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Bonus Chapter A - Working within the Legal Environment
Under contract law, "duress" means the presence of coercion through force or threat of
force.
85. Under contract law, "consideration" means something of value.
86. If a contract is to be legally binding, both parties must give consideration.
87. In order to be legally binding, a contract must be a written agreement between two or
more parties.
88. Under contract law, a 15-year-old may be a party to a contract.
Bonus Chapter A-22
89. Under contract law, an agreement for the sale of goods worth $50 or more must be in
writing.
90. A breach of contract occurs when one party fails to follow the terms of the contract.
91. Under contract law, "damages" are the monetary settlements awarded to a person who
is injured by a breach of contract.
92. "Specific performance" means that a person who violates a contract is required to live
up to the agreement even if money damages are adequate.
93.
Bonus Chapter A - Working within the Legal Environment
Requiring that both parties are competent for a contract to be legal protects those who
might be unable to protect themselves.
Feedback: A person under the influence of alcohol, drugs, or a person of unsound mind would
not posses the mental fitness to enter into a contract.
94. If I agree to sell you my bike for $50 and we are both competent individuals we have a
contract.
Feedback: A contract is a legally enforceable agreement between two or more parties. In this
case the bike and the $50 are consideration and since both parties are competent there is a
contract.
95. If I agree to sing at your wedding for free and then don't show up, you may sue me for
breach of contract.
Feedback: There is not a contract since there was no consideration given for the singing.
Since there is no contract I cannot be sued for breach.
Bonus Chapter A-24
96. If State University violates its housing contract with a student, the student is
prohibited from suing the university for damages because the contract was for the delivery
of services rather than the delivery of goods.
Feedback: A contract is a legally enforceable agreement between two or more parties. The
contract may involve goods or services.
97. Mary Ann owns a rare Monet painting and she has agreed to a contract whereby she
will sell it to the Museum of Art for $5.3 million. At the last minute she decides she
cannot bear to part with her painting and will not sell it to the Museum. The Museum can
sue Mary Ann for specific performance.
Feedback: A breach of contract occurs when one party (Mary Ann) fails to follow the terms
of a contract. When Mary Ann violated the contract by not selling her painting the court could
require her to do so since money damages would not be adequate. The museum would not be
able to buy another of these rare paintings anywhere else.
98. The Justice Department's antitrust division serves as a watchdog for violations of the
Uniform Commercial Code.
99.
Bonus Chapter A - Working within the Legal Environment
The Sherman Antitrust Act was designed to prevent large businesses from stifling the
competition of smaller or newer firms.
100. The Sherman Antitrust Act forbids actual monopolies or attempts to monopolize any
part of commerce.
101. The Justice Department's lawsuit against Microsoft is an example of an antitrust case.
102. The Clayton Act of 1914 prohibits price discrimination.
103. "Exclusive dealing" means selling goods with the condition that the buyer will not buy
goods from a competitor.
Bonus Chapter A-28
114. One purpose of the Robinson-Patman Act is to outlaw price differences that
"substantially" weaken competition.
115. The changing nature of U.S. business from manufacturing to knowledge technology
has led to the call for new levels of regulation from federal agencies.
116. Consumerism is a social movement that seeks to increase and to strengthen the rights
and powers of buyers in relation to sellers.
117. The Sarbanes-Oxley Act requires CEOs to verify the accuracy of their firms' financial
statements to the SEC.
118.
Bonus Chapter A - Working within the Legal Environment
Alcohol Labeling Legislation of 1988 provides for warning labels on liquor saying that
minors should not drink.
119. The Nutrition Labeling and Education Act of 1990 requires truthful and uniform
nutritional labeling on all food the FDA regulates.
120. Requiring a retailer to carry Performance Tires in order to sell Performance Batteries
is prohibited by the Robinson-Patman Act.
Feedback: The Robinson-Patman Act of 1936 prohibits price discrimination. Tying contracts,
as described by this question, are prohibited by the Clayton Act of 1914.
121. The intent of the Sherman Antitrust Act of 1890 was to encourage the growth of large
business organizations in the U.S. in order to compete with more established firms in
Europe.
Feedback: The Sherman Antitrust Act was designed to prevent large organizations from
stifling the competition of smaller or newer firms.
Bonus Chapter A-30
122. When a local restaurant offers a discount to senior citizens, they have violated the
price discrimination provisions of the Robinson-Patman Act.
Feedback: The Robinson-Patman Act applies to business-to-business transactions and does
not apply to business-to-consumer transactions.
123. An interlocking directorate occurs when a contract between a retailer and a wholesaler
requires misleading advertising.
Feedback: An interlocking directorate occurs when a board of directors of one firm includes
members of the board of competing businesses.
124. The Sarbanes-Oxley Act was passed to help allay consumer fears concerning falsified
corporate financial statements.
Feedback: To help allay consumer fears concerning falsified financial statements (such as
WorldCom's $11 billion accounting "mistake"), the Sarbanes/Oxley Act requires CEOs to
verify the accuracy of their firms' financial statements to the SEC.
125.
Bonus Chapter A - Working within the Legal Environment
Traditionally, taxes have been used as a source of funding for government operations and
programs.
126. Taxes have been used as a method of encouraging or discouraging taxpayers from
doing something.
127. The federal government can levy a sin tax in an effort to encourage businesses to hire
new employees.
128. A tax credit is a document that increases a tax bill.
129. Income taxes include taxes paid on real and personal property.
Bonus Chapter A-32
130. Sales taxes are the largest source of tax income received by the federal government.
131. Another name for "sin tax" is "excise tax."
132. Real property is real estate owned by individuals and businesses.
133. Money collected from excise taxes goes toward a specific purpose.
134.
Bonus Chapter A - Working within the Legal Environment
The primary objective of a sin tax is to generate additional revenue for the government.
Feedback: Sin taxes are intended to discourage consumer use of certain products. For
example, the revenue generated from taxes on cigarettes and beer goes to funding state and
federal government activities.
135. The primary objective of a tax credit is to encourage businesses to behave in certain
ways. One example is offering a tax credit to automobile manufacturers for the purchase
of robotics used in the manufacture of automobiles.
Feedback: Taxes or tax credits can be used to discourage or encourage taxpayers to behave in
particular ways. The government may encourage businesses to hire new employees or
purchase new equipment by offering a tax credit. A tax credit is an amount that can be
deducted from a tax bill.
136. The European Union currently levies certain Internet taxes.
Feedback: A tax issue sure to be debated further involves Internet taxation, especially taxing
Internet transactions. States claim they are losing over $15 billion in sales taxes from such
sales transactions. The European Union already levies certain Internet taxes, so the debate in
the U.S. is sure to continue.
Bonus Chapter A-34
137. Carlos has had a very successful year. His small-business corporation earned over
$500,000. His company will have to pay part of its income to the federal government for
income taxes.
Feedback: Taxes paid on the income received by businesses are called income taxes and are
the largest source of tax income received by the federal government.
138. Brian and Sondra own a very successful Cajun restaurant. They recently built their
own building and own all of the decorations in the restaurant, along with the equipment
needed to run the business. They will pay real property taxes on the building and land and
personal property taxes on the decorations and equipment.
Feedback: Real property tax is a tax on real estate owned by individuals and businesses and
personal property tax includes taxes on any movable property such as equipment that is
owned by the business.
139. Bankruptcy is the legal process by which a person, business, or government entity that
is unable to meet financial obligations is relieved of those debts by a court.
140.
Bonus Chapter A - Working within the Legal Environment
A bankruptcy allows creditors to get at least part of their money when there are assets
available to divide among the creditors.
141. The Constitution gives the judiciary the power to establish bankruptcy laws.
142. The Bankruptcy Reform Act of 2005 made it easier for individuals to eliminate most
debts in a bankruptcy.
143. The number of Americans filing for bankruptcy each year has increased since the late
1980s.
144. Though high-profile business bankruptcies such as Borders and Blockbuster dominate
the news, over 90 percent of bankruptcy filings each year are by individuals.
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150. Filing for bankruptcy under the Chapter 11 provisions allows a company to reorganize
and continue operations while paying only a proportion of its debts.
151. A company has to be insolvent before it can file for Chapter 11 bankruptcy.
152. Chapter 13 bankruptcy permits individuals and small-business owners to repay
creditors over a period of three to five years.
153. Chapter 13 proceedings are more complicated than Chapter 7 bankruptcy
proceedings.
154.
Bonus Chapter A - Working within the Legal Environment
Bonus Chapter A-38
The number of Americans filing for bankruptcy has decreased as a result of the
Bankruptcy Reform Act.
Feedback: There has been a significant increase in the number of Americans filling for
bankruptcy. Bankruptcy attorneys say the increase in filings is due to a lessening of the stigma
of bankruptcy, the changing economy, and an increase in the understanding of bankruptcy.
155. When Sam and Marie got married they wanted to travel, buy nice houses and cars, and
enjoy the good life. They used credit cards to finance their lifestyle, believing they would
be fine as long as they could make the minimum payments. One day they discovered that
because of rising interest rates, even the minimum payments were out of reach. They
decided to declare Chapter 13 bankruptcy. Under this plan, they will have to pay their
creditors back over 3 to 5 years.
Feedback: Chapter 13 bankruptcy permits individuals to pay back creditors over a period of
three to five years. The debtor files a proposed plan for paying off debts to the court. If the
plan is approved, the debtor pays a court-appointed trustee in monthly installments as agreed
on in the repayment plan. The trustee then pays each creditor.
156.
Bonus Chapter A - Working within the Legal Environment
Bonus Chapter A-39
When United Airlines declared bankruptcy several years ago, it continued to operate as a
business while it worked out a plan for paying off its debts. United Airlines filed a
Chapter 13 bankruptcy.
Feedback: Chapter 11 bankruptcy allows a company to reorganize and continue operations
while paying only a limited proportion of its debts. Under Chapter 11, a company continues to
operate but has court protection against creditors' lawsuits while it tries to work out a plan for
paying off its debts.
157. The purpose of governmental deregulation is to eliminate laws that seem to hinder
competition.
158. Both the airline and telecommunications industries have been deregulated.
159. Deregulation has always benefited consumers.
160.
Bonus Chapter A - Working within the Legal Environment
It appears that some regulation of business is necessary to ensure fair and honest dealings
with the public.
161. Business and government do not need to work together to create a competitive
environment that is fair and open since global competition is increasing.
162. When the airline industry was deregulated in 1980 consumers benefited because
airlines established new routes and charged lower fares.
Feedback: At one time, the government restricted airlines with regard to where they could
land and fly. When the industry was deregulated, airlines began competing for different routes
and charging lower prices. Consumers benefited from the deregulation, but established
airlines were challenged to be more competitive.
