business law final

What is a "B Corp." ?

A corporation that has met certain sustainability and environmental standards and has been certified by B-Lab.

Dirk Debtor had over $100,000 in credit card debt and could not pay his bills. Dirk files for Chapter 7 bankruptcy. One hundred days after filing the petition, and before the bankruptcy court has approved the bankruptcy, Dirk wins $2 million in the Michigan lottery. Dirk's creditiors demand to be paid from the lottery winnings. Must Dirk give this money to the bankruptcy trustee for payment of Dirk's creditors?

No, since Dirk won the lottery money after filing the bankruptcy petition.

In the video / outline material on ethics, professor Sanford has suggested that someday, someone will ask us to do something that is wrong. What did professor Sanford suggest to do when this happens?

Realize that this is an opportunity for us to tell the person who we really are by telling them that we do not engage in wrongful activity

A trust has three parties that are involved. Name the three parties:

The trustee, the grantor, and the beneficiary

A directors, who cannot attend a board meeting due to a good reason, is allowed to vote by proxy.

This statement is incorrect.

_____ protects employees against discrimination and harassment based upon race, color, religion, national origin, and sex.

Title VII of the Civil Rights Act of 1964

In the video lecture / related outline, professor Sanford discussed B-Corp's. Why does professor Sanford like B-Corp.'s and why does professor Sanford encourage students to do business with B-Corp.'s?

all (B-Corp.'s are committed to the 3BL (profits, people, planet, B-Corp.'s get great tax advantages and pass the savings to their customers, B-Corp.'s are fashionable and it is always important to keep up with fashion)

A _____ transaction is a transaction in which the payment of a debt is guaranteed by the debtor's personal property owned by the debtor.

secured

Managers should make sure they consider all the relevant _______ when they engage in ethical reasoning.

stakeholders

If a man is married, has no children, has one living parent, and dies "intestate," the surviving wife will generally receive how much of the property that must go through "probate" (based on the video class discussion / outline material of intestate distribution):

the first $60,000 & 1/2 of the rest of the probate estate (& the surviving parent gets the other 1/2 of the probate estate)

A power of attorney can be general or specific.

true

An agent's implied authority is derived from an agent's express authority and consists of what is reasonably necessary for carrying out the agent's grant of express authority.

true

In August of 2019, the Business Roundtable, a group of leading business executives, offered a new definition of the purpose of the corporation. Business as usual was no longer acceptable. Business managers should not only manage to make a profit but should manage to help make the world better by addressing various social issues. These issues include improving the environment, doing more for employees and the people of the world, and even addressing the issues of diversity in the workplace. Overall, this statement is

true

In the video lecture / related course outline, professor Sanford stressed that you should never loan money or extend credit to anyone without some form of "security" (some type of property that the creditor can use to pay toward the debt in the event of non-payment of the debt by the debtor).

true

Professor Sanford believes that the timeless values of honesty, kindness, courage, and fidelity matter. Professor Sanford believes that being ethical & having good character in business and in life is very important. Further professor Sanford believes that honest, ethical business people have opportunities to make the world a better place since maximizing profits should not be the sole reason for operating a business. Overall this statement is:

true

if the employer has substantial control over day-to-day operations of the worker, the worker is generally considered an employee.

true

Debtor buys a new car for $30,000 and finances the entire purchase at Chase Bank (the car is the collateral for the loan--Chase Bank is a secured creditor). The car is financed over a 7-year period. After almost five years, when the car is worth $8,000 (the cash value of the car), and the debtor owes Chase Bank $11,000, Debtor files a petition for Chapter 7 bankruptcy. Assuming in this bankruptcy case, general creditors get 10 cents on the dollar for their claims, how much will Chase Bank get in this Bankruptcy case?

$8,300

Subaru, the car, is manufactured in Lafayette, Indiana. Subaru promotes their car as a "green machine" from a green manufacturing process. Subaru advertises that they reduce their environmental footprint by

Achieving zero landfill status

It is the Board of Directors for a corporation that is responsible for the overall management of the business. For approximately the last one hundred years, until recently, the Board of Directors would manage to "maximize the profits" of the corporation. This management style was advocated by almost everyone including the famous economist, Milton Friedman, who won a Nobel Peace Prize. Friedman indicated that the only social responsibility a business should have was to maximize profits and increase shareholder value. Further, Friedman argued that any business that did not do this would eventually be driven out of business by the competition. On August 19, 2019, the Business Roundtable, a group of leading business leaders, stated that it should not be the only goal of the business to advance only the interest of the shareholders (the owners of the business). Instead the management of the business should take into account all "stakeholders." This was a major philosophical change. Who are the "stakeholders" that should be considered in the management of the corporation? Select the best answer.

All choices are correct (Employees of the corporation, Customers of the corporation, The society in general, including the goals of sustainability for the planet)

Which of the following is generally true regarding the management of a corporation?

All of the choices are correct (The board of directors selects officers to manage the day-to-day business of the corporation, Shareholders elect directors, Shareholders do not participate in corporate management)

Which of the following is a moratorium for almost all creditor litigation against a debtor in a Chapter 7 bankruptcy proceeding?

An automatic stay

Billy BigBucks, a millionaire, forms a corporation so Billy will have "limited liability" with his business. Billy invests $1,000 in the business and borrows the rest of the money needed to operate the business. Billy's business is called "Back-Yards-R-Us, Limited" and the business installs a swimming pool in Kelly's backyard (this is the first customer of the business). During construction of the swim pool, a neighbor's son, Mike, falls into the empty pool and hits his head, causing a serious concussion and injury. Billy's business did not have the required fence around the construction site as required by the local law. The neighbor sues "Back-Yards-R-Us, Limited" and Billy BigBucks personally for $200,000. Assuming the court awards the neighbor $200,000 in damages for the injury to Mike, is it possible that Billy BigBucks will be personally liable for this $200,000 judgement?

Back-Yards-R-Us, Limited is liable to the extent the business has assets and Billy is personally liable for the $200,000 judgement, assuming the court "pierces the corporate veil" and finds the owner of the business personally liable since the corporation was breaking the law.

When Rosa Parks died, as discussed in the video lecture / outline material, her will left everything Rosa owned to her charitable trust to educate people regarding "self-development". Based on class material, blood relatives of Rosa Parks contested the will of Rosa Parks on what grounds?

Both undue influence by the Personal Representative and Trustee of Mrs. Parks' estate and trust (Elaine Steele & Adam Shakoor) and lack of testamentary capacity by Mrs. Parks at the time she executed the will

Which of the following is true regarding the tort liability of employers for the actions of their employees and independent contractors?

Employers are generally liable in tort for the actions of their employees, while they are generally not liable for the actions of independent contractors.

typically, how are corporate directors chosen?

By a majority vote of the shareholders.

Which chapter of the Bankruptcy Code is used to reorganize the debtor's financial affairs under the supervision of the bankruptcy court?

Chapter 11

Eighty-year old Clark exhibits confusion, forgetfulness, and disorientation. To Clark's doctor Dave, the symptoms indicate dementia. Elsa, who has significant contact with Clark, believes that he is in a state of mental decline. These facts indicate

Clark's lack of capacity to execute a valid will.

Why does GVSU have or use to promote "meatless Mondays?"

GVSU, as a sustainability leader, wants to help GVSU and students reduce their "carbon footprint." Eating less meat helps reduce the production of greenhouse gases, a by-product of raising animals for meat.

In a limited partnership, who assumes unlimited personal liability for the debts of the partnership?

General partners

Jane has $300,000 in general unsecured debts and she loses her job. Jane files for Chapter 7 bankruptcy. Within 30 days, American Express sues Jane for the $10,000 of debt that Jane owes American Express. What will happen with this lawsuit?

Jane simply notifies American Express she has filed a petition in bankruptcy and there is an automatic stay of this type of legal action against Jane (the lawsuit becomes part of Jane's Chapter 7 bankruptcy).

In 2009, Larry Johnson, a former football player for the Kansas City Chiefs, called some sports reporters "H _ _ _ 's" (a gay slur term) and Larry was later suspended for two games (and later traded to another team). Bob Griese, a football analyst, made a comment on national television that Colombian NASCAR driver, Juan Pablo Montoya, was not doing well in the NASCAR standings because "he's out having a taco . . .". Bob Griese was later suspended for one game for his remark (and two games later "retired"). What did Larry Johnson and Bob Griese do wrong (based on our videoclass discussion / outline)?

Making stereotype comments regarding a person's ethnic, cultural, or gender identity, is seen as akin to using profanity. Also, making stereotype comments regarding a person's ethnic, cultural, or gender identity feeds a climate of intolerance toward various groups of individuals, which also leads to these individuals being assaulted or bullied.

Kay has 2 children, Larry (the eldest) and Mona, both of whom predecease Kay. Larry is survived by a son, Nick, and Mona by two daughters, Opal and Pearl. On Kay's death, if the estate is distributed to Kay's heirs per stirpes (and not per capita)

Nick will receive one-half of the estate, and Opal and Pearl will each receive one-fourth.

An NFL football player "crashed" a party where the home-owner asked football player to leave. Football player beat-up and kicked home-owner, before football player left the party. The home-owner called the police and went to the hospital (home-owner had $100,000 in medical bills). The police arrested football player and charged him with felony battery. Football player pled guilty to misdemeanor battery. Football player loses his job playing football and now has $500,000 in debt (credit cards and other unsecured debt) and football player is being sued by home-owner for $600,000. Home-owner claims he is entitled to $100,000 for medical bills and $500,000 for the pain and injury home-owner received from the beating. Football player, who only has assets of $20,000, and now works at Wendy's making $18,000 per year, files a peition in Chapter 7 bankruptcy. Is filing Chapter 7 bankruptcy the right strategy?

No. Football player should file for Chapter 11 bankruptcy since football player does not qualify for Chapter 13. The home-owner lawsuit is a non-dischargeable debt under Chapter 7 but may be paid-off under a Chapter 11 petition.

Jim has a $100,000 life insurance policy that names his wife, Lori, as the beneficiary. Jim has a house worth $300,000 that is in joint name with Lori. Jim has $200,000 in his savings account (Jim's name only), and Lori has $400,000 in her savings account (Lori's name only). Jim dies and his will leaves everything he owns to his wife, Lori. Which of the above items must go through "probate" before distribution to Jim's heirs.

Only Jim's $200,000 savings account

Professor Sanford has emphasized in the ethics material that good character matters. In re-enforcing this concept, Sanford discussed a mother's letter to her daughter where the mother told her daughter to never fall for a boy because he was good-looking. She wanted her daughter to look for integrity. She told her daughter that if her daughter settled for anything less than honorable character, it would lead to heartache and disappointment.

Professor Sanford believes this to be true

The sustainability movement has caused businesses to manage using the triple-bottom-line (3BL) philosophy. This concepts states that business management should consider what three factors in making business decisions?

Profits, People, and the Planet.

Which of the following is a term for a requirement that a minimum number of directors be present at a meeting for decisions made at the meeting to be valid?

Quorum

Ray and Vivian get married. It is their second marriage each. Ray, a widower, has four children from his previous marriage, and Vivian has four children from her previous marriage. Once married, neither parent adopts the other's children. Ray and Vivian put all assets in joint name. Vivian dies. Three months later, Ray dies without a will. Assuming there is no will and neither of Ray's or Vivian's parents are alive, who gets what?

Ray's children share equally the entire estate, & Vivian's children get zero

A mother lives in Indian River & has a farm with 400 acres valued at $400,000. The farm is in the mother's name only. When she dies, she wants to give her estate to her 3 children and avoid probate. Based on our class discussion, how could the mother do this?

Re-title mom's property so the three children and the mom are "joint tenants" or put the farm in a trust, during mother's life-time, naming the children the beneficiaries of the trust when mother dies are both good answers

When a debtor files a petition in Chapter 7 bankruptcy, which creditor listed below has the highest priority for payment when the bankruptcy trustee distributes the debtor's assets?

Secured creditors to extend the secured creditor has security or collateral

Based on our vido class discussion / outline material, why was Rosa Parks arrested on a bus in Montgomery, Alabama, on December 1, 1955?

She refused to give up her seat to a white person when ordered to do so by the bus driver (a violation of Alabama law)

Stieg Larsson, author of the Millennium Trilogy (The Girl with the Dragon Tattoo, etc.), lived with a woman, Gabrielsson, for 30 years & he considered her his wife/life partner but they were never legally married. In 2004, when Stieg died unexpectedly of a heart attack, Stieg was worth over $10 million. Based on our video class discussion and outline material, how much did Gabrielsson received from the Stieg Larson estate?

Since Stieg died without a will, she received nothing and Stieg's father got 1/2 of the estate and Stieg's brother got the other 1/2 of the estate.

In the video lecture / outline material, we discussed a white man, referred to as "ID Adam," who questioned a black woman's right to use the homeowners' association swimming pool. When the woman refused to produce an ID, due to racial profiling (no one else was asked to produce an ID), ID Adam called the police on the woman. Later the Homeowners Association issued an apology to the woman, a member of the association, and accepted ID Adam's resignation from the Association as a "pool chair and board member." ID Adam did this on his personal time. When ID Adam's employer, Sonoco Products, discovered what Adam did, what did Adam's employer do?

The Employer issued a statement stating, in part, that Sonoco's core values are built on dignity and respect for all, and we do not condone discrimination of any kind, inside or outside of the workplace. With 20,000 employees across the globe of all races, religions, colors and creeds, we value the diverse experiences and perspectives of all of our employees. We take seriously any incidents that do not reflect our values. In addition, the Employer terminated ID Adam's employment with the company.

Professor Sanford believes it is important for GVSU students to be "ethical" and to do the "right thing" as students, as future business and community leaders, and as future parents (role models for children). In getting students to think about "ethics" professor Sanford has suggested there are three approaches to discussing this important topic: (1) read, study, and discuss a chapter on ethics in a textbook, (2) talk about how students developed their own ethical compass by considering everything the student has learned in life from his or her parents, church, school, etc. and (3) the "Sanford's approach" of practicing daily doing the "right thing" so as to develop a pattern of good choices that over time, leads to good character, good ethics, and good business leadership. Professor Sanford thinks all three approaches have merit and recommends the approach the student thinks is best given the student's beliefs, values, and the situation. The key concept is professor Sanford wants students to be "ethical" throughout life. In the video lecture and related outline material, professor Sanford emphasized which approach in discussing ethics.

The Sanford Approach

Which statement below is incorrect?

The United States has ratified the Kyoto Protocol.

Based on video/outline discussion, what is corporate social responsibility (CSR)?

The deliberate inclusion of public interest into corporate decision-making & the 3BL

What is corporate social responsibility (CSR)?

The deliberate inclusion of the public interest into corporate decision-making and usually, directly or indirectly, considers the 3BL.

The enlightened business leader will manage considering the 3BL (triple bottom line). Profits, the planet, and the people of the community / the world are all important elements when making business decisions. This change in business thinking started within two years after the first Earth Summit in 1992. The primary purpose of the Earth Summit was

To limit the growth of global warming and address issues of climate change

When Tom dies, rather than leaving everything outright to his wife Becky, Tom's will leaves everything he owns in trust for Becky for her life (and Becky has the right to all income from the trust during her life-time), however, on Becky's death, everything in the trust goes to Tom and Becky's only son, Riley. Why might Tom do this? Why would he leave Becky only a life estate in his property when he dies rather than leaving her all property outright?

Tom insures that Riley or Riley's heirs eventually inherits his property

Mr. Smith died on October 1, 2019. His will left his estate to his blood heirs who survive him to be divided per capita & not per stirpes. Mr. Smith was survived by the following heirs: Tom (his son), Becky (his daughter), and Harry, Larry, and Jerry (his grandchildren from his pre-deceased son, Bill). Who will get what when Mr. Smith's estate is distributed?

Tom, Becky, Harry, Larry, and Jerry all share equally (1/5 of the estate each)

Aunt Mary dies & she has no relatives (blood heirs). She leaves everything she owns to Vivian ($60,000). Based on our video class discussion / class outline and assuming Vivian was just a friend of Mary, what is the best answer?

Vivian can reject this inheritance and elect to receive nothing.

When a company has an annual meeting and all shareholders are invited, normally what do the shareholders do at the annual meeting?

Vote for directors and vote on any major corporate structural changes.

In the video lecture and related outline, professor Sanford said he liked a sole proprietorship as a form of doing business when one first starts a business. Why does Sanford like the sole proprietorship?

While the owner will have unlimited liability for the business debts, the business is inexpensive and easy to form. If personal liability is an issue, buying insurance might be an option to solving that problem.

If Boch and Kent owned a warehouse at all times as tenants-in-common, upon Boch's death his interest in the warehouse:

Will pass to his wife after the will is probated, assuming the will names the wife as the sole beneficiary of Boch's estate.

Sally's works at XYZ Company and Sally's boss says to her, "If you want a raise, sleep with me." Sally says "OK" and sleeps with her boss. The boss gives Sally a big raise. Does Sally have a case of Sexual Harassment against her boss and company?

Yes, Sally has a case of sexual harassment against her boss and her company.

Dan Debtor owes John's Hardware $10,000 for purchases Dan has made on credit (assume this debt is not secured). John and Dan are good friends. Dan files for Chapter 7 bankruptcy but 60 days before filing the bankruptcy petition, Dan pays John's Hardware $10,000 so the debt is paid in full. After the Chapter 7 filing, a bankruptcy trustee is appointed. The trustee demands that John's Hardware give back the $10,000. Must John's Hardware give back the $10,000?

Yes, because the $10,000 payment was a preferential payment.

Mindy is a 60-year old woman who lives by herself, works at McDonald's making $20,000 a year, and Mindy's only asset is her $100,000 house. Mindy get sick, goes into the hospital for 2 weeks (Mindy has no health care insurance), and when Mindy is released she owes the hospital $150,000 in medical bills. Mindy has no money to pay the hospital since Mindy lives paycheck-to-paycheck. Mindy is worried that the hospital will sue her for the $150,000 in medical bills and Mindy will lose her house. Is there a way, Mindy can get rid of her debt and keep her house by filing a petition in bankruptcy?

Yes. Mindy can file for Chapter 13 bankruptcy, keep her house, and pay-off her medical bills, based on what she can afford to pay, over a 3-5 year period, under Chapter 13 bankruptcy.

Which of the following are non-dischargeable debts under a Chapter 7 bankruptcy filing?

all (Alimony and child support, Student or educational loans, unless payment of the loan imposes undue hardship on the debtor (determined by Bankruptcy Court and this is rarely the case), Intentional torts, for example, the willful and harmful touching (battery) of another person)

XYZ Corporation has an extensive anti-sexual harassment policy, which also outlines a reporting procedure if a company employee is the victim of sexual harassment. In spite of the policy, Harry ignores the policy. Harry Lunchmeat, a middle-level manager for the XYZ Corporation (and, what professor Sanford calls, a Dinosaur), is hot for one of his subordinates, Suzy Straight. Harry propositions Suzy about three times a day. In addition, he frequently sends her pornographic literature in the inter-office mail, exposes himself to her, and tells her about his wife's sexual inadequacies. Even though Suzy refuses to sleep with Harry and tries to ignore his behavior as best she can, Harry gives her two promotions and several raises. Finally, Suzy is unable to perform her job because Harry's attentions are making the job unbearable. As a result of her boss's behavior, Suzy sues her boss and XYZ (her employer) for sexual harassment under Title VII. What is Suzy's best theory for recovery? Will Suzy have a quid pro quo claim? A work (hostile) environment claim? Suzy's best claim is for:

a (hostile) work environment claim

In the video lecture / related class outline, we talked about various individuals who did some "bad things." For example, we talked about an attorney who abused his position by requesting "quid pro quo." Also, we talked about two GVSU students who stole a purse from another student. Professor Sanford suggested in the class material that these people engaged in bad, unethical conduct for the following reason(s) / select the best answer:

all (These individuals do not have a good ethical compass that they regularly follow, On a daily basis these individuals do not practice "doing the right thing", These individuals do not remember that they will "reap what they sow")

Which of the following are considered stakeholders in a firm?

all (customers, future generations, employees)

According to the _____ doctrine, an employee may be fired for almost any reason.

employment-at-will

Power of attorney is a specific form of ________ authority that grants an agent specific powers for either a specific or general POA).

expressed

An individual who hires an independent contractor can generally be held liable for the torts committed by an independent contractor.

false

For a creditor to get a perfected security interest in the debtor's property (to secure the related debt), generally, the debtor must sign three documents: (1) a security agreement that describes the collateral, (2) a promissory note promising to pay the debt, and (3) a power of attorney giving the creditor control of all other debtor property.

false

If a party completes a Chapter 7 bankruptcy, the party is not permitted to seek a Chapter 7 bankruptcy again for three years.

false

If you are an "employee-at-will" you can never sue your employer for wrongful discharge if your employment is terminated.

false

Shareholders are directly responsible for the daily management of a corporation.

false

The Sarbanes-Oxley Act of 2002 (called "socks") applies to all corporations (both publicly traded and private companies). This law provides additional responsibilities on those who are involved in the management of a company. There are civil and criminal penalties for a violation of this law.

false

Title VII of the Civil Rights Acts of 1964 applies to all employers, regardless of the number of employees they have.

false

Workers' compensation laws ensure that covered workers who are injured on the job can receive financial compensation only by suing their employer. Group starts

false

professor Sanford believes it is important for parents to model good ethical behavior so their children learn the importance of good character. Children will learn not from what parents say but what parents do. For example, we discussed how Lori Loughlin helped her daughter get into college. Professor Sanford thought Lori Loughlin modeled good, ethical behavior in helping her daughter.

false

The board of directors hires __________ to run the corporation on a day-to-day basis.

officers

Paul dies intestate and his survivors include his spouse Rhoda and his two children, from a previous marriage, Sue and Tony. According to our class discussion on the laws of intestate succession, under intestacy laws, Rhoda will receive how much of Paul's estate that goes through probate?

one-half

A(n) _____ takes over administration of the debtor's estate.

trustee