BLAW 200

Self-regulation is: Hint: Review the section on worker safety.

(c) A willing, active internal compliance effort to reduce the likelihood and severity of formal agency rule-making and enforcement (correct) Rationale: Agencies rely, as a practical matter, on self-regulation. They give to businesses a set of expectations, and then require that the business prove its compliance. This system of regulation adds to management the responsibility of ensuring compliance.

Which of the following is not an issue with the doctrine in contract law of unconscionability: Hint: Review the introductory section in contracts concerning unconscionability.

(d) The court lacks jurisdiction to decide equitable issues. (correct) Rationale: Only answer [d] is false:in the U.S., courts have jurisdiction in both law and equity.

Which of the following is NOT an advantage of a corporation: Hint: Review the law of corporations.

All of the above are advantages (correct) Rationale: A corporation offers investors the greatest possible opportunity to bring together capital, with an unlimited number and type of shareholders and shares, and perpetual existence—in addition to limited liability. Without a designation, a "corporation" is presumed to be a "C" corporation

Legislatures may override the common law.

TRUE (correct) Rationale: A common law rule—which is an accumulation of court decisions in cases—may be overridden by a statutory law (by a legislature), or by regulation (by an administrative agency).

An important duty in law is a fiduciary duty. Hint: Review the section for contracts and agency law.

TRUE (correct) Rationale: A fiduciary duty is one of the most important concepts in agency law. A fiduciary duty is a duty to use the utmost care in handling the property of another.

In regulation, the interests of the parties, including the government, are: Hint: Review regulatory law.

differing but with substantial overlap (correct) Rationale: The regulatory process is extremely lengthy, with mandated periods for public comment following a protracted rule-making process, and followed by additional rule-making procedures and often back-and-forth negotiations. These generally follow technical rather than purely partisan mandates. Both sides (the agency and those being regulated, as well as those interested in the regulation) are usually staffed with technically proficient specialists who "speak the same language." The language they speak is that of the actual subject. If, for example, the Occupational Safety and Health Administration is considering new rules for the structure and materials used in trenching in construction sites, consider what is likely to be at issue. One might think the construction firms will say, "Bah, humbug! We don't want to spend money on this! Let's just dig a trench and fill it with cardboard. It'll be okay." For a host of reasons (which should be clear after reading this text), this is highly unlikely. Not least, such a construction company is likely to be bankrupted the first time a trench collapses, especially if there's an email with the above statement in it. A union might say "These rules should be far more strict! The company should have to build a complete structure and drop it in place before anyone goes in." If that structure is too expensive, the company will go bankrupt for a different reason, with the same result for employees. And what of the regulators? What are they saying? The answer to all of this is in the nature of who these individuals are. The regulators charged with making rules as to trench construction to prevent collapses are almost certain to be experts, either by experience in construction or by training, such as metallurgists and structural engineers. So who is on the other side? Answer: Exactly the same. What we then see is a system that is mostly technical, with groups of experts arguing about this-or-that specific technical question. Should 6-guage metal be used on these cross-supports, or is 8-guage sufficient? Should a new, lighter aluminum alloy be allowed to replace the heavier steel ones? Each side clearly has interests. That is to be expected. But the language and substance of what is being discussed is intensely technical, all in the interest of, in this case, workplace safety. Moreover, the head of the company's operations team is not interested in anti-safety: the desire is good safety at a reasonable cost. Regulators might push "good safety" more, and be less sensitive to cost, but both are speaking the same language. They are literally speaking metal, structural integrity, lateral test loads, safety tolerances, and so on. In fact, they are not only speaking the same language, they are often more culturally comfortable with each other than they are with different departments within their own organizations: metallurgists and structural engineers likely get along better with each other (even if on "different sides") than they do with the accountants in their own agency or company. Both want pretty much the same thing, and even when they don't, they understand where the divide is. This is less true with other areas of the law, where the other side is usually trying to deny you whatever it is you want.

The terms (in years) of office for Representatives, Senators, Presidents, and Justices are:

2, 6, 4, lifetime (correct) Rationale: Members of the House of Representatives are elected for two-year terms. Senators are elected for six-year terms. Presidents are elected for four-year terms. They may serve a maximum of two full terms. Justices are nominated by the President and confirmed by the Senate for lifetime appointments (assuming "good behavior").

One discussion that is both legal and political is that of "positive rights." How do positive rights differ from negative rights?

A "positive" right requires that the government take action, while a "negative" right limits the power of government. (correct) Rationale: The U.S. Constitution provides in the Bill of Rights for several negative rights, which is "the right to be left alone" (and thus are referred to as "negative" rights): "The government is prohibited from...." Positive rights are argued among some as beyond and important to constitutional rights. President Franklin D. Roosevelt proposed these economic rights to include, for example, the "right to earn enough to provide adequate food and clothing and recreation."

Which of the following is true regarding types of corporations: Hint: Review the law of corporations.

A domestic corporation is one chartered in a home state; a foreign corporation is chartered out-of-state; an alien corporation is chartered outside the United States. (correct) Rationale: A domestic corporation refers to a corporation in its home state, or the state in which the corporation was incorporated. A foreign corporation refers to a corporation operating in a U.S. state outside its "home" state. The foreign corporation must file for a certificate of authority to do business in a state other than its state of incorporation (where it is a domestic corporation). This certificate of authority is routinely granted, but is still required. If violated, the second state may impose penalties, including fines or legal sanctions (such as prohibiting further business activity). An alien corporation is one formed outside the United States.

Which of the following is required under a "long arm" statute? Hint: Review jurisdiction and the minimum contacts test. Stare decisis Purposeful availment Foreseeability by defendant of being sued there Exclusive jurisdiction Fair play and substantial justice

B, C, and E (correct) Rationale: If a litigant is not physically present, is not a resident, is not licensed, and does not consent, a court can exercise jurisdiction if the minimum contacts test is met: The defendant has minimum contacts with the state if: Purposeful availment of a market within the state, such as by continuous activity in selling product to customers in the market. This can apply even if the defendant does not sell directly to customers: the defendant is said to introduce products into the stream of commerce if there is a commercial benefit, especially if the relationship is ongoing. Other examples of purposeful availment include use of roads or ports, or use of corporate laws. The defendant could reasonably foresee being sued in the state. Hauling the defendant into court would not violate principles of fair play and substantial justice. This is a balancing test in which the court asks whether the nexus (connection) is sufficiently close, whether it is overly inconvenient for the defendant to defend the suit, and the state's interest in defending the public.

The Supreme Court, head of the most important branch, is addressed in Article I of the U.S. Constitution.

FALSE (correct) Rationale: Congress is arguably the branch of government, as it is described first, in Article I, and has definite enumerated powers, or specific authorities granted under the Constitution. Article II addresses executive powers, and a short Article III addresses the Supreme Court.

In a civil law system, the laws are in flux, dependent upon court cases.

FALSE (correct) Rationale: A civil law system is one in which the rules of a society are codified (written into a code) in a systematic, comprehensive, and accessible way. Until changed, the laws remain fixed. Courts interpret but do not change the civil law.

Under Agency Law, only the servant owed duties. Hint: Research "master" or "servant" and "agency law."

FALSE (correct) Rationale: cant upload photo

The law of modern Japan is:

German (correct) Rationale: Japanese leaders, humiliated by their relative weakness against foreign powers, resolved to undertake the Meiji Restoration, to bring Japan to parity or better against any Western foe. Early Japanese law, derived from Chinese law, incorporated Confucianism from China, and Buddhism from India. These became a part of Japanese social and cultural norms. Japanese law was referred to as incomplete (relative to Western laws). While not entirely true, this was of course a highly sensitive issue. It was in this context that Japanese leaders sent Japanese jurists to the United States and Europe. Common law (of either the English or American varieties) was far too un-Japanese to be palatable. Continental European law was a better fit. As with other societies, Japan looked first to the French Code Civil as a model for its new laws. The Japanese experts who traveled abroad were acquainted not only with French law, but also with its Roman antecedents. Efforts to adapt the French code to Japan were extensive—but were halted when Japan discovered and explored the draft of the German civil code. The Bürgerliches Gesetzbuch was an even better match for the Japanese, and so the new Japanese Civil Code is based extensively on the German code. In short, Japanese law is to a large extent German law.

Which of the following is least likely to be a bona fide occupational qualification?

Hiring only female wait staff. (correct)

Administrative law is carried out through agencies, which are bureaucratic in structure. Which of the following is NOT part of the "rational model" of bureaucracy proposed by Max Weber?

Political decision-making. (correct) Rationale: Max Weber proposed a "rational model" of bureaucracy, following nine principles: Bureaucrats would have specialized roles. Recruitment is based on merit (e.g. tested through exampinations, qualifications, and open competition). An administrative system would develop uniform placement, promotion, and transfer. Careerism with systematic salary structure. Hierarchy, responsibility, and accountability. Official conduct subject to strict discipline and control. Supremacy of abstract rules (rather than personal opinion). Impersonal authority (i.e., the office does not belong to the office holder). Political neutrality. [e] is false, and thus is the correct answer, as bureaucracy is supposed to be politically neutral, and not to engage in politically-based decisions.

Fred Q. Taxpayer sues the federal government on the basis of a misuse of money in the acquisition of pencils for the U.S. Department of Commerce. A U.S. court is likely to rule that: Hint: Review jurisdiction.

The case cannot proceed due to a lack of standing (correct) Rationale: Standing refers to the sufficiency of connection between the litigant and the harm or action that is the basis of the lawsuit. Usually standing is not in question, as the litigant is directly connected with the issue. Occasionally, however, a plaintiff or group might seek to sue to prove a point, or stop some action, or otherwise use the courts to decide an issue they are not directly harmed by or connected with. To show standing, a plaintiff must show: Harm or imminent harm; A causal link to the actions of defendant; and A court decision that can redress the injury.5 Standing is of special concern where, for example, a taxpayer seeks to challenge the use of tax monies, or a citizen to challenge a statute. In such cases, the court will usually require a more-specific connection than simply being a "taxpayer" or "citizen."

Careful Carissa is singing the Karen Carpenter hit Close to You as she drives down First Avenue. She is driving under the speed limit, with both hands on the wheel. She is hitting the high notes in the song, shouting "Waa, ah ah ah ah...close to you..." when she is struck from the side by a large truck driven by an extremely inebriated ex-felon. Under which of the following tort laws is Carissa likely barred from recovery? Hint: Review the McDonald's hot coffee case

b) Contributory negligence, if it is shown that her singing is even 1% responsible for the accident (correct) Rationale: Under contributory negligence, the plaintiff who is even one percent at fault is barred from recovery. Comparative negligence was developed to avoid the injustices of contributory negligence.

The elements required to show negligence are: Hint: Review the elements of a cause of action for negligence under tort law

b) Duty, breach, cause (actual and proximate), and harm. (correct) Rationale: To show that neligence has occurred, the plaintiff must show the following: There was a duty to plaintiff, such as a duty of care in a medical context; There was a breach of that duty; The breach was the cause of the harm, which was: An actual cause (the "but for" test: "But for the act, the harm would not have occurred.") A proximate cause: Is the act sufficiently closely connected with the harm so that the court will allow it. In other words, is the cause so bizarre that the court will at some point cut off liability because it is not "reasonably foreseeable"? This test is usually met. A harm to the injured plaintiff.

Which of the following is not true of preferred shares: Hint: Review the rights of preferred shareholders

b) Preferred shareholders are paid dividends before bondholders. (correct) Rationale: is correct, because bondholders are entitled to repayment of debt before either preferred or common stock shareholders.

Which of the following is not an example of "trade dress"? Hint: Trade dress is an expansion in trademark law.

(a) The technology behind your product: Glarf. (correct) Rationale: Trade dress refers to any aspect of a product's identity beyond its trademark. The legal test is in whether a consumer would reasonably be confused as to the origin of the product. Trade dress can refer to color, shape, sound—any aspect of a product.

Which of the following rights under copyright law refers to the right to sell, rent, lease, lend, or give away copies of the work: Hint: Review the elements of the rights of a copyright owner.

(c) Distribution rights (correct) Rationale: Distribution rights under copyright law include the right to sell, rent, lease, lend, or give away copies of the copyrighted work.

You are CEO of a massive global enterprise, with successful divisions in many markets. The best economic and legal position for your company is: Hint: Consider the balance between competitive advantage in the marketplace and threat of antitrust litigation.

(d) Oligopoly (correct) Rationale: is correct: Business favors oligopoly, whereby a small group of dominant players effectively share the market, each gaining above-average returns in an undisturbed, unspoken stasis.

In contract law, what phrase refers to the power you have to enter into whatever deal you believe is best for you: Hint: What is the essence of making the best deal ... for you?

(d) You are the "master of your offer" (correct) Rationale: In contract law, you may offer (almost) anything you want, at any price you want, under any terms you want. As long as it's not illegal or otherwise against public policy, the law will recognize almost any deal. You are the master of your offer.

Which offices are responsible for enforcing antitrust law: Hint: Research "antitrust jurisdiction."

(e) Both "c" and "d" (correct) Rationale: The Federal Trade Commission shares jurisdiction over civil antitrust matters with the Antitrust Division of the U.S. Department of Justice. States are also active, including an increasingly visible role for state attorneys general, who can bring actions, join amicus briefs, or support others' legal actions.

Which is true in U.S. bankruptcy law: Hint: Review bankruptcy law.

(e) Chapter 7 covers liquidation, and Chapters 11-13 cover reorganization of debts (correct) Rationale: At the end of a bankruptcy case is the process of discharge, by which creditors receive whatever portion of the available assets the court determines, and individual debtors receive a "fresh start." The process is neither simple nor painless. Among the hurdles, debtors' actions are closely scrutinized by the court, and inappropriate or fraudulent transactions may be reversed or cause a court to deny or revoke a discharge (and thus deny a fresh start). Chapter 7 of the Bankruptcy Code covers liquidation, or the sale of assets and disbursement of proceeds to creditors. If an individual files for Chapter 7, a similar process occurs, except that individuals may keep certain exempt property set by state law. All other personal assets are collected, assessed, sold, and distributed to creditors. While most debts are discharged, certain debts remain: Debtors are not freed from child and spousal support, property taxes, recent income taxes (within three years), student loans, and certain court judgments. The process is difficult and almost always quite depressing. A Chapter 7 bankruptcy remains on the personal credit record of the debtor for 10 years. Under a Chapter 11 bankruptcy, a business that has debts it cannot service but underlying business potential may reorganize its business and debts, achieving a fresh start without liquidation. The court appoints a trustee, whose job it is to oversee the business operations, reorganization plan, and creditors' interests. Crucially, in most Chapter 11 proceedings, the debtor continues to run the business: this is the debtor in possession of the corporate assets needed to continue business operations. Individuals may qualify for a Chapter 13 reorganization bankruptcy, similar in principle to the Chapter 11 reorganization bankruptcy available to businesses. Among the qualifications, individual debtors may not have secured or unsecured assets above specified amounts. In a Chapter 13 bankruptcy, individual debtors with sufficient disposable income proposes a repayment plan to repay creditors over a 3-5 year timeframe. A Chapter 13 bankruptcy remains on the personal credit record of the debtor for 7 years. Chapter 12 bankruptcy is available to family farmers and to fishermen who tend to have large, illiquid assets (farms and boats, respectively).

Which of the following is least likely to be an acceptance in the formation of a contract: Hint: Review the section in contracts concerning offer, acceptance, and the objective standard.

(e) Silence (correct) Rationale: An offer and acceptance in contract formation are both based upon the objective test: What would a reasonable person in the other position have thought was intended by the statement or action? For this reason: [a] is clearly an acceptance, and is thus not "least likely" to be an acceptance. [b] might seem not to be an acceptance, because the person seems not to want to agree. One's reasoning or internal thoughts are irrelevant to offer and acceptance in a contract. What matters is what the other person would reasonably believe was intended. The ending statement indicates agreement, and is thus not "least likely" to be an acceptance. [c] Nodding of a head up and down would in the U.S. likely be perceived as an affirmative response. This is thus not "least likely" to be an acceptance. [d] As with [c], an extended hand and smile would in the U.S. likely be perceived as an affirmative response. This is thus not "least likely" to be an acceptance [e] As a rule, silence does not equal consent. This is thus least likely to be an acceptance.

"This is one of the finest vintages in the last 20 years!" Which of the following is most true: Hint: Research statements of opinion or value.

(e) This statement creates an express warranty if it is stated by a wine connoisseur. (correct) Rationale: There is an exception to the rule that statements of opinion are generally not sufficient to create an express warranty. If the statement of opinion is made by an expert recognized in the field, that would create an express warranty, because a reasonable buyer could rely upon the expert's opinion as a basis of the bargain. So, a wine expert (or a salesperson who pretends to be a wine expert) who promises that "This is one of the finest vintages in the last 20 years!" would create an express warranty as to each statement, thus creating liability for the seller.

Which of the following is least likely to be a case of disparate impact discrimination? Hint: Review disparate impact under Employment Law.

A requirement that all employees complete an HR-approved training program. (correct)

Under both the U.S. and English common law systems, which historical system provided relief in a case of extreme unfairness even if a legal rule did not:

Courts of Equity (correct) Rationale: A court of equity applies principles of equity based on Roman law, natural law, and broader notions of fairness. This was in many ways a "backstop" or last resort to avoid an injustice. In the U.S., these courts were merged, so a judge sitting in a "court of law" can issue equitable relief as well.

Regulation, while vast, is not as important to business as case law. Hint: Review the introduction and conclusion to Chapter 8.

FALSE (correct) Rationale: Administrative law is vast. If constitutional law is the top 1% of the law, and statutory and case law together are the next 9%, the realm of regulation (i.e., administrative law) is the remaining 90%. If constitutional law is the horizon, statutes and cases are forests and trees. This leaves us to tend the weeds: the vast array of specific rules relating to specific industries and activities. This is especially relevant to us in the business realm, as the manager's world is to accomplish task after specific task. This is the province of regulatory minutiae—of administrative law.

Sally is head of a department with an all-female staff. The first male is promoted into the department, and Sally realizes that the communications among the veteran staff are causing the new employee to be deeply uncomfortable, although he has not complained. Sally should:

Engage each staff member as to expected professional communication, including styles and tones (correct) Rationale: [c] is the best answer Ignoring a problem in a workplace is almost never the right answer. This issue raises serious concerns, and could be seen as a civil rights issue on the basis of sex discrimination in the form of differential treatment by sex or of hostile work environment sexual harassment. [b] is unacceptable because an inappropriate work environment is inappropriate regardless of a history of lax enforcement. This is particularly acute when a same-sex group sees its first member of the opposite sex (including multiple permutations as to gender). [d] would be dangerous as this would be an implicit admission of sex discrimination or sexual harassment (or both).

An employee experiences serious vision and hearing impairments. The firm purchased expensive equipment and software to allow the employee to continue to work productively. This was successful for a while. Unfortunately, the medical conditions continue to worsen, and the employee faces increasing challenges in performing the tasks of the job. Physicians are uncertain whether the employee will be able to continue to function in the job. The employer should:

Explore all possible means to accommodate the employee's impairments allowing them to accomplish the job (correct) Explore, with the employee, potential solutions including a redefinition of the job or of different jobs the employee might be able to do (correct) Rationale: [a] is the best answer, with [b] as a second-best answer. Under the Americans With Disabilities act, the employer must reasonable accommodate an employee's impairment that substantially limits one or more major life activities. The challenge is in deciding what is "reasonable," but the expectation is that the employer will go to some length to ensure that an employee is provided the means to meet the job description. Where an impairment worsens, the accommodation should be revisited with the same goal: to ensure that an employee is provided the means to meet the job description, if at all possible. [b] is second because there are multiple variables that might affect the legality and long-term options. While [c] and [e] might seem as if they are the "right" legal answer, following the standard employment policies when dealing with an employee who qualifies for an ADA accommodation could be a per se violation of the ADA law if not in full compliance with reasonable accommodation standards.

A litigant may file a case in federal court under the theory of diversity of citizenship if he or she is of a different racial or ethnic background than the defendant. Hint: Research "concurrent jurisdiction" involving state and federal courts.

FALSE (correct) Rationale: A federal court may have jurisdiction if the tests for diversity of citizenship are met. Diversity here means diversity of home state. The racial or ethnic background of any litigant is irrelevant. In a civil case, if the litigants are citizens of different states and the dollar amount in controversy exceeds $75,000, the case may be filed in either state or federal court. [If the amount in controversy is less than $75,000, the case must be heard by a state court.] Diversity of citizenship becomes more complicated when dealing with businesses: Natural persons (i.e., people) who are U.S. citizens have citizenship where they are domiciled, or the state in which they last lived and have an intent to remain. If there are multiple parties, no plaintiff can be from the same state as any defendant. All must be from different states. A partnership or LLC is deemed to have citizenship of each of its partners or members. Corporations present an especially difficult problem, as many have operations nationwide, and would thus destroy diversity of citizenship. The courts, however, look to a corporation's principal place of business, which is defined as the "nerve center" from where its officers conduct the corporation's main business.

A foreign corporation is a corporation from outside the United States. Hint: Consider the states of the United States.

FALSE (correct) Rationale: A foreign corporation refers not to a non-U.S. corporation. A foreign corporation refers to a corporation operating in a U.S. state outside its "home" state. If a corporation is incorporated in Delaware and starts doing business in Oregon, the corporation is a "domestic corporation" in Delaware and is a "foreign corporation" in Oregon. An alien corporation is one formed outside the United States. If you consider that the legal definition of state includes sovereignty, including maintenance of business forms, and that citizens of each of the early U.S. states considered themselves to be uniquely Virginians, New Yorkers, etc. (rather than being "American," a concept that didn't take primacy until later), the use of domestic and "foreign" makes more sense.

Actus reus is the "guilty mind" that shows a criminal intent. Hint: What is the root of the word "act"?

FALSE (correct) Rationale: Actus reus refers to the act taking in furtherance of a crime. Usually, any action is sufficient: for example, "casing a joint" in deciding the best way to commit the crime, or even calling someone to plan to case the joint.

If two parties have not dealt with each other before, the court will not interfere in interpreting a contract in a way the parties might not have agreed. Hint: Research "course of performance," "course of dealing," and "usage of trade."

FALSE (correct) Rationale: Courts can and will fill in needed contract terms to give effect to a known (or reasonably implied) agreement: First, if the transaction is part of a contract with on-going deliveries, the court will look to course of performance, or "a sequence of conduct between the parties to a particular transaction." Second, if the parties have done business before, the court can look to a course of dealing, or a "sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct." Third, if the parties have not done business before, the court can look to usage of trade, or a "practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question."

Covenants not to compete in employment are unenforceable. Hint: Review the section for contracts against public policy.

FALSE (correct) Rationale: Covenants Not to Compete are becoming more common in employment. These usually restrict the individual who signs it against working for a competitor. To be enforceable, the restrictions must be reasonable as to (1) duration, (2) geography, and (3) scope. In some jurisdictions, these covenants will not be enforced without a separate benefit, such as payment of an additional sum of money in exchange for the employee giving up the right to compete. Simply "remaining employed" is not sufficient consideration. In other jurisdictions, these covenants are not enforceable in employment situations at all. Courts are more likely to reform such a covenant if a discrete term makes that covenant unreasonable. If, for example, the duration is unreasonable, that can be shortened. If the geographic limitation is unreasonable, that can be modified—although the advent of the Internet has altered courts' consideration of this issue). Moreover, if the scope is overly broad, that can be narrowed.

Peaceful Pauline spends her life savings (and then some!) on building an artists' retreat, with a mission to expand art education to the people of the world, to make them more gentle and caring through art. Pauline, annoyed at continued burglary of her literally hand-built retreat, sets up a 12-gauge shotgun to protect her property (and her precious artwork!) during the off-season. The shotgun is set to fire when a trip-wire is triggered at the entrance. Evil Elizabeth, seeking artwork for her downtown loft, breaks into Pauline's building, and is immediately rendered devoid of life by the shotgun, aimed expertly at burglars' abdomens. Neither Pauline nor anyone else was in the building (as it was off-season). Pauline is charged with Elizabeth's murder, with a lesser charge of negligent homicide. If Pauline claims the defense of defense of dwelling, she will not be liable for a crime. Hint: Reread the section in criminal law on self-defense.

FALSE (correct) Rationale: Deadly force is never a defense if used solely to protect property. Self-defense or defense of others might be possible if the facts indicate that a person (not just property) was reasonably believed to be at risk of death or serious bodily injury.

A non-profit corporation need not worry about the monies that would be profits if the non-profit were a for-profit corporation. Hint: What are reserves?

FALSE (correct) Rationale: It is common to think of non-profit as being unconcerned with money. This is untrue, as most non-profit corporations are if anything extremely sensitive to financial concerns. Moreover, non-profit corporations are concerned with "profits"; they simply refer to them in a different way. They are acutely concerned with revenues-over-expenses (in other words, profits). In a non-profit organization, however, these "revenues" have a different name (often, donations), and these "profits" have a different name: these are reserves for the following accounting period. A lack of donations and reserves places the future of the organization in doubt. In short, whether called profits or reserves, managing the organization's many expenses within its limited revenues remains a tricky and exceedingly important set of tasks, regardless of its form.

Jurisdiction is the location of the court in which proceedings occur. Hint: What must a court ask before a litigant is allowed to proceed?

FALSE (correct) Rationale: Jurisdiction is the authority to make a legal decision. In other words, this is the power of the court to decide, to render decisions that will be enforced by agents of the State (often, the police). Rather than assuming the court has the power, courts assume the opposite: the jurisdictional authority must be shown. Usually this is clear. If the litigants are in the jurisdiction, or the contract was signed by a party in the jurisdiction, or the crime occurred in the jurisdiction...the authority of the court is established. A fact can, however, eliminate jurisdiction. If, for example, it becomes clear that a case involving a resident also involves bankruptcy, a state court must dismiss (or stay) the case pending resolution in federal bankruptcy court. Each court will confirm its own jurisdiction, and will refuse to continue if that jurisdiction is invalid—or becomes invalid at any point.

Punitive damages are common in tort law cases. Hint: Reread the sections concerning McDonald's hot coffee and the Ford Pinto.

FALSE (correct) Rationale: Punitive damages are an exceptional remedy in tort law, rarely granted. These are, in a sense, a hybrid between tort and criminal law, with the important distinction that the monies for the punishment are a form of extraordinary restitution to the plaintiff To be entitled to punitive damages, the defendant's actions must be sufficiently extreme to meet a gross negligence standard of recklessness, or a conscious and voluntary disregard of the need to use reasonable care likely to cause foreseeable grave injury or harm. Negligence is a lesser action, a failure to exercise reasonable care. Court will generally uphold punitive damages, in cases of extreme conduct, of up to three times compensatory damages.

Which of the following would be an approximate rank order of societies from most likely to follow the rule of law to least likely to follow the rule of law. In other words, rank the following societies from "most lawful" to "least lawful":

Finland, United States, Italy, Venezuela, North Korea (correct) Rationale: One way to visualize "the rule of law" is to look to the degree of corruption in a society. The level of corruption in a society is a useful indication of an absence of the rule of law. In other words, where the rule of law exists, corruption is limited; where corruption exists, the rule of law is limited. Transparency International maintains a Corruption Perceptions Index, which is a useful tool to view approximate social institutions including the rule of law.

"Independent" labs such as UL, which are funded by industry, are suspect because of their funding. Hint: Review the section on product safety in Chapter 8.

FALSE (correct) Rationale: The assurance of the testing depends upon the credibility and integrity of the tester and of the company. If it ever became known that either were to fabricate a false result (which would almost certainly be discovered), such would lead to the likelihood of punitive damages for the company—and destroy the reputation of UL as well as its future. This would also almost certainly bring down upon the company and tester the wrath of state attorneys general and the federal agencies responsible for consumer safety. Because this is taken so seriously, players at all levels of the economy use this as a benchmark. Among other factors, such testing becomes a base requirement for regulatory authorities as well as for manufacturers and their financiers, suppliers, retailers, and more.

If a breach of contract occurs, the court is likely to return the parties to their ex ante position, or the position they held before the contract. Hint: How do courts enforce the promises by both parties made in a contract?

FALSE (correct) Rationale: The essence of contract law in the United States is a strong predisposition to uphold private contract rights. A contract is a legally enforceable agreement. The courts want to know whether or not the parties consented to the agreement, whether the agreement covers valid value, and is not invalidated by one of several factors. These are easy tests to meet. Once met, the court will carry the parties forward, to the position they would have held had the contract been fully performed. The courts seek to "set the world right." In the case of a contract, this means to set the world right between the parties had they both performed as promised.

It is not possible, under Agency Law, to avoid liability for a violation of the important duty of loyalty. Hint: Review the rights and duties under Agency Law.

FALSE (correct) Rationale: The servant may avoid the enormously important duty of loyalty if the master grants permission. The courts do not care about whether the deal is a good one or bad one, favorable or unfavorable. They care only that permission is obtained.

Under the Uniform Commercial Code, special warranties apply to all parties. Hint: Under Article 2, what is a "merchant"?

FALSE (correct) Rationale: Under Article 2, higher standards apply to a merchant, who: deals in goods of the kind; holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction; or employs an intermediary who by his occupation holds himself out as having such knowledge or skill. Different rules apply to merchants, who are presumed to be more sophisticated and able to handle the burdens of commerce, and are held to higher standards. Among these are special warranties that automatically apply to UCC transactions involving merchants.

The jurisprudence of legal realism tells business how they must conduct business.

FALSE (correct) Rationale: Under Llewellyn's philosophies of legal realism, rather than telling business how to do business, Llewellyn instead looked at how business was conducted. He then crafted in the Uniform Commercial Code a set of rules to provide a clear and consistent basis for business transactions.

An appeals court will give deference to a trial court for findings of law. Hint: Review standards of review.

FALSE (correct) Rationale: Under the rules of a standard of review—meaning the degree of deference the appeals court must give to the lower court—the appeals court must view a finding of fact as true unless it is clearly erroneous. In other words, the appeals court must accept the jury's finding unless it is unsupportable by "substantial evidence." This is a high standard, meaning that the jury could have no reasonable basis upon which to make their determination. An appeals court thus rarely disturbs a trial court's finding of fact. Not least, the appeals court judges were not there: they did not see the evidence, nor hear the witnesses, first-hand. Appeals courts are thus highly deferential to findings of fact. Appeals courts are less deferential to a trial court judge's determinations of law, however. In fact, the appeals court will generally review a question of law de novo, meaning that the appeals court will review it as if the issue were being considered for the first time. The trial court's determination of a rule of law is thus granted no deference.

The "not in my backyard" term relates to regulations concerning environmental protections in residential backyards. Hint: Review the conclusion to Chapter 8.

FALSE (correct) Rationale: Wealthy and vocal communities often oppose many forms of development of the "Not in my backyard" variety, including environmentally conscious developments: The Cape Wind Project, a wind farm planned for Nantucket Sound off Cape Code, Massachusetts, ran into gale-force opposition in the form of powerful local leaders

In the U.S., state law may differ from federal law, as long as the laws do not conflict. Hint: Research the Supremacy Clause.

FALSE (correct) Rationale: Where state law conflicts with a federal law, under the Supremacy Clause of the U.S. Constitution, the federal law is supreme. In other words, the federal law supersedes the state law. Note, however, that it's possible for a state law to differ from a federal law, as long as the state law does not attempt to override the federal rule. For example, California might have more restrictive emissions regulations than are required under federal law; as long as federal law requires only a "floor" of regulation, states may impose higher restrictions (unless federal law "preempts" the states from doing so). Federal law is presumed to supplement rather than displace state law.

Sustainability often refers to environmental concerns, yet has little applicability in free-market economics or corporate governance. Hint: Review the section on corporate governance in Chapter 9.

FALSE (correct) Rationale: Without profits there can be no future business. An essential component of corporate governance is the sustainability of the business: in a word, profitability.

You are an entrepreneur, fresh from an IPO placing your net worth somewhere in the top one-one-hundredth of one percent. (You're now an evil top one-one-hundredth of one percenter!) You've always had a dream of flying, and so, between efforts at your newest start-up, you take lessons at your local airport to learn how to fly helicopters. Upon receiving your license (and after the appropriate festivities), you stop by the helicopter dealer next door, and purchase a sparkly, brand-new, 5-bladed, hot-rod Hughes MD500 helicopter (with the special two-tone paint job, of course). After signing the papers and being given the keys, you hop in the helicopter, lift off, and begin to climb away—whereupon the tail rotor, which had been installed without safety fasteners, twists off. The helicopter, minus its tail rotor, spins out of control. Your surviving relatives can sue the dealer because: This is an implied warranty from a usage of trade. This is an implied warranty of merchantability. This is an implied warranty of fitness for a specific purpose. This is an express warranty. Your surviving relatives cannot sue the dealer. Hint: Research warranties under the Uniform Commercial Code.

I, II, and III are correct (correct) Rationale: If both parties know of or reasonably assume a well-recognized usage of trade, that becomes part of the contract. Here, the practice among dealers of all types—and especially with products such as aircraft—is to ensure the elements of safe operation of the vehicle. So, a dealer will inspect the vehicle to ensure that it is properly ready for operation. With aircraft, this would include a visual inspection of the fasteners for the tail rotor, which are designed to be immediately recognizable as either properly installed or not. This is an implied warranty under the UCC based upon usage of trade: the practice of dealers inspecting aircraft before transferring title. Further, the implied warranty of merchantability means that the product will do what the seller says it will do. To be merchantable, the goods must be reasonably fit for the ordinary purpose for which such goods are used.13 In other words, if you buy a bicycle from the bicycle shop, this bike should have wheels that turn, brakes that work, and pedals that power the real wheel. If a seller (a merchant or non-merchant) knows that the buyer needs the product for a particular purpose and knows that the buyer is likely to rely on the seller's expertise to select a suitable model, there is an implied warranty of fitness for a particular purpose.

Fred is the supervisor for a crew of construction employees. Several employees converse with each other in their native language. Sam approaches Fred to voice concerns by the other employees about the foreign language being spoken. Fred should:

Require all employees to speak English when on the job, especially if safety issues are present (correct) Rationale: [d] is the best answer Ignoring a problem in a workplace is almost never the right answer. This issue raises serious concerns, and under certain circumstances could be seen as a civil rights issue. The bottom line in supervision is in the connection between the employee behavior and the direct needs of the job. If there is a direct connection between communication and productivity, the focus on productivity provides some means to manage the workforce including language spoken while on the job. This does not apply during breaks or before or after work or in any non-job-related way (and any such negative actions by the employer could be seen as a violation of civil rights laws). Moreover, safety is a paramount concern. So, if any employee actions, including the use of a language other than English, could be a safety concern, that is a strong reason for the employer to mandate communication in English. The job-relatedness must, however, be clearly established.

Prior to the advent of securities law, the assumption was that when a market fell, weaker firms would fail. This would "cleanse" the market, resulting in better and stronger future growth. The basis of this was the concept of "moral hazard," or the affect of risk on behavior. Hint: Review the section on securities law in Chapter 8.

TRUE (correct) Rationale: A business leveraging itself too much, or in the wrong market, or in the wrong way, or a speculator purchasing on margin—easy "wins" in a rising market—all can be wiped out in a falling one. The traditional answer for the unwise investor, speculator, or business was easy: Let them fail. The philosophical component is that of a moral hazard: the knowledge that one could be forced into bankruptcy was a strong antidote against taking unwise risks.

The Model Penal Code has, through legislation in individual states, modified common law crimes into a more standardized, simplified statutory approach. Hint: Research "Model Penal Code."

TRUE (correct) Rationale: A model code is drafted over an extended time by renowned thinkers in the field. The first Model Penal Code was released in 1962, and became a basis for states in redrafting their criminal law statutes. Courts can, occasionally, refer to the logic in a model code in deciding a case where the statute is not dispositive. In this way, a model code, while not a "controlling authority," is of substantial persuasive authority. The Model Penal Code was updated in 1981.

A "uniform code" is not law until adopted by a state. Hint: Research the history of the Uniform Commercial Code.

TRUE (correct) Rationale: A patchwork of state laws became a hindrance, which then became a focus to harmonize, or make uniform, state laws. This was an effort undertaken by elite groups of senior practitioners, judges, and law professors who developed proto-legislation: a proposed law dealing with a specific issue. These groups were not official. These were private efforts, with no official sanction except for their standing within the legal community. State legislators were invited to review and adopt these proposed uniform codes. Through this voluntary process, which occurred without official oversight—and because of the legal and logical power of the uniform codes—the new rules were widely reviewed and adopted by states.

One way to measure how closely a society follows the rule of law is to look at the inverse of the level of corruption in that society.

TRUE (correct) Rationale: The level of corruption in a society is a useful indication of an absence of the rule of law. In other words, where the rule of law exists, corruption is limited; where corruption exists, the rule of law is limited.

It is challenging to create and maintain a good culture, while a bad culture can quickly overwhelm a good one. Hint: Review the section on corporate governance in Chapter 9.

TRUE (correct) Rationale: A well-run business that suffers a single bad leader will set in motion multiple failures, which can permeate the organization and last far longer than the failed leader. This can occur at the top, of course, but it can also occur at any level: we often see individual departments subjected to unethical leadership. A challenge is in whether, and how, the larger organization identifies and correct such a lapse. If the larger organization is anything less than strictly ethical—meaning that ethical shortcomings are handled immediately and seriously, even and especially at the cost of short-term profits—the odds of a department within the organization "swimming against the tide" is vanishingly small. A bad culture will thus overwhelm a good one, and a good one requires considerable, consistent positive direction to maintain. This is the challenge of ethical leadership.`

If an investor is neither "accredited" nor "sophisticated," they are effectively excluded from many of the most highly lucrative deals. Hint: Review the section on securities law in Chapter 8.

TRUE (correct) Rationale: An unintended consequence of the regulations is the exclusion of most investors from some of the best investments. Because these laws are designed to protect average investors, the law differentiates "accredited" from "nonaccredited" investors. Small investors are essentially protected out of lucrative markets. Accredited investors are presumed to have sufficient investing experience to be able to effectively weigh the benefits and risks of particular investments. This is judged by wealth: an accredited investor is one who has a minimum net worth (currently $1 million, excluding the value of the primary residence) and income ($200,000-300,000/year). To complicate matters, the terms accredited investor and sophisticated investor are often used interchangeably, while the latter is technically someone with "sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment." Many of the most highly attractive investments are "private equity" investments, thus closed to nonaccredited investors. While generally justified, this has the side-effect of foreclosing lucrative-but-risky investments to a vast majority of investors

Businesses will often self-insure against knowns risks by budgeting a certain amount for likely costs, while insurance companies might share extraordinary risks with other insurers via co-insurance. Hint: Research the section on insurance.

TRUE (correct) Rationale: Co-insurance is a method among insurers for the sharing of risk through risk pools. Self-insurance is the process of setting aside funds to manage (i.e., self-insure) risks for known settlement costs.

Constructive knowledge occurs when a person should have known a fact. Hint: Review the three levels of knowledge in law.

TRUE (correct) Rationale: Constructive knowledge means that the person should have known the fact. Constructive knowledge widens the scope of "knowledge" considerably: We can be held to "know" something even if we did not actually know it.

In criminal law, the defense of defense of others is possible if the defense would have been available for defense of self. Hint: Reread the sections concerning the basis of criminal law. Type: True or False

TRUE (correct) Rationale: Defense of others is a defense available to what would otherwise be a crime (such as shooting an assailant) if the defense would have applied for defense of self (i.e., self-defense).

Managing conflict is ultimately productive, because in the resolution of disputes we can move on. Hint: Disputes will occur. What happens if we cannot, or won't, resolve them?

TRUE (correct) Rationale: Dispute resolution is important to our society and to our economy: We don't like disputes. They're messy. They're costly. They're distracting. We do like resolution. It's cleansing. It's cheaper. It's re-focusing. Ultimately, it's highly productive..

Bankruptcy and intellectual property are two types of cases that must be heard in federal court. Hint: Research "exclusive jurisdiction."

TRUE (correct) Rationale: Exclusive federal jurisdiction arises in cases involving a federal question: suits between states; cases involving ambassadors and other high-ranking public figures; federal crimes (which have expanded greatly); bankruptcy; intellectual property (patents, trademarks, and copyrights, but not trade secrets); admiralty; antitrust; securities and banking law; and other cases established under federal statutory law (such as civil rights, environmental protections, and labor laws). The majority of cases are not, however, cases in which there is exclusive jurisdiction. Most cases may thus be heard in either state or federal court.

Imputed knowledge occurs when the law assigns, or "imputes" knowledge to a master whether or not the master actually "knew" a fact. Hint: Review the three levels of knowledge in law.

TRUE (correct) Rationale: Imputed knowledge is the doctrine that knowledge given to one is attached (or imputed) to another. If the Servant is the lowly assistant to the swordsmith, and someone tells the Servant that a piece of metal is defective, that knowledge (of the defective metal) is imputed to the swordsmith and to the Master. In essence, the Master can be held to "know" everything that happens even if there's no reasonable possibility of actual knowledge. Why is this the rule? The answer is in the question: "Who can fix it?" The Master controls the relationship. Therefore, the Master is responsible. This includes being responsible for ensuring that knowledge to any insider is conveyed to the person who can resolve the issue.

A limited partnership must have at least one general partner who has unlimited liability for the debts of the partnership. Hint: Research general partner.

TRUE (correct) Rationale: In a limited partnership there must be at least one general partner, who is responsible for management of the partnership and who has unlimited liability. In essence, the states allow limited partners protection as long as they act essentially like shareholders in a corporation. The states protect the public by insisting upon at least one general partner with responsibility for management and liabilities. With joint-and-several liability, a creditor can recover the full debt against the wealthiest general partner, who must then sue other partners for "contribution."

A strict liability crime is one in which someone might be completely innocent in not intending to cause harm, but still be guilty of a crime. Hint: In negligence, the plaintiff must prove the tortfeasor caused the harm. In a strict liability tort case, the plaintiff must show only that the harm occurred. What is the application to a criminal act?

TRUE (correct) Rationale: In a strict liability crime, the requirement of mens rea, or a guilty mind, is not needed. One can be convicted of a crime regardless of whether one intended to commit the crime, or even knew about it. For example, selling alcohol to a minor is a strict liability crime: a conviction is possible even if the seller honestly thought the buyer was of legal age, and confirmed this through a well-forged document. Strict liability crimes include many regulatory crimes, such as health and safety regulations, environmental pollution, taxation, and a vast array of regulatory mandates. Often these mandates include criminal sanctions for the business—in the form of fines—and even fines and imprisonment for corporate officers.

If a jurisdiction has enacted a "stand your ground" law, the victim of a crime may claim a defense of self-defense even if they could have retreated. Hint: Reread the sections concerning self-defense.

TRUE (correct) Rationale: In some jurisdictions, the victim must first retreat if it is safe to do so. Other jurisdictions have, however, granted the victim the right to use deadly force even if they can retreat. This is the "Stand Your Ground" rule enacted in a number of states.

Insurance is the reallocation of risk via contract. Hint: Research the section on insurance.

TRUE (correct) Rationale: Insurance is the reallocation of risk. More specifically, insurance involves a contract in which one side, the insurer, accepts a contingent liability in exchange for a fee, a "premium," from the other side, the insured.

Real property is land and anything affixed thereto. Hint: What is "affixed," and how do we know when personal property is movable?

TRUE (correct) Rationale: Real property includes both land and anything affixed to the land, meaning that removing it would cause damage or disruption to the land.

Our legal system relies to a large degree upon industry self-regulation. Hint: Review the section on regulation in Chapter 8.

TRUE (correct) Rationale: Self-regulation is the ability and expectation of an industry or profession to govern itself Regulators delegate a surprising degree of enforcement...but just because an inspector is not there every hour beside you, does not mean that you, the manager, shouldn't think like an inspector and correct a problem as they would. In reality, our system of regulation adds to managerial tasks the additional task of being the inspector for each agency and concern under which your business operates.

Stare decisis is the legal principle of precedent.

TRUE (correct) Rationale: Stare decisis is the principle of precedent, or following earlier cases. The essence of the common law is consistency, meaning that what was true yesterday should be true today, and remain true tomorrow. For this reason, courts are required to follow precedent from higher courts within their jurisdiction. So, a federal district court in Hawaii is required to follow precedent of the ninth circuit, of which Hawaii is a part. The judge in Hawaii may follow precedent from a different circuit, as this is "persuasive" but not "controlling" precedent. All federal courts must follow precedent of the U.S. Supreme Court.

An LLC is among the most popular forms of business, providing numerous benefits and few disadvantages. Hint: Research Limited Liability Companies.

TRUE (correct) Rationale: The LLC is a hybrid form that combines the best of both ends of the spectrum: the LLC offers limited liability to members; a separate legal identity; a choice as to taxation; and flexibility in management and in who can be investors. As with a corporation, an LLC's members are protected by limited liability: they may lose their investment, but no more. Also as with a corporation, the LLC has a separate legal identity, and is liable for its debts. If, however, the LLC is improperly managed, a court may use the alter-ego theory to pierce the corporate veil to recover assets from members. The LLC may choose to be treated as either a corporation or as a partnership for taxation purposes. (A one-member LLC may choose to be treated as either a corporation or as a sole proprietorship.) This provides the benefit of avoiding double taxation: the members are taxed only once, as the LLC provides "pass-through" profits to the members' personal income. Members of an LLC may choose the form of management for the LLC: they may select a member-managed LLC (in which members manage by majority vote) or a manager-managed LLC (in which members may choose any combination of members, members and nonmembers, or only nonmembers as the management group). The other attractive limited liability option, from the "S" corporation, places restrictions on who may invest. This includes especially a restriction against foreign investors. Foreign investors may invest in and be members of an LLC. The disadvantages of an LLC are minor. The formality requirements are somewhat more strict (but no more burdensome than that of other limited liability forms). Second, as a relatively new form of business, the LLC is not uniformly adopted among the states. A business that operates in more than one state might thus face more complicated legal treatment, such as one state's application of the "home" state's laws. This is, however, more of an annoyance and preventative caution rather than a true disadvantage. Nine states have, as of this writing, adopted the Uniform Limited Liability Company Act. It is likely, however, that over time the treatment of LLCs will become more uniform. For these reasons, LLCs have become the preferred form of organization for many if not most businesses.

The essence of Agency Law is the Master-Servant relationship. Hint: Research "master" or "servant" and "agency law."

TRUE (correct) Rationale: The Master and Servant agree to a voluntary relationship, the basis of Agency Law.

Under Agency Law, the master must reimburse the servant for expenses taken on behalf of the master in furtherance of the service. Hint: What happens when an employee pays for an item the employer needs?

TRUE (correct) Rationale: The Master must reimburse the Servant for such expenses legitimately taken on behalf of the Master in performance of the service. If, for example, a swordsmith pays a toll in traveling to London for supplies, the Master must pay or reimburse for the toll and the supplies.

The Restatement of Torts (2d) has, through legislation in individual states, modified common law torts into a more standardized, simplified statutory approach. Hint: Research "Restatement of Torts Second."

TRUE (correct) Rationale: The Restatements are drafted over an extended time by renowned thinkers in the field. The second Restatement of Torts was released between 1965 and 1979. Its section on strict liability resulted in the change in the law described in the text, and was the basis of the Restatement of Torts, Third: Products Liability in 1997. States legislatures look to the Restatements of Torts in modifying their tort law statutes. Courts can, occasionally, refer to the logic in a Restatement in deciding a case where the statute is not dispositive. In this way, a Restatement, while not a "controlling authority," is of substantial persuasive authority.

The common law refers to case law, captured in "reporters" or series of case books.

TRUE (correct) Rationale: The common law solidified in "reporters" (a written record of cases, collected in volumes and together referred as reports or reporters).

In a general partnership, each partner may be sued for and lose all personal assets, even if the harm was caused by another partner. Hint: Research unlimited liability.

TRUE (correct) Rationale: The unlimited liability of a partnership applies to all general partners: if anything goes wrong with the partnership (which can be an action, omission, or fraud of another partner or of an employee of the partnership), all partners are liable to the full extent of their personal assets. Moreover, under the doctrine of joint-and-several liability, a creditor (including a judgment creditor) may seek to satisfy all of the debt from any of the partners. In other words, if a liability arises in a partnership, the third party may choose and seek to recover all of the money from a single partner—who might have been completely unaware of the original problem.

Once a valid contract is established but if there is some problem in performance, courts generally seek to take the parties to the position they would have held had the contract been fully performed. Hint: Review the introductory section for contract formation.

TRUE (correct) Rationale: This is a serious consideration of U.S. courts: Once a valid contract is established but if there is some deficiency in performance, courts generally seek to take the parties to the position they would have held had the contract been fully performed. In other words, courts will seek to "make the parties whole" according to the terms of the contract.

Title VII of the Civil Rights Act is among the most important of numerous exceptions to the legal doctrine of employment-at-will. Hint: Review the rights and duties under Employment Law.

TRUE (correct) Rationale: Title VII of the Civil Rights Act included the following major groupings, which became known as protected classes within employment law: Race or color Sex Religion National Origin A protected class is group sharing a common characteristic, who are entitled to legal protections against discrimination on the basis of that characteristic.

Under the doctrine of congressional delegation of power, when Congress creates a new agency it often delegates the rule-making process to the agency being created. Hint: How do we know, in our wholesale business, whether the tax rate applying to wholesale transfers of blueberries applies to blueberry hybrids as well as to wild blueberries?

TRUE (correct) Rationale: Under our constitutional system of government, the legislature establishes the rules, and the executive carries those rules out. Congress thus writes the Law, and the President or Governor executes those laws. In legislation, Congress often delegates the rule-making process to the agency being created. In this delegation, Congress demands that and empowers the agency to carry out its policy wishes. This is complicated because the agency is placed either under the executive power, or as an independent agency, also under substantial executive control. Congress maintains oversight, but the primary rule-making occurs within the agency itself, an enormous transfer of law-making authority.

Under Article 2 of the Uniform Commercial Code, a contract might be upheld even if the parties forgot to specify the price. Hint: What is "gap-filling" under the Uniform Commercial Code?

TRUE (correct) Rationale: Under the UCC, the contract "does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy."1 The court must thus determine whether or not the parties wished to be bound. If so (which we know from their objective conduct), the court will look to whether there is a "reasonably certain basis for giving an appropriate remedy.". The judge has the power to determine this, and will "fill in" a term—even one as basic as price—as needed. This is referred to as "gap filling" of a missing term. The only two elements the UCC requires are a (1) reasonable identification of the good, and a (2) quantity. That's it. The court can fill in everything else. This is an enormous power, and one directed to fulfilling the intent of the parties: To take the parties to the position they would have held had the contract been fully performed. 1Uniform Commercial Code, Article 2-204(3).

Under the Uniform Commercial Code, a "buyer in the ordinary course of business" supersedes the interests of the original seller who is still owed money on the item. In other words, such a buyer purchases the item "free and clear," even if the merchant doesn't own it. Hint: Research priorities in secured transactions under the Uniform Commercial Code.

TRUE (correct) Rationale: Under the Uniform Commercial Code: a buyer in the ordinary course of business purchases the item with good title. Under this doctrine, a buyer in the ordinary course of business is a person who (a) buys the goods in good faith, (b) without knowledge that the sale violates the rights of another person in the goods, and (c) in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind (i.e., a merchant).

Under the jurisprudence of legal positivism, a society's written law is law even if it is immoral or unfair. Hint: If one exceeds a speed limit while others are traveling even faster, is there a violation of the law?

TRUE (correct) Rationale: Under the jurisprudence of legal positivism, "the law" is whatever the recognized legal authority lays down as the law: what is positively asserted as "the rule." Whether a rule is a good rule or a bad rule is an entirely different question. If it is a bad rule, it is up to society to change it to a good rule (or to a less-bad rule). If there is a disagreement as to whether or not it is a good rule (as there often is), that is up to the internal workings of the society to so decide.

Which of the following refers in U.S. law to the legal equivalent of the Golden Rule: "Do unto others as you would have them do unto you": Hint: Review equitable doctrines.

The "Clean Hands" doctrine (correct) Rationale: Under the clean hands doctrine, "one who seeks equity must do equity." In other words, one cannot act in bad faith and then expect the court to reward such poor behavior. The court can and will look to the behavior of the party seeking equitable relief; unless that party acted in good faith and fulfilled their part of the bargain, the court might reject a request for equitable relief. One might even refer to the Golden Rule, the rule of reciprocity restated throughout history, including the well-known "Do to others what you would want them to do unto you."6 Clean hands does not mean that the person seeking relief must be completely blameless. But such a person must not have made the situation worse...and then ask for compensation for that same harm. This maxim has been expanded to nearly every corner of the law through the principles of good faith and fair dealing, which are codified in numerous statutes (such as with the Uniform Commercial Code) and also heartily applied in common law, by judges in deciding the merits of specific cases.

You are walking normally through the mall. Unbeknownst to you or to the mall owner, an elevator motor has begun leaking oil, dripping onto the ceiling of the elevator and then onto its floor. When riding the elevator, you step in the oil, and upon exiting the elevator, you slip on the sleek floor, breaking your hip. Under the common law, which of the following is true:

The court will look to the opinions of other judges. (correct) Rationale: [c] is correct, because the common law is primarily based in case law developed over many centuries, and cases are the collected opinions of courts (i.e., judges).

Civil procedure refers to Hint: Review civil procedure.

The process of litigation (correct) Rationale: Civil procedure refers to the legal process of litigation. Civil is used to distinguish civil procedure from criminal procedure, which relates to the legal process of punishing (or "prosecuting") crimes. [c] is incorrect as that refers to civil law. [e] is incorrect as ADR refers to an alternative to civil procedure.

Sally has been accused of a crime, which has been widely publicized in her local area. If Sally believes that she cannot receive a fair trial based on this negative publicity, she might seek to change the location of the trial. This is referred to as: Hint: Review jurisdiction.

Venue (correct) Rationale: Venue is the geographic location in which a case is heard. If, for example, a state's court system has multiple trial courts, which is likely, a specific case is likely to be heard in the trial court closest to one or more of the litigants. Occasionally, this can present issues, such as in a criminal case in which publicity has tainted the likely jury pool. In such case, the defendant might request a change of venue. Given the advent of social media, this is of relatively decreasing concern. It's possible, however, under extreme or peculiar circumstances that a litigant might seek to change venue

Suppose a person believes they have been discriminated against, and presents their case to the Equal Employment Opportunity Commission. The EEOC decides not to pursue the case. The employee: Hint: Review EEOC procedures under Employment Law.

Will receive a Notice of Right to Sue, and may pursue the case individually. (correct)

Under what circumstance would a judge not pierce the corporate veil? Hint: Research the principles of limited liability in a corporation.

d) Victim Victor amply funds a corporation, but it fails anyway due to a market downturn. (correct) Rationale: The essence of a corporation is that it is a separate, corporate person. Thus, the property of the corporate (including monies) must be maintained strictly. If a shareholder treats the corporate funds as if they were an extension of personal funds, such as in a sole proprietorship, the court can reject the application of limited liability and pierce the corporate veil, thus exposing the personal assets of the shareholder to payment of corporate debts. If one decides to start a new corporation with a $1,500 investment, then proceeds to contact commercial lessors to lease space for $24,000 per year, and manufacturers for $50,000 production lots, and marketing agents for expansive advertising efforts...this is a thinly capitalized corporation. Keep in mind that most third parties do not have access to internal accounts, and thus rely upon representations as to the fiscal strength of the business. In other word, if one can convince a third party that the business is solid, many third parties would reasonably rely upon this in doing business. This increases the risk of fraud.

Which of the following is false? Hint: What must a corporation be able to do?

e) A corporation is not a legal person. (correct) Rationale: is correct, because a corporation is a legal person, a corporate person, and thus [e] is the false answer.