SOLUTION AND ANSWER GUIDE
ESSENTIALS OF BUSINESS LAW
8TH EDITION
CHAPTER 1: INTRODUCTION TO LAW
TABLE OF CONTENTS
• Multiple Choice Questions
• Additional Exam Strategy Questions
• Case Questions
• Discussion Questions
MULTIPLE CHOICE QUESTIONS
1. The United States Constitution is among the finest legal accomplishments in the history
of the world. Which of the following influenced Ben Franklin, Thomas Jefferson, and the
rest of the Founding Fathers?
I. English common-law principles
II. The Iroquois system of federalism
a. Only I
b. Only II
c. Both I and II
d. Neither I nor II
Answer: C.
2. Which of the following parts of the modern legal system are “borrowed” from medieval
England?
a. Jury trials
b. Special rules for selling land
c. Following precedent
d. All of these
Answer: D
3. Union organizers at a hospital wanted to distribute leaflets to potential union members,
but hospital rules prohibited leafleting in areas of patient care, hallways, cafeterias, and
any areas open to the public. The National Labor Relations Board (NLRB), a government
agency, ruled that these restrictions violated the law and ordered the hospital to permit the
activities in the cafeteria and coffee shop. What kind of law was NLRB creating?
a. A statute
, b. Common law
c. A constitutional amendment
d. Administrative regulation
Answer: D. The NLRB, as an agency, creates regulations. Congress creates statutes,
and judges shape the common law.
4. For a statute to become law, Congress must pass it by a:
I. Majority vote in the House
II. Majority vote in the Senate
III. Two-thirds vote in the House, but only if the president has first vetoed it
IV. Two-thirds vote in the Senate, but only if the president has first vetoed it
a. Just I and II
b. Just III and IV
c. All of these
d. None of these
Answer: C
5. Dr. Martin Luther King, Jr., wrote “An unjust law is no law at all.” As such, “One has ...
a moral responsibility to disobey unjust laws.” Dr. King’s view is an example of:
a. legal realism.
b. jurisprudence.
c. legal positivism.
d. natural law.
Answer: D
ADDITIONAL EXAM STRATEGY QUESTIONS
1. The stock market crash of 1929 and the Great Depression that followed were caused, in
part, because so many investors blindly put their money into stocks they knew nothing
about. During the 1920s, it was often impossible for an investor to find out what a
corporation was planning to do with its money, who was running the corporation, and
many other vital things. Congress responded by passing the Securities Act of 1933, which
required a corporation to divulge more information about itself before it could seek
money for a new stock issue. What kind of law did Congress create?
Strategy: What is the question seeking? The question asks you which type of law
Congress created when it passed the 1933 Securities Act. What are the primary kinds of
law? Administrative law consists of rules passed by agencies. Congress is not a federal
agency. Common law is the body of cases decided by judges. Congress is not a judge.
Statutes are laws passed by legislatures. Congress is a legislature.
, Solution: The Securities Act of 1933 is a statute.
2. Bill and Diane are hiking in the woods. Diane walks down a hill to fetch fresh water. Bill
meets a stranger who introduces herself as Katrina. Bill sells a kilo of cocaine to Katrina,
who then flashes a badge and mentions how much she enjoys her job at the Drug
Enforcement Agency. Diane, heading back to camp with the water, meets Freddy, a
motorist whose car has overheated. Freddy is late for a meeting where he expects to make
a $30 million profit; he’s desperate for water for his car. He promises to pay Diane $500
tomorrow if she will give him the pail of water, which she does. The next day, Bill is in
jail and Freddy refuses to pay for Diane’s water. Explain the criminal law/civil law
distinction and what it means to Bill and Diane. Who will do what to whom, with what
results?
Strategy: You are asked to distinguish between criminal and civil law. What is the
difference? Criminal law concerns behavior that threatens society and is therefore
outlawed. The government prosecutes the defendant. Civil law deals with the rights and
duties between parties. One party files a suit against the other. Apply those different
standards to these facts.
Solution: The government will prosecute Bill for dealing in drugs. If convicted, he
will go to prison. The government will take no interest in Diane’s dispute. However,
if she chooses, she may sue Freddy for $500, the amount he promised her for the
water. In that civil lawsuit, a court will decide whether Freddy must pay what he
promised; however, even if Freddy loses, he will not go to jail.
CASE QUESTIONS
1. Lance, a hacker, stole 15,000 credit card numbers and sold them on the dark web, making
millions. Police caught Lance, and two legal actions followed, one civil and one criminal.
Who will be responsible for bringing the civil case? What will be the outcome if the jury
believes that Lance was responsible for identity thefts? Who will be responsible for
bringing the criminal case? What will be the outcome if the jury believes that Lance stole
the numbers?
Solution: The civil cases will be brought by the victims of identity theft, and the
outcome of a successful case against Lance would be some type of monetary award
for damages suffered. The criminal case will be brought by state prosecutors and the
outcome would be imprisonment for Lance.
2. As The Oculist’s Case indicates, the medical profession has faced many lawsuits for
centuries. In Texas, a law provides that, so long as a doctor was not reckless and did not
intentionally harm a patient, recovery for “pain and suffering” is limited to $250,000. In
many other states, no such limit exists. If a patient will suffer a lifetime of pain after a
, botched operation, for example, they might recover millions in compensation. Which rule
seems more sensible to you—the Texas rule or the alternative?
Solution: Answers may include the following:
• Some students may focus on the patients, saying that $250,000 is not
enough for some patients who are destined to live their entire lives in pain
and unable to accomplish many of their personal and professional goals
because of poor health.
• Other students, however, may focus on the larger healthcare system,
noting that unchecked awards could have an adverse effect on the public
as a whole. For example, if patients are routinely awarded millions for
pain and suffering, doctors will more comprehensive malpractice
insurance coverage, and these expenses will be passed along to the public
through higher healthcare costs.
3. Leslie Bergh and his two brothers, Milton and Raymond, formed a partnership to help
build a fancy saloon and dance hall in Evanston, Wyoming. Later, Leslie met with his
friend and drinking buddy, John Mills, and tricked Mills into investing in the saloon.
Leslie did not tell Mills that no one else was investing cash or that the entire enterprise
was already bankrupt. Mills remortgaged his home and invested $150,000 in the saloon—
and lost every penny of it. Mills sued all three partners for fraud. Milton and Raymond
defended on the grounds that they did not commit the fraud; only Leslie did. The
defendants lost. Was that fair? By holding them liable, what general idea did the court
rely on? What Anglo-Saxon legal custom did the ruling resemble?
Solution: The partners are indeed liable. Bergh v. Mills, 763 P.2d 214 (Wyo. 1988).
That is the essence of a partnership: All partners are liable for the acts of any partner
committed in the partnership’s normal business. This is the general idea of collective
responsibility. It relates to the “tithing” of English legal history, in which all tithing
members were legally responsible for the conduct of the others.
4. In 2015, terrorists coordinated a series of attacks on civilians in Paris, France. The father
of an American woman killed in a nightclub sued various social media companies
including YouTube, alleging the sites knowingly allowed terrorists to recruit members
and spread extremist propaganda. The sites defended themselves by saying that their
policies prohibit terrorist recruitment and that, when alerted to it, they quickly remove
offending videos. What type of lawsuit is this—criminal or civil? What responsibilities, if
any, should social media sites have for the spread of terrorism?
Solution: The case is a civil case, but answers will vary as to the scope of the
responsibilities social media sites should have for the spread of terrorism.
ESSENTIALS OF BUSINESS LAW
8TH EDITION
CHAPTER 1: INTRODUCTION TO LAW
TABLE OF CONTENTS
• Multiple Choice Questions
• Additional Exam Strategy Questions
• Case Questions
• Discussion Questions
MULTIPLE CHOICE QUESTIONS
1. The United States Constitution is among the finest legal accomplishments in the history
of the world. Which of the following influenced Ben Franklin, Thomas Jefferson, and the
rest of the Founding Fathers?
I. English common-law principles
II. The Iroquois system of federalism
a. Only I
b. Only II
c. Both I and II
d. Neither I nor II
Answer: C.
2. Which of the following parts of the modern legal system are “borrowed” from medieval
England?
a. Jury trials
b. Special rules for selling land
c. Following precedent
d. All of these
Answer: D
3. Union organizers at a hospital wanted to distribute leaflets to potential union members,
but hospital rules prohibited leafleting in areas of patient care, hallways, cafeterias, and
any areas open to the public. The National Labor Relations Board (NLRB), a government
agency, ruled that these restrictions violated the law and ordered the hospital to permit the
activities in the cafeteria and coffee shop. What kind of law was NLRB creating?
a. A statute
, b. Common law
c. A constitutional amendment
d. Administrative regulation
Answer: D. The NLRB, as an agency, creates regulations. Congress creates statutes,
and judges shape the common law.
4. For a statute to become law, Congress must pass it by a:
I. Majority vote in the House
II. Majority vote in the Senate
III. Two-thirds vote in the House, but only if the president has first vetoed it
IV. Two-thirds vote in the Senate, but only if the president has first vetoed it
a. Just I and II
b. Just III and IV
c. All of these
d. None of these
Answer: C
5. Dr. Martin Luther King, Jr., wrote “An unjust law is no law at all.” As such, “One has ...
a moral responsibility to disobey unjust laws.” Dr. King’s view is an example of:
a. legal realism.
b. jurisprudence.
c. legal positivism.
d. natural law.
Answer: D
ADDITIONAL EXAM STRATEGY QUESTIONS
1. The stock market crash of 1929 and the Great Depression that followed were caused, in
part, because so many investors blindly put their money into stocks they knew nothing
about. During the 1920s, it was often impossible for an investor to find out what a
corporation was planning to do with its money, who was running the corporation, and
many other vital things. Congress responded by passing the Securities Act of 1933, which
required a corporation to divulge more information about itself before it could seek
money for a new stock issue. What kind of law did Congress create?
Strategy: What is the question seeking? The question asks you which type of law
Congress created when it passed the 1933 Securities Act. What are the primary kinds of
law? Administrative law consists of rules passed by agencies. Congress is not a federal
agency. Common law is the body of cases decided by judges. Congress is not a judge.
Statutes are laws passed by legislatures. Congress is a legislature.
, Solution: The Securities Act of 1933 is a statute.
2. Bill and Diane are hiking in the woods. Diane walks down a hill to fetch fresh water. Bill
meets a stranger who introduces herself as Katrina. Bill sells a kilo of cocaine to Katrina,
who then flashes a badge and mentions how much she enjoys her job at the Drug
Enforcement Agency. Diane, heading back to camp with the water, meets Freddy, a
motorist whose car has overheated. Freddy is late for a meeting where he expects to make
a $30 million profit; he’s desperate for water for his car. He promises to pay Diane $500
tomorrow if she will give him the pail of water, which she does. The next day, Bill is in
jail and Freddy refuses to pay for Diane’s water. Explain the criminal law/civil law
distinction and what it means to Bill and Diane. Who will do what to whom, with what
results?
Strategy: You are asked to distinguish between criminal and civil law. What is the
difference? Criminal law concerns behavior that threatens society and is therefore
outlawed. The government prosecutes the defendant. Civil law deals with the rights and
duties between parties. One party files a suit against the other. Apply those different
standards to these facts.
Solution: The government will prosecute Bill for dealing in drugs. If convicted, he
will go to prison. The government will take no interest in Diane’s dispute. However,
if she chooses, she may sue Freddy for $500, the amount he promised her for the
water. In that civil lawsuit, a court will decide whether Freddy must pay what he
promised; however, even if Freddy loses, he will not go to jail.
CASE QUESTIONS
1. Lance, a hacker, stole 15,000 credit card numbers and sold them on the dark web, making
millions. Police caught Lance, and two legal actions followed, one civil and one criminal.
Who will be responsible for bringing the civil case? What will be the outcome if the jury
believes that Lance was responsible for identity thefts? Who will be responsible for
bringing the criminal case? What will be the outcome if the jury believes that Lance stole
the numbers?
Solution: The civil cases will be brought by the victims of identity theft, and the
outcome of a successful case against Lance would be some type of monetary award
for damages suffered. The criminal case will be brought by state prosecutors and the
outcome would be imprisonment for Lance.
2. As The Oculist’s Case indicates, the medical profession has faced many lawsuits for
centuries. In Texas, a law provides that, so long as a doctor was not reckless and did not
intentionally harm a patient, recovery for “pain and suffering” is limited to $250,000. In
many other states, no such limit exists. If a patient will suffer a lifetime of pain after a
, botched operation, for example, they might recover millions in compensation. Which rule
seems more sensible to you—the Texas rule or the alternative?
Solution: Answers may include the following:
• Some students may focus on the patients, saying that $250,000 is not
enough for some patients who are destined to live their entire lives in pain
and unable to accomplish many of their personal and professional goals
because of poor health.
• Other students, however, may focus on the larger healthcare system,
noting that unchecked awards could have an adverse effect on the public
as a whole. For example, if patients are routinely awarded millions for
pain and suffering, doctors will more comprehensive malpractice
insurance coverage, and these expenses will be passed along to the public
through higher healthcare costs.
3. Leslie Bergh and his two brothers, Milton and Raymond, formed a partnership to help
build a fancy saloon and dance hall in Evanston, Wyoming. Later, Leslie met with his
friend and drinking buddy, John Mills, and tricked Mills into investing in the saloon.
Leslie did not tell Mills that no one else was investing cash or that the entire enterprise
was already bankrupt. Mills remortgaged his home and invested $150,000 in the saloon—
and lost every penny of it. Mills sued all three partners for fraud. Milton and Raymond
defended on the grounds that they did not commit the fraud; only Leslie did. The
defendants lost. Was that fair? By holding them liable, what general idea did the court
rely on? What Anglo-Saxon legal custom did the ruling resemble?
Solution: The partners are indeed liable. Bergh v. Mills, 763 P.2d 214 (Wyo. 1988).
That is the essence of a partnership: All partners are liable for the acts of any partner
committed in the partnership’s normal business. This is the general idea of collective
responsibility. It relates to the “tithing” of English legal history, in which all tithing
members were legally responsible for the conduct of the others.
4. In 2015, terrorists coordinated a series of attacks on civilians in Paris, France. The father
of an American woman killed in a nightclub sued various social media companies
including YouTube, alleging the sites knowingly allowed terrorists to recruit members
and spread extremist propaganda. The sites defended themselves by saying that their
policies prohibit terrorist recruitment and that, when alerted to it, they quickly remove
offending videos. What type of lawsuit is this—criminal or civil? What responsibilities, if
any, should social media sites have for the spread of terrorism?
Solution: The case is a civil case, but answers will vary as to the scope of the
responsibilities social media sites should have for the spread of terrorism.
