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Introduction to Business Law
Jeffrey Beatty, Susan Samuelson
1. Congress passed a law imposing penalties for displaying "indecent" material online where
children could see it. If the U.S. Supreme Court subsequently rules that the statute conflicts
with the First Amendment of the U.S. Constitution, the statute is void.
Answer: True
2. In Anglo-Saxon society, men were put into groups of ten, known as a “tithing” and were
individually held responsible for any injury caused by any member of the group. This is the
forerunner of the idea of business partnerships.
Answer: True
3. A rule that establishes maximum length of work shifts for air traffic controllers is an
example of an administrative regulation.
Answer: True
4. In 1994, the Arizona Supreme Court decided the case of Hernandez v. Arizona Board of
Regents and found a duty of care to avoid furnishing alcohol to underage consumers. If in
2008 a Flagstaff, Arizona plaintiff brings a lawsuit against an Arizona university’s fraternity
for providing alcohol to members under the legal drinking age, the Hernandez v. Arizona
Board of Regents case will serve as precedent.
Answer: True
5. Wilfred was driving too fast for the icy road conditions and hit Sally's car. Sally can sue
Wilfred in criminal court.
Answer: False
6. If Milan asks a court to order Pamela to stop reprinting his copyrighted material, he is
seeking a legal, rather than an equitable, remedy.
Answer: False
7. Congress can create a statute on any topic at all.
Answer: False
8. If the President vetoes a bill, it can still become law if both the House and the Senate
approve it with a 51% majority.
Answer: False
9. The doctrine of precedent is binding on all courts from county courts to the U.S. Supreme
Answer: False
10. The case citation Pereda v. Parajon, 957 So.2d 1194 (2007) reveals that Pereda is the

Answer: False
11. Under the natural law theory of jurisprudence, an unjust law is no law at all.
Answer: True
12. Common law is a body of cases decided by legislatures.
Answer: False
13. The Constitution ensures that the states retain all power not given to the national
Answer: True
14. DoorWay Computers, Inc., the trademark owner of "DoorWay," sought a court injunction
to prevent Handyman Hardware, Inc. from using the domain name, "" A jury
will decide whether DoorWay is entitled to this remedy.
Answer: False
15. In the case of Panavision Int'l v. Toeppen, the Ninth Circuit Court of Appeals affirmed
the district court's decision. This means that the Ninth Circuit approved the district court's
decision and upheld the outcome in the case.
Answer: True
1. The government itself prosecutes the wrongdoer in a case involving behavior so
threatening that society outlaws it altogether. This kind of case involves:
a. Procedural law.
b. Private law.
c. Civil law.
d. Criminal law.
Answer: D
2. The Occupational Safety and Health Administration promulgated a rule requiring
warehouse employees to wear hardhats when in the vicinity of an operating forklift. The
purpose of the hardhats is to protect employees from danger of falling objects. This rule is:
a. an executive order.
b. a statute.
c. common law.
d. administrative law.
Answer: D
3. Common law refers to:

a. law that is the same or similar in all the states.
b. law made when judges decide cases and then follow those decisions in later cases.
c. law made by legislatures in the form of statutes.
d. the legal systems of France, Germany, and Italy.
Answer: B
4. Hasbro, Inc., the trademark owner of "Candy Land," sought a court injunction to stop
Internet Entertainment Group, LTD from using the domain name, "" Internet
Entertainment Group had established a sexually explicit site at the domain name. This
injunction would have to be issued by:
a. a jury.
b. a judge exercising equitable powers.
c. an executive order.
d. a subpoena.
Answer: B
5. The three branches of government in the United States are:
a. the executive, legislative, and administrative.
b. the administrative, executive, and statutory.
c. the executive, legislative, and judicial.
d. the administrative, legislative, and international.
Answer: C
6. The doctrine of stare decisis:
a. makes the legal process more expensive.
b. is an equitable remedy.
c. makes the law more predictable.
d. is unimportant to the common law.
Answer: C
7. In 1992, the North Carolina Supreme Court ruled in a case entitled Goodman v. Wenco
Foods, Inc., that when a substance in food causes injury to a consumer of the food, it is not a
bar to recovery against the seller that the substance was natural to the food. If, in a 2008 case
involving a consumer’s injury caused by a fish bone in a bowl of fish chowder, the court
followed the decision in Goodman v. Wenco Foods, Inc., the court's action in the second case
is an example of:
a. stare decisis.

b. statutory law.
c. public law.
d. criminal law.
Answer: A
8. When the Food and Drug Administration prohibits a certain drug from being marketed in
the United States, this is:
a. private law.
b. an administrative regulation.
c. legal negativism.
d. an executive order.
Answer: B
9. If the title of an appellate court case appears as Jones v. Smith:
a. Jones is the plaintiff and Smith is the defendant.
b. Smith won the trial court decision.
c. you cannot determine which party is the plaintiff, because when a defendant loses a trial
and files an appeal, some courts (but not all) reverse the names of the parties.
d. the trial judge was Jones and the appellate judge is Smith.
Answer: C
10. The Minnesota legislature passed a law requiring that employers allow each employee
adequate time within each four consecutive hours of work to utilize the nearest convenient
restroom. This law is:
a. an executive order.
b. an ordinance.
c. a statute.
d. a stare decisis.
Answer: C
11. The doctrine of precedent requires:
a. that the victim testify.
b. that the defendent testify.
c. a 12-member jury of the defendent’s peers.
d. judges to base rulings on previous cases.
Answer: D

12. Which of the following played a role in the creation of the U.S. government by solving
the problem of federalism?
a. The Visigoths.
b. The Iroquois Native Americans.
c. Confucius.
d. Alexis de Tocqueville.
Answer: B
13. Congress enacted legislation in 1933 to regulate the securities industry and prohibit
various forms of fraud with securities. The Securities Exchange Act of 1934 was passed a
year later. This law created the Securities and Exchange Commission (SEC) as an
independent regulatory entity whose function is to administer the two laws. The SEC has
generated rules and regulations to administer these acts. These rules and regulations are:
a. statutes.
b. administrative law.
c. executive orders.
d. common law.
Answer: B
14. Henry David Thoreau felt that war was unjust and therefore refused to pay his taxes when
the United States declared war on Mexico. Thoreau felt that there was a higher law than the
law of the land. Which theory of jurisprudence was he applying?
a. Legal Positivism.
b. Natural Law.
c. Legal Realism.
d. Common Law.
Answer: B
15. The federal judicial branch of the U.S. government:
a. interprets statutes.
b. passes statutes.
c. issues executive orders.
d. creates administrative agencies.
Answer: A
16. Henry David Thoreau felt that war was unjust and therefore refused to pay his taxes when
the United States declared war on Mexico. If Henry David Thoreau's neighbor agreed that

war was unjust but paid his taxes because the law required him to pay the tax, the neighbor
would be applying the jurisprudence theory of:
a. Legal Positivism.
b. Natural Law.
c. Legal Realism.
d. Common Law.
Answer: A
17. The United States Supreme Court has the power to:
a. appoint judges to serve on the Supreme Court.
b. declare an act of Congress unconstitutional.
c. issue executive orders.
d. ratify treaties.
Answer: B
18. The President of the United States:
a. creates federal common law.
b. can veto Congressional legislation.
c. determines the constitutionality of statutes.
d. passes statutes.
Answer: B
19. The notion of civil disobedience is founded on what principle?
a. Legal Positivism.
b. Natural Law.
c. Legal Realism.
d. Foreseeability.
Answer: B
20. Tony raped Jane in the parking lot of Joe's Brew Pub. The District Attorney's office
prosecuted Tony on rape charges. Subsequently, Jane filed a lawsuit against Tony for money
damages. Classify each legal action.
a. The District Attorney's case was a criminal case; Jane's lawsuit was a civil case.
b. The District Attorney's case was a civil case. Jane's lawsuit was a criminal case.
c. Both cases are criminal.

d. Both cases are civil.
Answer: A
21. Which school of jurisprudence is based on the philosophy that what matters is not what is
written as law, but who enforces the law and by what process?
a. Legal positivism.
b. Natural law.
c. Legal realism.
d. Sovereign selection.
Answer: C
22. Contemporary law’s principle of collective responsibility, such as all partners being
personally responsible for the debts of the partnership, had its roots in:
a. the Anglo-Saxon method of ensuring public order through tithing.
b. the Anglo-Saxon practice of using “oath helpers.”
c. the English use of “shire reeves.”
d. the English system of feudalism.
Answer: A
23. President Nixon issued wage-price controls in an effort to stabilize the economy. This use
of executive power was:
a. an illegal usurption of legislative powers which belong to the Congress.
b. a valid use of power, known as an executive order.
c. a valid use of power creating a treaty.
d. an illegal usurption of the regulatory powers of administrative agencies.
Answer: B
24. Which of the following would be an example of a civil lawsuit?
a. George is being prosecuted for bank fraud.
b. The government has initiated an action against Jeff for operating a motor vehicle under the
influence of alcohol.
c. Gretta hit Rita in a bar during happy hour. Rita is now suing for her injuries.
d. The district attorney is bringing Ali to court for violating the city's keg ordinance.
Answer: C
25. Curtis filed a lawsuit against Ulhoff for failure to repay $1,000 according to the terms of a
promissory note. The trial ended before it began, with the trial judge granting a motion for

summary judgment in favor of Curtis. Ulhoff has appealed, and the Supreme Court of Iowa
has remanded the case. This meAnswer: a. Curtis automatically wins because he won in the
lower court.
b. Ulhoff automatically wins because he lost in the lower court.
c. Neither party wins because the case is being thrown out.
d. We don't know who wins yet because the case is being returned to the trial court for
additional steps.
Answer: D
1. Explain the origins of equity and its place in contemporary American law.
Answer: Historically, in England, judges would at times refuse to hear a case, ruling that
there was no legal basis for the claim. The injured party might then take the case to the
Chancellor, whose status in the king’s council gave him unique, flexible powers. The
Chancellor was to accomplish what “good conscience” required, or what was fair and
equitable. Today, judges in the United States still exercise equity powers. Only a judge can
exercise equitable powers because, historically, there was no jury involved in the Chancery
court. An injunction is an example of an equitable remedy.
2. Identify and discuss the primary sources of contemporary U.S. law.
Answer: The primary sources of U.S. law include:
1. United States Constitution (the supreme law of the land) and state constitutions, which
establish state governments;
2. Statutes, which are drafted by the legislatures;
3. Common law, which is the body of cases decided by judges, as they follow earlier cases,
known as precedent;
4. Administrative law, the rules and decisions made by federal and state administrative
3. Identify and explain the parts of the following case name: Palsgraf v. Long Island Railroad
Co., 248 N.Y. 339, 162 N.E. 99, New York Court of Appeals.
Answer: The case name is Palsgraf v. Long Island Railroad Co. Palsgraf and the Long Island
Railroad Co. are the parties to the lawsuit. The order of the names does not necessarily
identify which party initially brought the lawsuit. The part stating “248 N.Y. 339, 162 N.E.
99” is the legal citation, which indicates where to find the case in a law library. The first part
of the citation means the Palsgraf case can be found on page 339 of the 248th volume of the
official court reporter of the state of New York. The decision is also reported starting on page
99 of the 162nd volume of the Northeast Reporter, a regional reporter. The reported case was
heard by the New York Court of Appeals.
4. Peggy Lou filed a lawsuit against "We Fix 'Em Rite," an auto body shop, for the sloppy
paint job it did on her 1998 car. Once the lawsuit was filed with the appropriate clerk of

court, Peggy Lou personally dropped a copy of the lawsuit in the mail. "We Fix 'Em" says it
never received notice of the lawsuit. Local court rules require that a lawsuit be served by an
independent process server or by the sheriff's department. Is this an example of substantive
law or procedural law? Explain the difference.
Answer: This is an example of procedural law. Procedural law establishes the process for
conducting the lawsuit. In this instance, the rule specifying the method and manner of service
of process is to make sure that the defendant does in fact have notice of the lawsuit. The
sheriff's department or the process server would submit an affidavit to verify that the
defendant was given notice of the pending lawsuit. Substantive law defines rights.
5. Misha, Gretchen, and Sam were stranded on a mountainside after their plane went down in
a snow storm. They had no means of radio communication and virtually no food or other
supplies. After 18 days, Misha and Gretchen killed Sam, the weakest survivor. Misha and
Gretchen ate Sam. This allowed them to survive until they were rescued. After they were
rescued, they were charged with premeditated first degree murder under the relevant state
statute. Discuss the three schools of jurisprudence and how each would influence a finding of
guilt or innocence for the three charged.
Answer: The three theories of jurisprudence are legal positivism, natural law, and legal
realism. The legal positivism would say the law is the law. Therefore Misha and Gretchen are
guilty and must pay the consequences of the state statute. The natural law supporter would
argue that in this instance the law is unjust and need not be obeyed because of the desperate
circumstances. The legal realists would argue that the case will be influenced by the judges'
and jury's income, education, family background, race, religion, and other factors which they
bring to the case.

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