Chapter 01 - Law as the Foundation of Business

Chapter 01
Law as the Foundation of Business

True / False Questions

1. The first known written set of laws was the Code of Hammurabi.
True False

2. Law and "rule of law" are synonymous terms.

True False

3. A decree of specific performance may be issued by a court to help an injured party in cases
involving breach of contract and tortuous conduct but not when a statutory violation has
occurred.
True False

4. Louisiana is the only state that follows a complete civil law system.
True False

5. Civil law relies primarily on legislation, while common law relies on court decisions.
True False

6. 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.
True False

7. Public law encompasses those legal problems and relationships that exist between
individuals.
True False

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Chapter 01 - Law as the Foundation of Business

8. Procedural law defines rights and duties for the parties.

True False

9. Legal realism goes past the word of law to examine how laws are enforced, interpreted and
applied.
True False

10. Property laws include wills, trusts and estates.

True False

11. Proposed uniform acts are drafted by the American Commissions Conference on Uniform
State Laws.
True False

12. Legislation enacted by Congress is called a statute while a law passed by a local
government is usually called an ordinance.
True False

13. The most significant uniform law for business is the Uniform Commercial Code.
True False

14. The time allowed for one party to sue another party is considered a substantive law issue.
True False

15. Dicta is not precedent because it is a comment on a matter not necessary to the decision
reached.
True False

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Chapter 01 - Law as the Foundation of Business

16. Jurisprudence refers to the law itself and not to the philosophy of law.
True False

17. "Constitutional relativity" stands for the proposition that the meaning of the language
found in the Constitution is relative to the time in which it is being interpreted.
True False

18. The Treaty on European Union states that the European Union is founded on the rule of
law.
True False

19. By definition, a crime is a wrong against just the victim.

True False

20. Under the doctrine of Stare Decisis, courts are bound to follow the holdings and dicta of
prior cases.
True False

Multiple Choice Questions

21. Which of the following is not an advantage of stare decisis applied to case law under
common law principles?
A. Stare decisis provides predictability in law.
B. Stare decisis and case law helps specify, in detail, the boundaries of our property based
legal system.
C. Case law eliminates conflict of laws problems due to the large number of decisions being
made.
D. Case law decisions cannot be overturned once established as precedent so consistence is
maintained and assured.

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Chapter 01 - Law as the Foundation of Business

22. ________ means to follow the case precedent.

A. Stare decisis.
B. Constitutional realism.
C. Statutory construction.
D. Constitutional relativism.

23. The common law system originated in:

A. France.
B. The United States.
C. Spain.
D. England.

24. Louisiana partially follows a civil law system based on which country?
A. Spain.
B. England.
C. France.
D. Italy.

25. What type of law describes the legal principles that apply to government agencies?
A. Administrative.
B. Constitutional.
C. Criminal.
D. Public.

26. Which of the following is not a type of law dealing with property:
A. Leases.
B. Wills.
C. Trusts.
D. Sales of goods.

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Chapter 01 - Law as the Foundation of Business

27. Mike has entered into a binding agreement to sell a car to Kathy. When Kathy shows up to
complete the deal as per the agreement, Mike refuses to go through with the transaction.
Which of the following best categorizes Mike and Kathy'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.

28. The prosperous nations exploit the resources and labor of poor nations through trade so
the wealthy nations are prosperous because the poor nations are poor describes the:
A. Wealth dissemination theory.
B. Wealth determination theory.
C. Dependency theory.
D. Dominance theory.

29. Which statement is true?

I. Substantive laws define rights and duties.
II. Procedural rules provide the machinery to enforce rights and duties.
A. I and II.
B. I only.
C. II only.
D. Neither I nor II.

30. 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.

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Chapter 01 - Law as the Foundation of Business

31. ________ jurisprudence believes that law is simply the commands of the state backed up
by force and punishment.
A. Historical School.
B. Sociological.
C. Natural law.
D. Positive law.

32. Exemplary damages are also called:

A. Compensatory damages.
B. Consequential damages.
C. Punitive damages.
D. Injunctive damages.

33. Which of the following is not an area of property law concern?

A. Promises to exchange resources in the future.
B. Patents and copyrights.
C. Trademarks and trade secrets.
D. All of the above are property law concerns.

34. Laws passed by Congress are usually referred to as:

A. Statutes.
B. Codes.
C. Ordinances.
D. Commandments.

35. The Uniform Commercial Code will not apply to:

A. The purchase of a new computer.
B. The purchase of a used car.
C. The use of a check as payment for a transaction.
D. The contract to hire a cleaning crew to clean your home or office.

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Chapter 01 - Law as the Foundation of Business

36. Judge Alan has issued a decision in a mortgage foreclosure case. The issue involved a
bank that granted a loan to a person who could not afford the payments. Judge Alan found for
the bank, however, in his opinion said that the bank acted legally but unethically and that
homeowners should have more protection from such unethical lending policies. He lamented
that the current law forced him to find for the bank. When the judge opined about the
unethical lending practices and said that he wished he could have helped the homeowner, his
statements would be considered:
A. Dicta.
B. Precedent.
C. Stare decisis.
D. A judicial holding.

37. The Uniform Commercial Code applies to:

I. Commercial transactions involving personal property.
II. Real estate.
III. Personal service contracts.
A. I, II, III.
B. I and III.
C. II and III.
D. I only.

38. ________ is what a court does when it interprets a statute to determine the intent of the
legislature when the statute was enacted.
A. Legislative history.
B. Statutory construction.
C. Judicial definition.
D. Statutory resolution.

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Chapter 01 - Law as the Foundation of Business

39. Sheila goes to the only car dealer in town to purchase a car. She tells the dealer that this
will be her first car and that she needs it to travel to a distant city for a new job that starts in
two days. After coming to an agreement, the dealer tells her the car will be ready at 9:00 am
the next morning. He then asks her out to dinner for that night. Sheila says no. The dealer is
very upset at her rejection so he refuses to provide to her the car the next morning breaching
the contract. Sheila has no way to get to the new job and she is fired.
A. Sheila can only sue for compensatory damages related to the breach of contract.
B. Sheila can sue for exemplary damages because a tort has been committed.
C. Sheila is entitled to consequential damages because the dealer knew that she needed the car
for travel to the new job.
D. Sheila is entitled to nothing because the dinner rejection gave the dealer just cause to
breach the contract.

40. A federal statute has been enacted establishing a national minimum wage of $8.00 per
hour.
A. Minnesota may enact a state law making the minimum wage $8.25 within the state.
B. Minnesota must keep their minimum wage at $8.00 per hour and may not go higher.
C. Minnesota may enact a state law making the minimum wage $7.50 per hour within the
state for private employers but must honor the $8.00 per hour rate for state and federal
government employees within the state.
D. Since the federal government has enacted minimum wage legislation, Minnesota may not
make any laws in the area which is now reserved for federal enforcement.

41. Which of the following would be considered intangible:

A. Oxygen.
B. A house.
C. Gasoline.
D. Ownership of your books.

42. Administrative agencies can be empowered to:

I. Investigate.
II. Prosecute.
III. Hold hearings.
A. I, II, III.
B. I and III.
C. II and III.
D. I and II.

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Chapter 01 - Law as the Foundation of Business

43. All but which of the following is a disadvantage of stare decisis and the common law
system:
A. Time involved.
B. Predictability.
C. Conflicting precedent.
D. Dicta.

44. Dicta is:

A. The same thing as the decision.
B. Like stare decisis.
C. The comments from the court that accompanies the decision.
D. The main thrust of the dissent.

45. Which of the following is false regarding uniform laws:

A. The National Conference of Commissioners on Uniform Laws drafts uniform laws which
become binding on the states upon approval by the National Conference.
B. The National Conference of Commissioners on Uniform Laws drafts uniform laws which,
upon approval by the National Conference, are recommended to state legislatures for
approval.
C. Uniform laws do not have to be adopted in every state.
D. Uniform laws may be adopted by state legislatures in principle, but, changes may be made
in some provisions to meet local needs.

46. An automobile accident occurs in Alabama, but the lawsuit is brought in Georgia. The
judge will apply what law for the accident?
A. Alabama.
B. Georgia.
C. Federal law.
D. Either Alabama or Georgia law.

47. Which of the following is not a means of applying the exclusionary right of property?
A. Private property.
B. Common property.
C. Personal.
D. Public property.

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Chapter 01 - Law as the Foundation of Business

48. Which of the following will be considered the lowest source of law and be voided or
prevailed over by the others?
A. A federal administrative regulation.
B. A state constitution.
C. A Congressional statute.
D. An amendment to the U.S. Constitution.

49. Which of the following is not a typical legal sanction for criminal conduct?
A. Payment of damages to the victim for her injuries.
B. Possible disqualification of voting rights.
C. Possible removal from political office.
D. Fine paid to the government.

50. When judges write their decisions on legal issues they set out their reasoning in _______.
A. Judgments.
B. Verdicts.
C. Opinions.
D. Citations.

51. If the citation for a case is 115 N.W. 2d 338 (1950), where can it be found in the
Northwestern Reporter?
A. Volume 115, page 338.
B. Volume 338, page 115.
C. Volume 338, page 1950.
D. Volume 115, page 1950.

52. Which of the following is not used as a punishment for a crime in the U.S. today?
A. Death.
B. Imprisonment.
C. Fine.
D. Public whipping.

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Chapter 01 - Law as the Foundation of Business

53. Damages, awarded to make the victim of the breach of a contract "whole" in the economic
sense, are called ________.
A. Compensatory.
B. Consequential.
C. Punitive.
D. Specific.

54. The fact that a search warrant must usually be obtained before entering and searching a
citizen's home is based on:
A. Substantive law.
B. Property law.
C. Administrative law.
D. Procedural law.

55. A local zoning law is an example of:

A. An ordinance.
B. A statute.
C. An order.
D. A regulation.

56. Which of the following is not an intentional tort?

A. Battery.
B. False imprisonment.
C. Assault.
D. Negligence.

57. Punitive damages are frequently awarded in:

A. Ordinary negligence cases.
B. Intentional tort cases.
C. Breach of contract cases.
D. Criminal cases.

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Chapter 01 - Law as the Foundation of Business

58. The Federal Communications Commission has just issued a ruling banning the word
"friggin" on terrestrial radio and non-cable television determining it to be obscene. This ruling
would be called a/an:
A. Statute.
B. Regulation.
C. Ordinance.
D. Order.

59. Which of the following would be considered private law?

A. Administrative law.
B. Criminal law.
C. Contract law.
D. Constitutional law.

60. Much, if not most, business in the United States is transacted through:
A. Sole proprietorships
B. Partnerships.
C. Corporations.
D. Administrative agencies.

Short Answer Questions

61. When Princeton graduate student Erica Field researched ownership in Peru, what effects
did she find when the "average squatter family" was granted property ownership?

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Chapter 01 - Law as the Foundation of Business

62. Define and distinguish common law and civil law.

63. What are the four basic sources of law?

64. Name at least four Internet law issues.

65. Congratulations, you have been appointed to the United States Supreme Court? Which
"school" of jurisprudence will you follow as your primary legal philosophy? Explain the
philosophy and your reasons for believing in it.

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Chapter 01 - Law as the Foundation of Business

66. What are some of the main advantages of stare decisis and why might a judge not follow
stare decisis in a particular case?

67. Why is there a need to have a uniformity of law in certain areas and what are the two ways
in which uniformity of law can be attained?

68. 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?

69. What information can be obtained from the citation of a case?

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Chapter 01 - Law as the Foundation of Business

70. 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.

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Chapter 01 - Law as the Foundation of Business

Chapter 01 Law as the Foundation of Business Answer Key

True / False Questions

1. (p. 6) The first known written set of laws was the Code of Hammurabi.
TRUE

Level: Medium
Objective: 3

2. (p. 6) Law and "rule of law" are synonymous terms.

FALSE

Level: Medium
Objective: 1, 3

3. (p. 20) A decree of specific performance may be issued by a court to help an injured party in
cases involving breach of contract and tortuous conduct but not when a statutory violation has
occurred.
FALSE

Level: Medium
Objective: 3

4. (p. 13) Louisiana is the only state that follows a complete civil law system.
FALSE

Level: Hard
Objective: 3

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Chapter 01 - Law as the Foundation of Business

5. (p. 12) Civil law relies primarily on legislation, while common law relies on court decisions.
TRUE

Level: Medium
Objective: 1

6. (p. 20) 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.
FALSE

Level: Hard
Objective: 3

7. (p. 13) Public law encompasses those legal problems and relationships that exist between
individuals.
FALSE

Level: Medium
Objective: 1, 2, 3

8. (p. 14) Procedural law defines rights and duties for the parties.
FALSE

Level: Hard
Objective: 1, 2, 3

9. (p. 12) Legal realism goes past the word of law to examine how laws are enforced, interpreted
and applied.
TRUE

Level: Medium
Objective: 1, 2, 3

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Chapter 01 - Law as the Foundation of Business

10. (p. 13) Property laws include wills, trusts and estates.
TRUE

Level: Hard
Objective: 2

11. (p. 16) Proposed uniform acts are drafted by the American Commissions Conference on
Uniform State Laws.
FALSE

Level: Hard
Objective: 3

12. (p. 15) Legislation enacted by Congress is called a statute while a law passed by a local
government is usually called an ordinance.
TRUE

Level: Easy
Objective: 3

13. (p. 16) The most significant uniform law for business is the Uniform Commercial Code.
TRUE

Level: Easy
Objective: 3

14. (p. 14) The time allowed for one party to sue another party is considered a substantive law
issue.
FALSE

Level: Hard
Objective: 3

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Chapter 01 - Law as the Foundation of Business

15. (p. 18) Dicta is not precedent because it is a comment on a matter not necessary to the
decision reached.
TRUE

Level: Medium
Objective: 4

16. (p. 12) Jurisprudence refers to the law itself and not to the philosophy of law.
FALSE

Level: Medium
Objective: 3

17. (p. 18) "Constitutional relativity" stands for the proposition that the meaning of the language
found in the Constitution is relative to the time in which it is being interpreted.
TRUE

Level: Medium
Objective: 1, 3

18. (p. 6) The Treaty on European Union states that the European Union is founded on the rule
of law.
TRUE

Level: Medium
Objective: 1, 2, 3

19. (p. 14) By definition, a crime is a wrong against just the victim.
FALSE

Level: Easy
Objective: 2, 3

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Chapter 01 - Law as the Foundation of Business

20. (p. 17) Under the doctrine of Stare Decisis, courts are bound to follow the holdings and dicta
of prior cases.
FALSE

Level: Medium
Objective: 3, 4

Multiple Choice Questions

21. (p. 17-18) Which of the following is not an advantage of stare decisis applied to case law
under common law principles?
A. Stare decisis provides predictability in law.
B. Stare decisis and case law helps specify, in detail, the boundaries of our property based
legal system.
C. Case law eliminates conflict of laws problems due to the large number of decisions being
made.
D. Case law decisions cannot be overturned once established as precedent so consistence is
maintained and assured.

Level: Hard
Objective: 3, 4

22. (p. 17) ________ means to follow the case precedent.

A. Stare decisis.
B. Constitutional realism.
C. Statutory construction.
D. Constitutional relativism.

Level: Easy
Objective: 4

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Chapter 01 - Law as the Foundation of Business

23. (p. 12) The common law system originated in:

A. France.
B. The United States.
C. Spain.
D. England.

Level: Easy
Objective: 1, 3

24. (p. 13) Louisiana partially follows a civil law system based on which country?
A. Spain.
B. England.
C. France.
D. Italy.

Level: Medium
Objective: 3

25. (p. 13) What type of law describes the legal principles that apply to government agencies?
A. Administrative.
B. Constitutional.
C. Criminal.
D. Public.

Level: Easy
Objective: 3

26. (p. 13) Which of the following is not a type of law dealing with property:
A. Leases.
B. Wills.
C. Trusts.
D. Sales of goods.

Level: Hard
Objective: 2, 3

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Chapter 01 - Law as the Foundation of Business

27. (p. 13) Mike has entered into a binding agreement to sell a car to Kathy. When Kathy shows
up to complete the deal as per the agreement, Mike refuses to go through with the transaction.
Which of the following best categorizes Mike and Kathy'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.

Level: Hard
Objective: 2, 3

28. (p. 4) The prosperous nations exploit the resources and labor of poor nations through trade
so the wealthy nations are prosperous because the poor nations are poor describes the:
A. Wealth dissemination theory.
B. Wealth determination theory.
C. Dependency theory.
D. Dominance theory.

Level: Hard
Objective: 1, 2

29. (p. 14) Which statement is true?

I. Substantive laws define rights and duties.
II. Procedural rules provide the machinery to enforce rights and duties.
A. I and II.
B. I only.
C. II only.
D. Neither I nor II.

Level: Medium
Objective: 3

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Chapter 01 - Law as the Foundation of Business

30. (p. 15) 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.

Level: Medium
Objective: 3

31. (p. 11) ________ jurisprudence believes that law is simply the commands of the state backed
up by force and punishment.
A. Historical School.
B. Sociological.
C. Natural law.
D. Positive law.

Level: Medium
Objective: 3

32. (p. 20) Exemplary damages are also called:

A. Compensatory damages.
B. Consequential damages.
C. Punitive damages.
D. Injunctive damages.

Level: Medium
Objective: 2, 3

33. (p. 13) Which of the following is not an area of property law concern?
A. Promises to exchange resources in the future.
B. Patents and copyrights.
C. Trademarks and trade secrets.
D. All of the above are property law concerns.

Level: Medium
Objective: 2, 3

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Chapter 01 - Law as the Foundation of Business

34. (p. 15) Laws passed by Congress are usually referred to as:
A. Statutes.
B. Codes.
C. Ordinances.
D. Commandments.

Level: Easy
Objective: 3

35. (p. 16) The Uniform Commercial Code will not apply to:
A. The purchase of a new computer.
B. The purchase of a used car.
C. The use of a check as payment for a transaction.
D. The contract to hire a cleaning crew to clean your home or office.

Level: Hard
Objective: 2, 3

36. (p. 17) Judge Alan has issued a decision in a mortgage foreclosure case. The issue involved a
bank that granted a loan to a person who could not afford the payments. Judge Alan found for
the bank, however, in his opinion said that the bank acted legally but unethically and that
homeowners should have more protection from such unethical lending policies. He lamented
that the current law forced him to find for the bank. When the judge opined about the
unethical lending practices and said that he wished he could have helped the homeowner, his
statements would be considered:
A. Dicta.
B. Precedent.
C. Stare decisis.
D. A judicial holding.

Level: Medium
Objective: 3, 4

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Chapter 01 - Law as the Foundation of Business

37. (p. 16) The Uniform Commercial Code applies to:

I. Commercial transactions involving personal property.
II. Real estate.
III. Personal service contracts.
A. I, II, III.
B. I and III.
C. II and III.
D. I only.

Level: Hard
Objective: 2, 3

38. (p. 16) ________ is what a court does when it interprets a statute to determine the intent of
the legislature when the statute was enacted.
A. Legislative history.
B. Statutory construction.
C. Judicial definition.
D. Statutory resolution.

Level: Hard
Objective: 3

39. (p. 20) Sheila goes to the only car dealer in town to purchase a car. She tells the dealer that
this will be her first car and that she needs it to travel to a distant city for a new job that starts
in two days. After coming to an agreement, the dealer tells her the car will be ready at 9:00 am
the next morning. He then asks her out to dinner for that night. Sheila says no. The dealer is
very upset at her rejection so he refuses to provide to her the car the next morning breaching
the contract. Sheila has no way to get to the new job and she is fired.
A. Sheila can only sue for compensatory damages related to the breach of contract.
B. Sheila can sue for exemplary damages because a tort has been committed.
C. Sheila is entitled to consequential damages because the dealer knew that she needed the car
for travel to the new job.
D. Sheila is entitled to nothing because the dinner rejection gave the dealer just cause to
breach the contract.

Level: Hard
Objective: 2, 3

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Chapter 01 - Law as the Foundation of Business

40. (p. 18) A federal statute has been enacted establishing a national minimum wage of $8.00
per hour.
A. Minnesota may enact a state law making the minimum wage $8.25 within the state.
B. Minnesota must keep their minimum wage at $8.00 per hour and may not go higher.
C. Minnesota may enact a state law making the minimum wage $7.50 per hour within the
state for private employers but must honor the $8.00 per hour rate for state and federal
government employees within the state.
D. Since the federal government has enacted minimum wage legislation, Minnesota may not
make any laws in the area which is now reserved for federal enforcement.

Level: Hard
Objective: 2, 3

41. (p. 13) Which of the following would be considered intangible:

A. Oxygen.
B. A house.
C. Gasoline.
D. Ownership of your books.

Level: Hard
Objective: 2

42. (p. 16-17) Administrative agencies can be empowered to:

I. Investigate.
II. Prosecute.
III. Hold hearings.
A. I, II, III.
B. I and III.
C. II and III.
D. I and II.

Level: Medium
Objective: 3

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Chapter 01 - Law as the Foundation of Business

43. (p. 17-18) All but which of the following is a disadvantage of stare decisis and the common
law system:
A. Time involved.
B. Predictability.
C. Conflicting precedent.
D. Dicta.

Level: Medium
Objective: 4

44. (p. 18) Dicta is:

A. The same thing as the decision.
B. Like stare decisis.
C. The comments from the court that accompanies the decision.
D. The main thrust of the dissent.

Level: Easy
Objective: 4

45. (p. 16) Which of the following is false regarding uniform laws:
A. The National Conference of Commissioners on Uniform Laws drafts uniform laws which
become binding on the states upon approval by the National Conference.
B. The National Conference of Commissioners on Uniform Laws drafts uniform laws which,
upon approval by the National Conference, are recommended to state legislatures for
approval.
C. Uniform laws do not have to be adopted in every state.
D. Uniform laws may be adopted by state legislatures in principle, but, changes may be made
in some provisions to meet local needs.

Level: Hard
Objective: 2, 3

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Chapter 01 - Law as the Foundation of Business

46. (p. 18) An automobile accident occurs in Alabama, but the lawsuit is brought in Georgia.
The judge will apply what law for the accident?
A. Alabama.
B. Georgia.
C. Federal law.
D. Either Alabama or Georgia law.

Level: Hard
Objective: 2, 3

47. (p. 7) Which of the following is not a means of applying the exclusionary right of property?
A. Private property.
B. Common property.
C. Personal.
D. Public property.

Level: Medium
Objective: 1, 2, 3

48. (p. 18) Which of the following will be considered the lowest source of law and be voided or
prevailed over by the others?
A. A federal administrative regulation.
B. A state constitution.
C. A Congressional statute.
D. An amendment to the U.S. Constitution.

Level: Medium
Objective: 3

49. (p. 19) Which of the following is not a typical legal sanction for criminal conduct?
A. Payment of damages to the victim for her injuries.
B. Possible disqualification of voting rights.
C. Possible removal from political office.
D. Fine paid to the government.

Level: Medium
Objective: 2, 3

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Chapter 01 - Law as the Foundation of Business

50. (p. 17) When judges write their decisions on legal issues they set out their reasoning in
_______.
A. Judgments.
B. Verdicts.
C. Opinions.
D. Citations.

Level: Medium
Objective: 4

51. (p. 17) If the citation for a case is 115 N.W. 2d 338 (1950), where can it be found in the
Northwestern Reporter?
A. Volume 115, page 338.
B. Volume 338, page 115.
C. Volume 338, page 1950.
D. Volume 115, page 1950.

Level: Medium
Objective: 3

52. (p. 19) Which of the following is not used as a punishment for a crime in the U.S. today?
A. Death.
B. Imprisonment.
C. Fine.
D. Public whipping.

Level: Easy
Objective: 3

53. (p. 19) Damages, awarded to make the victim of the breach of a contract "whole" in the
economic sense, are called ________.
A. Compensatory.
B. Consequential.
C. Punitive.
D. Specific.

Level: Medium
Objective: 2, 3

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Chapter 01 - Law as the Foundation of Business

54. (p. 14) The fact that a search warrant must usually be obtained before entering and searching
a citizen's home is based on:
A. Substantive law.
B. Property law.
C. Administrative law.
D. Procedural law.

Level: Medium
Objective: 2, 3

55. (p. 15) A local zoning law is an example of:

A. An ordinance.
B. A statute.
C. An order.
D. A regulation.

Level: Medium
Objective: 2, 3

56. (p. 20) Which of the following is not an intentional tort?

A. Battery.
B. False imprisonment.
C. Assault.
D. Negligence.

Level: Easy
Objective: 3

57. (p. 20) Punitive damages are frequently awarded in:

A. Ordinary negligence cases.
B. Intentional tort cases.
C. Breach of contract cases.
D. Criminal cases.

Level: Medium
Objective: 2, 3

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58. (p. 16) The Federal Communications Commission has just issued a ruling banning the word
"friggin" on terrestrial radio and non-cable television determining it to be obscene. This ruling
would be called a/an:
A. Statute.
B. Regulation.
C. Ordinance.
D. Order.

Level: Hard
Objective: 3

59. (p. 13) Which of the following would be considered private law?
A. Administrative law.
B. Criminal law.
C. Contract law.
D. Constitutional law.

Level: Easy
Objective: 1, 2, 3

60. (p. 21) Much, if not most, business in the United States is transacted through:
A. Sole proprietorships
B. Partnerships.
C. Corporations.
D. Administrative agencies.

Level: Easy
Objective: 1, 2

Short Answer Questions

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Chapter 01 - Law as the Foundation of Business

61. (p. 7) When Princeton graduate student Erica Field researched ownership in Peru, what
effects did she find when the "average squatter family" was granted property ownership?

She found that the granting of the property rights was associated with a 17 percent total
household work increase, a 47 percent increase in the probability of working outside of the
home and a 28 percent decline in the likelihood of child labor in the family. The study
concluded that formal ownership meant that the families did not have to spend as much time
defending their homes and could engage in more productive work; making them less poor.

Level: Hard
Objective: 1, 2

62. (p. 12) Define and distinguish common law and civil law.

Common law is based on case decisions from England and emphasizes the role of judges in
determining the meaning of laws and how they apply. Civil law is based on legislation from
non-common law countries, such as France. Civil courts decide facts but defer to the
legislature for determinations of legal issues.

Level: Easy
Objective: 1

63. (p. 15-18) What are the four basic sources of law?

The four basic sources of law are constitutions (U.S. and state), legislation (federal and state),
administrative law (rules, regulations, and decisions by administrative agencies), and judicial
decisions.

Level: Medium
Objective: 3

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64. (p. 14) Name at least four Internet law issues.

Issues in Internet Law include property interests (ex. software), the creation of legally binding
contracts over the Internet, monitoring of email transmissions, regulating pornography
transmitted over the Internet, copyright infringement, taxation of Internet purchases and
liability of ISPs.

Level: Medium
Objective: 2, 3

65. (p. 11-12) Congratulations, you have been appointed to the United States Supreme Court?
Which "school" of jurisprudence will you follow as your primary legal philosophy? Explain
the philosophy and your reasons for believing in it.

Student answers will vary; however, they should explain what the chosen philosophy believes
in and why they believe in it.

Level: Medium
Objective: 1, 2, 3

66. (p. 17-18) What are some of the main advantages of stare decisis and why might a judge not
follow stare decisis in a particular case?

The main advantages of stare decisis are the following: certainty, consistency, predictability,
and expediency for participants in lawsuits. Stare decisis allows people to act with more
certainty personally and in business. A judge may not follow a precedent if the legislature has
changed the law, if the former ruling is erroneous or the conditions upon which the former
ruling was based no longer exist. Also there may be a perceived change in the social climate
requiring a change in the decision.

Level: Hard
Objective: 4

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67. (p. 16) Why is there a need to have a uniformity of law in certain areas and what are the two
ways in which uniformity of law can be attained?

Because Congress, the fifty states and local governments are all entitled to and do enact
statutes and ordinances, there is often an overlap and inconsistency in the law when the laws
conflict. Certainly, individual states and local governmental bodies may and should enact laws
to govern their citizens, however, when citizens of two or more states are involved in a legal
matter, the conflict of laws can be problematic. Furthermore, in areas such as commerce, the
conflicting laws are often burdensome to interstate commerce. It is therefore to everyone's
benefit to have some sort of uniformity in these matters. Uniformity can be achieved in two
ways. First, Congress can pass a law which would then preempt any state or local laws.
Second, the states can join together and adopt a single uniform law in the particular area.

Level: Medium
Objective: 1, 2, 3

68. (p. 11) 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?

One of the primary reasons is Russia's lack of the rule of law. The Russian governments still
controls over half of the resources in the country. Fraud, bribery, force (duress) and corruption
are prevalent and the courts cannot be depended upon to resolve issues justly and fairly.

Level: Medium
Objective: 1, 2

69. (p. 17) What information can be obtained from the citation of a case?

The citation contains the volume, page number, name and edition of the reporter (book) and
the date on which the case was decided.

Level: Easy
Objective: 3

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70. (p. 19) 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.

Resources owned by individuals may be taken (1) for the benefit of society as in the exercise
of eminent domain; (2) to punish someone as in the payment of a fine; or (3) for the benefit of
another person such as an award of damages.

Level: Hard
Objective: 1, 2

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