Chapter 01
Law as the Foundation of Business
True / False Questions
TrueFalse
2. / The first known written set of laws was the Code of Hammurabi.
TrueFalse
3. / Rule-of-law nations adopt laws supporting the private market because it is in everyone's interest, including the lawmakers'.
TrueFalse
4. / Common property, applies to public resources owned by the government (or "state") like roads, public buildings, public lands, and monuments.
TrueFalse
5. / Contract law compensates owners whose resources are wrongfully harmed by the actions of others.
TrueFalse
6. / The secret to economic prosperity and the wealth of nations lies in the foundation of property law and the legal system to implement it under the rule of law.
TrueFalse
7. / Jurisprudence is the rule of law.
TrueFalse
8. / Natural law theory asserts that law contains universal moral principles.
TrueFalse
9. / Sociological jurisprudence emphasizes that contemporary law should focus on legal principles that have withstood the test of time in a nation.
TrueFalse
10. / Jurisprudence refers to the general body of law interpretations by judges as different from legislation passed by legislators.
TrueFalse
11. / Legal realism is the idea that courts should understand the meaning of the Constitution relative to the times in which they interpret it.
TrueFalse
12. / The United Kingdom, the United States, Canada, Jamaica, India, Nigeria, New Zealand, and a few other countries—all colonized by England—follow the common law.
TrueFalse
13. / Civil law arose in the eleventh and twelfth centuries as the English monarch appointed royal judges to ride circuits around the English countryside and to resolve disputes in the name of the king (or queen).
TrueFalse
14. / Louisiana is the only state in the U.S. that follows a partial civil law system due to Louisiana's historical ties with France, a civil law nation.
TrueFalse
15. / Common law relies more on legislation than judicial decisions to determine what the law is.
TrueFalse
16. / In administrative law, a government official represents society, or "the people," and the official is responsible for seeking justice to achieve the ends of society.
TrueFalse
17. / Although property law is categorized as one kind of private law; in our legal system, it is at the heart of both public and private law.
TrueFalse
18. / Contract law often but not always requires actual injury to the owner's resources.
TrueFalse
19. / Legislation passed by the Congress is called a statute or an act.
TrueFalse
20. / The Second Amendment to the Constitution holds that "No State shall . . . deprive any person of life, liberty or property without due process of law."
TrueFalse
21. / Disadvantages of case law do not destroy the benefits of certainty, predictability, and stability provided by case law and stare decisis.
TrueFalse
22. / Judges in future cases are not so likely to follow the dicta in prior cases as they are the holdings.
TrueFalse
23. / Conflicting precedents when applying the principle of stare decisis do not create confidence in the certainty of law.
TrueFalse
24. / With reference to the hierarchy of sources of law, Case law prevails over local ordinances.
TrueFalse
25. / The Fourteenth Amendment to the Constitution recognizes that the law is enforced by taking a person's life, freedom, or the resources that he or she owns.
TrueFalse
26. / Whether it's stated in the contract or not, when a breach of contract occurs, the injured party will usually recover her attorney fees as part of her compensatory damages.
TrueFalse
27. / The single largest number of lawsuits today, especially in the federal courts, involves one business suing another business for tortious conduct.
TrueFalse
28. / Tort law helps protect property boundaries by providing compensation when someone wrongfully crosses such boundaries.
TrueFalse
29. / In addition to compensatory damages, breach-of-contract cases may award punitive damages, when the breaching party knew or had reason to know that special circumstances existed that would cause the other party to suffer additional losses if the contract were breached.
TrueFalse
30. / Drake verbally lashes out at his neighbor one evening following a drunken party. He also beats him up when Drake tries to back away from the argument. He is said to have committed a strict liability tort.
TrueFalse
31. / Corporate governance can fail even when corporate managers do nothing illegal.
TrueFalse
Multiple Choice Questions
A. / specific performance.
B. / private markets.
C. / staredecisis.
D. / rule of law.
E. / property.
33. / Economic growth depends "in particular on the rule of law" which is a "lodestar for all countries." Why?
A. / Rule-of-law nations adopt laws supporting the private market because it is in everyone's interest, including the lawmakers'.
B. / It distinguishes lawmakers as being above the rule of law.
C. / It allows special interest groups to benefit at the expense of others.
D. / It adopts laws supporting the growth of the public markets over private markets increasing economic growth of nations.
E. / It removes the power of the courts and creates an autocratic regime where businesses can freely invest and economic growth is high.
34. / _____ property is an ownership fence which applies to resources like land that more than one individual owns jointly.
A. / Private
B. / Civil
C. / Public
D. / Common
E. / Tort
35. / A property based legal system:
A. / is unimportant in Western legal systems.
B. / protects and assists the wealthy over the poor.
C. / applies only to common property or resources like land that more than one individual owns jointly.
D. / does not allow for the transfer of private resources.
E. / allows people to exclude others from interfering with what their efforts produce.
36. / _____ can be thought of as the central concept underlying Western legal systems.
A. / Rule of law
B. / Property
C. / Tort law
D. / Ethics
E. / Stare decisis
37. / Contract law:
A. / enables an owner to exchange resources, especially at a future date.
B. / compensates owners whose resources are wrongfully harmed by the actions of others.
C. / punishes those who harm an owner's resources in particular ways.
D. / identifies how individuals can own and use private resources in groups.
E. / protects ownership and sets limits on private resource use.
38. / _____ law both protects ownership and sets limits on private resource use.
A. / Tort
B. / Antitrust
C. / Securities
D. / Regulatory
E. / Contract
39. / The law protecting the owners of a business organization from the managers who run it for them is _____.
A. / corporate governance
B. / antitrust law
C. / labor law
D. / contract law
E. / tort law
40. / Which law forbids owners from monopolizing classes of resources and sets rules for how businesses can compete to acquire ownership in new resources?
A. / Regulatory
B. / Tort
C. / Antitrust
D. / Antidiscrimination
E. / Contract
41. / The ideas and philosophies that explain the origin of law and its justification is called _____.
A. / rule of law
B. / torts
C. / stare decisis
D. / jurisprudence
E. / statutes
42. / _____ law jurisprudence believes that law is simply the commands of the state backed up by force and punishments.
A. / Positive
B. / Natural
C. / Historical
D. / Sociological
E. / Tort
43. / Friedrich Savigny, a prominent German legal philosopher, helped develop _____ jurisprudence, which emphasizes that contemporary law should focus on legal principles that have withstood the test of time in a nation.
A. / sociological
B. / tort
C. / positive
D. / historical
E. / natural
44. / _____ jurisprudence supports the idea that law can and should change to meet new developments in society.
A. / Historical
B. / Natural
C. / Sociological
D. / Positive law
E. / Tort
45. / Which idea of law tries to go beyond just the words of law to examine what police, administrators, prosecutors, and judges are actually doing as they enforce, interpret, and apply laws?
A. / Positive law jurisprudence
B. / Sociological jurisprudence
C. / Stare Decisis
D. / Legal realism
E. / Originalism
46. / So significant is the role of judges in the United States that they determine the meaning of the Constitution and can declare void the legislation of Congress and the acts of the president. This illustrates that the legal system in the U.S. is based on _____.
A. / civil law
B. / religious law
C. / common law
D. / hybrid law
E. / constitutional law
47. / _____ law courts do not make law nor do their judges think themselves obligated to follow prior judicial decisions, called precedents.
A. / Common
B. / Religious
C. / Civil
D. / Hybrid
E. / Constitutional
48. / _____ law covers the legal principles that apply to government agencies, bureaus, boards, or commissions.
A. / Administrative
B. / Constitutional
C. / Tort
D. / Criminal
E. / Contract
49. / Which of the following is not a typical area of concern in property law?
A. / Promises to exchange resources in the future
B. / Rules regarding patent, copyright, trademark, and trade secret
C. / Rules for compensation when an owner's legal boundaries are wrongfully crossed
D. / Rules regarding injury to an owner's resources
E. / Legal principles that apply to government agencies, bureaus, boards, or commissions
50. / Stephanie has written a book, "Mirari" and was talking to some interested parties from Hollywood about making a movie based on it. However, she turned down the offer due to differences of opinion. A year later, Mirari was made into a movie but it did not acknowledge the author. Such situations come under _____ law.
A. / property
B. / administrative
C. / constitutional
D. / criminal
E. / tort
51. / Burberry is a luxury brand that has its own distinctive trademark pattern. The company recently learned that another retailer has been selling fake Burberry bags. The legal dispute that will arise here is governed by _____ law.
A. / administrative
B. / constitutional
C. / property
D. / criminal
E. / tort
52. / Which of the following statements are true of tort law?
A. / It involves the recognition of exclusive right in both tangible (physically touchable) and intangible resources such as copyrights, patents, trademarks etc.
B. / It covers the rules of how owners transfer resources by exchanging them.
C. / It specifies various offenses against the proper order of the state.
D. / It covers the legal principles that apply to government agencies, bureaus, boards, or commissions.
E. / It establishes rules for compensation when an owner's legal boundaries are wrongfully crossed by another.
53. / Kate has entered into a binding agreement to sell a house to Michael. When Michael shows up to complete the deal as per the agreement, Kate refuses to go through with the transaction. Which of the following best categorizes Kate and Michael's issues with regard to classification of laws?
A. / This is a public law issue regarding contract law.
B. / This is a private law issue regarding contract law.
C. / This is a public law issue regarding property law.
D. / This is a private law issue regarding criminal law.
E. / This is a public law issue regarding tort law.
54. / In most criminal cases, an arrest can be made only based on probable cause and requires the officer to read out the Miranda rights to the criminal suspect before the arrest is made. This is an example of:
A. / tort law.
B. / procedural law.
C. / rule of law.
D. / substantive law.
E. / sociological jurisprudence.
55. / Which of the following statements about substantive law is true?
A. / It is regulation and made by agencies of the federal government.
B. / It covers the rules of how owners transfer resources by exchanging them.
C. / The time allowed for one party to sue another is an example of substantive law.
D. / Enforcement of a contractual promise is substantive in nature.
E. / It provides the machinery for rights and duties.
56. / A collection of legislations passed by the Congress on the same subject are called:
A. / statutes.
B. / jurisprudence.
C. / staredecisis.
D. / codes.
E. / citations.
57. / Following much debate the Congress has decided to pass a bill that will increase the taxes on tobacco. This legislation is called a:
A. / statute.
B. / regulation.
C. / ordinance.
D. / tort.
E. / citation.
58. / The City of Dover has passed a written law banning smoking in most restaurants and bars. Dover has enacted a/an:
A. / statute.
B. / act.
C. / regulation.
D. / ordinance.
E. / jurisprudence.
59. / At the state level, the hierarchy of law sources begins with the state _____.
A. / act
B. / statute
C. / constitution
D. / citation
E. / commercial code
60. / Judicial decisions, called _____ laws, apply to a legal problem and interpret the relevant constitutional, legislative, and regulatory laws.
A. / case
B. / procedural
C. / ordinance
D. / commercial
E. / code
61. / The _____ in prior cases are precisely what was necessary to the decision reached.
A. / dicta
B. / holdings
C. / citations
D. / statutes
E. / ordinances
62. / According to _____, judges in current cases follow whenever possible the interpretation of law determined by judges in prior cases.
A. / staredecisis.
B. / constitutional realism.
C. / statutory construction.
D. / constitutional relativism.
E. / legal realism.
63. / When judges, decide appeals from trial courts, make decisions on legal issues, they write their decisions, or _____, setting out reasons.
A. / citations
B. / opinions
C. / codes
D. / statutes
E. / ordinances
64. / Which of the following are judicial decisions that interpret the relevant constitutional, legislative, and regulatory laws?
A. / Citations
B. / Opinions
C. / Case law
D. / Dicta
E. / Statutes
65. / In constitutional law the idea that courts should understand the meaning of the Constitution relative to the times in which they interpret it is known as _____.
A. / constitutional relativity
B. / legal realism
C. / originalism
D. / dicta
E. / rule of law
66. / _____ stands for the idea that courts should interpret the Constitution only according to the intentions of those who wrote it.
A. / Constitutional relativity
B. / Originalism
C. / Legal realism
D. / Dicta
E. / Conflicts of law
67. / The source of law which ranks the lowest among all the others is a _____.
A. / local ordinance
B. / statute
C. / case law
D. / state administrative regulation
E. / federal administration regulation
68. / _____ are in effect a form of punishment for violating the law and sometimes also serve as a preventive action.
A. / Ordinances
B. / Statutes
C. / Sanctions
D. / Torts
E. / Opinions
69. / The right of an individual to take another person's resources (especially money) because that person has failed to meet the requirements of the law (e.g., the breach of a contract) is known as a(n) _____.
A. / sanction
B. / amendment
C. / remedy
D. / dicta
E. / holding
70. / A(n) _____ is a civil wrong other than a breach of contract.
A. / ordinance
B. / tort
C. / sanction
D. / remedy
E. / dicta
71. / Which of the following statements about a breach of contract is false?
A. / If a breach by one party is serious enough, the other party may be permitted to rescind or cancel the contract.
B. / The remedy of an injured party may be an order by the court commanding the other party actually to perform a bargain as agreed.
C. / The single largest number of lawsuits today involves businesses suing one another for a breach of contract.
D. / A tort is a kind of breach of contract which is a civil wrongdoing.
E. / Compensatory damages along with additional consequential damages may be awarded in some cases of breach of contract.
72. / In some cases of a breach of contract, a decree of _____ may be made —an order by the court commanding the other party actually to perform a bargain as agreed.
A. / consequential damages
B. / compensatory damages
C. / stare decisis
D. / specific performance
E. / dicta
73. / Each of the following is a remedy in case of a breach of contract EXCEPT:
A. / punitive damages.
B. / consequential damages.
C. / specific performance.
D. / rescind the contract.
E. / cancel the contract.
74. / Coach Kleats is in charge of the softball team at Phoenix Junior School. He loses his temper with one of the substitutes following a game and slams the child against the lockers in his anger. The child is badly bruised and is bleeding from the nose. The coach can be sued for committing a(n) _____ tort.
A. / negligence
B. / intentional
C. / strict liability
D. / specific performance
E. / criminal conduct
75. / Punitive damages are frequently awarded in:
A. / ordinary negligence cases.
B. / intentional tort cases.
C. / breach of contract cases.
D. / criminal cases.
E. / violating the statutes.
76. / In a broad general sense, _____ includes the legal property relations that large businesses have with each other, with their customers, and with society.
A. / corporate governance
B. / specific performance
C. / stare decisis
D. / tort law
E. / strict liability
Short Answer Questions
78. / When the former Soviet Union collapsed, many observers thought that the new private market would promptly improve Russia's economy. Why has the Soviet economy been slow to recover from the decline that it experienced?
79. / What is rule of law?
80. / With reference to property in the legal sense, what are the 3 main types of ownership?
81. / Compare natural law and positive law in jurisprudence.
82. / Illustrate the concept of sociological jurisprudence with an example.
83. / Compare common law and civil law and how stare decisis is important in both instances.
84. / Describe public law and its categories.
85. / What is private law? What are its categories?
86. / What is civil and criminal law?
87. / Illustrate the concept of substantive and procedural law with examples.
88. / What are acts, statutes and codes?
89. / Define stare decisis.
90. / What are opinions, precedents and citations?
91. / What information can be obtained from the citation of a case?
92. / List two disadvantages of stare decisis or case law?
93. / Distinguish between holding and dicta in prior precedent.
94. / What is constitutional relativity? How does it affect stare decisis?
95. / Explain conflicts of law.
96. / List the various sources of law and their order of hierarchy.
97. / The 14th amendment recognizes that law may be enforced by taking resources owned by a citizen. Name the instances in which someone's resources may be taken.
98. / Differentiate between an intentional tort and negligence.
99. / What are exemplary damages?
100. / What sanctions may be imposed for violating statutes and regulations?
101. / Define a corporation?
102. / How does corporate governance break down due to the illegal actions of managers?
Chapter 01 Law as the Foundation of Business Answer Key
True / False Questions
FALSE
Law is known by everyone as being intended to tell members of society what they can or cannot do. Under the rule of law, laws that are made are generally and equally applicable.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 01-01 To recognize why the legal systems of nations contribute to making the economies of some nations much stronger than the economies of other nations.
Topic: Law, the Rule of Law, and Property
2. / The first known written set of laws was the Code of Hammurabi.
TRUE
The first known written set of laws was the Code of Hammurabi, named after the Babylonian king of the 18th century BC.