Ch. 1 Legal foundations & thinking strategically Quizzes and answers

What is/are the source(s) and level(s) of law that govern the following business transactions?

  1. American Hardware Supply enters into an agreement with a retail home improvement chain to supply the chain with certain inventory.

  2. Whitney invents a device and now wishes to apply for a patent.

  3. Wong is considering raising money for a new venture by selling stock in the venture to investors.

  4. Bio-Tech Inc. ran out of cash and cannot pay its debts as they become due. Management seeks protection from creditors.

  5. Barnum wishes to bring his famous horse show into town and plans to stage it in a residential area of the city.

  1. The U.S. Congress passes a law imposing criminal penalties on executives at corporations who engage in banking fraud. The law fits into which category(ies)?

Quick Quiz ANSWERS

Source of Law

  1. A contract issue governed by statutory (UCC) law at the state level.

  2. A patent issue governed by statutory law at the federal level.

  3. A securities issue governed by statutory and administrative law at the federal and state levels.

  4. A bankruptcy issue governed by statutory and administrative law at the federal level.

  5. A zoning issue governed by statutory law at the local level.

I. Public

II. Private

III. Statutory

IV. Civil

a) I only

b)III only

c) I and III

d) III and IV

e) I, II, and III

  1. In the course of a typical day, Singh gives legal advice and prepares daily memorandums for the executive management team of a publicly traded technology company. The memos outline all current and potential legal challenges faced by the company, including the status of any securities compliance issues. Singh is a member of executive management and provides official record-keeping and certification procedures for the company’s board of directors. Singh is likely to be

a) Vice president and general counsel at a technology company.

b)A business attorney working in a law firm.

c)A litigator working for a law firm.

d)In-house intellectual property counsel.

e) An assistant district attorney.

  1. Constitutional law

I. Establishes a structure of government.

II. Grants specific powers for the different branches of government.

III. Provides procedural protection of citizens against wrongful government actions.

Iv. Allows executive branch and independent agencies to create and enforce regulations.

I only

II only

I and III

I, II, and III

IV only

  1. A state legislature passes a law that requires all licensed real estate brokers to have liability insurance. The law is a

Federal statute.

State statute.

Local ordinance.

Federal administrative regulation.

Constitutional amendment.

  1. Generally speaking, legal strategy in business refers to a ____

Statute. Plan of action.

Random occurrence.

Lawyer transaction.

Law firm.

  1. The U.S. Constitution is a secondary source of law.

True False

  1. The U.S. Environmental Protection Agency is a federal administrative agency.

True False

  1. Precedent may be overruled only by the U.S. Supreme Court.

True False

9.Legal decisions in the business context are made solely by corporate counsel.

True False

  1. One important function of law in the business environment is reliability for future business planning.

True False

Answers

CHAPTER REVIEW QUESTIONS: Answers and Explanations

  1. c. The fact that Congress passed the law makes it public (government-made) and a statute (legislative body). A law passed by Congress cannot be private, and because it carries criminal penalties, it cannot be categorized as civil.

  1. a. Because Singh's duties involve working for the same company on a variety of matters, (a) is the best answer. Answers (b) and (c) are wrong because law firm attorneys have multiple clients. Answer (d) is wrong because Singh's duties are more general, and answer (e) is wrong because Singh is not a prosecutor.

  1. d. The remaining are wrong because constitutional law has the functions listed in I, II, and III. IV is incorrect because it describes administrative law.

  1. b. State legislatures pass state statutes. The remaining answers are incorrect because they are all sources of law where the state legislature has no role.

  1. b. Legal strategy is a planning process. Answer (c) is incorrect because random is the opposite of strategy. Answers (a), (d), and (e), are incorrect because they are nonsensical.

  1. b. False. The U.S. Constitution is a primary source of law. An example of a secondary source would be the UCC and Restatements.

  1. a. True. The U.S. EPA is an administrative agency charged with environmental rulemaking, enforcement, and adjudication.

  1. b. False. Precedent may be overruled (and set) by any court of authority. Although the U.S. Supreme Court is a court of authority, it is not the only court of authority, which renders the statement false.

  1. b. False. Managers are on the front lines of legal decision making, and most businesses do not have regular access or resources to contact corporate counsel.

  1. a. True. Reliability allows business owners to plan transactions with a certain degree of assurance as to the legal impact of the transaction by understanding how similar transactions have been treated in the past.

Quick Quiz ANSWERS

Source of Law

A contract issue governed by statutory (UCC) law at the state level.

A patent issue governed by statutory law at the federal level.

A securities issue governed by statutory and administrative law at the federal and state levels.

A bankruptcy issue governed by statutory and administrative law at the federal level.

A zoning issue governed by statutory law at the local level.