Legal Environment of Business Final Exam Review

Development Associates (DA) agrees to buy five acres of land from Eastside Properties for $15,000. Eastside fails to go through with the deal on the agreed date, when the market price of the land is $17,000. DA may recover

$2,000

A contract involving property of any kind must be in writing to be enforceable.

False

A contract is always enforceable even if one party is aware that the other party made a mistake of fact.

False

A contract is void if one of the parties was intoxicated at the time of its formation.

False

A corporation cannot be held liable for the criminal acts of its employees.

False

A corporation is a legal entity created and recognized by federal law. True

False

A court cannot exercise jurisdiction over an out-of-state defendant who has only done business in the state over the Internet.

False

A duty to perform under a contract is never absolute.

False

A justiciable controversy is a case in which the court's decision ¾ the "justice" that will be served¾will be controversial.

False

A law that has any impact on religion is unconstitutional.

False

A limited liability company as an entity is not liable for the wrongful acts or omissions of its members.

False

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.

False

A summary judgment is granted only if there is no genuine question of material law.

False

A trial commences with the plaintiff's attorney's direct examination of the first witness.

False

An agreement is evidenced by a single event: an offer.

False

An incidental third party beneficiary can sue to enforce the contract.

False

Anticipatory repudiation discharges a contract.

False

Common law is a term for law that is common throughout the world.

False

Compensatory damages are foreseeable damages that arise from a party's breach of a contract.

False

Constitutional law includes only the U.S. Constitution.

False

Damages are designed to punish a breaching party and deter others from similar conduct.

False

Federal cases typically originate in appellate courts.

False

Federal courts are superior to state courts.

False

Federal courts have jurisdiction over any case involving citizens of different states regardless of the amount in controversy.

False

In a sole proprietorship, the proprietor shares the burden of any losses or liabilities incurred by the business enterprise with the government.

False

Minimum contacts with a jurisdiction can be sufficient to support jurisdiction over a nonresident defendant.

False

Most contracts are discharged by rescission.

False

Most contracts need to be performed to personally satisfy the party to whom performance is owed.

False

National legislation governs nearly every major business activity, including conduct that has nothing to do with commerce.

False

Normally, a dissociated member of an limited liability company (LLC) has the right to force the LLC to dissolve.

False

Officers hire the directors and other executive employees.

False

Shareholders are personally liable for the debts of a corporation.

False

Shareholders' meetings need not occur at any certain interval.

False

State agency regulations take precedence over conflicting federal agency regulations.

False

Statutory law does not include county ordinances.

False

The Constitution expressly excludes state regulation of commerce.

False

The First Amendment does not protect corporate political speech.

False

The purpose of the doctrine of election of remedies is to permit a double recovery.

False

Under their police powers, states can regulate only public activities, such as political demonstrations.

False

Venue is the term for the subject matter of a case.

False

Grant offers to sell his Honda Civic for $10,000 to Ivy. Referring to the prices for similar Hondas, Ivy says, "I'll pay no more than $5,000." Grant says, "Forget it." Grant's offer was terminated by

Ivy

Lester and Myrtle want to rescind their contract under which Lester sold an MP3 player for $40. To rescind the contract

Lester must return the $40 and Myrtle must return the player

Fact Pattern 17-2A Luann and Mace are partners in Networx, a computer peripherals firm. Refer to Fact Pattern 17-2A. Luann signs a contract with Oleo Chips, a retail component supplier, apparently on Networx's behalf. The contract is binding on

Luann, Mace, and Networx

Milo files a suit against Nik in an Ohio state court, noting that Nik operates a Web site through which Ohio residents have done substantial business with him. The court is most likely to exercise jurisdiction over Nik if Milo's claim arises from

Nik's Web site activities.

In Recycle Cafe's suit against Sanitary Services, Inc., the court issues a judgment in Recycle's favor. The judgment can be appealed to an appropriate court of appeals by

Recycle or Sanitary.

A corporation formed in another country but doing business in the United States is referred to in the United States as an alien corporation.

True

A default judgment is entered against a party who fails to respond to the allegations in a complaint.

True

A director must make a full disclosure of any potential conflict of interest that might arise in any corporate transaction.

True

A limited liability company (LLC) formed in one state but doing business in another state is referred to in the second state as a foreign LLC.

True

A limited liability company can be taxed as a partnership.

True

A limited liability partnership allows its partners to avoid personal liability for the malpractice of other partners.

True

A party who knowingly accepts defective performance of a contract waives the breach.

True

A sole proprietorship lacks continuity on the death of the proprietor.

True

A state constitution is supreme within the state's borders.

True

A state law that conflicts with the U.S. Constitution will be deemed unconstitutional.

True

At every stage of a trial, either party can file a motion to dismiss the case.

True

Concurrent jurisdiction exists when both federal and state courts have the power to hear a particular case.

True

Concurrent jurisdiction exists when neither federal nor state courts have the power to hear a particular case.

True

Congress can only pass legislation that falls within the limits set up by the U.S. Constitution.

True

Congress can regulate all commerce in the United States.

True

Corporate profits can be subject to double taxation.

True

Each state has its own constitution.

True

Hearsay evidence is testimony about a statement made by someone who was not under oath at the time.

True

If a discovery request involves confidential business information, the scope of the request can be limited.

True

In a general partnership, all partners have equal rights in managing the partnership.

True

In a limited partnership, with the exception of the right to participate in management, limited partners have essentially the same rights as general partners.

True

Limited liability companies (LLCs) are governed by state LLC statutes.

True

Misrepresentation of a material fact can occur through conduct alone.

True

Most parties settle their lawsuits for damages or other remedies prior to trial.

True

Some constitutional protections apply to business entities.

True

Special damages are awarded for damage caused by special circumstances beyond a contract.

True

Sufficient Minimum contacts with a jurisdiction are never enough to support jurisdiction over a nonresident defendant.

True

The First Amendment does not protect commercial speech as extensively as noncommercial speech.

True

The U.S. Constitution is the supreme law of the United States.

True

The checks and balances in the U.S. Constitution prevent any one branch of government from exercising too much power.

True

The courts can decide whether the other branches of government have acted within the scope of their constitutional authority.

True

The duty owed under the mitigation of damages doctrine depends on the nature of the contract.

True

The establishment clause of the U.S. Constitution prohibits the federal government from promoting a religion.

True

The liability of the members of a limited liability company is limited to the amount of their investments.

True

The rules of contract law are often followed to avoid potential disputes.

True

The simplest form of business is a sole proprietorship.

True

The stability and predictability of the law is essential to business activities.

True

The state governments retain all powers not specifically delegated to the federal government.

True

There is one set of procedural rules for federal courts and various sets for state courts.

True

To be effective, an offer must be communicated to the offeree.

True

To pierce the corporate veil means to ignore the corporate structure, exposing the shareholders to personal liability.

True

Under the mailbox rule, an acceptance takes effect at the time it is sent.

True

When there is a direct conflict between a federal and a state law, the state law is rendered invalid.

True

Liu files a suit against Macro Sales, Inc., in a New Jersey state court based on a Web site through which New Jersey residents can do business with Macro. The court will most likely exercise jurisdiction over Macro if the interactivity of the site is seen as

a "substantial enough" connection with the state.

Loren files a suit against Mabel, alleging a failure to pay for the harvest of Mabel's orchards. Mabel denies Loren's charge and claims that Loren breached their contract to harvest a certain number of acres and owes Mabel money for the breach. Mabel's claim is

a counterclaim.

Xtreme Publications, Inc., disseminates obscene materials. This is

a crime under numerous state and federal statutes

To prepare for a trial between Condo Development Corporation and Demo Construction Company, Condo's attorney places Demo's president under oath. An authorized court official makes a record of the attorney's questions and the officer's answers. This is

a deposition.

During a trial in Gene's suit against Homer over the use of Gene's lakeside cabin, Gene's attorney asks questions of the plaintiff's witness Illya. This is

a direct examination.

Rolf, a citizen of New Mexico, wants to file a suit against Sandy, a citizen of Texas, relating to a motorcycle accident in which Rolf's injuries resulted in medical costs of more than $75,000. Their diversity of citizenship may be a basis for

a federal court to exercise original jurisdiction

Odell is a director of Price Rite, Inc. As a director, with respect to the corporation, Odell is

a fiduciary (fiduciary= typically, a fiduciary prudently takes care of money or other assets for another person. One party, for example, a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to another party, who, for example, has entrusted funds to the fiduciary for safekeeping or investment)

SFX Paintball Games, Inc., and Truck & Trailer Delivery Corporation sign an agreement that provides for the payment of "$1,000 by whichever party commits a material breach of the contract that creates damages difficult to estimate but approximately $1,000." This is

a liquidated damages clause

Fact Pattern 10-1A Mutual Company enters into a contract to employ Neil as an investment manager for two years. During the first year, Neil is often absent without explanation and when present fails to adequately monitor and manage Mutual's investments. Refer to Fact Pattern 10-1A. Neil's performance is most likely

a material breach

Heidi and Ian are directors and shareholders of Globe Software, Inc. Heidi's written authorization to Ian to vote Heidi's shares at a Globe shareholders' meeting is

a proxy

Bev is a shareholder of All-Terrain Vehicle Company. As a shareholder, Bev does not have

a right to compensation

Hermione starts up, and assumes the financial risk of, Graphic Ads, a new enterprise. Hermione is

a sole proprietor

Vicky contracts with Rashad for the delivery of hospice services to benefit Sigmund. This is

a third party beneficiary contract

The case of Max v. National Credit Co. is heard in a trial court. The case of O! Boy! Ice Cream Co. v. Pickled Peppers, Inc., is heard in an appellate court. The difference between a trial and an appellate court is whether

a trial is being held

Owen is a federal judge whose judicial decisions are part of case law, which includes interpretations of

administrative regulations, constitutional provisions, and statutes.

Hailey and Ike hold the first organizational meeting of Java Drive-In Corporation. Probably the most important function of this meeting is

adopting Java's bylaws

In Abel v. Baker, 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 Charles v. Delta, a case with similar facts. Under the doctrine of stare decisis, the trial court is likely to

allow the minor to cancel the contract.

Gladys is a shareholder of Frozen Yogurt, Inc. As a shareholder, Gladys must approve

amending the bylaws

In Dawg Stop's suit against Condiment Vendor, Inc., Dawg serves a written request for Condiment to admit the truth of matters relating to the trial. Condiment's admission in response is the equivalent of

an admission in court.

Minnesota enacts a statute to ban advertising in "bad taste." This statute would likely be held by a court to be

an unconstitutional restriction of speech

Grande Properties, Inc., and Investment Capital Corporation enter into a contract for a sale of land. To be enforceable, the contract must be in writing if the land is valued at

any price

Ivy and Justin want to form and do business as Kayak Adventures Corporation. A corporation can be owned by

artificial or natural persons

Kurt is a judge hearing the case of Local Co. v. Macro Corp. Applying the relevant rule of law to the facts of the case requires Kurt to find previously decided cases that, in relation to the case under consideration, are

as similar as possible.

Coco is considering forms of business organization for her concessions business¾Coco's Cupcakes. Most states require that a limited liability company have at least

at least one member

As a judge, Nina decides cases that involve principles of various sources of law. Common law is

case law

Jo files a suit against Lara in a Missouri state court. Lara's only connection to Missouri is an ad on the Web originating in Nebraska. For Missouri to exercise jurisdiction, the issue is whether Lara, through her ad, has

conducted substantial business with Missouri residents.

3D HD TV Company, a firm in Minnesota, advertises on the Web. A court in North Dakota would be most likely to exercise jurisdiction over 3D HD if the firm

conducted substantial business with North Dakota residents through its Web site.

LCD TV Company, a firm in Minnesota, advertises on the Web. A court in North Dakota would be most likely to exercise jurisdiction over LCD if the firm

conducted substantial business with North Dakota residents through its Web site.

As a judge, Jay applies common law rules. These rules develop from

decisions of the courts in legal disputes.

Mary is a consultant to the National Conference of Commissioners on Uniform State Laws. This organization

drafts uniform laws for adoption by the states.

The Constitution sets out the authority and the limits of the branches of the government. The term checks and balances means that

each branch has some power to limit the actions of the others

Drummond wants to make a federal case out of his dispute with Elena. Federal cases originate in

federal district courts.

After a trial between OptiGames, Inc., and Play Video Corporation, the jury renders a verdict in OptiGames's favor. Play Video's attorney can file a motion

for a new trial.

Hua, a resident of Illinois, owns a commercial building in Indiana. A dispute arises over the ownership of the building with Jac, a resident of Kentucky. Jac files a suit against Hua in Indiana. In this suit, Indiana has

in rem jurisdiction

John is a judge. The function of John and other judges is to

interpret and apply the laws.

Tami's Tasty Tacos, a mobile vendor, files a suit against the state of Utah, claiming that a Utah state law violates the commerce clause. The court will agree if the statute imposes a substantial burden on

interstate commerce

Hawaii enacts a state law that violates the U.S. Constitution. This law can be enforced by

no one

Jolie signs a contract with Keaton, an unlicensed physician, to perform plastic surgery¾a medical procedure. This contract is enforceable by

no one

Enterprising Markets Coalition (EMC), a political lobbying group, wants a certain policy enacted into law. If EMC's policy conflicts with the U.S. Constitution, a law embodying it can be imposed by

none of the choices

Yvon asks Zach, "Do you want to buy one of my fishing rods?" This is

not a valid offer because the terms are not definite

Boyd files a suit in a federal district court against Cathy. Cathy loses the suit, appeals to the U.S. Court of Appeals for the Second Circuit, and loses again. Cathy asks the United States Supreme Court to hear the case. The Court is

not required to hear the case.

Maya is a stockbroker. Nora believes that the price of OK Goods, Inc. (OKGI), a widely traded stock, is going to increase substantially. Through Maya, Nora buys 500 shares of OKGI at $10 per share, but the price soon drops to $2. Nora can successfully recover from Maya

nothing

Vacation Vistas, Inc., agrees to sell certain acreage to Umiko, who intends to develop a destination resort. Vacation Vistas repudiates the deal. Umiko sues Vacation Vistas and recovers damages. She can now obtain

nothing more

Civil law is concerned with disputes between persons and

other persons and between citizens and their governments.

Boutique Corporation would like to change its corporate status to become an S Corp to avoid income taxes at the corporate level. To qualify, the shareholders must not be

partnerships

The Securities Exchange Commission is an administrative agency. The chief purpose of such agencies is to

perform specific government functions.

The state of New York regulates private activities to protect or promote the public order, health, safety, and general welfare under its

police powers

Reusable Energy Corporation regularly expresses opinions on political issues. Under the First Amendment, corporate political speech is

protected

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,

public policy or social values.

Refined Commodities, Inc., agrees to deliver ten tons of sheet metal to Select Builders Corporation. The agreement states that delivery is to be within "3" days, although the parties intend "30" days. Refined cannot convince Select to amend the contract. Refined should seek

reformation

Kelsey promises to pay Jon, her son, $5,000 if he obtains his degree at Ivy University, where he is currently in his second year. Jon graduates. Kelsey is

required to pay, because Jon obtained a degree at Ivy

Panini Vittles, Inc., contracts with Qino to deliver its sandwiches. Later, the parties decide to cancel their contract. They can

rescind their contract to the extent that it is executory

Rural Power Utility, Inc., enters into a contract with Shovel Excavation Service to dig up, replace, and rebury Rural's cables in a certain location. Rural advances Shovel 10 percent of its cost. The parties rescind the contract. Shovel's refund of the payment is

restitution

The United States has a common law system. The common law began as

rules applied in the courts throughout England.

Sullivan and Taylor want to form a corporation to provide catering services. The first step in the incorporation procedure is to

select a state in which to incorporate

Gaudy Ornaments, Inc., sells decorative ware. Hank, who has never bought a Gaudy product, files a suit against the firm, alleging that its products are defective. The firm's best ground for dismissal of the suit is that Hank does not have

standing.

The River City Council, the Santa Clara County Board, the Texas state legislature, and the U.S. Congress enact laws. These laws constitute

statutory law

During a trial, the attorney for Gloria the plaintiff questions her witness Heidi. Heidi, who is not an expert in the matter about which she is being asked, can

testify about only what she personally observed.

Kit loses her suit against Lou in a Minnesota state trial court. Kit appeals to the state court of appeals and loses again. Kit would appeal next to

the Minnesota Supreme Court.

If a provision in the Florida state constitution conflicts with a provision in the U.S. Constitution

the U.S. Constitution takes precedence.

Mountaintop Clearview Corporation authorizes Niles, its employee, to oversee its timber operation. In the course of his employment, Niles disposes of the operation's waste illegally. Orson is a Mountaintop shareholder. Liability for this crime most likely rests with Orson to

the amount of Orson's investment in the firm

Tyler, a citizen of Utah, files a suit in a Utah state court against Veritas Sales Corporation, a Washington state company that does business in Utah. The court has original jurisdiction, which means that

the case is being heard for the first time

Ginger wants to file a suit against Fred. For a court to hear the case

the court must have jurisdiction

Ulrica wants to initiate a suit against Valley Farms by filing a complaint. The complaint should include

the facts establishing Ulrica's basis for relief.

Congress enacts a law that sets out a medical-device approval process for the Food and Drug Administration to follow. The law includes a preemption provision. A device that goes through the process injures Joe, who files a claim under state law to recover. The court will most likely rule that

the federal law preempts Joe's state law claim

Ulrich, a citizen of Virginia, wants to enforce in the state of Washington certain rights that he has under a contract with Xtreme SnoBoards Inc. A Washington state court is most likely to enforce such rights under

the full faith and credit clause

The Ohio state legislature passes a law to regulate local delivery services. The final authority regarding the constitutionality of this law is

the judicial system

The South Carolina state legislature passes a law to regulate local delivery services. The final authority regarding the constitutionality of this law is

the judicial system

Mariah wins her suit against Natural Products Company. Natural's best ground for appeal is the trial court's interpretation of

the law that applied to the issues in the case.

Carl sells Direct Marketing Enterprises, a sole proprietorship, to Eve. This is a transfer of

the ownership of the business

Mike, an advocate of a certain religion, publishes an article in New Times magazine insisting that Congress base all federal law on his religion's principles. The First Amendment guarantees Mike's freedom of

the press, speech, and religion

Under Ohio's state constitution, the Ohio Environmental Protection Agency issues a new rule, the Polk County Commission approves a new property tax measure, and the professors and students at Ohio Law School publish the results of their most recent legal research. Sources of law do not include

the results of legal scholars' research

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

the rules, orders, and decisions of the Federal Trade Commission.

A federal statute regulates an employment practice. To resolve a dispute concerning the practice, Paula, a judge, will most likely apply

the statute.

Len, a citizen of Maryland, obtains a federal license to operate a commercial fishing boat in Chesapeake Bay. The Maryland state legislature enacts a law that bans all commercial fishing in the bay. The state law most likely violates

the supremacy clause

The U.S. Congress enacts a new federal statute that sets different standards for the liability of businesses selling defective products. This statute applies

to all of the states

The Motor Vehicle Insurance Association wants the federal government to spend money to build a new highway. Congress can spend revenues

to promote any objective that Congress deems worthwhile

Vijay is a member of Watchit, LLC, a limited liability company. Vijay is liable for Watchit's debts

to the extent of his capital contribution

An appellate court can affirm or reverse the decision of a trial court in whole or in part.

true

Beachside City enacts an ordinance that bans the distribution of all printed materials on city streets. Carl opposes the city's latest "revenue-enhancing" measure and wants to protest by distributing handbills. In his suit against the city, a court would likely hold the printed-materials ban to be

unconstitutional under the First Amendment

Jody owns KuppaJava Kiosks, a sole proprietorship. Jody's liability is

unlimited

The police obtain a search warrant and search Errol's apartment. After yelling obscenities at the officers, Errol confesses to a crime and implicates his friends. The Constitution protects against

unreasonable searches