LAW 3220- EXAM 1 QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026
What are the main sources of law discussed in these notes? - Answers Constitutional law, statutory
law, common law/judge-made law, local laws/ordinances, and business-organization law rules. Local
laws and ordinances are rules made by local governments/entities; examples include the City of
Clemson and Duke Energy making some rules.
What is the U.S. Constitution and why is it important? - Answers It is the oldest written constitution
still in use, a short document of general principles, and the fundamental/supreme law of the land.
What are the three branches of government? - Answers Legislative, Executive, and Judicial. In the
federal system: Congress, President, courts. In states: state legislature/General Assembly, governor,
state courts.
How do state constitutions compare with the U.S. Constitution? - Answers A state constitution is the
highest law within that state, but the federal Constitution is supreme. State constitutions are usually
more specific, such as rules on public education or alcohol regulation.
What is statutory law? - Answers Law created by Congress or state legislatures. Statutes are laws, and
lawmaking is intentionally difficult. In some states, voters can directly pass legislation through
referendums or initiatives, but these are not available in South Carolina.
What is a bicameral legislature? - Answers A two-house legislature. The federal government and
every state except Nebraska have bicameral legislatures, intended as a check and balance that slows
lawmaking.
What are zombie laws? - Answers Statutes that are technically still in effect but are extremely
unlikely to be enforced and would almost certainly be thrown out by a court.
What is a common-law system? - Answers A legal system brought from England by colonists and
developed through court precedent; the U.S. is a common-law system.
What is a case in the legal system? - Answers A dispute brought to court. When there is a question of
law, judges look to earlier court decisions resolving similar disputes.
What is precedent? - Answers An earlier court decision that guides later courts in similar disputes.
Judges use earlier cases by analogizing to similar ones and distinguishing meaningfully different ones.
Why is common law sometimes called judge-made law? - Answers Because judges create and
develop legal rules through decisions in cases, especially when statutes or constitutions do not
answer the issue directly. A civil-law system relies mainly on codes rather than judge-made
precedent; Louisiana uses a civil-law system.
What is stare decisis? - Answers The principle that courts generally give significant weight to previous
decisions; Latin for 'let the decision stand.'
What did Judge Posner say about precedent? - Answers A single precedent is fragile, but an
accumulation of precedents creates a strong rule of law.
What are the benefits of stare decisis? - Answers It promotes consistency in the legal system,
improves the ability to plan business decisions, and helps neutralize prejudice of individual judges.
Is stare decisis absolute? - Answers No. It is a general principle, not an ironclad rule.
When can stare decisis be overcome? - Answers When there was error in the precedent, the
precedent is obsolete, following it would harm the community, or it conflicts with new statutory law.
What is civil law in the civil vs. criminal distinction? - Answers Civil law deals with relationships,
property, contracts, and divorces. Criminal law involves regulation/enforcement of rights and crimes
such as murder and assault.
What are the major types of business organizations in the notes? - Answers Sole proprietorship,
partnership, corporation, limited liability company (LLC), and franchise.
What is a sole proprietorship? - Answers A simple business where someone does business for
themselves without creating a separate legal entity.
What are the basic advantages or informalities of a sole proprietorship? - Answers Few formalities,
no state filing, but the owner might still need a local business license or special license based on the
business type. A DBA/trade name does not create legal coverage or liability protection. A business
license provides zero legal coverage.
Who has control and risk in a sole proprietorship? - Answers The individual owner bears all control
and all risk. Raising capital is on the owner through personal funds or loans; if others invest, it is
probably no longer a sole proprietorship.
How is a sole proprietorship taxed? - Answers Pass-through taxation: all business income is reported
on the individual owner's tax return.
, Why do businesses often operate as sole proprietorships? - Answers They are often very small or just
starting out; however, no serious business person should usually operate as a sole proprietorship
because of unlimited personal risk.
How is a general partnership formed? - Answers By an association of 2 or more persons carrying on a
business as co-owners for shared profits.
Is intent to form a partnership required? - Answers No. Intent to be a partnership is not required, and
the label used by the parties does not matter. A lender being repaid with interest is not a partner, but
an investor participating in profits may indicate a partnership.
Why do partnerships form? - Answers Often by accident; also to expand the capital pool, divide labor,
and create opportunities to expand.
What facts can indicate creation of a partnership? - Answers Profit sharing, expression of intent to be
partners, participation or right to control the business, agreement to share losses/liability, and
contributing money or property to the business.
What is partnership liability? - Answers General partnerships have joint and several liability, meaning
unlimited personal liability for partners.
What does joint liability mean in a partnership? - Answers Partners are both/all responsible for
partnership obligations. Several liability means each partner can be liable for the entire total
obligation.
What happens if partners are sued and only one has money? - Answers The partner with money may
have to pay the whole amount, even if other partners are also responsible. A paying/sued partner can
bring a contribution claim against non-sued or nonpaying partners.
When does partnership liability generally apply? - Answers It generally extends only to actions within
the scope of the partnership.
What is the general rule for management of a general partnership? - Answers Unless the partnership
agreement says otherwise, each partner has an equal vote in management. A partnership agreement
outlines rights and duties and can change default management or voting rules.
Does ownership percentage control voting in a general partnership by default? - Answers No. Size of
ownership does not matter by default; a 90% owner and 10% owner may still each have one vote
unless the agreement says otherwise.
How are partnership decisions usually made? - Answers Decisions are based on majority rules, which
can lead to disagreements and lawsuits.
What fiduciary role does each partner have? - Answers Each partner is a fiduciary of the partnership
and must act in good faith and in the partnership's best interest.
What are key fiduciary duties in a partnership? - Answers Loyalty, reasonable care, information, and
candor. Reasonable care means acting as a reasonably careful partner would act.
What is the partnership duty of loyalty? - Answers A partner must place personal interests below the
interests of the partnership.
What is the partnership duty of information? - Answers A partner cannot withhold information
related to the partnership.
What is the partnership duty of candor? - Answers A partner must be truthful with other partners.
What happens if a partner violates fiduciary duties? - Answers Violation can lead to liability and
money damages.
What is a limited partnership (LP)? - Answers A registered entity with at least one general partner
and one or more limited partners.
How are LPs formed? - Answers LPs are registered entities filed with the state.
Who manages a limited partnership? - Answers Only the general partners have management
authority and liability responsibility.
What are limited partners sometimes called? - Answers Silent partners.
What liability do limited partners have? - Answers Limited partners are liable only up to the amount
of their investment; their risk is that their ownership interest goes to zero.
What happens if a limited partner acts like a general partner? - Answers They could lose limited-
partner status and become liable as a general partner.
Can limited partners control the business? - Answers No. If they disagree with business direction,
they generally cannot control management.
Why do limited partners need a partnership agreement? - Answers To anticipate disagreements and
clarify rights because limited partners lack management control.
What are the main sources of law discussed in these notes? - Answers Constitutional law, statutory
law, common law/judge-made law, local laws/ordinances, and business-organization law rules. Local
laws and ordinances are rules made by local governments/entities; examples include the City of
Clemson and Duke Energy making some rules.
What is the U.S. Constitution and why is it important? - Answers It is the oldest written constitution
still in use, a short document of general principles, and the fundamental/supreme law of the land.
What are the three branches of government? - Answers Legislative, Executive, and Judicial. In the
federal system: Congress, President, courts. In states: state legislature/General Assembly, governor,
state courts.
How do state constitutions compare with the U.S. Constitution? - Answers A state constitution is the
highest law within that state, but the federal Constitution is supreme. State constitutions are usually
more specific, such as rules on public education or alcohol regulation.
What is statutory law? - Answers Law created by Congress or state legislatures. Statutes are laws, and
lawmaking is intentionally difficult. In some states, voters can directly pass legislation through
referendums or initiatives, but these are not available in South Carolina.
What is a bicameral legislature? - Answers A two-house legislature. The federal government and
every state except Nebraska have bicameral legislatures, intended as a check and balance that slows
lawmaking.
What are zombie laws? - Answers Statutes that are technically still in effect but are extremely
unlikely to be enforced and would almost certainly be thrown out by a court.
What is a common-law system? - Answers A legal system brought from England by colonists and
developed through court precedent; the U.S. is a common-law system.
What is a case in the legal system? - Answers A dispute brought to court. When there is a question of
law, judges look to earlier court decisions resolving similar disputes.
What is precedent? - Answers An earlier court decision that guides later courts in similar disputes.
Judges use earlier cases by analogizing to similar ones and distinguishing meaningfully different ones.
Why is common law sometimes called judge-made law? - Answers Because judges create and
develop legal rules through decisions in cases, especially when statutes or constitutions do not
answer the issue directly. A civil-law system relies mainly on codes rather than judge-made
precedent; Louisiana uses a civil-law system.
What is stare decisis? - Answers The principle that courts generally give significant weight to previous
decisions; Latin for 'let the decision stand.'
What did Judge Posner say about precedent? - Answers A single precedent is fragile, but an
accumulation of precedents creates a strong rule of law.
What are the benefits of stare decisis? - Answers It promotes consistency in the legal system,
improves the ability to plan business decisions, and helps neutralize prejudice of individual judges.
Is stare decisis absolute? - Answers No. It is a general principle, not an ironclad rule.
When can stare decisis be overcome? - Answers When there was error in the precedent, the
precedent is obsolete, following it would harm the community, or it conflicts with new statutory law.
What is civil law in the civil vs. criminal distinction? - Answers Civil law deals with relationships,
property, contracts, and divorces. Criminal law involves regulation/enforcement of rights and crimes
such as murder and assault.
What are the major types of business organizations in the notes? - Answers Sole proprietorship,
partnership, corporation, limited liability company (LLC), and franchise.
What is a sole proprietorship? - Answers A simple business where someone does business for
themselves without creating a separate legal entity.
What are the basic advantages or informalities of a sole proprietorship? - Answers Few formalities,
no state filing, but the owner might still need a local business license or special license based on the
business type. A DBA/trade name does not create legal coverage or liability protection. A business
license provides zero legal coverage.
Who has control and risk in a sole proprietorship? - Answers The individual owner bears all control
and all risk. Raising capital is on the owner through personal funds or loans; if others invest, it is
probably no longer a sole proprietorship.
How is a sole proprietorship taxed? - Answers Pass-through taxation: all business income is reported
on the individual owner's tax return.
, Why do businesses often operate as sole proprietorships? - Answers They are often very small or just
starting out; however, no serious business person should usually operate as a sole proprietorship
because of unlimited personal risk.
How is a general partnership formed? - Answers By an association of 2 or more persons carrying on a
business as co-owners for shared profits.
Is intent to form a partnership required? - Answers No. Intent to be a partnership is not required, and
the label used by the parties does not matter. A lender being repaid with interest is not a partner, but
an investor participating in profits may indicate a partnership.
Why do partnerships form? - Answers Often by accident; also to expand the capital pool, divide labor,
and create opportunities to expand.
What facts can indicate creation of a partnership? - Answers Profit sharing, expression of intent to be
partners, participation or right to control the business, agreement to share losses/liability, and
contributing money or property to the business.
What is partnership liability? - Answers General partnerships have joint and several liability, meaning
unlimited personal liability for partners.
What does joint liability mean in a partnership? - Answers Partners are both/all responsible for
partnership obligations. Several liability means each partner can be liable for the entire total
obligation.
What happens if partners are sued and only one has money? - Answers The partner with money may
have to pay the whole amount, even if other partners are also responsible. A paying/sued partner can
bring a contribution claim against non-sued or nonpaying partners.
When does partnership liability generally apply? - Answers It generally extends only to actions within
the scope of the partnership.
What is the general rule for management of a general partnership? - Answers Unless the partnership
agreement says otherwise, each partner has an equal vote in management. A partnership agreement
outlines rights and duties and can change default management or voting rules.
Does ownership percentage control voting in a general partnership by default? - Answers No. Size of
ownership does not matter by default; a 90% owner and 10% owner may still each have one vote
unless the agreement says otherwise.
How are partnership decisions usually made? - Answers Decisions are based on majority rules, which
can lead to disagreements and lawsuits.
What fiduciary role does each partner have? - Answers Each partner is a fiduciary of the partnership
and must act in good faith and in the partnership's best interest.
What are key fiduciary duties in a partnership? - Answers Loyalty, reasonable care, information, and
candor. Reasonable care means acting as a reasonably careful partner would act.
What is the partnership duty of loyalty? - Answers A partner must place personal interests below the
interests of the partnership.
What is the partnership duty of information? - Answers A partner cannot withhold information
related to the partnership.
What is the partnership duty of candor? - Answers A partner must be truthful with other partners.
What happens if a partner violates fiduciary duties? - Answers Violation can lead to liability and
money damages.
What is a limited partnership (LP)? - Answers A registered entity with at least one general partner
and one or more limited partners.
How are LPs formed? - Answers LPs are registered entities filed with the state.
Who manages a limited partnership? - Answers Only the general partners have management
authority and liability responsibility.
What are limited partners sometimes called? - Answers Silent partners.
What liability do limited partners have? - Answers Limited partners are liable only up to the amount
of their investment; their risk is that their ownership interest goes to zero.
What happens if a limited partner acts like a general partner? - Answers They could lose limited-
partner status and become liable as a general partner.
Can limited partners control the business? - Answers No. If they disagree with business direction,
they generally cannot control management.
Why do limited partners need a partnership agreement? - Answers To anticipate disagreements and
clarify rights because limited partners lack management control.
