In the Air Products & Chemicals, Inc. v. Airgas, Inc. case discussed in the text,
defendant’s boardof directors allegedly breached its fiduciary duties to stockholders by
refusing to redeem a poison pill in place and allow a hostile takeover to proceed. The
court ruled that:
a. the board satisfied its fiduciary duties because as a matter of law directors may use
poison pills to block hostile takeovers that would result in a change of management.
b. the board satisfied its fiduciary duties because the members acted reasonably in
response to the belief, based on reasonable grounds, that the hostile takeover offer was
inadequate and posed a legitimate threat if accepted.
c. the board failed to act reasonably because the members acted in their own self
interest, not in the best interests of the shareholders, and that the board failed to
properly seek expert opinion regarding the hostile takeover offer in relation to the value
of the company.
d. the board failed to act reasonably because as a matter of law it could not leave the
poison pill in place in the face of a hostile takeover bid.
Answer:
Many states have professional licensing statutes which provide that if a party to a
contract does not have a required license, the other party must still pay and can sue in
court for damages.
a. True
b. False
Answer:
A copyright is a government-granted right to exclude others from making, using, or
selling an invention.
a. True
b. False
Answer:
Which one of the following is NOT a manner in which a company can promote ethical
behavior?
a. Lobby legislators for more ethical guidelines
b. Craft an ethical mission statement
c. Provide ethics training
d. Adopt a Code of Ethics
Answer:
An agency by __________ occurs when a person leads another to believe that someone
else is his or her agent and is thereafter prevented from denying it.
a. ratification
b. conduct
c. agreement
d. estoppel
Answer:
Assuming requirements are met, Rule 144A permits the resale of unregistered securities
to qualified:
a. issuers.
b. underwriters.
c. institutional buyers.
d. federal banks.
Answer:
If a business is operated by a partnership, LLC, or S corporation, then operating losses
will be passed through to the individual partners or shareholders.
a. True
b. False
Answer:
ThePLIVA, Inc. v. Mensing case discussed in the text, involved theissue of whether the
federal law requirement that generic drugs must bear the same FDA-approved labels as
their brand-name counterparts preempts state law claims for failure to warn. What was
the holding by the US Supreme Court?
a. That federal law did not preempt state law claims for failure to warn.
b. That federal law preempted state law claims for failure to warn.
c. That federal law preempted state law claims for failure to warn based on strict
liability but that failure to warn claims based on negligence could proceed.
d. That federal law preempted state law claims for failure to warn based on negligence
but that failure to warn claims based on strict liability could proceed.
Answer:
The Patient Protection and Affordable Care Act prohibits insurers from denying
health-care coverage or charging higher premiums due to preexisting conditions.
a. True
b. False
Answer:
Accountants have to sign a written consent before their audited report can be included
in a registration statement.
a. True
b. False
Answer:
Courts apply the per se rule when reviewing most tying arrangements and will,
therefore, consider business justifications proffered by the tying firm.
a. True
b. False
Answer:
Agencies are usually part of which branch of government?
a. Judicial
b. Legislative
c. Executive
d. They are equally split between the legislative and executive branches
Answer:
Section 7 of the Clayton Act prohibits:
a. price discrimination.
b. monopolies and attempts to monopolize.
c. every contract, combination or conspiracy in restraint of trade.
d. mergers that threaten competition.
Answer:
Section 5 of the Federal Trade Commission Act is broader than the other antitrust laws.
a. True
b. False
Answer:
Which of the following is true regarding an independent contractor’s entitlement to
fringe benefits offered by a principal?
a. An independent contractor is generally eligible for the same fringe benefits provided
to employees.
b. An independent contractor is generally eligible for the same medical insurance
provided to employees but not for retirement benefits.
c. An independent contractor is generally eligible for the same retirement benefits
provided to employees but not for medical benefits.
d. An independent contractor is not generally eligible for the fringe benefits provided to
employees.
Answer:
Which of the following statements is NOT true regarding the advantages and
disadvantages of a sole proprietorship?
a. A sole proprietorship can be created without formal agreements or state filings.
b. The proprietor reports income from the business on a personal tax return.
c. The proprietor alone bears liability for the losses.
d. It is usually easy for sole proprietorships to raise capital.
Answer:
Fact Pattern 19-1
Joan decides to enter into a franchise agreement with XYZ Burgers to sell their burgers
in her town. The franchise agreement did not prohibit XYZ Burgers from granting other
franchises in the area, but that did not concern Joan because she thought XYZ Burgers
would treat her fairly. She did not bother to read the franchise papers, contracts, and
disclosures she was provided. Joan’s business went very well for the six months. Then,
however, another XYZ Burgers franchise opened just down the street from Joan’s
restaurant. She was very upset and called XYZ Burgers to complain. The CEO brushed
off her concerns and told her that there was enough business for everyone. Joan,
however, is interested in suing XYZ Burgers.
Refer to Fact Pattern 19-1. What is the position of the Federal Trade Commission
regarding a franchisor selling a franchise very near to an existing franchise?
a. That the practice is illegal.
b. That the practice is illegal unless the first franchisee provides specific permission for
the sale to the second franchisee.
c. That the practice is legal and that no disclosures are required.
d. That the practice is legal but that certain disclosures must be made to the first
franchisee when that agreement is made.
Answer:
Generally, an offeror may not revoke an offer before the offeree has had a reasonable
time in which to consider it.
a. True
b. False
Answer:
Fact Pattern 5-2
Billy owns a used car lot. Samantha works for Billy selling used cars. Billy fully directs
and controls her work, sets her hours, and pays her an hourly salary as well as a
commission. Belinda comes to the lot to buy a used car. Samantha, however, tells
Belinda that she needs to sell her mother’s used vehicle and that if Belinda will meet her
after hours, she will give Belinda an excellent deal. Belinda meets Samantha after work
and ends up buying the car belonging to Samantha’s mother. The next day, Samantha,
acting within the scope of her employment, is moving a car. She, however, is in a hurry
and in a grossly negligently manner backs it over the foot of Wesley, another customer.
While waiting for the ambulance to come for Wesley, Belinda storms onto the lot
complaining about the condition of the vehicle she purchased from Samantha’s mother.
Billy fires Samantha on the spot based on her obviously intoxicated condition and the
fact that she arranged for the sale of her mother’s vehicle. Samantha informs him that
she has been an excellent employee and that he has no reason to be unhappy with her.
Refer to Fact Pattern 5-2. Who is liable for Wesley’s injured foot?
a. Only Billy
b. Only Samantha
c. Both Billy and Samantha with Billy having the right to recover from Samantha any
amounts paid
d. Both Billy and Samantha with Samantha having the right to recover from Billy any
amounts paid
Answer:
Fact Pattern 12-1
Ricardo, an Italian citizen, who is trained in a specialized form of computer
programming that is highly in demand, is interested in coming to work in the U.S. A
friend of his told him that he could come to the U.S., but that he would not be protected
by U.S. employment laws and regulations. Ricardo also understands that a strictly
enforced rule is that he could only work in the U.S. for three years. Ricardo is inclined
to come to the U.S. but would like additional information regarding his rights and the
process.
Refer to Fact Pattern 12-1. Which of the following would enable Ricardo to work in the
U.S.?
a. A passport
b. An H-1B visa
c. A recognized visa
d. A work permit
Answer:
Courts will generally defer to an agency’s construction of a statute within its area of
expertise.
a. True
b. False
Answer:
In the caseClinton v. City of New York referenced in the text, the U.S. Supreme Court
dealt with the question of the Supremacy Clause of the United States Constitution.
a. True
b. False
Answer:
Which of the following was passed in 2010 and represents the most sweeping reform of
U.S. financial markets since the Great Depression?
a. The Laughlin-Glover Investor and Financial Reconciliation Act
b. The Mallicoat-Whaley Consumer and Investor Securities Protection Act
c. The Dodd-Frank Wall Street Reform and Consumer Protection Act
d. The Barnhill-Obama Wall Street Investors Reconciliation Act
Answer:
An agreement between two parties that provides that the seller will sell all of a product
that he produces to the buyer is called a(n):
a. illusory promise.
b. requirements contract.
c. output contract.
d. fulfillment contract.
Answer:
Ricardo develops a new type of software and asks you how he should go about making
money through distribution of it. He has been told that he should sell the software as
opposed to issuing licenses for its use. What should you tell him?
a. That by selling, rather than by licensing, a software vendor can avoid the doctrine of
first sale, which allows a lawful owner to sell or otherwise dispose of the copy.
b. That by licensing, rather than by selling, a software vendor can avoid the doctrine of
first sale, which allows a lawful owner to sell or otherwise dispose of the copy.
c. That selling is the only reasonable alternative because computer programs are not
copyrightable.
d. That licensing is the only reasonable alternative because computer programs are not
copyrightable.
Answer:
To which of the following does Article 2 of the UCC apply?
a. The sale of goods.
b. The rendering of services.
c. The sale of land.
d. Both the sale of goods and the rendering of services.
Answer:
Administrative agencies are a relatively new development in the history of the U.S.
a. True
b. False
Answer:
The UCC applies identical rules concerning the sales of goods to merchants and
nonmerchants.
a. True
b. False
Answer:
Rights under the Employee Polygraph Protection Act can be waived in advance by the
employee.
a. True
b. False
Answer:
In CASE 12.2 Edwards v. Arthur Anderssn LLP. (2008), plaintiffEdwards was a tax
manager at an Arthur Anderson office in Los Angeles. Arthur Anderson was later
indicted for its role in the Enron debacle, but an AA subsidiary HSBC offered to hire
Edwards conditioned on signing a “termination of non-compete” agreement (TONC).
Edwards signed the employment offer but not the TONC. The offer was rescinded and
Edwards was terminated. Edwards sued. The main issue dealt with California’s statutory
ban on most:
a. employee surveillance tactics.
b. ‘clawback’ agreements.
c. confidentiality agreements.
d. noncompete agreements.
Answer:
Which of the following is NOT one of the basic elements for formation of a valid
contract?
a. Consideration
b. Promissory estoppel
c. An offer and acceptance
d. A legal purpose
Answer:
Define the term “navigable waters” as used in the Clean Water Act and set forth what
the U.S. Supreme Court has said that the term includes and excludes. Why was the U.S.
Supreme Court concerned with limiting the scope of the term “navigable waters”?
Answer:
Compare and contrast joint tenancy and tenancy by the entirety.
Answer:
Set forth the seven principle European Institutions primarily responsible for governing
the European Union.
Answer:
Chef Susan has developed a great new recipe for homemade ice cream that she serves at
her restaurant. She would like to keep the recipe secret and prevent anyone else from
using it. What four areas should a trade secret program cover?
Answer:
Susan, an accountant, prepared an audit report for a company that wanted to include the
report in a registration statement. What must Susan do before the company can do so?
What step should she perform in relation to events occurring subsequent to the date of
the certified balance sheet in the registration statement?
Answer:
May private plaintiffs, the SEC, or both bring aider and abettor actions under Rule
10(b)? What must be proven? What type of relief may be sought?
Answer:
List the factors set forth in the text that may give rise to an implied obligation to
discharge the employee only for good cause in jurisdictions recognizing the
contract-based implied contract judicial exception to the employment-at-will rule.
Answer:
The president of a company wishes to comment on a proposed administrative agency
rule. What does a comment letter usually contain?
Answer:
Set forth the definitions used for determining whether an item is a food or a drug for
purposes of FDA categorization.
Answer:
Set forth the elements of a strict liability claim.
Answer:
The federal government originally did not regulate the pollution created by industry. As
environmental law developed, the government began to issue permits to businesses to
control and regulate the amount of their pollution. Many industries claim that the cost
of compliance with current environmental laws unduly hampers their ability to compete
effectively in the marketplace. Is it fair to business owners to be burdened with these
costs? Are the strict liability provisions in the federal environmental acts ethical and
fair? Discuss fully.
Answer:
When does an advertiser violate the Federal Trade Commission bait and switch
advertising rules?
Answer:
According to Exhibit 1.4, what are the four ways referenced in the text by which U.S.
law promotes public welfare?
Answer:
Explain in detail EPA practice in regard to approving a state program in lieu of the
EPA’s federal program.
Answer:
Bob, age 60, works at Big Company as an assistant manager and has been approached
by his supervisor, Sue, on several occasions for a date. She makes lewd and
inappropriate comments to him that are very embarrassing. Bob complained to Selina,
the president of Big Company, but no action was taken. In fact, Selina told him that he
should feel lucky that Sue was interested in an old guy like him and proceeded to tell
several jokes involving age and sexual performance. Again, Bob was humiliated and
embarrassed. Bob complained to the Equal Employment Commission regarding what
he believed was inappropriate conduct involving the requests for dates, and references
to sex and age. Selina was told by the Commission representative that she needed to put
a stop to inappropriate behavior. A few days later, Bob was told that he was being
demoted. He was replaced by a 25 year old female. What causes of action, if any, would
Bob have?
Answer: