TEST BANK
Business Law: Text and Cases
Author: Kenneth Clarkson
, Chapter 1
Introduction to Law and
Legal Reasoning
TRUE/FALSE QUESTIONS
A1. The stability and predictability of the law is essential to business activities.
ANSWER: T PAGE: 2 TYPE: =
NAT: AACSB Analytic AICPA Critical Thinking
A2. Law is a body of enforceable rules governing relationships among
individuals and between individuals and their society.
ANSWER: T PAGE: 2 TYPE: =
NAT: AACSB Analytic AICPA Legal
A3. A breach of a contract is a failure to perform it.
ANSWER: T PAGE: 3 TYPE: N
NAT: AACSB Ethics AICPA Critical Thinking
A4. Constitutional law includes only the U.S. Constitution.
1
, ANSWER: F PAGE: 4 TYPE: =
NAT: AACSB Analytic AICPA Legal
A5. A state constitution is supreme within the state’s borders.
ANSWER: T PAGE: 4 TYPE: =
NAT: AACSB Analytic AICPA Legal
A6. Whether a law is constitutional depends on its source.
ANSWER: F PAGE: 4 TYPE: =
NAT: AACSB Analytic AICPA Legal
A7. Uniform laws apply in all states, including those in which the laws have not
been adopted.
ANSWER: F PAGE: 4 TYPE: =
NAT: AACSB Analytic AICPA Legal
A8. A state law that conflicts with the U.S. Constitution will be deemed
unconstitutional.
ANSWER: T PAGE: 4 TYPE: =
NAT: AACSB Analytic AICPA Legal
A9. Statutory law does not include county ordinances.
ANSWER: F PAGE: 4 TYPE: =
NAT: AACSB Reflective AICPA Legal
A10. No state has adopted the Uniform Commercial Code in its entirety.
ANSWER: F PAGE: 5 TYPE: =
NAT: AACSB Reflective AICPA Legal
A11. Common law is a term for law that is common throughout the world.
ANSWER: F PAGE: 7 TYPE: =
NAT: AACSB Analytic AICPA Critical Thinking
,A12. Damages is a remedy at law.
ANSWER: T PAGE: 7 TYPE: =
NAT: AACSB Analytic AICPA Legal
A13. Remedies in equity include injunctions and decrees of specific performance.
ANSWER: T PAGE: 7 TYPE: =
NAT: AACSB Analytic AICPA Legal
A14. In most states, the courts no longer grant “equitable” remedies.
ANSWER: F PAGE: 8 TYPE: =
NAT: AACSB Analytic AICPA Legal
A15. A defendant is a person against whom a lawsuit is brought.
ANSWER: T PAGE: 8 TYPE: =
NAT: AACSB Analytic AICPA Legal
A16. Courts do not depart from precedents.
ANSWER: F PAGE: 9 TYPE: =
NAT: AACSB Reflective AICPA Critical Thinking
A17. A judge’s function is to make the law.
ANSWER: F PAGE: 13 TYPE: N
NAT: AACSB Analytic AICPA Legal
A18. Criminal law focuses on duties that exist between persons.
ANSWER: F PAGE: 14 TYPE: =
NAT: AACSB Analytic AICPA Legal
A19. A reference to “28 U.S.C. Section 1332” means that a statute can be found
in section 1332 of title 28 of the United States Code.
ANSWER: T PAGE: 15 TYPE: =
NAT: AACSB Analytic AICPA Research
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part.
,A20. Most state trial court decisions are not published.
ANSWER: T PAGE: 16 TYPE: =
NAT: AACSB Analytic AICPA Research
MULTIPLE CHOICE QUESTIONS
A1. The legislature of the state of Mississippi enacts a new statute that sets
standards for the liability of businesses selling defective products. This
statute applies
a. only in Mississippi.
b. only in Mississippi and its border states.
c. in all states.
d. in all states but only to matters not covered by other states’ laws.
ANSWER: A PAGE: 4 TYPE: N
NAT: AACSB Reflective AICPA Critical Thinking
A2. Lewis is a state court judge. Like other judges, Lewis often refers to
secondary sources of law for guidance. These sources include
a. official comments to statute.
b. other states’ statutes.
c. state constitutions.
d. the U.S. Constitution.
ANSWER: A PAGE: 4 TYPE: N
NAT: AACSB Reflective AICPA Legal
A3. Hawaii enacts a state law that violates the U.S. Constitution. This law can
be enforced by
a. no one.
b. the federal government only.
c. the state of Hawaii only.
d. the United States Supreme Court only.
, ANSWER: A PAGE: 4 TYPE: =
NAT: AACSB Reflective AICPA Legal
A4. The Federal Trade Commission is a government agency that issues rules,
orders, and decisions. The Georgia state legislature enacts statutes. The
Jackson County Board and the Peach City Council enacts ordinances.
Administrative law includes
a. all law that affects a business’s operation.
b. the rules, orders, and decisions of the Federal Trade Commission.
c. statutes enacted by the Georgia state legislature.
d. ordinances created by the Jackson County Board and the city council
of Peach City, Georgia.
ANSWER: B PAGE: 5 TYPE: =
NAT: AACSB Reflective AICPA Legal
A5. The Securities Exchange Commission is an administrative agency. The
chief purpose of such agencies is to
a. act as liaisons between federal and state governments.
b. impose uniform laws on the states.
c. perform specific government functions.
d. standardize laws for the executive and judicial branches.
ANSWER: C PAGE: 5 TYPE: =
NAT: AACSB Reflective AICPA Legal
A6. In a suit against Corbin, Donatella obtains damages. This is
a. an order to do or to refrain from doing a particular act.
b. an order to perform what was promised.
c. a payment of money or property as compensation.
d. the cancellation of a contract.
ANSWER: C PAGE: 7 TYPE: N
NAT: AACSB Reflective AICPA Legal
A7. In an action against Elin, Frank obtains a remedy. This is
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part.
, a. an administrative agency’s enforcement of its rule.
b. a principle of the law derived from earlier court cases.
c. a statute enacted by a state legislature or Congress.
d. the legal means to recover a right or to redress a wrong.
ANSWER: D PAGE: 7 TYPE: =
NAT: AACSB Reflective AICPA Legal
A8. In a suit against Evan, Floyd obtains an injunction. This is
a. an order to do or to refrain from doing a particular act.
b. an order to perform what was promised.
c. a payment of money or property as compensation.
d. the cancellation of a contract.
ANSWER: A PAGE: 7 TYPE: N
NAT: AACSB Reflective AICPA Legal
A9. In a suit against Vladimir over the performance of a contract, Wyler obtains
rescission. This is
a. an order to do or to refrain from doing a particular act.
b. an order to perform what was promised.
c. a payment of money or property as compensation.
d. the cancellation of a contract.
ANSWER: D PAGE: 7 TYPE: N
NAT: AACSB Reflective AICPA Legal
A10. In a suit against Sandy, Tippy obtains damages. In the U.S. legal system,
this remedy at law is
a. equitable.
b. normal.
c. unlikely.
d. unusual.
ANSWER: B PAGE: 7 TYPE: N
NAT: AACSB Reflective AICPA Legal
A11. Maggie and Nate enter into a contract for the sale of car, but Nate later
, refuses to deliver the goods. Maggie asks a court to order Nate to perform as
promised. Ordering a party to perform what was promised is
a. an equitable remedy.
b. an unenforceable demand.
c. a remedy at law.
d. a type of harm.
ANSWER: A PAGE: 7 TYPE: N
NAT: AACSB Reflective AIPA Critical Thinking
A12. As a judge, Diane applies common law rules. These rules develop from
a. decisions of the courts in legal disputes.
b. regulations issued by administrative agencies.
c. statutes enacted by Congress and the state legislatures.
d. uniform laws drafted by legal scholars.
ANSWER: A PAGE: 8 TYPE: =
NAT: AACSB Reflective AICPA Legal
A13. Craig is a state court judge. In his court, as in most state courts, legal and
equitable remedies have merged. But it is important to distinguish between
equitable and legal remedies
a. because neither type of remedy can be granted today.
b. for no good reason.
c. to negotiate an enforceable business contract.
d. to request a proper remedy.
ANSWER: D PAGE: 8 TYPE: N
NAT: AACSB Reflective AICPA Legal
A14. In Ben v. City Car Dealership, a state supreme court held that a minor could
cancel a contract for the sale of a car. Now a trial court in the same state is
deciding Daphne v. Even Steven Auto Deals, Inc.,, a case with similar facts.
Under the doctrine of stare decisis, the trial court is likely to
a. allow the minor to cancel the contract.
b. disregard the previous case.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part.
, c. order the minor to cancel the contract.
d. require the minor to fulfill the contract.
ANSWER: A PAGE: 9 TYPE: =
NAT: AACSB Reflective AICPA Critical Thinking
A15. In Export Co. v. Imports, Inc., there is no precedent on which the court can
base a decision. The court can consider, among other things,
a. neither public policy nor social values.
b. public policy only.
c. public policy or social values.
d. social values only.
ANSWER: C PAGE: 10 TYPE: =
NAT: AACSB Reflective AICPA Critical Thinking
A16. A federal statute regulates an employment practice. To resolve a dispute
concerning the practice, Paula, a judge, will most likely apply
a. a common law doctrine that applied before the statute was enacted.
b. a common law doctrine that applies to other, different practices.
c. Paula’s personal philosophy of law.
d. the statute.
ANSWER: D PAGE: 12 TYPE: =
NAT: AACSB Reflective AICPA Critical Thinking
Fact Pattern 1-A1 (Questions A17–A19 apply)
The Texas Supreme Court decides the case of Livewire Entertainment Co. v. Power
Play Corp. Of nine justices, six believe the judgment should be in Livewire’s favor.
Justice Bellamy, one of the six, writes a separate opinion. The four justices who
believe the judgment should be in Power’s favor join in a third separate opinion.
A17. Refer to Fact Pattern 1-A1. These opinions are collected and published in
volumes called
a. citations.
b. codes.
c. reporters.
d. reviews.
, ANSWER: C PAGE: 16 TYPE: +
NAT: AACSB Reflective AICPA Research
A18. Refer to Fact Pattern 1-A1. Bellamy’s opinion is known as
a. a concurring opinion.
b. a dissenting opinion.
c. a majority opinion.
d. a per curiam opinion.
ANSWER: A PAGE: 21 TYPE: +
NAT: AACSB Reflective AICPA Research
A19. Refer to Fact Pattern 1-A1. The opinion joined by the four justices who
favor Power is known as
a. a concurring opinion.
b. a dissenting opinion.
c. a majority opinion.
d. a per curiam opinion.
ANSWER: B PAGE: 21 TYPE: +
NAT: AACSB Reflective AICPA Research
A20. At a prison in Ohio, inmate Steve recruits other inmates to play Towers &
Trolls, a potentially violent, fantasy, role-playing game. Ryan, the prison’s
warden, confiscates the game materials and bans its play at the prison.
Under the principles discussed in “A Sample Court Case,” Singer v.
Raemisch, Ryan most likely acted
a. in violation of Steve’s rights under the First Amendment.
b. reasonably in taking the game materials but not in banning its play.
c. reasonably in banning the game but not in taking the materials.
d. reasonably in the circumstances and under the law.
ANSWER: D PAGE: 26 TYPE: N
NAT: AACSB Reflective AICPA Research
ESSAY QUESTIONS
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part.
Business Law: Text and Cases
Author: Kenneth Clarkson
, Chapter 1
Introduction to Law and
Legal Reasoning
TRUE/FALSE QUESTIONS
A1. The stability and predictability of the law is essential to business activities.
ANSWER: T PAGE: 2 TYPE: =
NAT: AACSB Analytic AICPA Critical Thinking
A2. Law is a body of enforceable rules governing relationships among
individuals and between individuals and their society.
ANSWER: T PAGE: 2 TYPE: =
NAT: AACSB Analytic AICPA Legal
A3. A breach of a contract is a failure to perform it.
ANSWER: T PAGE: 3 TYPE: N
NAT: AACSB Ethics AICPA Critical Thinking
A4. Constitutional law includes only the U.S. Constitution.
1
, ANSWER: F PAGE: 4 TYPE: =
NAT: AACSB Analytic AICPA Legal
A5. A state constitution is supreme within the state’s borders.
ANSWER: T PAGE: 4 TYPE: =
NAT: AACSB Analytic AICPA Legal
A6. Whether a law is constitutional depends on its source.
ANSWER: F PAGE: 4 TYPE: =
NAT: AACSB Analytic AICPA Legal
A7. Uniform laws apply in all states, including those in which the laws have not
been adopted.
ANSWER: F PAGE: 4 TYPE: =
NAT: AACSB Analytic AICPA Legal
A8. A state law that conflicts with the U.S. Constitution will be deemed
unconstitutional.
ANSWER: T PAGE: 4 TYPE: =
NAT: AACSB Analytic AICPA Legal
A9. Statutory law does not include county ordinances.
ANSWER: F PAGE: 4 TYPE: =
NAT: AACSB Reflective AICPA Legal
A10. No state has adopted the Uniform Commercial Code in its entirety.
ANSWER: F PAGE: 5 TYPE: =
NAT: AACSB Reflective AICPA Legal
A11. Common law is a term for law that is common throughout the world.
ANSWER: F PAGE: 7 TYPE: =
NAT: AACSB Analytic AICPA Critical Thinking
,A12. Damages is a remedy at law.
ANSWER: T PAGE: 7 TYPE: =
NAT: AACSB Analytic AICPA Legal
A13. Remedies in equity include injunctions and decrees of specific performance.
ANSWER: T PAGE: 7 TYPE: =
NAT: AACSB Analytic AICPA Legal
A14. In most states, the courts no longer grant “equitable” remedies.
ANSWER: F PAGE: 8 TYPE: =
NAT: AACSB Analytic AICPA Legal
A15. A defendant is a person against whom a lawsuit is brought.
ANSWER: T PAGE: 8 TYPE: =
NAT: AACSB Analytic AICPA Legal
A16. Courts do not depart from precedents.
ANSWER: F PAGE: 9 TYPE: =
NAT: AACSB Reflective AICPA Critical Thinking
A17. A judge’s function is to make the law.
ANSWER: F PAGE: 13 TYPE: N
NAT: AACSB Analytic AICPA Legal
A18. Criminal law focuses on duties that exist between persons.
ANSWER: F PAGE: 14 TYPE: =
NAT: AACSB Analytic AICPA Legal
A19. A reference to “28 U.S.C. Section 1332” means that a statute can be found
in section 1332 of title 28 of the United States Code.
ANSWER: T PAGE: 15 TYPE: =
NAT: AACSB Analytic AICPA Research
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part.
,A20. Most state trial court decisions are not published.
ANSWER: T PAGE: 16 TYPE: =
NAT: AACSB Analytic AICPA Research
MULTIPLE CHOICE QUESTIONS
A1. The legislature of the state of Mississippi enacts a new statute that sets
standards for the liability of businesses selling defective products. This
statute applies
a. only in Mississippi.
b. only in Mississippi and its border states.
c. in all states.
d. in all states but only to matters not covered by other states’ laws.
ANSWER: A PAGE: 4 TYPE: N
NAT: AACSB Reflective AICPA Critical Thinking
A2. Lewis is a state court judge. Like other judges, Lewis often refers to
secondary sources of law for guidance. These sources include
a. official comments to statute.
b. other states’ statutes.
c. state constitutions.
d. the U.S. Constitution.
ANSWER: A PAGE: 4 TYPE: N
NAT: AACSB Reflective AICPA Legal
A3. Hawaii enacts a state law that violates the U.S. Constitution. This law can
be enforced by
a. no one.
b. the federal government only.
c. the state of Hawaii only.
d. the United States Supreme Court only.
, ANSWER: A PAGE: 4 TYPE: =
NAT: AACSB Reflective AICPA Legal
A4. The Federal Trade Commission is a government agency that issues rules,
orders, and decisions. The Georgia state legislature enacts statutes. The
Jackson County Board and the Peach City Council enacts ordinances.
Administrative law includes
a. all law that affects a business’s operation.
b. the rules, orders, and decisions of the Federal Trade Commission.
c. statutes enacted by the Georgia state legislature.
d. ordinances created by the Jackson County Board and the city council
of Peach City, Georgia.
ANSWER: B PAGE: 5 TYPE: =
NAT: AACSB Reflective AICPA Legal
A5. The Securities Exchange Commission is an administrative agency. The
chief purpose of such agencies is to
a. act as liaisons between federal and state governments.
b. impose uniform laws on the states.
c. perform specific government functions.
d. standardize laws for the executive and judicial branches.
ANSWER: C PAGE: 5 TYPE: =
NAT: AACSB Reflective AICPA Legal
A6. In a suit against Corbin, Donatella obtains damages. This is
a. an order to do or to refrain from doing a particular act.
b. an order to perform what was promised.
c. a payment of money or property as compensation.
d. the cancellation of a contract.
ANSWER: C PAGE: 7 TYPE: N
NAT: AACSB Reflective AICPA Legal
A7. In an action against Elin, Frank obtains a remedy. This is
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part.
, a. an administrative agency’s enforcement of its rule.
b. a principle of the law derived from earlier court cases.
c. a statute enacted by a state legislature or Congress.
d. the legal means to recover a right or to redress a wrong.
ANSWER: D PAGE: 7 TYPE: =
NAT: AACSB Reflective AICPA Legal
A8. In a suit against Evan, Floyd obtains an injunction. This is
a. an order to do or to refrain from doing a particular act.
b. an order to perform what was promised.
c. a payment of money or property as compensation.
d. the cancellation of a contract.
ANSWER: A PAGE: 7 TYPE: N
NAT: AACSB Reflective AICPA Legal
A9. In a suit against Vladimir over the performance of a contract, Wyler obtains
rescission. This is
a. an order to do or to refrain from doing a particular act.
b. an order to perform what was promised.
c. a payment of money or property as compensation.
d. the cancellation of a contract.
ANSWER: D PAGE: 7 TYPE: N
NAT: AACSB Reflective AICPA Legal
A10. In a suit against Sandy, Tippy obtains damages. In the U.S. legal system,
this remedy at law is
a. equitable.
b. normal.
c. unlikely.
d. unusual.
ANSWER: B PAGE: 7 TYPE: N
NAT: AACSB Reflective AICPA Legal
A11. Maggie and Nate enter into a contract for the sale of car, but Nate later
, refuses to deliver the goods. Maggie asks a court to order Nate to perform as
promised. Ordering a party to perform what was promised is
a. an equitable remedy.
b. an unenforceable demand.
c. a remedy at law.
d. a type of harm.
ANSWER: A PAGE: 7 TYPE: N
NAT: AACSB Reflective AIPA Critical Thinking
A12. As a judge, Diane applies common law rules. These rules develop from
a. decisions of the courts in legal disputes.
b. regulations issued by administrative agencies.
c. statutes enacted by Congress and the state legislatures.
d. uniform laws drafted by legal scholars.
ANSWER: A PAGE: 8 TYPE: =
NAT: AACSB Reflective AICPA Legal
A13. Craig is a state court judge. In his court, as in most state courts, legal and
equitable remedies have merged. But it is important to distinguish between
equitable and legal remedies
a. because neither type of remedy can be granted today.
b. for no good reason.
c. to negotiate an enforceable business contract.
d. to request a proper remedy.
ANSWER: D PAGE: 8 TYPE: N
NAT: AACSB Reflective AICPA Legal
A14. In Ben v. City Car Dealership, a state supreme court held that a minor could
cancel a contract for the sale of a car. Now a trial court in the same state is
deciding Daphne v. Even Steven Auto Deals, Inc.,, a case with similar facts.
Under the doctrine of stare decisis, the trial court is likely to
a. allow the minor to cancel the contract.
b. disregard the previous case.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part.
, c. order the minor to cancel the contract.
d. require the minor to fulfill the contract.
ANSWER: A PAGE: 9 TYPE: =
NAT: AACSB Reflective AICPA Critical Thinking
A15. In Export Co. v. Imports, Inc., there is no precedent on which the court can
base a decision. The court can consider, among other things,
a. neither public policy nor social values.
b. public policy only.
c. public policy or social values.
d. social values only.
ANSWER: C PAGE: 10 TYPE: =
NAT: AACSB Reflective AICPA Critical Thinking
A16. A federal statute regulates an employment practice. To resolve a dispute
concerning the practice, Paula, a judge, will most likely apply
a. a common law doctrine that applied before the statute was enacted.
b. a common law doctrine that applies to other, different practices.
c. Paula’s personal philosophy of law.
d. the statute.
ANSWER: D PAGE: 12 TYPE: =
NAT: AACSB Reflective AICPA Critical Thinking
Fact Pattern 1-A1 (Questions A17–A19 apply)
The Texas Supreme Court decides the case of Livewire Entertainment Co. v. Power
Play Corp. Of nine justices, six believe the judgment should be in Livewire’s favor.
Justice Bellamy, one of the six, writes a separate opinion. The four justices who
believe the judgment should be in Power’s favor join in a third separate opinion.
A17. Refer to Fact Pattern 1-A1. These opinions are collected and published in
volumes called
a. citations.
b. codes.
c. reporters.
d. reviews.
, ANSWER: C PAGE: 16 TYPE: +
NAT: AACSB Reflective AICPA Research
A18. Refer to Fact Pattern 1-A1. Bellamy’s opinion is known as
a. a concurring opinion.
b. a dissenting opinion.
c. a majority opinion.
d. a per curiam opinion.
ANSWER: A PAGE: 21 TYPE: +
NAT: AACSB Reflective AICPA Research
A19. Refer to Fact Pattern 1-A1. The opinion joined by the four justices who
favor Power is known as
a. a concurring opinion.
b. a dissenting opinion.
c. a majority opinion.
d. a per curiam opinion.
ANSWER: B PAGE: 21 TYPE: +
NAT: AACSB Reflective AICPA Research
A20. At a prison in Ohio, inmate Steve recruits other inmates to play Towers &
Trolls, a potentially violent, fantasy, role-playing game. Ryan, the prison’s
warden, confiscates the game materials and bans its play at the prison.
Under the principles discussed in “A Sample Court Case,” Singer v.
Raemisch, Ryan most likely acted
a. in violation of Steve’s rights under the First Amendment.
b. reasonably in taking the game materials but not in banning its play.
c. reasonably in banning the game but not in taking the materials.
d. reasonably in the circumstances and under the law.
ANSWER: D PAGE: 26 TYPE: N
NAT: AACSB Reflective AICPA Research
ESSAY QUESTIONS
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part.
