business was established



The ease with which the founder of a business can transfer ownership to someone else



The degree of competition faced by the business

 

Business Organizations

23

Select the true statement about the relationship between law, ethics, and business.



The marketplace is generally unconcerned with whether or not businesses conduct themselves morally, since morality is difficult to define.



Each person has a different definition of what is moral or ethical, so it is not possible for businesses to know what qualifies as ethical conduct.



Since morals and ethics are not objective and cannot be specifically measured, the relationship between the value of a business and its ethical conduct is murky at best.



People generally have similar opinions on what actions or conduct are called moral, and the marketplace rewards businesses that conduct themselves in such a manner.

 

 

1

Why is an LLC an attractive form of business organization for many new companies?



Because neither LLCs nor their members must pay taxes on earnings



Because, although they are more complicated to manage than corporations, they provide greater protection from risk



Because it is a relatively simple way of establishing and operating a business while limiting the risk taken by its members



Because lenders are particularly willing to lend money to LLCs, since they are a very stable type of business

 

Limited Liability Entities

2

Compared to traditional litigation, arbitration and mediation are both __________.



more formal and complex



quicker and more cost-effective



rarely used as forms of dispute resolution



not favored or supported by courts

 

Alternative Dispute Resolution

3

Select the true statement about the relationship between law, ethics, and business.



Ethical business practices and conduct increase employee and customer satisfaction, but do not affect a business' bottom line.



Ethical business practices and conduct have value only to the owners and managers of a business.



Ethical business practices and conduct generate goodwill that can be measured in the monetary value of a business.



Ethical business practices and conduct are more important to the short-term success of a business than the long-term.

 

What Is Ethics?

4

Knowledge of the __________ Act minimizes a business's liability exposure when making decisions related to accounting practices.



Civil Rights



Truth in Lending



Sarbanes-Oxley



Federal Trade Commission

 

Law in Business

5

After several quarters of negative earnings, the CEO of a social media corporation decides to end the company's policy of providing paid parental leave in order to reduce labor expenses, among other cost-saving measures. As a result of the CEO's decisions, the company's stock price rises significantly.

 

According to Milton Friedman, did the corporation fulfill its duty?



No, because employees are stakeholders who rely on the company for their well-being.



Yes, because the shareholders' return on investment has risen.



No, because paid parental leave is an important social good that companies have a responsibility to support.



Yes, because the CEO feels no personal obligation to support his or her employees' decisions to have children.

 

Corporate Governance

6

Which of the following accurately characterizes the function of the U.S. Circuit Courts?



The Circuit Courts are responsible for overseeing all of the federal court system.



The Circuit Courts are responsible for reviewing cases decided by the Supreme Court.



The Circuit Courts are responsible for trying both criminal and civil cases.



The Circuit Courts are responsible for hearing appeals sent to them by the District Court system.

 

Federal Courts in the U.S.

7

A whistleblower informs a VP at an online retail company about the widespread practice of warehouse workers being asked to work extra hours without pay. The VP raises the issue with the CEO, who responds that the company can’t compete in the industry without its workers putting in some extra hours, and that paying them for these hours would negatively affect earnings. The CEO assures the VP that the company’s workforce is happy to work these extra hours, since no warehouse workers have complained directly to him.

 

Consider what you have learned about the factors that impact corporate culture. What is the ethical strength of the corporation in the example?



Weak, because the CEO is taking credit for the work of others.



Strong, because the CEO is protecting the financial strength of the company.



Weak, because the CEO is failing to provide top-down ethical leadership.



Strong, because the CEO is willing to meet with people in the organization who have ethical concerns.

 

Corporate Culture and Codes of Ethics

8

Which of the following is true of civil law?



Evidence of guilt beyond a reasonable doubt is necessary for conviction.



Defendants retain the right to remain silent.



Cases are always prosecuted by the government.



Possible remedies include monetary damages.

 

U.S. Positive Law

9

A successful computer software corporation has decided to launch a charitable giving program that provides tuition grants to young women planning to study computer programming in college. By doing so, the corporation hopes to increase diversity in the field.

 

How would a social contract theorist evaluate this decision?



The corporation is acting unethically because its primary duty is to its shareholders, and diverting funds to charitable giving will not increase profits.



The corporation is acting ethically because it is practicing the ideals of generosity and liberality.



The corporation is acting unethically because the total good it will do by providing grants to women is cancelled out by the total harm it will do to men who cannot receive the grants.



The corporation is acting ethically because, since the company benefits from the stability and security that the nation provides, it has a duty to support principles that the nation values, such as diversity.

 

Major Ethical Perspectives

10

Pharmaceutical Company Z received government approval for a medicine that lowers high blood pressure. Over time, however, the company realizes that the drug causes tremors in a small number of people who use it. In deciding how to proceed, the company identifies a range of stakeholders, including corporate shareholders, consumers, physicians, the government, and society as a whole, and comes up with several possible courses of action.

 

According to the Josephson's core values model for ethical decision-making, what should Company Z do next?



Evaluate which course of action will provide the greatest benefit to the corporate shareholders, to whom the company has the greatest obligation.



Try to determine which core values are most important to the company.



Try to determine which course of action will best protect the company in the short-term.



Evaluate the impact of each possible course of action on each of the various stakeholders.

 

An Ethical Decision Model

11

The theory of legal realism holds that __________.



a judge's personal perspective has no bearing on how law is applied



law should always be applied exactly as written



law should be interpreted based on social and economics considerations



law has nothing to do with the exercise of power

 

What Is Law?

12

Which of the following is true of corporations and their shareholders?



A corporation can have as many shares as it wishes to sell.



A corporation cannot have a single shareholder.



The number of shareholders is limited to the number of corporate officers.



State law determines how many shares a corporation can have.

 

Corporations

13

State governments have jurisdiction over __________.



the exact same areas of law as the federal government



any areas of law not specifically reserved to the federal government



individual rights, but not public law



only the areas of law explicitly given to them by the U.S. Constitution

 

U.S. Constitution as a Source of Law

14

Select the example where the court has established personal jurisdiction over the defendant.



Fatima is being sued by her former landlord who claims that Fatima owes three months of unpaid rent. Both Fatima and her former landlord are residents of Minnesota, but the court has not yet been able to find Fatima to deliver her a summons, and she has no forwarding address or known location.



Oleg is being sued for failing to deliver goods sold to Abe. Oleg is a resident of Arizona, and Abe lives across the country in West Virginia. Abe has filed the lawsuit in West Virginia and a summons has been delivered to Oleg's home.



Lillian, Min, and Carmen were once friends, but Min is now suing Lillian and Carmen for defamation. Min and Carmen live in Michigan, but Lillian lives in Iowa. Lillian receives a summons to appear in court in Michigan, since that's where both Min and Carmen live.



Betsy receives a summons at her home in Utah, informing her that she is a defendant in a lawsuit filed in Nevada. She is being sued by Frank, a resident of Nevada, for unpaid medical bills stemming from when Betsy hit his car while driving through Nevada.

 

Personal Jurisdiction

15

Select the case that is under the subject matter jurisdiction of a state court.



A case involving navigation in Puget Sound



A dispute over a copyright



A paternity suit



A suit between two states

 

Subject Matter Jurisdiction

16

Which of the following is a consideration when choosing a form of business organization?



The degree of competition faced by the business



The time of year that the business was established



The ease with which the founder of a business can transfer ownership to someone else



The type of product manufactured by the business

 

Business Organizations

17

Select the true statement about primary sources of law in the U.S.



Procedural laws must provide for efficiency, but not fairness.



Public law is typically only binding on specific parties.



Substantive laws specify the right of all citizens to due process.



Private law applies to everyone within a lawmaking body's jurisdiction.

 

Origins of Law

18

An energy corporation is worried about its exposure to criminal liability after a rival company is indicted for violating environmental laws.

Select the strategy that would be least effective in reducing the company's criminal liability.



It could develop an anonymous internal reporting system for employees who suspect illegal or unauthorized behavior.



It could hold annual training seminars on the current state of environmental law, using the investigation as an example.



Its leadership could establish a culture of respect for legal compliance through example.



It could cooperate with authorities in their investigation of the rival company.

 

Minimizing Corporate Criminal Liability

19

Select the true statement about administrative law.



The authority for administrative law at the federal level comes from Congress.



Administrative agencies create enabling legislation, which makes up the body of administrative law.



Administrative law can be vetoed by the President, which represents a "check" on the legislative branch.



It is produced by private individuals working at the request of the government to manage a social or business activity.

 

Legislation and Other Sources of Law

20

In which scenario do the different court systems in the U.S. interact properly?



A West Virginia woman was driving across the country on vacation and caused a traffic accident in Nebraska that resulted in a personal injury tort claim. The case is tried in Nebraska, but the state court judge applies West Virginia law, since that's where the defendant is from.



A convict on death row in Texas sues, claiming that the death penalty violates the prohibition in the Constitution of cruel and unusual punishment. The federal courts refuse to hear the case, because the complaint includes questions of Texas state law.



A Colorado man is a defendant in a personal injury lawsuit for an incident that occurred in New Mexico when he was under the influence of marijuana. When hearing the case, the New Mexico judge applies the laws of Colorado, where marijuana is legal, rather than New Mexico law, which criminalizes it.



A New Jersey resident is sued by an Iowa resident. After a trial in which the New Jersey resident vigorously defends himself, the Iowa state court finds in favor of the defendant. The Iowa resident then files the same claim in a New Jersey state court, which dismisses the case.

 

The Courts and the Legal Process

21

Which of the following is an example of a general partnership?



Ken and Paul start a graphic design business together. When Ken fails to deliver on a contract with a customer, Ken and Paul are held equally responsible when the customer sues for damages.



Jonathan and Craig's catering business is going through a rough patch wherein the debts exceed the income. Jonathan is worried because he is personally liable for the whole of the company's debts, but Craig is only liable for the initial $50,000 that he invested.



Stefanie's photography business has grown so quickly that she needs to invest in more equipment. She brings in a partner who provides the capital to purchase the new equipment, but who has no control over the day-to-day operations of the business.



Yvonne opens her first business selling sporting goods. She hires a marketing manager, an accountant, and several sales staff to help her manage the demand for her goods. When she files her annual taxes, she claims 100% of the profits of the business on her individual tax return.

 

Sole Proprietorships and Partnerships

22

Which level of state court would most likely decide a case related to running a red traffic light?



Limited jurisdiction court



Supreme court



Intermediate appellate court



General jurisdiction court

 

State Courts in the U.S.

23

A 33-year-old business owner is put on trial for negligence.

 

When in his trial process does voir dire occur?



After the closing arguments



At the beginning, as part of jury selection



In the appeals stage



After a witness has given testimony, as part of the cross-examination

 

 

1

Which of the following is an example of a limited partnership?



Anthony decides to turn his woodworking hobby into a business and is so successful that he soon employs ten people to help him manage the daily demands of his business. Anthony remains exclusively responsible for all of the company's decisions and for all of its debts.



Bethany and four of her friends open an interior design business when they graduate from college. Only Bethany meets directly with clients and opens new contracts, but all of the friends are fully liable for the contracts that Bethany signs.



Maria agrees to invest some of her college savings in her sister's natural skin care company, but she doesn't want to risk losing more than she invested. Maria and her sister sign a partnership agreement that protects Maria from further accountability.



Liam's father invites Liam to help him run the family HVAC business. They sign an agreement in which they agree to share all of the business' profits and losses.

 

Sole Proprietorships and Partnerships

2

Arbitration is a __________ form of alternative dispute resolution.



voluntary, binding



voluntary, non-binding



sometimes involuntary, non-binding



sometimes involuntary, binding

 

Alternative Dispute Resolution

3

Select the true statement about primary sources of law in the U.S.



Speed limits are an example of substantive law.



Banning cigarette sales to minors is an example of private law.



How a lawyer is required to file papers in a civil case is a concern of substantive law.



Racial discrimination in hiring is a concern of procedural law.

 

Origins of Law

4

A landlord sues a tenant for destruction of property. During the trial, the judge issues instructions to the jury to clarify what facts it must determine to issue a verdict.

 

When in the trial process does this occur?



Following jury selection



During cross-examination



Before the opening statements



After the closing arguments

 

The Trial

5

Which of the following correctly pairs the levels of the federal court system with the types of cases each decides?



U.S. Circuit Court - trials; U.S. District Court - trials



U.S. Circuit Court - appeals; U.S. District Court - trials



U.S. Supreme Court - trials; U.S. Circuit Court - appeals



U.S. Supreme Court - appeals; U.S. Circuit Court - trials

 

Federal Courts in the U.S.

6

Which level of state court would most likely decide a case related to running a red traffic light?



Supreme court



General jurisdiction court



Limited jurisdiction court



Intermediate appellate court

 

State Courts in the U.S.

7

Which of the following is true of corporations and their shareholders?



The number of shareholders is limited to the number of corporate officers.



A corporation can have as many shares as it wishes to sell.



State law determines how many shares a corporation can have.



A corporation cannot have a single shareholder.

 

Corporations

8

Select the case that is under the subject matter jurisdiction of a state court.



A dispute over a copyright



A case involving navigation in Puget Sound



A paternity suit



A suit between two states

 

Subject Matter Jurisdiction

9

An energy corporation is worried about its exposure to criminal liability after a rival company is indicted for violating environmental laws.

Select the strategy that would be least effective in reducing the company's criminal liability.



It could develop an anonymous internal reporting system for employees who suspect illegal or unauthorized behavior.



It could hold annual training seminars on the current state of environmental law, using the investigation as an example.



It could cooperate with authorities in their investigation of the rival company.



Its leadership could establish a culture of respect for legal compliance through example.

 

Minimizing Corporate Criminal Liability

10

Select the example where the court has established personal jurisdiction over the defendant.



Fatima is being sued by her former landlord who claims that Fatima owes three months of unpaid rent. Both Fatima and her former landlord are residents of Minnesota, but the court has not yet been able to find Fatima to deliver her a summons, and she has no forwarding address or known location.



Oleg is being sued for failing to deliver goods sold to Abe. Oleg is a resident of Arizona, and Abe lives across the country in West Virginia. Abe has filed the lawsuit in West Virginia and a summons has been delivered to Oleg's home.



Lillian, Min, and Carmen were once friends, but Min is now suing Lillian and Carmen for defamation. Min and Carmen live in Michigan, but Lillian lives in Iowa. Lillian receives a summons to appear in court in Michigan, since that's where both Min and Carmen live.



Betsy receives a summons at her home in Utah, informing her that she is a defendant in a lawsuit filed in Nevada. She is being sued by Frank, a resident of Nevada, for unpaid medical bills stemming from when Betsy hit his car while driving through Nevada.

 

Personal Jurisdiction

11

Why is an LLC an attractive form of business organization for many new companies?



Because, although they are more complicated to manage than corporations, they provide greater protection from risk



Because neither LLCs nor their members must pay taxes on earnings



Because it is a relatively simple way of establishing and operating a business while limiting the risk taken by its members



Because lenders are particularly willing to lend money to LLCs, since they are a very stable type of business

 

Limited Liability Entities

12

As part of its strategic planning, a fast food corporation considers the societal effects of using poultry treated with high levels of antibiotics in its supply chain. The Board of Directors ultimately instructs the officers to continue using the corporation's current poultry suppliers since the levels of antibiotics they use, while high, comply with the law and are very cheap.

 

According to stakeholder theory, did the corporation fulfill its duty?



Yes, because the corporation is not violating any laws.



Yes, because the corporation has a social contract to fulfill and must consider the impact of its actions on public health.



No, because the company is prioritizing profits over other social responsibilities.



No, because the officers of the corporation are failing to fulfill their fiduciary duty to the Board and the corporate shareholders.

 

Corporate Governance

13

Which of the following is true of U.S. positive law?



It includes common law and state statutory law, but not federal statutory law.



It includes statutory law, but not common law.



It includes common law, but not statutory law.



It includes common law, as well as federal and state statutory law.

 

U.S. Positive Law

14

Pharmaceutical Company Z received government approval for a medicine that lowers high blood pressure. Over time, however, the company realizes that the drug causes tremors in a small number of people who use it. In deciding how to proceed, the company identifies a range of stakeholders, including corporate shareholders, consumers, physicians, the government, and society as a whole, and comes up with several possible courses of action.

 

According to the Josephson's core values model for ethical decision-making, what should Company Z do next?



Evaluate the impact of each possible course of action on each of the various stakeholders.



Try to determine which core values are most important to the company.



Evaluate which course of action will provide the greatest benefit to the corporate shareholders, to whom the company has the greatest obligation.



Try to determine which course of action will best protect the company in the short-term.

 

An Ethical Decision Model

15

Tim's lawncare company has decided to start using solar powered equipment, even though that means he has to raise prices and some clients might terminate their contracts. Tim wants to replace his use of gasoline with a clean energy source to help reduce pollution levels in his town and because he is concerned about global warming.

 

How would a utilitarian evaluate Tim's decision?



Tim is acting unethically because he is making his services more expensive, and some people will no longer be able to afford them.



Tim is acting ethically because he is supporting the value of gentleness by expressing a concern for others.



Tim is acting ethically because he is putting the greater good of society above his personal profits.



Tim is acting unethically because if everyone were to make the switch to solar energy, a lot of fuel companies would go out of business.

 

Major Ethical Perspectives

16

A whistleblower informs a VP at an online retail company about the widespread practice of warehouse workers being asked to work extra hours without pay. The VP raises the issue with the CEO, who responds that the company can’t compete in the industry without its workers putting in some extra hours, and that paying them for these hours would negatively affect earnings. The CEO assures the VP that the company’s workforce is happy to work these extra hours, since no warehouse workers have complained directly to him.

 

Consider what you have learned about the factors that impact corporate culture. What is the ethical strength of the corporation in the example?



Weak, because the CEO is failing to provide top-down ethical leadership.



Weak, because the CEO is taking credit for the work of others.



Strong, because the CEO is willing to meet with people in the organization who have ethical concerns.



Strong, because the CEO is protecting the financial strength of the company.

 

Corporate Culture and Codes of Ethics

17

The theory of legal realism holds that __________.



law should always be applied exactly as written



law has nothing to do with the exercise of power



law should be interpreted based on social and economics considerations



a judge's personal perspective has no bearing on how law is applied

 

What Is Law?

18

Select the true statement about common law.



Common law is highly malleable, because precedents are often overturned.



Common law is binding regardless of jurisdiction.



In a common-law system, attorneys do not need to use legal reasoning to argue their case.



Rules of law are shaped by the courts through the practice of stare decisis.

 

Legislation and Other Sources of Law

19

State governments have jurisdiction over __________.



any areas of law not specifically reserved to the federal government



individual rights, but not public law



the exact same areas of law as the federal government



only the areas of law explicitly given to them by the U.S. Constitution

 

U.S. Constitution as a Source of Law

20

In which scenario do the different court systems in the U.S. interact properly?



When an employee tries to file a discrimination complaint against her employer in Maine after she loses in a Vermont state court, the Maine state court agrees to hear the case.



When an employee in Colorado sues her employer for sexual harassment, the state court judge applies federal law relating to workplace harassment because it extends protections to employees beyond those provided by state law.



A federal judge refuses to hear a negligence case that includes a state-based claim in addition to a federal one. She cites the fact that federal courts can never have jurisdiction over cases that involve state laws.



An Arizona resident drove through New Mexico to visit his college roommate and is hit by a delivery truck. When the New Mexico state court hears the case, the judge only takes Arizona law into consideration, since that's where the plaintiff resides.

 

The Courts and the Legal Process

21

Which of the following is a consideration when choosing a form of business organization?



The short-term goals of the business founders



The location of the business



The earnings generated by the business in prior years



The tax burden that a business owner is willing to accept

 

Business Organizations

22

Select the true statement about the relationship between law, ethics, and business.



The law ensures ethical conduct in most areas of business.



What is ethical in business is not necessarily required by law.



It is impossible for a business to behave unethically if it follows the law.



Abiding by the law is sufficient for businesses to earn a moral reputation.

 

What Is Ethics?

23

Knowledge of the __________ minimizes a business's liability exposure when making employment decisions.



Federal Trade Commission



Civil Rights Act



Sarbanes-Oxley Act



Securities and Exchange Commission

 

Law in Business

 

X Corporation discovers that a product it manufactures has exposed its employees to asbestos for decades. It must decide what to do with this information. If it suppresses its discovery, the business will remain successful and the company's owners will continue to profit, but current and former employees will continue to endure negative health effects.

 

According to Josephson's core values model for ethical decision-making, what should X Corporation do next?



Evaluate whether the decision to suppress the information would satisfy any core values and contrast it to other possible decisions.



Evaluate how likely the corporation is to successfully suppress this information and determine the consequences of being caught.



Decide which core values are at stake in the decision to suppress the information and rank them in order of importance.



Determine if the benefits to the owners from suppressing the information outweigh the consequences to employees, or if the reverse is true.

 

Select the case that would clearly be under the exclusive subject matter jurisdiction of the federal courts.



Breach of contract



A tort claim for injuries



Treason



A child custody challenge

 

Mediation is a __________ form of alternative dispute resolution.



sometimes involuntary, non-binding



sometimes involuntary, binding



voluntary, binding



voluntary, non-binding

 

Alongside the states, the federal government increasingly governs which area of law?



Domestic matters



Environmental law



Contract law



Property law

 

Which statement accurately characterizes the constitutional relationship between the states and the federal government?



The U.S. Constitution gives the federal government jurisdiction over any areas that state constitutions do not expressly reserve to themselves.



State laws cannot conflict with federal laws or with the U.S. Constitution.



State laws must always be respected by the U.S. Congress.



The U.S. Constitution protects individual rights, whereas state constitutions do not.

 

A corporation is concerned about their exposure to criminal liability after the most recent election cycle placed a number of new legislators in Congress who campaigned against corporate corruption.

Select the strategy that would be least effective in reducing the company's criminal liability.



It could prioritize ethical leadership when making hiring decisions for management-level positions.



It could encourage reporting by establishing internal protections for whistleblowers beyond what is provided by Congressional law.



It could donate to the election campaigns of the new members of Congress to establish goodwill.



It could strengthen its code of ethics to reflect the current political mood.

 

Since corporations are separate legal entities from their shareholders, which of the following is true?



Shareholders are usually not financially accountable for the actions of the corporation, but neither do they own the assets of the corporation.



A corporation can only exist for as long as its original owners are present.



Shareholders do not need to pay taxes on dividend earnings since corporations are taxed independently.



Under no circumstances can the protection of limited liability be removed from shareholders.

 

Which level of state court has the right to select which cases it wishes to hear?



General jurisdiction court



Intermediate appellate court



Supreme court



Limited jurisdiction court

 

Why do LLCs often have problems borrowing funds for business growth?



Because members of the LLC cannot legally authorize the business to create debt or to borrow money



Because the partners and directors of the LLC do not share responsibility for the debts of the LLC



Because the members of the LLC are not personally liable for the debts and loans received by the LLC



Because an LLC can only issue stock certificates to members of the company

 

Which of the following laws or agencies protects the public from various forms of investment fraud?



Civil Rights Act



Federal Trade Commission



Securities and Exchange Commission



Truth in Lending Act

 

1

A red car crashes into a blue car at night on a dark road. The driver of the blue car sues the other driver for negligence.

 

Assuming it is true, which of the following would represent a strong defense against the negligence claim?



The red car was rushing to the scene of another accident to provide medical care.



Both drivers assumed the increased risk associated with driving at night.



The driver of the blue car was drunk and driving erratically, which caused the accident.



Neither driver was wearing a seatbelt.

 

Negligent Torts: Damages and Defenses

2

Cynthia orders 100 shirts in a variety of colors for her screenprinting business from Juan, a shirt supplier. Before Juan ships the shirts, he discovers through conversations with other shirt suppliers that Cynthia is insolvent and is unlikely to pay for the shirts upon their delivery.

 

What remedy does Juan have in this scenario?



Juan has 10 days to determine whether or not Cynthia is actually insolvent, at which point he must ship the shirts or cancel the contract.



Juan must ship the shirts regardless; otherwise, he will be in breach of contract.



Juan has no recourse in this scenario, since Cynthia is insolvent.



Juan may refuse to deliver the shirts unless Cynthia pays in cash ahead of delivery.

 

Seller's Remedies Under the Uniform Commercial Code

3

Tort law is similar to criminal law in that __________.



they both have primarily developed in common law courts



they both require a wrongful act by a defendant for the plaintiff to recover



they both require specific intent on the part of the defendant



they both require specific intent on the part of the plaintiff

 

Introduction to Tort Law

4

An example of foreseeable damages from a faulty repair of your car that led to an accident would be __________.



your loss of one year's wages from a job, since you were fired that day for being late after the accident



your loss of a winning lottery ticket that blew away in the wind during the accident



additional hotel and travel charges that you incurred, because you missed your flight that day as a result of the accident



the cost to repair your vehicle, as well as all damage to other vehicles involved in the accident

 

Limitations on Contract Remedies

5

A 60-year-old man develops lung cancer, and sues the manufacturer of an asbestos-containing material. The man worked in construction for 45 years, and often used the asbestos-containing material in building projects. He believes that the asbestos-containing material was unreasonably unsafe, because friends of his in the construction trade who used alternative materials did not develop lung cancer.

 

How strong is the negligence case against the product manufacturer?



Strong, because the alternative materials used by his friends were much safer.



Weak, because the manufacturer can claim preemption.



Strong, because the manufacturer failed to warn users of the potential dangers of asbestos.



Weak, because proximate cause is difficult to prove in the absence of other, similarly-affected individuals.

 

Negligent Products Liability

6

A laundry detergent company advertises that its new product can remove any stain from clothes in just one wash, although company testing has shown that it oftentimes takes two or three washes for a stain to disappear.

 

Which type of intentional tort does this represent?



Tortious interference with contract



Defamation



Misrepresentation



This action does not rise to the level of an intentional tort.

 

Intentional Torts

7

Select the example that is inconsistent with the provisions of the UCC for contract remedies for a seller's breach of contract.



An appliance company sells a defective stove that injures its owner. The sales contract excludes responsibility for consequential damages except those deemed unconscionable, so the company replaces the stove and compensates the woman for her injury.



In its sales contract, a software company specifies that its sole obligation in the event that its software is defective is to replace it with a non-defective copy.



In order to be more competitive with buyers, the sales contract for a television manufacturer extends the statute of limitations for breach of contract claims to six years.



The sales contract for a shoe company specifies that the statute of limitations for any charges of breach of contract shall be limited to two years.

 

Remedies in General Under the Uniform Commercial Code

8

Heidi purchases an original work by one of her favorite sculptors from an art dealer for $8,000. When the sculpture is delivered, Heidi has it inspected by an art appraiser, who informs her that the sculpture is a fake. When Heidi calls the art dealer to tell him the news, he is honestly shocked and appalled.

 

What remedy does Heidi have in this scenario?



Heidi is entitled to recover the purchase price of the sculpture, as well as the money she spent to have the sculpture appraised.



Heidi has no recourse in this scenario, because she accepted delivery of a non-conforming good.



Heidi is only entitled to recover the money that she paid for the sculpture.



Heidi may sue the art dealer for specific performance and require the dealer to secure the original sculpture in any way possible.

 

Buyer's Remedies Under the Uniform Commercial Code

9

A driver is texting and runs into a pedestrian crossing the road at a crosswalk. The pedestrian suffers a broken leg and is rushed to the hospital.

 

Is the driver liable for negligence if the pedestrian sues?



No, because it would be difficult to prove that the driver's texting was the proximate cause of the pedestrian's broken leg.



Yes, because the driver broke the law by texting while driving.



No, because even though the driver was texting while driving, the pedestrian had a duty to look out for possible dangers before entering the crosswalk.



Yes, because the driver had a duty of care which was breached by texting while driving, and the pedestrian had legally recognizable injuries directly resulting from that breach.

 

Negligent Torts: Liability

10

Christine hires a deck company to build a deck. The company initially does a terrible job and agrees to rebuild it. A court requires the company to pay for the cost of the inspection that Christine has done to ensure the rebuilt deck is structurally sound.

 

This is an example of which type of monetary award?



Nominal damages



Incidental damages



Consequential damages



Punitive damages

 

Monetary Awards

11

In most cases, an enforceable contract has to include consideration, which __________.



is defined as an offer extended from one party to the other



must be morally or economically adequate to make the bargain a fair one



means that both parties have full mental capacity to form an agreement



must be an exchange of legal value between the parties to the agreement

 

Contract Formation

12

Which of the following scenarios would likely result in an order for specific performance or an injunction, rather than a monetary award?



Yolanda's landscaping company orders a new riding mower that is supposed to be delivered before Yolanda's next big job on Monday. The mower doesn't arrive until Friday, so Yolanda loses out on that job. Yolanda sues the company that promised her the riding mower for breach of contract.



A homeowner requests that a fencing company install a particular brand of vinyl fence. The company ends up installing a different brand that looks and performs exactly the same. The homeowner sues for breach of contract.



Joyce signs a contract to purchase her first home for $180,000 from Mei. Mei then gets a better offer, and breaks her contract with Joyce. Joyce sues Mei for breach of contract.



A hospital hires a new CEO who signs a two-year employment contract. After six months, the CEO quits, and the hospital sues her for breach of contract.

 

Equitable Remedies: Specific Performance and Injunction

13

Select the true statement about the Convention on Contracts for the International Sale of Goods (CISG).



It governs international sales contracts for all countries in the world.



It governs the international sale of services in addition to goods.



Its purpose is to unify contract law among countries to facilitate international trade.



Parties to the Convention must re-approve the treaty every five years.

 

Sources of Contract Law

14

Which contract generally must be in writing under the Statute of Frauds?



Nora accepts a job working for a local nonprofit agency.



Alejandro purchases part of his neighbor's fields to expand his growing capacity.



Jamal agrees to dog-sit for his neighbor for the weekend.



Robert buys a used computer from a store for $400.

 

Statute of Frauds

15

A manufacturer of kitchen knives is sued for strict product liability by Jack, who cut himself with one of the knives and suffered permanent nerve damage and paralysis in three fingers on his left hand. Jack argues that the knives were overly sharp and, thus, defective in their manufacturing. The manufacturer defends against the claim by arguing that the risk to the consumer is outweighed by the utility of the knives.

 

How does Jack's claim stand up to the manufacturer's defense?



Jack is likely to win, unless the manufacturer can prove that Jack was misusing or abusing the knife in some way.



Jack is likely to lose, because the knife is clearly safe for its intended use.



Jack is likely to lose, because the knife cannot function for its intended purpose unless it is sharp, and the risk to consumers is more than outweighed by the utility of a sharp kitchen knife.



Jack is likely to win, because the risk-utility test is only applicable to strict product liability claims involving pharmaceuticals.

 

Problems with Strict Products Liability

16

In which scenario would strict liability most likely apply?



A dishwasher fails to fully clean the dishes.



A car's radio sometimes stops working.



A lightbulb burns out prematurely.



An airplane's brakes fail in freezing weather.

 

Strict Liability

17

Select the statement that is true of consumer law prior to the 20th century.



Its central tenet was "seller beware."



It relied primarily on the threat of litigation to ensure product safety.



It essentially functioned in the same way as current products liability law.



It was rooted in the fact that consumers had much more direct contact with producers than they do now.

 

Products Liability

18

Which of the following conditions always renders a contract voidable?



If a party to the contract fraudulently misrepresents material facts



If a party to the contract is in good mental health but misunderstands the terms of the contract



If a party to the contract can no longer afford the promised consideration



If a party to the contract has changed his or her mind

 

Unenforceable Contracts

19

A manufacturer of a disposable butane lighter is sued for the wrongful death of two adults and a child under strict products liability law when the family's house burned down as a result of the six-year-old child setting bed clothes on fire using the manufacturer’s butane lighter. The allegation against the manufacturer is based on the theory that the lighter was defective because it did not have a childproof device to prevent children from igniting the lighter. This butane lighter had the words: “Keep Out of Reach of Children” written on the outside of the lighter body.

 

How strong of a case does the family's estate have in its strict product liability lawsuit against the manufacturer based on the lighter being a defective product?



Strong, because the product only contained a warning to keep the lighter away from children, but did not provide a childproofing mechanism.



Strong, because lighters are unavoidably unsafe.



Weak, because it would be difficult to prove with certainty that the lighter was the cause of the fire.



Weak, because there was no evidence that the product was unreasonably dangerous in normal use.

 

Strict Products Liability

20

Contracts function as a symbol of __________ in modern society.



wealth



disorder



free will



oppression

 

General Perspectives on Contracts

21

You and I verbally agree that you will buy my bicycle for $200. 

This is a(n) __________.



unilateral contract



implied contract



express contract



quasi-contract

 

1

A red car crashes into a blue car at night on a dark road. The driver of the blue car sues the other driver for negligence.

 

Assuming it is true, which of the following would represent a strong defense against the negligence claim?



The red car was rushing to the scene of another accident to provide medical care.



The driver of the blue car was drunk and driving erratically, which caused the accident.



Neither driver was wearing a seatbelt.



Both drivers assumed the increased risk associated with driving at night.

 

Negligent Torts: Damages and Defenses

2

Which of the following scenarios would likely result in an order for specific performance or an injunction, rather than a monetary award?



When a tree removal service comes to Amanda's house to cut down several trees, it ends up damaging the roof of her garage. The company refunds the tree work but refuses to pay to repair her garage. Amanda sues the company for breach of contract.



Hannah agrees to sell her used nursery furniture to her friend, Melissa. Several months pass and it seems clear that Hannah will not follow through on the contract, so Melissa sues her for breach of contract.



Paul and Jordan hire a pool company to install a new pool in their backyard. When the pool is complete, it's clear the company did a poor job, and chlorine water is leaking out of the pool and killing their grass. Paul and Jordan sue the pool company for breach of contract.



Fortuna owns a painting done by a famous artist, and she agrees to sell it to Langston for a significant sum of money. Later, Fortuna changes her mind and refuses to part with the painting. Langston sues Fortuna for breach of contract.

 

Equitable Remedies: Specific Performance and Injunction

3

To be enforceable, a contract typically must __________.



have mutual assent, legal value exchanged by both parties, legal capacity of both parties, and be for a legal purpose



have mutual assent, legal value exchanged by both parties, and be entered into in good faith



have mutual assent and legal capacity of both parties, and be in written form



have assent and consideration from at least one party, and have legal capacity and purpose from both parties

 

Contract Formation

4

You and I verbally agree that you will buy my bicycle for $200. 

This is a(n) __________.



unilateral contract



quasi-contract



express contract



implied contract

 

Different Types of Contracts

5

Heidi purchases an original work by one of her favorite sculptors from an art dealer for $8,000. When the sculpture is delivered, Heidi has it inspected by an art appraiser, who informs her that the sculpture is a fake. When Heidi calls the art dealer to tell him the news, he is honestly shocked and appalled.

 

What remedy does Heidi have in this scenario?



Heidi may sue the art dealer for specific performance and require the dealer to secure the original sculpture in any way possible.



Heidi has no recourse in this scenario, because she accepted delivery of a non-conforming good.



Heidi is only entitled to recover the money that she paid for the sculpture.



Heidi is entitled to recover the purchase price of the sculpture, as well as the money she spent to have the sculpture appraised.

 

Buyer's Remedies Under the Uniform Commercial Code

6

In which scenario would strict liability most likely apply?



A hardware company fails to label its nails as dangerous to ingest.



A tobacco company fails to put a cancer warning on its cartons of cigarettes.



A baseball manufacturer fails to put an impact warning on its baseballs.



A scissor company fails to label its scissors as sharp.

 

Strict Liability

7

Cynthia orders 100 shirts in a variety of colors for her screenprinting business from Juan, a shirt supplier. Before Juan ships the shirts, he discovers through conversations with other shirt suppliers that Cynthia is insolvent and is unlikely to pay for the shirts upon their delivery.

 

What remedy does Juan have in this scenario?



Juan has no recourse in this scenario, since Cynthia is insolvent.



Juan has 10 days to determine whether or not Cynthia is actually insolvent, at which point he must ship the shirts or cancel the contract.



Juan may refuse to deliver the shirts unless Cynthia pays in cash ahead of delivery.



Juan must ship the shirts regardless; otherwise, he will be in breach of contract.

 

Seller's Remedies Under the Uniform Commercial Code

8

Which contract generally must be in writing under the Statute of Frauds?



Nora accepts a job working for a local nonprofit agency.



Alejandro purchases part of his neighbor's fields to expand his growing capacity.



Jamal agrees to dog-sit for his neighbor for the weekend.



Robert buys a used computer from a store for $400.

 

Statute of Frauds

9

A manufacturer marketed a new mascara that initial testing revealed could cause an allergic reaction in a small number of people. One of the people found to have this allergic reaction in initial testing suffered significant loss of vision in one eye as a result. When the mascara was released on the market, the manufacturer included a warning of the possibility of an allergic reaction, but did not provide the consumer with any way to test for the allergy and made no mention of the possibility of this allergic reaction causing loss of vision. Joan purchased the new mascara from a local drug store and suffered an allergic reaction to the mascara that caused a 90% loss of vision in her right eye.

 

How strong of a case does Joan have against the manufacturer for strict product liability?



Strong, because the warning by the manufacturer was inadequate, since the risk of harm was foreseeable and could have been reduced by providing a way of testing for the allergic reaction and informing consumers of the potential of vision loss.



Weak, because the manufacturer is not engaged in the business of selling and is therefore not subject to Section 402A of the Restatement of Torts (Second). However, Joan could sue the local drug store.



Weak, because the manufacturer met its duty to warn by informing consumers that the product could cause an allergic reaction, and therefore users of the mascara assumed the risk.



Strong, because the manufacturer was clearly negligent by releasing a product to market that could cause an allergic reaction in anyone.

 

Strict Products Liability

10

A 60-year-old man develops lung cancer, and sues the manufacturer of an asbestos-containing material. The man worked in construction for 45 years, and often used the asbestos-containing material in building projects. He believes that the asbestos-containing material was unreasonably unsafe, because friends of his in the construction trade who used alternative materials did not develop lung cancer.

 

How strong is the negligence case against the product manufacturer?



Strong, because the manufacturer failed to warn users of the potential dangers of asbestos.



Weak, because proximate cause is difficult to prove in the absence of other, similarly-affected individuals.



Weak, because the manufacturer can claim preemption.



Strong, because the alternative materials used by his friends were much safer.

 

Negligent Products Liability

11

An adult climbs over a fence onto a neighbor's property and falls into the pool, which is also surrounded by a fence.

 

Assuming the adult is injured in a legally recognizable way, is the neighbor liable for negligence if the adult then sues?



Yes, because homeowners have a duty of care to anyone on their property at all times, no matter the circumstances.



No, because the neighbor exercised a reasonable degree of care by fencing in her property and her pool.



No, because the adult was trespassing on his neighbor's property.



Yes, because the adult had legally recognizable injuries.

 

Negligent Torts: Liability

12

The purpose of contracts is __________.



to eliminate any disagreement in economic exchanges



to bring order to medieval societies



to limit personal freedom



to facilitate economic transactions between individuals

 

General Perspectives on Contracts

13

In which scenario would the non-breaching party lose the opportunity to avoid or limit losses?



A car dealer finds a new buyer for an automobile that was previously under contract.



A cabinetmaker stops building cabinets for an order when he learns of his customer's insolvency.



An art store stops selling paints once it discovers that its recent paint order contains defective materials.



An office supply store continues to ship printer paper to a business that it knows has closed.

 

Limitations on Contract Remedies

14

A manufacturer of kitchen knives is sued for strict product liability by Jack, who cut himself with one of the knives and suffered permanent nerve damage and paralysis in three fingers on his left hand. Jack argues that the knives were overly sharp and, thus, defective in their manufacturing. The manufacturer defends against the claim by arguing that the risk to the consumer is outweighed by the utility of the knives.

 

How does Jack's claim stand up to the manufacturer's defense?



Jack is likely to win, because the risk-utility test is only applicable to strict product liability claims involving pharmaceuticals.



Jack is likely to lose, because the knife is clearly safe for its intended use.



Jack is likely to lose, because the knife cannot function for its intended purpose unless it is sharp, and the risk to consumers is more than outweighed by the utility of a sharp kitchen knife.



Jack is likely to win, unless the manufacturer can prove that Jack was misusing or abusing the knife in some way.

 

Problems with Strict Products Liability

15

Which of the following conditions always renders a contract unenforceable?



If the contract is deemed to be unfair to one party



If a party to the contract is unable to fulfill the terms of the contract



If the contract is informal (i.e., verbal rather than written)



If a party to the contract is deemed incapacitated by intoxication or mental state

 

Unenforceable Contracts

16

A laundry detergent company advertises that its new product can remove any stain from clothes in just one wash, although company testing has shown that it oftentimes takes two or three washes for a stain to disappear.

 

Which type of intentional tort does this represent?



Misrepresentation



This action does not rise to the level of an intentional tort.



Defamation



Tortious interference with contract

 

Intentional Torts

17

The Uniform Commercial Code (UCC) is the primary source of law for contracts regarding __________.



the sale or lease of goods only



the sale of goods and services



the sale of goods, services, and real estate



the sale of goods and real estate

 

Sources of Contract Law

18

Select the example that is inconsistent with the provisions of the UCC for contract remedies for a seller's breach of contract.



In its sales contract, a maker of musical instruments gives buyers a maximum of two years to raise any concerns relating to breach of contract.



The sales contract for a lumber mill that sells building materials includes a liquidated damages clause for the amount of $50 million in the event of a breach of contract.



The sales contract for a consumer electronics company excludes specific performance as a remedy for non-delivery of items ordered by the buyer, but it allows for refunds.



The sales contract for a swimming pool supply store allows for a single remedy for any contract breaches.

 

Remedies in General Under the Uniform Commercial Code

19

Malia signs a contract to purchase a used car. The seller breaches the contract, but Malia is able to buy the exact same car from another dealer at a better price. Malia sues the original seller and is awarded $2.

 

This is an example of which type of monetary award?



Nominal damages



Incidental damages



Punitive damages



Restitution

 

Monetary Awards

20

Select the statement that is true of current products liability law, rather than consumer law prior to the 20th century.



It assumes that most commerce is local.



It rests on the principle of "buyer beware."



It is an important way of ensuring consumer product safety.



It is rarely applied, as most consumer products are extremely safe.

 

Products Liability

21

Tort law is similar to criminal law in that __________.



they both require a wrongful act by a defendant for the plaintiff to recover



they both require specific intent on the part of the plaintiff



they both have primarily developed in common law courts



they both require specific intent on the part of the defendant

 

 

1

Select the example that is inconsistent with the provisions of the UCC for contract remedies for a seller's breach of contract.



In order to be more competitive with buyers, the sales contract for a television manufacturer extends the statute of limitations for breach of contract claims to six years.



The sales contract for a shoe company specifies that the statute of limitations for any charges of breach of contract shall be limited to two years.



An appliance company sells a defective stove that injures its owner. The sales contract excludes responsibility for consequential damages except those deemed unconscionable, so the company replaces the stove and compensates the woman for her injury.



In its sales contract, a software company specifies that its sole obligation in the event that its software is defective is to replace it with a non-defective copy.

 

Remedies in General Under the Uniform Commercial Code

2

A children's highchair is recalled after numerous reports emerge of children slipping out of the safety restraint and falling to the floor, injuring themselves. The product has a label that warns parents to strap children in while they are sitting in the highchair. Several parents sue for negligence.

 

How strong is their negligence case against the product manufacturer?



Weak, because proximate cause is difficult to establish.



Weak, because parents can't expect children to sit still in a highchair.



Strong, because the highchair clearly has a defective design that makes it unsafe.



Strong, because the highchair's manufacturer failed to warn users of its potential dangers.

 

Negligent Products Liability

3

In which scenario would strict liability most likely apply?



A car's radio sometimes stops working.



A lightbulb burns out prematurely.



A dishwasher fails to fully clean the dishes.



An airplane's brakes fail in freezing weather.

 

Strict Liability

4

You and I verbally agree that you will buy my bicycle for $200. 

This is a(n) __________.



express contract



quasi-contract



implied contract



unilateral contract

 

Different Types of Contracts

5

Which of the following scenarios would likely result in an order for specific performance or an injunction, rather than a monetary award?



When a tree removal service comes to Amanda's house to cut down several trees, it ends up damaging the roof of her garage. The company refunds the tree work but refuses to pay to repair her garage. Amanda sues the company for breach of contract.



Hannah agrees to sell her used nursery furniture to her friend, Melissa. Several months pass and it seems clear that Hannah will not follow through on the contract, so Melissa sues her for breach of contract.



Fortuna owns a painting done by a famous artist, and she agrees to sell it to Langston for a significant sum of money. Later, Fortuna changes her mind and refuses to part with the painting. Langston sues Fortuna for breach of contract.



Paul and Jordan hire a pool company to install a new pool in their backyard. When the pool is complete, it's clear the company did a poor job, and chlorine water is leaking out of the pool and killing their grass. Paul and Jordan sue the pool company for breach of contract.

 

Equitable Remedies: Specific Performance and Injunction

6

A manufacturer of kitchen knives is sued for strict product liability by Jack, who cut himself with one of the knives and suffered permanent nerve damage and paralysis in three fingers on his left hand. Jack argues that the knives were overly sharp and, thus, defective in their manufacturing. The manufacturer defends against the claim by arguing that the risk to the consumer is outweighed by the utility of the knives.

 

How does Jack's claim stand up to the manufacturer's defense?



Jack is likely to win, unless the manufacturer can prove that Jack was misusing or abusing the knife in some way.



Jack is likely to lose, because the knife is clearly safe for its intended use.



Jack is likely to lose, because the knife cannot function for its intended purpose unless it is sharp, and the risk to consumers is more than outweighed by the utility of a sharp kitchen knife.



Jack is likely to win, because the risk-utility test is only applicable to strict product liability claims involving pharmaceuticals.

 

Problems with Strict Products Liability

7

A man riding a roller coaster is severely injured when the car he's riding in jumps off the track. He sues the amusement park for negligence.

 

Assuming it is true, which of the following would represent a strong defense against the negligence claim?



The man has seen roller coasters before, and knowingly and voluntarily assumed the risk of participating in a dangerous activity.



The amusement park has never had an accident like this before.



The man undid his seatbelt after the roller coaster started moving.



The man snuck into the amusement park rather than paying for admission.

 

Negligent Torts: Damages and Defenses

8

Select the statement that is true of consumer law prior to the 20th century.



It was rooted in the fact that consumers had much more direct contact with producers than they do now.



Its central tenet was "seller beware."



It essentially functioned in the same way as current products liability law.



It relied primarily on the threat of litigation to ensure product safety.

 

Products Liability

9

Cynthia orders 100 shirts in a variety of colors for her screenprinting business from Juan, a shirt supplier. After Juan ships the shirts, Cynthia calls him to inform him of her insolvency. The box of shirts is currently in transit and will be delivered by the postal service tomorrow.

 

What remedy does Juan have in this scenario?



Juan may stop delivery of the box by the post service, upon which time he may pursue a variety of remedies to recover his damages.



Juan may recover the contracted price of the shirts from Cynthia, and then he may resell the shirts to another buyer with no restrictions.



Juan may not stop delivery of the box by the postal service, but he may recover the funds owed to him by Cynthia.



Juan has no recourse in this scenario, since Cynthia is insolvent.

 

Seller's Remedies Under the Uniform Commercial Code

10

In which scenario would the non-breaching party lose the opportunity to avoid or limit losses?



An art store stops selling paints once it discovers that its recent paint order contains defective materials.



A cabinetmaker stops building cabinets for an order when he learns of his customer's insolvency.



A car dealer finds a new buyer for an automobile that was previously under contract.



An office supply store continues to ship printer paper to a business that it knows has closed.

 

Limitations on Contract Remedies

11

Malia signs a contract to purchase a used car. The seller breaches the contract, but Malia is able to buy the exact same car from another dealer at a better price. Malia sues the original seller and is awarded $2.

 

This is an example of which type of monetary award?



Nominal damages



Restitution



Incidental damages



Punitive damages

 

Monetary Awards

12

Which of the following conditions always renders a contract unenforceable?



If a party to the contract is deemed incapacitated by intoxication or mental state



If the contract is informal (i.e., verbal rather than written)



If the contract is deemed to be unfair to one party



If a party to the contract is unable to fulfill the terms of the contract

 

Unenforceable Contracts

13

Under contract law, a promise not to do something that a person could otherwise do __________.



is only deemed legal consideration for a contract if the person giving it is financially harmed



is called a forbearance, but is not adequate legal consideration for a contract



is called promissory estoppel, and qualifies as legal consideration



is called a forbearance and is an adequate legal value to support the existence of consideration for a contract

 

Contract Formation

14

Contracts allow a free society to __________.



plan an orderly progression to capitalism



ensure economic equality among its members



engage in efficient economic exchanges



do away with the need for law

 

General Perspectives on Contracts

15

Tort law is similar to criminal law in that __________.



they both require specific intent on the part of the plaintiff



they both require specific intent on the part of the defendant



they both have primarily developed in common law courts



they both require a wrongful act by a defendant for the plaintiff to recover

 

Introduction to Tort Law

16

A manufacturer of a disposable butane lighter is sued for the wrongful death of two adults and a child under strict products liability law when the family's house burned down as a result of the six-year-old child setting bed clothes on fire using the manufacturer’s butane lighter. The allegation against the manufacturer is based on the theory that the lighter was defective because it did not have a childproof device to prevent children from igniting the lighter. This butane lighter had the words: “Keep Out of Reach of Children” written on the outside of the lighter body.

 

How strong of a case does the family's estate have in its strict product liability lawsuit against the manufacturer based on the lighter being a defective product?



Weak, because there was no evidence that the product was unreasonably dangerous in normal use.



Strong, because lighters are unavoidably unsafe.



Strong, because the product only contained a warning to keep the lighter away from children, but did not provide a childproofing mechanism.



Weak, because it would be difficult to prove with certainty that the lighter was the cause of the fire.

 

Strict Products Liability

17

An adult climbs over a fence onto a neighbor's property and falls into the pool, which is also surrounded by a fence.

 

Assuming the adult is injured in a legally recognizable way, is the neighbor liable for negligence if the adult then sues?



No, because the adult was trespassing on his neighbor's property.



Yes, because homeowners have a duty of care to anyone on their property at all times, no matter the circumstances.



Yes, because the adult had legally recognizable injuries.



No, because the neighbor exercised a reasonable degree of care by fencing in her property and her pool.

 

Negligent Torts: Liability

18

Which contract generally must be in writing under the Statute of Frauds?



Shara and Asher form a prenuptial agreement before they get married.



Colin hires a contractor to remove several trees from his property next month.



Hilary hires a personal assistant to help with her catering business.



George loans his daughter $300 to buy a new bicycle.

 

Statute of Frauds

19

Select the true statement about the Convention on Contracts for the International Sale of Goods (CISG).



It governs the international sale of services in addition to goods.



It governs international sales contracts for all countries in the world.



Parties to the Convention must re-approve the treaty every five years.



Its purpose is to unify contract law among countries to facilitate international trade.

 

Sources of Contract Law

20

Heidi purchases an original work by one of her favorite sculptors from an art dealer for $8,000. When the sculpture is delivered, Heidi has it inspected by an art appraiser, who informs her that the sculpture is a fake. When Heidi calls the art dealer to tell him the news, he is honestly shocked and appalled.

 

What remedy does Heidi have in this scenario?



Heidi is entitled to recover the purchase price of the sculpture, as well as the money she spent to have the sculpture appraised.



Heidi has no recourse in this scenario, because she accepted delivery of a non-conforming good.



Heidi is only entitled to recover the money that she paid for the sculpture.



Heidi may sue the art dealer for specific performance and require the dealer to secure the original sculpture in any way possible.

 

Buyer's Remedies Under the Uniform Commercial Code

21

A laundry detergent company advertises that its new product can remove any stain from clothes in just one wash, although company testing has shown that it oftentimes takes two or three washes for a stain to disappear.

 

Which type of intentional tort does this represent?



Misrepresentation



Tortious interference with contract



Defamation



This action does not rise to the level of an intentional tort.

 

 

1

A firefighter is injured by smoke inhalation while fighting an accidental fire at a local resident's house.

 

Is the homeowner liable for negligence if the firefighter sues?



No, because the firefighter was acting unreasonably by entering a burning home.



Yes, but only if causation can be established.



Yes, because the homeowner breached a duty of reasonable care to the firefighter.



No, because the homeowner had no duty of care to the firefighter.

 

Negligent Torts: Liability

2

Select the example that is inconsistent with the provisions of the UCC for contract remedies for a seller's breach of contract.



The sales contract for a swimming pool supply store allows for a single remedy for any contract breaches.



The sales contract for a lumber mill that sells building materials includes a liquidated damages clause for the amount of $50 million in the event of a breach of contract.



The sales contract for a consumer electronics company excludes specific performance as a remedy for non-delivery of items ordered by the buyer, but it allows for refunds.



In its sales contract, a maker of musical instruments gives buyers a maximum of two years to raise any concerns relating to breach of contract.

 

Remedies in General Under the Uniform Commercial Code

3

Cynthia orders 100 shirts in a variety of colors for her screenprinting business from Juan, a shirt supplier. Before Juan ships the shirts, Cynthia calls him to inform him that she is going out of business and no longer needs the shirts. Juan decides to resell the 100 shirts at public auction.

 

What further remedy does Juan have in this scenario?



Juan may sell the shirts at public auction without notifying Cynthia, since she is in breach of contract.



If Cynthia becomes aware of the public auction, Juan may refuse to allow Cynthia to bid on the shirts since she is in breach of contract.



If Juan sells the shirts at auction for more that the original contract price, he is obligated to share the profits, less any incidental costs, with Cynthia.



Since Juan is reselling the shirts at public auction and they are not a perishable good, he must notify Cynthia of the public sale and allow her to bid if she wishes.

 

Seller's Remedies Under the Uniform Commercial Code

4

To be enforceable, a contract typically must __________.



have mutual assent, legal value exchanged by both parties, legal capacity of both parties, and be for a legal purpose



have mutual assent, legal value exchanged by both parties, and be entered into in good faith



have mutual assent and legal capacity of both parties, and be in written form



have assent and consideration from at least one party, and have legal capacity and purpose from both parties

 

Contract Formation

5

Which of the following conditions always renders a contract unenforceable?



If a party to the contract is unable to fulfill the terms of the contract



If the contract is deemed to be unfair to one party



If a party to the contract is deemed incapacitated by intoxication or mental state



If the contract is informal (i.e., verbal rather than written)

 

Unenforceable Contracts

6

A manufacturer of a portable circular saw is sued by Dennis, who, while using the saw, put it down on the ground in front of him after it was shut off but while the blade was still turning. The still-circulating saw creeped across the floor, causing significant personal injury to Dennis' foot. Dennis sued the manufacturer for defective design of the circular saw based on it not having a brake mechanism or a retractable cover for the blade once the saw was turned off.

 

How strong of a case does Dennis have in his strict liability lawsuit against the manufacturer based on the defective design of the circular saw?



Weak, because there is no evidence that the saw was unreasonably dangerous in normal use.



Strong, because the saw was unreasonably dangerous under circumstances that would be foreseeable as normal use by a consumer.



Strong, but only if Dennis can prove that the saw was less safe when turned off than other saws on the market.



Weak, because Dennis assumed the risk of injury when he chose to use a circular saw, which is known to be dangerous.

 

Strict Products Liability

7

In which scenario would the non-breaching party lose the opportunity to avoid or limit losses?



An office supply store continues to ship printer paper to a business that it knows has closed.



A car dealer finds a new buyer for an automobile that was previously under contract.



An art store stops selling paints once it discovers that its recent paint order contains defective materials.



A cabinetmaker stops building cabinets for an order when he learns of his customer's insolvency.

 

Limitations on Contract Remedies

8

Select the statement that is true of consumer law prior to the 20th century.



It was more important than it is now, because consumer products were less sophisticated.



It forced sellers to take financial responsibility for any defects in products they sold.



The burden of responsibility generally rested on the buyer.



It incorporated the s of express and implied warranties.

 

Products Liability

9

In which scenario would strict liability most likely apply?



A tobacco company fails to put a cancer warning on its cartons of cigarettes.



A baseball manufacturer fails to put an impact warning on its baseballs.



A scissor company fails to label its scissors as sharp.



A hardware company fails to label its nails as dangerous to ingest.

 

Strict Liability

10

Contracts allow a free society to __________.



engage in efficient economic exchanges



do away with the need for law



plan an orderly progression to capitalism



ensure economic equality among its members

 

General Perspectives on Contracts

11

A manufacturer of an electric meter that included surge protectors to prevent damage to the meter from overloads is sued exclusively for strict product liability by an electric company after the surge protectors failed and damaged the electric meters. The manufacturer defends the claim of strict product liability on the basis that the defect in the product only damaged the product itself and there were no personal injuries.

 

How strong is this defense by the manufacturer?



Weak, because strict product liability applies to defective products even when they do not cause personal injuries or damage a company's property.



Strong, unless the electric company can provide a reasonable alternative design to the meter that would have mitigated the risk of the surge protectors failing.



Weak, because there is no indication that the electric company was aware of the product's defective surge protectors and elected to use the meters anyway.



Strong, because strict product liability does not allow for economic loss occasioned from a defect in a product that only causes damage to the product itself.

 

Problems with Strict Products Liability

12

Regarding fault, tort law is different from criminal law in that __________.



under tort law, a tortfeasor may only be held liable if he or she did not observe all possible precautions



under tort law, a plaintiff may recover only if the defendant had a deliberate desire to do harm



under tort law, a plaintiff may only recover if a wrongful act has been committed by the defendant



under tort law, a plaintiff may recover even if the tortfeasor is not involved in intentionally wrongful conduct

 

Introduction to Tort Law

13

A disgruntled employee writes a letter to the local newspaper that contains harmful lies about his employer. The letter is published in Monday's edition of the newspaper.

 

Which type of intentional tort does this represent?



Misrepresentation



This action does not rise to the level of an intentional tort.



Intentional infliction of emotional distress



Defamation

 

Intentional Torts

14

Which contract generally must be in writing under the Statute of Frauds?



Neesa agrees to co-sign a loan for her daughter to pay for college tuition.



Finn agrees to buy a watch from a friend for $300.



Harlow agrees to pay $50 to anyone who can help her find her lost dog.



Miguel agrees to replace his neighbor's roof in three months for $15,000.

 

Statute of Frauds

15

Zahra and Joseph sign a contract worth $1,000. When Zahra breaks the contract, Joseph loses the $1,000.

 

Which type of monetary award does Joseph receive if he is later awarded $1,000?



Nominal damages



Incidental damages



Compensatory damages



Restitution

 

Monetary Awards

16

Last September, you and I discussed you cutting my lawn this summer for $50 per week. This June, you began cutting my lawn every week.

 

We have a(n) __________.



express contract



implied contract



unenforceable contract



quasi-contract

 

Different Types of Contracts

17

Cynthia orders 100 blue shirts for her screenprinting business from Juan, a shirt supplier. When Cynthia receives the shirts, she discovers that Juan has sent her a batch of pink shirts. She rightfully rejects delivery, and the shirts are shipped back to Juan. Because of the delay in receiving the blue shirts, Cynthia is unable to fill a large order and loses $500 in sales.

 

What remedy does Cynthia have in this scenario?



Cynthia must fulfill the contract by paying for the blue shirts when they finally arrive, but she is entitled to recover damages relating to her business losses in the meantime.



Cynthia may either replevy the shirts or sue Juan for specific performance.



Cynthia can cancel the contract with Juan and recover in full what she paid for the shirts, as well as sue for damages since she suffered a loss directly related to the non-delivery.



Since she rejected the delivery, Cynthia has no recourse in this scenario except for a refund of the price she paid for the shirts.

 

Buyer's Remedies Under the Uniform Commercial Code

18

The Uniform Commercial Code (UCC) is the primary source of law for contracts regarding __________.



the sale of goods, services, and real estate



the sale or lease of goods only



the sale of goods and real estate



the sale of goods and services

 

Sources of Contract Law

19

A man riding a roller coaster is severely injured when the car he's riding in jumps off the track. He sues the amusement park for negligence.

 

Assuming it is true, which of the following would represent a strong defense against the negligence claim?



The man snuck into the amusement park rather than paying for admission.



The man has seen roller coasters before, and knowingly and voluntarily assumed the risk of participating in a dangerous activity.



The man undid his seatbelt after the roller coaster started moving.



The amusement park has never had an accident like this before.

 

Negligent Torts: Damages and Defenses

20

Andy is driving a 20-year-old boat that he borrowed from a friend. While he's on the water, the steering system fails and the boat crashes. Subsequent investigation shows that the steering system failed as a result of corrosion. Andy sues the boat manufacturer for negligence.

 

How strong is his negligence case against the product manufacturer?



Strong, because proximate cause between the corroded steering system and the crash is easy to establish.



Weak, because he does not have privity of contract, since he was borrowing his friend's boat.



Weak, unless he can show that the corrosion was the result of a design defect rather than normal wear and tear on a 20-year-old boat.



Strong, because there is no evidence that Andy's own actions contributed to the damages.

 

Negligent Products Liability

21

Which of the following scenarios would likely result in an order for specific performance or an injunction, rather than a monetary award?



Uma buys a copy of a photograph she loves from a local home decor shop. When she has the photograph framed, the framing company damages it and refuses to pay for its restoration. Uma sues the framing company for breach of contract.



Martina pays Omar $250 to deliver a cord of firewood to her home. Omar never delivers the wood, and Martina eventually sues him for breach of contract.



Cheryl has all of her employees sign non-compete agreements that extend for two years after their employment ends. Cheryl's former employee, Jen, starts working for a competitor three months after she stops working for Cheryl. Cheryl files a suit against Jen for breach of contract.



Darien buys a new car from a dealership that is supposed to come with leather seating. When he takes possession of the car, it has regular fabric seating. Darien sues the car dealership for breach of contract.

 

Equitable Remedies: Specific Performance and Injunction

 

Which of the following statements about torts and crimes is true?



A criminal act is immoral, while a tortious act is not.



Tort law is more concerned than criminal law about the reasons for a defendant’s actions.



An act may either be a crime or a tort, but not both.



Torts carry a legal remedy of damages, while crimes do not.

 

Which of the following is an example of a voidable contract?



A 28-year-old adult forms a written contract with an able-bodied and competent 17-year-old neighbor to cut her lawn for $200 per week.



A 21-year-old adult forms a written contract with an able-bodied and competent adult neighbor to clean his house for $1 per month.



A 52-year-old forms an oral contract with an able-bodied and competent adult neighbor to paint his deck for $1,000.



A 21-year-old forms a contract with an able-bodied and competent 30-year-old neighbor to drive her to work all year in exchange for gas money.

 

In which scenario would strict liability most likely apply?



An explosion at a chemical plant injures several workers.



The ceiling of a city hall crumbles and injures a few employees.



A deck collapses at a restaurant, injuring two diners.



A fire at a grocery store injures several customers.

 

Select the example that is inconsistent with the provisions of the UCC for contract remedies for a seller's breach of contract.



In its sales contract, a jewelry maker gives buyers a maximum of 18 months to raise any concerns relating to breach of contract.



The sales contract for machine parts excludes responsibility for any loss of business that may result from a delivery delay.



The sales contract for a company that sells rare antiques includes a liquidated damages clause in the event of a breach of contract that the courts have deemed reasonable.



An auto manufacturer's sales contract reduces the statute of limitations for breach of contract claims to nine months.

 

Which of the following statements regarding the enforceability of contracts involving minors is true?



Minors may never enter into legally enforceable contracts.



All contracts involving minors are unenforceable.



Contracts for necessities (such as food or shelter) involving a minor as a party are enforceable.



Provided all other conditions for enforceability are met, a contract may not be voided simply because one party is a minor.

 

A store employee drops a box of oranges while stocking the produce section, and oranges roll all over the floor. A customer steps on an orange and falls, injuring her arm. The customer sues the store employee for negligence.

 

Assuming it is true, which of the following would represent a strong defense against the negligence claim?



The customer ignored a barrier that the employee had set up around the produce section of the store.



The customer has mounting debts and needs money to pay them off.



The employee had already partially cleaned up the oranges when the customer fell.



The customer was talking to her friend when the accident happened.

 

A drug manufacturer of an oral contraceptive is sued for strict product liability when Alana suffered severe side effects from the drug. The manufacturer defends against the claim on the basis of assumption of risk and proves that both the prescribing physician and Alana knew of the potential side effects, and that Alana continued to use the drug after she experienced those side effects.

 

How strong is the manufacturer's defense against Alana's claim?



Strong, because the utility of oral contraceptives outweighs their known side effects.



Strong, because Alana knew of the potential for side effects, actually suffered these side effects, and decided to continue to use the drug anyway.



The strength of the defense cannot be determined without knowing if the drug came with a written warning about potential side effects.



Weak, because assumption of risk is not a recognized defense to strict product liability claims involving pharmaceuticals.

 

Select the true statement about the Restatement of the Law of Contracts.



It is the primary source of law for contract cases involving the sale of goods.



It is a valuable resource for judges to consult, but it is not formal law.



It must be renewed by Congress every ten years.



It completely overturned the contract law that had developed in the common law courtroom.

 

 

1

If a bailment is voluntary and benefits both the bailor and the bailee, what sort of responsibility does the bailee owe the bailor?



Extraordinary duty of care



Ordinary duty of care



Minimum duty of care



The bailee has no responsibility in this case.

 

Bailment

2

Carla (principal) hires an agent to represent her business and find buyers for her artwork. At the same time, Carla continues to aggressively market her artwork and sells several pieces on her own.

 

Is Carla in breach of her duty?



Yes, because Carla is violating her fiduciary duty to her agent.



No, because Carla may compete with her agent unless their contract states otherwise.



Yes, because Carla is "self-dealing" by continuing to sell pieces on her own.



No, because of the shop rights doctrine.

 

Duties between Agent and Principal

3

Frida hires Gwen, a real estate broker, to find a buyer for her home. Real estate brokers only have the authority to execute a purchase and sale agreement if expressly given it, and Gwen is not. Nevertheless, a young couple is thrilled when they and Gwen sign a purchase and sale agreement for Frida's house, which is their dream home.

 

Is Frida liable for the purchase and sale agreement?



No, Frida is not liable.



Yes, due to express authority.



Yes, due to apparent authority.



Yes, due to implied authority.

 

Principal's Contract Liability

4

Trudy is an aspiring chef. She takes a job in a famous restaurant in order to learn the head chef's highly secretive technique for making pasta, which people from all over the country come to eat. After quitting her job, Trudy opens her own restaurant and makes pasta using the same technique. She advertises this fact in order to generate business.

 

Does Trudy's conduct violate trade secret law?



Yes, because the method by which Trudy discovered the trade secret is illegal according to trade secret law.



No, because Trudy was upfront about the fact that she was using the trade secret.



Yes, because Trudy used a trade secret without permission from the secret’s owner.



No, because the head chef was not able to keep her technique a secret from Trudy.

 

Trade Secrets

5

A government plane is __________.



tangible private property



tangible fungible public property



intangible private property



tangible public property

 

Personal Property

6

A plant patent __________.



is obtainable, but not for commercial use



is available for new uses discovered for existing plants



is available for new plant species that are asexually reproduced



is not permitted, because living things are not patentable

 

Patents

7

Jennifer includes a copyrighted photograph in her new book without obtaining permission from the copyright owner.

 

Select the correct classification for this example.



Legal use of a copyright license



Direct copyright infringement



Fair use



Contributory infringement

 

Copyright Law

8

Which of the following most clearly represents an illegal termination of employment?



A delivery service manager fires a female employee after making numerous comments about how unreliable he thinks women are.



A mechanic is fired after refusing to wear the safety gear required by the shop owners.



A builder fires one of his carpenters for showing up late to work, without asking the carpenter why he was late.



A waitress quits her job in the middle of a shift because the restaurant is understaffed and patrons are getting upset.

 

Employment at Will

9

Marissa, a principal, hires a new fifth grade teacher for the upcoming school year.

 

Which type of agent is the new teacher?



Collection agent



General agent



Special agent



Employee

 

Types of Agents

10

Yvette is the owner of a restaurant run by a general manager named Paul, whom Yvette closely supervises. Paul recently hired two new dishwashers. Unbeknownst to Yvette, Paul pays them less than the minimum wage because he knows they need the job. The dishwashers eventually obtain legal help and sue Paul and Yvette for violating minimum wage laws.

 

Is Yvette criminally liable?



No, Yvette cannot be held liable because she had no knowledge of Paul's actions.



Yes, Yvette may be held liable for Paul's actions if the wage violations are strict liability crimes in this jurisdiction.



No, Yvette cannot be held liable because a principal is never liable for an agent's unauthorized crimes.



No, Yvette cannot be held liable because she could not have foreseen that Paul would pay workers less than the minimum wage.

 

Principal's Tort and Criminal Liability

11

Which of the following is true of agency relationships?



Agency relationships require an exchange of consideration to be formed.



Agency relationships are created between a principal and an employee, who represents the principal to an agent.



Legally binding agency relationships may be formed between a principal who is a minor and an agent, if the agent is a fully capable adult.



Agency relationships are created between a principal and an agent, who represents the principal to a third party.

 

Introduction to Agency Law

12

Why was the power to confer intellectual property rights given to Congress?



To defend equality



To support capitalism



To promote progress



To deter monopolies

 

Intellectual Property

13

Priyanka is a branch manager at a bank in town. She hires Hudson, who comes with strong references and several years' experience, as a bank teller. Several months later, Priyanka is surprised to be personally named in a lawsuit alleging that Hudson misrepresented the bank's products by promising new account holders $1,000 for starting a savings account.

 

Is Priyanka, as Hudson's manager, personally liable for the tort?



Yes, because Priyanka is Hudson's manager and so his liability extends to her.



No, because agents are almost never responsible for torts that are committed within the scope of their employment.



Yes, because Priyanka was responsible for hiring Hudson.



No, because as an agent, Priyanka is not responsible for torts committed by other agents for which she is not at fault.

 

Agent's Personal Liability for Torts and Contracts

14

Select the true statement regarding inherited or gifted real property.



If an owner dies intestate, his or her property will be divided up evenly by inheritors.



Real property may be gifted only if the property is valued at less than $1 million.



A gift of real property still requires consideration for title to transfer.



Real property will escheat to the state if an owner dies intestate and a next of kin cannot be identified.

 

Real Property: Methods of Acquisition

15

Which of the following is true of property ownership in the United States?



Property must be tangible in order for the legal system to recognize ownership.



Animals and humans both have the right to own property.



Property ownership is primarily defined at the state level.



You may own property even if the legal system does not recognize your right to do so.

 

The Property System

16

Select the answer that best applies to the phrase "National Basketball Association."



This phrase is an example of a collective mark.



This phrase likely cannot be trademarked.



This phrase is an example of a certification mark.



This phrase is an example of a service mark.

 

Trademarks

17

If you sign a lease to rent an office in a building, you have a __________ in the office.



fee simple defeasible interest



possessory interest



devisable interest



reversionary interest

 

1

A local shopkeeper has been doing business with Imogene for years. Imogene is a caretaker for an elderly woman in town, and she is authorized to purchase groceries and other goods in the store on the elderly woman's account. One day, a man named Andrew comes to the store and claims to be the elderly woman's new caretaker. He charges groceries to her account and leaves. The elderly woman later refuses to pay those charges, asserting that she doesn't know an Andrew.

 

Is Andrew personally liable for the charges?



No, because Andrew was only a partially disclosed agent.



Yes, because an agent is almost always responsible for a contract formed on behalf of a principal.



No, because the shopkeeper should have known that Andrew was not a legitimate agent.



Yes, because he did not have the authority to make a contract on the elderly woman's behalf.

 

Agent's Personal Liability for Torts and Contracts

2

A deed transferring ownership of a 500-acre parcel of land, subject to the condition that you maintain the roads criss-crossing the land, is a __________.



possessory interest



fee simple defeasible interest



reversionary interest



fee simple absolute interest

 

Real Property: Duties, Responsibilities, and Interests

3

Ryan owns a Christmas tree farm that struggles to compete with the Christmas tree farm on the other end of town. He instructs one of his employees to set a fire at the rival farm, which destroys much of their stock and drives up demand for Ryan's trees. Ryan's employee is arrested for arson, and the rival farm sues for damages.

 

Is Ryan liable for the tort?



Yes, Ryan is vicariously liable according to the "zone of risk" test because his employee's actions were foreseeable.



Yes, Ryan is directly liable for the tort and for the employee's criminal act of arson.



No, Ryan is not liable in this case.



Yes, Ryan is directly liable for the tort but not for the employee's criminal act of arson.

 

Principal's Tort and Criminal Liability

4

Select the true statement regarding adverse possession of real property.



Adverse possession is more difficult to attain if the possessor's possession is openly visible to others.



A possessor must occupy real property at the owner's invitation in order to qualify for adverse possession.



A possessor may acquire real property through adverse possession only if his or her possession has been continuous.



Adverse possession is a common method of acquiring real property because its requirements are easily met.

 

Real Property: Methods of Acquisition

5

Trudy is an aspiring chef. She takes a job in a famous restaurant in order to learn the head chef's highly secretive technique for making pasta, which people from all over the country come to eat. After quitting her job, Trudy opens her own restaurant and makes pasta using the same technique. She advertises this fact in order to generate business.

 

Does Trudy's conduct violate trade secret law?



No, because the head chef was not able to keep her technique a secret from Trudy.



Yes, because the method by which Trudy discovered the trade secret is illegal according to trade secret law.



Yes, because Trudy used a trade secret without permission from the secret’s owner.



No, because Trudy was upfront about the fact that she was using the trade secret.

 

Trade Secrets

6

Carla (principal) hires an agent to represent her business and find buyers for her artwork. At the same time, Carla continues to aggressively market her artwork and sells several pieces on her own.

 

Is Carla in breach of her duty?



No, because of the shop rights doctrine.



No, because Carla may compete with her agent unless their contract states otherwise.



Yes, because Carla is violating her fiduciary duty to her agent.



Yes, because Carla is "self-dealing" by continuing to sell pieces on her own.

 

Duties between Agent and Principal

7

A share of corporate stock is __________.



intangible private property



tangible public property



tangible fungible private property



intangible public property

 

Personal Property

8

A utility patent __________.



may be granted for inventing any item whatsoever



may be granted for inventing a useful item that does not infringe on the patent of another item



may be granted for inventing or modifying any useful item, even if the item was previously patented



may be granted solely for the idea of a new invention

 

Patents

9

Which of the following best defines property law?



A system for excluding certain groups from property ownership



A process for assigning property value



A method of acquiring, retaining, and transferring property peacefully



A means of dividing wealth in a society

 

The Property System

10

Which of the following is true of agency relationships?



Agency relationships are created for an agent to act as an intermediary between a principal and a third party.



Agency relationships are created for a third party to act as an intermediary between an employee and an agent.



Agency relationships are created for an agent to act as an intermediary between a principal and an employee.



Agency relationships are created for a principal to act as an intermediary between an agent and third party.

 

Introduction to Agency Law

11

Jennifer includes a copyrighted photograph in her new book without obtaining permission from the copyright owner.

 

Select the correct classification for this example.



Direct copyright infringement



Contributory infringement



Fair use



Legal use of a copyright license

 

Copyright Law

12

Hallie hires an accountant to prepare and file her personal income tax return this year.

 

Which type of agent relationship does this represent?



Special agent



Agency coupled with an interest



Subagent



General agent

 

Types of Agents

13

Which of the following most clearly represents an illegal termination of employment?



A builder fires one of his carpenters for showing up late to work, without asking the carpenter why he was late.



A mechanic is fired after refusing to wear the safety gear required by the shop owners.



A waitress quits her job in the middle of a shift because the restaurant is understaffed and patrons are getting upset.



A delivery service manager fires a female employee after making numerous comments about how unreliable he thinks women are.

 

Employment at Will

14

Which of the following is an important purpose of intellectual property rights?



To advance the public good by encouraging invention



To encourage inventors to form monopolies



To promote capitalism and make inventors rich



To prevent others from ever copying an inventor's product

 

Intellectual Property

15

If a voluntary bailment is only of benefit to the bailee, what sort of responsibility does the bailee owe the bailor?



Minimum duty of care



The bailee has no responsibility in this case.



Ordinary duty of care



Extraordinary duty of care

 

Bailment

16

Select the statement that best applies to the new company name "Pep-C."



This name is an example of a collective mark.



This name is an example of a service mark.



This name is an example of a certification mark.



This name likely cannot be trademarked.

 

Trademarks

17

Jenna has been employed as Rashid's personal assistant for five years. Her job description is vague, but she helps him with many aspects of his day to day life. Jenna knows he likes art, so every year she attends a local art auction and purchases a painting on Rashid's behalf. This year, she buys a painting that is twice as expensive as usual.

 

Is Rashid responsible for the full price of the painting?



Yes, due to implied authority.



Yes, due to apparent authority.



No, Rashid is not liable.



Yes, due to express authority.

 

 

1

Ramona purchases a DVD of a copyrighted movie from a store and watches it at home with her family and a few friends.

 

Select the correct classification for this example.



Contributory infringement



Legal use of a copyright license



Direct copyright infringement



Fair use

 

Copyright Law

2

Jenna has been employed as Rashid's personal assistant for five years. Her job description is vague, but she helps him with many aspects of his day to day life. Jenna knows he likes art, so every year she attends a local art auction and purchases a painting on Rashid's behalf. This year, she buys a painting that is twice as expensive as usual.

 

Is Rashid responsible for the full price of the painting?



Yes, due to express authority.



Yes, due to apparent authority.



Yes, due to implied authority.



No, Rashid is not liable.

 

Principal's Contract Liability

3

A pound of coffee beans is __________.



intangible private property



tangible fungible private property



intangible public property



fungible public property

 

Personal Property

4

Select the statement that best applies to the phrase "Animal cruelty-free."



This phrase likely cannot be trademarked.



This phrase is an example of a certification mark.



This phrase is an example of a collective mark.



This phrase is an example of a service mark.

 

Trademarks

5

Priyanka is a branch manager at a bank in town. She hires Hudson, who comes with strong references and several years' experience, as a bank teller. Several months later, Priyanka is surprised to be personally named in a lawsuit alleging that Hudson misrepresented the bank's products by promising new account holders $1,000 for starting a savings account.

 

Is Priyanka, as Hudson's manager, personally liable for the tort?



No, because agents are almost never responsible for torts that are committed within the scope of their employment.



Yes, because Priyanka was responsible for hiring Hudson.



Yes, because Priyanka is Hudson's manager and so his liability extends to her.



No, because as an agent, Priyanka is not responsible for torts committed by other agents for which she is not at fault.

 

Agent's Personal Liability for Torts and Contracts

6

Gary (principal) hires Dawn (agent) to sell his house. Every time Dawn tries to bring a potential buyer to see Gary's house, he asks her to reschedule for another day. Dawn suspects that Gary does not actually want to sell his house.

 

Is Gary in breach of his duty?



No, because principals have no duties toward their agents.



No, because Gary does not have a fiduciary duty to Dawn.



Yes, because he failed to warn Dawn of the potential for pecuniary loss.



Yes, because he has a responsibility to not interfere with Dawn's task.

 

Duties between Agent and Principal

7

Which of the following is true of agency relationships?



Legally binding agency relationships may be formed between a principal who is a minor and an agent, if the agent is a fully capable adult.



Agency relationships are created between a principal and an employee, who represents the principal to an agent.



Agency relationships are created between a principal and an agent, who represents the principal to a third party.



Agency relationships require an exchange of consideration to be formed.

 

Introduction to Agency Law

8

Trudy is an aspiring chef. She takes a job in a famous restaurant in order to learn the head chef's highly secretive technique for making pasta, which people from all over the country come to eat. After quitting her job, Trudy opens her own restaurant and makes pasta using the same technique. She advertises this fact in order to generate business.

 

Does Trudy's conduct violate trade secret law?



Yes, because Trudy used a trade secret without permission from the secret’s owner.



Yes, because the method by which Trudy discovered the trade secret is illegal according to trade secret law.



No, because Trudy was upfront about the fact that she was using the trade secret.



No, because the head chef was not able to keep her technique a secret from Trudy.

 

Trade Secrets

9

A plant patent __________.



is available for new plant species that are asexually reproduced



is obtainable, but not for commercial use



is available for new uses discovered for existing plants



is not permitted, because living things are not patentable

 

Patents

10

Which of the following most clearly represents an illegal termination of employment?



A mechanic is fired after refusing to wear the safety gear required by the shop owners.



A builder fires one of his carpenters for showing up late to work, without asking the carpenter why he was late.



A delivery service manager fires a female employee after making numerous comments about how unreliable he thinks women are.



A waitress quits her job in the middle of a shift because the restaurant is understaffed and patrons are getting upset.

 

Employment at Will

11

Select the true statement regarding inherited or gifted real property.



A gift of real property still requires consideration for title to transfer.



Real property will escheat to the state if an owner dies intestate and a next of kin cannot be identified.



Real property may be gifted only if the property is valued at less than $1 million.



If an owner dies intestate, his or her property will be divided up evenly by inheritors.

 

Real Property: Methods of Acquisition

12

Which of the following is true of property ownership in the United States?



You may own property even if the legal system does not recognize your right to do so.



Animals and humans both have the right to own property.



Property must be tangible in order for the legal system to recognize ownership.



Property ownership is primarily defined at the state level.

 

The Property System

13

Hallie hires an accountant to prepare and file her personal income tax return this year.

 

Which type of agent relationship does this represent?



Agency coupled with an interest



General agent



Special agent



Subagent

 

Types of Agents

14

Ryan owns a Christmas tree farm that struggles to compete with the Christmas tree farm on the other end of town. He instructs one of his employees to set a fire at the rival farm, which destroys much of their stock and drives up demand for Ryan's trees. Ryan's employee is arrested for arson, and the rival farm sues for damages.

 

Is Ryan liable for the tort?



Yes, Ryan is directly liable for the tort but not for the employee's criminal act of arson.



Yes, Ryan is directly liable for the tort and for the employee's criminal act of arson.



Yes, Ryan is vicariously liable according to the "zone of risk" test because his employee's actions were foreseeable.



No, Ryan is not liable in this case.

 

Principal's Tort and Criminal Liability

15

A deed transferring ownership of a 500-acre parcel of land, subject to the condition that you maintain the roads criss-crossing the land, is a __________.



fee simple absolute interest



fee simple defeasible interest



reversionary interest



possessory interest

 

Real Property: Duties, Responsibilities, and Interests

16

Which of the following is an important purpose of intellectual property rights?



To make new products affordable for consumers



To give Congress the power to decide which discoveries are useful



To encourage inventors to share their discoveries with the public



To ensure quality and efficiency in the marketplace

 

Intellectual Property

17

If a voluntary bailment is only of benefit to the bailee, what sort of responsibility does the bailee owe the bailor?



Ordinary duty of care



The bailee has no responsibility in this case.



Extraordinary duty of care



Minimum duty of care

 

 

1

Wilhelm discovers that a tech company has just received a patent for a new type of headphone that reduces the potential for hearing damage at high volume. The existence of this new technology is not yet widely known. However, once Wilhelm learns about it, he tells several of his friends, and they all buy stock in the tech company.

 

Does Wilhelm's conduct violate trade secret law?



No, because the company is not yet deriving value from the technology.



Yes, because Wilhelm will potentially profit from his discovery.



Yes, because Wilhelm misappropriated the tech company's trust by telling his friends about the new technology.



No, because the invention of this technology is publicly available information through the issuance of the patent.

 

Trade Secrets

2

A share of corporate stock is __________.



tangible fungible private property



intangible private property



tangible public property



intangible public property

 

Personal Property

3

Karen (principal) hires John (agent) to be her financial planner. John recommends that Karen purchase a life insurance policy because he honestly believes that her family will benefit from it. He recommends a policy from UNeed Insurance because he will receive an undisclosed commission from the company if Karen purchases it.

 

Is John in breach of his duty to Karen?



No, because he is fulfilling his fiduciary duty.



No, because he is performing his duty to obey.



Yes, because he is failing in his duty to give information.



Yes, because he is "self-dealing."

 

Duties between Agent and Principal

4

Which of the following is an important purpose of intellectual property rights?



To make new products affordable for consumers



To ensure quality and efficiency in the marketplace



To encourage inventors to share their discoveries with the public



To give Congress the power to decide which discoveries are useful

 

Intellectual Property

5

Russ owns a construction company and manages 10 employees. He has an extensive employee manual that clearly lays out the company's policies and expectations for its workers. The manual expressly forbids drinking alcohol during the work day. Nevertheless, one of his roofers drinks a few beers at work and ends up injuring a passerby when he throws some tools down from the roof. The injured party sues.

 

Is Russ liable for the tort?



Yes, Russ is directly liable because he was the person who hired the roofer in the first place.



Yes, Russ is vicariously liable according to the "zone of risk" test because the roofer was at the worksite performing his job, and his actions were foreseeable.



No, Russ would only be liable if the injured party were another employee.



No, Russ is not liable for the roofer's actions in this case because the employee manual forbade drinking on the job.

 

Principal's Tort and Criminal Liability

6

Jason is a salesperson at a clothing company. He has no authority to order inventory, but one day he sends a purchase order on company letterhead to a shoe supplier. He likes the shoes and thinks they'll sell quickly in the store. When the company's manager discovers the invoice from the shoe supplier, she refuses to pay it.

 

Is the company liable for the invoice?



Yes, due to implied authority.



No, the company is not liable.



Yes, due to express authority.



Yes, due to apparent authority.

 

Principal's Contract Liability

7

Hallie hires an accountant to prepare and file her personal income tax return this year.

 

Which type of agent relationship does this represent?



Agency coupled with an interest



Subagent



General agent



Special agent

 

Types of Agents

8

Which of the following most clearly represents a lawful termination of employment?



A car salesman quits his job in June after signing a contract to work at the dealership until the end of the year.



A daycare center fires one of its teachers for wearing a hijab to work.



A landscaping company fires an employee who habitually leaves work earlier than he's supposed to. The employee has to leave early to pick up his child from school.



A newspaper publisher fires one of its reporters after the reporter exposes discrimination within the publishing company.

 

Employment at Will

9

If a voluntary bailment is only of benefit to the bailee, what sort of responsibility does the bailee owe the bailor?



Extraordinary duty of care



Minimum duty of care



The bailee has no responsibility in this case.



Ordinary duty of care

 

Bailment

10

Ramona purchases a DVD of a copyrighted movie from a store and watches it at home with her family and a few friends.

 

Select the correct classification for this example.



Direct copyright infringement



Fair use



Contributory infringement



Legal use of a copyright license

 

Copyright Law

11

A local shopkeeper has been doing business with Imogene for years. Imogene is a caretaker for an elderly woman in town, and she is authorized to purchase groceries and other goods in the store on the elderly woman's account. One day, a man named Andrew comes to the store and claims to be the elderly woman's new caretaker. He charges groceries to her account and leaves. The elderly woman later refuses to pay those charges, asserting that she doesn't know an Andrew.

 

Is Andrew personally liable for the charges?



Yes, because an agent is almost always responsible for a contract formed on behalf of a principal.



No, because the shopkeeper should have known that Andrew was not a legitimate agent.



Yes, because he did not have the authority to make a contract on the elderly woman's behalf.



No, because Andrew was only a partially disclosed agent.

 

Agent's Personal Liability for Torts and Contracts

12

Who can own property in the United States today?



All people, animals, and nonhuman legal persons



All people and some nonhuman legal persons



Only people



People and animals

 

The Property System

13

Which of the following is true of agency relationships?



Agency relationships are created for a third party to act on behalf of an agent.



Agency relationships are created for an agent to act on behalf of a third party.



Agency relationships are created for an agent to act on behalf of a principal.



Agency relationships are created for a principal to act on behalf of an agent.

 

Introduction to Agency Law

14

A utility patent __________.



may be granted for inventing or modifying any useful item, even if the item was previously patented



may be granted for inventing any item whatsoever



may be granted solely for the idea of a new invention



may be granted for inventing a useful item that does not infringe on the patent of another item

 

Patents

15

Select the statement that best applies to the phrase "Animal cruelty-free."



This phrase is an example of a certification mark.



This phrase is an example of a collective mark.



This phrase likely cannot be trademarked.



This phrase is an example of a service mark.

 

Trademarks

16

Select the true statement regarding adverse possession of real property.



Adverse possession is a common method of acquiring real property because its requirements are easily met.



A possessor may acquire real property through adverse possession only if his or her possession has been continuous.



Adverse possession is more difficult to attain if the possessor's possession is openly visible to others.



A possessor must occupy real property at the owner's invitation in order to qualify for adverse possession.

 

Real Property: Methods of Acquisition

17

If ownership of Isaiah's home transfers to his sister upon his death, Isaiah has a __________ in his home.



leasehold interest



reversionary interest



life estate interest



possessory interest

 

Real Property: Duties, Responsibilities, and Interests

 

A new and useful idea __________.



can be patented without any other qualifications



can be patented if it holds potential commercial value



can be patented if it is completely original



cannot itself be patented

 

Which of the following is true of agency relationships?



Agency relationships are created for an agent to act as an intermediary between a principal and a third party.



Agency relationships are created for a third party to act as an intermediary between an employee and an agent.



Agency relationships are created for an agent to act as an intermediary between a principal and an employee.



Agency relationships are created for a principal to act as an intermediary between an agent and third party.

 

Nancy, a sixteen-year-old entrepreneur, appoints her friend Josh, who is twenty, to be her agent. She asks Josh to sign a contract with a supplier for several cases of frosting for her cupcake business. Josh contacts the supplier and notifies him of his agency for Nancy. After assuring the supplier that both he and Nancy are adults, Josh signs a contract promising to pay $200. After the first shipment of frosting goes out, Nancy loses interest in the business and disavows the contract.

 

Is Josh personally liable for the $200?



Yes, because Josh warranted to the seller that Nancy was of legal age to form a binding contract.



No, because Nancy is a minor and lacks capacity, and therefore may disavow a contract without liability.



No, because an agent is almost never liable for contracts signed on behalf of a principal.



Yes, because Josh was acting in a personal capacity.

 

Select the true statement regarding real property purchases.



By law, all deeds must be recorded at the end of real property sales.



A contract for the purchase of real property may be either verbal or written.



All real property transfers must involve a warranty deed.



A purchase of real property includes the acquisition of fixtures, if such fixtures exist and are not excluded by contract.

 

Which of the following most clearly represents an illegal termination of employment?



The owner of a small greeting card company suddenly files for bankruptcy and closes the business, letting go all of his employees.



A janitor misses work for three days to serve on a jury and is fired by his employer for exceeding his vacation time.



A store clerk is fired after violating several provisions of the employee handbook. The clerk has no formal employment contract, but she is only given two weeks' notice.



A test prep tutor is fired by the company that hired her because its revenue is falling. The employee has performed well since she was hired.

 

Russ owns a construction company and manages 10 employees. He has an extensive employee manual that clearly lays out the company's policies and expectations for its workers. The manual expressly forbids drinking alcohol during the work day. Nevertheless, one of his roofers drinks a few beers at work and ends up injuring a passerby when he throws some tools down from the roof. The injured party sues.

 

Is Russ liable for the tort?



No, Russ would only be liable if the injured party were another employee.



Yes, Russ is vicariously liable according to the "zone of risk" test because the roofer was at the worksite performing his job, and his actions were foreseeable.



No, Russ is not liable for the roofer's actions in this case because the employee manual forbade drinking on the job.



Yes, Russ is directly liable because he was the person who hired the roofer in the first place.

 

Wanda's financial advising firm wants to know the private client list held by a competing firm in town. Wanda sets up a meeting with an employee at the rival firm, and while there, Wanda downloads the client list to a flash drive when the employee steps away from his office. Three days later, Wanda uses the flash drive to open the client list.

 

Does Wanda's conduct violate trade secret law?



Yes, because the method by which Wanda discovered the trade secret is illegal according to trade secret law.



Yes, because Wanda did not pay the rival firm for its client list.



No, because the firm with the private client list failed to keep it a secret.



No, because trade secret protections disappear when a trade secret is discovered.

 

Ramona purchases a DVD of a copyrighted movie from a store and watches it at home with her family and a few friends.

 

Select the correct classification for this example.



Contributory infringement



Legal use of a copyright license



Fair use



Direct copyright infringement

 

In which scenario would the non-breaching party lose the opportunity to avoid or limit losses?



A landscaper avoids using a newly-purchased lawnmower that she knows is defective.



A caterer resells cakes that she baked for an event that was cancelled.



A housepainter stops painting a client's house once he realizes that the homeowner can't pay.



A landlord makes no attempt to find a new renter after a tenant breaks her lease.

 

If a voluntary bailment is only of benefit to the bailor, what sort of responsibility does the bailee owe the bailor?



Ordinary duty of care



Minimum duty of care



The bailee has no responsibility in this case.



Extraordinary duty of care

 

 

Select the example where the court has established personal jurisdiction over the defendant.



Caroline is served a summons to appear in court in Florida. She is accused of not paying a man in full after purchasing a car from him. Caroline lives in North Carolina, which is also where she purchased the car. However, the seller lives in Florida.



Daniel and Lee both live in Illinois. Daniel is personally delivered a summons at his home, ordering him to appear in court in Illinois to defend himself against a lawsuit filed by Lee alleging fraud.



Jorge receives a summons in the mail, notifying him that a complaint has been filed against him in Kansas. He is being sued by Julia, a resident of Kansas, in relation to a small traffic accident between the two in Colorado. Jorge is a resident of Oklahoma and has never been to Kansas.



Taylor is a resident of Wyoming and works in the state as well. Her employer is suing her for destruction of property in Montana, which is her employer's state of residence. Taylor has no substantive connections to Montana, and she has not responded to the summons that she received.

 

A technician from a utility company walks onto a homeowner's property to read the electrical meter and tramples some flowers that grow under the meter.

 

Which type of intentional tort does this represent?



Invasion of privacy



This action does not rise to the level of an intentional tort.



Trespassing



Misrepresentation

 

Ursula allows a friend to borrow her copyrighted CD, knowing that her friend intends to make copies of the CD to sell in school.

 

Select the correct classification for this example.



Legal use of a copyright license



Contributory infringement



Fair use



Direct copyright infringement

 

Lisa is the CEO of a corporation. As such, she is authorized to make daily operating decisions for the company on behalf of shareholders.

 

Which type of agent relationship does this represent?



Special agent



Subagent



Independent contractor



General agent

 

Heidi purchases an original work by one of her favorite sculptors from an art dealer for $8,000. When the sculpture arrives, Heidi determines that she no longer likes it and refuses delivery.

 

What remedy does Heidi have in this scenario?



Heidi is entitled to a refund of the $8,000 that she paid for the sculpture as well as the shipping costs associated with returning it, regardless of whether or not she notifies the seller of her refusal to accept delivery.



As long as Heidi notifies the seller that she is refusing delivery, she is entitled to recover the $8,000 that she paid for the sculpture.



Heidi has no recourse, because the seller is not in breach of contract and Heidi did not rightfully refuse delivery.



Heidi may cancel the contract, upon which time she is excused from any further performance.