Questions and Answers of Essentials of Business Law

Having heard that it was a profitable new business, Smith decided to breed emus. They are flightless birds that reproduce rapidly and provide high-quality meat. For $4,000, Penbridge Farms sold Smith
When Michael Eagan married James Gory’s daughter Jennifer, the two men started a business flipping houses. Eagan found the houses and supervised their renovation. Gory provided the funds, purchased
Blackriver Partnership is in the process of winding up. It has three partners: Jason, Kiera, and Lancelot. The partnership has assets of $90,000, but debts of $60,000, including $30,000 it owes to
Four friends pooled their money to buy a small airplane because they enjoyed flying. Sometimes they flew separately, other times they went on vacation trips together. Abbi, who was one of the owners,
Facebook’s charter has an exculpatory clause, which protects directors from liability unless they act in bad faith or they intentionally engage in wrongdoing. Is that a reasonable standard?
Which of the following statements is/are true?(a) Shareholders can amend the bylaws.(b) Directors can amend the bylaws.(c) Both shareholders and directors must approve any amendment to the bylaws.(d)
Under the Williams Act, _______________.(a) If shareholders offer more stock than the bidder wants, it must purchase shares pro rata(b) Target companies must reveal the names of any shareholders who
When Attack made an offer to acquire the stock of Target, the Target board welcomed the offer. Not so when Francis Co. also indicated an interest in Target. In its negotiations with Francis, the
A majority of shareholders at Weed, Inc., wanted to reinstate the former CEO of the company and sell off an unprofitable division. Do shareholders have the right to make these two decisions?(a) Yes
Companies are required to _______________.I. Disclose the relationship between financial performance and executive compensationII. Appoint a lead director to run the meetings of the independent
A company is allowed to hold its annual meeting online _______________.(a) If a majority of its shareholders approve(b) If it also holds a live meeting for shareholders who want to attend in
By law, a candidate for the board of a publicly traded company must receive a _______________.(a) Majority of the votes cast(b) Majority vote of the shares outstanding(c) Plurality of the votes
When Comcast decided to hold a virtual annual shareholders meeting, an investor submitted a proposal that would have required the company to hold a hybrid meeting—that is, both in person and
If directors and officers cause harm to their company, _______________.(a) Shareholders have the right to file suit against them and recover damages(b) Shareholders have the right to file suit
Securities laws are a balancing act between companies’ desire to raise money and investors’ need for protection. Congress recently changed Rule 506 to permit public advertising to accredited
At an Alcoholics Anonymous meeting, a man told his mentor, Timothy McGee, that he had started drinking again because he was so stressed out about his company being acquired. McGee bought stock in
It used to be that disposable contact lenses cost $169 a year. But then each of the five major manufacturers independently told retailers to charge at least $270 a year. Is this legal?
All the first-run movie theaters in Houston, Texas, charge the same prices for tickets. If one cinema raises its prices, so do the others. What is this type of activity called, and is it a violation
Businesses in Silicon Valley often struggle to recruit enough engineers and, as a result, salaries are highly competitive. Adobe, Apple, Google, Intel, Intuit, Pixar, Lucasfilm, and eBay entered into
Dell sold computers online with a particular software. In fact, the software was not available for several months. Instead, Dell sent customers a coupon for the software “when available.” What
Taylor Swift wanted to trademark her song lyrics: “And I’ll write your name.” She _______________.(a) Can trademark it because it is a short phrase associated with her entertainment services(b)
Hair Corp. sells shampoo in the United States and internationally. Its international prices are 30 percent less than its domestic prices. Big Seller, Inc., is in the business of buying products
A boat manufacturer incorporated under the name “Glasco, Inc.,” but operated its business solely under the name “Elite Boats, Division of Glasco, Inc.” When Citizens Bank agreed to finance
Which of the following statements is true?(a) Vagueness occurs when the parties do not want the contract to be clear.(b) Ambiguity occurs when the parties do not want the contract to be clear.(c)
Julie signs a contract to buy Nick’s 2015 Mustang GT for $20,000. Later, Nick changes his mind and refuses to sell his car. Julie soon buys a similar 2015 Mustang GT for $21,500. She then sues Nick
Under the Uniform Commercial Code, a seller _______________ generally entitled to recover consequential damages, and a buyer _______________ generally entitled to recover consequential damages.(a)
The Basketball Marketing Company (BMC) signed a long-term endorsement contract with a 16-year-old basketball player, Darko Milicic. Soon after his 18th birthday, Milicic successfully disaffirmed the
Alpha perfects its security interest by properly filing a financing statement on January 1, 2016. Alpha files a continuation statement on September 1, 2020. It files another continuation statement on
Cooke borrowed money from Haddon and gave as collateral four cases of champagne and a promissory note. When Cooke failed to pay the debt, Haddon obtained a judgment for the outstanding balance. Cooke
Which of the following standards are required for negotiability?(a) The instrument must be signed by the payee.(b) The instrument must be payable on demand.(c) The instrument must contain a promise
Able was a partner in the law firm of Able, Baker & Charley. He wrote nine checks on the firm’s checking account payable to “Bank of the United States.” The law firm was not a customer of
Roofing Company wrote a check to Dan for his work on a house. Dan cashed the check at Check Cashing, which deposited the check into its account at Bank. Roofing Company then discovered that Dan had
One of Doris’s job responsibilities at Winkie, Inc., was preparing company checks for the president, Willie, to sign. Using Winkie’s check-signing machine, Doris forged $150,000 of checks on her
A check has the following indorsements on the back: Paul Frank Without recourse George Hopkins Payment guaranteed Ann Quarry Collection guaranteed Rachel Ott Which of the following conditions
Which of the following actions does not discharge a prior party to a commercial instrument?(a) Good-faith payment or satisfaction of the instrument(b) Cancellation of that prior party’s
David had five bank accounts spread over four banks. Each morning, he directed his assistant, Maureen, to call all of the banks and obtain balance information. He would then direct her to write
Karim writes a check to Lew but Karim’s bank accidently refuses to pay the check, despite the fact that Karim’s account has sufficient funds. As a result, Lew bounces Liability for Negotiable
Nan forges Mina’s name on a check to buy a television set from Costmart. The store deposits that check into its account at Bank, but Bank does not credit Costmart’s account for the amount of the
An accountant has a fiduciary duty:(a) To a client when conducting an audit.(b) To an investor who buys stock in a company the accountant has audited.(c) To any third party that the accountant knows
An accounting team’s worst nightmare might be to wake up one morning and discover that a company for which it had repeatedly issued clean opinions did not really exist. In fact, the company had
Cox engaged Datz as her agent. It was mutually agreed that Datz would not disclose that he was acting as Cox’s agent. Instead, he was to deal with prospective customers as if he were a principal
Apex gave Marcie an employment handbook stating that(1) She was an at-will employee,(2) The handbook did not create any contractual rights,(3) Employees who were fired had the right to a termination
During a job interview with Venetia, Jack reveals that he and his wife are expecting twins. Venetia asks him if he is planning to take a leave once the babies are born. When Jack admits that he would
Sally is sent home from school with the chicken pox. Her father takes her to a pediatrician who says that she will be fine in about a week and in the meantime just needs bed rest and plenty of
Which of the following statements is true?(a) In about half the states, employees have the right to bring guns into their workplace.(b) In about half the states, employees have the right to bring
As the manager of BigBox Store, you are afraid that, if your workers unionize, you will not be able to compete against stores with a non-union workforce. You would very much like to fire Geraldo, the
An employer placed a job advertisement for security guards, specifying that applicants had to be U.S. citizens. It also required applicants to present a Social Security card. Was this ad legal?
A high-end boutique in Phoenix would hire only women to work in sales because fittings and alterations took place in the dressing room or immediately outside. The customers were buying expensive
When Allain University was looking for a diversity officer, it decided it would only hire a person of color. Is this decision legal?(a) Yes, color is a BFOQ for this position.(b) No, color is never a
A limited liability company _______________.(a) Is regulated by a well-established body of law(b) Pays taxes on its income(c) Cannot have members that are corporations(d) Is a form of organization
A limited liability partnership _______________.(a) Protects partners from liability for their own misdeeds(b) Protects the partners from liability for the debts of the partnership(c) Must pay taxes
Will misses three straight payments on his SUV, and his bank repossesses it. The right to repossess _______________ a security interest. Security interests are governed by Article _______________ of
Raymond and Connie Loftus hired American Realty Co. to manage and sell their vacant home. ARC secured a buyer. Prior to closing, ARC hired Fitzpatrick to light the home’s gas water heater. During
A novation completely releases an _______________ from any further liability. To be effective, it _______________ require the agreement of both the obligor and obligee.(a) Obligor; does(b) Obligor;
Amanda agrees to pay Jennifer $1,000 for a pair of tickets to see the Broadway show Hamilton. “Hamilton is my boyfriend Octavio’s favorite play, and the tickets will be a great birthday present
In December 2018 Eric hires a band to play at a huge graduation party he is planning to hold in May, 2020. The deal is never put into writing. In January 2020, if he wanted to cancel the job, Eric
Robins, an art collector, sold a painting by artist Marlene Dumas named Reinhardt’s Daughter to Zwirner, an art dealer. Since both men knew that Dumas would scanned, or duplicated, in whole or in
Because of his success in a big case, a lawyer named Melbourne promised his assistant, Barbara, a large bonus. After the case settled, Melbourne met with Barbara to discuss when and how much he would
Rafaella wants to plant a garden, and she agrees to buy a small piece of land for $300. Later, she agrees to buy a table for $300. Neither agreement is put in writing. The agreement to buy the land
The common law Statute of Frauds requires that to be “in writing,” an agreement must be signed by:(a) The plaintiff.(b) The defendant.(c) Both A and B.(d) None of these.
Scarborough’s Department Store opens for business on a busy shopping day just before Christmas. A hurried clerk places a sign in the middle of a table piled high with red cashmere sweaters. The
Frank, an accountant, says to Missy, “I’ll sell you my laptop for $100.” Missy asks, “Will you give me until tomorrow to make up my mind?” “Sure,” Frank replies.Which of the following
Linda goes to an electronics store and buys a Smart television. Lauren hires a company to clean her swimming pool once a week. The _______________ governs Linda’s contract with the store, and the
Consider the following scenarios:I. Madison says to a group of students, “I’ll pay $35 to the first one of you who shows up at my house and mows my lawn.”II. Lea posts a flyer around town that
Jennifer worked as a grant writer for Brightway, a Christian nonprofit. When she announced she was moving in with her boyfriend, all of her supervisors, including the company’s president,
Machado Ford published the following newspaper ad: “Buy a New Ford and Get $3,000 Minimum Trade-In Allowance.” Izadi attempted to purchase a new Ford Ranger valued at $6,595 for $3,595 in cash
Miller listed her home for sale. On August 4th, Norman made an offer, specifying that it must be accepted by 5:00 p.m. on August 5th. Miller received the offer, made several changes, signed it, and
Ryan Leslie, a rapper, was distraught when someone stole his computer and external hard drive because they contained some music he was writing. In an effort to retrieve his items, he created a series
Non-compete agreements are common features of employment contracts.Currently, courts _______________ enforce these clauses.(a) always(b) usually(c) rarely(d) never
Wells Fargo Armored Service offered a $25,000 reward for information leading to the arrest and conviction of the person who shot one of its guards. Slattery worked as an independent contractor
Barbara Richards leased an apartment at a complex owned by Twin Lakes. The lease declared that Twin Lakes would maintain the common areas, but it would not be responsible for any harm, anywhere on
The Basultos were Cuban immigrants who spoke only Spanish. When they purchased a new minivan from Potamkin Dodge, the dealer had them sign a blank, English-language contract with the promise that he
Cranwell Associates owned a 42-story skyscraper in midtown Manhattan. The building had a central station fire alarm system, which was monitored by Holmes Protection. A fire broke out and Holmes
Jim, about to start a pickup soccer game, asks Desiree if she will hold his wallet while he plays. Desiree, a law student, says, “Sure, if you’ll sign this exculpatory clause holding me blameless
Some commentators argue that Walker-Thomas Furniture was providing a valuable service to Mrs. Williams and that the litigation ultimately harmed her community. No other business of the time was
What is Luke’s most powerful and persuasive response to the reasons and rationalizations he needs to address?a. In the end, Luke used all of these arguments and also said, flatly, that he was not
Assume the same facts as in question 1, except now Barney lives in a state that follows comparative negligence. Now Barney will recover _______________.(a) $0(b) $10,000(c) $50,000(d) $90,000(e)
Randy works for a vending machine company. One morning, he fills up an empty vending machine that is on the third floor of an office building. Later that day, Mark buys a can of Pepsi from that
Boboli Co. wanted to promote its “California-style” pizza, which it sold in supermarkets. The company contracted with Highland Group, Inc., to produce two million recipe brochures, which would be
For this question,. Now determine which of the following can be considered a proximate cause of Carl’s injuries.(a) Randy(b) Mark(c) Both Randy and Mark(d) None of these
Which of the following factors is least important in determining whether a manufacturer is strictly liable in tort for a defective product?(a) The negligence of the manufacturer(b) The contributory
The following agency is charged with the regulation of electronic communications:(a) National Security Agency(b) Federal Trade Commission(c) Federal Communications Commission(d) Foreign Intelligence
Because Blaine Blogger reviews movies on his blog, cinemas allow him in for free. Nellie Newspaper Reporter also gets free admission to movies. Blaine _______________ disclose on his blog that he
Which of the following is not protected by the First Amendment?(a) True threats(b) All threats(c) Offensive language(d) Insults
An employer has the right to monitor workers’ electronic communications if:(a) The employee consents.(b) The monitoring occurs in the ordinary course of business.(c) The employer provides the
Spiro Spammer sends millions of emails a day asking people to donate to his college tuition fund. Oddly enough, many people do. Everything in the emails is accurate (including his 1.9 GPA). Which of
Sushila suspects that her boyfriend Plum is being unfaithful. While he is asleep, she takes his smart phone out from under his pillow and goes through all his texts. Which law has Sushila
Bill and Diane are hiking in the woods. Diane walks down a hill to fetch fresh water. Bill meets a stranger who introduces herself as Katrina. Bill sells a kilo of cocaine to Katrina who then flashes
Which of the following parts of the modern legal system are “borrowed” from medieval England?(a) Jury trials(b) Special rules for selling land(c) Following precedent(d) All of these
As The Oculist’s Case indicates, the medical profession has faced a large number of lawsuits for centuries. In Texas, a law provides that, so long as a doctor was not reckless and did not
Union organizers at a hospital wanted to distribute leaflets to potential union members, but hospital rules prohibited leafleting in areas of patient care, hallways, cafeterias, and any areas open to
If Congress creates a new statute with the president’s support, it must pass the idea by a _______________ majority vote in the House and the Senate. If the president vetoes a proposed statute and
Dr. Martin Luther King, Jr., wrote “An unjust law is no law at all.” As such, “One has a moral responsibility to disobey unjust laws.” Dr. King’s view is an example of:(a) Legal realism.(b)
James fears that the policy will prevent HIC from hiring the very people who need jobs the most. Also, he knows that nicotine is highly addictive and that many people who want to stop smoking
What are the main arguments Luke is trying to counter? That is, what are the reasons and rationalizations he needs to address?a. There is no money in the budget this year to buy the necessary
Which of the following wrote the book Utilitarianism and believed that ethical actions should “generate the greatest good for the greatest number”?(a) Milton Friedman(b) John Stuart Mill(c)
Located in Bath, Maine, Bath Iron Works builds high-tech warships for the Navy. Winning Navy contracts is crucial to the company’s success—it means jobs for the community and profits for the
What is at stake for the key parties, including those with whom Luke disagrees?a. If the customer leaves the company, performance reviews—and bonuses—for Luke, his boss, and his team would be
Which of the following believed that the dignity of human beings must be respected and that the most ethical decisions are made out of a sense of obligation?(a) Milton Friedman(b) John Stuart Mill(c)
A group of medical schools conducted a study on very premature babies— those born between 24 and 27 weeks of gestation (instead of the normal 40 weeks). These children face a high risk of blindness

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