Buisness Law
CHAPTER 1 LEGAL, BUSINESS, AND E-COMMERCE ENVIRONMENT
TRUE/FALSE QUESTIONS
What is Law? 1. The law in the United States has been influenced by English, but not by French or Spanish law. F [moderate p. 3] Law is intended to protect persons, but not their property, from unwanted interference from others. F [easy p. 3] Businesses that are organized in the United States are subject to its laws, but not to the laws of other countries in which they do business. T [moderate p. 3] Promoting social justice is a function of the law. T [moderate p. 4] Law serves the functions both to facilitate orderly change and to maintain the status quo. T [moderate p. 4] The U.S. Supreme Court has ruled that it is improper for a party to be convicted in a criminal case if another party involved in the same criminal activity has been acquitted. F [moderate p. 5] One goal of the law is to anticipate all disputes that can arise in the future and to establish laws that address all situations before they arise. F [moderate p. 4] The United States Supreme Court decision in Brown v. Board of Education demonstrates that the law’s function to maintain the status quo. F [moderate p. 5] In the case of Ashcroft, Attorney General v. The Free Speech Coalition, the United States Supreme Court set aside portions of the Child Pornography Prevention Act, because the Act violated the First Amendment’s free speech clause. T [moderate p. 6] According to Anotole France, the law should apply equally to the rich as well as the poor. T [easy p. 5]
2.
3.
4.
5.
6.
7.
8.
9.
10.
1
Schools of Jurisprudential Thought
11. The proponents of feminist legal theory argue that women should have superior rights to men in some circumstances due to the past unequal treatment of women. F [moderate p. 7] The Natural Law School of jurisprudence believes that the law should be based on what is moral and correct, and that this natural law is discovered by man through the use of reason. T [easy p.7] The Historical School of jurisprudence believes that the law should not change and that what has historically been the law should remain the law. F [moderate p. 7] The Sociological School of jurisprudence emphasizes the following of precedent. F [moderate p. 7] The Command School of jurisprudence believes that the law commands the ruling class, thus the law should not change when there is a change in the ruling class. F [easy p. 7] Proponents of the Critical Legal Studies School argue for great subjectivity in decisions made by judges. T [moderate p. 8] The Law and Economics School of jurisprudential thought holds that rights are not worth protecting if it is too costly from an economic viewpoint to do so. T [easy p. 8] The Nineteenth Amendment to the United States Constitution gave women the right to vote. T [difficult p. 7] In the past the law did not allow married women in the United States to own property. T [difficult p. 6] The Law and Economics School of jurisprudential thought is also known as the “Chicago School.” T [difficult p. 8]
12.
13.
14.
15.
16.
17.
18.
19.
20.
History of American Law 21. The English law courts could only award monetary damages. T [moderate p. 9] The English law courts emphasized legal procedure over the merits of the individual case. T [easy p. 9] The English Chancery Courts were under the authority of the Lord Chancellor.
22.
23.
2
T 24.
[moderate p. 9]
In most states today the law courts and equity courts have been combined so that both legal and equitable remedies can be sought in the same court. T [moderate p 9] In general, the courts in a civil law system play a much larger role in making law than in a common law system. F [easy p. 9]
25.
Sources of Law in the United States 26. Together, the federal and state constitutions are considered the supreme law of the land. F [moderate p. 10] The federal government has any power that the U.S. Constitution does not give to the states. F [moderate p. 11] Codes consist of statutes that have been organized by topic. T [easy p. 11] The executive and legislative branches of the federal government are each empowered to create administrative agencies. T [easy p. 12] The doctrine of stare decisis provides that each court decision is independent and should stand on its own. F [easy p. 13]
27.
28.
29.
30.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
What is Law? 31. According to the text, what is the definition of “law”? a. The list of actions a person must not perform. AA body of rules of action or conduct prescribed by controlling authority. b. c. WThe acts a person must perform in order to assure fairness. d. TOptional rules for members of society to follow or ignore as they see fit. B [moderate p. 4] Which of the following is not a general function of the law? SShaping moral standards. a. b. MMaintaining the status quo. c. EEncouraging individual justice. d. FFacilitating orderly change. C [moderate p. 4]
32.
3
33.
When statutes are passed only after considerable study, debate and public input, this is an example of which function of the law? a. Maintaining the status quo. b. Facilitating orderly change. c. Keeping the peace. d. Shaping moral standards. e. Encouraging individual justice. B [moderate p. 4] What was the U.S. Supreme Court’s reaction to a case where a business executive was found guilty of aiding and abetting in the bribery of an Internal Revenue Service Agent even though the Internal Revenue Service agent had been found not guilty of the bribery in a separate trial? a. Because one of the defendants had been found guilty, then both should have been found guilty. b. Because one of the defendants had been found not guilty, they both should have been found not guilty. c. Because of the inconsistent outcomes, a third combined trial was ordered to reconcile the different outcomes. d. The decisions in both cases were thrown out, making it possible, though not mandatory, that one or both defendants would have to face another trial. e. This simply underscores the fact that there is always the possibility that different juries might reach different results in a given situation. E [moderate p. 5] According to Judge Jerome Frank, uncertainty in the law: a. Is an unfortunate accident. b. Should be avoided whenever possible. c. Is of immense social value. d. Does not exist in the U.S. legal system. C [difficult p. 5] The concept of flexibility in the law is best illustrated by: TThe use of precedent to decide similar cases in similar ways. a. b. PPassing statutes that purposely do not address precisely how they would apply in all situations. c. TThe use of appointed judges rather than elected judges. d. IImposing mandatory penalties for criminal violations. e. SSetting a fixed amount of damages applicable to all wrongful death cases. B [difficult p. 5] Which doctrine was overturned in the case of Brown v. Board of Education? a. The legality of poll taxes. b. The permissibility of separate but equal facilities. c. Allowing only white males to vote. d. The acceptability of paying women less than men for comparable work. e. Differential working hours for male and female factory workers.
34.
35.
36.
37.
4
B
[easy p. 5]
Schools of Jurisprudential Thought 38. One of the goals of feminist legal theory is to: PPlace as many women in legal decision-making roles as possible. a. b. EEnsure that law schools graduate approximately equal numbers of men and HHave the courts use a “reasonable woman” standard in evaluating the conduct UUsher in an era where woman hold the bulk of the power in the legal system. EEnsure that there are no areas in the law where women and men are treated [difficult p. 7]
women. c. of women. d. e. differently. C
39. Documents such as the U. S. Constitution, the Magna Carta, and the United Nations Charter reflect what legal theory? a. The Natural Law School. b. The Historical School. c. The Sociological School. d. The Analytical School. A [moderate p. 7] 40. Persons who believe that law is “discovered” by men and women through the use of reasoning and choosing between good and evil, adhere to which school of jurisprudential thought? a. The Natural School. b. The Historical School. c. The Analytical School. d. The Command School. e. The Sociological School. A [easy p. 7] Proponents of which school(s) of jurisprudential thought are unlikely to adhere to precedent in making decisions? a. The Sociological School only. b. The Critical Legal Studies School only. c. Both the Sociological School and the Critical Legal Studies School. d. Neither the Sociological School nor the Critical Legal Studies School. C [difficult p. 7] Someone who believes that law is a reflection of those in power, believes in which school of jurisprudential thought? a. The Natural School. b. The Historical School. c. The Analytical School. d. The Command School. D [easy p. 7]
41.
42.
5
43.
Which of the following is most consistent with the Natural Law School of jurisprudence? a. Law is based on moral and ethical principles of what is right, and it is the job of men and women, through study, to discover what these principles are. b. The law is a reflection of society, thus the law must change naturally as society changes over time. c. The laws of man are secondary to the laws of nature, and thus the laws of nature take precedence whenever the laws of man are in conflict with the laws of nature. d. By applying the rules of logic to specific cases, the logical, or natural, result will be obtained. e. Laws must first and foremost respect, preserve and promote the preservation of the environment and life in all its forms. A [moderate, p 6] The __________________ School of jurisprudence believes that legal rules are unnecessary and used by the powerful to maintain the status quo, and that disputes should be resolved based on general notions of fairness a. The Historical School.T. b. The Natural School. c. The Command School.T. d. The Critical Legal Studies School.. [moderate p. 8] D The Critical Legal Studies School of jurisprudence believes that: a. FFree market forces and market efficiency are the most important principles underlying the law. b. PPast court decisions must be analyzed and criticized in developing new law. c. SSubjective decision making by judges based on general notions of fairness is appropriate. d. OThe purpose of law is to serve as an official voice of criticism of those in power. JJudges should employ the same critical methods of analyzing cases in the e. courtroom that law schools use in teaching the law to students. C [moderate p. 8] The school of jurisprudence that believes that free market forces should determine the outcomes to lawsuits is: a. TThe Command School. b. TThe Sociological School. c. TThe Critical Legal Studies School.
44.
45.
46.
6
d. D
TThe Law and Economics School. [moderate p. 8]
47.
Which of the following is true about the Law and Economics School of jurisprudence? a. It is also known as the Chicago School. b. It promotes the use of economic principles in resolving cases, so long as the case is one involving business. c. It would say that a case which no lawyer would take on a contingent fee basis should be brought by an attorney who is paid by the state. d. It holds that antitrust cases should be vigorously prosecuted in order to protect the economic viability of smaller firms. A [moderate p. 8]
History of American Law 48. The following courts were common in England before the founding of the United States except: a. Chancery Courts. b. Bankruptcy Courts. c. Merchant Courts. d. Equity Courts. B [moderate p. 9] What was the only remedy (relief) available in the law courts of England? SSpecific performance. a. b. FFines and imprisonment. c. MMonetary awards for damages. d. RReturning the parties to their positions before the dispute arose. C [moderate p. 9] Chancery Courts were also known as: a. Law Courts. b. Equity Courts. c. Criminal Courts. d. Merchant Courts. B
49.
50.
[moderate p. 9]
51.
What is an “equitable remedy”? AAny remedy that is fair to the parties involved. a. b. AA remedy fashioned by the chancery court to fit a particular situation. c. AAny remedy granted by the merchant court.
7
d. e. B
A remedy that cannot be modified from its rigid prescribed form. A remedy that Rmust to be approved by the law court. [moderate p. 9]
52.
Which of the following is true about the creation of courts in England? a. The law courts were created in order to have broader jurisdiction than the merchant courts. b. The merchant courts were created in order to have more flexibility in fashioning remedies than the chancery courts. c. The equity courts were created to allow remedies that could not be granted by the law courts. d. The different types of courts were created in order to handle different types of cases, but the remedies available to the different courts were the same. e. Today, the Merchant Court remains a separate system of courts in England and the United States. C [moderate p. 9] Why was “common law” considered to be “common? a. IIt was the law that applied to the common people. b. BIt was uniformly applied and was therefore common to the various jurisdictions in England. c. IIt was the same in England and the United States, and thus common to the two nations. IIt was the law that applied to common, everyday situations. d. B [difficult p. 9] Which of the following is a distinguishing feature of a common law legal system? a. RRequiring guilt to be proven beyond a reasonable doubt. b. The sole source of law is a comprehensive Civil Code.U c. FThe making of law by the judges and the following of precedent. d. HHaving an appeal process. e. PProviding remedies to aggrieved parties. C [medium p. 9] Which of the following is true about United States law today? a. The law of all states is based on English common law. b. In several states, a portion of the law is based on civil law. c. The law and equity courts remain separate in most states today. d. The laws of the 50 states are essentially similar. B [moderate p 9]
53.
54.
55.
8
56. A legal system that relies on extensive codes in which judicial decisions do not become law is known as what kind of legal system? a. Code law. b. Equitable law. c. Common law. d. Civil law. D [easy p. 10] 57. Influential Civil Codes include the following except: a. Tthe Napoleonic Code. b. Tthe Roman Corpus Juris Civilis. c. Tthe Spanish Civil Code of 1898. d. Tthe German Civil Code of 1896. C [moderate p. 10]
Sources of Law in the United States 58. In the United States, what is the Supreme Law of the land? a. TThe U.S. Constitution. b. TThe statutes passed by Congress. c. TExecutive orders issued by the President. d. TState constitutions. A [moderate p. 10] Which branch of government has the authority to determine the validity of a law? a. Executive.. b. Administrative.. c. Judicial.. d. Legislative.. C [easy p. 10] Assume that there is a provision in the Colorado state constitution that is in conflict with a statute that was passed by the U.S. Congress and enacted into law. Which is true? a. The Colorado constitutional provision will control; the federal statute is invalid. b. The federal statute will control and make the state constitutional provision invalid. c. In Colorado, the Colorado constitutional provision will control over the statute passed by Congress, but the federal statute will apply in the other 49 states. d. Within Colorado, whichever was passed earlier will control over the other. e. Within Colorado, whichever was passed later will control over the other. B [difficult p. 11] Which of the following statements is true about treaties? a. Treaties are valid only if they do not conflict with a statute passed by Congress. b. Treaties are valid only if they do not conflict with a statute passed by Congress or any of the state legislatures. c. Treaties are the supreme law of the land, equal in priority with the U.S. Constitution. d. Treaties are the supreme law of the land, and take priority over any inconsistent constitutional provision.
59.
60.
61.
9
C 62.
[moderate p. 11]
The Uniform Commercial Code is an example of what type of law? a. Statutory law. b. Treaty. c. Administrative law. d. Judicial law. e. Executive order. A [moderate p. 11] When statutes are organized by topic, the resulting compilation of law is known as: AA code. a. b. CCommon law. c. CCivil law. d. PPrecedent. A [moderate p. 11]
63.
64. The ability of Native American Indians to conduct gambling operations on Indian reservations: a. IIs determined solely by the respective Indian tribe. b. IIs within the control of the federal government because of provisions in the U.S. Constitution. c. IIs determined solely by the state in which the reservation is located. d. HHas been found by the courts, in many instances, to have been improperly granted. B [difficult p. 11] 65. Which of the following powers do administrative agencies typically have? a. Rulemaking only. b. Statute Interpretation only. c. Dispute Adjudication only. d. All of the above. D [moderate p. 12]
The Federal Trade Commission is an example of: a. AA federal agency created by Congress. b. AA corporation subsidized by the federal government. c. AA branch of the U.S. Supreme Court. d. AA temporary commission created by executive order that has become permanent. AA judicially-created subdivision of the executive branch. e. A [easy p. 12] 67. The power of the president to issue executive orders: a. IIs expressly provided for in the U.S. Constitution. b. WWas granted to the president in an early Supreme Court decision. c. IIs implied, but not expressly stated in the U.S. Constitution. d. Is Ssubject to a two-thirds approval of the Senate. e. EExists only because it has never been challenged.
66.
10
C 68.
[moderate p. 12]
The export of software encryption technology from the United States is prohibited: a. HBy the U. S. Constitution. b. IBy a federal statute passed by Congress. c. By treaty. d. By executive order. D [moderate p. 12]
69.
Stare Decisis is the doctrine of: SSeparation of powers so that decisions are not made by a single branch of a. government. b. FFollowing precedent so that legal principles in earlier cases are followed in later cases. c. CConstitutional principles applied when making any decision. d. SSpending long periods of time looking at facts before making a decision. B [difficult p. 13]
70. What use may a court of one state make of an earlier state court decision made in another state? a. If the earlier decision in the other state is relevant, it must be followed even though it is from another state because all of the states are part of one legal system. b. When deciding the case, the court deciding the case cannot take the decisions of other states into account. c. Earlier court decisions are equally relevant as precedent whether they were made in the same state or in a different state. d. The court of the state deciding a case can look to earlier court decisions in other states for guidance in deciding the case at hand, but is not required to follow them. D [difficult p. 13] MULTIPLE CHOICE QUESTIONS—FACTUAL APPLICATION What is Law? 71. A woman was physically abused for years by her husband. The woman has limited education and never worked outside the home. One day after being abused the previous evening, she plotted to kill her husband when he came home that night. The husband came home and the woman killed him. At the time of the crime, the husband was not making any threats. In the woman’s trial, which of the following would be most consistent with feminist legal theory? a. Whether the killing was justified should be viewed from the standpoint of a reasonable woman, not from that of a reasonable man. b. Any abuse justifies the killing of the abuser.
11
c. d. A
A woman should not be guilty of murder if the murder victim is a man who abused her. The jury should be composed only of women. [difficult p. 7]
Schools of Jurisprudential Thought 72. John lives in a large city and desires to start an airport shuttle service. In order to do so, John must go through a complicated permit application and approval process. John believes that this process is in place in order to protect the persons already operating such services. John believes that these rules are arbitrary, and that he should be allowed to start his business based on general notions of fairness. John’s beliefs most closely correspond to which school of jurisprudence? a. Critical Legal Studies School. b. Law and Economics School. c. Natural Law School. d. Historical School. e. Sociological School. A [moderate p. 8]
73.
Betty believes that she has been discriminated against because of her sexual orientation. Although federal law does not prohibit this discrimination, Mary believes that the law should be changed in order to make the members of society more accepting of gay individuals. Mary’s beliefs most closely correspond to which school of jurisprudence? a. Critical Legal Studies School. b. Natural Law School. c. Historical School. d. Sociological School. [moderate p. 7] D
Sources of Law in the United States 74. Assume that Colorado passes a new law that provides “skiing and snowboarding at excessive speed within the boundaries of a commercially operated ski area shall result in a $1,000 fine.” Charlie is convicted of violating this statute for skiing at 30 m.p.h. on a run at the Silver Peak ski area. Later, two skiers are separately charged with violating the same statute in conditions virtually identical to those when Charlie was skiing. Sam Swift was skiing at 25 m.p.h. and Barry Bomber was skiing at 35 m.p.h. Based on the precedent established in the Standfer v. United States case, what would the juries in each case decide? a. Both would be found guilty because even 25 miles per hour is simply too fast. b. Sam would be found not guilty and Barry would be found guilty. c. Sam’s case could be decided either way, but Barry would be found guilty. d. Either case could be decided either way because the prior case is separate from the two later cases. e. Sam would be found not guilty, but Barry’s case could be decided either way. D [difficult p. 5] Barry owns a small software development firm. Barry has an employee who needs special accommodations in order to be able to perform the functions of his job. These
75.
12
accommodations would cost $10,000, an amount that Barry believes is more than he should have to spend. The Americans with Disabilities Act provides that an employer is required to make “reasonable accommodations” for employees with a disability, but does not define what constitutes a “reasonable accommodation.” Assume that size of the employer (by some measure) determines the maximum amount of money that would be considered reasonable for a particular employer to be required to spend. Under the principles of stare decisis, which of the following is true? a. If a similar-size employer had been required to spend $15,000 in the past, then Barry would be required to spend the $10,000. b. If a similar-size employer had been required to spend $15,000 in the past, this would not be relevant in Barry’s case because it happened in the past. c. If a similar-size employer had not been required to spend $15,000 in the past, then Barry would not be required to spend $10,000. d. If a similar-size employer had not been required to spend $15,000 in the past, then Barry would be required to spend $10,000. A [difficult p. 13]
ESSAY QUESTIONS—ETHICS AND POLICY
76. A number of the functions of the law can be viewed as being contradictory. For example, one function is to maintain the status quo, whereas another is to facilitate orderly change. What other functions could be in conflict with one another? How can the law simultaneously have seemingly inconsistent functions? The law has the function to keep the peace, yet also to maximize individual freedom. Likewise, the function of shaping moral standards can conflict with maximizing individual freedom. There are other examples of conflicting functions. This is reasonable because, although all are legitimate functions of the law, these functions will inevitably come into conflict in some circumstances. Thus, the law not only has these functions, but it must also determine which function takes precedence when there is a conflict. Thus the law can have the function of maximizing individual freedoms, but that can be limited by the separate function of keeping the peace. [moderate] There has been much talk in recent years of eliminating the so called “marriage penalty” in the tax code. This “penalty” actually consists of many different provisions, each of which results in a married couple paying greater taxes than the same two people would pay if both were single. How might the changing norms of society justify the elimination of these provisions, even though they have long been part of the tax code? Because it is less expensive for two people to share a household than for those same two people to maintain separate households, the tax law incorporated numerous provisions providing smaller deductions or higher tax rates for married couples. One argument for eliminating the marriage penalty is that society has changed. In the past, very few couples would share a household without getting married, thus marital status was a determinant of whether people lived together and enjoyed the lower living expenses of living under one roof. In other words, if you were not married, then you must be supporting a household with only one income. Because many couples living together today are not married, marital status is not as much of a determinant whether two persons are supporting one household or two, and thus, proponents say, not a justification for taxation differences. Thus today, many single people are living together as couples without getting married, and many people
77.
13
argue that a decision by these persons to marry should not increase their tax burden. [difficult] 78. Evaluate the views of the Critical Legal Studies School of jurisprudence. What are the benefits and drawbacks of using broad notions of fairness in deciding cases? An advantage is that decisions might be more flexible in fitting the situation of the case being decided. On the other hand, some judges might not use this discretion properly. Furthermore, by not relying on precedent, there would be much uncertainty in the law. [moderate] What are the good and bad aspects of relying on precedent to decide current cases? Give an example of precedent that either was not followed in the past, or should not be followed in the future. How much leeway do judges have in deciding whether to follow precedent? How much leeway should they have? Precedent provides consistency in the law, but can lead to bad decisions when precedent becomes outdated or when the precedent-setting decision was wrong. [moderate]
79.
80. As courts decide cases involving the Internet and new kinds of issues not addressed previously, what role, if any, does precedent play? What role should it play? What difficulties could arise? A court would first look to see if any applicable statutes apply to the situation. Beyond that, the court would consider whether or not there are any earlier relevant court decisions applicable to the case. The court might find a similar case, though one not involving the Internet, and extend its application to the Internet. Through this process, existing law can be extended to apply to new situations. Difficulties can arise if courts extend the application of an existing law to a new area where there are crucial differences that make the application of the old law improper. [moderate]
CHAPTER 2 JUDICIAL AND ALTERNATIVE DISPUTE RESOLUTION
TRUE/FALSE QUESTIONS
The State Court Systems 1. General jurisdiction courts are often referred to as courts of record. T [moderate p. 22] An inferior court is a court whose decision must be approved by a higher court in order to be effective. F [easy p. 22] In many situations, the parties in a small claims court cannot have a lawyer represent them.
2.
3.
14
T 4.
[moderate p. 22]
An intermediate appellate court generally provides the parties an additional opportunity to present evidence. F [easy p. 23] Most states use specialized courts to handle commercial litigation. F [moderate p. 24] General jurisdiction trial courts hear evidence and testimony. T [easy p. 22] Small claims courts are considered courts of record. F [difficult p. 22] Decisions of state supreme courts can always be appealed to the U.S. Supreme Court. F [moderate p. 23] In Delaware the Chancery Court hears and decides business litigation. T [moderate p. 24] A Justice of the Peace Court is considered a special trial court. T [easy p. 22]
5.
6.
7.
8.
9.
10.
The Federal Court System 11. The U.S. Courts of Appeal were created by Congress rather than the U.S. Constitution. T [moderate p. 24] The United States District Court is the general jurisdiction trial court in the federal system. T [easy p. 24]
12.
13.
Each state has only one U.S. District Court. F [easy p. 24] In the U.S. Circuit Courts of Appeals, a review en banc is an appeal heard by a threejudge panel. F [moderate p. 24] A majority decision of the U.S. Supreme Court that is not unanimous does not become precedent. F [moderate p. 26] There is concurrent state and federal jurisdiction for diversity of citizenship cases so long as the minimum amount in controversy is met. T [easy p. 28] The Court of Appeals for the Federal Circuit was the thirteenth court of appeals that was created.
14.
15.
16.
17.
15
T 18.
[moderate p. 25]
The Court of Appeals for the Federal Circuit is located in New York City. F [easy p. 25] Appeals from the Court of International Trade are heard by the Court of Appeals for the Federal Circuit. T [easy p. 25]
19.
The Jurisdiction of Courts 20. A federal question case brought in federal district court must meet the minimum dollar amount limit of $75,000. F [moderate p. 28] The concept of standing requires that the plaintiff have a stake in the outcome of the case that is filed. T [easy p. 29] Subject matter jurisdiction is not necessary in a lawsuit where there is in rem jurisdiction. F [moderate pp. 29-30] Even where a long-arm statute is present, a defendant must have had some minimum contact with a state for that state’s courts to have jurisdiction over the defendant. T [moderate p. 30] A forum-selection clause allows parties to a contract to designate and agree to the jurisdiction of a court that otherwise might not have personal jurisdiction. T [moderate p. 30] Courts generally frown upon forum shopping. T [easy p. 31]
21.
22.
23.
24.
25.
The Pretrial Litigation Process 26. The document filed to initiate a lawsuit is known as an allegation. F [moderate p. 33] In an answer filed for a lawsuit, the defendant must present the defendant’s version of the events described in the complaint. F [moderate p. 33] A party must file a motion to consolidate in order to become a party to a preexisting lawsuit between other parties F [easy p. 34] A statute of limitation provides time limits for initiating lawsuits. T [moderate p. 35] In general, a party must wait until the trial to find out the facts of the other party’s case. F [moderate p. 36]
27.
28.
29.
30.
16
The Trial 31. For a trial to be conducted with a jury, both parties must request a jury trial. F [moderate pp. 38-39] Potential jurors are selected to hear specific cases through the process of voir dire. T [easy p. 39]
32.
Alternative Dispute Resolution 33. An arbitrator’s decision is generally known as a judgment. F [easy p. 41] The Uniform Arbitration Act is a federal statute that applies to all states. F [easy p. 42] The U.S. Supreme Court has upheld the use of arbitration to solve employment disputes. T [easy p. 42]
34.
35.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
The State Court Systems 36. The following are examples of limited jurisdiction trial courts except: a. small claims court. b. appellate court. c. family law court. d. traffic court. e. probate court. B [easy p. 22]
37.
An inferior trial court is one that: a. can hear only matters involving relatively small dollar amounts. b. has had a larger than normal portion of its decisions overturned on appeal. c. has an appointed judge rather than an elected judge. d. can only hear certain kinds of cases. e. must have all of its decisions approved by a higher court before they become effective. D [moderate p. 22] Which article of the United States Constitution deals with the judicial power of the federal government? a. Article I. b. Article II. c. Article III.
38.
17
d. e. C
Article IV. Article V. [moderate p. 24]
39. Which of the following statements is generally not true about state intermediate appellate courts? a. The appellate court reviews the record of the trial court. b. The appellate court usually allows the parties to file briefs outlining support for their positions. c. The appellate court allows the parties to make oral arguments outlining their position. d. The appellate court allows the parties to introduce new evidence so long as it was not previously introduced at the original trial. e. Appellate court decisions are final and further appeal is not possible. D [difficult p. 25] 40. Which of the following is correct about litigating commercial disputes? a. Nearly all states have specialized trial courts that hear commercial disputes. b. Commercial disputes, because of their specialized nature, are first heard at the appellate court level. c. A few states have established specialized trial courts for commercial disputes. d. Businesses generally dislike the concept of specialized trail courts for commercial disputes because the large numbers of consumers who sue businesses in these courts have led the judges to become generally biased against business. e. In all states, commercial disputes must be heard in a limited-jurisdiction court. C [difficult p. 24]
The Federal Court System 41. The general jurisdiction trial court in the federal system is called the: a. United States Trial Court. b. United States Circuit Court. c. United States General Court. d. United States District Court. e. Federal Chancery Court. D [moderate p. 24]
42.
Which federal court or courts is directly established by the United States Constitution? a. The Supreme Court only. b. Federal trial courts only. c. The Supreme Court and federal trial courts. d. The Supreme Court and federal courts of appeal. e. The Supreme Court, federal courts of appeal, and federal trial courts. A [moderate p. 26] How are judges for the federal courts selected? a. By nationwide election. b. By election by the voters within the state where they preside.
43.
18
c. d. e. C 44.
By the President, subject to confirmation by the Senate. By the Supreme Court justices. By the sitting federal judges within the same circuit. [easy p. 24]
The U.S. claims court hears what kind of cases? a. Any case with claims involving more than one state. b. Civil cases where at least $75,000 is in dispute. c. Cases against the United States. d. Cases where counterclaims have been filed. e. Cases involving disputes in the way an earlier case was decided. C [moderate p. 24] Most federal circuits of the federal appellate court system are determined based on: a. Geography. b. The subject matter of the case being appealed. c. Whether the case is criminal or civil. d. The amount in controversy in the appeal. e. Whether the appeals come from state or federal courts. A [easy p. 25] Which of the following is generally true about federal appellate court proceedings? a. The appeals can come only from a U.S. district court. b. New evidence can be introduced, so long as it relates to the evidence introduced in the original trial. c. Appeals are usually heard by a three-judge panel rather than by all the judges of the court. d. To avoid being improperly influenced by the lower court decision, the appellate court must make its own decision on the case without knowing the outcome in the original trial. C [moderate p. 25]
Which of the following is correct with regard to the Court of Appeals for the Federal District?
45.
46.
47.
a. b. c. d. e. E 48.
It hears appeals of all federal district court cases. It hears its cases in New York City.. It includes three Supreme Court justices on its panel of judges. hears appeals only from within the District of Columbia. reviews decisions of the Patent and Trademark Office. [moderate p. 25]
What happens if the U.S. Supreme Court reaches a tie in a decision? a. The case will be reconsidered in the following year. b. The decision will be held in abeyance until one of the justices decides to change his or her mind. c. The case will be returned to the Circuit Court of Appeals to reconsider the case in light of the tie decision by the Supreme Court. d. The lower court decision in the case is overturned. e. The lower court decision in the case is affirmed. E [moderate p. 27]
19
49.
The consequence of a plurality decision is that: a. The decision of the Circuit Court of Appeals is affirmed. b. The case is not decided, and will be reheard at a later date. c. The case is decided, but is not precedent for later cases. d. The case is decided and becomes precedent for later cases. e. The case is not decided, but the applicable legal reasoning becomes precedent for later cases. C [difficult p. 27] A justice who agrees with the outcome in a case, but not with the reasoning used by the other justices, can issue which type of opinion? a. Agreeing opinion b. Concurring opinion c. Dissenting opinion d. Parallel opinion e. Adverse opinion B [moderate p. 27] In most cases, following a decision by the Circuit Court of Appeals: a. The case cannot be appealed further. b. Either party has a right to have the Supreme Court review the merits of the case. c. Either party can request that the Supreme Court review the merits of the case, but the Supreme Court denies this request in most cases. d. Either party can request that the Supreme Court review the merits of the case, with the request being granted unless the Circuit Court of Appeals decision was clearly correct. e. The Circuit Court of Appeals decision must be reconfirmed by the District Court where the case was originally tried. C [difficult p. 27] Which of the following is true with regard to the appellate process? a. Very important cases are usually initially tried in the U.S. Supreme Court. b. When a case is appealed, the appellate court usually holds a new trial. c. In the federal court system, there are usually two levels of appeal by right. d. The U.S. Supreme Court chooses to review only a small fraction of those cases that it is asked to review. e. The vote of only one justice is needed for the U.S. Supreme Court to hear a case. D [difficult p. 26]
50.
51.
52.
53.
Federal courts have exclusive jurisdiction to hear what kinds of cases? a. Suits against the United States. b. Patent cases. c. Copyright cases. d. Federal criminal cases e. All of the above E [easy p. 28] How many women have served as justices on the U.S. Supreme Court?
54.
20
a. b. c. d. e. C
None One Two Three Five [moderate p. 29]
The Jurisdiction of Courts 55. The power or authority of a court to hear a case is known as: a. Standing. b. Venue. c. Certiorari. d. Forum-selection. e. Jurisdiction. E [moderate p. 29] The requirement that a plaintiff have a stake in the outcome of a case is known as: a. Jurisdiction. b. Certiorari. c. Venue. d. Standing. e. Relevance. D [easy p. 29] Which of the following kinds of jurisdiction would be necessary and sufficient for a court to hear a case? a. Subject matter and in personem and in rem b. Subject matter or in personem or in rem c. Subject matter and either in personem or in rem d. In rem and either subject matter or in personem C [difficult pp. 29-30] The term for jurisdiction based on the location of a piece of property is: a. Long-arm jurisdiction. b. In personam jurisdiction. c. In rem jurisdiction. d. Subject matter jurisdiction. e. Standing. C [moderate p. 30]
56.
57.
58.
59.
What does it mean if a court has “in personam jurisdiction”? a. It means the court has the power to make and enforce a judgment against a particular person. b. It means a party has a personal stake in the outcome of a particular case. c. It means the court must meet special requirements in non-business cases involving individuals. d. It means the case has been filed at the correct location with the state. e. It means the court has personal jurisdiction but not subject matter jurisdiction.
21
A 60.
[moderate p. 30]
How are long-arm statutes and forum-selection clauses similar? a. They both eliminate the necessity for a court to have subject matter jurisdiction. b. They both eliminate any requirement that there be a connection between a state and a party over whom that state is attempting to exercise jurisdiction. c. They both can be factors in determining whether or not a state has personal jurisdiction over a defendant. d. They both eliminate the need to meet venue requirements in a case. C [difficult p. 30] How is a forum-selection clause related to questions of personal jurisdiction? a. The two are not related at all. b. The forum-selection clause will be valid only if it names a jurisdiction that would have personal jurisdiction over the parties to the contract even in the absence of the forum-selection clause. c. Forum-selection clauses are attempts by some parties to contracts to take away jurisdictional rights from the other party, and are generally found to be invalid. d. A forum-selection clause will specify which courts have personal jurisdiction over the parties to the contract, and for disputes related to the particular contract, the forum selection clause will control over the general jurisdiction rules. e. Forum-selection clauses are usually enacted by one party to select a jurisdiction most favorable to that party, thus they are effective only if, after a lawsuit has been filed, the defendant in the action agrees to jurisdiction as provided in the clause. D [difficult p. 30] A motion for a change of venue would typically be granted where: a. A court does not have personal jurisdiction over the plaintiff. b. Selection of an impartial jury is unlikely at the original venue location. c. The party losing a case would like a retrial in another location. d. The judge committed errors in a trial. e. The plaintiff but not the defendant requests it. B [difficult p. 31]
61.
62.
The Pretrial Litigation Process 63. Which of the following pleadings could typically be filed by a defendant in a lawsuit? a. Answer and complaint b. Complaint and cross-complaint c. Motion to intervene and complaint d. Answer and cross-complaint e. Cross-complaint and reply D [difficult p. 33] In connection with the pleadings in a lawsuit, what is an answer? a. The response of the defendant to questions posed by the judge b. The response of the plaintiff to questions posed by the judge c. The response of the defendant to the plaintiff’s complaint d. The response of the judge to the plaintiff’s complaint e. Both A and B
64.
22
C 65.
[moderate p. 33]
Someone who is not a party to a lawsuit but has an interest in the outcome and therefore wants to become a party to the suit must: a. await the outcome of this trial and then file a separate action. b. intervene. c. interfere. d. consolidate. e. file a cross-complaint. B [moderate p. 34] Which of the following is not a purpose of discovery? a. To eliminate surprise at trial. b. To save the time of the court. c. To promote the settlement of cases. d. Preserving evidence. e. To avoid the use of the evidence at trial. E [moderate pp. 36-37] Live testimony taken under oath before the actual trial is a discovery device known as a(n): a. Deposition. b. Interrogatory. c. Arbitration. d. Intervention. e. Production of evidence. A [easy p. 37] A motion asserting that there are no factual issues in dispute in a trial is known as a: a. Motion for settlement. b. Motion for judgment on the pleadings. c. Motion for summary judgment. d. Motion to intervene. e. Motion for determination. C [moderate p. 38] Forms of discovery include all but which one of the following? a. Depositions. b. Interrogatories. c. Physical examinations. d. Mental examinations. e. Voir Dire. E [moderate, pp. 37, 39]
66.
67.
68.
69.
70.
A party who is making a motion for summary judgment is asserting that: a. most of the factual evidence is in its favor, so that the judge, rather than a jury, should decide the factual disputes. b. the factual disputes are relatively simple and straightforward such that a full detailed judgment is not necessary in the case.
23
c. the d. are in D The Trial 71.
the case can be decided solely on the information contained in the complaint and answer. a jury is not needed in deciding the case because there are no relevant facts that dispute. [difficult p. 38]
What is “voir dire?” a. The jury deliberation process in a trial b. The U.S. Supreme Court’s case selection process c. The jury selection process in a trial d. A discovery method to learn about the other party’s case e. A motion to dismiss a case C [moderate p. 39] Which of the following is true about cross examination of a plaintiff’s witness in a trial? a. Cross examination is conducted by the plaintiff’s attorney, and can cover any matters relevant to the case. b. Cross examination is conducted by the plaintiff’s attorney, and can cover only matters that were brought up during the discovery process. c. Cross examination is conducted by the defendant’s attorney, and can cover any matters relevant to the case. d. Cross examination is conducted by the defendant’s attorney, and can cover only matters that were brought up in the direct examination. e. Cross examination is conducted by the defendant’s attorney, and can cover only matters that were brought up during the discovery process. D [difficult p. 39] In a civil case, which of the following is true about the order of the presentation of the case? a. The plaintiff is first to present, followed by the defendant. b. The defendant is first to present, followed by the plaintiff. c. The judge decides who goes first, which depends on the circumstances of the case. d. The order of presentation is determined by the flip of a coin or other random selection method. A [moderate p. 39] Under what circumstances is it appropriate for a judge to issue a judgment n.o.v.? a. When there are no disputes as to the facts of the case. b. When the evidence cannot support the verdict of the jury. c. When the judge would have reached a different conclusion than the jury based on the evidence. d. Where the judgment n.o.v. is issued pursuant to a fair and impartial pretrial hearing. B [difficult p. 40]
72.
73.
74.
The Appeal
24
75.
When an appellate court receives a case appealed to it, it will: a. retry the case with a new jury. b. review the jury’s verdict to see if the appellate court judges would have reached the same result. c. retry the case with the appellate court judge acting as the jury. d. review the record of the trial court so see if there were any errors of law made by the judge. D [difficult p. 40] In general, an appellate court might typically reverse which of the following? a. The trial court’s findings of fact. b. The trial court’s conclusions of law. c. Both A and B. d. Neither A nor B. B [moderate p. 40]
76.
MULTIPLE CHOICE QUESTION—FACTUAL APPLICATION
The Jurisdiction of Courts 77. Two friends, Mary and Dean, are hiking in the Colorado mountains when a dog being walked by its owner, Wally, who is from Wyoming, bites Dean, causing injury. Mary wants Dean to sue Wally, but Dean does not want to incur the cost. Which of the following is true? a. Mary does not have standing to sue Wally, the owner of the dog. b. Mary will have standing only if she files the lawsuit in Wyoming. c. Whether Mary has standing depends on whether Mary files the suit in state or federal court. d. Mary has standing if Dean consents to Mary filing the suit. e. Mary’s presence at the time of Dean’s injury gives her standing to file suit. A [difficult p. 29] Tammi Tenant was a university student in Ohio who rented a house from Loretta, who also lived in Ohio. Upon graduation, Tammi moved to Nebraska. Assuming that one party sued the other in connection with the lease after Tammi had moved to Nebraska, which of the following correctly describes the court(s) with jurisdiction over the defendant? If Loretta sued, there would be If Tammi sued, there would be personal jurisdiction over Loretta in: personal jurisdiction over Tammi in: Ohio only Ohio only Nebraska only Ohio only Nebraska or Ohio Nebraska only Nebraska or Ohio Nebraska or Ohio Nebraska or Ohio Ohio only [difficult p. 30]
78.
a. b. c. d. e. E
25
79.
Paul and Dan are involved in a traffic accident at an intersection where there is a traffic circle, but no posted signs or traffic lights. They are in agreement as to everything that happened in the accident, including the locations of the two cars and the timing of events leading to the accident. Based on their pleadings and on information obtained during discovery, the only dispute they have is the interpretation of the state law affecting who had the right of way when they collided. The appropriate motion for one of the parties to file is: a. motion for judgment on the pleadings. b. motion for judgment n.o.v. c. motion for dismissal. d. motion for summary judgment. D [difficult p. 38] Mike, an 80-year-old resident of North Dakota, has long wanted to experience driving in New York City during rush hour. He realizes his goal, but gets into an accident with a taxi driver who has never been outside of New York City. The accident causes $24,000 in damage to Mike’s Porsche Boxter. Mike wants to sue the taxi driver. Where can Mike file his lawsuit? a. In state or federal court in either North Dakota or New York b. In state or federal court in New York only c. Only in state court in New York d. Only in federal court in New York e. In federal court in either New York or New Jersey C [difficult pp. 29-30] The Double Diamond Dude Ranch is located in Montana and maintains a Web site on the Internet. Before the Internet, the ranch had relied exclusively on word-of-mouth advertising. The Web site simply provides some general information and lists the ranch’s phone number for reservations, but reservations cannot be made online. The ranch has no other connections or presence outside of Montana. Bob lives in Ohio, and learned of the ranch through its Web site. Bob then spent a week as a paying guest at the ranch, but was injured when he fell off a horse. Can Bob sue the dude ranch in an Ohio state court? a. No, because the mere ability of an Ohio resident to view the ranch’s Internet advertising does not amount to the minimum contacts necessary for personal jurisdiction over the ranch in Ohio. b. No, because the minimum contacts standard simply cannot be met based on Internet activity. c. No, because cases involving residents of two different states must be filed in federal, not state, court. d. Yes, because Bob noticed the advertisement when he was in Ohio. e. Yes, assuming that other Ohio residents had visited the ranch before Bob’s visit. A [difficult p. 30]
80.
81.
26
ESSAY QUESTIONS—ETHICS AND POLICY
82. Is it reasonable for appellate courts to not hear new evidence in an appeal? Should new available evidence be grounds for appeal? In many cases additional evidence is available by the time of the appeal. If this is the case, wouldn’t justice be best served by allowing the appellate court to consider it? And even if there is no new evidence available, should the appellate court be able to reconsider the trial evidence and impose a different verdict from that of the jury? If new evidence could support an appeal, no case would ever be final. The parties would always have to worry that the other side might find new evidence. The appellate court cannot hear new evidence because there are no juries at the appellate court level, and the evidence would likely involve factual matters. Lastly, if the appellate court could replace jury verdicts with its own fact finding, it would be usurping the role of the jury. [difficult] When the U.S. Constitution was written and established the Supreme Court, the population of the country was under 5 million. Today the population is more than 260 million. Because this means that there are far more lawsuits today than in the early days of our nation, the chances that the Supreme Court will accept a case is much smaller today than in the past. Should one or more additional “supreme” courts be established so that more cases are reviewed twice? Even if several times as many cases could be accepted, it will nonetheless be a tiny fraction of the cases for which a petition for certiorari is filed. The Supreme Court has some ability to adjust the number of cases it hears by changing the number of judicial clerks that it hires to assist in researching and writing opinions. [difficult] If the discovery process results in learning about the other side’s case, what is the purpose of having a trial? Wouldn’t it be redundant to have the trial if both parties already know what is going to be said? The purpose of discovery is to learn about the other party’s case, not to have discovery take the place of the trial. It is still the jury’s job to determine the facts of a case. Thus, even though both parties might know in advance the general evidence that will be presented, they often cannot predict how the jury will decide. Furthermore, the discovery process is not perfect, and there is often evidence at trial that did not come out during discovery. [moderate] Increasing numbers of consumer contracts contain arbitration clauses in which the consumer agrees in advance that any dispute related to the contract will be submitted to an arbitrator, often chosen by the other party to the contract. Agreements between consumers and insurance companies, as well as agreements between stockbrokers and their clients are two areas where these are increasingly common. What are the advantages and disadvantages to the consumer of such a clause? Should these clauses be effective to allow consumers to give up their rights to use the court system? Does it affect your analysis if you learn that many consumers are not aware of these provisions or do not understand them when they enter into these agreements? How enforceable should these mandatory arbitration clauses be? Has the consumer knowingly consented to give up access to courts? There can be problems if the arbitrator(s) is biased, either individually or by virtue of being
83.
84.
85.
27
industry-sponsored; absent these problems, the courts generally enforce arbitration clauses. A related issue is the responsibility of a party to a contract to make sure the contract is understood. [moderate]
28
ESSAY QUESTIONS—FACTUAL APPLICATION The Jurisdiction of the Courts 86. Steve often purchases office supplies from Supplymax, a company with stores in many states, but none in Steve’s home state of Missouri. Supplymax does, however, maintain a distribution center in Kansas City, Missouri. Supplymax does not advertise in Missouri except that it places a few advertisements in national magazines, some of which are sold in Missouri. Steve has an arrangement with their store in Chicago, and Steve will often contact the Chicago store and have them hold items for him to pick up when he is on one of his frequent business trips to Chicago. Last year, Steve purchased eight chairs from Supplymax to use with his conference table at his business. At a recent meeting with his local sales staff, one of the chairs collapsed, injuring Steve. Steve has sued Supplymax in state court in his hometown of St. Louis. Supplymax does not want to have this case heard in St. Louis, or anywhere in Missouri for that matter. But if it must be in Missouri, Supplymax demands that the case be heard in Kansas City. Discuss the issues and likely outcome of this situation. Supplymax probably meets the minimum contacts requirement with the state of Missouri, given its distribution center and advertising in national publication that reach Missouri, thus Missouri would have personal jurisdiction. Because the lawsuit arises out of events in St. Louis and there are witnesses from St. Louis, proper venue would be in St. Louis. If the amount in controversy were more than $75,000, Supplymax could transfer the case to federal court. [difficult]
Alternative Dispute Resolution 87. Susan is part owner of one of the best restaurants in a medium-sized city. This restaurant is operated as a partnership. In October, 2004, the local newspaper published a story about Bill, who is Susan’s business partner in the restaurant. In this article it is stated that Bill’s net worth is several million dollars. About ten days later, Susan receives a summons notifying her that the restaurant is named as the defendant in a negligence case. The plaintiff in the case alleged that she slipped and fell to the floor inside the restaurant near the rear door late one night in December, 2002. According to the plaintiff, she slipped on water from snow that had been tracked in and had melted. The plaintiff also alleged that there were no employees or other customers in sight of the back door when the plaintiff slipped and fell, and that she was leaving the restaurant when the accident occurred. The plaintiff did not notify anyone at the restaurant when the accident occurred or at anytime thereafter prior to the filing of the lawsuit. Although the majority of diners at this restaurant make reservations in advance, and pay with a credit card, the restaurant has no records of reservations or payment by the plaintiff. The plaintiff claims to have paid with cash. Susan and Bill have heard about alternative dispute resolution and would like to know more about how it works and about its advantages and disadvantages. If you were the attorney for Susan and Bill, what would you explain to them about mediation and arbitration, including their advantages and disadvantages. What would you recommend to them? Mediation uses a neutral third party to assist the disputants in settling their case, but the mediator has no authority to create a binding outcome. With arbitration, the third-party arbitrator has the power to impose a binding decision on the parties. Either mediation or arbitration would likely save time and money, but a regular trial would be public and set precedent with regard to questions of law. They might
29
choose to use normal litigation to show resolve to fight and discourage similar suits because the claims in this suit might appear to others to be questionable, whether or not the claims are, in fact, legitimate. [difficult]
CHAPTER 3 CONSTITUTIONAL AUTHORITY TO REGULATE BUSINESS
TRUE/FALSE QUESTIONS
Basic Constitutional Concepts
1.
The Articles of Confederation gave no power to the federal government to levy and collect taxes or to regulate commerce.
T
2.
[moderate p. 49]
Article I of the Constitution establishes the legislative branch of government. T [easy p. 49] The concept of federalism is that the states are more powerful than the central government. F [moderate p. 49] Any powers not delegated to either the federal government or the states are shared by the federal and state governments. F [easy p. 49] The existence of the electoral college means that the president is not elected by the popular vote. T [easy p. 50] The judicial branch has authority to examine the actions of both the legislative branch and the executive branch to determine whether these acts are constitutional. T [easy p. 50] The legislative branch of the U.S. Government can enact statutes that change laws that have been made by the judicial branch. T [moderate p. 50]
3.
4.
5.
6.
7.
The Supremacy Clause 8. If the federal government preempts states from regulating in an area, the states may continue to pass legislation that conflicts with federal statutes. F [moderate p. 50]
30
9.
In most subject matter areas the federal government and state governments have concurrent jurisdiction to regulate activity. T [moderate p. 50]
The Commerce Clause 10. The Commerce Clause of the U.S. Constitution gives Congress the power to regulate interstate commerce, as well as commerce with foreign nations and with Indian tribes. T [moderate p. 52] Hunting, fishing, and gathering rights in Minnesota granted to the Chippewa Indians in 1837 were found to be valid today even though the State of Minnesota has since been admitted to the union. T [moderate pp. 52-53] Congress has the authority to regulate an activity that does not itself involve interstate commerce if the activity does have an effect on interstate commerce. T [moderate p. 53] The U.S. Supreme Court has determined that gender-motivated crimes of violence do not fall within the definition of commerce under the U.S. Constitution. T [easy pp. 54-55] The police power of a state gives the state much general authority to regulate business. T [easy p. 55] A state can regulate in areas affecting interstate commerce where the federal government has chosen not to regulate if the state law does not place an undue burden on interstate commerce. T [moderate p. 55] The U.S. Supreme Court has ruled that garbage that is transported across state lines involves interstate commerce even though the garbage does not have any economic value. T [moderate p. 56]
11.
12.
13.
14.
15.
16.
The Bill of Rights and Business 17. The first 10 amendments that were added to the U.S. Constitution are known as the Bill of Rights. T [moderate p. 57] Since their creation, the protections in the Bill of Rights have generally been applicable to state and local governments as well as the federal government. F [easy p. 57] The First Amendment protects symbolic speech as well as actual spoken or written speech. T [easy p. 58]
18.
19.
31
20.
The Due Process Clause of the Fourteenth Amendment made most of the guarantees contained in the Bill of Rights applicable to the federal government. F [moderate p. 57] Commercial speech and offensive speech both receive only limited protection under the U.S. Constitution. T [moderate p. 59]
21.
22.
Because of the First Amendment, a city could not prohibit billboards along its highways for safety and aesthetic reasons. F [moderate p. 59] The Federal Communications Commission (FCC) can regulate the use of offensive language on television even though the First Amendment applies to such speech. T [moderate pp. 59-60] The establishment clause of the U.S. Constitution allows the federal government to establish which religions are entitled to protection. F [moderate p. 63] The Equal Protection Clause generally requires that businesses, both private and public, treat similarly situated persons similarly. F [moderate p. 65] The Establishment Clause prohibits the government from establishing a governmentsponsored religion but not from promoting one religion over other religions. F [moderate p. 65] The level of scrutiny in equal protection cases refers to how difficult it is for alleged equal protection violations to be justified. T [moderate p. 65] Substantive due process generally addresses the issue of whether or not a law is reasonably clear. F [moderate p. 66] The Privileges and Immunities Clause protects individuals, but not corporations. T [moderate p. 68] The strict scrutiny test is used in Equal Protection Clause cases involving sex or age discrimination. F [moderate p. 65]
23.
24.
25.
26.
27.
28.
29.
30.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Basic Constitutional Concepts 31. The Continental Congress formed a federal government in 1778 and adopted what document?
32
a. b. c. d. B 32.
The Declaration of Independence. The Articles of Confederation. The Bill of Rights.. The U.S. Constitution. [easy p. 49]
Since declaring independence, the current U.S. Constitution is the _______ document to set out the general operations of the government. a. First. b. Second. c. Third. d. Fourth. B [moderate p. 49]
33.
The Constitutional Convention was convened in 1787 for what purpose? a. To add a Bill of Rights to the Constitution. b. To create a court system. c. To ratify the First Amendment. d. To strengthen the federal government. D [easy p. 49] The two main functions of the U.S. Constitution are to: a. Create the three branches of government and create the individual states. b. Create the three branches of government and promote a strong economy. c. Protect individual rights and establish the Electoral College. d. Create the three branches of government and protect individual rights. e. Provide all citizens with a right to vote and allow for judicial review of laws. D [moderate p. 49] Powers that are not specifically delegated to the federal government by the United States Constitution: a. Are held both by the states and by the federal government. b. Are reserved to the states. c. Are reserved to the federal government. d. Can be delegated by the U.S. Supreme Court to either the states or the federal government. e. Cannot be exercised by either the states or the federal government. B [moderate p. 49] The number of ____________ to which a state is entitled can change over time. a. Senators b. Representatives c. Both Senators and representatives d. Supreme Court justices. B [easy p. 49]
34.
35.
36.
33
37.
Which Article of the United States Constitution establishes the legislative branch of government? a. Article I. b. Article II. c. Article III. d. Article IV. e. Article V. A [easy p. 49] Which Article of the United States Constitution establishes the executive branch of government? a. Article I. b. Article II. c. Article III. d. Article IV. e. Article V. [easy p. 50]
38.
B
The Supremacy Clause 39. Under the Supremacy Clause of the U.S. Constitution, when Congress chooses to regulate in an area: a. It will automatically have exclusive jurisdiction to regulate in that area. b. States will always remain able to freely regulate in that area. c. States will always be able to regulate in that area so long as the state law does not directly and substantially conflict with the federal law. d. Whether the state has any authority to regulate in the area will depend on whether Congress provides that the federal government has exclusive authority to regulate in that area. e. The state will be able to regulate in that area only with prior permission of the U.S. Supreme Court. D [moderate p. 50] When can a state regulate in an area that the federal government has validly chosen to regulate? a. Only if Congress expressly allows it. b. Only if the U.S. Supreme Court expressly allows it. c. When the federal statute or regulation does not expressly provide that the federal government exclusively regulates in the area. d. In all situations because the concept of federalism allows regulation in all areas. e. Only in areas that the federal government does not regulate. C [difficult p. 50] Which of the following would take precedence over a state constitution under the Supremacy Clause of the U.S. Constitution? a. The U.S. Constitution only. b. The U.S. Constitution and treaties with foreign nations. c. The U.S. Constitution and federal statutes.
40.
41.
34
d. e. E
The U.S. Constitution, federal statutes, and federal regulations. The U.S. Constitution, federal statutes, federal regulations, and treaties with foreign nations. [moderate p. 50]
The Commerce Clause 42. What is the result of the “effects on interstate commerce” test? a. The federal government can regulate all interstate commerce that actually crosses state lines. b. Prior to enacting laws, states are required to identify any effects that the law might have on interstate commerce. c. The federal government can regulate a business activity that takes place within a single state if the activity has an effect on interstate commerce even though the regulated activity does not, itself, involve interstate commerce. d. Commercial speech protections apply only to speech that has an effect on interstate commerce. C [difficult p. 53]
43.
The Commerce Clause gives the federal government the power to regulate commerce that: a. Actually crosses state lines only. b. Affects interstate commerce or is conducted with foreign nations or Indian tribes. c. The states have chosen not to regulate. d. Involves at least one business domiciled in the United States. B [moderate p. 53] What was the outcome when the U.S. Supreme Court ruled on the constitutionality of the Violence Against Women Act of 1994? a. The statute was viewed as a legitimate exercise of the federal police power. b. The statute violated the Equal Protection Clause because it treated women differently than men. c. The statute was found to infringe on some kinds of symbolic speech. d. The statute was found to be invalid because it did not involve interstate commerce. D [moderate pp. 54-55] With regard to the Commerce Clause of the United States Constitution, which of the following is correct? a. States have no power to regulate interstate commerce. b. Commerce must actually cross state lines to be considered “interstate commerce.” c. The police power of the states gives them the power to regulate intrastate and much interstate business within their borders. d. Although a state cannot regulate interstate commerce within its borders, it has full power to prevent interstate business activities within its borders.
44.
45.
35
e. C 46.
Cases involving interstate commerce are decided under strict scrutiny. [difficult p. 55]
If there is an area of interstate commerce that the federal government has chosen not to regulate, the states can: a. Regulate without restriction in that area. b. Regulate in that area so long as the state law does not unduly burden interstate commerce. c. Regulate in that area so long as it first gets the requisite approval from Congress. d. Not regulate in that area because states cannot pass laws affecting interstate commerce. e. Not regulate in that area because the federal government’s decision to not regulate in an area implies that there is to be no regulation in that area at any level. B [difficult p. 55] Under what circumstances can a state impose a tax on goods that are imported from other nations? a. In any circumstance. b. If the tax does not conflict with any valid federal law. c. If the amount of the tax is reasonable. d. If the tax also applied equally to the same type(s) of goods produced domestically. e. In no circumstance. D [moderate p. 57]
47.
48.
What clause of the United States Constitution did the United States Supreme Court interpret in the Minnesota v. Mille Lacs Bank of Chippewa Indians case? a. The Due Process Clause. b. The Equal Protection Clause. c. The Establishment of the Religion Clause. d. The Freedom of Religion Clause. e. The Commerce Clause. E [moderate pp. 52-53]
The Bill of Rights and Business 49. The Bill of Rights is another name for: a. The Articles of Confederation. b. The U.S. Constitution. c. The document that explains the U.S. Constitution. d. The first ten amendments to the U.S. Constitution. e. The first seven articles of the U.S. Constitution. D [easy p. 57] As originally drafted, the protections in the Bill of Rights limited intrusive action by: a. The federal government only.
50.
36
b. c. d. e. A 51.
State governments only. Federal, state, and local governments. The legislative and executive branches of the federal government, but not to state and local governments. The federal government and businesses that operate across state lines. [moderate p. 57]
What did the Fourteenth Amendment of the U.S. Constitution do? a. It established prohibition. b. It granted the power to regulate interstate commerce to Congress. c. It gave Congress the power to place reasonable restrictions on commercial speech. d. It made the protections in the Bill of Rights applicable to actions by state governments. D [moderate p. 65] Do the protections in the Bill of Rights apply to corporations? a. Yes, in all instances. b. Yes, in most, but not all, instances. c. Only in those instances where Congress has specifically stated that they do apply. d. Only where it would cause an undue burden on the corporation if they did not apply. e. No, not in any instance. B [moderate p. 57] Which of the following is correct with respect to freedom of speech? a. All speech receives the same degree of Constitutional protection. b. Some speech is not protected. c. Commercial speech receives no protection due to its profit motive. d. Most speech critical of the government can be restricted because such speech can be destabilizing. B [difficult p. 59] Which of the following is correct with regard to commercial speech? a. The government cannot regulate commercial speech. b. The government can regulate the time, place or manner of commercial speech, but it cannot prevent it. c. The government can restrict or prevent commercial speech, so long as the speech does not have political content. d. The government can prohibit commercial speech if the Congress and the President agree. B [moderate p. 59]
52.
53.
54.
55.
Which of the following is true regarding obscene speech? a. It cannot be prevented, but can be subject to time, place or manner restrictions. b. Because the definition of obscene is so subjective, it cannot be restricted or prevented. c. Even though the definition of obscene speech is subjective, if speech is determined to be obscene, it loses all constitutional protection. d. Obscene speech and offensive speech receive the same degree of protection.
37
e. C 56.
The U.S. Supreme Court has set out a clear definition of what speech is defined as obscene and therefore unprotected. [moderate p. 59]
Which of the following is considered to be fully protected speech under the U.S. Constitution? a. Political speech only b. Political speech and commercial speech c. Offensive speech and commercial speech d. Commercial speech only e. Political speech, commercial speech and offensive speech A [easy p. 59] Which of the following receives at least some protection under the U.S. Constitution? a. Political speech only b. Political speech and commercial speech c. Offensive speech and commercial speech d. Commercial speech only e. Political speech, commercial speech and offensive speech E [easy p 59] Which of the following receives at least some protection under the U.S. Constitution? a. Obscene speech b. Offensive speech c. Both obscene speech and offensive speech d. Neither obscene speech nor offensive speech B [moderate p. 59] What type of commercial speech did the U.S. Supreme Court say was protected in the Greater New Orleans Broadcasting Association, Inc. v. United States case? a. Information on gambling and lotteries. b. Obscene speech. c. Information about child pornography. d. Information on how to build a bomb. A [easy p. 61] In responding to a constitutional challenge to the Computer Decency Act, the U.S. Supreme Court ruled that: a. Computers and the Internet were not covered by the free speech provisions of the U.S. Constitution because they did not exist when the Constitution was drafted. b. The Act was constitutional because obscene speech receives no protection. c. Obscene materials could not be available between 6:00 a.m. and 10:00 p.m. local time. d. The Act was unconstitutional because its provisions were too vague to define. e. The Internet was similar to television and that restrictions similar to those on television programming were appropriate. D [moderate p. 62] Which of the following is correct regarding freedom of religion under the U.S. Constitution? a. It comes from the Establishment Clause as well as the Free Exercise Clause.
57.
58.
59.
60.
61.
38
b. c. d. A 62.
It applies only to those religions in existence on the date the Constitution became effective. It gives practitioners of any religion absolute rights to take part in actions that are based on the religion. It allows the government to establish an official religion or religions so long as citizens remain free to practice any other religion they choose. [moderate p. 63]
Which of the following would likely violate of the freedom of religion protections in the U.S. Constitution? a. The government promoting one religion as better than other religions. b. The government preventing the practice of unpopular or fringe religions. c. The government establishing a time in school for persons to practice the religion of their choice. d. A and B only e. A, B and C E [moderate p. 63] An equal protection challenge to a statute that treats adults of different ages differently would be decided by using what standard? a. Intermediate scrutiny. b. Majority scrutiny. c. Strict scrutiny. d. Rational basis scrutiny. e. Limited scrutiny. A [easy p. 65]
63.
64.
Which of the following is true about how courts address equal protection cases? a. If a law treats different groups differently, the court determines whether the difference in treatment is justified using one of three different levels of scrutiny. b. If a law treats different groups differently, the law will be invalidated. c. If a law treats different groups differently, it will be acceptable so long as there is adequate notice to the persons affected. d. Laws that affect persons differently based on race, gender, or age will be invalidated; laws that affect persons differently based on other factors will be deemed acceptable. e. If a law treats a particular group more favorably than others, it will be acceptable, but if a law treats a particular group less favorably than others, it will be invalidated. A [difficult p. 65]
39
65.
Substantive due process requires that: a. A notice and hearing be given before one is deprived of life, liberty or property. b. A criminal defendant have an attorney present at all times. c. A law treat all persons the same. d. A law be sufficiently clear that a reasonable person can understand it in order to comply with it. e. A defendant not be tried twice for the same crime D [moderate p. 66] The privileges and immunities clause provides that: a. It is a privilege to be granted immunity from a criminal prosecution. b. States must generally treat nonresidents as favorably as residents. c. Corporations receive most of the same constitutional protections as individuals. d. The government is not subject to being sued unless the constitutional matter is a right rather than a privilege. e. An individual has the privilege of practicing any religion, and is immune from any government interference with that right. B [easy p. 68]
66.
MULTIPLE CHOICE QUESTION—FACTUAL APPLICATION
The Supremacy Clause 67. There are extensive federal regulations covering airplanes and pilots. Assume that the state of Missouri passes a statute containing numerous requirements, some conflicting with the federal rules, covering the licensing of airplane pilots and the operation of aircraft. A pilot’s constitutional challenge to this statute would most likely succeed on the basis of: a. The preemption doctrine. b. The Equal Protection Clause. c. Substantive due process. d. The state police power. A [moderate p. 50]
The Commerce Clause 68. Assume that the state of Tennessee passes a statute that grants all residents who purchase a brand new Saturn automobile made in Tennessee a $2,000 state income tax credit. It is most likely true that: a. An equal protection claim would be evaluated using strict scrutiny. b. Because the statute gives the tax credit only to Tennessee residents who purchase a car made in Tennessee, there is no violation of the commerce clause. c. There is a procedural due process violation. d. This statute probably violates the commerce clause. D [difficult p. 52]
40
69.
Assume that the state of Kansas passes a law requiring all inline skates sold in Kansas to have disc brakes. Assume that there are no federal regulations covering inline skate design. Assume also, that the required disc brakes would make inline skates easier to stop and thus safer, but that they would add considerably to the cost of the skates and require extensive changes in design to meet the Kansas requirements. Which of the following is most likely true? a. Even though there are no federal regulations on the design of inline skates, the Kansas statute would probably be considered a burden on interstate commerce and thus unconstitutional. b. Because the required modification is a better design, the law would be constitutional. c. Because the statute does not conflict with a federal statute or regulation, it could not be found to be unconstitutional. d. If all manufacturers of inline skates stopped selling them in Kansas, there could be no constitutional violation because interstate commerce would not be involved. A [difficult p. 55] Assume that Congress passes a statute that bans the use of personal watercraft on any body of water before 8:00 a.m. and after 9:00 p.m. Congress bases its passage of the law on its authority to regulate interstate commerce because it believes that fewer persons will buy personal watercraft because of this law. In a constitutional challenge, most likely: a. The law will be found constitutional only if it does not conflict with a valid state b. The law will be found to violate the Equal Protection Clause because it applies water, but not on land. The law will be constitutional because of the federal government’s police power. The law will be found unconstitutional because any effect on interstate commerce too remote for this to be a valid exercise of federal power. [difficult p. 53]
70.
law. on c. d. is D
The Bill of Rights and Business 71. Assume that a federal regulation is adopted that requires bicycle manufacturers to disclose the weight of the largest frame size, fully equipped for riding, when they advertise the weight of a bicycle. If this requirement is challenged under freedom of speech, most likely: a. It would be found to be an acceptable regulation of commercial speech. b. It would be found to be an unacceptable prohibition of commercial speech. c. The court would not consider the case because this advertising is not political speech. d. The court would evaluate the restriction using strict scrutiny. e. There would be no violation because this does not prohibit speech, but requires it in certain circumstances. A [moderate p. 59] Assume that a state passes a statute that prevents the disclosure of the horsepower of automobile engines. The purpose of this law is to prevent the car companies from trying
72.
41
to market cars with more horsepower than those of their competitors. This statute would most likely be found to: a. Be constitutional under state police power. b. Be viewed as an unconstitutional restriction of commercial speech. c. Violate the Equal Protection Clause under intermediate scrutiny. d. Be found to violate substantive due process. e. Be found to violate procedural due process. B [difficult p. 59] 73. Assume that a law is passed that establishes airline security screening requirements for male passengers that differ from the requirements for female passengers. In evaluating an equal protection challenge to this law, a court would use: a. Strict scrutiny. b. Intermediate scrutiny. c. Limited scrutiny. d. The rational basis test. B [moderate p. 65] A city ordinance prohibits any advertising of fur coats within the city limits. This ordinance: a. Is constitutional, because the U.S. Constitution provides no right to advertise. b. Would be analyzed under strict scrutiny if challenged on equal protection grounds. c. Would be challenged on the grounds of either equal protection or freedom of speech. d. Is not constitutional because commercial speech cannot be restricted. C [difficult p. 65] A state statute prohibits “the wearing of clothing that is not appropriate for one’s gender.” What would be the most likely basis for a constitutional challenge to this law? a. A substantive due process violation. b. A procedural due process violation. c. A freedom of speech violation. d. An equal protection violation. A [moderate p. pp. 66-67]
74.
75.
76.
Assume that the state of Colorado institutes a law requiring that persons from outside the state of Colorado take a skiing exam and obtain a skiing license before being allowed to ski at a downhill resort on runs other than the beginner runs. The fee for this license is $75. Colorado residents are not required to get a license because most resident skiers learn to ski properly at an early age. On what basis could this statute be challenged? a. The Equal Protection Clause. b. The Privileges and Immunities Clause. c. The Interstate Commerce Clause. d. Both A and B e. A, B and C
42
E
[difficult pp. 55, 65, and 68]
ESSAY QUESTIONS—ETHICS AND POLICY 77. To what extent should “speech” over the Internet be regulated? Should the Internet be treated like television, or should different standards apply? Or is the Internet more like print media such as books or newspapers? Give reasons for your positions. There are many opinions possible on this issue. Compared to regulating broadcast media, the Internet raises many additional issues. For example, unlike television, the Internet can be used for two-way communication. Furthermore, communications on the Internet can not only be aimed at a mass market, but can be directed to a focused group or single individual. Perhaps different rules, if any, should apply to these individualized communications. On the other hand, it is less likely for someone to be accidentally exposed to material on the Internet compared to television, although this is changing as the Internet evolves. [moderate] Following the events of September 11, 2001, the government took many actions directed at preventing acts of terrorism. One of the first and most visible was increased intensity of searches at airports. When government personnel do the screening, they are subject to the Equal Protection Clause. Should government screeners be able to search members of certain groups more rigorously than others? Is it constitutional to do so? There has been considerable controversy over elderly women and young mothers being randomly selected for more intensive searches and screening. One might argue that if it is known that terrorists most often come from certain groups, it might be reasonable to subject members of these groups to more thorough searches. Such conduct might or might not be constitutional because unequal treatment is balanced against the purpose of the law. It might be fairly easy to justify such a policy constitutionally given that the consequence of the unequal treatment (a few more minutes to get through security screening) is relatively minor compared to the purposes advanced by the law. [difficult]
78.
ESSAY QUESTIONS—FACTUAL APPLICATION The Supremacy Clause 79. In the late 1990s, bicycle helmets became subject to federal regulation for the first time. Prior to the adoption of federal standards, manufacturers of bicycle helmets could get their helmets safety-certified by several private organizations. Manufacturers were not required to use any of these organizations, but most used at least one as part of their marketing. Assume that someone who is injured while wearing a bike helmet believes that a defect in the helmet’s design contributed to the injuries sustained. Under what circumstances can this person bring a tort claim under state law? Prior to the passage of the federal regulations, there would be no restrictions on the ability to bring the claim. Whether or not the helmet had been certified (and whether it actually met the certification test) could be introduced as evidence in
43
court, but the existence of the private party certification does not affect the ability to bring a claim. Once the federal standards have been adopted, the state law tort claim would probably be preempted by the federal standards. The plaintiff could allege that the helmet did not meet the federal standards, but if the helmet did meet the standards, the plaintiff would not be able to raise a claim that the helmet was unsafe under state law. [moderate] The Bill of Rights and Business 80. Assume that there are numerous Internet service providers in a large city. Because of fierce competition, these businesses advertise heavily. One of the features that some of them provide and advertise is streamlined access to pornography sites as well as proprietary pornography sites that can be accessed only by those who subscribe with that particular service provider. This city passes an ordinance that prohibits any advertising about being able to access pornography over the Internet. One of the service providers challenges the constitutionality of this statute. Discuss how the case would turn out. The most likely challenge would be on the basis of freedom of speech. The speech in question is commercial speech. Commercial speech can be subjected to reasonable time, place, and manner restrictions, but cannot be prohibited. This ordinance is probably an impermissible prohibition of this advertising. Note that the speech in question is the advertising of the access to the pornography, not the pornography itself. Assuming that accessing the pornography is legal, the city is limited in how it can restrict the advertising. Also note that not all pornography is considered to be unprotected obscene speech. The city would have much greater latitude in regulating advertising of an illegal activity, such as child pornography. [moderate] Assume that a city passes an ordinance that prohibits all smoking in restaurants and bars, except in outdoor seating areas. Evaluate an equal protection challenge to this ordinance. Although this ordinance might seem to treat “smokers” differently than “nonsmokers,” individuals are not inherently smokers or nonsmokers. This ordinance prohibits anyone from smoking regardless of whether that person is a smoker or nonsmoker. Restaurant and bar owners, however, might be able to raise an equal protection challenge because those two kinds of businesses are being singled out under the ordinance. Because the distinction is based on the type of business (and not race, age or gender) the validity of the distinction would be evaluated under rational basis, and thus likely to be constitutional. [difficult]
81.
CHAPTER 4 INTENTIONAL TORTS AND NEGLIGENCE
TRUE/FALSE QUESTIONS
Intentional Torts Against Persons
44
2. F 2.
Persons found to have committed a tort usually must either pay a fine or serve time in prison. [moderate p. 74] Punitive damages can be recovered only in strict liability intentional tort cases. F [moderate p. 74] Physical contact is not necessary to be liable for the tort of assault. T [moderate p. 74] Transferred intent occurs when someone attempts to injure someone, but actually injures another. T [easy p. 74] In all defamation of character cases, the plaintiff must prove that the defendant knew that the statement was false. F [moderate p. 75] A party can be liable for defamation for truthful statements if the statement hurts the plaintiff’s reputation. F [moderate p. 75] The tort of appropriation does not apply in the case of public figures because public figures are presumed to have consented to public use of their likeness. F [moderate p. 76] True statements can be the basis for commission of the tort of invasion of the right to privacy. T [easy p. 77] Intentional infliction of emotional distress requires that the conduct be outrageous. T [easy p. 78]
3.
4.
5.
6.
7.
8.
9.
Intentional Torts Against Property 10. Trespass to land occurs only if the trespasser in some way interferes with the owner’s use of the land. F [moderate p. 79] Conversion occurs when someone deprives the rightful owner of personal property of the use and enjoyment of that property by treating it as her own. T [moderate p. 79]
11.
Unintentional Torts (Negligence) 12. In order to be liable for a negligence tort, one must have intended the consequences of the act or conduct in question. F [easy p. 80]
45
13.
The reasonable person standard is used in determining the duty of care in a negligence case. T [easy p. 81] In order to meet the causation requirement in a negligence tort, both causation in fact and proximate cause must be proven. T [difficult p. 83] A plaintiff can generally recover for negligent infliction of emotional distress for any unintentional conduct of the defendant that causes the plaintiff to suffer emotional distress. F [moderate p. 85]
14.
15.
Special Negligence Doctrines 16. The doctrine of negligence per se is used where the plaintiff was unable to observe the conduct of the defendant that led to the injury. F [moderate p. 86] Good Samaritan laws do not generally protect persons who are not medical professionals and who have not had training in CPR. T [moderate p. 87] Guest statutes apply to persons in someone’s home with the permission of the homeowner. F [easy p. 88] A landowner owes a duty even to trespassers. T [moderate p. 89]
17.
18.
19.
Defenses Against Negligence 20. Assumption of the risk, if present, prevents a plaintiff from recovering for negligence even if the plaintiff has proven all the required elements of negligence. T [moderate p. 90] Comparative negligence allows the plaintiff to make a partial recovery from the defendant in situations where the plaintiff was less than 50 percent at fault. T [moderate p. 91]
21.
Business Torts 22. A tort claim of unfair competition seldom succeeds because of the policy of encouraging open and vigorous competition. F [moderate p. 92] Intent is not required for a product disparagement claim. F [easy p. 92] In order to be liable for intentional interference with contractual relations, the defendant must have breached a valid existing contract.
23. 24.
46
F [moderate p. 91] Strict Liability 25. Strict liability is liability without fault. T [easy p. 95]
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Intentional Torts Against Persons 26. Which of the following is not one of the general categories of torts? a. Strict liability b. Rational c. Negligence d. Intentional B [easy p. 74] What is the definition of a tort? a. Any violation of an ethical duty. b. Any crime or misdemeanor. c. Any action done in violation of a prior agreement which allows the victim to recover damages. d. Any civil wrong that allows the injured person to recover damages. e. Any conduct by one party that is objected to by another. D [moderate p. 74] Damages intended to punish a defendant and deter the defendant from engaging in the same tortuous conduct in the future are called: a. Penalty damages. b. Retribution damages. c. Punitive damages. d. Preventative damages. e. Nominal damages. C [easy 74] The tort of assault and the tort of battery: a. Are two names for the same tort. b. Are strict liability torts. c. Can occur independently or together. d. Require proof of each of the separate elements of negligence. e. Cannot both occur in the same incident. C [moderate p. 74]
27.
28.
29.
30.
The doctrine applied when someone intends to cause injury to a certain person, but instead actually causes that injury to a different person is:
47
a. b. c d. e. A 31.
Transferred intent. Innocent bystander. Multiple victim. Misplaced consequence. Res ipsa loquitur. [easy p. 74]
How is false imprisonment defined? a. Being held in jail when no formal charges have been filed. b. The intentional confinement or restraint of another without authority of justification and without that person’s consent. c. The holding in prison of one who was convicted of crime that the person did not commit. d. A confinement caused when one accidentally causes another to be confined without that person’s consent. B [moderate p. 74] Assuming that statutory requirements are met, what is protected under merchant protection statutes? a. Merchants are protected from the intentional torts of their customers. b. Merchants are protected from product disparagement claims of their competitors. c. Merchants are protected from product disparagement claims of their suppliers. d. Merchants are protected from false imprisonment claims of persons detained on suspicion of shoplifting. e. Customers are protected from the negligent conduct of merchants. D [moderate p. 75] What differs in a defamation suit when the plaintiff is a public figure, as opposed to when the plaintiff is not a public figure? a. Punitive damages are available. b. The plaintiff need not prove actual injury to the reputation. c. The plaintiff can recover even when the statement is a mere opinion. d. The plaintiff must prove that the statement was made with malice. e. The plaintiff must prove that the statement was made in writing. D [moderate p. 76] A nonpublic figure in a defamation case must prove the following except that: a. There was an untrue statement. b. The statement contained a factual assertion. c. The statement was communicated by the defendant to at least one person other than the plaintiff. d. The defendant knew the statement was false. e. The statement caused an injury to the plaintiff’s reputation. D [difficult p. 75]
32.
33.
34.
48
35.
Which of the following is true? a. Slander and libel are two kinds of defamation. b. Defamation and slander are two kinds of libel. c. Defamation and libel are two kinds of slander. d. Slander and libel are two terms for the same tort, and defamation is a different tort altogether. e. Slander, libel and defamation are three terms with the same meaning. A [moderate p. 75] Which of the following is the best description of misappropriation of the right to publicity? a. Claiming credit for the accomplishments of another. b. Publishing the creative work of another and claiming that it is yours. c. Publicly claiming to have accomplished something that you have not accomplished. d. Attempting to use another living person’s name or identity for commercial purposes without that person’s consent. e. Publicizing private information about someone without that person’s consent. D [moderate p. 76] Which of the following is true about the tort of invasion of the right to privacy? a. The tort is actionable only by public figures. b. True statements or facts that are disclosed can support a claim for the invasion of the right to privacy. c. Once a fact has become public, its disclosure cannot thereafter support a claim for the invasion of the right to privacy. d. The tort requires that the defendant entered the plaintiff’s home or place of business to acquire the information that was disclosed. B [moderate p. 77] Which of the following is true about intentional infliction of emotional distress? a. Recovery is allowed any time there is a measurable amount of mental distress. b. There must be some physical contact with the plaintiff. c. The defendant’s conduct must go beyond all possible bounds of decency and be regarded as atrocious and utterly intolerable in a civilized society. d. The plaintiff must have witnessed severe physical injury to a relative or other significant person in the plaintiff’s life. C [moderate p. 78] For which of the following torts are the general requirements for the plaintiff’s case dependent on whether or not the plaintiff is a public figure? a. Defamation b. Invasion of the right to privacy c. Intentional infliction of emotional distress d. Both A and B e. A, B and C A [moderate p. 76]
36.
37.
38.
39.
49
Intentional Torts Against Property 40. Which is true regarding the tort of trespass to land? a. A person who enters another’s land without permission is liable to the landowner even if the landowner was not using the land at the time and there was no damage to the land. b. A person cannot be liable for trespass to land if that person was not told, either directly by the owner or by means of a sign, to stay off the property. c. So long as a person stays away from the portions of land that the owner is currently using, there can be no trespass to land. d. So long as a person originally entered the land of another with the permission of the owner, there can be no trespass to land if the non-owner stays beyond the period of permission granted by the owner. A [difficult p. 79]
41. How does the tort of conversion of personal property differ from trespass to personal property? a. In conversion, the true owner is denied use and enjoyment of the property. b. In conversion, the true owner can recover damages for the denial of use of the property. c. In conversion, the tortfeasor treats the property as if it is her own. d. In conversion, the plaintiff is entitled to recover punitive damages. e. In conversion, the defendant must have published his use of the property to another. C [difficult p. 79] 42. Which of the following is true about a malicious prosecution case? a. The claim must be against a government agency for wrongfully bringing a criminal action. b. Most victorious defendants are able to prove the elements of a malicious prosecution claim. c. The plaintiff must prove that there were false statements made by the other party at the original trial that injured the plaintiff’s reputation. d. The plaintiff must prove that the original lawsuit was brought with malice. e. The plaintiff must prove that there were statements made by the other party at the original trial that invaded the plaintiff’s privacy. D [difficult p. 79] Unintentional Torts (Negligence) 43. The best statement of the test applied in determining if a defendant was the proximate cause of the plaintiff’s injuries is: a. Was it foreseeable to the plaintiff that the defendant would engage in this conduct? b. Given this particular injury to the plaintiff, was it foreseeable that the defendant was the cause? c. Should it have been foreseeable to the defendant that defendant’s conduct could lead to this kind of injury? d. Was the injury foreseeable to the plaintiff prior to the injury’s occurrence?
50
e. C
Was it foreseeable to the plaintiff that this kind of injury could occur under the particular conditions that the injury did occur? [difficult p. 83]
44.
Negligence is also known as what kind of tort? a. An unintentional tort. b. An intentional tort. c. Strict liability. d. Unfair competition. e. Breach of contract. A [easy p. 80] A medical doctor who commits medical malpractice has committed what tort? a. Defamation of character. b. Intentional infliction of emotional distress.. c. Trespass. d. Negligence. D [easy p. 80]
45.
Special Negligence Doctrines 46. The doctrine that is applied when a defendant violates an existing statute intended to prevent the injury in question to persons of a class that includes the plaintiff is: a. Negligence per se. b. Res ipsa loquitur. c. Proximate cause statute. d. Concurrent statutory violation. A [moderate p. 86] The doctrine that shifts the burden of proof from the plaintiff to the defendant is: a. Negligence per se. b. Res ipsa loquitur. c. Apparent negligence. d. Good Samaritan. B [moderate p. 86] What does a guest statute provide? a. That a driver who has voluntarily given a ride to a passenger without compensation is not liable to the passenger for ordinary negligence. b. That someone serving alcohol to guests in the home is liable if the alcohol causes the guest to become intoxicated and injure another person while intoxicated. c. That tavern owners are strictly liable for alcohol related injuries caused by tavern guests who were served alcohol at the tavern. d. That homeowners cannot be sued by their social guests for injuries incurred while the guests were in the homeowner’s home with permission. A [moderate p. 88]
47.
48.
51
49.
What is a dram shop? a. A house of ill repute. b. A factory that illegally uses child labor. c. A bar or tavern. d. A pharmacy. e. A seller of second-hand goods. C [easy p. 88] Which of the following best describes the effect of Good Samaritan laws? a. Medical professionals are obligated to stop and assist persons in need. b. Medical professionals have a lower duty of care to strangers than to their regular patients. c. Medical professionals cannot be held liable if they cause injury to someone they provide medical care to in an emergency. d. Someone injured by a medical professional who is providing emergency medical care at the scene of an accident cannot recover if the injury was due to ordinary negligence. D [moderate p. 87] A landowner owes a duty of ordinary care to: a. Licensees only. b. Invitees only. c. Trespassers only. d. Licensees and invitees. e. Licensees, invitees and trespassers. D [easy pp. 88-89] The customer of a store who is at the store for purposes of doing business would be classified as what type of visitor while on the store’s premises? a. A licensee. b. An invitee. c. A trespasser. d. A guest. B [easy p. 88]
50.
51.
52
Defenses Against Negligence 53. The legal effect of the presence of a superseding event is that: a. The defendant is not liable even if the plaintiff has proved all the elements of negligence. b. The plaintiff and defendant will share liability. c. Thee burden of proof shifts from the plaintiff to the defendant. d. Intent must be proven in addition to the elements of negligence. A [moderate p. 89] Which best describes assumption of the risk in a negligence case? a. The plaintiff knowingly and willingly subjected herself to a risk, and by doing so, is not able to collect from a defendant even if all of the elements of negligence are present. b. The defendant gave advance warning to the plaintiff that an injury would occur.
54.
52
c. d. e. in it. A
The plaintiff is more at fault than the defendant in causing the accident. The plaintiff was involved in an abnormally dangerous activity. The defendant knew that the conduct was risky, but nonetheless chose to engage [moderate p. 90]
55.
A plaintiff wants to sue on a negligence tort, but knows that he was partly as fault. Which of the following is true? a. A state applying contributory negligence will allow the plaintiff to recover so long as his fault is minor. b. The plaintiff will have to elect whether to sue under comparative or contributory negligence. c. Because the plaintiff is partly at fault, he will not be able to recover under either comparative or contributory negligence. d. If the plaintiff’s fault is only 5%, his recovery will be the same under either pure or partial comparative negligence. e. In all circumstances the plaintiff will recover more under pure comparative negligence than under partial comparative negligence. D [difficult p. 91] Which of the following is true about comparative negligence and contributory negligence? a. Most states that once used comparative negligence now apply contributory negligence instead. b. They are two names for the same defense. c. In order to avoid liability for an unintentional tort, the defendant must prove the presence of both defenses. d. Comparative negligence is used with intentional torts and contributory negligence is used with unintentional torts. e. Comparative negligence allows the plaintiff to make a partial recovery whereas contributory negligence does not. E [difficult pp. 90-91] 57. If a plaintiff knows of and voluntarily enters into or participates in a risky activity that results in injury, what is the most likely defense that can be raised by a defendant? Contributory negligence. Comparative negligence. Superseding event. Negligence per se. Assumption of the risk. [easy p. 90]
56.
a. b. c. d. e. E Business Torts
53
58.
The tort of palming off involves: a. Knowingly selling goods that are defective. b. Blaming another for one’s own actions and communicating that blame to at least one other person. c. Failing to credit another for that other person’s legal accomplishments. d. Making false statements about the goods of another. e. Representing one’s own goods to be those of a competitor. E [moderate p. 92]
59.
Product disparagement differs from defamation of a nonpublic figure in that: a. Intent is required for the disparagement case, but not in the defamation case. b. Intent is required for the defamation case, but not in the disparagement case. c. Publication to a third party is required in the disparagement case, but not in the defamation case. d. Publication to a third party is required in the defamation case, but not in the disparagement case. e. Both A and D are true. A [difficult p. 92] The tort of intentional interference with contractual relations requires the following except: a. A valid, enforceable contract between the contracting parties. b. Third-party knowledge of this contract. c. Third-party inducement to breach the contract. d. A new contract involving the third party who induced the breach. D [moderate p. 93]
60.
Strict Liability 61. Persons who engage in abnormally dangerous activities such as crop dusting or blasting: a. Are liable only if all the elements of negligence are proven against them. b. Are liable only if they intended to cause a particular injury. c. Are generally not liable for the injuries they cause because otherwise no one would undertake these activities. d. Are liable to persons they injure even if they are not at fault. D [moderate p. 95]
MULTIPLE CHOICE QUESTION—FACTUAL APPLICATION
Intentional Torts Against Persons 62. Sam, who weighs 250 pounds, calls his 110 pound girlfriend, Alice, one morning while she is at
54
work. He says, “You are to stay in your office until midnight. If you come to my house before midnight, I will make you sorry that you did.” Assuming that Alice usually leaves her office at 5:00 but stays until midnight that night because of the threat, if Alice files a false imprisonment case against Sam, a court most likely will find that: a. There was false imprisonment because Sam’s threat forced Alice to stay in the office. b. There was no false imprisonment because Sam and Alice previously knew one another. c. There was no false imprisonment because Alice could have left the office and stayed away from Sam’s house, and because the threat related to future harm. d. There was no false imprisonment because Alice’s office was not a prison, even though it might feel like one to Alice. C [moderate p. 74]
63.
While attending a baseball game cheering for the home team, a fan of the other team sneaks up behind Jack and hits Jack on the head with a hard piece of pizza crust, injuring Jack. Jack has no idea he is about to be hit and is severely embarrassed when his friends see that he was injured by a pizza crust. Which of the following torts has the fan committed? a. Assault b. Battery c. Assault and battery d. Battery and negligent infliction of emotional distress e. Assault, battery, and negligent infliction of emotional distress B [moderate p. 74]
64.
An English professor puts a comment on a student’s composition that says, “Can’t you write at all? You are writing at a third grade level and will never be able to graduate from this university!” The student is extremely upset and sues the professor. For which torts could the professor be held liable? a. Defamation only b. Intentional infliction of emotional distress c. Invasion of the right to privacy d. Both A and B e. Neither A, B nor C E [moderate p. 75]
Intentional Torts Against Property 65. Bob’s fraternity brother lent Bob his car for a weekend trip to Las Vegas. While there, he hit a couple of substantial payoffs in the casinos and decided that it was time for a new life. He decided to move to Venice Beach in California. He did not bother to tell anyone
55
of this change in life plans, including his fraternity brother back in Utah who lent him the car. “After all,” thought Bob, “if there’s anything to this brotherhood thing, he shouldn’t mind at all. And if he comes for it, I’ll certainly let him have it back.” Bob moved to Venice Beach. Is Bob liable for conversion of personal property? a. No, because the friend originally gave him the car with permission. b. No, as long as he has not damaged the car. c. Yes, because he did not return the car when agreed. d. No, because he was willing to return the car if asked to. e. Yes, because he took the car to a different state. C [difficult p. 79] Negligence 66. Which of the following is true about the case against McDonald’s for serving very hot coffee? a. The plaintiff was burned while driving her car. b. McDonald’s coffee was found to be the same temperature as that served by its competitors. c. McDonald’s had turned down a pretrial offer of settlement which was much lower than the amount awarded by the jury. d. McDonald’s paid the amount to the plaintiff that the jury awarded. C [moderate p. 81]
67.
In the Palsgraf case, foreseeability was an issue. The question addressed by the court was: a. Was it foreseeable to the plaintiff (Ms. Palsgraf) that the scales would fall? b. Was it foreseeable to the plaintiff (Ms. Palsgraf) that someone in the train station would be carrying explosive fireworks? c. Was it foreseeable to the passenger carrying the fireworks that they might explode and injure someone? d. Was it foreseeable to the railroad employee helping the passenger onto the train that doing so might lead to injury to Ms. Palsgraf or another bystander? e. Was it foreseeable to Ms. Palsgraf that her injury would have been caused by an explosion? D [difficult p. 83] The proximate cause requirement for a negligence tort is most likely not met where: a. a customer becomes ill from food that is carelessly packed at a processing plant. b. a patient becomes sick from a doctor carelessly prescribing the wrong medicine. c. a customer in a building supply store carelessly drops a small can of paint that breaks open and is ignited from a spark caused when the metal can hits the concrete floor. d. a driver injures a pedestrian when rounding a curve at twice the legal speed limit. e. the victim of an accident was aware, prior to the actual accident, that the accident was likely to occur. C [moderate p. 83] Mary, a 68-year-old widow, hired an electrician to make some wiring repairs to her home. The electrician accidentally started a fire that destroyed her house. Mary was not injured, but watched her house burn along with all her possessions. It was emotionally
68.
69.
56
devastating to watch as she lost a whole life’s worth of memories. Can she recover for negligent infliction of emotional distress? a. Yes, because the electrician was the cause of her emotional distress through his outrageous conduct of starting the fire. b. Yes, because her distress was genuine. c. No, because her situation does not meet all the elements necessary to recover for negligent infliction of emotional distress. d. No, because she assumed the risk by having someone do electrical work in her home. C [moderate p. 85] Special Negligence Doctrines 70. Sandy lives on the top floor of a ten-story building in a big city. There is a 30-story apartment building under construction next door to her building. One morning while eating her corn flakes, a brand new toilet comes crashing through the roof of Sandy’s apartment and injures her. She would like to sue the construction firm, but has no way of finding out or proving what persons were involved or exactly what happened. The doctrine that would most help Sandy is: a. last clear chance. b. res ipsa loquitur. c. strict liability. d. comparative negligence. e. negligence per se. B [moderate p. 86]
71.
Patti Passenger is riding with her friend, Danetta Driver, up to the mountains to ski for the day. Patti is happy that Danetta is giving her a ride, not even asking Patti to share the cost of gas. On the way home that evening, Danetta suddenly remembers that she is late to a meeting she had that night. Danetta immediately passes a car on a blind curve and gets into an accident. Which of the following is true in Patti’s negligence suit against Danetta? a. Patti can recover from Danetta under the doctrine of res ipsa loquitur. b. Patti can recover because Danetta was negligent per se. c. Patti can recover because the injury was a foreseeable consequence of Danetta’s actions. d. Patti cannot recover because Danetta was a Good Samaritan in taking Patti skiing without charging her for a portion of the gas cost. e. Patti cannot recover assuming that there is a guest statute in her state. E [moderate p. 88] A driver stopped at a convenience store to run inside briefly. The driver left the engine running and forgot to set the parking brake. The car suddenly started rolling toward two small children, and Vicki, a bystander, pulled the two children out of the way of the rolling car. Vicki is injured in the process. Can Vicki recover from the driver of the car? a. Yes, because of the Good Samaritan rule. b. No, because of an intervening event. c. No, because of assumption of the risk. d. Yes, because the driver set up the dangerous situation.
72.
57
D
[difficult p. 88]
Defenses Against Negligence 73. Sam had just finished a great day of skiing as he walked toward the parking lot with his skis over his shoulders. While waiting to cross at a crosswalk, a car’s horn honks down the street. He suddenly turns to see where the sound came from, and in doing so his skis swing around and hit Pam in the head, injuring her. Which of the following, if true, would give Sam the best chance of avoiding liability to Pam? a. Sam did not intend to harm anyone when he turned to see the source of the sound. b. The driver of the car violated an anti-noise ordinance in blowing the horn. c. Pam had planned to cross the crosswalk as soon as traffic allowed, rather than wait for the “walk” light to indicate that it was safe to do so. d. Pam had been walking behind Sam for several hundred yards and had observed that Sam, on several occasions, had nearly struck other persons as he carried his skis. D [difficult p. 90] Cindy was riding her bicycle on a paved bike path and had an accident with another cyclist. Cindy’s $1,000 bicycle was destroyed in the accident. If the jury determined that Cindy was 60 percent at fault and the other cyclist 40 percent at fault, under which doctrines would Cindy be entitled to recover $400 from the other cyclist? a. Contributory negligence only b. Pure comparative negligence only c. Partial comparative negligence only d. Either form of comparative negligence, but not under contributory negligence e. Either form of comparative negligence as well as under contributory negligence B [difficult p. 91]
74.
Business Torts 75. Burger Prince is one of the largest hamburger chains in the nation, and fiercely competitive with the well-known chain of Captain Hook Seafood House restaurants. Captain Hook has recently introduced a new line of hamburgers in order to expand beyond seafood. Burger Prince received information that it believed was reliable indicating that the Captain Hook’s burgers contained substantial amounts of filler. Burger Prince then ran advertisements saying that its pure beef burgers were better than the Captain Hook’s burgers that used filler. Which of the following is true? a. Burger Prince is liable for product disparagement because the statement about the use of filler was false. b. Burger prince would be liable for invasion of privacy if the formula for Captain Hook’s burgers was not publicly available. c. This is a case of palming off. d. Captain Hook will not be able to win a product disparagement case here. e. This is an example of intentional interference with contractual relations. D [moderate p. 93]
58
ESSAY QUESTIONS—ETHICS AND POLICY
76. In what circumstances should persons be liable for materials put on Internet Web sites? For example, should persons who post bomb-making information be responsible to the victims of someone who acts on this information? Should persons be liable who call for someone to be killed, but take no action themselves toward accomplishing this other than to call for others to do the killing? What if someone makes extremely derogatory comments about another person or corporation and widely distributes them? In this circumstance, should the defamation requirement that the statements be fact, and not opinion, apply? The Internet has made it easier to distribute information. In many cases this is information that has long been available, though more difficult to locate. In the case of bomb-making information, courts have been reluctant to impose liability for posting information that is available elsewhere. Possibly defamatory statements raise other issues due to the ease to which they can be distributed to others, and the ability in many cases for them to be made anonymously. [moderate] Does the requirement for a plaintiff in a negligent case to prove foreseeability make sense? Shouldn’t a defendant be responsible for all the actual consequences of the careless conduct? Is it fair that an injured party might be able to recover from no one? Foreseeability is a way to put a limit on the chain of causation. If a defendant should ask what could reasonably be expected to happen if she engages in certain conduct, the defendant should only be responsible for the expected consequences of the conduct. Unfortunately, there are situations where a party is injured but there is no one who is legally obligated to compensate the injured party. [moderate]
77.
ESSAY QUESTIONS—FACTUAL APPLICATION Unintentional Torts (Negligence) 78. Powdersurf is a manufacturer of snowboards. Powdersurf is an aggressive marketer, and new to this product line. Powdersurf has adopted several strategies to help it rapidly build market share. One approach was to make the designs and graphics of some of their snowboards nearly identical to those of the industry leader’s snowboards. In addition, Powdersurf has begun an advertising campaign that criticizes its competitor’s products. For example, it has made several claims, known to be false, about the materials used in the competitor’s boards. It has also made claims about a tendency of one competitor’s boards to break during use. This was based on an independent lab’s report that later proved to be false. Lastly, Powdersurf made several allegations about the president of the leading competitor, primarily claiming that this well-known snowboarding pioneer had not accomplished all that he claimed. Powdersurf believed that its allegations were correct, but it turned out that they were wrong. Discuss any tort claims that might be brought against Powdersurf and their likely resolution. If Powdersurf were trying to pass its snowboards off as those of a competitor, it could face liability for palming off. It could face liability for the false statements
59
about the competitor’s products that were knowingly false. It would not be liable for those that it honestly believed were true. Liability for the statements about the competitor’s president would depend on whether or not the president would be considered a public figure because Powdersurf believed the statements to be true. Powdersurf could face civil liability to any injured party for false advertising under the Lanham Act. [moderate] 79. Ray and Rayetta were on a camping vacation in Maine. They had reservations for themselves and their car on a ferry from Bar Harbor, Maine to Nova Scotia. Because they had their two mountain bikes mounted upright on a roof rack on their car, they had to use a special line including motor homes, vans and other high vehicles. Upon loading onto the ferry, all of these high profile vehicles used the rightmost of the six parallel lanes on the auto deck of the ferry. When the drivers returned to their cars upon reaching Nova Scotia, they were directed off the ferry by ferry employees. The driver of the motor home immediately in front of their car had not returned by the time all of the cars from other lanes had exited. After waiting for another 10 minutes, one of the ferry employees motioned Ray and Rayetta to turn to the left into the next lane rather than wait for the motor home to move. Ray and Rayetta followed the employee’s hand signals, but unfortunately their bikes struck a low clearance pipe and the frames of both bikes were destroyed. Discuss the issues and outcome of their lawsuit against the ferry company. They could fairly easily prove the five elements of negligence against the ferry company. The crucial part of the case would be whether the ferry company could prove any defenses. Most likely would be contributory or comparative negligence. One factor would be how visible this pipe was from the driver’s seat. Even with this defense, Ray and Rayetta might prevail if they could prove that the ferry employee had the last clear chance to avoid the accident. [moderate] Sam is a business executive who flies often in connection with work. After the September, 2001 terrorists’ destruction in New York and Washington, Sam flew less frequently. In response to the attacks, new federal regulations made the federal government responsible for all airport security personnel. In most cases, including at Sam’s home airport, the government met the obligation by hiring private contractors to provide the security services. These firms were heavily regulated and controlled by the government. Also, in the new regulations were profiling guidelines that required additional security screenings for persons meeting such guidelines. These guidelines were partly secret, but it was known that members of certain races were much more likely to fall within them. In addition, on average, six times as many males as females met the guidelines. Shortly after these regulations were in place, Sam went to his airport and found extremely long lines at the security checkpoint. He waited in line nearly three hours. As he was about 10 people away from being screened, an irate passenger, Marvin, came running through the line screaming that he was about to miss his flight. Marvin accidentally hit Sam forcefully, breaking Sam’s arm. In addition, Sam had his pet ferret (a small animal, an exotic pet) in his coat pocket. The impact caused the ferret to die. Marvin said that the slowness and incompetence of the security personnel had caused him to “lose it.” When Sam reached the security checkpoint, he was pulled aside for additional screening. This involved waiting in an additional line for 30 minutes longer. Sam learned that he had to go through the additional security because he was returning home on the same day, had no checked baggage, and was male. Sam has sued both the security screening company and Marvin for his injuries and the loss of his ferret, and
80.
60
emotional distress related to these. Discuss Sam’s claims, any defenses and their likely resolution. Sam’s claims would not prevail against the security screening company because they did not breach a duty and because Marvin’s actions would likely be viewed as a superseding event. Sam could prove all the elements of negligence against Marvin for his physical injuries, but the presence of a ferret in his pocket would likely make that consequence unforeseeable. Sam would not be able to recover for emotional distress because his pet would not be considered a relative. Therefore, he would prevail in the negligence claim except that he would not prevail for the claim related to the ferret. Note: Students could also be asked to discuss an equal protection claim (from Chapter 3) against the screening company for its conduct and the government for the regulations. [difficult]
CHAPTER 5 PRODUCT AND STRICT LIABILITY
TRUE/FALSE QUESTIONS
Tort Liability Based on Fault 1. The failure of the manufacturer of a product to warn users of the dangerous propensities of a product can be negligence. T [easy p. 103] In a negligence action, all parties in the product’s chain of distribution are liable for the injury, even if only one party was negligent. F [moderate p.103] Negligence is a possible theory under which to recover for injuries caused by products. T [easy p. 103] To be successful in a negligence cause of action, the plaintiff must prove that the defendant breached a duty of care that caused the plaintiff’s injuries. T [easy p.103] A seller who conceals a defect in a product, but who does not affirmatively misrepresent the quality of the product cannot be sued for intentional misrepresentation. F [moderate p. 103] Greenman v. Yuba Power Products Inc. is a landmark product liability case involving the tort or intentional misrepresentation. F [moderate p. 104]
2.
3.
4.
5.
6.
The Doctrine of Strict Liability 7. Strict liability is imposed only when the defendant is at fault. F [easy p. 105]
61
8.
Under strict liability for products liability, all parties in the chain of distribution are liable, even when the product was not defective when it left that party’s hands. F [moderate p. 106] Because strict liability is a tort doctrine, privity does not apply, so that even bystanders can recover under strict liability. T [easy p. 107] The most widely recognized articulation of the doctrine of strict liability is found in Section 402A of the Restatement (Second of Torts. T [easy p. 105]
9.
10.
11.
The doctrine of strict liability applies to sellers of products, but not to lessors of products. F [easy p. 105] Strict liability applies only to products, not services. T [easy p. 105] Strict liability would not apply to the sale of blood required for a blood transfusion. T [easy p. 105] A homeowner not in the business of selling products could be sued for the sale of a defective product at a garage sale. F [easy p. 105] The manufacturer of a subcomponent of a product cannot be sued if the product is defective and causes an injury. F [easy p. 106]
12.
13.
14.
15.
The Concept of Defect 16. Strict liability for products liability requires that the plaintiff show there was a defect in the product causing the injury. T [easy p. 107] In a product liability action based on strict liability, the plaintiff must prove the existence of a defect and who caused the defect. F [moderate p. 107]
17.
Defect in Manufacture 18. The failure of a manufacturer to properly test a product can be a defect in manufacture. T [moderate p. 107
Defect in Design 19. The crashworthiness doctrine requires that vehicles be designed to be able to avoid collisions. F [moderate p. 110]
62
20.
In evaluating the adequacy of a product’s design, the courts apply a risk-utility analysis. T [easy p. 110] A household appliance that works fine but that is designed without proper safeguards would be defective in terms of product liability law. T [easy p. 108 A toy for a child under three years of age that contains parts small enough for the child to swallow is defective in terms of product liability law. T [easy p. 108]
21.
22.
Defect in Packaging 23. Drug manufacturers have no duty to place their products in containers that cannot be opened by children. F [easy p. 111]
Failure to Warn 24. Failure to warn about a product’s dangers can make an otherwise safe product defective. T [moderate p. 112] A proper and conspicuous warning placed on a product protects the manufacturer from strict liability. T [easy p. 112]
25.
26.
Manufacturers of over the counter drugs such as aspirin must warn consumers of possible side effects of the drug or they can be sued for selling a defective product. T [easy p. 112] Other Product Defects Failure to provide adequate instructions for the safe assembly of a product is a defect. T [moderate p. 113] The concept of “defect” is expanding in the law. T [easy p. 113]
27.
28.
Defenses to Product Liability 29. The original seller of the product is liable for an injury caused by a modification of the product even if the modification occurred after it left the seller’s possession. F [moderate p. 113] A statute of repose sets a limited time after an injury occurs in which a product liability suit can be brought. F [moderate p. 114]
30.
63
31.
The maker of a product is required to warn about all dangers associated with using the product including dangers that are generally known. F [moderate p. 113]
Contributory and Comparative Negligence 32. Contributory negligence is a defense to negligence actions, but not generally in strict liability actions. T [moderate p. 115] Comparative negligence is more widely recognized as a defense in product liability actions than contributory negligence. T [moderate p.115]
33.
34.
Under comparative negligence, if a plaintiff is found by the jury to be 25% negligent and the damages are $100,000, the plaintiff would only recover $25,000. F [moderate p. 115] Under comparative negligence, if a plaintiff is found by the jury to be 25% negligent and the damages are $400,000, the plaintiff would only recover $300,000. T [moderate p. 115]
35.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Tort Liability Based on Fault 36. The doctrine that imposes liability on a seller of a product only if the seller sold the defective product directly to the injured party is known as: a. Privity of contract. b. Resolution of contractual relationships. c. Doctrine of direct commercial contacts. d. Doctrine of merchants’ liability limitations. A [moderate p. 103] Under the judicial philosophies developed in the area of product liability: a. It does not pay to sue because of the high cost of legal expenses. b. The doctrine of privity of contract will prevent liability. c. The doctrine of privity of contract has been greatly reduced in importance. d. Most consumers cannot recover because the UCC has been written to protect merchants. C [moderate p. 106] Someone who is injured by a product that she purchased new could recover on the basis of: a. Breach of warranty. b. Breach of warranty or negligence. c. Breach of warranty or strict liability.
37.
38.
64
d. e. E
Negligence or strict liability. Breach of warranty, negligence, or strict liability. [easy pp. 103-105]
The Doctrine of Strict Liability 39. Which of the following is true in a products liability case? a. The plaintiff must prove the existence of a duty. b. The plaintiff must have purchased the product from the defendant. c. The plaintiff must prove her case with a preponderance of the evidence. d. The plaintiff will lose if she cannot prove proximate causation. C [difficult pp. 105-107]
40.
In order to recover in a products liability case based on strict liability, the plaintiff must prove that the product had a defect: a. That was caused by the defendant. b. Of any type. c. That made the product unreasonably dangerous. d. That affected the value of the product. e. That the defendant knew existed. C [moderate pp. 105-107] A public policy reason for imposing strict product liability on all in the chain of distribution is: a. These parties are able to insure against product liability costs. b. These parties should be punished for putting dangerous products on the market. c. Consumers should be able to choose dangerous products if they want to. d. Negligence was making it too easy for plaintiffs to recover. A [moderate p.106] If a manufacturer produces a defective product, sells it to a wholesaler, who sells it to a retailer, who sells it to a consumer, who is injured, which parties in the chain of distribution are potentially liable under strict liability? a. Only the manufacturer. b. Only the manufacturer and wholesaler. c. The manufacturer, wholesaler, and retailer. d. Only the party at fault. C [easy p. 106] Who can recover for their injuries under product liability law? a. Someone who purchases a product new. b. Someone who uses a product with the owner’s permission c. A nonuser such as a bystander. d. A and B only. e. A, B, and C.
41.
42.
43.
65
E The Concept of Defect 44.
[easy p. 107]
What test do the courts apply in determining the adequacy of a product’s design? a. The comparative negligence test. b. The contributory negligence test. c. Risk-utility analysis. d. The crashworthiness doctrine. e. The doctrine of strict liability. C [easy p. 108] What is the significance of a “defect” in a products liability case based on strict liability? a. It is not necessary, but can be used to eliminate the need to prove that there was an injury. b. It is a required element in the proof of such a case. c. Its presence would allow punitive damages to be awarded. d. Its presence would eliminate liability for the defendant. e. The party who caused the defect is the only one who can be held liable. B [moderate p. 107] Carl wants to recover in a products liability lawsuit because of a couch that he bought. He must prove the following except: a. That the product caused the injury. b. That he in fact was injured. c. That he had a contractual relationship with the manufacturer. d. That the injury resulted from a defect in the product. C [moderate p. 105]
45.
46.
Defect in Manufacture 47. Which of the following is not a defect in manufacture? a. Failure to properly assemble the product. b. Failure to properly package the product. c. Failure to properly test the product. d. Failure to properly check the quality of the product. B [moderate p. 107]
Defect in Design 48. In considering whether a product contains a defective design, the courts will consider the following except: a. The degree of danger posed by the design. b. The profitability of the product. c. The likelihood of injury. d. The social utility of the product. e. The cost of producing a safer design. B [moderate p. 108] Which of the following is correct with regard to the crashworthiness doctrine?
49.
66
a. b. c. d. B
Car manufacturers should make cars with a minimal chance of being involved in an accident. Car manufacturers should make cars that are designed so that the risk of injury arising from striking the interior of the car in an accident is minimized. Car dealers should train car buyers in order to minimize their chances of being involved in an accident. Car manufacturers should design cars to minimize their repair costs in the event of an accident. [moderate p. 110]
Defect in Packaging 50. Which of the following best describes a defect in packaging under products liability? a. The packaging of a product, such as a bottle or can, causes an injury to the user. b. The packaging of a product is such that it allows the product to spoil. c. The packaging of a product contains misleading or deceptive information about the product contained inside. d. The packaging of a product fails to contain necessary warnings about the dangers associated with a product. e. The packaging of a product allows children to access a product, such as drugs or poisons, that is generally safe when used as directed, but can be harmful if not used properly. E [moderate p. 111]
Failure to Warn 51. When a product is found to be defective because of a failure to warn, it means: a. That the manufacturer made an unreasonably dangerous product about which consumers should have been told. b. That the product would not have been unreasonably dangerous if consumers had been warned about certain dangers of the product. c. A state of the art design is accepted so long as consumers are warned that there are no safer designs available. d. That the manufacturer did not meet its duty to warn against all possible dangers that might exist in connection with a product. B [moderate p. 112]
Defenses to Product Liability
67
52.
A wholesale distributor who is named in a product liability suit based on strict liability could avoid liability if: a. The plaintiff had not purchased the product causing the injury. b. The distributor exercised reasonable care in all ways with respect to the product causing the injury. c. This product had been used for many years by other users without injury. d. This defect which caused the injury occurred after the product left the distributor. e. The product has been redesigned to eliminate the problem which caused the injury in this case. D [difficult pp. 113-114] In order for the government contractor defense to apply, the following must be present except: a. The government set precise specifications for the product. b. The product conformed to the government specification. c. The contractor warned the government of any known defects or dangers. d. The contractor presented the government with a proposed safer design for the product. e. All four of the above must be proven in order for the defense to apply. D [moderate p. 113]
53.
54.
Which of the following best describes the defense of correction of a defect? a. The defense applies if a product is redesigned such that future production does not contain the defect. b. The defense applies only if the particular sample of the item was repaired, thus fixing the defect. c. The defense applies in a situation where a user received a recall notice to correct the defect but did not comply with the notice. d. It applies only if the manufacturer replaces the defective product at no additional charge to the owner. C [moderate p. 114] Based on the law of products liability, which of the following is correct? a. A manufacturer should design its products to take into account foreseeable misuse. b. A manufacturer should design its products to take into account all possible misuse. c. A manufacturer should design its products to take into account all possible misuse by the initial purchaser, but need not worry about misuse by other users. d. A manufacturer need only take into account the intended use of its products. A [moderate p. 114] Which of the following is true about statutes of limitation and statutes of repose? a. Statutes of limitation, but not statutes of repose, set time limits on bringing legal actions. b. Neither type of statute applies in the event of serious injuries. c. These statutes are federal law and apply nationwide even to state law actions.
55.
56.
68
d. D 57.
A statute of repose requires that a claim be brought within the specified number of years that the product was originally sold. [moderate p. 114]
Which of the following is not a commonly recognized defense in product liability? a. Government contractor defense. b. State of the art design. c. Correction of the defect. d. Assumption of the risk. e. Unforeseeable misuse of the product. B [moderate pp. 114-115]
MULTIPLE CHOICE QUESTIONS—FACTUAL APPLICATION
Tort Liability Based on Fault 58. Irma bought a new Zenith car from the Zenith dealership. As Irma was driving it, one of the wheels fell off, causing the car to crash and Irma to be injured. It can be shown that the manufacturer negligently attached the wheel to the axle. Irma wants to sue the Zenith manufacturer. Under which of the following causes of action can Irma sue the dealership? a. Breach of warranty of merchantability. b. Negligence. c. Strict Liability. d. A, B, and C. e. A and C only. E [moderate pp. 103-105]
The Doctrine of Strict Liability 59. Which of the following could not give rise to a strict liability in tort action for products liability? a. Buying a new car from a Genard Motors dealer. b. Buying food at a Joke-in-the-Box restaurant. c. Buying a prescription which was filled in a drug store. d. Buying legal services for the drafting of a will. D [moderate pp. 105-107] Paul purchased a deluxe motorhome from Wide Open Spaces Motorhomes. In a products liability suit against Wide Open Spaces Motorhome Corporation, Paul must show which of the following in order to recover? a. That Wide Open Spaces was the manufacturer of the motorhome, and not just a dealer. b. That the negligence of Wide Open Spaces led to Paul’s injury. c. That a “defect” made the motorhome unreasonably dangerous, leading to an injury. d. That Paul was not misusing the motorhome when the injury occurred. e. That the motorhome was new when Paul purchased it. C [difficult p. 107]
60.
69
Defect in Design 61. Little Bobby, five years old, finds his older brother’s “Extendo Sword” which is a toy sword about a foot long which springs out to five feet long when a button is pushed on the handle. His mother tells him to put it down because he will hurt someone if he’s not careful. Bobby pushes the button when the sword is pointed toward his face and, just as all properly functioning “Extendo Swords” do, the sword shoots out. Bobby is injured and, under products liability, sues the toy store which sold the toy. Bobby will most likely: a. Lose because of contributory negligence by playing with the sword after being told not to. b. Lose if he cannot prove negligence on the part of the toy store. c. Win on the basis of a manufacturing defect. d. Win on the basis of a design defect. e. Lose if the defendant can show that the sword was a state of the art design. D [difficult p. 108] As Betty is riding her new “LogLeaper XRTSHX 10,000 GTI” mountain bike, the front axle breaks and she is injured. She decides to sue Generalized, the maker of the bike, after learning that all LogLeapers have this problem. She would most likely sue on the basis of: a. Negligence in assembly. b. Failure to warn. c. Manufacturing defect. d. Design defect. e. Defect in packaging. D [moderate p. 108]
62.
Defenses to Products Liability 63. Justin buys a computer from a retailer and his son is injured when the glass on the monitor shatters while he is using it. He sues the wholesaler only and the jury determines that this was a manufacturing defect that existed when the computer left the factory and caused the son’s injury. The jury determined that the wholesaler was only five-percent responsible, the retailer 20-percent and the manufacturer 75-percent. Justin can: a. Recover the full amount of his damages from the wholesaler. b. Recover only five percent of his damages from the wholesaler. c. Recover 20 percent from the retailer, but none from the parties he did not deal with. d. Not recover because he (the son) was not the one who bought the computer. A [difficult p. 115]
64.
Pat is pledging at the Delta Upsilon Delta (DUD) fraternity in order to become a member. As part of his initiation, he must eat a piece of cheese which is on a mousetrap which has
70
been set to trap a mouse. He tries, but the trap slams shut on his nose, injuring him. Pat files a products liability suit against the hardware store which sold the mousetrap to the fraternity members. Which of the following, if true, would allow the hardware store to avoid liability? a. The store exercised reasonable care in selling the mousetrap. b. It was an unforeseeable misuse for anyone to use a mousetrap in this way. c. Any defect in the mousetrap was caused by the manufacturer, not the hardware store. d. Pat was not the purchaser from the hardware store. B [difficult p. 114]
65.
A seller is being sued by a buyer under a strict liability theory, for having sold a defective widget. Which of the following facts would not be beneficial to the seller’s defense? a. That the seller was not engaged in the business of selling widgets. b. That the widget had been altered after the seller sold it. c. That the seller had taken all steps possible to ensure a safe product. d. That the product was not unreasonably dangerous. C [difficult p. 108] Dangerous Products, Inc. is currently the defendant in several products liability cases. Which of the following situations would provide the weakest defense for the manufacturer? a. The Plaintiff had received a recall notice addressing the defect which caused the injury, but did not respond to the recall and continued to use the product. b. The Plaintiff was misusing the product, an electric sander, to remove the outer layer of his facial skin in order to improve his facial complexion. c. The Plaintiff had taken one of the company’s lawn mowers and modified it to be a ceiling fan which he attached to his bedroom ceiling. d. The injury occurred when a boy used a drill to drill a hole in his younger brother’s arm because the younger brother had broken the older brother’s toy car. e. The Plaintiff was misusing an electric wood saw because the owner’s manual said to only use it to cut with (along) the grain of the wood and the Plaintiff was using it to cut across the grain, causing it to kick up and injure the Plaintiff. E [difficult p. 114] Barry buys a new sports car. The car sits low to the ground and because of the styling, visibility to the rear is limited. About a month after Barry has the car he backs over his pet poodle as he is leaving for work. In his strict liability suit against the car manufacturer, Barry will: a. Win because driving a sports car is an inherently dangerous activity. b. Win on the basis of design defect. c. Win on the basis of packaging defect because the car could have been packaged in a differently styled body. d. Lose because he assumed the risk of backing up in a car when he could not see to the rear. e. Lose because he is not in privity of contract with the car manufacturer. D [difficult p. 114]
66.
67.
71
68.
Power Tool Company manufactures table saws. These saws have several safety devices including a permanent blade guard. This guard keeps the user’s hands from touching the blade while it is moving. Ralph buys a Power table saw, but he takes off the blade guard because it inhibits the type of work he wants to do. Later, Ralph is injured while using the saw. If the blade guard had been left on, Ralph would not have been injured. Ralph sues Power Tool Co. under a strict liability theory. The best defense that Power could raise based on these facts is: a. Supervening event. b. Assumption of risk. c. Generally known dangers. d. State of the art. e. Misuse of the product. A [difficult p. 113] JKL, Inc. manufactures small appliances, including toasters. JKL learns that its toasters are defective and might cause serious harm to a user. Which of the following statements is not true? a. JKL must make a reasonable effort to notify purchasers and users of this defect. b. JKL must correct the defect. c. If a user gets a notice of the defect, but continues to use the product without having it repaired or replaced, and is subsequently injured, JKL is probably still liable for the injury. d. One reasonable way to notify purchasers of the defect is by mail. C [difficult p.114] Which of the following would be a supervening event from the standpoint of a car manufacturer that has been sued in strict liability for an injury caused by one of its cars? a. A redesign of the particular model car such that the ones being currently manufactured do not have the defect which led to the injury. b. A recall notice sent to the car owner which was ignored. c. An enactment, after the date of the injury, of a new safety regulation that would have prevented the injury. d. The fact that the defect was caused by the car dealer when the car dealer was installing accessories for the purchaser. D [difficult p. 114]
69.
70.
71.
Sean has a six-year-old car which he bought two years ago directly from its original owner. Eight months ago he received a recall notice about a safety problem with the brakes. He never responded to the notice. Yesterday Sean was driving when the brakes failed and caused him to strike and injure a pedestrian. Which of the following is true in lawsuits against the car’s manufacturer? a. The pedestrian cannot recover due to the fact that the pedestrian was not using the car. b. Sean can recover despite having received the recall notice. c. The pedestrian cannot recover because the correction of a defect defense will apply even though Sean did not take the car in for the repair.
72
d. e. C
Neither party can recover if Sean’s car was one of only a few of these cars that actually had a brake defect. The pedestrian could not recover due to assumption of the risk. [difficult p. 114]
ESSAY QUESTIONS—ETHICS AND POLICY
72. Should plaintiffs be able to recover from cigarette manufacturers for smoking-related illnesses? Are there variables that should affect the manufacturers’ liability? What are they? What effect should the warnings on cigarette packages have on the outcome? Some of the cases have been based on smokers who began smoking before the warning labels were used. Another issue that has been raised is that the decision to start smoking is often made at a young age and that the warnings were not understood; by the time the smoker was old enough to understand the warnings, he or she was addicted. Decisions in product liability cases sometimes make headlines, with much of the public outraged over what seems to be an excessive recovery for action seen to be the fault of the plaintiff. Is it too easy to recover in product liability? Why has the law changed over the past several decades to eliminate the need to prove negligence? Who wins and who loses from these changes? What changes would you make if you could? Many persons believe that strict liability has led to safer products overall. The headline cases represent a small fraction of product liability cases. Among the general reasons for the imposition of strict liability are the increasing complexity of products (making it harder for consumers to judge their safety) and the multi-layer distribution system whereby a privity requirement or the necessity to prove negligence would often work an injustice. In 1995, Congress passed a law affecting products liability actions relating to single engine airplanes. Among other provisions, this law sets an 18-year statute of repose. In 1996, Cessna resumed production of several models of single engine airplanes which had been stopped several years earlier, in part because of products liability exposure. Is this law ethical? Was this needed legislation, or was this a special favor given to one industry that makes a product known to lead to death and injury? How does the fact that flight training schools were unable to replace the single engine planes they were using for training with newer ones affect your analysis? Pilots are generally aware of the risks of general aviation, and can decide whether to fly a single engine plane based on those risks. This is generally less true for passengers. To the extent that the law has resulted in new single engine planes being manufactured, overall safety is likely increased. Furthermore, many would argue that the liability exposure for 18 years of a plane’s life is sufficient incentive for the manufacturers to make safe planes.
73.
74.
75.
In the case where General Motors was found liable for defective design of the fuel tank in a Chevrolet Malibu from the late 1970s, General Motors was not allowed to introduce evidence at the trial about the car’s safety history or that the driver was intoxicated when the accident occurred. Should this evidence have been able to be introduced?
73
Because there will probably be some accidents that lead to fuel tank fires or explosions with any fuel tank design, perhaps the overall safety record would have some bearing on the safety of this design relative to others. The driver’s intoxication would probably be viewed as a foreseeable misuse, and should not affect whether the design of the fuel tank was defective.
ESSAY QUESTIONS—FACTUAL APPLICATION Defect in Design 76. Smith purchased the latest kitchen counter top appliance, the Wonderslicer. It was designed to slice any type of dry food with amazing speed in a variety of settings. In the owner’s manual that came with the Wonderslicer it clearly warned that it should not be used on wet food. The Wonderslicer itself contained a warning to read the owner’s manual. Smith’s ten-year-old daughter used the Wonderslicer to slice some oranges. In the process, she received a severe electrical shock which caused burns to her hand. There is both a design defect (because most food is wet to some degree) and failure to warn because such a warning should be on the product itself. Any misuse here is foreseeable. [moderate] It is a hot summer afternoon so Rob takes his brand new Rocketski (a personal watercraft similar to a Jet Ski) out to a local park at a reservoir to try it out. The Rocketski has a built-in CD stereo sound system, with speakers, but also with a headphone jack. The owner’s manual contains a warning that the headphones should only be used in light traffic areas and with extreme caution. Rob takes the Rocketski out on the water and puts the headphones on with his new CD, the greatest hits of the Ultradeath Slashers and Destroyers. He takes the machine out to the open area of the reservoir and tries out the machine. He’s never done this before, is having lots of fun, and then wants to show his friends back on shore how fast the Rocketski can go. He comes close to shore at full speed where there are many swimmers and sailboards in the water. Several swimmers are yelling at him to stop, but he doesn’t hear anyone because he’s listening to his favorite song, “Destroy Me Bad, My Love,” at full volume on the headphones. He is rapidly approaching Sally on her sailboard, but doesn’t see her because he’s looking for his friends on shore. He would have missed Sally (just barely), but just as he got near her the engine on the Rocketski suddenly failed, causing the machine to lurch to the left and into Sally and her sailboard. Sally suffers severe injuries and sues Rocketski, Inc. Discuss the likely basis of the suit, claims raised, possible defenses, and likely outcome, assuming that the engine defect occurred in the manufacture of the Rocketski. Even with the warning, the headphone jack was likely a design defect because of the likelihood of misuse. The warning likely should have been on the Rocketski itself, not merely in the owner’s manual. Rocketski will probably lose despite the negligence (which might be looked at as an intervening event) of Rob because engine failure (most likely a defect in manufacture) was a cause of the injury. [difficult]
77.
Defense to Products Liability
74
78.
Barbara purchases a Radartel cellular phone. One of the reasons she bought this was for security because she lives alone and often travels alone. After using the phone for about a week, she noticed that the rechargeable batteries (supplied in the phone by the maker) lasted a shorter time than claimed by the manufacturer. One evening a few days later, Barbara was in bed, but not yet asleep, and heard someone in her living room. She picked up the cellular phone from beside her bed and attempted to make an emergency call to 911, but the batteries were dead. She panicked and stayed in her bed motionless. About five minutes later, the burglar came into her bedroom, at which point she screamed. As he then tried to climb out the bedroom window she hit him with a lamp, but he kicked it back at her and injured her. The burglar got away and was never caught. Barbara sues Radartel, the maker of the phone. Prior to the lawsuit she returned the phone to the store where she bought it and learned that the batteries were defective, at which point she was provided with new batteries which have worked properly since then. Discuss the likely basis for Barbara’s suit, the defenses that Radartel might raise, and the likely outcome. The defect here was not the cause of the injury, and Barbara assumed any risk of continuing to use the phone knowing of the problem with the batteries. The intruder, and Barbara’s hitting him with the lamp as he tried to flee would likely be viewed as intervening events. Radartel would not be able to use the correction of the defect defense because the correction was not made prior to the injury claimed in this case. [difficult] Bob is at the Boston Biceps Bodybuilding Club riding an exercise bike. Bob wants to change the channel on the television that is mounted high on a nearby wall. He reaches for the remote control device and finds that another member has accidentally taken the remote control and left behind a cellular phone. Bob drags the exercise bike over to the television. He stands on the seat of the exercise bike in order to reach the television, but the seat post breaks and Bob falls to the floor. Bob is injured and cannot control his temper. He puts his entire 170 pounds into destroying the bike and throws it across the room against the wall, breaking off several pieces, with the handlebars landing on the running track. Half an hour later, another patron, Randy, trips over the handlebars as he is running on the track and is injured. Randy and Bob both sue the manufacturer and the health club under products liability for their injuries. Discuss their cases. Although Bob misused the bike, it is probably foreseeable that persons might stand on the seat of an exercise bike. Furthermore, the seat should have been strong enough to support Bob’s 170 pounds. This is either a design or manufacturing defect, although the outcome of the case would be the same regardless of which type of defect this is. Bob would likely be able to recover. Randy would have difficulty proving that the defect caused his injury. The manufacturer could defend on the basis of intervening events, such as Bob’s throwing the bike, the gym’s failure to clean up the track, and possibly Randy’s role in not seeing the handlebars on the track. Note: This question can be expanded by asking about suits by Randy against Bob and the club for negligence. He could easily prove the elements of a negligence case against Bob, and likely also against the club because of their failure to clean up the track in a reasonable time. Both defendants could defend on either contributory/comparative negligence or assumption of the risk. [difficult]
79.
75
80.
George buys a power handsaw from a local hardware store. The manufacturer had made the saw with a blade guard, which surrounds the blade, helping to prevent blade contact with the user. The manufacturer sold the saw to a wholesaler, which sold it to the hardware store. The hardware store removed the blade guard from the saw, but put it in the box that contained the saw. When George got home, he noticed that the blade guard was off. He could have reattached it, or he could have taken it back to the store, but George was in a hurry, so he used it the way it was. While sawing, he hit a knot in the wood, the saw kicked back, and the blade hit George’s hand, seriously injuring it. Kickbacks are a relatively common occurrence, but if the blade guard had been installed, George would not have between injured. George wants to sue everyone in the chain of distribution under a strict liability theory. Discuss the potential liability of each member in the chain of distribution, and any possible defenses that may be raised. The manufacturer and wholesaler are not liable because any defect did not exist when it left their hands, enabling them to use the supervening event defense. The hardware store could assert assumption of risk or generally known danger. [moderate]
CHAPTER 6 BUSINESS AND ONLINE CRIMES
TRUE/FALSE QUESTIONS
Definition of a Crime 1. Statutes are the primary source of criminal law. T [easy p. 122] The evil intent necessary to commit a crime is known as “actus reus.” F [moderate p. 122] If a statute imposes criminal liability based on strict liability, then “mens rea” is not required. T [moderate p. 122] Felonies, but not misdemeanors, can be punished by imprisonment. F [moderate pp. 122-23] In most crimes, it is the conduct, rather than the intent behind the conduct, that determines whether the defendant committed the crime. F [easy p. 123] In a criminal case, intent can be proved by using indirect evidence. T [moderate p 123] The person who initiates a criminal case is known as the plaintiff... F [easy p 123]
2.
3.
4.
5.
6.
7.
76
8.
A lawsuit for any torts connected with a crime may be brought by the victim, but the lawsuit is separate from the criminal case. T [easy p 123] The burden of proof in both civil and criminal cases is “beyond a reasonable doubt.” T [easy p 124] There is no International Criminal Court to prosecute “crimes against humanity.” F [easy p. 125]
9.
10.
Criminal Procedure 11. A police officer must be certain beyond a reasonable doubt that a person has committed a crime before that person can be arrested. F [moderate p 125] An arrest warrant is required before any arrest can be made. F [moderate p 125] An arraignment is necessary before an indictment can be issued. F [easy p 125] A plea of “nolo contendere” means that the defendant admits guilt but no penalty can be imposed. F [moderate p 125] After a criminal trial, only the defendant has the right to appeal the verdict. T [easy p 126] Persons convicted of money laundering can be fined up to $500,000 or twice the value of the property involved in the crime. T [easy p 127]
12.
13.
14.
15.
16.
Crimes Affecting Business 17. Under common law, the crime of burglary could occur only at night. T [easy, p 127] Under common law, arson was defined as intentionally burning one’s own dwelling in order to collect insurance proceeds. F [moderate p. 128]
18.
White Collar Crimes 19. A distinguishing characteristic of embezzlement is that the wrongdoer initially had proper custody or access to the property that was embezzled. T [easy p. 129] It is a crime for a United States citizen to bribe a foreign official even if the conduct takes place entirely outside of the United States.
20.
77
T 21.
[moderate pp. 131-132]
The Racketeer Influenced and Corrupt Organizations Act has been applied to defendants who have no connections to organized crime. T [easy p. 132]
Inchoate Crimes 22. Persons who unsuccessfully try to complete a crime can be convicted of a crime even if they are unsuccessful in carrying out the original crime. T [easy p. 133]
Corporate Criminal Liability 23. A corporate director can be held individually liable for a crime the director committed on the behalf of a corporation, but cannot be held liable for crimes committed by his or her subordinates. F [moderate p. 135]
Constitutional Safeguards 24. Search warrants are not required for searches of business premises for businesses in certain heavily regulated industries. T [easy p. 136] The Fifth Amendment privilege against self-incrimination applies only to natural persons and not to corporations and partnerships. T [easy p. 140]
25.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Definition of a Crime 26. Which of the following is not true about the United States criminal law system? a. Criminal defendants are presumed innocent until proven guilty. b. The burden of proof in a criminal case is on the government. c. A jury’s vote to convict must be unanimous. d. Once there has been an arraignment, most of a defendant’s constitutional rights are no longer applicable. D [moderate p. 122] What is a “penal code?” a. The classification of a particular crime. b. A series of statutes that define precisely the conduct that is considered criminal. c. The list of sentences for particular crimes. d. The unwritten code of conduct among prison personnel. e. Another term used to describe a crime’s degree, such as first degree or second degree. B [moderate p. 122]
27.
78
28.
Imprisonment is generally imposed to serve all of the following functions except: a. Protect society from the person imprisoned. b. Providing a means to rehabilitate the criminal. c. Allowing victims to have a formalized process to meet and confront the criminal. d. Deterring others from engaging in criminal conduct. C [moderate p. 122] For what offenses can imprisonment be imposed? a. Felonies only. b. Felonies and misdemeanors. c. Felonies and violations. d. Misdemeanors and violations. e. Felonies, misdemeanors and violations. E [moderate pp. 122-23] Crimes such as illegal parking and jaywalking are normally categorized as: a. Violations. b. Misdemeanors. c. Felonies. d. None of the above. A [easy p.123] Which of the following correctly ranks the types of crimes from most serious to least serious? a. Violations, misdemeanors, felonies b. Violations, felonies, misdemeanors c. Misdemeanors, felonies, violations d. Felonies, violations, misdemeanors e. Felonies, misdemeanors, violations E [moderate pp. 122-123] In a criminal trial, which of the following is true? a. To be guilty, the defendant must have had a criminal intent at the time of the crime. b. The accused is presumed guilty once an indictment has been issued. c. The government must prove that the accused is guilty beyond all possible doubt. d. At the trial, the grand jury listens to evidence to determine guilt or innocence. A [moderate p. 123] The two general elements required in order to prove guilt in a crime are: a. Criminal act and damages. b. Criminal act and criminal intent. c. Criminal act and at least one impartial witness. d. Criminal act and resultant harm. e. Criminal act and physical injury. B [easy p. 123] Once a criminal case has been brought against a defendant, a related civil case: a. Will automatically become part of the criminal case. b. Can be incorporated into the criminal case, but only if the victim and the prosecutor agree. c. Will always be filed, but as a separate action.
29.
30.
31.
32.
33.
33.
79
d. e. D 34.
Can be filed by the victim, but in many cases no civil case is filed. Can be filed, but only if there is a conviction in the criminal case. [difficult p. 123]
Which of the following is true about crimes? a. Criminal liability exists only if there is a victim who suffered damages. b. A criminal defendant will be found guilty whenever the jury believes it is more likely than not that the defendant committed the crime. c. Torts always accompany crimes, although the civil case is often not brought. d. Criminal law is based on the conduct or activities of the defendant, rather than on resultant harm. D [moderate pp. 122-24]
35
Where is the new International Criminal Court located? a. Geneva. b. Zurich. c. New York. d. The Hague. e. Paris. D [moderate p. 123] Sam is charged with the crime of theft and has also had a civil suit filed against him by the victim. Which of the following could not be a consistent outcome? a. Not guilty in the criminal case, liable in the civil case b. Not guilty in the criminal case, not liable in the civil case c. Guilty in the criminal case, liable in the civil case d. Guilty in the criminal case, not liable in the civil case D [difficult p. 124]
36.
Criminal Procedure 37. In which of the following are these steps of a criminal case listed in the correct order? a. Arraignment, arrest, trial, indictment b. Arrest, indictment, arraignment, trial c. Indictment, arraignment, arrest, trial d. Arrest, arraignment, indictment, trial e. Arrest, indictment, trial, arraignment B [moderate, pp 124-26] Probable cause is most directly associated with which step of the criminal process? a. Arrest
38.
80
b. c. d. e. A 39.
Indictment Plea bargaining Arraignment Jury deliberations [moderate p. 125]
In a criminal proceeding, what is the difference between an indictment and an information? a. The defendant is charged with a crime in an indictment, but not in an information. b. Guilt or innocence is determined in an indictment, but not in an information. c. A grand jury issues an indictment, but does not issue an information. d. An indictment requires proof beyond a reasonable doubt, but an information does not. C [moderate p. 125] In criminal law, what is an “information?” a. The testimony of someone who has been given immunity as part of a plea bargain. b. The evidence presented by the prosecutor at trial. c. Mitigating circumstances presented by a defendant at a sentencing hearing. d. A formal charge of a crime issued by a magistrate. e. Summary of facts learned in the discovery process. D [moderate p. 125 ]
40.
41.
In a criminal trial, the hearing where the defendant is formally notified of the charges and asked to enter a plea is the: a. Indictment. b. Plea hearing. c. Arraignment. d. Information. e. Booking. C [easy p. 125] If a defendant does not admit guilt, but is willing to accept the penalty for a crime, the defendant would most likely: a. Plea bargain with the grand jury. b. Request the mandatory minimum sentence. c. Enter a plea of “ nolo contendere .” d. Proceed directly to the appeal phase. e. Immediately be placed on probation. C [easy p. 125] Which of the following is true about how plea bargaining usually works? a. A defendant waives the right to a jury trial and the judge determines guilt or innocence. b. A defendant who is serving a prison sentence for a crime the defendant was convicted of can get the sentence reduced for good behavior, community service or similar reasons.
42.
43.
81
c.
d. C 44.
A defendant pleads guilty to the charged crime or to a lesser offense in exchange for receiving a lighter sentence than if the defendant were to be tried and found guilty of the original charges. A defendant waives certain constitutional rights in exchange for a lighter sentence. [moderate p. 126]
Which is true about jury verdicts in criminal cases? a. If the defendant is found guilty, the defendant may appeal. b. If the defendant is found not guilty, the government may appeal. c. If the jury cannot agree on guilt or innocence, this is a hung jury and the defendant goes free just as if found not guilty. d. In the case of a tie jury vote, the judge casts a vote to break the tie. e. Both A and B are true. A [moderate p. 126] Which of the following is true about a hung jury in a criminal case? a. Because it means that the jury did not find guilt beyond a reasonable doubt, it has the same result as if the jury had issued a verdict of not guilty. b. It will automatically result in a new trial conducted before the same judge. c. It will automatically result in a new trial, although it might be conducted before a different judge. d. It will allow another trial of the defendant to be held, which the state might or might not choose to actually prosecute. D [moderate p. 126]
45.
Which of the following is true about money laundering? a. The primary difficulty with money laundering activities is that money laundering is not itself illegal. b. Although illegal, the penalties for money laundering are too small to be an effective deterrent. c. Money laundering is a federal crime and can carry fines up to $500,000 or more, depending on the amount of money laundered. d. One difficulty with prosecuting for money laundering is that lenient laws in some states allow those states to function as money laundering havens. C [moderate pp. 126-27] Crimes Affecting Business 47. Someone who takes personal property from someone’s home after entering without authorization has committed: a. Extortion. b. Burglary. c. Embezzlement. d. Robbery. B [easy p. 127]
46.
82
48.
Which of the following is true? a. Some states now group the crimes of robbery, burglary and larceny as theft. b. Some states now group the crimes of robbery, burglary and theft as larceny. c. Some states now group the crimes of burglary, theft and larceny as robbery. d. Some states now group the crimes of robbery, larceny and theft as burglary. A [moderate p. 127] To find someone guilty of receiving stolen property, it is sufficient to prove that the defendant: a. Was in possession of stolen property. b. Intended to keep the property himself. c. Paid for the property and intends to keep it himself. d. Knowingly received the stolen property and intended to deprive the true owner of the property. e. Took part in the wrongful taking of the property and intended to deprive the true owner of the property. D [moderate p. 127] Which of the following is characteristic of a “qui tam” case? a. The federal government sues an individual for breach of a government contract. b. An individual brings a lawsuit against an alleged fraudulent government contractor. c. An individual files a false claim for workers’ compensation or unemployment benefits. d. An individual or business is prosecuted for alleged money laundering. e. An individual or business is prosecuted for alleged involvement with organized crime. B [difficult pp. 128-29]
49.
50.
White Collar Crimes 51. Which of the following would constitute the crime embezzlement? a. A self-serve gasoline customer drives away without paying for the gas. b. The cashier at a grocery store takes money from his own cash register. c. A receptionist who works in a bank lobby distracts a teller and takes money from the teller without the teller’s knowledge. d. A roofing contractor takes a lawnmower from a homeowner while doing a job for the homeowner. e. An electrician working in a client’s home takes $100 from the homeowner’s desk drawer. B [difficult p. 129] Identity fraud typically occurs when: a. Someone uses a fictitious name in place of her real name. b. Someone steals a ticket with a name associated with it, such as an airline ticket, and uses it in place of the original owner.
52.
83
c. d. C 53.
Someone uses the name and other identifying information of another person to engage in fraudulent activity. Someone operates under two or more different names, at least one of which is fictitious. [moderate p. 130]
Which of the following is true about the crime of bribery? a. Only the person who receives the bribe can be convicted. b. Only the person who gives a bribe and is successful at having it accepted can be convicted. c. Only the person who offers the bribe can be convicted, but that person is guilty whether or not the bribe is accepted. d. A party who actually accepts a bribe can be convicted, as well as the person offering the bribe, whether or not it is accepted. e. A party who even considers accepting a bribe can be convicted, as well as the person offering the bribe, whether or not it is accepted. D [moderate p. 130] Under The Racketeer Influenced and Corrupt Organizations Act: a. Racketeering activity is narrowly defined to include only offenses commonly engaged in by organized crime such as money laundering. b. To constitute a pattern under the statute the conduct must be engaged in at least once a year for five consecutive years. c. Only corporations and individuals are subject to its provisions. d. As few as two acts in a ten year period can amount to a pattern under the statute. e. Only organized crime organizations and their members can be convicted under the statute. D [moderate p. 132]
54.
To prove a pattern of racketeering under RICO, at least _________ predicate acts must be committed by a defendant within a 10-year period. a. 1 b. 2. c. 3. d. 5 A [easy p. 132] Inchoate Crimes 56. Which of the following is true regarding inchoate crimes? a. One can be found guilty only if the related crime was committed. b. They do not require any level of intent. c. One can be charged and found guilty of some inchoate crimes even if one did not try to commit the related crime. d. Because the sentence is usually less than that for the related crime, guilt need not be proven beyond a reasonable doubt. C [moderate p. 134] What is RICO? a. Rural Income Corporate Organization Act. b. Rural Inchoate and Corrupt Organization Act. c. Racketeer Influenced and Corrupt Organization Act.
55.
57.
84
d. C
Racketeer Information and Corporate Organization Act. [easy p. 132]
Corporate Criminal Liability 58. Which is true about corporate criminal liability? a. Corporations have always been just as subject to criminal liability as individuals. b. Because a corporation cannot be sent to prison, they generally cannot be held criminally liable for the actions of their officers. c. If the criminal conduct can be traced to a specific person or persons, those persons will be liable and not the corporation. d. There can be liability for both the individuals who commit crimes and for the corporation on whose behalf the crimes were committed. D [easy p. 135]
Constitutional Safeguards 59. What does the Fourth Amendment do? a. It protects the rights of the people from unreasonable search and seizure by the government. b. It requires the police to obtain a search warrant in all search and seizure cases. c. It prohibits warrantless searches in connection with an arrest. d. It guarantees the defendant the right to an attorney. A [easy p. 126] In the U.S. Supreme Court’s decision in 2000 regarding warrantless searches at traffic stops in Indianapolis, the Court held that: a. Any warrantless searches at traffic stops were unconstitutional. b. A traffic stop, without suspicion, to check sobriety was unconstitutional. c. Roadblock checkpoints to look for drugs in the possession of the persons stopped were unconstitutional. d. Roadblocks near the U.S. border were found to unconstitutionally discriminate against aliens. C [difficult pp. 138-139]
60.
61.
Which of the following statements is true? a. The Fifth Amendment guarantee against self-incrimination does not prohibit the taking of fingerprints against a suspect’s will. b. The guarantee has been extended to include all business records and documents. c. Even if immunity from prosecution has been granted, the defendant may still refuse to testify. d. The attorney-client privilege is the only privilege that has been recognized under the Fifth Amendment. A [difficult p. 140] The Miranda decision requires that a criminal suspect be notified of the following except: a. The right to a trial by jury. b. The right to have a lawyer present during interrogation. c. The fact that anything the suspect says may be used against the suspect. d. The right of the suspect to remain silent.
62.
85
e. A 63.
The right to have an attorney appointed if the suspect cannot afford one. [difficult p. 140]
All of the following privileges have been recognized under the Fifth Amendment except: a. Psychologist/psychiatrist-patient. b. Minister-penitent. c. Accountant-client. d. Parent-child. e. Spouse-spouse. C [moderate, p 141] Because of the prohibition against double jeopardy: a. Criminal defendants are never tried twice on the same charge. b. All criminal defendants are entitled to an attorney. c. The prosecution cannot appeal when a verdict of “not guilty” is rendered. d. Persons are allowed one phone call when arrested. e. A jury’s verdict in a criminal case is final and cannot be appealed. C [difficult p. 141]
64.
65.
The Sixth Amendment right to a public jury trial includes the following rights except: a. The right to be tried in the same state or district where the alleged crime was committed. b. The right to a speedy trial. c. The right to have the assistance of a lawyer. d. The right to know the identity of the jurors deciding the case. e. The right to confront the witnesses testifying against the defendant. D [moderate p. 142] 66. The Federal Antiterrorism Act of 2001 includes the following provisions except: a. The authorization of a Special Intelligence Court. b. Allowing nationwide search warrants. c. Permitting roving wiretaps. d. Allowing the detention of noncitizens for up to seven days without filing charges if the person has been certified as being under suspicion of involvement in terrorist activities. e. Taking away the right to court-appointed attorneys for terrorism defendants who cannot afford to pay for their own attorneys. E [moderate p. 143]
MULTIPLE CHOICE QUESTIONS—FACTUAL APPLICATION
Crimes Affecting Business 67. Mary was at a party given by friends of her boyfriend. It was summer and the guests spent most of the time outdoors. Mary fell in love with a crystal serving dish being used, and when no one was looking, slipped it into her purse. She took the dish home and placed in her kitchen cabinet. Under the definitions under common law, what crimes has Mary committed? a. Burglary and larceny b. Robbery and burglary
86
c. d. e. D
Larceny and receiving stolen property Larceny Larceny and Robbery [moderate p. 127]
68.
Jan saw an item at a local department store, which she considered purchasing but did not. After getting home, she changed her mind. Her roommate was going to the same store, so Jan asked the roommate to pick up the item for her. Jan gave her credit card to the roommate and said, “Just sign my name; you know they never check the signature.” The roommate purchased the item with Jan’s credit card and signed Jan’s name. Has the roommate committed forgery? a. Yes, because the roommate misrepresented that she was Jan. b. Yes, because forgery occurs whenever one person signs the name of another. c. No, because the store did not realize that the roommate was not Jan. d. No, because the roommate did not intend to defraud either Jan or the store. e. No, because Jan is always liable for charges on her credit card. D [difficult p. 128] Sean works for a defense contractor. This contractor has a contract to sell 2 million pocket flashlights per year to the military at a price of “one dollar more than the cost to produce.” The contractor has elaborate and detailed reports on the cost of making these flashlights. Copies of these reports are submitted to the government. Sean knows that some of the information in these reports calculating a cost per flashlight of $243.00 is false. Which of the following is true? a. Because of Sean’s knowledge, he is equally guilty as the corporation of committing fraud. b. Sean can report this information to the government, but Sean cannot gain financially by doing so. c. Sean could file a suit against the contractor under the Civil False Claims Act, and if the case is successful, receive a portion of the recovery. d. Sean could possibly receive a portion of the recovery, but only if the government chooses to not intervene in the suit. e. If Sean reports this information to the government, Sean is entitled to receive a reward whether or not the government is able to recover any money from the contractor. C [difficulty pp. 128-29]
69.
Inchoate Crimes 70. Dean and Mary agree to sell fake stock to investors and disappear into the mountains with the proceeds. They print the stock and send offers to persons through the mail and make offers in person, but are unable to sell any of the fake stock. Dean and Mary are afraid they will get caught and go stay with Mary’s friend Kathleen in another state. Kathleen gives Dean and Mary her car to escape, but the car breaks down a few blocks from Kathleen’s house. Mary and Dean are picked up by the police as they try to get Kathleen’s car running. Which of the following is true?
87
a. Dean and Mary have committed no crime because no one purchased the fake stock. b. Dean and Mary became guilty of conspiracy when they agreed to sell the fake stock. c. Kathleen did not commit a crime because her unreliable car did not help Dean and Mary escape. d. Dean and Mary have committed conspiracy and at least one other crime. D [difficult pp. 129-34] 71. Jean, a nurse practitioner, is sitting at home one afternoon when an old friend comes knocking on her door looking very frightened. The friend said to Jean, “I don’t know what got into me, but I just stole $200 from a convenience store. I don’t know what to do, I want to return the money, but also fear the cops are on my trail.” Jean says, “Don’t worry, go hide in that secret room downstairs until we see what happens. Which convenience store was it? I’ll put the $200 in an envelope and send it back.” Just after Jean gets the envelope sealed and addressed, a police officer knocks on Jean’s door. The officer warns Jean that there might be a robber in the neighborhood, and asks Jean if she has seen anyone unfamiliar. Jean says that she has not seen a single unfamiliar person, and the police officer leaves. Has Jean committed a crime? a. Yes, she has committed the crime of aiding and abetting. b. Yes, she has committed the crime of conspiracy. c. She has committed no crime because she did not take part in the robbery. d. She has committed no crime, but only if she actually returns the $200. e. She has committed no crime because Jean was telling the truth in saying that she had not seen an unfamiliar person. A [difficult p. 134]
Constitutional Safeguards 72. A Rocky Mountain state has extensive safety regulations covering the design, operation, and maintenance of ski lifts. One day a state inspector arrives at the Powdermania Ski Resort to inspect the lifts. The inspector does not have a search warrant and does not expect to find any violations, but finds several criminal violations. Which best describes this situation? a. This was an illegal search made without a warrant and without probable cause. b. The constitutional protection would not apply in this case because it was an inspector, rather than a police officer who conducted the inspection. c. Assuming that Powdermania Ski Resort is a corporation, it does not receive any Fourth Amendment protections due to its status as a corporation. d. Assuming the inspection was conducted in accordance with state law, a search warrant was not needed because the lift operation aspect of the business is highly regulated. D [moderate p. 139]
73.
Roger intentionally set his residence on fire in order to collect insurance proceeds. While the fire was being fought, the police arrived to help with the crowds of onlookers. Roger realized he had done something wrong and went to one of the police officers and told the officer that he had started the fire intentionally. The police officer did not give Roger the
88
Miranda warnings. What is the most likely outcome if Roger tries to have the confession excluded from evidence at trial? a. Because the Miranda warnings were not given, the confession must be excluded. b. Because Roger was not in custody, was not a suspect, and was not being questioned about the fire, the Miranda warnings did not need to be given and the confession may be admitted as evidence. c. Because the police did not have an arrest warrant, the confession cannot be admitted because the Miranda warnings were not given. d. Because the Fifth Amendment requires exclusion of any incriminating evidence, the confession cannot be used. B [difficult p. 140] 74. Kim robbed a bank. Kim used a gun and attempted to murder the teller because the teller screamed upon seeing Kim’s gun. The teller was injured. Bank robbery is a federal offense, and attempted murder is a state law offense. A trial is held on the state law charge of attempted murder and results in a hung jury. This is the only lawsuit Kim has faced up to this point arising from this incident. What is the complete list of legal actions that could be brought against Kim at this point arising from the bank robbery? a. State criminal case, and federal criminal case b. State criminal case, federal criminal case, and a civil case by the teller for damages c. Federal criminal case, and a civil case by the teller for damages d. Either a state or federal criminal case, but not both, and a civil case by the teller B [difficult p. 141]
ESSAY QUESTIONS—ETHICS AND POLICY
75. Assume that a CPA working as an internal auditor embezzles $50,000 from the bank over the course of a year. The CPA has no previous criminal record. An unemployed auto mechanic in the same town who has tried to find work unsuccessfully for 18 months robs a bank and gets away with $50,000. He used a gun in the robbery to threaten bank employees, but the gun was not loaded and therefore he obviously did not fire it. No one was injured. The mechanic has no previous criminal record. Which of these persons deserves the greater sentence? How much greater should it be? In general, should whitecollar criminals receive stronger or more lenient sentences than the more traditional criminal for roughly equivalent crimes? Be sure to clearly state all your reasons for the conclusions you reach. There is a wide perception that white collar criminals receive softer punishments for their crimes. On one hand, the CPA did not threaten anyone, but on the other hand, the CPA has a good job with a good salary, whereas the mechanic might have been desperate. [moderate] In 2000, the U.S. Supreme Court ruled that police roadblocks where people were stopped without individualized suspicion in order to discover and intercept drugs were unconstitutional. In its opinion, the Court acknowledged its earlier 1990 decision in which sobriety checkpoints were constitutional even though drivers were stopped without individualized suspicion. Are the outcomes in these two cases consistent? How do you think they should have been decided?
76.
89
Although they are similar, the sobriety checkpoints are intended to prevent driving while in a condition that could cause immediate and severe harm to others. The drug searches were not aimed at preventing such immediate harm. There are differing views on whether this difference is significant enough for one search to be constitutional and the other not. [moderate] 77. Many persons believe that the Antiterrorism Act of 2001 improperly interferes with constitutional protections and civil liberties. Do you think it does? What risks are there associated with limiting the rights of persons charged in connection with international terrorism? As always, constitutional issues involve a balancing. On one hand, some have argued that ironically the September 11, 2001 terrorists used the civil liberties of the United States in orchestrating the attacks on the United States. On the other hand, the legal system of the United States has long had a reputation for fairness. If the protections are cut back too much, in the court of world opinion, a conviction in the United States will not have much respect and may be viewed as unfair. [difficult]
ESSAY QUESTIONS—FACTUAL APPLICATION Crimes Affecting Business 78. Barry is the computer systems director for a medium-sized consulting firm. One night Barry is at happy hour at a local bar talking about his job with some people he has just met. Barry mentions that he needs to buy computers for the three new persons the firm has recently hired. One of the persons he has just met, Tom, asks Barry what kind of computers he plans to purchase. Barry says, “I’m not sure. I’m still checking out what’s available.” Tom says, “Well, I can get you anything you want for much less than the stores.” A week later Barry calls Tom and says he is interested in the Cybermega 4000 model, and would order three if the price was right. Tom quotes a price, which is about half the normal price. Three days later Tom comes to Barry’s office with the three computers. Barry is curious why only one is in a box and Tom replies, “Oh, I thought you wouldn’t want the trash in your office. I also already sent in the warranty cards for you to save you the trouble.” Later it is learned that the computers were stolen a few days before Tom took them to Barry. Is Barry or the consulting firm guilty of receiving stolen property? The elements can be proven by circumstantial evidence, which are probably present here. A jury would likely find that Barry should have known the property was likely stolen, even if he did not know with certainty. The firm could also have criminal liability for the crimes committed on its behalf. [moderate]
White Collar Crimes 79. John is a sales associate for Neptune Cyber Solutions, a manufacturer of medium size computer operating systems. John is overseas in the nation of Megalopia hoping to secure a contract with a large manufacturing firm. Because the firm has technology contracts with the Megalopia’s military, any contract with the manufacturer must be approved by the Defense Department of Megalopia. John makes a cash payment of
90
$10,000 to the Megalopia representative who is negotiating the contract. Of this amount, $3,000 is to cover the standard published fee that the government charges for these approvals, $2,000 is for an additional $2,000 to be paid to the government officials to expedite the approval, and $5,000 is a “thank you” to the manufacturer’s representative for choosing the Neptune system. The $2,000 for expediting the approval is consistent with what is customary in Megalopia to pay for an expedited approval. Has John violated the Foreign Corrupt Practices Act? The $3,000 is likely not a violation, as it is a published fee, and would likely be considered part of the written laws of Megalopia. The $5,000 was not paid to a government official and is thus not a violation of the Act. The $2,000 payment, even though not paid directly to a government official, might be a violation. More would need to be know if the “expediting” is really simply a speeding up of the approval process (and thus more ministerial and not a violation) or something paid to change the outcome of the approval process, in which case it is likely a violation. [moderate] Inchoate Crimes 80. Hank, a Web page designer, recently discussed with his friend, Frank, how easy it would be to defraud people over the Internet. They decide to set up a fraudulent online casino. The next day Hank makes prints of the homepages of a dozen online casinos. Before either Hank or Frank does anything further, they are arrested for conspiracy. Are they guilty of conspiracy? There was conspiracy by Hank and Frank because there was agreement, and Hank’s prints of existing online casinos would be an overt act. [moderate]
CHAPTER 7 ETHICS AND SOCIAL RESPONSIBILITY OF BUSINESS
TRUE/FALSE QUESTIONS
Law and Ethics 1. Businesses organized in the United States are subject to the laws of other countries in which they operate. T [easy, p. 149] All ethical standards have been enacted as law. F [easy p. 149] If something is legal, it is also ethical. F
2.
3.
[easy p. 149]
Moral Theories and Business Ethics
91
4.
Under ethical fundamentalism, persons look internally and decide for themselves whether a course of action is appropriate. F [easy p. 150] Ethical fundamentalism does not permit a person to determine right and wrong for himself. T [easy p. 150] Utilitarianism requires taking the course of action that provides at least some good to the greatest number of people. F [moderate p. 151] One advantage of utilitarianism is that there is no need for measuring the good of an action for society. F [moderate p. 151] A Michigan appellate court ruled that statements made by General Motors to keep a factory open if it received certain tax incentives was not a legally enforceable promise. T [easy p. 151] Deontology is based on universal rules that require that all similar cases be treated alike with no exceptions. T [easy p. 151] The concept of reversibility under Deontology allows that the rules be reversed when doing so would make the particular situation more just. F [moderate p. 152]
5.
6.
7.
8.
9.
10.
11.
The universal duties under Kantian ethics were agreed upon, with some modification, shortly after being proposed by Kant. F [moderate p. 151] John Locke and Jean-Jacques Rousseau both proposed a social contract theory of morality under which each person is presumed to have entered into a social contract with all others in society to obey moral rules that are necessary for people to live in peace and harmony. T [moderate p. 152] Under the social contract theory of societal justice, members of society are obligated to obey the moral rules of society regardless of whether others obey those rules. F [moderate p. 152] The distributive justice theory has been criticized because its principles of justice are supposed to be chosen by persons who do not know their position in society, something that is unrealistic. T [easy p. 152] Under Rawls’s distributive justice theory, every individual has the same responsibility to use her own efforts to realize her potential. F [moderate p. 152]
12.
13.
14.
15.
92
16.
Ethical relativism allows an individual to evaluate the ethics of his actions based on his own feelings about what is ethical. T [moderate p. 153] John Stuart Mill is the best known proponent of duty ethics. F [easy p. 151] “Deontology” is another name for duty ethics. T [easy 151]
17.
18.
The Social Responsibility of Business 19. One limitation of the ethical principles of the Caux Round Table is that they are based only on Western principles and thus are not accepted by many Eastern nations. F [easy p. 155] Under the maximizing profits theory of the social responsibility of business, it is improper for a business to undertake charitable acts for the benefit of society if doing so reduces profits. T [easy p. 156] Under the maximizing profits theory of the social responsibility of business, a business should never voluntarily reduce its prices. F [easy p. 156] Under the moral minimum theory of the social responsibility of business, businesses are presumed to operate in order to generate profits and thus have minimal moral obligations. F [easy p. 158]
20.
21.
22.
23.
Under the moral minimum theory of the social responsibility of business, it is acceptable for a business to injure others so long as the business adequately compensates those who are injured. T [moderate p. 158] Under the stakeholder interest theory of the social responsibility of business, a business has obligations to both shareholders and employees, but not to others. F [moderate p. 158-159] A criticism of the stakeholder interest theory of the social responsibility of business is that it is often impossible to determine how the interests of the different stakeholders should be balanced. T [easy p. 159] Under the corporate citizenship theory of the social responsibility of business, a business has multiple obligations, but these obligations are only to those who have some direct interest or connection with the business. F [moderate p. 160]
24.
25.
26.
93
27.
The corporate citizenship theory of social responsibility argues that businesses have the responsibility to do good for society. T [easy p. 160] Social audits have recently become mandatory for publicly-traded corporations. F [easy p. 160]
28.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Law and Ethics 29. Which of the following statements is true regarding the relationship of law and ethics? a. The legal requirements will almost always be the same as the ethical requirement because the law is based on the ethical standards. b. In some cases ethics will require a higher standard of conduct than the law, but never vice versa. c. In some cases the law will require a higher standard of conduct than ethics, but never vice versa. d. Depending on the circumstances, the law can require a higher, lower, or the same standard of conduct as ethics demands. D [moderate p. 149] The Houston-based energy company that filed for Chapter 11 bankruptcy and whose business conduct is one of the grossest examples of corporate greed and fraud in America was: a. Shell Oil Company. b. Exxon Corporation. c. Houston Oil and Gas Corporation. d. Enron Corporation. e. Mobil Oil Company. D [moderate p. 150]
30.
31.
Which of the following is correct with regard to the relationship between law and ethics? a. The rule of law and the golden rule of ethics demand the same response. b. The law may not .permit something that would be ethically wrong. c. Lawful conduct is always ethical conduct. d. Although much of law is based on ethical standards, not all ethical standards have been enacted as law. D [moderate p. 149]
Moral Theories and Business Ethics 32. Someone who makes moral decisions based on the guidance of an outside source, such as another person, is applying which moral theory? a. Ethical relativism b. Utilitarianism c. Ethical fundamentalism d. Kantian ethics
94
e. C 33.
Rawls’s distributive justice theory [easy p. 150]
The moral theory of ethical fundamentalism can best be characterized by: a. the consultation of an outside source, such as a book or person, for ethical guidance. b. the belief that the moral rules should be determined by persons who have a “veil of ignorance” about their place or station in society. c. the belief that a person must decide what course of action is proper based on that person’s own set of beliefs or feelings. d. determining which course of action produces the greatest amount of good for the greatest number of people. e. a set of universal rules based on reasoning which must be applied in all situations and is characterized by reversibility. A [moderate p. 151] Someone who believes that moral decisions should be made such that the greatest amount of good in total results from the actions, believes in which moral theory? a. Ethical relativism b. Utilitarianism c. Ethical fundamentalism d. Kantian ethics e. Rawls’s distributive justice theory B [easy p. 151] Which of the following is a frequently raised criticism of “utilitarianism”? a. Under utilitarianism moral and ethical rules are too rigid and fixed over time. b. Under utilitarianism actions taken must harm the smallest number of people thereby failing to consider the effect on the majority. c. Decisions made using utilitarianism require the measurement of qualities that are not subject to precise measurements. d. Decisions made using a utilitarian analysis are not allowed to take into account an individual’s station or place in society. C [moderate p. 151]
33.
34.
35.
Which course of action would utilitarianism require be taken? a. The one that provides at least some good to the greatest number of people. b. The one that provides the greatest overall good to society, even if the benefit of that alternative flows to only one person. c. The one that harms the smallest number of individuals. d. The one that places the greatest number of people in a better position than they were in previously. B [moderate p. 151] Which of the following best characterizes “utilitarianism”? a. Consultation of an outside source, such as a book or person, for guidance. b. The belief that the moral rules should be determined by persons who have a “veil of ignorance” about their place or station in society. c. The belief that a person must decide what course of action is proper based on that person’s own set of beliefs or feelings.
36.
95
d. e. D 37.
Determining which course of action produces the greatest amount of good for society. A set of universal rules based on reasoning which must be applied in all situations and are characterized by reversibility. [moderate p. 151]
What did the appeals court rule when General Motors was sued in Ypsilanti, Michigan? a. General Motors had to reduce the wages of its employees contrary to a collective bargaining agreement so that the factory would remain profitable. b. General Motors had to lay off a portion of the workforce at one of its other factories. c. General Motors could not outsource work currently being performed in its own factory. d. The promises made by General Motors to maintain continuous employment at its Willow Run plant were merely expressions of hope and did not amount to an enforceable promise. e. General Motors was contractually bound to the City of Ypsilanti to keep its Willow Run factory open. D [moderate p. 151] The golden rule, “Do unto others as you would have them do unto you,” is most directly reflected in which moral theory? a. Ethical relativism b. Utilitarianism c. Ethical fundamentalism d. Kantian ethics e. Rawls’s distributive justice theory D [moderate p. 151]
38.
39.
Kantian ethics can best be characterized by: a. The consultation of an outside source, such as a book or person, for guidance. b. The belief that the moral rules should be determined by persons who have a “veil of ignorance” about their place or station in society. c. The belief that a person must decide what course of action is proper based on that person’s own set of beliefs or feelings. d. Determining which course of action produces the greatest amount of good for the greatest number of people. e. A set of universal rules based on reasoning which must be applied in all situations and is characterized by reversibility. E [moderate p. 151] Deontology is another term applied to:
40.
96
a. b. c. d. e. D 41.
Ethical relativism Utilitarianism Ethical fundamentalism Kantian ethics Rawls’s distributive justice theory [moderate p. 151]
Which of the following is not a part of the beliefs of Kantian Ethics? a. All cases should be treated alike. b. The applicability of “do unto others as you would have them do unto you.” c. Choosing a course of action based on what does the greatest good for society. d. Abiding by the rules applied to others in making decisions. C [moderate p. 151] When the city of Ypsilanti, Michigan sued General Motors Corporation for reneging on its implied promise to stay in town in return for tax breaks, what did the appellate court find? a. The agreement was generally unethical and illegal. b. GM made no promise to stay put in Ypsilanti as a quid pro quo for tax abatements. c. Tax abatement agreements provide societal benefits. d. There would be a gross inequity if GM were allowed to close its plant in Ypsilanti. B [moderate, p 182] What does the “veil of ignorance” require under Rawls’ distributive justice theory? a. That ethical obligations are decided by less intelligent members of society so that they can be understood by all. b. That ethical obligations in society not be made public because if they were, individuals would strive to merely do the minimum c. That ethical obligations be determined by persons who do not know their place in society. d. That persons who have suffered an injustice not be able to learn the identity of the person causing the injustice, at least when it is practical to keep this information from the person who was harmed. C [easy p. 152]
42.
43.
44.
Rawls’s social justice theory includes which of the following? a. The consultation of an outside source, such as a book or person, for guidance. b. The belief that the moral rules should be determined by persons who have a “veil of ignorance” about their place or station in society. c. The belief that a person must decide what course of action is proper based on that person’s own set of beliefs or feelings. d. Determining which course of action produces the greatest amount of good for the greatest number of people.
97
e. B 46.
A set of universal rules based on reasoning which must be applied in all situations and are characterized by reversibility. [moderate p. 152]
Someone who believes that the principles of justice and moral duties are based on universal rules, and that the actor must abide by the same rules being applied to others, believes in which moral theory? a. Ethical relativism b. Utilitarianism c. Ethical fundamentalism d. Kantian ethics e. Rawls’s distributive justice theory E [easy p. 152] What is the Japanese concept of “ kyosei”? a. The theory that requires that businesses should maximize profits for shareholders. b. The concept that a business has a duty to maximize profits while avoiding harm to others. c. The rule that businesses must avoid illicit operation. d. The concept of living and working together for the common good. B [difficult p. 155] Someone who makes moral and ethical decisions based on his own beliefs is applying which moral theory? a. Ethical relativism b. Utilitarianism c. Ethical fundamentalism d. Kantian ethics e. Rawls’s distributive justice theory A [easy p. 153] Which two philosophers proposed a social contract theory of morality? a. John Locke and Jean Jacques Rousseau. b. Jeremy Bentham and John Stuart Mill. c. Karl Marx and Joseph Story. d. Milton Friedman and Henry Ford. e. R.J. Rehnolds and Arthur Anderson. A [moderate p. 152]
47.
48.
49.
50.
The moral theory of ethical relativism can best be characterized by: a. The consultation of an outside source, such as a book or person, for guidance. b. The belief that the moral rules should be determined by persons who have a “veil of ignorance” about their place or station in society.
98
c. d. e. C 51.
The belief that a person must decide what course of action is proper based on that person’s own set of beliefs or feelings. Determining which course of action produces the greatest amount of good for the greatest number of people. a set of universal rules based on reasoning which must be applied in all situations and is characterized by reversibility. [moderate p. 153]
Which of the following is a criticism of ethical relativism? a. moral and ethical rules are too rigid and fixed over time. b. some persons would take actions which they believe to be moral, but which most persons in society believe to be immoral. c. decisions require the measurement of qualities which are not subject to precise measurements. d. decisions are not allowed to take into account a particular person’s station or place in society. B [moderate pp. 153-154] Which ethical theory holds that individuals must decide what is ethical based on their own feelings as to what is right or wrong? a. Ethical fundamentalism. b. Ethical relativism. c. Utilitarianism. d. Kantian ethics. B [moderate p. 154]
52.
The Social Responsibility of Business 53. Which of the following is not one of the Caux Round Table Principles for International Business? a. Avoidance of Illicit Operations. b. Support for Multilateral Trade. c. Promotion of Multiculturalism. d. Respect for the Environment. e. Responsibility of Business Beyond Shareholders Toward Stakeholders. C [moderate pp. 155-156] The theory of business social responsibility that holds that a business owes duties solely to produce the highest return for its shareholders is: a. The moral minimum theory. b. The maximizing profits theory. c. The stakeholder interest theory. d. The corporate citizenship theory. e. The social audit theory. B [easy p. 156] Which social responsibility theory has been advocated by Novel Prizewinning economist Milton Friedman? a. Maximizing profits. b. Moral minimum.
54.
55.
99
c. d. e. A 56.
Stakeholder interest. Corporate citizenship. Corporate social audit. [moderate p. 156]
Which of the following actions is consistent with the maximizing profits theory of the social responsibility of business? a. Raising wages because it is expected to lower employee turnover and long-term overall compensation expenses. b. Raising wages because it is believed that workers are underpaid relative to the industry average and that employee relations will be improved even though overall compensation expenses will increase. c. Raising wages to avoid a strike that would cost more than the increased costs of the wage increase. d. A and C only e. A, B and C D [moderate p. 156] What was the outcome of the case against the R.J. Reynolds Tobacco Company for its use of the Joe Camel character in promoting its cigarettes? a. The court found that the company had engaged in unfair business practices. b. The court ruled that the use of the character was unethical, but not illegal. c. The plaintiffs dropped the case because of the cost of litigating against a large corporation. d. Prior to trial, the company agreed to end the use of the Joe Camel character. D [moderate p. 157] One of the outcomes in the car repair fraud case against Sears was: a. Sears had to cease its car repair business for a period of time. b. Sears had to refund amounts customers had paid for certain car repairs during a specified period of time. c. Sears had to provide free car repairs in the future for customers who had paid for certain car repairs during a specified period of time. d. Sears had to provide coupons toward Sears products and services for customers who had paid for certain car repairs during a specified period of time. D [moderate p. 153] The theory of business social responsibility that holds that the obligation of a business is to earn a profit while not harming others, or if it does cause harm, to compensate the victims for the harms caused, is: a. The moral minimum theory. b. The maximizing profits theory. c. The stakeholder interest theory d. The corporate citizenship theory. A [easy p. 158]
57.
58.
59.
60.
The Foreign Corrupt Practices Act prevents each of the following except:
100
a. b. c. d. D 61.
Bribes to foreign officials. Bribes to foreign political party officials. Bribes to candidates for office in foreign nations. Bribes to foreign officials if the payment is legal under the local written laws. [moderate pp. 156, 161]
The theory of business social responsibility that holds that a business owes duties to the various constituencies such as customers and employees in addition to the shareholders is: a. The moral minimum theory. b. The maximizing profits theory. c. The stakeholder interest theory. d. The corporate citizenship theory. C [easy pp. 158-159] The theory of business social responsibility that holds that a business has a duty to generally do good for society is: a. The moral minimum theory. b. The maximizing profits theory. c. The stakeholder interest theory. d. The corporate citizenship theory. D [easy p. 161] The four theories of social responsibility of business discussed in the text can best be described as: a. Laws, only one of which applies in each state. b. Laws, more than one of which can apply in a particular state. c. Mutually-exclusive policies on which laws should be based. d. Policies on which laws should be based, more than one of which might be proper. D [difficult pp. 155-162] A business that is concerned solely with the financial implications of alternate courses of actions is applying which theory of the social responsibility of business? a. Moral minimum. b. Maximizing profits. c. Stakeholder interest. d. Corporate citizenship. B [moderate pp. 156, 161]
62.
63.
64.
65.
A business that is willing to sacrifice some income in order to avoid harm to others is applying which theory of the social responsibility of business? a. Moral minimum. b. Maximizing profits. c. Stakeholder interest. d. Corporate citizenship. A [moderate p. 158, 161]
101
66.
A business that undertakes activities that benefit persons who are in no way connected with the business is applying which theory of the social responsibility of business? a. Moral minimum b. Maximizing profits c. Stakeholder interest d. Corporate citizenship D [moderate pp. 160-161] Which of the theories of the social responsibility of business includes obligations of a business to parties other than shareholders? a. Corporate citizenship only. b. Stakeholder interest only. c. Stakeholder interest and corporate citizenship. d. Moral minimum and stakeholder interest. e. Moral minimum, stakeholder interest and maximizing profits. C [difficult pp. 158-159, 161] Constituency statutes most directly relate to which theory of the social responsibility of business? a. Moral minimum b. Maximizing profits c. Stakeholder interest d. Corporate citizenship C [moderate pp. 158-159, 161] A procedure which can be used to assess the moral health of a corporation is the: a. Social audit. b. Valdez checkup. c. Corrupt practices inventory. d. Minimum moral assessment. A [easy p. 160]
67.
68.
69.
MULTIPLE CHOICE QUESTION—FACTUAL APPLICATION
Moral Theories and Business Ethics 70. Mary owns her own business and has just attended a cash flow management seminar where it was suggested the businesses should delay paying their suppliers as long as absolutely possible even if doing so violates the stated payment terms. Mary decides to continue paying her suppliers on time in accordance with their payment terms because Mary would like her customers to pay her on time. Mary has reached her decision in accordance with: a. Ethical relativism. b. Utilitarianism. c. Ethical fundamentalism. d. Kantian ethics. D [difficult, pp. 151-152]
102
71.
Peter runs an auto air conditioning repair shop. Because of the phase-out of the ozonedepleting refrigerants used in older auto air conditioners, auto air conditioning repairers have become subject to numerous new laws and regulations, some of which are costly and burdensome to comply with. Although it costs him more, Peter decides to follow all the statutes and regulations so long as everyone else does the same. Peter has reached his decision in accordance with: a. Ethical relativism. b. Utilitarianism. c. Ethical fundamentalism. d. Kantian ethics. e. Rawls’s distributive justice theory. E [difficult pp. 152-153] Peter runs an auto air conditioning repair shop. Because of the phase-out of the ozonedepleting refrigerants used in older auto air conditioners, auto air conditioning repairers have become subject to numerous new laws and regulations, some of which are costly and burdensome to comply with. This results in much higher costs for air conditioning repairs for many owners of older cars. By not following some of these regulations, Peter can repair these older cars at a much lower cost. Peter believes that the good that comes from the reduced repair costs outweighs the resulting incremental damage to the environment, and thus decides to not follow the regulations. Peter has reached his decision in accordance with: a. Ethical relativism. b. Utilitarianism. c. Ethical fundamentalism. d. Kantian ethics. e. Rawls’s distributive justice theory. B [difficult pp. 151] A famous psychologist has written a highly acclaimed book targeted at victims of domestic abuse. This book gives practical advice on getting out of such abusive relationships and avoiding further injury prior to getting out of the relationship. Pat thinks the book is excellent, but knows that many persons who could benefit from the book are unaware of its existence and unable to afford its $39.95 price. Pat is considering photocopying significant portions of the book and selling the photocopied portions to such persons at the cost of photocopying, which is much less than $39.95. In using a utilitarianism approach to decide whether to undertake this, Pat would: a. Look to an outside source regarding the photocopying and selling. b. Look for a universal rule about photocopying and selling such material. c. Try to determine the fairest thing to do. d. Determine if the total good to the world would be increased if Pat were to undertake the photocopying and selling of the copied book sections. D [difficult p. 151]
72.
73.
103
The Social Responsibility of Business 74. Big Green Company is considering introducing a new product to replace an existing product. The new product would result in increased revenues, but slightly lower overall profits because the product will cause injury to a few users and Big Green will compensate persons who are injured. The introduction of this product would be the proper decision under: a. Both the moral minimum theory and the profit maximization theory. b. Neither the moral minimum theory nor the profit maximization theory. c. The moral minimum theory, but not under the profit maximization theory. d. The profit maximization theory, but not under the moral minimum theory. C [difficult p. 158]
ESSAY QUESTIONS—ETHICS AND POLICY
75. The increasing use of the Internet and computers generally has made it much easier for businesses to gather, process and distribute information about its customers, as well those who are not customers. To what extent should business be able to gather and sell this information? This widespread practice raises questions about privacy and the growing problem of identity theft. Under the moral minimum theory, one must ask if a business causes harm by merely gathering and selling information. Under stakeholder interest the business should consider customers’ interests. [moderate] Beginning in about 1990, many credit card issuers began marketing more aggressively to college students on the basis that they have considerable future earning potential even though their current income is not very high. Prior to 1990, most credit card issuers required co-signers, who would typically be the student’s parent. This has led to far more students incurring excessive debt. This has required some students to work longer hours while in college and to have more debt-related problems after getting out of college. Furthermore, employers are increasingly using credit information in the hiring selection process so that some students’ debt problems adversely affect their ability to find a job. Evaluate the propriety of these marketing efforts. One question is who causes these problems. If the cause is the cardholder’s unwise decisions, then the issuer has done no wrong. But if the issuer is part of the cause, then the issuer might have violated the moral minimum theory because it has caused harm. Any such harm would be difficult to quantify. Utilitarianism would ask if the overall good increased from these credit cards. [moderate] A company is planning to promote its services heavily via telemarketing. The company has learned that the majority of those to be called are strongly opposed to receiving telemarketing calls. In addition, many of the persons who will be called are elderly who might decide to purchase the product even though they do not really need it or cannot afford it. Discuss the appropriateness of proceeding with this plan under the different theories of the social responsibility of business.
76.
77.
104
The telemarketing plan is presumably aimed toward maximizing profits. Whether the plan meets the moral minimum would depend on whether the company is the cause of any harm due to unwanted telemarketing calls or elderly customers purchasing unneeded products. Under stakeholder interests, the company would need to consider the needs of its customers, many of whom might be better served by other marketing methods. Under corporate citizenship, being a good corporate citizen might include avoiding such marketing methods. [moderate] 78. Assume that a drug company has recently developed a new weight-loss drug that is available only by doctor’s prescription. This drug has some significant side effects, but is quite effective for helping individuals lose weight. The drug is being heavily advertised directly to the public, resulting in large numbers of individuals contacting their doctors in order to get a prescription for the drug. Because of the side effects, this drug is intended only for persons who are severely overweight. Some of the advertising for this drug emphasizes the happiness and beauty that can result when one is slender, leading to many doctors over-prescribing the drug. Discuss the drug company’s actions in light of the theories of the social responsibility of business. The company’s actions are presumably aimed at maximizing profits. It is likely that the moral minimum is being violated as there is likely injury that is not being compensated. The patients’ needs are possibly not being addressed under the stakeholder interest theory, and the promotion of the “skinniness is godliness” belief might violate corporate citizenship. [moderate] The government has proposed demolishing 800 of 2,000 units in a low-income public housing project that has become crime-ridden and in poor repair. These 800 units will be replaced with 300 units, half of which will be for low-income families, and half for moderate-income families, resulting in fewer low-income housing units in total. Evaluate this proposal under utilitarianism. There might be more overall good if crime and other problems are reduced, but crime, as well as residents, might simply be displaced to other parts of the community. Other factors in evaluating what amounts to the overall good include the demand for low-income housing, other options for those displaced, and the current project vacancy rate, which would affect the actual numbers displaced. [moderate] Compare and contrast the views held by Milton Friedman regarding the ethical responsibility of a corporate business to that of someone following the stakeholder interest theory of social responsibility. Milton Friedman asserted that in a free society, “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits as long as it stays within the rules of the game. “ To Friedman, following the “rules of the game” meant engaging in open and free competition without deception and fraud. Someone who follows the stakeholder interest theory of social responsibility would say that although a corporation does have an obligation to its shareholders, there are also others to whom the corporation/business owes an obligation. These others include employees, customers, suppliers, creditors and the local community. [moderate]
79.
80.
105
CHAPTER 8 INTERNATIONAL AND COMPARATIVE LAW
TRUE/FALSE QUESTIONS
The United States and Foreign Affairs 1. At the international level, there is no single international world court responsible for enforcing and interpreting international law, nor is there a world executive branch to enforce international laws. T [moderate p. 166] In the Constitution, the power over international affairs is primarily, though not exclusively, vested in the states. F [easy p. 166] The Commerce Clause grants Congress the power to regulate commerce with foreign nations. T [easy p. 166] A state may not enter into a treaty with a foreign nation even if the treaty does not conflict with any other treaties and does not interfere with foreign commerce. T [moderate p. 166] A Massachusetts statute banning the state from doing business with companies who also did business with the nation of Myanmar was found to violate the Foreign Commerce Clause. T [easy pp. 167-168]
2.
3.
4.
5.
Sources of International Law 6. The Statute of the International Court of Justice identifies the four sources of international law that courts are required to turn to in resolving international law disputes. F [moderate p. 167] Treaties differ from conventions in that treaties are usually agreements directly between the signatory nations. T [moderate p. 168] The World Intellectual Property Organization is a special agency of the United Nations that can enforce, but not develop treaties and conventions affecting intellectual property rights. F [moderate p. 168] Under international law, in order to be considered a custom, a practice must be followed because of legal obligation. T [moderate p. 168]
7.
8.
9.
106
10.
11.
In an international dispute, a general principle of law would be applied in settling the dispute only if the principle is part of the law of both nations involved in the dispute. T [moderate p. 169] As a source of international law, past judicial decisions are not required to be followed, but are often referred to in reaching a decision. T [easy p. 169] The rule of comity is a rule of law guiding most international law court decisions. F [moderate p. 167]
12.
The United Nations 13. The General Assembly of the United Nations has representatives from only 15 member nations. F [easy p. 169] The International Monetary Fund is part of the United Nations. T [moderate p. 170] A nation involved in a dispute before the International Court of Justice may not have a judge from that nation on the panel of judges hearing the dispute. F [moderate p. 170] A class action lawsuit filed against Swiss banks by survivors of the holocaust of World War II resulted in a decision by the International Court of Justice to return certain assets to survivors of victims. F [moderate p. 171]
14.
15.
16.
International Regional Organizations 17. The European Court of Justice can hear only disputes that involve nations as a party. F [difficult p. 172] The North American Free Trade Agreement was formed in 1992 with only three nations. T [easy p. 172]
18.
The World Trade Organization 19. The World Trade Organization was established by the Untied Nations in 1995. F [moderate p. 175] China did not become a member of the World Trade Organization until 2002. T [moderate p. 175] One criticism of the World Trade Organization is that it does not have an appellate process for its decisions. F [moderate p. 177] The World Trade Organization recently ordered that certain United States income tax laws be changed because they amounted to impermissible favorable tax subsidies.
20.
21.
22.
107
T
[moderate p. 178]
Jurisdiction of National Courts to Decide International Disputes 23. In order to prevent bias, international disputes generally cannot be heard by the national courts of any party to the dispute. F [moderate p. 179] A choice of forum clause automatically determines that the forum nation’s laws are applied in settling a dispute. F [moderate p. 179] The United States does not recognize sovereign immunity for commercial activities of foreign nations. T [moderate p. 181]
24.
25.
International Arbitration 26. Many nations have signed an international convention that provides for the enforcement of international arbitration awards. T [easy p. 182]
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
The United States and Foreign Affairs 27. Which of the following are characteristics of international law? a. No single legislative body b. No single court to settle disputes c. No single body to enforce court decisions d. All of the above. e. A and C only D [moderate p. 166] Which of the following is not true regarding international law? a. Enforcement is a problem because there is no “executive branch” to enforce it. b. The United Nations is the body that has the power to enforce most court decisions involving international law disputes. c. International law comes from multiple sources. d. There is no single court system for dealing with all international disputes. B [moderate p. 166] What are the primary sources in the U.S. Constitution of the federal government’s power over international affairs? a. The Commerce Clause and the Treaty Clause b. The Commerce Clause and the Privileges and Immunities Clause c. The Treaty Clause and the Police Power Clause d. The Treaty Clause and the War Powers Clause
28.
29.
108
e. A
The Privileges and Immunities Clause and the Supremacy Clause [moderate p. 166]
30.
Which of the following is correct about the states’ powers regarding foreign affairs? a. The states have no power over foreign affairs because the U.S. Constitution grants that power exclusively to the federal government. b. The states can pass laws and enter into treaties with foreign nations so long as they do not unduly burden foreign commerce. c. The states can pass laws affecting foreign commerce and enter into treaties with foreign nations so long as they first obtain the consent of the Senate. d. The states can pass laws so long as they do not unduly burden foreign commerce, but the states have no authority to enter into treaties with foreign nations. e. Because of the sharing of powers between the federal government and the states, states have powers over foreign affairs equal to the powers of the federal government. D [difficult p. 166] What was the holding of the U.S. Supreme Court in its 2000 decision regarding a Massachusetts law affecting firms doing business with the nation of Myanmar (formerly Burma)? a. The state of Massachusetts was prohibited from conducting business with firms based in Myanmar. b. The Massachusetts law prohibiting the state government from purchasing goods or services from firms doing business with Myanmar violated the Supremacy Clause. c. Massachusetts was acting properly within its power in limited sales only within Massachusetts of firms conducting business with Myanmar. d. The state of Massachusetts was ordered to not discriminate against firms from Myanmar. B [difficult pp. 166-167]
31.
Sources of International Law 32. Which of the following is not one of the general sources of international law? a. A treaty between countries b. A convention among countries c. Custom d. United Nations resolutions e. Judicial teachings D [easy pp. 167-168] Which of the following lists, in descending priority, of sources considered by most courts in settling questions of international law? a. Treaties, customs, conventions, comity b. Treaties, customs, general principles of law, judicial decisions and teachings c. Conventions, comity, customs, general principles of law d. Conventions, treaties, comity, customs e. Treaties, customs, conventions, comity B [moderate pp. 168-169]
33.
109
34.
35.
An agreement sponsored by an international organization that is signed and ratified by two or more nations is called a: a. treaty. b. convention. c. custom. d. charter. e. Statute. B [easy p. 168] Under international law, what is the difference between a treaty and a convention? a. A treaty is an agreement, and a convention is typically the meeting at which the treaty was drafted. b. The two terms have the same meaning, thus there is no difference between them. c. A treaty is an agreement negotiated directly be the signatory nations, whereas a convention is first drafted by a sponsoring international organization, after which, nations can decided whether to be bound by it. d. Conventions usually have only a few signatory nations whereas treaties usually have many. C [moderate p. 168] What two conventions did the World Intellectual Property Organization issue in the late 1990s? a. The Internet Treaty and the Web Page Convention b. The Copyright Treaty and the Software Protection Treaty c. The Music Reproduction Treaty and the Authors’ Rights Treaty d. The Domain Name Registration Treaty and the Internet Trade Name Convention e. The Copyright Treaty and the Phonogram Treaty E [moderate p. 168] Which of the following is true about general principles of law as a source of international law? a. The “general principles” refer to principles that both common law legal systems and civil law legal systems share. b. The “general principles” in a given dispute can include legal principles from any nation with a developed legal system. c. The “general principles” must be part of the law of each nation that is a party to the dispute. d. The “general principles” must be agreed to by the disputing parties before the principles can be used as a basis to settle the dispute. e. The “general principles” must come from constitutions or statutes. C [difficult p. 169] What is comity under international law? a. The system of rules for determining which nation has jurisdiction over a matter. b. The requirement that a nation’s laws, if applicable outside that nation’s borders, apply in the same manner within its borders as outside its borders. c. The enforcement mechanism for the decisions of international tribunals. d. The system of reaching a compromise law to apply to a dispute when the relevant laws of the disputing nations differ. e. Voluntary courtesies that nations use in choosing not to apply their own laws to a dispute. E [moderate p. 169]
36.
37.
38.
110
The United Nations 39. The following are governing bodies of the United Nations except: a. The Secretariat. b. The General Assembly. c. The World Trade Organization. d. The Security Council. C [easy p. 169]
40.
Which of the following is not true about the United Nations? a. It was founded in 1918 at the end of World War I. b. Most nations of the world are members. c. There are only five permanent members of the Security Council. d. It contains a number of autonomous agencies that deal with specialized problems. e. Its headquarters are in New York City. A [moderate p. 169] In what year was the United Nations founded? a. 1918 b. 1939 c. 1941 d. 1945 e. 1959 D [easy p. 169] The body of the United Nations that includes permanent members from only five nations is the: a. Security Council. b. Secretariat. c. General Assembly. d. World Senate. e. International Monetary Fund. A [moderate p. 169] Which of the following is not a permanent member of the Security Council of the United Nations? a. China b. France c. Germany d. United Kingdom e. Russia C [easy p. 169] Which of the following is not an agency of the United Nations? a. United Nations Educational, Scientific and Cultural Organization b. International Monetary Fund c. International Organization for Trade Equalization d. International Fund for Agricultural Development e. United Nations International Children’s Emergency Fund
41.
42.
43.
44.
111
C 45.
[moderate pp. 169-170]
Which of the following is true about the International Court of Justice? a. It is the appellate court for decisions of the World Court. b. It can hear cases involving governments, businesses or individuals of nations that are members of the United Nations. c. No nation can have more than one judge among the 15 sitting judges. d. A nation that is a party to a dispute may appoint one judge on an ad hoc basis for the particular case. D [moderate p. 170] What was the outcome of the litigation against a number of Swiss banks over their handling of assets that had belonged to victims of the Holocaust in Germany? a. The principle of comity required that the matter be left for Swiss courts to decide. b. A trial was held in which the victims won the right to recovery of assets held by the Swiss banks. c. The plaintiffs’ claims were barred by the statute of limitations. d. A settlement was reached prior to trial providing for a substantial settlement fund. e. The World Court ruled that United States courts did not have jurisdiction to hear the case. D [moderate p. 171]
46.
International Regional Organizations 47. Which of the following is not true about the European Union? a. A common currency has been introduced. b. The Union has established the EU Commission and delegated certain powers to it. c. A majority vote is needed to admit a new member. d. The gross economic output of EU nations is greater than that of the United States. e. The Union was created in 1957. C [moderate p. 172] Which of the following is true about the European Union? a. Member nations have not given up any sovereignty to the EU. b. Customs tariffs have been eliminated between member nations and nonmember nations. c. An EU central bank has been established. d. The EU includes a couple of nations from Northern Africa with European ties. e. Its primary purpose is military defense. C [moderate p. 172] The European Court of Justice: a. Hears only commercial disputes involving at least one member nation. b. Is responsible for enforcing its own judgments. c. Has developed its own body of common law. d. Follows the common law of the nation that filed the complaint. e. Includes one judge from each member nation. E [moderate p. 172]
48.
49.
112
50.
The purpose of the European Court of First Instance is: a. To relieve some of the European Court’s caseload. b. To decide cases in new and emerging areas of the law such as Internet technology. c. To be the first court for all cases before they are heard by the European Court of Justice. d. To enforce decisions of the European Court of Justice. e. To serve as the first court for European disputes before being heard in the World Court. A [easy p. 172] Negotiators from which nations signed the North American Free Trade Agreement in 1992? a. The United States and Canada b. The United States and Mexico c. The United States, Canada and Mexico d. The United States, Mexico and Panama e. The United States, Canada, Mexico, Guatemala and Panama C [easy p. 172] Which of the following was not a provision of NAFTA at the time of its signing? a. An immediate 50 percent reduction of Mexican tariffs on vehicles b. An immediate elimination of trade restrictions on textiles and apparel c. A 15-year period to phase out tariffs on import-sensitive American industries d. A nation’s ability to reimpose tariffs where a surge of imports hurts its economy or workers e. Increased protection for intellectual property rights B [difficult p. 173] ASEAN was formed by which nations in 1967? a. Thailand, Japan, Indonesia, Singapore, and the Philippines b. Thailand, Indonesia, the Philippines, Malaysia and China c. Indonesia, Malaysia, the Philippines, Singapore and Thailand d. Japan, China, Singapore, Malaysia and Vietnam e. Thailand, Malaysia, Indonesia, Japan and South Korea C [moderate p. 174] Which of the following is not a member of the Association of South East Asian Nations? a. Japan b. Vietnam c. Singapore d. Indonesia e. Cambodia A [easy p. 174] The MERCOSUR Common Market consists of nations from which Continent? a. Africa b. Europe c. South America d. Asia e. North America
51.
52.
53.
54.
55.
113
C 56.
[easy p. 174]
Which of the following is not one of the economic communities of the Americas? a. The Central American Common Market b. The South American Free Trade Organization c. The MERCOSUR Common Market d. The Caribbean Community e. The Andean Common Market B [moderate p. 174] What did 55 African nations sign in 1991? a. The Treaty Establishing the African Economic Community b. The Treaty Establishing Mutual Defense of the African Continent c. Sub-Saharan Economic Free Trade Zone Agreement d. Resolution for the Unity of South Africa e. The African Economic Leadership Organization A [moderate p. 174]
57.
The World Trade Organization 58. The World Trade Organization was created by: a. the United Nations. b. the North American Free Trade Agreement. c. the International Monetary Fund. d. negotiations on the General Agreement on Tariffs and Trade. e. the European Union. D [moderate p. 175] Which of the following is not one of the provisions agreed to by China in order to open its markets as part of the 1999 bilateral trade treaty between China and the United States? a. Allowing foreign ownership of up to 50 percent of Chinese telephone companies. b. Allowing up to 20 United States films into China each year. c. Allowing foreign firms to sell directly to Chinese consumers. d. Allowing foreign majority interest ownership of Chinese Internet businesses. e. Allowing foreign auto manufacturers to sell and finance sales to Chinese customers. D [difficult pp. 175-176] Which of the following is correct about the World Trade Organization (WTO)? a. The WTO was created in the 1940s. b. The WTO adopted a judicial-based dispute resolution system to replace the politically oriented system in place previously. c. Only a few nations have a representative on the WTO dispute settlement body. d. Parties to a dispute have a veto power over any decision reached by the WTO. e. China has not been admitted to the WTO. B [difficult pp. 176-177] Today, most international trade disputes are settled by: a. The General Agreement on Tariffs and Trade. b. The Security Council of the United Nations.
59.
60.
61.
114
c. d. e. D 62.
The American Arbitration Association. The World Trade Organization. The International Court of Justice. [moderate pp. 176-177]
What can a nation do if it disagrees with a decision made by the dispute settlement body of the World Trade Organization? a. Appeal to the World Court. b. Nothing, as these decisions are final. c. Appeal to that nation’s own national court system. d. Appeal to the appellate body within the WTO. e. This situation would not arise because of the veto power held by the parties to a dispute being resolved by the WTO. D [moderate p. 177]
63.
What was the outcome when the World Trade Organization (WTO) heard a dispute involving United States tax law provisions that provided certain tax breaks to U.S. corporations when they processed paperwork for transactions through certain nations in the Caribbean region? a. The WTO could not hear the case because it involved a United States tax matter rather than a trade issue. b. The WTO heard the case and ruled in favor of the United States because this was an internal tax matter. c. The WTO heard the case and ruled against the United States holding that the tax provision was actually an illegal trade subsidy. d. The WTO heard the case and ruled against the United States, but the decision was overturned upon its appeal to the World Court. e. The WTO could have heard the case, but chose to invoke the doctrine of comity and thus did not actually hear it. C [moderate p. 178]
Jurisdiction of National Courts to Decide International Disputes 64. What is the purpose of a choice of forum clause in an international contract? a. To give the parties a choice of nations in which to bring a lawsuit under the contract. b. To determine in advance where any lawsuits under the contract will be brought. c. To determine who will choose the location of any lawsuit which is brought under the contract. d. To determine which nation’s law will apply in settling disputes that arise under the contract. B [moderate p. 179] The courts of one nation cannot question the actions undertaken by another nation within the other nation’s borders under: a. the act of state doctrine. b. the sovereign immunity doctrine.
65.
115
c. d. e. A 66.
the extradition doctrine. the expropriation doctrine. the comity doctrine. [easy p. 180]
In which of the following circumstances would a foreign government not be subject to suit in a U.S. court according to the Federal Sovereign Immunities Act? a. If the foreign government has explicitly waived immunity. b. If the foreign government has impliedly waived immunity. c. If the action is based on a tort committed by the foreign government. d. If the action is based on commercial activity by the foreign government. e. B and C only C [difficult p. 181] Under which of the following processes is the party whose property is taken compensated? a. Expropriation only b. Confiscation only c. Both expropriation and confiscation d. Neither expropriation nor confiscation A [easy p. 182]
67.
International Arbitration 68. Under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards: a. Businesses in signatory nations are required to submit international contract disputes to arbitration. b. Arbitration awards are recognized only if they were granted by an organization approved by the United Nations. c. Property of the loser that is located in a signatory nation can be attached in order to enforce an arbitration award. d. Arbitration awards granted in foreign nations will be valid only if separately recognized in the nation of the losing party. C [difficult pp. 182-183]
International Law 69. Jewish law is a complex legal system based on ideology and theology of: a. The Torah. b. The Koran. c. The Smitris d. The Veda. A [moderate p. 184] The Islamic law system is derived from: a. The Koran. b. The Sunnah. c. Reasonings by Islamic scholars. d. All of the above. D [moderate p. 184]
70.
116
MULTIPLE CHOICE QUESTION—FACTUAL APPLICATION
The United Nations 71. Mabel, a citizen of England, and Pierre, a citizen of France, have been doing business for many years. Pierre now wants to sue Mabel. Which of the following is true? a. Pierre can sue Mabel in the World Court because the dispute is commercial. b. Pierre cannot sue Mabel in the World Court because the dispute is commercial. c. Pierre cannot sue Mabel in the International Court of Justice under any circumstances. d. Pierre can sue Mabel in the International Court of Justice only if Mabel consents. C [difficult p. 170]
International Regional Organizations 72. An Austrian auto component manufacturer supplies parts to a German automaker under contract. The contract contains a choice of law clause stating that German law applies to any disputes arising under the contract. In a dispute involving the contract, the Austrian supplier could sue: a. In either the International Court of Justice or the European Court of Justice. b. In neither the International Court of Justice nor the European Court of Justice. c. In the International Court of Justice, but not the European Court of Justice. d. In the European Court of Justice, but not the International Court of Justice. B [difficult p. 170]
Jurisdiction of National Courts to Decide International Disputes 73. Janet and Henry were married in Bulgaria when they were each 14 years old. The marriage is valid in Bulgaria. They have now moved to the United States, and there is some question whether their marriage is valid in the United States. Which of the following doctrines would prevent a United States court from questioning the validity of their marriage? a. Sovereign immunity b. Comity c. Act of state d. Diplomatic Immunity e. A United Nations Convention C [moderate p. 180]
117
74.
A farmer’s cooperative in North Dakota entered into a contract to sell wheat to the government of Thailand. If a dispute arises under the contract, the farmers’ cooperative can: a. Sue in a United States court because neither the act of state doctrine nor sovereign immunity would apply. b. Not sue in a United States court because the act of state doctrine. c. Not sue in a United States court because of sovereign immunity. d. Not sue in a United States court because of comity. A [difficult pp. 180-181]
International Arbitration 75. A Japanese computer maker entered into a contract with a United States disk drive manufacturer. The contract contains an arbitration clause that all disputes would be arbitrated by the American Arbitration Association. A dispute under the contract was arbitrated resulting in the American disk drive maker being ordered to pay $50,000 to the Japanese computer manufacturer. Which of the following is true? a. The disk drive maker can appeal the decision to the International Court of Justice. b. The disk drive maker is not obligated to pay the judgment because arbitration awards are not binding. c. The disk drive maker has the option to provide $50,000 worth of disk drives in place of the cash payment. d. The Japanese company can get a United States court to attach the property of the disk drive maker if it does not pay the award of $50,000. D [difficult pp. 182-183]
ESSAY QUESTIONS—ETHICS AND POLICY
76. Large protests have appeared at many recent meetings of the World Trade Organization. What are some of the claims made by the protesters? Do you agree with these claims? How do such protests affect the future and effectiveness of the World Trade Organization? Some have claimed that the World Trade Organization principles are damaging to the environment because the lack of trade barriers allow companies in nations with strict environmental laws to move production to nations with weak environmental laws. Other claims are based on labor abuses. A more general claim is that by giving up sovereignty to the WTO, nations become limited in their ability to pass certain laws, especially ones providing worker protections. Nations’ willingness to abide by decisions of the WTO might be affected by such protests. [moderate] Arbitration clauses appear in many international contracts specifying that arbitration be used for the settlement of disputes. A number of international organizations exist that arbitrate disputes arising under these contracts. What special characteristics of international contracts might make arbitration even more advantageous than in the case of domestic contracts? Compare mediation and arbitration as means of settling international contract disputes.
77.
118
Arbitration avoids the question of which nation’s courts should hear a dispute. In many cases, the arbitrator will be far more neutral than the courts of either nation. Arbitration can avoid many of the problems of working in a court system that is unfamiliar to one of the parties. Mediation is often less desirable in the international contract setting because of the active involvement (often including face-to-face meetings) of the parties that is usually necessary in mediation. [moderate] 78. Under the European Union Directive on Data Protection, broad protections are provided for consumers relative to information collected on them by businesses. What are some of these protections? Should similar protections be available in the United States? What are some of the difficulties if each nation has its own rules on the collection and dissemination of information on customers? Among the protections, companies must show customers their consumer profile upon request, and companies cannot use the information for cross-marketing without the consent of the customer. When the information is originally gathered, the company must explain the reason that it is being gathered. With different rules and regulations, companies need to classify its customers by nation, and then would have many different rules on the allowable means of gathering information and uses that it could make of that information. When the gathering of information is done over the Internet, determining a person’s nation of citizenship can be difficult. [moderate]
ESSAY QUESTIONS—FACTUAL APPLICATION Jurisdiction of National Courts to Decide International Disputes 79. Magnum Enterprises has operated a subsidiary in a South American nation for several years. Over the course of this period, the subsidiary has acquired substantial property, including land and a couple of factories. In addition, it has acquired considerable equipment. Two months ago, the government of this nation took over all the assets of the subsidiary. The government paid the subsidiary the fair value for its land, but paid only a fraction of the value of the buildings. No money was paid for any equipment or other personal property taken. Discuss Magnum’s legal situation and its possible recourse in this situation. The nationalization of Magnum’s property is called expropriation where, for the land, it received fair value, and confiscation where, for the other assets, it received less than fair value. Magnum has little recourse, except possibly through diplomatic intervention. Magnum could possibly recover under any political risk insurance policies that it carries. [moderate] The government of Germany enters into a multi-year contract with a French farmers’ cooperative for the purchase of a quantity of wine. This cooperative is a quasigovernmental agency. After purchasing a substantial quantity of the wine, the British government concludes that the French government has subsidized the cooperative contrary to regulations of the European Union and contrary to other international trade agreements. The farmers’ cooperative disagrees and wants to compel the German government to pay for all wine that it has already received. Discuss the cooperative’s options in this case.
80.
119
There are public law issues in connection with the claimed trade violations and contract law issues in connection with this specific contract. The trade issue could possibly be addressed by the World Trade Organization. Because the parties are both members of the European Union, the European Court of Justice and the Court of First Instance might be available. Because this dispute involves a commercial activity, the sovereign immunity doctrine might not apply to an action brought in the national courts of either nation. [difficult]
CHAPTER 9 NATURE OF TRADITIONAL AND E-COMMERCE CONTRACTS
TRUE/FALSE QUESTIONS
Definition of a Contract 1. The person who makes an offer to enter into a contract is the “offeree.” F [easy p. 191] The fact that a contract is legally enforceable means that the police can be called to make the other party live up to the terms of the contract. F [easy p. 191] There must be at least three parties in order for a contract to be valid. F [easy p. 191] In order for an offer to be valid, an offeror must promise to undertake some affirmative action. F [moderate p. 191] Two of the four basic contract requirements are agreement and signatures of the parties. F [easy pp. 191-192] In the early days of our nation’s history, contracting was largely left up to the individual parties with little government regulation or oversight. T [moderate p. 192] The Industrial Revolution led to greater government regulation in the area of contracts. T [easy p. 192]
2.
3.
4.
5.
6.
7.
Sources of Contract Law 8. The federal common law of contracts is the most important common law source with state common law relative to contracts filling in gaps in the federal common law. F [moderate p. 192] There is some variation in contract law from state to state. T [easy p. 193]
9.
120
10.
The Uniform Commercial Code is a source of contract law that has been adopted by only a minority of the states. F [easy p. 193] The Restatement of the Law of Contracts is the highest priority source of contract law. F [easy p. 193] The Uniform Information Transactions Act was passed by Congress in 1999. F [moderate pp. 193-194]
11.
12.
Classifications of Contracts 13. Offers for both bilateral and unilateral contracts involve a promise by the offeror. T [moderate p. 194] An offer for a unilateral contract cannot be accepted by a mere promise to perform. T [easy p. 194] An offer for a unilateral contract can always be revoked at any time prior to the offeree’s completion of the requested act. F [moderate pp. 194-195] One requirement of an express contract is that it be in writing. F [moderate p. 195] An implied-in-fact contract is one based on the conduct of the parties. T [moderate p. 195] The objective theory of contracts provides that it is the offeror who determines whether or not a contract has come into existence. F [easy p. 196] Quasi-contracts and implied-in-law contracts are two terms for the same situation. T [easy p. 197] Quasi-contract law attempts to prevent unjust enrichment where no contract actually existed. T [easy p. 197] A valid informal contract is just as enforceable as a valid formal contract. T [moderate p. 198] A one-year lease for an apartment that is 12 pages long, printed, covers all details of the parties’ obligations, and contains the dated signature of each party is a formal contract. F [moderate pp. 198, 200] A voidable contract is one that neither party can perform. F [moderate pp. 198, 200] A contract remains executory as long as any party to the contract has not fully performed.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
121
T Equity 25.
[moderate pp. 199, 200]
Equity courts, whether separate or merged into law courts, can decide contract disputes. T [easy p. 200] The United Nations Convention on Contracts for the International Sale of Goods applies to any contract that involves a buyer and seller in different nations. F [easy p. 201]
26.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Definition of a Contract 27. Which of the following is true? a. Contracts can be classified as either voluntary or involuntary. b. All contracts are legally enforceable. c. The terms of a valid contract become private law between the parties. d. Contract promises are generally not enforced by the courts. C [easy p. 191] Which of the following is not characteristic of a valid contract? a. It can be viewed as private law between the parties. b. The parties must have the contract’s terms approved by the appropriate court. c. A court will enforce its terms if the parties do not voluntarily perform. d. It will have at least two parties. B [moderate p. 191] Every contract has both: a. A buyer and seller. b. An offeror and offeree. c. A breaching party and a nonbreaching party. d. An initiator and a responder. B [easy p. 191] To create an enforceable contract, which of the following is(are) needed? a. Agreement b. Agreement and consideration c. Agreement, consideration and contractual capacity d. Agreement, consideration, contractual capacity and a lawful objective D [moderate pp. 191-192] Which of the following is not needed in order to have a valid contract? a. Contractual capacity b. An agreement c. A signed written document d. Consideration e. A legal object C [easy pp. 191-192]
28.
29.
30.
31.
122
32.
The most important historic event for the government to begin taking a proactive role in the regulation of the right to contract was: a. The United States becoming independent from Great Britain. b. The Civil War. c. The Industrial Revolution. d. The widespread ownership of radio. e. The development of the Internet. C [moderate p. 192]
33.
How has the government role in contract regulation changed since the founding of the United States? a. There is greater state and federal government involvement today than in the past. b. There is less state and federal government involvement today than in the past. c. There is approximately the same degree of state and federal government involvement today as in the past. d. There is less state, but more federal involvement today than in the past. e. There is less federal, but more state involvement today than in the past. A [easy p. 192]
Sources of Contract Law 34. Common law as a source of law for contracts: a. Comes primarily from federal law. b. Comes exclusively from state law. c. Comes primarily from federal law. d. Comes primarily from state law. e. Comes equally from state and federal law. D [easy p. 192] The Uniform Commercial Code was first drafted in: a. 1910. b. 1933. c. 1945. d. 1952. e. 1976. D [easy p. 193] The Uniform Commercial Code has been adopted by: a. fewer than half of the states. b. most, but not all states. c. at least in part by all states. d. in its entirety by all states. C [easy p. 193] The original source of the Uniform Commercial Code was: a. The U.S. Constitution. b. Congress. c. The state legislature of Delaware.
35.
36.
37.
123
d. e. E 38.
The United Nations. The National Conference of Commissioners on Uniform State Laws. [easy p. 193]
Which of the following best describes the Restatement of the Law of Contracts? a. It is the supreme legal authority for contract law. b. A law which has been adopted, at least in part, by every state. c. A summary of the constitutional provisions affecting contract law. d. A compilation of contract law that is not itself contract law, but is often referred to by judges. D [easy p. 193] What is the name of the act recently drafted by the National Conference of Commissioners on Uniform State Laws in response to the growth in business conducted over the Internet? a. The Uniform Computer Information Transactions Act b. The Standard Internet Commerce Act c. The Uniform Computer Transaction Code d. The New Millennium E-Commerce Act A [moderate p. 194] What is the purpose of the Uniform Computer Information Transactions Act? a. To ensure that credit card companies process transactions promptly. b. To establish uniform rules for the formation and enforcement of electronic contracts and licenses. c. To convert existing contract law so that all contracts are interpreted as if they were negotiated over the Internet. d. To provide consumers certain rights in their contracts with Internet service providers. B [easy p. 194]
39.
40.
Classifications of Contracts 41. Which of the following is true in a unilateral contract? a. The offeror requests an act as acceptance of his offer. b. The offeror cannot revoke the offer once the offeree has begun performance or has substantially completed performance. c. The offeror will treat either a promise to perform or the actual performance of the act as acceptance of his offer. d. A and B only e. B and C only D [moderate p. 194] The terms “bilateral” and “unilateral” as applied to contracts are based on: a. The number of parties in a contract. b. The number of attempts made to form a contract. c. The number of parties who make a promise in the formation of a contract. d. The number of promises that are made in connection with a contract. e. The number of attempts it took for a contract to be successfully performed. C [difficult p. 194]
42.
124
43.
An offeree can form a contract by making a promise if the offer to form the contract is: a. Bilateral. b. Unilateral. c. Trilateral. d. Either A or B e. Neither A, B, nor C A [moderate p. 194] A contract is formed by the performance of the requested act in what kind(s) of contract? a. Bilateral b. Unilateral c. Both A and B d. Neither A nor B B [moderate p. 194] When can an offer to form a unilateral contract be revoked? a. Before the offeree begins performance. b. After the offeree begins performance, but before the performance is completed. c. After completion of performance. d. Both A and B e. A, B and C A [moderate p. 195] What is the common name for an agreement to protect one from having others disclose confidential information or ideas? a. A proprietary secrecy agreement. b. A silence or be-penalized agreement. c. A mute thoughts agreement. d. A hold-information-close agreement. e. A nondisclosure agreement. E [easy p. 195] What is required for a contract to be an express contract? a. It is stated in words. b. It is written. c. It is written and signed. d. It is performed immediately after formation. e. It is performed for mutual benefit. A [moderate p. 195] What kind of contract is based on the conduct of the parties? a. Express. b. Action-oriented. c. Implied-in-fact. d. Implied-in-law. e. Quasi-contract. C [moderate p. 197] Which of the following is not required in order to create an implied-in-fact contract? a. The plaintiff having provided property or services to the defendant. b. An expectation of payment by the plaintiff. c. The plaintiff having not provided the services gratuitously.
44.
45.
46.
47.
48.
49.
125
d. e. D 50.
An agreement between the parties on the amount of the payment. An opportunity by the defendant to reject the goods or services, followed by the defendant not rejecting the goods or services. [difficult p. 195]
51.
Which of the following does not need to be proven by a plaintiff who is claiming that an implied-in-fact contract exists? a. The plaintiff provided property or services to the defendant. b. The plaintiff and defendant communicated with each other about the property or services. c. The plaintiff expected to be paid by the defendant for the property or services and did not intend to provide the property or services gratuitously. d. The defendant was given an opportunity to reject the property or services provided by the plaintiff but failed to do so. B [difficult, p 195] In the case in the text where an author discussed an idea for a book on strategy for the board game Scrabble, what was the outcome of the case? a. Because there was no express contract, there was no basis for the author to recover. b. The court found that an implied-in-fact contract existed so that the author won the suit. c. The court found that an implied-in-law contract existed so that the author won the suit. d. Because the offer was for a unilateral contract, there was no contract until the book was completed. B [difficult p. 196] Under the objective theory of contracts, whether or not a contract exists is based on: a. The reasonable person standard. b. The rules of unilateral offers. c. The existence of the contract’s principal object. d. The intent of the offeror. e. The intent of the offeree. A [moderate p. 196] The reasonable person standard is used to decide whether an express contract exists under the: a. Quasi-contract rules. b. Objective theory of contracts. c. Standard offer requirements. d. Contract existence standard guidelines. e. Nondisclosure rules. B [moderate p. 196] Under the objective theory of contracts, a contract could result from an offer made: a. In jest. b. In anger. c. Due to a need to sell an item quickly. d. Due to undue excitement. C [moderate p. 196]
52.
53.
54.
126
55.
In the case in the text where someone purchased a used safe at an auction for $50, but was later found by the buyers to contain more than $30,000 in cash, how did the court rule? a. There was no contract because the buyer was unjustly enriched. b. There was no contract because the act of opening the safe was not completed before the buyers took the safe. c. This was an implied-in-fact contract and the buyers were required to pay the fair value for the safe and its contents. d. There was objective intent that the parties intended that the safe, and whatever might be in it, be sold for a price of $50. D [moderate p. 196] The doctrine that applies when one person confers a benefit on another who retains the benefit in a situation where it would be unjust to allow the recipient to retain the benefit without paying for it, is known as: a. Quasi-contract. b. Pseudo-contract. c. Unjust-contract. d. Unilateral-contract. A [easy p. 197] Which of the following are two terms for concept or situation? a. Implied-in-law contract and implied-in-fact contract. b. Implied-in-law contract and quasi-contract. c. Implied-in-fact contract and quasi-contract. d. Unilateral contract and informal contract. e. Formal contract and implied-in-law contract. B [moderate p. 197] Which of the following is needed to impose a quasi-contract? a. A benefit having been conferred and injustice if the benefit were not paid for. b. Actions implying a contract and an agreement as to the price. c. A promise asking for action and the requested action having been completed. d. A benefit having been conferred and objective intent that it be conferred. A [moderate p. 197] What is the distinguishing characteristic that makes a contract a formal contract? a. A signature by both parties. b. The contract being in writing. c. A legal requirement that the contract be in a specific form. d. All possible scenarios are addressed in the contract terms. C [easy p. 198] Which of the following is not a formal contract? a. Contract under seal. b. Recognizance. c. Negotiable instrument. d. Letter of credit. e. New car purchase contract. E [moderate p. 198] Which of the following is true regarding contract validity?
56.
57.
58.
59.
60.
61.
127
a. b. c. d. e. B 62.
A void contract is one where a party has the option to avoid his/her contractual liability. A voidable contract is one in which a party may avoid his/her obligation under that contract. A voidable contract is one that has no legal effect because one of the essential elements is missing. An executory contract is also unenforceable. A unilateral contract is unenforceable. [difficult p. 198]
Over time, most contracts are: a. executory at one time and executed at another time. b. bilateral at one time and unilateral at another time. c. valid at one time and void at another time. d. implied at one time and express at another time. A [difficult pp. 198-200]
MULTIPLE CHOICE QUESTIONS—FACTUAL APPLICATION
Classifications of Contracts 63. Otto approaches Edie and says, “If you pick up my new suit for me at the mall tomorrow, I’ll pay you $20.” Edie replies, “I don’t know if I’ll have time to get it, but I’ll see if I get a chance.” As a result of this conversation: a. Otto and Edie have formed a bilateral contract. b. Edie has a legal obligation to use her best efforts to pick up the suit. c. A contract will be formed only if Edie picks up the suit. d. The contract which they have formed is voidable because Edie did not obligate herself. C [moderate p. 194] Jean says to Joan, “If you’ll promise to feed my dog each day while I am out of town next week, I’ll pay you $100.” Joan replies, “I’ll absolutely do that, I hope you have a nice trip.” Joan then feeds the dog, after which Jean paid her. At what point did a contract come into existence? a. When Jean made the offer to Joan. b. When Joan said that she would feed Jean’s dog. c. When Joan started feeding Jean’s dog. d. When Joan completed the final feeding of Jean’s dog. e. When Jean paid the $100 to Joan. B [moderate p. 194] Frank says to Mary, “If you wash every window in my house today, I’ll pay you $200. I don’t care if you do it, but there is $200 in it for you if you do.” Mary washes 12 of the 20 windows in Frank’s house by 2:00 p.m. At this point: a. Frank can revoke his offer to pay Mary the $200 for washing the windows.
64.
65.
128
b. c. d. D 66.
Mary is obligated to finish washing the windows. Mary has formed a contract by beginning to wash the windows. There is no contract yet in this situation. [difficult pp. 194-195]
Janet pulls her car into a line for a car wash. Janet says nothing and her car is washed by the employees there. Janet then refuses to pay for the car wash, stating that there is no contract. What would the results be in a lawsuit over this situation? a. Janet wins; because she said nothing, there can be no contract. b. Car wash wins; this is an express, unilateral contract that has been accepted. c. Janet wins; because the car wash made no promise to wash her car, there is no contract. d. Car wash wins; this is an implied-in-fact contract that has been accepted. D [moderate p. 195] Lori just purchased a brand new lawnmower for $500. When she got home and tried to use it, it would not work. She became angry and shouted, “I’d sell this thing for $50.” Her neighbor heard her and said, “I’ll take it,” and offered Lori the $50 in cash. Which of the following best describes this situation? a. This is an enforceable bilateral contract. b. This is an express contract. c. If Lori sells the lawnmower for $50, it would be a case of unjust enrichment. d. This situation does not result in the creation of a contract. D [moderate p. 196] Mr. Smith awakens one morning to the sound of construction in his back yard. When he looks out the window, he sees Ajax Construction Co. apparently erecting a garage on his property. He had not spoken or contracted with Ajax for this service. However, Mr. Smith really wanted a new garage, so he let them continue. Later, it was discovered that the garage was intended to go next door. Ajax sues Mr. Smith for the value of the garage. What is the probable result? a. Ajax wins; this is a case of a contract implied-in-fact, and Mr. Smith implicitly agreed to pay for the garage. b. Smith wins; there was no contract upon which Ajax could recover, and people are not liable for benefits that are thrust upon them. c. Ajax wins; although there is no real contract, this is a case of unjust enrichment, and because Mr. Smith accepted the garage, he must pay for it. d. Smith wins; unjust enrichment does not apply here because Mr. Smith had no duty to tell Ajax that they had the wrong house. C [difficult p. 197] Mike and Ike agreed orally that Mike would tutor Ike in geology for $10 per hour for three hours. After Mike has done the three hours of tutoring, but before Ike pays him next week, this contract is: a. Executed. b. Implied-in-fact. c. Executory. d. Performed. e. Quasi-executed. C [moderate p. 199]
67.
68.
69.
129
70.
Jana and Annie enter into a written agreement whereby Jana promises to sell and Annie promises to buy a certain parcel of land for $5,000. There is adequate consideration, the contract is legal and both parties have contractual capacity. The contract is fully performed by both parties on January 1. Which of the following best describes this contract as of January 2? a. Bilateral, express, executed, valid b. Unilateral, express, executed, valid c. Unilateral, express, executory, valid d. Unilateral, implied, executory, valid A [difficult pp. 194-199] Jean says to Joan, “If you’ll promise to feed my dog each day while I am out of town next week, I’ll pay you $100.” Joan replies, “I’ll absolutely do that, I hope you have a nice trip.” Joan then feeds the dog, after which Jean paid her. At what point did this become an executed contract? a. When Jean made the offer to Joan. b. When Joan said that she would feed Jean’s dog. c. When Joan started feeding Jean’s dog. d. When Joan completed the final feeding of Jean’s dog. e. When Jean paid the $100 to Joan. E [moderate p. 199]
71.
ESSAY QUESTIONS—ETHICS AND POLICY
72. In the case involving the maker of the board game Scrabble, the court found that there was an implied-in-fact contract that if the maker of Scrabble used the author’s information in writing a book on winning strategies for the game that it would compensate the author. How might an inventor or author use express contracts in situations such as this to avoid the situation in that case? What terms should be in these contracts? What other practical problems are there when inventors or authors want to protect their work, but are trying to sell it at the same time? This is a situation where nondisclosure agreements provide protection. This protection is not absolute because the other party can steal the ideas and subject the victim to high litigation costs. At some point in a negotiation process, the party disclosing the information will have to make a “leap of faith” in trusting the other party to live up to the terms of any nondisclosure agreement. [moderate] Which type of contract, bilateral or unilateral, is more common in business? Why? Under what circumstance would someone prefer one or the other? What are the advantages of each type for the offeror? For the offeree? Bilateral contracts are more common in business because of the certainty that they provide regarding the other party’s performance. An offer for a unilateral contract gives the offeree the option to perform the act or not, while an offer for a bilateral contract will allow the offeror to know, once the return promise has been made, that the offeree is obligated to perform the act. [moderate]
73.
130
74.
Under the objective theory of contracts it is possible that one can be in a contract against her will. What are the advantages of the objective theory of contract formation? The objective theory of contract formation prevents a party from being able to make it appear that he has entered a contract, yet be able to say that he was not serious, was simply joking, etc. If one could avoid a contract on the basis of subjective intent, no one would ever truly be bound to a contract. [difficult]
ESSAY QUESTIONS—FACTUAL APPLICATION Classifications of Contracts 75. Hilda Homeowner said to her neighbor, Paulette Painter, “If you paint my house, I’ll pay you $1,500. All you must do is finish by the end of the next month. My price assumes that you will pay for all of the paint and any needed supplies.” Paulette decided to paint the house. She purchased some supplies as well as enough custom-colored paint to complete the job. On the morning that Paulette was about to begin painting, Hilda told her that she had changed her mind and would not pay Paulette to paint the house. Discuss the rights of the parties in this situation. This is a unilateral contract because Hilda seeks the act of having her house painted, not a promise that it will be painted. The contract is not formed until Paulette has completed the painting, but Hilda loses any right to revoke her offer once Paulette has begun to perform, including steps in preparation. [difficult] Ron took his car to the muffler shop to have the left muffler of his dual exhaust system replaced. From the waiting room he sees that the worker is preparing to remove the right muffler. Ron says nothing, hoping that he’ll get a free muffler for the right side. Discuss this situation. Because Ron could have avoided the mistake, he will be liable, under the doctrine of quasi-contract, for any benefit he received. [moderate]
76.
131
TRUE/FALSE QUESTIONS
What is Law? 1. The law in the United States has been influenced by English, but not by French or Spanish law. F [moderate p. 3] Law is intended to protect persons, but not their property, from unwanted interference from others. F [easy p. 3] Businesses that are organized in the United States are subject to its laws, but not to the laws of other countries in which they do business. T [moderate p. 3] Promoting social justice is a function of the law. T [moderate p. 4] Law serves the functions both to facilitate orderly change and to maintain the status quo. T [moderate p. 4] The U.S. Supreme Court has ruled that it is improper for a party to be convicted in a criminal case if another party involved in the same criminal activity has been acquitted. F [moderate p. 5] One goal of the law is to anticipate all disputes that can arise in the future and to establish laws that address all situations before they arise. F [moderate p. 4] The United States Supreme Court decision in Brown v. Board of Education demonstrates that the law’s function to maintain the status quo. F [moderate p. 5] In the case of Ashcroft, Attorney General v. The Free Speech Coalition, the United States Supreme Court set aside portions of the Child Pornography Prevention Act, because the Act violated the First Amendment’s free speech clause. T [moderate p. 6] According to Anotole France, the law should apply equally to the rich as well as the poor. T [easy p. 5]
2.
3.
4.
5.
6.
7.
8.
9.
10.
1
Schools of Jurisprudential Thought
11. The proponents of feminist legal theory argue that women should have superior rights to men in some circumstances due to the past unequal treatment of women. F [moderate p. 7] The Natural Law School of jurisprudence believes that the law should be based on what is moral and correct, and that this natural law is discovered by man through the use of reason. T [easy p.7] The Historical School of jurisprudence believes that the law should not change and that what has historically been the law should remain the law. F [moderate p. 7] The Sociological School of jurisprudence emphasizes the following of precedent. F [moderate p. 7] The Command School of jurisprudence believes that the law commands the ruling class, thus the law should not change when there is a change in the ruling class. F [easy p. 7] Proponents of the Critical Legal Studies School argue for great subjectivity in decisions made by judges. T [moderate p. 8] The Law and Economics School of jurisprudential thought holds that rights are not worth protecting if it is too costly from an economic viewpoint to do so. T [easy p. 8] The Nineteenth Amendment to the United States Constitution gave women the right to vote. T [difficult p. 7] In the past the law did not allow married women in the United States to own property. T [difficult p. 6] The Law and Economics School of jurisprudential thought is also known as the “Chicago School.” T [difficult p. 8]
12.
13.
14.
15.
16.
17.
18.
19.
20.
History of American Law 21. The English law courts could only award monetary damages. T [moderate p. 9] The English law courts emphasized legal procedure over the merits of the individual case. T [easy p. 9] The English Chancery Courts were under the authority of the Lord Chancellor.
22.
23.
2
T 24.
[moderate p. 9]
In most states today the law courts and equity courts have been combined so that both legal and equitable remedies can be sought in the same court. T [moderate p 9] In general, the courts in a civil law system play a much larger role in making law than in a common law system. F [easy p. 9]
25.
Sources of Law in the United States 26. Together, the federal and state constitutions are considered the supreme law of the land. F [moderate p. 10] The federal government has any power that the U.S. Constitution does not give to the states. F [moderate p. 11] Codes consist of statutes that have been organized by topic. T [easy p. 11] The executive and legislative branches of the federal government are each empowered to create administrative agencies. T [easy p. 12] The doctrine of stare decisis provides that each court decision is independent and should stand on its own. F [easy p. 13]
27.
28.
29.
30.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
What is Law? 31. According to the text, what is the definition of “law”? a. The list of actions a person must not perform. AA body of rules of action or conduct prescribed by controlling authority. b. c. WThe acts a person must perform in order to assure fairness. d. TOptional rules for members of society to follow or ignore as they see fit. B [moderate p. 4] Which of the following is not a general function of the law? SShaping moral standards. a. b. MMaintaining the status quo. c. EEncouraging individual justice. d. FFacilitating orderly change. C [moderate p. 4]
32.
3
33.
When statutes are passed only after considerable study, debate and public input, this is an example of which function of the law? a. Maintaining the status quo. b. Facilitating orderly change. c. Keeping the peace. d. Shaping moral standards. e. Encouraging individual justice. B [moderate p. 4] What was the U.S. Supreme Court’s reaction to a case where a business executive was found guilty of aiding and abetting in the bribery of an Internal Revenue Service Agent even though the Internal Revenue Service agent had been found not guilty of the bribery in a separate trial? a. Because one of the defendants had been found guilty, then both should have been found guilty. b. Because one of the defendants had been found not guilty, they both should have been found not guilty. c. Because of the inconsistent outcomes, a third combined trial was ordered to reconcile the different outcomes. d. The decisions in both cases were thrown out, making it possible, though not mandatory, that one or both defendants would have to face another trial. e. This simply underscores the fact that there is always the possibility that different juries might reach different results in a given situation. E [moderate p. 5] According to Judge Jerome Frank, uncertainty in the law: a. Is an unfortunate accident. b. Should be avoided whenever possible. c. Is of immense social value. d. Does not exist in the U.S. legal system. C [difficult p. 5] The concept of flexibility in the law is best illustrated by: TThe use of precedent to decide similar cases in similar ways. a. b. PPassing statutes that purposely do not address precisely how they would apply in all situations. c. TThe use of appointed judges rather than elected judges. d. IImposing mandatory penalties for criminal violations. e. SSetting a fixed amount of damages applicable to all wrongful death cases. B [difficult p. 5] Which doctrine was overturned in the case of Brown v. Board of Education? a. The legality of poll taxes. b. The permissibility of separate but equal facilities. c. Allowing only white males to vote. d. The acceptability of paying women less than men for comparable work. e. Differential working hours for male and female factory workers.
34.
35.
36.
37.
4
B
[easy p. 5]
Schools of Jurisprudential Thought 38. One of the goals of feminist legal theory is to: PPlace as many women in legal decision-making roles as possible. a. b. EEnsure that law schools graduate approximately equal numbers of men and HHave the courts use a “reasonable woman” standard in evaluating the conduct UUsher in an era where woman hold the bulk of the power in the legal system. EEnsure that there are no areas in the law where women and men are treated [difficult p. 7]
women. c. of women. d. e. differently. C
39. Documents such as the U. S. Constitution, the Magna Carta, and the United Nations Charter reflect what legal theory? a. The Natural Law School. b. The Historical School. c. The Sociological School. d. The Analytical School. A [moderate p. 7] 40. Persons who believe that law is “discovered” by men and women through the use of reasoning and choosing between good and evil, adhere to which school of jurisprudential thought? a. The Natural School. b. The Historical School. c. The Analytical School. d. The Command School. e. The Sociological School. A [easy p. 7] Proponents of which school(s) of jurisprudential thought are unlikely to adhere to precedent in making decisions? a. The Sociological School only. b. The Critical Legal Studies School only. c. Both the Sociological School and the Critical Legal Studies School. d. Neither the Sociological School nor the Critical Legal Studies School. C [difficult p. 7] Someone who believes that law is a reflection of those in power, believes in which school of jurisprudential thought? a. The Natural School. b. The Historical School. c. The Analytical School. d. The Command School. D [easy p. 7]
41.
42.
5
43.
Which of the following is most consistent with the Natural Law School of jurisprudence? a. Law is based on moral and ethical principles of what is right, and it is the job of men and women, through study, to discover what these principles are. b. The law is a reflection of society, thus the law must change naturally as society changes over time. c. The laws of man are secondary to the laws of nature, and thus the laws of nature take precedence whenever the laws of man are in conflict with the laws of nature. d. By applying the rules of logic to specific cases, the logical, or natural, result will be obtained. e. Laws must first and foremost respect, preserve and promote the preservation of the environment and life in all its forms. A [moderate, p 6] The __________________ School of jurisprudence believes that legal rules are unnecessary and used by the powerful to maintain the status quo, and that disputes should be resolved based on general notions of fairness a. The Historical School.T. b. The Natural School. c. The Command School.T. d. The Critical Legal Studies School.. [moderate p. 8] D The Critical Legal Studies School of jurisprudence believes that: a. FFree market forces and market efficiency are the most important principles underlying the law. b. PPast court decisions must be analyzed and criticized in developing new law. c. SSubjective decision making by judges based on general notions of fairness is appropriate. d. OThe purpose of law is to serve as an official voice of criticism of those in power. JJudges should employ the same critical methods of analyzing cases in the e. courtroom that law schools use in teaching the law to students. C [moderate p. 8] The school of jurisprudence that believes that free market forces should determine the outcomes to lawsuits is: a. TThe Command School. b. TThe Sociological School. c. TThe Critical Legal Studies School.
44.
45.
46.
6
d. D
TThe Law and Economics School. [moderate p. 8]
47.
Which of the following is true about the Law and Economics School of jurisprudence? a. It is also known as the Chicago School. b. It promotes the use of economic principles in resolving cases, so long as the case is one involving business. c. It would say that a case which no lawyer would take on a contingent fee basis should be brought by an attorney who is paid by the state. d. It holds that antitrust cases should be vigorously prosecuted in order to protect the economic viability of smaller firms. A [moderate p. 8]
History of American Law 48. The following courts were common in England before the founding of the United States except: a. Chancery Courts. b. Bankruptcy Courts. c. Merchant Courts. d. Equity Courts. B [moderate p. 9] What was the only remedy (relief) available in the law courts of England? SSpecific performance. a. b. FFines and imprisonment. c. MMonetary awards for damages. d. RReturning the parties to their positions before the dispute arose. C [moderate p. 9] Chancery Courts were also known as: a. Law Courts. b. Equity Courts. c. Criminal Courts. d. Merchant Courts. B
49.
50.
[moderate p. 9]
51.
What is an “equitable remedy”? AAny remedy that is fair to the parties involved. a. b. AA remedy fashioned by the chancery court to fit a particular situation. c. AAny remedy granted by the merchant court.
7
d. e. B
A remedy that cannot be modified from its rigid prescribed form. A remedy that Rmust to be approved by the law court. [moderate p. 9]
52.
Which of the following is true about the creation of courts in England? a. The law courts were created in order to have broader jurisdiction than the merchant courts. b. The merchant courts were created in order to have more flexibility in fashioning remedies than the chancery courts. c. The equity courts were created to allow remedies that could not be granted by the law courts. d. The different types of courts were created in order to handle different types of cases, but the remedies available to the different courts were the same. e. Today, the Merchant Court remains a separate system of courts in England and the United States. C [moderate p. 9] Why was “common law” considered to be “common? a. IIt was the law that applied to the common people. b. BIt was uniformly applied and was therefore common to the various jurisdictions in England. c. IIt was the same in England and the United States, and thus common to the two nations. IIt was the law that applied to common, everyday situations. d. B [difficult p. 9] Which of the following is a distinguishing feature of a common law legal system? a. RRequiring guilt to be proven beyond a reasonable doubt. b. The sole source of law is a comprehensive Civil Code.U c. FThe making of law by the judges and the following of precedent. d. HHaving an appeal process. e. PProviding remedies to aggrieved parties. C [medium p. 9] Which of the following is true about United States law today? a. The law of all states is based on English common law. b. In several states, a portion of the law is based on civil law. c. The law and equity courts remain separate in most states today. d. The laws of the 50 states are essentially similar. B [moderate p 9]
53.
54.
55.
8
56. A legal system that relies on extensive codes in which judicial decisions do not become law is known as what kind of legal system? a. Code law. b. Equitable law. c. Common law. d. Civil law. D [easy p. 10] 57. Influential Civil Codes include the following except: a. Tthe Napoleonic Code. b. Tthe Roman Corpus Juris Civilis. c. Tthe Spanish Civil Code of 1898. d. Tthe German Civil Code of 1896. C [moderate p. 10]
Sources of Law in the United States 58. In the United States, what is the Supreme Law of the land? a. TThe U.S. Constitution. b. TThe statutes passed by Congress. c. TExecutive orders issued by the President. d. TState constitutions. A [moderate p. 10] Which branch of government has the authority to determine the validity of a law? a. Executive.. b. Administrative.. c. Judicial.. d. Legislative.. C [easy p. 10] Assume that there is a provision in the Colorado state constitution that is in conflict with a statute that was passed by the U.S. Congress and enacted into law. Which is true? a. The Colorado constitutional provision will control; the federal statute is invalid. b. The federal statute will control and make the state constitutional provision invalid. c. In Colorado, the Colorado constitutional provision will control over the statute passed by Congress, but the federal statute will apply in the other 49 states. d. Within Colorado, whichever was passed earlier will control over the other. e. Within Colorado, whichever was passed later will control over the other. B [difficult p. 11] Which of the following statements is true about treaties? a. Treaties are valid only if they do not conflict with a statute passed by Congress. b. Treaties are valid only if they do not conflict with a statute passed by Congress or any of the state legislatures. c. Treaties are the supreme law of the land, equal in priority with the U.S. Constitution. d. Treaties are the supreme law of the land, and take priority over any inconsistent constitutional provision.
59.
60.
61.
9
C 62.
[moderate p. 11]
The Uniform Commercial Code is an example of what type of law? a. Statutory law. b. Treaty. c. Administrative law. d. Judicial law. e. Executive order. A [moderate p. 11] When statutes are organized by topic, the resulting compilation of law is known as: AA code. a. b. CCommon law. c. CCivil law. d. PPrecedent. A [moderate p. 11]
63.
64. The ability of Native American Indians to conduct gambling operations on Indian reservations: a. IIs determined solely by the respective Indian tribe. b. IIs within the control of the federal government because of provisions in the U.S. Constitution. c. IIs determined solely by the state in which the reservation is located. d. HHas been found by the courts, in many instances, to have been improperly granted. B [difficult p. 11] 65. Which of the following powers do administrative agencies typically have? a. Rulemaking only. b. Statute Interpretation only. c. Dispute Adjudication only. d. All of the above. D [moderate p. 12]
The Federal Trade Commission is an example of: a. AA federal agency created by Congress. b. AA corporation subsidized by the federal government. c. AA branch of the U.S. Supreme Court. d. AA temporary commission created by executive order that has become permanent. AA judicially-created subdivision of the executive branch. e. A [easy p. 12] 67. The power of the president to issue executive orders: a. IIs expressly provided for in the U.S. Constitution. b. WWas granted to the president in an early Supreme Court decision. c. IIs implied, but not expressly stated in the U.S. Constitution. d. Is Ssubject to a two-thirds approval of the Senate. e. EExists only because it has never been challenged.
66.
10
C 68.
[moderate p. 12]
The export of software encryption technology from the United States is prohibited: a. HBy the U. S. Constitution. b. IBy a federal statute passed by Congress. c. By treaty. d. By executive order. D [moderate p. 12]
69.
Stare Decisis is the doctrine of: SSeparation of powers so that decisions are not made by a single branch of a. government. b. FFollowing precedent so that legal principles in earlier cases are followed in later cases. c. CConstitutional principles applied when making any decision. d. SSpending long periods of time looking at facts before making a decision. B [difficult p. 13]
70. What use may a court of one state make of an earlier state court decision made in another state? a. If the earlier decision in the other state is relevant, it must be followed even though it is from another state because all of the states are part of one legal system. b. When deciding the case, the court deciding the case cannot take the decisions of other states into account. c. Earlier court decisions are equally relevant as precedent whether they were made in the same state or in a different state. d. The court of the state deciding a case can look to earlier court decisions in other states for guidance in deciding the case at hand, but is not required to follow them. D [difficult p. 13] MULTIPLE CHOICE QUESTIONS—FACTUAL APPLICATION What is Law? 71. A woman was physically abused for years by her husband. The woman has limited education and never worked outside the home. One day after being abused the previous evening, she plotted to kill her husband when he came home that night. The husband came home and the woman killed him. At the time of the crime, the husband was not making any threats. In the woman’s trial, which of the following would be most consistent with feminist legal theory? a. Whether the killing was justified should be viewed from the standpoint of a reasonable woman, not from that of a reasonable man. b. Any abuse justifies the killing of the abuser.
11
c. d. A
A woman should not be guilty of murder if the murder victim is a man who abused her. The jury should be composed only of women. [difficult p. 7]
Schools of Jurisprudential Thought 72. John lives in a large city and desires to start an airport shuttle service. In order to do so, John must go through a complicated permit application and approval process. John believes that this process is in place in order to protect the persons already operating such services. John believes that these rules are arbitrary, and that he should be allowed to start his business based on general notions of fairness. John’s beliefs most closely correspond to which school of jurisprudence? a. Critical Legal Studies School. b. Law and Economics School. c. Natural Law School. d. Historical School. e. Sociological School. A [moderate p. 8]
73.
Betty believes that she has been discriminated against because of her sexual orientation. Although federal law does not prohibit this discrimination, Mary believes that the law should be changed in order to make the members of society more accepting of gay individuals. Mary’s beliefs most closely correspond to which school of jurisprudence? a. Critical Legal Studies School. b. Natural Law School. c. Historical School. d. Sociological School. [moderate p. 7] D
Sources of Law in the United States 74. Assume that Colorado passes a new law that provides “skiing and snowboarding at excessive speed within the boundaries of a commercially operated ski area shall result in a $1,000 fine.” Charlie is convicted of violating this statute for skiing at 30 m.p.h. on a run at the Silver Peak ski area. Later, two skiers are separately charged with violating the same statute in conditions virtually identical to those when Charlie was skiing. Sam Swift was skiing at 25 m.p.h. and Barry Bomber was skiing at 35 m.p.h. Based on the precedent established in the Standfer v. United States case, what would the juries in each case decide? a. Both would be found guilty because even 25 miles per hour is simply too fast. b. Sam would be found not guilty and Barry would be found guilty. c. Sam’s case could be decided either way, but Barry would be found guilty. d. Either case could be decided either way because the prior case is separate from the two later cases. e. Sam would be found not guilty, but Barry’s case could be decided either way. D [difficult p. 5] Barry owns a small software development firm. Barry has an employee who needs special accommodations in order to be able to perform the functions of his job. These
75.
12
accommodations would cost $10,000, an amount that Barry believes is more than he should have to spend. The Americans with Disabilities Act provides that an employer is required to make “reasonable accommodations” for employees with a disability, but does not define what constitutes a “reasonable accommodation.” Assume that size of the employer (by some measure) determines the maximum amount of money that would be considered reasonable for a particular employer to be required to spend. Under the principles of stare decisis, which of the following is true? a. If a similar-size employer had been required to spend $15,000 in the past, then Barry would be required to spend the $10,000. b. If a similar-size employer had been required to spend $15,000 in the past, this would not be relevant in Barry’s case because it happened in the past. c. If a similar-size employer had not been required to spend $15,000 in the past, then Barry would not be required to spend $10,000. d. If a similar-size employer had not been required to spend $15,000 in the past, then Barry would be required to spend $10,000. A [difficult p. 13]
ESSAY QUESTIONS—ETHICS AND POLICY
76. A number of the functions of the law can be viewed as being contradictory. For example, one function is to maintain the status quo, whereas another is to facilitate orderly change. What other functions could be in conflict with one another? How can the law simultaneously have seemingly inconsistent functions? The law has the function to keep the peace, yet also to maximize individual freedom. Likewise, the function of shaping moral standards can conflict with maximizing individual freedom. There are other examples of conflicting functions. This is reasonable because, although all are legitimate functions of the law, these functions will inevitably come into conflict in some circumstances. Thus, the law not only has these functions, but it must also determine which function takes precedence when there is a conflict. Thus the law can have the function of maximizing individual freedoms, but that can be limited by the separate function of keeping the peace. [moderate] There has been much talk in recent years of eliminating the so called “marriage penalty” in the tax code. This “penalty” actually consists of many different provisions, each of which results in a married couple paying greater taxes than the same two people would pay if both were single. How might the changing norms of society justify the elimination of these provisions, even though they have long been part of the tax code? Because it is less expensive for two people to share a household than for those same two people to maintain separate households, the tax law incorporated numerous provisions providing smaller deductions or higher tax rates for married couples. One argument for eliminating the marriage penalty is that society has changed. In the past, very few couples would share a household without getting married, thus marital status was a determinant of whether people lived together and enjoyed the lower living expenses of living under one roof. In other words, if you were not married, then you must be supporting a household with only one income. Because many couples living together today are not married, marital status is not as much of a determinant whether two persons are supporting one household or two, and thus, proponents say, not a justification for taxation differences. Thus today, many single people are living together as couples without getting married, and many people
77.
13
argue that a decision by these persons to marry should not increase their tax burden. [difficult] 78. Evaluate the views of the Critical Legal Studies School of jurisprudence. What are the benefits and drawbacks of using broad notions of fairness in deciding cases? An advantage is that decisions might be more flexible in fitting the situation of the case being decided. On the other hand, some judges might not use this discretion properly. Furthermore, by not relying on precedent, there would be much uncertainty in the law. [moderate] What are the good and bad aspects of relying on precedent to decide current cases? Give an example of precedent that either was not followed in the past, or should not be followed in the future. How much leeway do judges have in deciding whether to follow precedent? How much leeway should they have? Precedent provides consistency in the law, but can lead to bad decisions when precedent becomes outdated or when the precedent-setting decision was wrong. [moderate]
79.
80. As courts decide cases involving the Internet and new kinds of issues not addressed previously, what role, if any, does precedent play? What role should it play? What difficulties could arise? A court would first look to see if any applicable statutes apply to the situation. Beyond that, the court would consider whether or not there are any earlier relevant court decisions applicable to the case. The court might find a similar case, though one not involving the Internet, and extend its application to the Internet. Through this process, existing law can be extended to apply to new situations. Difficulties can arise if courts extend the application of an existing law to a new area where there are crucial differences that make the application of the old law improper. [moderate]
CHAPTER 2 JUDICIAL AND ALTERNATIVE DISPUTE RESOLUTION
TRUE/FALSE QUESTIONS
The State Court Systems 1. General jurisdiction courts are often referred to as courts of record. T [moderate p. 22] An inferior court is a court whose decision must be approved by a higher court in order to be effective. F [easy p. 22] In many situations, the parties in a small claims court cannot have a lawyer represent them.
2.
3.
14
T 4.
[moderate p. 22]
An intermediate appellate court generally provides the parties an additional opportunity to present evidence. F [easy p. 23] Most states use specialized courts to handle commercial litigation. F [moderate p. 24] General jurisdiction trial courts hear evidence and testimony. T [easy p. 22] Small claims courts are considered courts of record. F [difficult p. 22] Decisions of state supreme courts can always be appealed to the U.S. Supreme Court. F [moderate p. 23] In Delaware the Chancery Court hears and decides business litigation. T [moderate p. 24] A Justice of the Peace Court is considered a special trial court. T [easy p. 22]
5.
6.
7.
8.
9.
10.
The Federal Court System 11. The U.S. Courts of Appeal were created by Congress rather than the U.S. Constitution. T [moderate p. 24] The United States District Court is the general jurisdiction trial court in the federal system. T [easy p. 24]
12.
13.
Each state has only one U.S. District Court. F [easy p. 24] In the U.S. Circuit Courts of Appeals, a review en banc is an appeal heard by a threejudge panel. F [moderate p. 24] A majority decision of the U.S. Supreme Court that is not unanimous does not become precedent. F [moderate p. 26] There is concurrent state and federal jurisdiction for diversity of citizenship cases so long as the minimum amount in controversy is met. T [easy p. 28] The Court of Appeals for the Federal Circuit was the thirteenth court of appeals that was created.
14.
15.
16.
17.
15
T 18.
[moderate p. 25]
The Court of Appeals for the Federal Circuit is located in New York City. F [easy p. 25] Appeals from the Court of International Trade are heard by the Court of Appeals for the Federal Circuit. T [easy p. 25]
19.
The Jurisdiction of Courts 20. A federal question case brought in federal district court must meet the minimum dollar amount limit of $75,000. F [moderate p. 28] The concept of standing requires that the plaintiff have a stake in the outcome of the case that is filed. T [easy p. 29] Subject matter jurisdiction is not necessary in a lawsuit where there is in rem jurisdiction. F [moderate pp. 29-30] Even where a long-arm statute is present, a defendant must have had some minimum contact with a state for that state’s courts to have jurisdiction over the defendant. T [moderate p. 30] A forum-selection clause allows parties to a contract to designate and agree to the jurisdiction of a court that otherwise might not have personal jurisdiction. T [moderate p. 30] Courts generally frown upon forum shopping. T [easy p. 31]
21.
22.
23.
24.
25.
The Pretrial Litigation Process 26. The document filed to initiate a lawsuit is known as an allegation. F [moderate p. 33] In an answer filed for a lawsuit, the defendant must present the defendant’s version of the events described in the complaint. F [moderate p. 33] A party must file a motion to consolidate in order to become a party to a preexisting lawsuit between other parties F [easy p. 34] A statute of limitation provides time limits for initiating lawsuits. T [moderate p. 35] In general, a party must wait until the trial to find out the facts of the other party’s case. F [moderate p. 36]
27.
28.
29.
30.
16
The Trial 31. For a trial to be conducted with a jury, both parties must request a jury trial. F [moderate pp. 38-39] Potential jurors are selected to hear specific cases through the process of voir dire. T [easy p. 39]
32.
Alternative Dispute Resolution 33. An arbitrator’s decision is generally known as a judgment. F [easy p. 41] The Uniform Arbitration Act is a federal statute that applies to all states. F [easy p. 42] The U.S. Supreme Court has upheld the use of arbitration to solve employment disputes. T [easy p. 42]
34.
35.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
The State Court Systems 36. The following are examples of limited jurisdiction trial courts except: a. small claims court. b. appellate court. c. family law court. d. traffic court. e. probate court. B [easy p. 22]
37.
An inferior trial court is one that: a. can hear only matters involving relatively small dollar amounts. b. has had a larger than normal portion of its decisions overturned on appeal. c. has an appointed judge rather than an elected judge. d. can only hear certain kinds of cases. e. must have all of its decisions approved by a higher court before they become effective. D [moderate p. 22] Which article of the United States Constitution deals with the judicial power of the federal government? a. Article I. b. Article II. c. Article III.
38.
17
d. e. C
Article IV. Article V. [moderate p. 24]
39. Which of the following statements is generally not true about state intermediate appellate courts? a. The appellate court reviews the record of the trial court. b. The appellate court usually allows the parties to file briefs outlining support for their positions. c. The appellate court allows the parties to make oral arguments outlining their position. d. The appellate court allows the parties to introduce new evidence so long as it was not previously introduced at the original trial. e. Appellate court decisions are final and further appeal is not possible. D [difficult p. 25] 40. Which of the following is correct about litigating commercial disputes? a. Nearly all states have specialized trial courts that hear commercial disputes. b. Commercial disputes, because of their specialized nature, are first heard at the appellate court level. c. A few states have established specialized trial courts for commercial disputes. d. Businesses generally dislike the concept of specialized trail courts for commercial disputes because the large numbers of consumers who sue businesses in these courts have led the judges to become generally biased against business. e. In all states, commercial disputes must be heard in a limited-jurisdiction court. C [difficult p. 24]
The Federal Court System 41. The general jurisdiction trial court in the federal system is called the: a. United States Trial Court. b. United States Circuit Court. c. United States General Court. d. United States District Court. e. Federal Chancery Court. D [moderate p. 24]
42.
Which federal court or courts is directly established by the United States Constitution? a. The Supreme Court only. b. Federal trial courts only. c. The Supreme Court and federal trial courts. d. The Supreme Court and federal courts of appeal. e. The Supreme Court, federal courts of appeal, and federal trial courts. A [moderate p. 26] How are judges for the federal courts selected? a. By nationwide election. b. By election by the voters within the state where they preside.
43.
18
c. d. e. C 44.
By the President, subject to confirmation by the Senate. By the Supreme Court justices. By the sitting federal judges within the same circuit. [easy p. 24]
The U.S. claims court hears what kind of cases? a. Any case with claims involving more than one state. b. Civil cases where at least $75,000 is in dispute. c. Cases against the United States. d. Cases where counterclaims have been filed. e. Cases involving disputes in the way an earlier case was decided. C [moderate p. 24] Most federal circuits of the federal appellate court system are determined based on: a. Geography. b. The subject matter of the case being appealed. c. Whether the case is criminal or civil. d. The amount in controversy in the appeal. e. Whether the appeals come from state or federal courts. A [easy p. 25] Which of the following is generally true about federal appellate court proceedings? a. The appeals can come only from a U.S. district court. b. New evidence can be introduced, so long as it relates to the evidence introduced in the original trial. c. Appeals are usually heard by a three-judge panel rather than by all the judges of the court. d. To avoid being improperly influenced by the lower court decision, the appellate court must make its own decision on the case without knowing the outcome in the original trial. C [moderate p. 25]
Which of the following is correct with regard to the Court of Appeals for the Federal District?
45.
46.
47.
a. b. c. d. e. E 48.
It hears appeals of all federal district court cases. It hears its cases in New York City.. It includes three Supreme Court justices on its panel of judges. hears appeals only from within the District of Columbia. reviews decisions of the Patent and Trademark Office. [moderate p. 25]
What happens if the U.S. Supreme Court reaches a tie in a decision? a. The case will be reconsidered in the following year. b. The decision will be held in abeyance until one of the justices decides to change his or her mind. c. The case will be returned to the Circuit Court of Appeals to reconsider the case in light of the tie decision by the Supreme Court. d. The lower court decision in the case is overturned. e. The lower court decision in the case is affirmed. E [moderate p. 27]
19
49.
The consequence of a plurality decision is that: a. The decision of the Circuit Court of Appeals is affirmed. b. The case is not decided, and will be reheard at a later date. c. The case is decided, but is not precedent for later cases. d. The case is decided and becomes precedent for later cases. e. The case is not decided, but the applicable legal reasoning becomes precedent for later cases. C [difficult p. 27] A justice who agrees with the outcome in a case, but not with the reasoning used by the other justices, can issue which type of opinion? a. Agreeing opinion b. Concurring opinion c. Dissenting opinion d. Parallel opinion e. Adverse opinion B [moderate p. 27] In most cases, following a decision by the Circuit Court of Appeals: a. The case cannot be appealed further. b. Either party has a right to have the Supreme Court review the merits of the case. c. Either party can request that the Supreme Court review the merits of the case, but the Supreme Court denies this request in most cases. d. Either party can request that the Supreme Court review the merits of the case, with the request being granted unless the Circuit Court of Appeals decision was clearly correct. e. The Circuit Court of Appeals decision must be reconfirmed by the District Court where the case was originally tried. C [difficult p. 27] Which of the following is true with regard to the appellate process? a. Very important cases are usually initially tried in the U.S. Supreme Court. b. When a case is appealed, the appellate court usually holds a new trial. c. In the federal court system, there are usually two levels of appeal by right. d. The U.S. Supreme Court chooses to review only a small fraction of those cases that it is asked to review. e. The vote of only one justice is needed for the U.S. Supreme Court to hear a case. D [difficult p. 26]
50.
51.
52.
53.
Federal courts have exclusive jurisdiction to hear what kinds of cases? a. Suits against the United States. b. Patent cases. c. Copyright cases. d. Federal criminal cases e. All of the above E [easy p. 28] How many women have served as justices on the U.S. Supreme Court?
54.
20
a. b. c. d. e. C
None One Two Three Five [moderate p. 29]
The Jurisdiction of Courts 55. The power or authority of a court to hear a case is known as: a. Standing. b. Venue. c. Certiorari. d. Forum-selection. e. Jurisdiction. E [moderate p. 29] The requirement that a plaintiff have a stake in the outcome of a case is known as: a. Jurisdiction. b. Certiorari. c. Venue. d. Standing. e. Relevance. D [easy p. 29] Which of the following kinds of jurisdiction would be necessary and sufficient for a court to hear a case? a. Subject matter and in personem and in rem b. Subject matter or in personem or in rem c. Subject matter and either in personem or in rem d. In rem and either subject matter or in personem C [difficult pp. 29-30] The term for jurisdiction based on the location of a piece of property is: a. Long-arm jurisdiction. b. In personam jurisdiction. c. In rem jurisdiction. d. Subject matter jurisdiction. e. Standing. C [moderate p. 30]
56.
57.
58.
59.
What does it mean if a court has “in personam jurisdiction”? a. It means the court has the power to make and enforce a judgment against a particular person. b. It means a party has a personal stake in the outcome of a particular case. c. It means the court must meet special requirements in non-business cases involving individuals. d. It means the case has been filed at the correct location with the state. e. It means the court has personal jurisdiction but not subject matter jurisdiction.
21
A 60.
[moderate p. 30]
How are long-arm statutes and forum-selection clauses similar? a. They both eliminate the necessity for a court to have subject matter jurisdiction. b. They both eliminate any requirement that there be a connection between a state and a party over whom that state is attempting to exercise jurisdiction. c. They both can be factors in determining whether or not a state has personal jurisdiction over a defendant. d. They both eliminate the need to meet venue requirements in a case. C [difficult p. 30] How is a forum-selection clause related to questions of personal jurisdiction? a. The two are not related at all. b. The forum-selection clause will be valid only if it names a jurisdiction that would have personal jurisdiction over the parties to the contract even in the absence of the forum-selection clause. c. Forum-selection clauses are attempts by some parties to contracts to take away jurisdictional rights from the other party, and are generally found to be invalid. d. A forum-selection clause will specify which courts have personal jurisdiction over the parties to the contract, and for disputes related to the particular contract, the forum selection clause will control over the general jurisdiction rules. e. Forum-selection clauses are usually enacted by one party to select a jurisdiction most favorable to that party, thus they are effective only if, after a lawsuit has been filed, the defendant in the action agrees to jurisdiction as provided in the clause. D [difficult p. 30] A motion for a change of venue would typically be granted where: a. A court does not have personal jurisdiction over the plaintiff. b. Selection of an impartial jury is unlikely at the original venue location. c. The party losing a case would like a retrial in another location. d. The judge committed errors in a trial. e. The plaintiff but not the defendant requests it. B [difficult p. 31]
61.
62.
The Pretrial Litigation Process 63. Which of the following pleadings could typically be filed by a defendant in a lawsuit? a. Answer and complaint b. Complaint and cross-complaint c. Motion to intervene and complaint d. Answer and cross-complaint e. Cross-complaint and reply D [difficult p. 33] In connection with the pleadings in a lawsuit, what is an answer? a. The response of the defendant to questions posed by the judge b. The response of the plaintiff to questions posed by the judge c. The response of the defendant to the plaintiff’s complaint d. The response of the judge to the plaintiff’s complaint e. Both A and B
64.
22
C 65.
[moderate p. 33]
Someone who is not a party to a lawsuit but has an interest in the outcome and therefore wants to become a party to the suit must: a. await the outcome of this trial and then file a separate action. b. intervene. c. interfere. d. consolidate. e. file a cross-complaint. B [moderate p. 34] Which of the following is not a purpose of discovery? a. To eliminate surprise at trial. b. To save the time of the court. c. To promote the settlement of cases. d. Preserving evidence. e. To avoid the use of the evidence at trial. E [moderate pp. 36-37] Live testimony taken under oath before the actual trial is a discovery device known as a(n): a. Deposition. b. Interrogatory. c. Arbitration. d. Intervention. e. Production of evidence. A [easy p. 37] A motion asserting that there are no factual issues in dispute in a trial is known as a: a. Motion for settlement. b. Motion for judgment on the pleadings. c. Motion for summary judgment. d. Motion to intervene. e. Motion for determination. C [moderate p. 38] Forms of discovery include all but which one of the following? a. Depositions. b. Interrogatories. c. Physical examinations. d. Mental examinations. e. Voir Dire. E [moderate, pp. 37, 39]
66.
67.
68.
69.
70.
A party who is making a motion for summary judgment is asserting that: a. most of the factual evidence is in its favor, so that the judge, rather than a jury, should decide the factual disputes. b. the factual disputes are relatively simple and straightforward such that a full detailed judgment is not necessary in the case.
23
c. the d. are in D The Trial 71.
the case can be decided solely on the information contained in the complaint and answer. a jury is not needed in deciding the case because there are no relevant facts that dispute. [difficult p. 38]
What is “voir dire?” a. The jury deliberation process in a trial b. The U.S. Supreme Court’s case selection process c. The jury selection process in a trial d. A discovery method to learn about the other party’s case e. A motion to dismiss a case C [moderate p. 39] Which of the following is true about cross examination of a plaintiff’s witness in a trial? a. Cross examination is conducted by the plaintiff’s attorney, and can cover any matters relevant to the case. b. Cross examination is conducted by the plaintiff’s attorney, and can cover only matters that were brought up during the discovery process. c. Cross examination is conducted by the defendant’s attorney, and can cover any matters relevant to the case. d. Cross examination is conducted by the defendant’s attorney, and can cover only matters that were brought up in the direct examination. e. Cross examination is conducted by the defendant’s attorney, and can cover only matters that were brought up during the discovery process. D [difficult p. 39] In a civil case, which of the following is true about the order of the presentation of the case? a. The plaintiff is first to present, followed by the defendant. b. The defendant is first to present, followed by the plaintiff. c. The judge decides who goes first, which depends on the circumstances of the case. d. The order of presentation is determined by the flip of a coin or other random selection method. A [moderate p. 39] Under what circumstances is it appropriate for a judge to issue a judgment n.o.v.? a. When there are no disputes as to the facts of the case. b. When the evidence cannot support the verdict of the jury. c. When the judge would have reached a different conclusion than the jury based on the evidence. d. Where the judgment n.o.v. is issued pursuant to a fair and impartial pretrial hearing. B [difficult p. 40]
72.
73.
74.
The Appeal
24
75.
When an appellate court receives a case appealed to it, it will: a. retry the case with a new jury. b. review the jury’s verdict to see if the appellate court judges would have reached the same result. c. retry the case with the appellate court judge acting as the jury. d. review the record of the trial court so see if there were any errors of law made by the judge. D [difficult p. 40] In general, an appellate court might typically reverse which of the following? a. The trial court’s findings of fact. b. The trial court’s conclusions of law. c. Both A and B. d. Neither A nor B. B [moderate p. 40]
76.
MULTIPLE CHOICE QUESTION—FACTUAL APPLICATION
The Jurisdiction of Courts 77. Two friends, Mary and Dean, are hiking in the Colorado mountains when a dog being walked by its owner, Wally, who is from Wyoming, bites Dean, causing injury. Mary wants Dean to sue Wally, but Dean does not want to incur the cost. Which of the following is true? a. Mary does not have standing to sue Wally, the owner of the dog. b. Mary will have standing only if she files the lawsuit in Wyoming. c. Whether Mary has standing depends on whether Mary files the suit in state or federal court. d. Mary has standing if Dean consents to Mary filing the suit. e. Mary’s presence at the time of Dean’s injury gives her standing to file suit. A [difficult p. 29] Tammi Tenant was a university student in Ohio who rented a house from Loretta, who also lived in Ohio. Upon graduation, Tammi moved to Nebraska. Assuming that one party sued the other in connection with the lease after Tammi had moved to Nebraska, which of the following correctly describes the court(s) with jurisdiction over the defendant? If Loretta sued, there would be If Tammi sued, there would be personal jurisdiction over Loretta in: personal jurisdiction over Tammi in: Ohio only Ohio only Nebraska only Ohio only Nebraska or Ohio Nebraska only Nebraska or Ohio Nebraska or Ohio Nebraska or Ohio Ohio only [difficult p. 30]
78.
a. b. c. d. e. E
25
79.
Paul and Dan are involved in a traffic accident at an intersection where there is a traffic circle, but no posted signs or traffic lights. They are in agreement as to everything that happened in the accident, including the locations of the two cars and the timing of events leading to the accident. Based on their pleadings and on information obtained during discovery, the only dispute they have is the interpretation of the state law affecting who had the right of way when they collided. The appropriate motion for one of the parties to file is: a. motion for judgment on the pleadings. b. motion for judgment n.o.v. c. motion for dismissal. d. motion for summary judgment. D [difficult p. 38] Mike, an 80-year-old resident of North Dakota, has long wanted to experience driving in New York City during rush hour. He realizes his goal, but gets into an accident with a taxi driver who has never been outside of New York City. The accident causes $24,000 in damage to Mike’s Porsche Boxter. Mike wants to sue the taxi driver. Where can Mike file his lawsuit? a. In state or federal court in either North Dakota or New York b. In state or federal court in New York only c. Only in state court in New York d. Only in federal court in New York e. In federal court in either New York or New Jersey C [difficult pp. 29-30] The Double Diamond Dude Ranch is located in Montana and maintains a Web site on the Internet. Before the Internet, the ranch had relied exclusively on word-of-mouth advertising. The Web site simply provides some general information and lists the ranch’s phone number for reservations, but reservations cannot be made online. The ranch has no other connections or presence outside of Montana. Bob lives in Ohio, and learned of the ranch through its Web site. Bob then spent a week as a paying guest at the ranch, but was injured when he fell off a horse. Can Bob sue the dude ranch in an Ohio state court? a. No, because the mere ability of an Ohio resident to view the ranch’s Internet advertising does not amount to the minimum contacts necessary for personal jurisdiction over the ranch in Ohio. b. No, because the minimum contacts standard simply cannot be met based on Internet activity. c. No, because cases involving residents of two different states must be filed in federal, not state, court. d. Yes, because Bob noticed the advertisement when he was in Ohio. e. Yes, assuming that other Ohio residents had visited the ranch before Bob’s visit. A [difficult p. 30]
80.
81.
26
ESSAY QUESTIONS—ETHICS AND POLICY
82. Is it reasonable for appellate courts to not hear new evidence in an appeal? Should new available evidence be grounds for appeal? In many cases additional evidence is available by the time of the appeal. If this is the case, wouldn’t justice be best served by allowing the appellate court to consider it? And even if there is no new evidence available, should the appellate court be able to reconsider the trial evidence and impose a different verdict from that of the jury? If new evidence could support an appeal, no case would ever be final. The parties would always have to worry that the other side might find new evidence. The appellate court cannot hear new evidence because there are no juries at the appellate court level, and the evidence would likely involve factual matters. Lastly, if the appellate court could replace jury verdicts with its own fact finding, it would be usurping the role of the jury. [difficult] When the U.S. Constitution was written and established the Supreme Court, the population of the country was under 5 million. Today the population is more than 260 million. Because this means that there are far more lawsuits today than in the early days of our nation, the chances that the Supreme Court will accept a case is much smaller today than in the past. Should one or more additional “supreme” courts be established so that more cases are reviewed twice? Even if several times as many cases could be accepted, it will nonetheless be a tiny fraction of the cases for which a petition for certiorari is filed. The Supreme Court has some ability to adjust the number of cases it hears by changing the number of judicial clerks that it hires to assist in researching and writing opinions. [difficult] If the discovery process results in learning about the other side’s case, what is the purpose of having a trial? Wouldn’t it be redundant to have the trial if both parties already know what is going to be said? The purpose of discovery is to learn about the other party’s case, not to have discovery take the place of the trial. It is still the jury’s job to determine the facts of a case. Thus, even though both parties might know in advance the general evidence that will be presented, they often cannot predict how the jury will decide. Furthermore, the discovery process is not perfect, and there is often evidence at trial that did not come out during discovery. [moderate] Increasing numbers of consumer contracts contain arbitration clauses in which the consumer agrees in advance that any dispute related to the contract will be submitted to an arbitrator, often chosen by the other party to the contract. Agreements between consumers and insurance companies, as well as agreements between stockbrokers and their clients are two areas where these are increasingly common. What are the advantages and disadvantages to the consumer of such a clause? Should these clauses be effective to allow consumers to give up their rights to use the court system? Does it affect your analysis if you learn that many consumers are not aware of these provisions or do not understand them when they enter into these agreements? How enforceable should these mandatory arbitration clauses be? Has the consumer knowingly consented to give up access to courts? There can be problems if the arbitrator(s) is biased, either individually or by virtue of being
83.
84.
85.
27
industry-sponsored; absent these problems, the courts generally enforce arbitration clauses. A related issue is the responsibility of a party to a contract to make sure the contract is understood. [moderate]
28
ESSAY QUESTIONS—FACTUAL APPLICATION The Jurisdiction of the Courts 86. Steve often purchases office supplies from Supplymax, a company with stores in many states, but none in Steve’s home state of Missouri. Supplymax does, however, maintain a distribution center in Kansas City, Missouri. Supplymax does not advertise in Missouri except that it places a few advertisements in national magazines, some of which are sold in Missouri. Steve has an arrangement with their store in Chicago, and Steve will often contact the Chicago store and have them hold items for him to pick up when he is on one of his frequent business trips to Chicago. Last year, Steve purchased eight chairs from Supplymax to use with his conference table at his business. At a recent meeting with his local sales staff, one of the chairs collapsed, injuring Steve. Steve has sued Supplymax in state court in his hometown of St. Louis. Supplymax does not want to have this case heard in St. Louis, or anywhere in Missouri for that matter. But if it must be in Missouri, Supplymax demands that the case be heard in Kansas City. Discuss the issues and likely outcome of this situation. Supplymax probably meets the minimum contacts requirement with the state of Missouri, given its distribution center and advertising in national publication that reach Missouri, thus Missouri would have personal jurisdiction. Because the lawsuit arises out of events in St. Louis and there are witnesses from St. Louis, proper venue would be in St. Louis. If the amount in controversy were more than $75,000, Supplymax could transfer the case to federal court. [difficult]
Alternative Dispute Resolution 87. Susan is part owner of one of the best restaurants in a medium-sized city. This restaurant is operated as a partnership. In October, 2004, the local newspaper published a story about Bill, who is Susan’s business partner in the restaurant. In this article it is stated that Bill’s net worth is several million dollars. About ten days later, Susan receives a summons notifying her that the restaurant is named as the defendant in a negligence case. The plaintiff in the case alleged that she slipped and fell to the floor inside the restaurant near the rear door late one night in December, 2002. According to the plaintiff, she slipped on water from snow that had been tracked in and had melted. The plaintiff also alleged that there were no employees or other customers in sight of the back door when the plaintiff slipped and fell, and that she was leaving the restaurant when the accident occurred. The plaintiff did not notify anyone at the restaurant when the accident occurred or at anytime thereafter prior to the filing of the lawsuit. Although the majority of diners at this restaurant make reservations in advance, and pay with a credit card, the restaurant has no records of reservations or payment by the plaintiff. The plaintiff claims to have paid with cash. Susan and Bill have heard about alternative dispute resolution and would like to know more about how it works and about its advantages and disadvantages. If you were the attorney for Susan and Bill, what would you explain to them about mediation and arbitration, including their advantages and disadvantages. What would you recommend to them? Mediation uses a neutral third party to assist the disputants in settling their case, but the mediator has no authority to create a binding outcome. With arbitration, the third-party arbitrator has the power to impose a binding decision on the parties. Either mediation or arbitration would likely save time and money, but a regular trial would be public and set precedent with regard to questions of law. They might
29
choose to use normal litigation to show resolve to fight and discourage similar suits because the claims in this suit might appear to others to be questionable, whether or not the claims are, in fact, legitimate. [difficult]
CHAPTER 3 CONSTITUTIONAL AUTHORITY TO REGULATE BUSINESS
TRUE/FALSE QUESTIONS
Basic Constitutional Concepts
1.
The Articles of Confederation gave no power to the federal government to levy and collect taxes or to regulate commerce.
T
2.
[moderate p. 49]
Article I of the Constitution establishes the legislative branch of government. T [easy p. 49] The concept of federalism is that the states are more powerful than the central government. F [moderate p. 49] Any powers not delegated to either the federal government or the states are shared by the federal and state governments. F [easy p. 49] The existence of the electoral college means that the president is not elected by the popular vote. T [easy p. 50] The judicial branch has authority to examine the actions of both the legislative branch and the executive branch to determine whether these acts are constitutional. T [easy p. 50] The legislative branch of the U.S. Government can enact statutes that change laws that have been made by the judicial branch. T [moderate p. 50]
3.
4.
5.
6.
7.
The Supremacy Clause 8. If the federal government preempts states from regulating in an area, the states may continue to pass legislation that conflicts with federal statutes. F [moderate p. 50]
30
9.
In most subject matter areas the federal government and state governments have concurrent jurisdiction to regulate activity. T [moderate p. 50]
The Commerce Clause 10. The Commerce Clause of the U.S. Constitution gives Congress the power to regulate interstate commerce, as well as commerce with foreign nations and with Indian tribes. T [moderate p. 52] Hunting, fishing, and gathering rights in Minnesota granted to the Chippewa Indians in 1837 were found to be valid today even though the State of Minnesota has since been admitted to the union. T [moderate pp. 52-53] Congress has the authority to regulate an activity that does not itself involve interstate commerce if the activity does have an effect on interstate commerce. T [moderate p. 53] The U.S. Supreme Court has determined that gender-motivated crimes of violence do not fall within the definition of commerce under the U.S. Constitution. T [easy pp. 54-55] The police power of a state gives the state much general authority to regulate business. T [easy p. 55] A state can regulate in areas affecting interstate commerce where the federal government has chosen not to regulate if the state law does not place an undue burden on interstate commerce. T [moderate p. 55] The U.S. Supreme Court has ruled that garbage that is transported across state lines involves interstate commerce even though the garbage does not have any economic value. T [moderate p. 56]
11.
12.
13.
14.
15.
16.
The Bill of Rights and Business 17. The first 10 amendments that were added to the U.S. Constitution are known as the Bill of Rights. T [moderate p. 57] Since their creation, the protections in the Bill of Rights have generally been applicable to state and local governments as well as the federal government. F [easy p. 57] The First Amendment protects symbolic speech as well as actual spoken or written speech. T [easy p. 58]
18.
19.
31
20.
The Due Process Clause of the Fourteenth Amendment made most of the guarantees contained in the Bill of Rights applicable to the federal government. F [moderate p. 57] Commercial speech and offensive speech both receive only limited protection under the U.S. Constitution. T [moderate p. 59]
21.
22.
Because of the First Amendment, a city could not prohibit billboards along its highways for safety and aesthetic reasons. F [moderate p. 59] The Federal Communications Commission (FCC) can regulate the use of offensive language on television even though the First Amendment applies to such speech. T [moderate pp. 59-60] The establishment clause of the U.S. Constitution allows the federal government to establish which religions are entitled to protection. F [moderate p. 63] The Equal Protection Clause generally requires that businesses, both private and public, treat similarly situated persons similarly. F [moderate p. 65] The Establishment Clause prohibits the government from establishing a governmentsponsored religion but not from promoting one religion over other religions. F [moderate p. 65] The level of scrutiny in equal protection cases refers to how difficult it is for alleged equal protection violations to be justified. T [moderate p. 65] Substantive due process generally addresses the issue of whether or not a law is reasonably clear. F [moderate p. 66] The Privileges and Immunities Clause protects individuals, but not corporations. T [moderate p. 68] The strict scrutiny test is used in Equal Protection Clause cases involving sex or age discrimination. F [moderate p. 65]
23.
24.
25.
26.
27.
28.
29.
30.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Basic Constitutional Concepts 31. The Continental Congress formed a federal government in 1778 and adopted what document?
32
a. b. c. d. B 32.
The Declaration of Independence. The Articles of Confederation. The Bill of Rights.. The U.S. Constitution. [easy p. 49]
Since declaring independence, the current U.S. Constitution is the _______ document to set out the general operations of the government. a. First. b. Second. c. Third. d. Fourth. B [moderate p. 49]
33.
The Constitutional Convention was convened in 1787 for what purpose? a. To add a Bill of Rights to the Constitution. b. To create a court system. c. To ratify the First Amendment. d. To strengthen the federal government. D [easy p. 49] The two main functions of the U.S. Constitution are to: a. Create the three branches of government and create the individual states. b. Create the three branches of government and promote a strong economy. c. Protect individual rights and establish the Electoral College. d. Create the three branches of government and protect individual rights. e. Provide all citizens with a right to vote and allow for judicial review of laws. D [moderate p. 49] Powers that are not specifically delegated to the federal government by the United States Constitution: a. Are held both by the states and by the federal government. b. Are reserved to the states. c. Are reserved to the federal government. d. Can be delegated by the U.S. Supreme Court to either the states or the federal government. e. Cannot be exercised by either the states or the federal government. B [moderate p. 49] The number of ____________ to which a state is entitled can change over time. a. Senators b. Representatives c. Both Senators and representatives d. Supreme Court justices. B [easy p. 49]
34.
35.
36.
33
37.
Which Article of the United States Constitution establishes the legislative branch of government? a. Article I. b. Article II. c. Article III. d. Article IV. e. Article V. A [easy p. 49] Which Article of the United States Constitution establishes the executive branch of government? a. Article I. b. Article II. c. Article III. d. Article IV. e. Article V. [easy p. 50]
38.
B
The Supremacy Clause 39. Under the Supremacy Clause of the U.S. Constitution, when Congress chooses to regulate in an area: a. It will automatically have exclusive jurisdiction to regulate in that area. b. States will always remain able to freely regulate in that area. c. States will always be able to regulate in that area so long as the state law does not directly and substantially conflict with the federal law. d. Whether the state has any authority to regulate in the area will depend on whether Congress provides that the federal government has exclusive authority to regulate in that area. e. The state will be able to regulate in that area only with prior permission of the U.S. Supreme Court. D [moderate p. 50] When can a state regulate in an area that the federal government has validly chosen to regulate? a. Only if Congress expressly allows it. b. Only if the U.S. Supreme Court expressly allows it. c. When the federal statute or regulation does not expressly provide that the federal government exclusively regulates in the area. d. In all situations because the concept of federalism allows regulation in all areas. e. Only in areas that the federal government does not regulate. C [difficult p. 50] Which of the following would take precedence over a state constitution under the Supremacy Clause of the U.S. Constitution? a. The U.S. Constitution only. b. The U.S. Constitution and treaties with foreign nations. c. The U.S. Constitution and federal statutes.
40.
41.
34
d. e. E
The U.S. Constitution, federal statutes, and federal regulations. The U.S. Constitution, federal statutes, federal regulations, and treaties with foreign nations. [moderate p. 50]
The Commerce Clause 42. What is the result of the “effects on interstate commerce” test? a. The federal government can regulate all interstate commerce that actually crosses state lines. b. Prior to enacting laws, states are required to identify any effects that the law might have on interstate commerce. c. The federal government can regulate a business activity that takes place within a single state if the activity has an effect on interstate commerce even though the regulated activity does not, itself, involve interstate commerce. d. Commercial speech protections apply only to speech that has an effect on interstate commerce. C [difficult p. 53]
43.
The Commerce Clause gives the federal government the power to regulate commerce that: a. Actually crosses state lines only. b. Affects interstate commerce or is conducted with foreign nations or Indian tribes. c. The states have chosen not to regulate. d. Involves at least one business domiciled in the United States. B [moderate p. 53] What was the outcome when the U.S. Supreme Court ruled on the constitutionality of the Violence Against Women Act of 1994? a. The statute was viewed as a legitimate exercise of the federal police power. b. The statute violated the Equal Protection Clause because it treated women differently than men. c. The statute was found to infringe on some kinds of symbolic speech. d. The statute was found to be invalid because it did not involve interstate commerce. D [moderate pp. 54-55] With regard to the Commerce Clause of the United States Constitution, which of the following is correct? a. States have no power to regulate interstate commerce. b. Commerce must actually cross state lines to be considered “interstate commerce.” c. The police power of the states gives them the power to regulate intrastate and much interstate business within their borders. d. Although a state cannot regulate interstate commerce within its borders, it has full power to prevent interstate business activities within its borders.
44.
45.
35
e. C 46.
Cases involving interstate commerce are decided under strict scrutiny. [difficult p. 55]
If there is an area of interstate commerce that the federal government has chosen not to regulate, the states can: a. Regulate without restriction in that area. b. Regulate in that area so long as the state law does not unduly burden interstate commerce. c. Regulate in that area so long as it first gets the requisite approval from Congress. d. Not regulate in that area because states cannot pass laws affecting interstate commerce. e. Not regulate in that area because the federal government’s decision to not regulate in an area implies that there is to be no regulation in that area at any level. B [difficult p. 55] Under what circumstances can a state impose a tax on goods that are imported from other nations? a. In any circumstance. b. If the tax does not conflict with any valid federal law. c. If the amount of the tax is reasonable. d. If the tax also applied equally to the same type(s) of goods produced domestically. e. In no circumstance. D [moderate p. 57]
47.
48.
What clause of the United States Constitution did the United States Supreme Court interpret in the Minnesota v. Mille Lacs Bank of Chippewa Indians case? a. The Due Process Clause. b. The Equal Protection Clause. c. The Establishment of the Religion Clause. d. The Freedom of Religion Clause. e. The Commerce Clause. E [moderate pp. 52-53]
The Bill of Rights and Business 49. The Bill of Rights is another name for: a. The Articles of Confederation. b. The U.S. Constitution. c. The document that explains the U.S. Constitution. d. The first ten amendments to the U.S. Constitution. e. The first seven articles of the U.S. Constitution. D [easy p. 57] As originally drafted, the protections in the Bill of Rights limited intrusive action by: a. The federal government only.
50.
36
b. c. d. e. A 51.
State governments only. Federal, state, and local governments. The legislative and executive branches of the federal government, but not to state and local governments. The federal government and businesses that operate across state lines. [moderate p. 57]
What did the Fourteenth Amendment of the U.S. Constitution do? a. It established prohibition. b. It granted the power to regulate interstate commerce to Congress. c. It gave Congress the power to place reasonable restrictions on commercial speech. d. It made the protections in the Bill of Rights applicable to actions by state governments. D [moderate p. 65] Do the protections in the Bill of Rights apply to corporations? a. Yes, in all instances. b. Yes, in most, but not all, instances. c. Only in those instances where Congress has specifically stated that they do apply. d. Only where it would cause an undue burden on the corporation if they did not apply. e. No, not in any instance. B [moderate p. 57] Which of the following is correct with respect to freedom of speech? a. All speech receives the same degree of Constitutional protection. b. Some speech is not protected. c. Commercial speech receives no protection due to its profit motive. d. Most speech critical of the government can be restricted because such speech can be destabilizing. B [difficult p. 59] Which of the following is correct with regard to commercial speech? a. The government cannot regulate commercial speech. b. The government can regulate the time, place or manner of commercial speech, but it cannot prevent it. c. The government can restrict or prevent commercial speech, so long as the speech does not have political content. d. The government can prohibit commercial speech if the Congress and the President agree. B [moderate p. 59]
52.
53.
54.
55.
Which of the following is true regarding obscene speech? a. It cannot be prevented, but can be subject to time, place or manner restrictions. b. Because the definition of obscene is so subjective, it cannot be restricted or prevented. c. Even though the definition of obscene speech is subjective, if speech is determined to be obscene, it loses all constitutional protection. d. Obscene speech and offensive speech receive the same degree of protection.
37
e. C 56.
The U.S. Supreme Court has set out a clear definition of what speech is defined as obscene and therefore unprotected. [moderate p. 59]
Which of the following is considered to be fully protected speech under the U.S. Constitution? a. Political speech only b. Political speech and commercial speech c. Offensive speech and commercial speech d. Commercial speech only e. Political speech, commercial speech and offensive speech A [easy p. 59] Which of the following receives at least some protection under the U.S. Constitution? a. Political speech only b. Political speech and commercial speech c. Offensive speech and commercial speech d. Commercial speech only e. Political speech, commercial speech and offensive speech E [easy p 59] Which of the following receives at least some protection under the U.S. Constitution? a. Obscene speech b. Offensive speech c. Both obscene speech and offensive speech d. Neither obscene speech nor offensive speech B [moderate p. 59] What type of commercial speech did the U.S. Supreme Court say was protected in the Greater New Orleans Broadcasting Association, Inc. v. United States case? a. Information on gambling and lotteries. b. Obscene speech. c. Information about child pornography. d. Information on how to build a bomb. A [easy p. 61] In responding to a constitutional challenge to the Computer Decency Act, the U.S. Supreme Court ruled that: a. Computers and the Internet were not covered by the free speech provisions of the U.S. Constitution because they did not exist when the Constitution was drafted. b. The Act was constitutional because obscene speech receives no protection. c. Obscene materials could not be available between 6:00 a.m. and 10:00 p.m. local time. d. The Act was unconstitutional because its provisions were too vague to define. e. The Internet was similar to television and that restrictions similar to those on television programming were appropriate. D [moderate p. 62] Which of the following is correct regarding freedom of religion under the U.S. Constitution? a. It comes from the Establishment Clause as well as the Free Exercise Clause.
57.
58.
59.
60.
61.
38
b. c. d. A 62.
It applies only to those religions in existence on the date the Constitution became effective. It gives practitioners of any religion absolute rights to take part in actions that are based on the religion. It allows the government to establish an official religion or religions so long as citizens remain free to practice any other religion they choose. [moderate p. 63]
Which of the following would likely violate of the freedom of religion protections in the U.S. Constitution? a. The government promoting one religion as better than other religions. b. The government preventing the practice of unpopular or fringe religions. c. The government establishing a time in school for persons to practice the religion of their choice. d. A and B only e. A, B and C E [moderate p. 63] An equal protection challenge to a statute that treats adults of different ages differently would be decided by using what standard? a. Intermediate scrutiny. b. Majority scrutiny. c. Strict scrutiny. d. Rational basis scrutiny. e. Limited scrutiny. A [easy p. 65]
63.
64.
Which of the following is true about how courts address equal protection cases? a. If a law treats different groups differently, the court determines whether the difference in treatment is justified using one of three different levels of scrutiny. b. If a law treats different groups differently, the law will be invalidated. c. If a law treats different groups differently, it will be acceptable so long as there is adequate notice to the persons affected. d. Laws that affect persons differently based on race, gender, or age will be invalidated; laws that affect persons differently based on other factors will be deemed acceptable. e. If a law treats a particular group more favorably than others, it will be acceptable, but if a law treats a particular group less favorably than others, it will be invalidated. A [difficult p. 65]
39
65.
Substantive due process requires that: a. A notice and hearing be given before one is deprived of life, liberty or property. b. A criminal defendant have an attorney present at all times. c. A law treat all persons the same. d. A law be sufficiently clear that a reasonable person can understand it in order to comply with it. e. A defendant not be tried twice for the same crime D [moderate p. 66] The privileges and immunities clause provides that: a. It is a privilege to be granted immunity from a criminal prosecution. b. States must generally treat nonresidents as favorably as residents. c. Corporations receive most of the same constitutional protections as individuals. d. The government is not subject to being sued unless the constitutional matter is a right rather than a privilege. e. An individual has the privilege of practicing any religion, and is immune from any government interference with that right. B [easy p. 68]
66.
MULTIPLE CHOICE QUESTION—FACTUAL APPLICATION
The Supremacy Clause 67. There are extensive federal regulations covering airplanes and pilots. Assume that the state of Missouri passes a statute containing numerous requirements, some conflicting with the federal rules, covering the licensing of airplane pilots and the operation of aircraft. A pilot’s constitutional challenge to this statute would most likely succeed on the basis of: a. The preemption doctrine. b. The Equal Protection Clause. c. Substantive due process. d. The state police power. A [moderate p. 50]
The Commerce Clause 68. Assume that the state of Tennessee passes a statute that grants all residents who purchase a brand new Saturn automobile made in Tennessee a $2,000 state income tax credit. It is most likely true that: a. An equal protection claim would be evaluated using strict scrutiny. b. Because the statute gives the tax credit only to Tennessee residents who purchase a car made in Tennessee, there is no violation of the commerce clause. c. There is a procedural due process violation. d. This statute probably violates the commerce clause. D [difficult p. 52]
40
69.
Assume that the state of Kansas passes a law requiring all inline skates sold in Kansas to have disc brakes. Assume that there are no federal regulations covering inline skate design. Assume also, that the required disc brakes would make inline skates easier to stop and thus safer, but that they would add considerably to the cost of the skates and require extensive changes in design to meet the Kansas requirements. Which of the following is most likely true? a. Even though there are no federal regulations on the design of inline skates, the Kansas statute would probably be considered a burden on interstate commerce and thus unconstitutional. b. Because the required modification is a better design, the law would be constitutional. c. Because the statute does not conflict with a federal statute or regulation, it could not be found to be unconstitutional. d. If all manufacturers of inline skates stopped selling them in Kansas, there could be no constitutional violation because interstate commerce would not be involved. A [difficult p. 55] Assume that Congress passes a statute that bans the use of personal watercraft on any body of water before 8:00 a.m. and after 9:00 p.m. Congress bases its passage of the law on its authority to regulate interstate commerce because it believes that fewer persons will buy personal watercraft because of this law. In a constitutional challenge, most likely: a. The law will be found constitutional only if it does not conflict with a valid state b. The law will be found to violate the Equal Protection Clause because it applies water, but not on land. The law will be constitutional because of the federal government’s police power. The law will be found unconstitutional because any effect on interstate commerce too remote for this to be a valid exercise of federal power. [difficult p. 53]
70.
law. on c. d. is D
The Bill of Rights and Business 71. Assume that a federal regulation is adopted that requires bicycle manufacturers to disclose the weight of the largest frame size, fully equipped for riding, when they advertise the weight of a bicycle. If this requirement is challenged under freedom of speech, most likely: a. It would be found to be an acceptable regulation of commercial speech. b. It would be found to be an unacceptable prohibition of commercial speech. c. The court would not consider the case because this advertising is not political speech. d. The court would evaluate the restriction using strict scrutiny. e. There would be no violation because this does not prohibit speech, but requires it in certain circumstances. A [moderate p. 59] Assume that a state passes a statute that prevents the disclosure of the horsepower of automobile engines. The purpose of this law is to prevent the car companies from trying
72.
41
to market cars with more horsepower than those of their competitors. This statute would most likely be found to: a. Be constitutional under state police power. b. Be viewed as an unconstitutional restriction of commercial speech. c. Violate the Equal Protection Clause under intermediate scrutiny. d. Be found to violate substantive due process. e. Be found to violate procedural due process. B [difficult p. 59] 73. Assume that a law is passed that establishes airline security screening requirements for male passengers that differ from the requirements for female passengers. In evaluating an equal protection challenge to this law, a court would use: a. Strict scrutiny. b. Intermediate scrutiny. c. Limited scrutiny. d. The rational basis test. B [moderate p. 65] A city ordinance prohibits any advertising of fur coats within the city limits. This ordinance: a. Is constitutional, because the U.S. Constitution provides no right to advertise. b. Would be analyzed under strict scrutiny if challenged on equal protection grounds. c. Would be challenged on the grounds of either equal protection or freedom of speech. d. Is not constitutional because commercial speech cannot be restricted. C [difficult p. 65] A state statute prohibits “the wearing of clothing that is not appropriate for one’s gender.” What would be the most likely basis for a constitutional challenge to this law? a. A substantive due process violation. b. A procedural due process violation. c. A freedom of speech violation. d. An equal protection violation. A [moderate p. pp. 66-67]
74.
75.
76.
Assume that the state of Colorado institutes a law requiring that persons from outside the state of Colorado take a skiing exam and obtain a skiing license before being allowed to ski at a downhill resort on runs other than the beginner runs. The fee for this license is $75. Colorado residents are not required to get a license because most resident skiers learn to ski properly at an early age. On what basis could this statute be challenged? a. The Equal Protection Clause. b. The Privileges and Immunities Clause. c. The Interstate Commerce Clause. d. Both A and B e. A, B and C
42
E
[difficult pp. 55, 65, and 68]
ESSAY QUESTIONS—ETHICS AND POLICY 77. To what extent should “speech” over the Internet be regulated? Should the Internet be treated like television, or should different standards apply? Or is the Internet more like print media such as books or newspapers? Give reasons for your positions. There are many opinions possible on this issue. Compared to regulating broadcast media, the Internet raises many additional issues. For example, unlike television, the Internet can be used for two-way communication. Furthermore, communications on the Internet can not only be aimed at a mass market, but can be directed to a focused group or single individual. Perhaps different rules, if any, should apply to these individualized communications. On the other hand, it is less likely for someone to be accidentally exposed to material on the Internet compared to television, although this is changing as the Internet evolves. [moderate] Following the events of September 11, 2001, the government took many actions directed at preventing acts of terrorism. One of the first and most visible was increased intensity of searches at airports. When government personnel do the screening, they are subject to the Equal Protection Clause. Should government screeners be able to search members of certain groups more rigorously than others? Is it constitutional to do so? There has been considerable controversy over elderly women and young mothers being randomly selected for more intensive searches and screening. One might argue that if it is known that terrorists most often come from certain groups, it might be reasonable to subject members of these groups to more thorough searches. Such conduct might or might not be constitutional because unequal treatment is balanced against the purpose of the law. It might be fairly easy to justify such a policy constitutionally given that the consequence of the unequal treatment (a few more minutes to get through security screening) is relatively minor compared to the purposes advanced by the law. [difficult]
78.
ESSAY QUESTIONS—FACTUAL APPLICATION The Supremacy Clause 79. In the late 1990s, bicycle helmets became subject to federal regulation for the first time. Prior to the adoption of federal standards, manufacturers of bicycle helmets could get their helmets safety-certified by several private organizations. Manufacturers were not required to use any of these organizations, but most used at least one as part of their marketing. Assume that someone who is injured while wearing a bike helmet believes that a defect in the helmet’s design contributed to the injuries sustained. Under what circumstances can this person bring a tort claim under state law? Prior to the passage of the federal regulations, there would be no restrictions on the ability to bring the claim. Whether or not the helmet had been certified (and whether it actually met the certification test) could be introduced as evidence in
43
court, but the existence of the private party certification does not affect the ability to bring a claim. Once the federal standards have been adopted, the state law tort claim would probably be preempted by the federal standards. The plaintiff could allege that the helmet did not meet the federal standards, but if the helmet did meet the standards, the plaintiff would not be able to raise a claim that the helmet was unsafe under state law. [moderate] The Bill of Rights and Business 80. Assume that there are numerous Internet service providers in a large city. Because of fierce competition, these businesses advertise heavily. One of the features that some of them provide and advertise is streamlined access to pornography sites as well as proprietary pornography sites that can be accessed only by those who subscribe with that particular service provider. This city passes an ordinance that prohibits any advertising about being able to access pornography over the Internet. One of the service providers challenges the constitutionality of this statute. Discuss how the case would turn out. The most likely challenge would be on the basis of freedom of speech. The speech in question is commercial speech. Commercial speech can be subjected to reasonable time, place, and manner restrictions, but cannot be prohibited. This ordinance is probably an impermissible prohibition of this advertising. Note that the speech in question is the advertising of the access to the pornography, not the pornography itself. Assuming that accessing the pornography is legal, the city is limited in how it can restrict the advertising. Also note that not all pornography is considered to be unprotected obscene speech. The city would have much greater latitude in regulating advertising of an illegal activity, such as child pornography. [moderate] Assume that a city passes an ordinance that prohibits all smoking in restaurants and bars, except in outdoor seating areas. Evaluate an equal protection challenge to this ordinance. Although this ordinance might seem to treat “smokers” differently than “nonsmokers,” individuals are not inherently smokers or nonsmokers. This ordinance prohibits anyone from smoking regardless of whether that person is a smoker or nonsmoker. Restaurant and bar owners, however, might be able to raise an equal protection challenge because those two kinds of businesses are being singled out under the ordinance. Because the distinction is based on the type of business (and not race, age or gender) the validity of the distinction would be evaluated under rational basis, and thus likely to be constitutional. [difficult]
81.
CHAPTER 4 INTENTIONAL TORTS AND NEGLIGENCE
TRUE/FALSE QUESTIONS
Intentional Torts Against Persons
44
2. F 2.
Persons found to have committed a tort usually must either pay a fine or serve time in prison. [moderate p. 74] Punitive damages can be recovered only in strict liability intentional tort cases. F [moderate p. 74] Physical contact is not necessary to be liable for the tort of assault. T [moderate p. 74] Transferred intent occurs when someone attempts to injure someone, but actually injures another. T [easy p. 74] In all defamation of character cases, the plaintiff must prove that the defendant knew that the statement was false. F [moderate p. 75] A party can be liable for defamation for truthful statements if the statement hurts the plaintiff’s reputation. F [moderate p. 75] The tort of appropriation does not apply in the case of public figures because public figures are presumed to have consented to public use of their likeness. F [moderate p. 76] True statements can be the basis for commission of the tort of invasion of the right to privacy. T [easy p. 77] Intentional infliction of emotional distress requires that the conduct be outrageous. T [easy p. 78]
3.
4.
5.
6.
7.
8.
9.
Intentional Torts Against Property 10. Trespass to land occurs only if the trespasser in some way interferes with the owner’s use of the land. F [moderate p. 79] Conversion occurs when someone deprives the rightful owner of personal property of the use and enjoyment of that property by treating it as her own. T [moderate p. 79]
11.
Unintentional Torts (Negligence) 12. In order to be liable for a negligence tort, one must have intended the consequences of the act or conduct in question. F [easy p. 80]
45
13.
The reasonable person standard is used in determining the duty of care in a negligence case. T [easy p. 81] In order to meet the causation requirement in a negligence tort, both causation in fact and proximate cause must be proven. T [difficult p. 83] A plaintiff can generally recover for negligent infliction of emotional distress for any unintentional conduct of the defendant that causes the plaintiff to suffer emotional distress. F [moderate p. 85]
14.
15.
Special Negligence Doctrines 16. The doctrine of negligence per se is used where the plaintiff was unable to observe the conduct of the defendant that led to the injury. F [moderate p. 86] Good Samaritan laws do not generally protect persons who are not medical professionals and who have not had training in CPR. T [moderate p. 87] Guest statutes apply to persons in someone’s home with the permission of the homeowner. F [easy p. 88] A landowner owes a duty even to trespassers. T [moderate p. 89]
17.
18.
19.
Defenses Against Negligence 20. Assumption of the risk, if present, prevents a plaintiff from recovering for negligence even if the plaintiff has proven all the required elements of negligence. T [moderate p. 90] Comparative negligence allows the plaintiff to make a partial recovery from the defendant in situations where the plaintiff was less than 50 percent at fault. T [moderate p. 91]
21.
Business Torts 22. A tort claim of unfair competition seldom succeeds because of the policy of encouraging open and vigorous competition. F [moderate p. 92] Intent is not required for a product disparagement claim. F [easy p. 92] In order to be liable for intentional interference with contractual relations, the defendant must have breached a valid existing contract.
23. 24.
46
F [moderate p. 91] Strict Liability 25. Strict liability is liability without fault. T [easy p. 95]
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Intentional Torts Against Persons 26. Which of the following is not one of the general categories of torts? a. Strict liability b. Rational c. Negligence d. Intentional B [easy p. 74] What is the definition of a tort? a. Any violation of an ethical duty. b. Any crime or misdemeanor. c. Any action done in violation of a prior agreement which allows the victim to recover damages. d. Any civil wrong that allows the injured person to recover damages. e. Any conduct by one party that is objected to by another. D [moderate p. 74] Damages intended to punish a defendant and deter the defendant from engaging in the same tortuous conduct in the future are called: a. Penalty damages. b. Retribution damages. c. Punitive damages. d. Preventative damages. e. Nominal damages. C [easy 74] The tort of assault and the tort of battery: a. Are two names for the same tort. b. Are strict liability torts. c. Can occur independently or together. d. Require proof of each of the separate elements of negligence. e. Cannot both occur in the same incident. C [moderate p. 74]
27.
28.
29.
30.
The doctrine applied when someone intends to cause injury to a certain person, but instead actually causes that injury to a different person is:
47
a. b. c d. e. A 31.
Transferred intent. Innocent bystander. Multiple victim. Misplaced consequence. Res ipsa loquitur. [easy p. 74]
How is false imprisonment defined? a. Being held in jail when no formal charges have been filed. b. The intentional confinement or restraint of another without authority of justification and without that person’s consent. c. The holding in prison of one who was convicted of crime that the person did not commit. d. A confinement caused when one accidentally causes another to be confined without that person’s consent. B [moderate p. 74] Assuming that statutory requirements are met, what is protected under merchant protection statutes? a. Merchants are protected from the intentional torts of their customers. b. Merchants are protected from product disparagement claims of their competitors. c. Merchants are protected from product disparagement claims of their suppliers. d. Merchants are protected from false imprisonment claims of persons detained on suspicion of shoplifting. e. Customers are protected from the negligent conduct of merchants. D [moderate p. 75] What differs in a defamation suit when the plaintiff is a public figure, as opposed to when the plaintiff is not a public figure? a. Punitive damages are available. b. The plaintiff need not prove actual injury to the reputation. c. The plaintiff can recover even when the statement is a mere opinion. d. The plaintiff must prove that the statement was made with malice. e. The plaintiff must prove that the statement was made in writing. D [moderate p. 76] A nonpublic figure in a defamation case must prove the following except that: a. There was an untrue statement. b. The statement contained a factual assertion. c. The statement was communicated by the defendant to at least one person other than the plaintiff. d. The defendant knew the statement was false. e. The statement caused an injury to the plaintiff’s reputation. D [difficult p. 75]
32.
33.
34.
48
35.
Which of the following is true? a. Slander and libel are two kinds of defamation. b. Defamation and slander are two kinds of libel. c. Defamation and libel are two kinds of slander. d. Slander and libel are two terms for the same tort, and defamation is a different tort altogether. e. Slander, libel and defamation are three terms with the same meaning. A [moderate p. 75] Which of the following is the best description of misappropriation of the right to publicity? a. Claiming credit for the accomplishments of another. b. Publishing the creative work of another and claiming that it is yours. c. Publicly claiming to have accomplished something that you have not accomplished. d. Attempting to use another living person’s name or identity for commercial purposes without that person’s consent. e. Publicizing private information about someone without that person’s consent. D [moderate p. 76] Which of the following is true about the tort of invasion of the right to privacy? a. The tort is actionable only by public figures. b. True statements or facts that are disclosed can support a claim for the invasion of the right to privacy. c. Once a fact has become public, its disclosure cannot thereafter support a claim for the invasion of the right to privacy. d. The tort requires that the defendant entered the plaintiff’s home or place of business to acquire the information that was disclosed. B [moderate p. 77] Which of the following is true about intentional infliction of emotional distress? a. Recovery is allowed any time there is a measurable amount of mental distress. b. There must be some physical contact with the plaintiff. c. The defendant’s conduct must go beyond all possible bounds of decency and be regarded as atrocious and utterly intolerable in a civilized society. d. The plaintiff must have witnessed severe physical injury to a relative or other significant person in the plaintiff’s life. C [moderate p. 78] For which of the following torts are the general requirements for the plaintiff’s case dependent on whether or not the plaintiff is a public figure? a. Defamation b. Invasion of the right to privacy c. Intentional infliction of emotional distress d. Both A and B e. A, B and C A [moderate p. 76]
36.
37.
38.
39.
49
Intentional Torts Against Property 40. Which is true regarding the tort of trespass to land? a. A person who enters another’s land without permission is liable to the landowner even if the landowner was not using the land at the time and there was no damage to the land. b. A person cannot be liable for trespass to land if that person was not told, either directly by the owner or by means of a sign, to stay off the property. c. So long as a person stays away from the portions of land that the owner is currently using, there can be no trespass to land. d. So long as a person originally entered the land of another with the permission of the owner, there can be no trespass to land if the non-owner stays beyond the period of permission granted by the owner. A [difficult p. 79]
41. How does the tort of conversion of personal property differ from trespass to personal property? a. In conversion, the true owner is denied use and enjoyment of the property. b. In conversion, the true owner can recover damages for the denial of use of the property. c. In conversion, the tortfeasor treats the property as if it is her own. d. In conversion, the plaintiff is entitled to recover punitive damages. e. In conversion, the defendant must have published his use of the property to another. C [difficult p. 79] 42. Which of the following is true about a malicious prosecution case? a. The claim must be against a government agency for wrongfully bringing a criminal action. b. Most victorious defendants are able to prove the elements of a malicious prosecution claim. c. The plaintiff must prove that there were false statements made by the other party at the original trial that injured the plaintiff’s reputation. d. The plaintiff must prove that the original lawsuit was brought with malice. e. The plaintiff must prove that there were statements made by the other party at the original trial that invaded the plaintiff’s privacy. D [difficult p. 79] Unintentional Torts (Negligence) 43. The best statement of the test applied in determining if a defendant was the proximate cause of the plaintiff’s injuries is: a. Was it foreseeable to the plaintiff that the defendant would engage in this conduct? b. Given this particular injury to the plaintiff, was it foreseeable that the defendant was the cause? c. Should it have been foreseeable to the defendant that defendant’s conduct could lead to this kind of injury? d. Was the injury foreseeable to the plaintiff prior to the injury’s occurrence?
50
e. C
Was it foreseeable to the plaintiff that this kind of injury could occur under the particular conditions that the injury did occur? [difficult p. 83]
44.
Negligence is also known as what kind of tort? a. An unintentional tort. b. An intentional tort. c. Strict liability. d. Unfair competition. e. Breach of contract. A [easy p. 80] A medical doctor who commits medical malpractice has committed what tort? a. Defamation of character. b. Intentional infliction of emotional distress.. c. Trespass. d. Negligence. D [easy p. 80]
45.
Special Negligence Doctrines 46. The doctrine that is applied when a defendant violates an existing statute intended to prevent the injury in question to persons of a class that includes the plaintiff is: a. Negligence per se. b. Res ipsa loquitur. c. Proximate cause statute. d. Concurrent statutory violation. A [moderate p. 86] The doctrine that shifts the burden of proof from the plaintiff to the defendant is: a. Negligence per se. b. Res ipsa loquitur. c. Apparent negligence. d. Good Samaritan. B [moderate p. 86] What does a guest statute provide? a. That a driver who has voluntarily given a ride to a passenger without compensation is not liable to the passenger for ordinary negligence. b. That someone serving alcohol to guests in the home is liable if the alcohol causes the guest to become intoxicated and injure another person while intoxicated. c. That tavern owners are strictly liable for alcohol related injuries caused by tavern guests who were served alcohol at the tavern. d. That homeowners cannot be sued by their social guests for injuries incurred while the guests were in the homeowner’s home with permission. A [moderate p. 88]
47.
48.
51
49.
What is a dram shop? a. A house of ill repute. b. A factory that illegally uses child labor. c. A bar or tavern. d. A pharmacy. e. A seller of second-hand goods. C [easy p. 88] Which of the following best describes the effect of Good Samaritan laws? a. Medical professionals are obligated to stop and assist persons in need. b. Medical professionals have a lower duty of care to strangers than to their regular patients. c. Medical professionals cannot be held liable if they cause injury to someone they provide medical care to in an emergency. d. Someone injured by a medical professional who is providing emergency medical care at the scene of an accident cannot recover if the injury was due to ordinary negligence. D [moderate p. 87] A landowner owes a duty of ordinary care to: a. Licensees only. b. Invitees only. c. Trespassers only. d. Licensees and invitees. e. Licensees, invitees and trespassers. D [easy pp. 88-89] The customer of a store who is at the store for purposes of doing business would be classified as what type of visitor while on the store’s premises? a. A licensee. b. An invitee. c. A trespasser. d. A guest. B [easy p. 88]
50.
51.
52
Defenses Against Negligence 53. The legal effect of the presence of a superseding event is that: a. The defendant is not liable even if the plaintiff has proved all the elements of negligence. b. The plaintiff and defendant will share liability. c. Thee burden of proof shifts from the plaintiff to the defendant. d. Intent must be proven in addition to the elements of negligence. A [moderate p. 89] Which best describes assumption of the risk in a negligence case? a. The plaintiff knowingly and willingly subjected herself to a risk, and by doing so, is not able to collect from a defendant even if all of the elements of negligence are present. b. The defendant gave advance warning to the plaintiff that an injury would occur.
54.
52
c. d. e. in it. A
The plaintiff is more at fault than the defendant in causing the accident. The plaintiff was involved in an abnormally dangerous activity. The defendant knew that the conduct was risky, but nonetheless chose to engage [moderate p. 90]
55.
A plaintiff wants to sue on a negligence tort, but knows that he was partly as fault. Which of the following is true? a. A state applying contributory negligence will allow the plaintiff to recover so long as his fault is minor. b. The plaintiff will have to elect whether to sue under comparative or contributory negligence. c. Because the plaintiff is partly at fault, he will not be able to recover under either comparative or contributory negligence. d. If the plaintiff’s fault is only 5%, his recovery will be the same under either pure or partial comparative negligence. e. In all circumstances the plaintiff will recover more under pure comparative negligence than under partial comparative negligence. D [difficult p. 91] Which of the following is true about comparative negligence and contributory negligence? a. Most states that once used comparative negligence now apply contributory negligence instead. b. They are two names for the same defense. c. In order to avoid liability for an unintentional tort, the defendant must prove the presence of both defenses. d. Comparative negligence is used with intentional torts and contributory negligence is used with unintentional torts. e. Comparative negligence allows the plaintiff to make a partial recovery whereas contributory negligence does not. E [difficult pp. 90-91] 57. If a plaintiff knows of and voluntarily enters into or participates in a risky activity that results in injury, what is the most likely defense that can be raised by a defendant? Contributory negligence. Comparative negligence. Superseding event. Negligence per se. Assumption of the risk. [easy p. 90]
56.
a. b. c. d. e. E Business Torts
53
58.
The tort of palming off involves: a. Knowingly selling goods that are defective. b. Blaming another for one’s own actions and communicating that blame to at least one other person. c. Failing to credit another for that other person’s legal accomplishments. d. Making false statements about the goods of another. e. Representing one’s own goods to be those of a competitor. E [moderate p. 92]
59.
Product disparagement differs from defamation of a nonpublic figure in that: a. Intent is required for the disparagement case, but not in the defamation case. b. Intent is required for the defamation case, but not in the disparagement case. c. Publication to a third party is required in the disparagement case, but not in the defamation case. d. Publication to a third party is required in the defamation case, but not in the disparagement case. e. Both A and D are true. A [difficult p. 92] The tort of intentional interference with contractual relations requires the following except: a. A valid, enforceable contract between the contracting parties. b. Third-party knowledge of this contract. c. Third-party inducement to breach the contract. d. A new contract involving the third party who induced the breach. D [moderate p. 93]
60.
Strict Liability 61. Persons who engage in abnormally dangerous activities such as crop dusting or blasting: a. Are liable only if all the elements of negligence are proven against them. b. Are liable only if they intended to cause a particular injury. c. Are generally not liable for the injuries they cause because otherwise no one would undertake these activities. d. Are liable to persons they injure even if they are not at fault. D [moderate p. 95]
MULTIPLE CHOICE QUESTION—FACTUAL APPLICATION
Intentional Torts Against Persons 62. Sam, who weighs 250 pounds, calls his 110 pound girlfriend, Alice, one morning while she is at
54
work. He says, “You are to stay in your office until midnight. If you come to my house before midnight, I will make you sorry that you did.” Assuming that Alice usually leaves her office at 5:00 but stays until midnight that night because of the threat, if Alice files a false imprisonment case against Sam, a court most likely will find that: a. There was false imprisonment because Sam’s threat forced Alice to stay in the office. b. There was no false imprisonment because Sam and Alice previously knew one another. c. There was no false imprisonment because Alice could have left the office and stayed away from Sam’s house, and because the threat related to future harm. d. There was no false imprisonment because Alice’s office was not a prison, even though it might feel like one to Alice. C [moderate p. 74]
63.
While attending a baseball game cheering for the home team, a fan of the other team sneaks up behind Jack and hits Jack on the head with a hard piece of pizza crust, injuring Jack. Jack has no idea he is about to be hit and is severely embarrassed when his friends see that he was injured by a pizza crust. Which of the following torts has the fan committed? a. Assault b. Battery c. Assault and battery d. Battery and negligent infliction of emotional distress e. Assault, battery, and negligent infliction of emotional distress B [moderate p. 74]
64.
An English professor puts a comment on a student’s composition that says, “Can’t you write at all? You are writing at a third grade level and will never be able to graduate from this university!” The student is extremely upset and sues the professor. For which torts could the professor be held liable? a. Defamation only b. Intentional infliction of emotional distress c. Invasion of the right to privacy d. Both A and B e. Neither A, B nor C E [moderate p. 75]
Intentional Torts Against Property 65. Bob’s fraternity brother lent Bob his car for a weekend trip to Las Vegas. While there, he hit a couple of substantial payoffs in the casinos and decided that it was time for a new life. He decided to move to Venice Beach in California. He did not bother to tell anyone
55
of this change in life plans, including his fraternity brother back in Utah who lent him the car. “After all,” thought Bob, “if there’s anything to this brotherhood thing, he shouldn’t mind at all. And if he comes for it, I’ll certainly let him have it back.” Bob moved to Venice Beach. Is Bob liable for conversion of personal property? a. No, because the friend originally gave him the car with permission. b. No, as long as he has not damaged the car. c. Yes, because he did not return the car when agreed. d. No, because he was willing to return the car if asked to. e. Yes, because he took the car to a different state. C [difficult p. 79] Negligence 66. Which of the following is true about the case against McDonald’s for serving very hot coffee? a. The plaintiff was burned while driving her car. b. McDonald’s coffee was found to be the same temperature as that served by its competitors. c. McDonald’s had turned down a pretrial offer of settlement which was much lower than the amount awarded by the jury. d. McDonald’s paid the amount to the plaintiff that the jury awarded. C [moderate p. 81]
67.
In the Palsgraf case, foreseeability was an issue. The question addressed by the court was: a. Was it foreseeable to the plaintiff (Ms. Palsgraf) that the scales would fall? b. Was it foreseeable to the plaintiff (Ms. Palsgraf) that someone in the train station would be carrying explosive fireworks? c. Was it foreseeable to the passenger carrying the fireworks that they might explode and injure someone? d. Was it foreseeable to the railroad employee helping the passenger onto the train that doing so might lead to injury to Ms. Palsgraf or another bystander? e. Was it foreseeable to Ms. Palsgraf that her injury would have been caused by an explosion? D [difficult p. 83] The proximate cause requirement for a negligence tort is most likely not met where: a. a customer becomes ill from food that is carelessly packed at a processing plant. b. a patient becomes sick from a doctor carelessly prescribing the wrong medicine. c. a customer in a building supply store carelessly drops a small can of paint that breaks open and is ignited from a spark caused when the metal can hits the concrete floor. d. a driver injures a pedestrian when rounding a curve at twice the legal speed limit. e. the victim of an accident was aware, prior to the actual accident, that the accident was likely to occur. C [moderate p. 83] Mary, a 68-year-old widow, hired an electrician to make some wiring repairs to her home. The electrician accidentally started a fire that destroyed her house. Mary was not injured, but watched her house burn along with all her possessions. It was emotionally
68.
69.
56
devastating to watch as she lost a whole life’s worth of memories. Can she recover for negligent infliction of emotional distress? a. Yes, because the electrician was the cause of her emotional distress through his outrageous conduct of starting the fire. b. Yes, because her distress was genuine. c. No, because her situation does not meet all the elements necessary to recover for negligent infliction of emotional distress. d. No, because she assumed the risk by having someone do electrical work in her home. C [moderate p. 85] Special Negligence Doctrines 70. Sandy lives on the top floor of a ten-story building in a big city. There is a 30-story apartment building under construction next door to her building. One morning while eating her corn flakes, a brand new toilet comes crashing through the roof of Sandy’s apartment and injures her. She would like to sue the construction firm, but has no way of finding out or proving what persons were involved or exactly what happened. The doctrine that would most help Sandy is: a. last clear chance. b. res ipsa loquitur. c. strict liability. d. comparative negligence. e. negligence per se. B [moderate p. 86]
71.
Patti Passenger is riding with her friend, Danetta Driver, up to the mountains to ski for the day. Patti is happy that Danetta is giving her a ride, not even asking Patti to share the cost of gas. On the way home that evening, Danetta suddenly remembers that she is late to a meeting she had that night. Danetta immediately passes a car on a blind curve and gets into an accident. Which of the following is true in Patti’s negligence suit against Danetta? a. Patti can recover from Danetta under the doctrine of res ipsa loquitur. b. Patti can recover because Danetta was negligent per se. c. Patti can recover because the injury was a foreseeable consequence of Danetta’s actions. d. Patti cannot recover because Danetta was a Good Samaritan in taking Patti skiing without charging her for a portion of the gas cost. e. Patti cannot recover assuming that there is a guest statute in her state. E [moderate p. 88] A driver stopped at a convenience store to run inside briefly. The driver left the engine running and forgot to set the parking brake. The car suddenly started rolling toward two small children, and Vicki, a bystander, pulled the two children out of the way of the rolling car. Vicki is injured in the process. Can Vicki recover from the driver of the car? a. Yes, because of the Good Samaritan rule. b. No, because of an intervening event. c. No, because of assumption of the risk. d. Yes, because the driver set up the dangerous situation.
72.
57
D
[difficult p. 88]
Defenses Against Negligence 73. Sam had just finished a great day of skiing as he walked toward the parking lot with his skis over his shoulders. While waiting to cross at a crosswalk, a car’s horn honks down the street. He suddenly turns to see where the sound came from, and in doing so his skis swing around and hit Pam in the head, injuring her. Which of the following, if true, would give Sam the best chance of avoiding liability to Pam? a. Sam did not intend to harm anyone when he turned to see the source of the sound. b. The driver of the car violated an anti-noise ordinance in blowing the horn. c. Pam had planned to cross the crosswalk as soon as traffic allowed, rather than wait for the “walk” light to indicate that it was safe to do so. d. Pam had been walking behind Sam for several hundred yards and had observed that Sam, on several occasions, had nearly struck other persons as he carried his skis. D [difficult p. 90] Cindy was riding her bicycle on a paved bike path and had an accident with another cyclist. Cindy’s $1,000 bicycle was destroyed in the accident. If the jury determined that Cindy was 60 percent at fault and the other cyclist 40 percent at fault, under which doctrines would Cindy be entitled to recover $400 from the other cyclist? a. Contributory negligence only b. Pure comparative negligence only c. Partial comparative negligence only d. Either form of comparative negligence, but not under contributory negligence e. Either form of comparative negligence as well as under contributory negligence B [difficult p. 91]
74.
Business Torts 75. Burger Prince is one of the largest hamburger chains in the nation, and fiercely competitive with the well-known chain of Captain Hook Seafood House restaurants. Captain Hook has recently introduced a new line of hamburgers in order to expand beyond seafood. Burger Prince received information that it believed was reliable indicating that the Captain Hook’s burgers contained substantial amounts of filler. Burger Prince then ran advertisements saying that its pure beef burgers were better than the Captain Hook’s burgers that used filler. Which of the following is true? a. Burger Prince is liable for product disparagement because the statement about the use of filler was false. b. Burger prince would be liable for invasion of privacy if the formula for Captain Hook’s burgers was not publicly available. c. This is a case of palming off. d. Captain Hook will not be able to win a product disparagement case here. e. This is an example of intentional interference with contractual relations. D [moderate p. 93]
58
ESSAY QUESTIONS—ETHICS AND POLICY
76. In what circumstances should persons be liable for materials put on Internet Web sites? For example, should persons who post bomb-making information be responsible to the victims of someone who acts on this information? Should persons be liable who call for someone to be killed, but take no action themselves toward accomplishing this other than to call for others to do the killing? What if someone makes extremely derogatory comments about another person or corporation and widely distributes them? In this circumstance, should the defamation requirement that the statements be fact, and not opinion, apply? The Internet has made it easier to distribute information. In many cases this is information that has long been available, though more difficult to locate. In the case of bomb-making information, courts have been reluctant to impose liability for posting information that is available elsewhere. Possibly defamatory statements raise other issues due to the ease to which they can be distributed to others, and the ability in many cases for them to be made anonymously. [moderate] Does the requirement for a plaintiff in a negligent case to prove foreseeability make sense? Shouldn’t a defendant be responsible for all the actual consequences of the careless conduct? Is it fair that an injured party might be able to recover from no one? Foreseeability is a way to put a limit on the chain of causation. If a defendant should ask what could reasonably be expected to happen if she engages in certain conduct, the defendant should only be responsible for the expected consequences of the conduct. Unfortunately, there are situations where a party is injured but there is no one who is legally obligated to compensate the injured party. [moderate]
77.
ESSAY QUESTIONS—FACTUAL APPLICATION Unintentional Torts (Negligence) 78. Powdersurf is a manufacturer of snowboards. Powdersurf is an aggressive marketer, and new to this product line. Powdersurf has adopted several strategies to help it rapidly build market share. One approach was to make the designs and graphics of some of their snowboards nearly identical to those of the industry leader’s snowboards. In addition, Powdersurf has begun an advertising campaign that criticizes its competitor’s products. For example, it has made several claims, known to be false, about the materials used in the competitor’s boards. It has also made claims about a tendency of one competitor’s boards to break during use. This was based on an independent lab’s report that later proved to be false. Lastly, Powdersurf made several allegations about the president of the leading competitor, primarily claiming that this well-known snowboarding pioneer had not accomplished all that he claimed. Powdersurf believed that its allegations were correct, but it turned out that they were wrong. Discuss any tort claims that might be brought against Powdersurf and their likely resolution. If Powdersurf were trying to pass its snowboards off as those of a competitor, it could face liability for palming off. It could face liability for the false statements
59
about the competitor’s products that were knowingly false. It would not be liable for those that it honestly believed were true. Liability for the statements about the competitor’s president would depend on whether or not the president would be considered a public figure because Powdersurf believed the statements to be true. Powdersurf could face civil liability to any injured party for false advertising under the Lanham Act. [moderate] 79. Ray and Rayetta were on a camping vacation in Maine. They had reservations for themselves and their car on a ferry from Bar Harbor, Maine to Nova Scotia. Because they had their two mountain bikes mounted upright on a roof rack on their car, they had to use a special line including motor homes, vans and other high vehicles. Upon loading onto the ferry, all of these high profile vehicles used the rightmost of the six parallel lanes on the auto deck of the ferry. When the drivers returned to their cars upon reaching Nova Scotia, they were directed off the ferry by ferry employees. The driver of the motor home immediately in front of their car had not returned by the time all of the cars from other lanes had exited. After waiting for another 10 minutes, one of the ferry employees motioned Ray and Rayetta to turn to the left into the next lane rather than wait for the motor home to move. Ray and Rayetta followed the employee’s hand signals, but unfortunately their bikes struck a low clearance pipe and the frames of both bikes were destroyed. Discuss the issues and outcome of their lawsuit against the ferry company. They could fairly easily prove the five elements of negligence against the ferry company. The crucial part of the case would be whether the ferry company could prove any defenses. Most likely would be contributory or comparative negligence. One factor would be how visible this pipe was from the driver’s seat. Even with this defense, Ray and Rayetta might prevail if they could prove that the ferry employee had the last clear chance to avoid the accident. [moderate] Sam is a business executive who flies often in connection with work. After the September, 2001 terrorists’ destruction in New York and Washington, Sam flew less frequently. In response to the attacks, new federal regulations made the federal government responsible for all airport security personnel. In most cases, including at Sam’s home airport, the government met the obligation by hiring private contractors to provide the security services. These firms were heavily regulated and controlled by the government. Also, in the new regulations were profiling guidelines that required additional security screenings for persons meeting such guidelines. These guidelines were partly secret, but it was known that members of certain races were much more likely to fall within them. In addition, on average, six times as many males as females met the guidelines. Shortly after these regulations were in place, Sam went to his airport and found extremely long lines at the security checkpoint. He waited in line nearly three hours. As he was about 10 people away from being screened, an irate passenger, Marvin, came running through the line screaming that he was about to miss his flight. Marvin accidentally hit Sam forcefully, breaking Sam’s arm. In addition, Sam had his pet ferret (a small animal, an exotic pet) in his coat pocket. The impact caused the ferret to die. Marvin said that the slowness and incompetence of the security personnel had caused him to “lose it.” When Sam reached the security checkpoint, he was pulled aside for additional screening. This involved waiting in an additional line for 30 minutes longer. Sam learned that he had to go through the additional security because he was returning home on the same day, had no checked baggage, and was male. Sam has sued both the security screening company and Marvin for his injuries and the loss of his ferret, and
80.
60
emotional distress related to these. Discuss Sam’s claims, any defenses and their likely resolution. Sam’s claims would not prevail against the security screening company because they did not breach a duty and because Marvin’s actions would likely be viewed as a superseding event. Sam could prove all the elements of negligence against Marvin for his physical injuries, but the presence of a ferret in his pocket would likely make that consequence unforeseeable. Sam would not be able to recover for emotional distress because his pet would not be considered a relative. Therefore, he would prevail in the negligence claim except that he would not prevail for the claim related to the ferret. Note: Students could also be asked to discuss an equal protection claim (from Chapter 3) against the screening company for its conduct and the government for the regulations. [difficult]
CHAPTER 5 PRODUCT AND STRICT LIABILITY
TRUE/FALSE QUESTIONS
Tort Liability Based on Fault 1. The failure of the manufacturer of a product to warn users of the dangerous propensities of a product can be negligence. T [easy p. 103] In a negligence action, all parties in the product’s chain of distribution are liable for the injury, even if only one party was negligent. F [moderate p.103] Negligence is a possible theory under which to recover for injuries caused by products. T [easy p. 103] To be successful in a negligence cause of action, the plaintiff must prove that the defendant breached a duty of care that caused the plaintiff’s injuries. T [easy p.103] A seller who conceals a defect in a product, but who does not affirmatively misrepresent the quality of the product cannot be sued for intentional misrepresentation. F [moderate p. 103] Greenman v. Yuba Power Products Inc. is a landmark product liability case involving the tort or intentional misrepresentation. F [moderate p. 104]
2.
3.
4.
5.
6.
The Doctrine of Strict Liability 7. Strict liability is imposed only when the defendant is at fault. F [easy p. 105]
61
8.
Under strict liability for products liability, all parties in the chain of distribution are liable, even when the product was not defective when it left that party’s hands. F [moderate p. 106] Because strict liability is a tort doctrine, privity does not apply, so that even bystanders can recover under strict liability. T [easy p. 107] The most widely recognized articulation of the doctrine of strict liability is found in Section 402A of the Restatement (Second of Torts. T [easy p. 105]
9.
10.
11.
The doctrine of strict liability applies to sellers of products, but not to lessors of products. F [easy p. 105] Strict liability applies only to products, not services. T [easy p. 105] Strict liability would not apply to the sale of blood required for a blood transfusion. T [easy p. 105] A homeowner not in the business of selling products could be sued for the sale of a defective product at a garage sale. F [easy p. 105] The manufacturer of a subcomponent of a product cannot be sued if the product is defective and causes an injury. F [easy p. 106]
12.
13.
14.
15.
The Concept of Defect 16. Strict liability for products liability requires that the plaintiff show there was a defect in the product causing the injury. T [easy p. 107] In a product liability action based on strict liability, the plaintiff must prove the existence of a defect and who caused the defect. F [moderate p. 107]
17.
Defect in Manufacture 18. The failure of a manufacturer to properly test a product can be a defect in manufacture. T [moderate p. 107
Defect in Design 19. The crashworthiness doctrine requires that vehicles be designed to be able to avoid collisions. F [moderate p. 110]
62
20.
In evaluating the adequacy of a product’s design, the courts apply a risk-utility analysis. T [easy p. 110] A household appliance that works fine but that is designed without proper safeguards would be defective in terms of product liability law. T [easy p. 108 A toy for a child under three years of age that contains parts small enough for the child to swallow is defective in terms of product liability law. T [easy p. 108]
21.
22.
Defect in Packaging 23. Drug manufacturers have no duty to place their products in containers that cannot be opened by children. F [easy p. 111]
Failure to Warn 24. Failure to warn about a product’s dangers can make an otherwise safe product defective. T [moderate p. 112] A proper and conspicuous warning placed on a product protects the manufacturer from strict liability. T [easy p. 112]
25.
26.
Manufacturers of over the counter drugs such as aspirin must warn consumers of possible side effects of the drug or they can be sued for selling a defective product. T [easy p. 112] Other Product Defects Failure to provide adequate instructions for the safe assembly of a product is a defect. T [moderate p. 113] The concept of “defect” is expanding in the law. T [easy p. 113]
27.
28.
Defenses to Product Liability 29. The original seller of the product is liable for an injury caused by a modification of the product even if the modification occurred after it left the seller’s possession. F [moderate p. 113] A statute of repose sets a limited time after an injury occurs in which a product liability suit can be brought. F [moderate p. 114]
30.
63
31.
The maker of a product is required to warn about all dangers associated with using the product including dangers that are generally known. F [moderate p. 113]
Contributory and Comparative Negligence 32. Contributory negligence is a defense to negligence actions, but not generally in strict liability actions. T [moderate p. 115] Comparative negligence is more widely recognized as a defense in product liability actions than contributory negligence. T [moderate p.115]
33.
34.
Under comparative negligence, if a plaintiff is found by the jury to be 25% negligent and the damages are $100,000, the plaintiff would only recover $25,000. F [moderate p. 115] Under comparative negligence, if a plaintiff is found by the jury to be 25% negligent and the damages are $400,000, the plaintiff would only recover $300,000. T [moderate p. 115]
35.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Tort Liability Based on Fault 36. The doctrine that imposes liability on a seller of a product only if the seller sold the defective product directly to the injured party is known as: a. Privity of contract. b. Resolution of contractual relationships. c. Doctrine of direct commercial contacts. d. Doctrine of merchants’ liability limitations. A [moderate p. 103] Under the judicial philosophies developed in the area of product liability: a. It does not pay to sue because of the high cost of legal expenses. b. The doctrine of privity of contract will prevent liability. c. The doctrine of privity of contract has been greatly reduced in importance. d. Most consumers cannot recover because the UCC has been written to protect merchants. C [moderate p. 106] Someone who is injured by a product that she purchased new could recover on the basis of: a. Breach of warranty. b. Breach of warranty or negligence. c. Breach of warranty or strict liability.
37.
38.
64
d. e. E
Negligence or strict liability. Breach of warranty, negligence, or strict liability. [easy pp. 103-105]
The Doctrine of Strict Liability 39. Which of the following is true in a products liability case? a. The plaintiff must prove the existence of a duty. b. The plaintiff must have purchased the product from the defendant. c. The plaintiff must prove her case with a preponderance of the evidence. d. The plaintiff will lose if she cannot prove proximate causation. C [difficult pp. 105-107]
40.
In order to recover in a products liability case based on strict liability, the plaintiff must prove that the product had a defect: a. That was caused by the defendant. b. Of any type. c. That made the product unreasonably dangerous. d. That affected the value of the product. e. That the defendant knew existed. C [moderate pp. 105-107] A public policy reason for imposing strict product liability on all in the chain of distribution is: a. These parties are able to insure against product liability costs. b. These parties should be punished for putting dangerous products on the market. c. Consumers should be able to choose dangerous products if they want to. d. Negligence was making it too easy for plaintiffs to recover. A [moderate p.106] If a manufacturer produces a defective product, sells it to a wholesaler, who sells it to a retailer, who sells it to a consumer, who is injured, which parties in the chain of distribution are potentially liable under strict liability? a. Only the manufacturer. b. Only the manufacturer and wholesaler. c. The manufacturer, wholesaler, and retailer. d. Only the party at fault. C [easy p. 106] Who can recover for their injuries under product liability law? a. Someone who purchases a product new. b. Someone who uses a product with the owner’s permission c. A nonuser such as a bystander. d. A and B only. e. A, B, and C.
41.
42.
43.
65
E The Concept of Defect 44.
[easy p. 107]
What test do the courts apply in determining the adequacy of a product’s design? a. The comparative negligence test. b. The contributory negligence test. c. Risk-utility analysis. d. The crashworthiness doctrine. e. The doctrine of strict liability. C [easy p. 108] What is the significance of a “defect” in a products liability case based on strict liability? a. It is not necessary, but can be used to eliminate the need to prove that there was an injury. b. It is a required element in the proof of such a case. c. Its presence would allow punitive damages to be awarded. d. Its presence would eliminate liability for the defendant. e. The party who caused the defect is the only one who can be held liable. B [moderate p. 107] Carl wants to recover in a products liability lawsuit because of a couch that he bought. He must prove the following except: a. That the product caused the injury. b. That he in fact was injured. c. That he had a contractual relationship with the manufacturer. d. That the injury resulted from a defect in the product. C [moderate p. 105]
45.
46.
Defect in Manufacture 47. Which of the following is not a defect in manufacture? a. Failure to properly assemble the product. b. Failure to properly package the product. c. Failure to properly test the product. d. Failure to properly check the quality of the product. B [moderate p. 107]
Defect in Design 48. In considering whether a product contains a defective design, the courts will consider the following except: a. The degree of danger posed by the design. b. The profitability of the product. c. The likelihood of injury. d. The social utility of the product. e. The cost of producing a safer design. B [moderate p. 108] Which of the following is correct with regard to the crashworthiness doctrine?
49.
66
a. b. c. d. B
Car manufacturers should make cars with a minimal chance of being involved in an accident. Car manufacturers should make cars that are designed so that the risk of injury arising from striking the interior of the car in an accident is minimized. Car dealers should train car buyers in order to minimize their chances of being involved in an accident. Car manufacturers should design cars to minimize their repair costs in the event of an accident. [moderate p. 110]
Defect in Packaging 50. Which of the following best describes a defect in packaging under products liability? a. The packaging of a product, such as a bottle or can, causes an injury to the user. b. The packaging of a product is such that it allows the product to spoil. c. The packaging of a product contains misleading or deceptive information about the product contained inside. d. The packaging of a product fails to contain necessary warnings about the dangers associated with a product. e. The packaging of a product allows children to access a product, such as drugs or poisons, that is generally safe when used as directed, but can be harmful if not used properly. E [moderate p. 111]
Failure to Warn 51. When a product is found to be defective because of a failure to warn, it means: a. That the manufacturer made an unreasonably dangerous product about which consumers should have been told. b. That the product would not have been unreasonably dangerous if consumers had been warned about certain dangers of the product. c. A state of the art design is accepted so long as consumers are warned that there are no safer designs available. d. That the manufacturer did not meet its duty to warn against all possible dangers that might exist in connection with a product. B [moderate p. 112]
Defenses to Product Liability
67
52.
A wholesale distributor who is named in a product liability suit based on strict liability could avoid liability if: a. The plaintiff had not purchased the product causing the injury. b. The distributor exercised reasonable care in all ways with respect to the product causing the injury. c. This product had been used for many years by other users without injury. d. This defect which caused the injury occurred after the product left the distributor. e. The product has been redesigned to eliminate the problem which caused the injury in this case. D [difficult pp. 113-114] In order for the government contractor defense to apply, the following must be present except: a. The government set precise specifications for the product. b. The product conformed to the government specification. c. The contractor warned the government of any known defects or dangers. d. The contractor presented the government with a proposed safer design for the product. e. All four of the above must be proven in order for the defense to apply. D [moderate p. 113]
53.
54.
Which of the following best describes the defense of correction of a defect? a. The defense applies if a product is redesigned such that future production does not contain the defect. b. The defense applies only if the particular sample of the item was repaired, thus fixing the defect. c. The defense applies in a situation where a user received a recall notice to correct the defect but did not comply with the notice. d. It applies only if the manufacturer replaces the defective product at no additional charge to the owner. C [moderate p. 114] Based on the law of products liability, which of the following is correct? a. A manufacturer should design its products to take into account foreseeable misuse. b. A manufacturer should design its products to take into account all possible misuse. c. A manufacturer should design its products to take into account all possible misuse by the initial purchaser, but need not worry about misuse by other users. d. A manufacturer need only take into account the intended use of its products. A [moderate p. 114] Which of the following is true about statutes of limitation and statutes of repose? a. Statutes of limitation, but not statutes of repose, set time limits on bringing legal actions. b. Neither type of statute applies in the event of serious injuries. c. These statutes are federal law and apply nationwide even to state law actions.
55.
56.
68
d. D 57.
A statute of repose requires that a claim be brought within the specified number of years that the product was originally sold. [moderate p. 114]
Which of the following is not a commonly recognized defense in product liability? a. Government contractor defense. b. State of the art design. c. Correction of the defect. d. Assumption of the risk. e. Unforeseeable misuse of the product. B [moderate pp. 114-115]
MULTIPLE CHOICE QUESTIONS—FACTUAL APPLICATION
Tort Liability Based on Fault 58. Irma bought a new Zenith car from the Zenith dealership. As Irma was driving it, one of the wheels fell off, causing the car to crash and Irma to be injured. It can be shown that the manufacturer negligently attached the wheel to the axle. Irma wants to sue the Zenith manufacturer. Under which of the following causes of action can Irma sue the dealership? a. Breach of warranty of merchantability. b. Negligence. c. Strict Liability. d. A, B, and C. e. A and C only. E [moderate pp. 103-105]
The Doctrine of Strict Liability 59. Which of the following could not give rise to a strict liability in tort action for products liability? a. Buying a new car from a Genard Motors dealer. b. Buying food at a Joke-in-the-Box restaurant. c. Buying a prescription which was filled in a drug store. d. Buying legal services for the drafting of a will. D [moderate pp. 105-107] Paul purchased a deluxe motorhome from Wide Open Spaces Motorhomes. In a products liability suit against Wide Open Spaces Motorhome Corporation, Paul must show which of the following in order to recover? a. That Wide Open Spaces was the manufacturer of the motorhome, and not just a dealer. b. That the negligence of Wide Open Spaces led to Paul’s injury. c. That a “defect” made the motorhome unreasonably dangerous, leading to an injury. d. That Paul was not misusing the motorhome when the injury occurred. e. That the motorhome was new when Paul purchased it. C [difficult p. 107]
60.
69
Defect in Design 61. Little Bobby, five years old, finds his older brother’s “Extendo Sword” which is a toy sword about a foot long which springs out to five feet long when a button is pushed on the handle. His mother tells him to put it down because he will hurt someone if he’s not careful. Bobby pushes the button when the sword is pointed toward his face and, just as all properly functioning “Extendo Swords” do, the sword shoots out. Bobby is injured and, under products liability, sues the toy store which sold the toy. Bobby will most likely: a. Lose because of contributory negligence by playing with the sword after being told not to. b. Lose if he cannot prove negligence on the part of the toy store. c. Win on the basis of a manufacturing defect. d. Win on the basis of a design defect. e. Lose if the defendant can show that the sword was a state of the art design. D [difficult p. 108] As Betty is riding her new “LogLeaper XRTSHX 10,000 GTI” mountain bike, the front axle breaks and she is injured. She decides to sue Generalized, the maker of the bike, after learning that all LogLeapers have this problem. She would most likely sue on the basis of: a. Negligence in assembly. b. Failure to warn. c. Manufacturing defect. d. Design defect. e. Defect in packaging. D [moderate p. 108]
62.
Defenses to Products Liability 63. Justin buys a computer from a retailer and his son is injured when the glass on the monitor shatters while he is using it. He sues the wholesaler only and the jury determines that this was a manufacturing defect that existed when the computer left the factory and caused the son’s injury. The jury determined that the wholesaler was only five-percent responsible, the retailer 20-percent and the manufacturer 75-percent. Justin can: a. Recover the full amount of his damages from the wholesaler. b. Recover only five percent of his damages from the wholesaler. c. Recover 20 percent from the retailer, but none from the parties he did not deal with. d. Not recover because he (the son) was not the one who bought the computer. A [difficult p. 115]
64.
Pat is pledging at the Delta Upsilon Delta (DUD) fraternity in order to become a member. As part of his initiation, he must eat a piece of cheese which is on a mousetrap which has
70
been set to trap a mouse. He tries, but the trap slams shut on his nose, injuring him. Pat files a products liability suit against the hardware store which sold the mousetrap to the fraternity members. Which of the following, if true, would allow the hardware store to avoid liability? a. The store exercised reasonable care in selling the mousetrap. b. It was an unforeseeable misuse for anyone to use a mousetrap in this way. c. Any defect in the mousetrap was caused by the manufacturer, not the hardware store. d. Pat was not the purchaser from the hardware store. B [difficult p. 114]
65.
A seller is being sued by a buyer under a strict liability theory, for having sold a defective widget. Which of the following facts would not be beneficial to the seller’s defense? a. That the seller was not engaged in the business of selling widgets. b. That the widget had been altered after the seller sold it. c. That the seller had taken all steps possible to ensure a safe product. d. That the product was not unreasonably dangerous. C [difficult p. 108] Dangerous Products, Inc. is currently the defendant in several products liability cases. Which of the following situations would provide the weakest defense for the manufacturer? a. The Plaintiff had received a recall notice addressing the defect which caused the injury, but did not respond to the recall and continued to use the product. b. The Plaintiff was misusing the product, an electric sander, to remove the outer layer of his facial skin in order to improve his facial complexion. c. The Plaintiff had taken one of the company’s lawn mowers and modified it to be a ceiling fan which he attached to his bedroom ceiling. d. The injury occurred when a boy used a drill to drill a hole in his younger brother’s arm because the younger brother had broken the older brother’s toy car. e. The Plaintiff was misusing an electric wood saw because the owner’s manual said to only use it to cut with (along) the grain of the wood and the Plaintiff was using it to cut across the grain, causing it to kick up and injure the Plaintiff. E [difficult p. 114] Barry buys a new sports car. The car sits low to the ground and because of the styling, visibility to the rear is limited. About a month after Barry has the car he backs over his pet poodle as he is leaving for work. In his strict liability suit against the car manufacturer, Barry will: a. Win because driving a sports car is an inherently dangerous activity. b. Win on the basis of design defect. c. Win on the basis of packaging defect because the car could have been packaged in a differently styled body. d. Lose because he assumed the risk of backing up in a car when he could not see to the rear. e. Lose because he is not in privity of contract with the car manufacturer. D [difficult p. 114]
66.
67.
71
68.
Power Tool Company manufactures table saws. These saws have several safety devices including a permanent blade guard. This guard keeps the user’s hands from touching the blade while it is moving. Ralph buys a Power table saw, but he takes off the blade guard because it inhibits the type of work he wants to do. Later, Ralph is injured while using the saw. If the blade guard had been left on, Ralph would not have been injured. Ralph sues Power Tool Co. under a strict liability theory. The best defense that Power could raise based on these facts is: a. Supervening event. b. Assumption of risk. c. Generally known dangers. d. State of the art. e. Misuse of the product. A [difficult p. 113] JKL, Inc. manufactures small appliances, including toasters. JKL learns that its toasters are defective and might cause serious harm to a user. Which of the following statements is not true? a. JKL must make a reasonable effort to notify purchasers and users of this defect. b. JKL must correct the defect. c. If a user gets a notice of the defect, but continues to use the product without having it repaired or replaced, and is subsequently injured, JKL is probably still liable for the injury. d. One reasonable way to notify purchasers of the defect is by mail. C [difficult p.114] Which of the following would be a supervening event from the standpoint of a car manufacturer that has been sued in strict liability for an injury caused by one of its cars? a. A redesign of the particular model car such that the ones being currently manufactured do not have the defect which led to the injury. b. A recall notice sent to the car owner which was ignored. c. An enactment, after the date of the injury, of a new safety regulation that would have prevented the injury. d. The fact that the defect was caused by the car dealer when the car dealer was installing accessories for the purchaser. D [difficult p. 114]
69.
70.
71.
Sean has a six-year-old car which he bought two years ago directly from its original owner. Eight months ago he received a recall notice about a safety problem with the brakes. He never responded to the notice. Yesterday Sean was driving when the brakes failed and caused him to strike and injure a pedestrian. Which of the following is true in lawsuits against the car’s manufacturer? a. The pedestrian cannot recover due to the fact that the pedestrian was not using the car. b. Sean can recover despite having received the recall notice. c. The pedestrian cannot recover because the correction of a defect defense will apply even though Sean did not take the car in for the repair.
72
d. e. C
Neither party can recover if Sean’s car was one of only a few of these cars that actually had a brake defect. The pedestrian could not recover due to assumption of the risk. [difficult p. 114]
ESSAY QUESTIONS—ETHICS AND POLICY
72. Should plaintiffs be able to recover from cigarette manufacturers for smoking-related illnesses? Are there variables that should affect the manufacturers’ liability? What are they? What effect should the warnings on cigarette packages have on the outcome? Some of the cases have been based on smokers who began smoking before the warning labels were used. Another issue that has been raised is that the decision to start smoking is often made at a young age and that the warnings were not understood; by the time the smoker was old enough to understand the warnings, he or she was addicted. Decisions in product liability cases sometimes make headlines, with much of the public outraged over what seems to be an excessive recovery for action seen to be the fault of the plaintiff. Is it too easy to recover in product liability? Why has the law changed over the past several decades to eliminate the need to prove negligence? Who wins and who loses from these changes? What changes would you make if you could? Many persons believe that strict liability has led to safer products overall. The headline cases represent a small fraction of product liability cases. Among the general reasons for the imposition of strict liability are the increasing complexity of products (making it harder for consumers to judge their safety) and the multi-layer distribution system whereby a privity requirement or the necessity to prove negligence would often work an injustice. In 1995, Congress passed a law affecting products liability actions relating to single engine airplanes. Among other provisions, this law sets an 18-year statute of repose. In 1996, Cessna resumed production of several models of single engine airplanes which had been stopped several years earlier, in part because of products liability exposure. Is this law ethical? Was this needed legislation, or was this a special favor given to one industry that makes a product known to lead to death and injury? How does the fact that flight training schools were unable to replace the single engine planes they were using for training with newer ones affect your analysis? Pilots are generally aware of the risks of general aviation, and can decide whether to fly a single engine plane based on those risks. This is generally less true for passengers. To the extent that the law has resulted in new single engine planes being manufactured, overall safety is likely increased. Furthermore, many would argue that the liability exposure for 18 years of a plane’s life is sufficient incentive for the manufacturers to make safe planes.
73.
74.
75.
In the case where General Motors was found liable for defective design of the fuel tank in a Chevrolet Malibu from the late 1970s, General Motors was not allowed to introduce evidence at the trial about the car’s safety history or that the driver was intoxicated when the accident occurred. Should this evidence have been able to be introduced?
73
Because there will probably be some accidents that lead to fuel tank fires or explosions with any fuel tank design, perhaps the overall safety record would have some bearing on the safety of this design relative to others. The driver’s intoxication would probably be viewed as a foreseeable misuse, and should not affect whether the design of the fuel tank was defective.
ESSAY QUESTIONS—FACTUAL APPLICATION Defect in Design 76. Smith purchased the latest kitchen counter top appliance, the Wonderslicer. It was designed to slice any type of dry food with amazing speed in a variety of settings. In the owner’s manual that came with the Wonderslicer it clearly warned that it should not be used on wet food. The Wonderslicer itself contained a warning to read the owner’s manual. Smith’s ten-year-old daughter used the Wonderslicer to slice some oranges. In the process, she received a severe electrical shock which caused burns to her hand. There is both a design defect (because most food is wet to some degree) and failure to warn because such a warning should be on the product itself. Any misuse here is foreseeable. [moderate] It is a hot summer afternoon so Rob takes his brand new Rocketski (a personal watercraft similar to a Jet Ski) out to a local park at a reservoir to try it out. The Rocketski has a built-in CD stereo sound system, with speakers, but also with a headphone jack. The owner’s manual contains a warning that the headphones should only be used in light traffic areas and with extreme caution. Rob takes the Rocketski out on the water and puts the headphones on with his new CD, the greatest hits of the Ultradeath Slashers and Destroyers. He takes the machine out to the open area of the reservoir and tries out the machine. He’s never done this before, is having lots of fun, and then wants to show his friends back on shore how fast the Rocketski can go. He comes close to shore at full speed where there are many swimmers and sailboards in the water. Several swimmers are yelling at him to stop, but he doesn’t hear anyone because he’s listening to his favorite song, “Destroy Me Bad, My Love,” at full volume on the headphones. He is rapidly approaching Sally on her sailboard, but doesn’t see her because he’s looking for his friends on shore. He would have missed Sally (just barely), but just as he got near her the engine on the Rocketski suddenly failed, causing the machine to lurch to the left and into Sally and her sailboard. Sally suffers severe injuries and sues Rocketski, Inc. Discuss the likely basis of the suit, claims raised, possible defenses, and likely outcome, assuming that the engine defect occurred in the manufacture of the Rocketski. Even with the warning, the headphone jack was likely a design defect because of the likelihood of misuse. The warning likely should have been on the Rocketski itself, not merely in the owner’s manual. Rocketski will probably lose despite the negligence (which might be looked at as an intervening event) of Rob because engine failure (most likely a defect in manufacture) was a cause of the injury. [difficult]
77.
Defense to Products Liability
74
78.
Barbara purchases a Radartel cellular phone. One of the reasons she bought this was for security because she lives alone and often travels alone. After using the phone for about a week, she noticed that the rechargeable batteries (supplied in the phone by the maker) lasted a shorter time than claimed by the manufacturer. One evening a few days later, Barbara was in bed, but not yet asleep, and heard someone in her living room. She picked up the cellular phone from beside her bed and attempted to make an emergency call to 911, but the batteries were dead. She panicked and stayed in her bed motionless. About five minutes later, the burglar came into her bedroom, at which point she screamed. As he then tried to climb out the bedroom window she hit him with a lamp, but he kicked it back at her and injured her. The burglar got away and was never caught. Barbara sues Radartel, the maker of the phone. Prior to the lawsuit she returned the phone to the store where she bought it and learned that the batteries were defective, at which point she was provided with new batteries which have worked properly since then. Discuss the likely basis for Barbara’s suit, the defenses that Radartel might raise, and the likely outcome. The defect here was not the cause of the injury, and Barbara assumed any risk of continuing to use the phone knowing of the problem with the batteries. The intruder, and Barbara’s hitting him with the lamp as he tried to flee would likely be viewed as intervening events. Radartel would not be able to use the correction of the defect defense because the correction was not made prior to the injury claimed in this case. [difficult] Bob is at the Boston Biceps Bodybuilding Club riding an exercise bike. Bob wants to change the channel on the television that is mounted high on a nearby wall. He reaches for the remote control device and finds that another member has accidentally taken the remote control and left behind a cellular phone. Bob drags the exercise bike over to the television. He stands on the seat of the exercise bike in order to reach the television, but the seat post breaks and Bob falls to the floor. Bob is injured and cannot control his temper. He puts his entire 170 pounds into destroying the bike and throws it across the room against the wall, breaking off several pieces, with the handlebars landing on the running track. Half an hour later, another patron, Randy, trips over the handlebars as he is running on the track and is injured. Randy and Bob both sue the manufacturer and the health club under products liability for their injuries. Discuss their cases. Although Bob misused the bike, it is probably foreseeable that persons might stand on the seat of an exercise bike. Furthermore, the seat should have been strong enough to support Bob’s 170 pounds. This is either a design or manufacturing defect, although the outcome of the case would be the same regardless of which type of defect this is. Bob would likely be able to recover. Randy would have difficulty proving that the defect caused his injury. The manufacturer could defend on the basis of intervening events, such as Bob’s throwing the bike, the gym’s failure to clean up the track, and possibly Randy’s role in not seeing the handlebars on the track. Note: This question can be expanded by asking about suits by Randy against Bob and the club for negligence. He could easily prove the elements of a negligence case against Bob, and likely also against the club because of their failure to clean up the track in a reasonable time. Both defendants could defend on either contributory/comparative negligence or assumption of the risk. [difficult]
79.
75
80.
George buys a power handsaw from a local hardware store. The manufacturer had made the saw with a blade guard, which surrounds the blade, helping to prevent blade contact with the user. The manufacturer sold the saw to a wholesaler, which sold it to the hardware store. The hardware store removed the blade guard from the saw, but put it in the box that contained the saw. When George got home, he noticed that the blade guard was off. He could have reattached it, or he could have taken it back to the store, but George was in a hurry, so he used it the way it was. While sawing, he hit a knot in the wood, the saw kicked back, and the blade hit George’s hand, seriously injuring it. Kickbacks are a relatively common occurrence, but if the blade guard had been installed, George would not have between injured. George wants to sue everyone in the chain of distribution under a strict liability theory. Discuss the potential liability of each member in the chain of distribution, and any possible defenses that may be raised. The manufacturer and wholesaler are not liable because any defect did not exist when it left their hands, enabling them to use the supervening event defense. The hardware store could assert assumption of risk or generally known danger. [moderate]
CHAPTER 6 BUSINESS AND ONLINE CRIMES
TRUE/FALSE QUESTIONS
Definition of a Crime 1. Statutes are the primary source of criminal law. T [easy p. 122] The evil intent necessary to commit a crime is known as “actus reus.” F [moderate p. 122] If a statute imposes criminal liability based on strict liability, then “mens rea” is not required. T [moderate p. 122] Felonies, but not misdemeanors, can be punished by imprisonment. F [moderate pp. 122-23] In most crimes, it is the conduct, rather than the intent behind the conduct, that determines whether the defendant committed the crime. F [easy p. 123] In a criminal case, intent can be proved by using indirect evidence. T [moderate p 123] The person who initiates a criminal case is known as the plaintiff... F [easy p 123]
2.
3.
4.
5.
6.
7.
76
8.
A lawsuit for any torts connected with a crime may be brought by the victim, but the lawsuit is separate from the criminal case. T [easy p 123] The burden of proof in both civil and criminal cases is “beyond a reasonable doubt.” T [easy p 124] There is no International Criminal Court to prosecute “crimes against humanity.” F [easy p. 125]
9.
10.
Criminal Procedure 11. A police officer must be certain beyond a reasonable doubt that a person has committed a crime before that person can be arrested. F [moderate p 125] An arrest warrant is required before any arrest can be made. F [moderate p 125] An arraignment is necessary before an indictment can be issued. F [easy p 125] A plea of “nolo contendere” means that the defendant admits guilt but no penalty can be imposed. F [moderate p 125] After a criminal trial, only the defendant has the right to appeal the verdict. T [easy p 126] Persons convicted of money laundering can be fined up to $500,000 or twice the value of the property involved in the crime. T [easy p 127]
12.
13.
14.
15.
16.
Crimes Affecting Business 17. Under common law, the crime of burglary could occur only at night. T [easy, p 127] Under common law, arson was defined as intentionally burning one’s own dwelling in order to collect insurance proceeds. F [moderate p. 128]
18.
White Collar Crimes 19. A distinguishing characteristic of embezzlement is that the wrongdoer initially had proper custody or access to the property that was embezzled. T [easy p. 129] It is a crime for a United States citizen to bribe a foreign official even if the conduct takes place entirely outside of the United States.
20.
77
T 21.
[moderate pp. 131-132]
The Racketeer Influenced and Corrupt Organizations Act has been applied to defendants who have no connections to organized crime. T [easy p. 132]
Inchoate Crimes 22. Persons who unsuccessfully try to complete a crime can be convicted of a crime even if they are unsuccessful in carrying out the original crime. T [easy p. 133]
Corporate Criminal Liability 23. A corporate director can be held individually liable for a crime the director committed on the behalf of a corporation, but cannot be held liable for crimes committed by his or her subordinates. F [moderate p. 135]
Constitutional Safeguards 24. Search warrants are not required for searches of business premises for businesses in certain heavily regulated industries. T [easy p. 136] The Fifth Amendment privilege against self-incrimination applies only to natural persons and not to corporations and partnerships. T [easy p. 140]
25.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Definition of a Crime 26. Which of the following is not true about the United States criminal law system? a. Criminal defendants are presumed innocent until proven guilty. b. The burden of proof in a criminal case is on the government. c. A jury’s vote to convict must be unanimous. d. Once there has been an arraignment, most of a defendant’s constitutional rights are no longer applicable. D [moderate p. 122] What is a “penal code?” a. The classification of a particular crime. b. A series of statutes that define precisely the conduct that is considered criminal. c. The list of sentences for particular crimes. d. The unwritten code of conduct among prison personnel. e. Another term used to describe a crime’s degree, such as first degree or second degree. B [moderate p. 122]
27.
78
28.
Imprisonment is generally imposed to serve all of the following functions except: a. Protect society from the person imprisoned. b. Providing a means to rehabilitate the criminal. c. Allowing victims to have a formalized process to meet and confront the criminal. d. Deterring others from engaging in criminal conduct. C [moderate p. 122] For what offenses can imprisonment be imposed? a. Felonies only. b. Felonies and misdemeanors. c. Felonies and violations. d. Misdemeanors and violations. e. Felonies, misdemeanors and violations. E [moderate pp. 122-23] Crimes such as illegal parking and jaywalking are normally categorized as: a. Violations. b. Misdemeanors. c. Felonies. d. None of the above. A [easy p.123] Which of the following correctly ranks the types of crimes from most serious to least serious? a. Violations, misdemeanors, felonies b. Violations, felonies, misdemeanors c. Misdemeanors, felonies, violations d. Felonies, violations, misdemeanors e. Felonies, misdemeanors, violations E [moderate pp. 122-123] In a criminal trial, which of the following is true? a. To be guilty, the defendant must have had a criminal intent at the time of the crime. b. The accused is presumed guilty once an indictment has been issued. c. The government must prove that the accused is guilty beyond all possible doubt. d. At the trial, the grand jury listens to evidence to determine guilt or innocence. A [moderate p. 123] The two general elements required in order to prove guilt in a crime are: a. Criminal act and damages. b. Criminal act and criminal intent. c. Criminal act and at least one impartial witness. d. Criminal act and resultant harm. e. Criminal act and physical injury. B [easy p. 123] Once a criminal case has been brought against a defendant, a related civil case: a. Will automatically become part of the criminal case. b. Can be incorporated into the criminal case, but only if the victim and the prosecutor agree. c. Will always be filed, but as a separate action.
29.
30.
31.
32.
33.
33.
79
d. e. D 34.
Can be filed by the victim, but in many cases no civil case is filed. Can be filed, but only if there is a conviction in the criminal case. [difficult p. 123]
Which of the following is true about crimes? a. Criminal liability exists only if there is a victim who suffered damages. b. A criminal defendant will be found guilty whenever the jury believes it is more likely than not that the defendant committed the crime. c. Torts always accompany crimes, although the civil case is often not brought. d. Criminal law is based on the conduct or activities of the defendant, rather than on resultant harm. D [moderate pp. 122-24]
35
Where is the new International Criminal Court located? a. Geneva. b. Zurich. c. New York. d. The Hague. e. Paris. D [moderate p. 123] Sam is charged with the crime of theft and has also had a civil suit filed against him by the victim. Which of the following could not be a consistent outcome? a. Not guilty in the criminal case, liable in the civil case b. Not guilty in the criminal case, not liable in the civil case c. Guilty in the criminal case, liable in the civil case d. Guilty in the criminal case, not liable in the civil case D [difficult p. 124]
36.
Criminal Procedure 37. In which of the following are these steps of a criminal case listed in the correct order? a. Arraignment, arrest, trial, indictment b. Arrest, indictment, arraignment, trial c. Indictment, arraignment, arrest, trial d. Arrest, arraignment, indictment, trial e. Arrest, indictment, trial, arraignment B [moderate, pp 124-26] Probable cause is most directly associated with which step of the criminal process? a. Arrest
38.
80
b. c. d. e. A 39.
Indictment Plea bargaining Arraignment Jury deliberations [moderate p. 125]
In a criminal proceeding, what is the difference between an indictment and an information? a. The defendant is charged with a crime in an indictment, but not in an information. b. Guilt or innocence is determined in an indictment, but not in an information. c. A grand jury issues an indictment, but does not issue an information. d. An indictment requires proof beyond a reasonable doubt, but an information does not. C [moderate p. 125] In criminal law, what is an “information?” a. The testimony of someone who has been given immunity as part of a plea bargain. b. The evidence presented by the prosecutor at trial. c. Mitigating circumstances presented by a defendant at a sentencing hearing. d. A formal charge of a crime issued by a magistrate. e. Summary of facts learned in the discovery process. D [moderate p. 125 ]
40.
41.
In a criminal trial, the hearing where the defendant is formally notified of the charges and asked to enter a plea is the: a. Indictment. b. Plea hearing. c. Arraignment. d. Information. e. Booking. C [easy p. 125] If a defendant does not admit guilt, but is willing to accept the penalty for a crime, the defendant would most likely: a. Plea bargain with the grand jury. b. Request the mandatory minimum sentence. c. Enter a plea of “ nolo contendere .” d. Proceed directly to the appeal phase. e. Immediately be placed on probation. C [easy p. 125] Which of the following is true about how plea bargaining usually works? a. A defendant waives the right to a jury trial and the judge determines guilt or innocence. b. A defendant who is serving a prison sentence for a crime the defendant was convicted of can get the sentence reduced for good behavior, community service or similar reasons.
42.
43.
81
c.
d. C 44.
A defendant pleads guilty to the charged crime or to a lesser offense in exchange for receiving a lighter sentence than if the defendant were to be tried and found guilty of the original charges. A defendant waives certain constitutional rights in exchange for a lighter sentence. [moderate p. 126]
Which is true about jury verdicts in criminal cases? a. If the defendant is found guilty, the defendant may appeal. b. If the defendant is found not guilty, the government may appeal. c. If the jury cannot agree on guilt or innocence, this is a hung jury and the defendant goes free just as if found not guilty. d. In the case of a tie jury vote, the judge casts a vote to break the tie. e. Both A and B are true. A [moderate p. 126] Which of the following is true about a hung jury in a criminal case? a. Because it means that the jury did not find guilt beyond a reasonable doubt, it has the same result as if the jury had issued a verdict of not guilty. b. It will automatically result in a new trial conducted before the same judge. c. It will automatically result in a new trial, although it might be conducted before a different judge. d. It will allow another trial of the defendant to be held, which the state might or might not choose to actually prosecute. D [moderate p. 126]
45.
Which of the following is true about money laundering? a. The primary difficulty with money laundering activities is that money laundering is not itself illegal. b. Although illegal, the penalties for money laundering are too small to be an effective deterrent. c. Money laundering is a federal crime and can carry fines up to $500,000 or more, depending on the amount of money laundered. d. One difficulty with prosecuting for money laundering is that lenient laws in some states allow those states to function as money laundering havens. C [moderate pp. 126-27] Crimes Affecting Business 47. Someone who takes personal property from someone’s home after entering without authorization has committed: a. Extortion. b. Burglary. c. Embezzlement. d. Robbery. B [easy p. 127]
46.
82
48.
Which of the following is true? a. Some states now group the crimes of robbery, burglary and larceny as theft. b. Some states now group the crimes of robbery, burglary and theft as larceny. c. Some states now group the crimes of burglary, theft and larceny as robbery. d. Some states now group the crimes of robbery, larceny and theft as burglary. A [moderate p. 127] To find someone guilty of receiving stolen property, it is sufficient to prove that the defendant: a. Was in possession of stolen property. b. Intended to keep the property himself. c. Paid for the property and intends to keep it himself. d. Knowingly received the stolen property and intended to deprive the true owner of the property. e. Took part in the wrongful taking of the property and intended to deprive the true owner of the property. D [moderate p. 127] Which of the following is characteristic of a “qui tam” case? a. The federal government sues an individual for breach of a government contract. b. An individual brings a lawsuit against an alleged fraudulent government contractor. c. An individual files a false claim for workers’ compensation or unemployment benefits. d. An individual or business is prosecuted for alleged money laundering. e. An individual or business is prosecuted for alleged involvement with organized crime. B [difficult pp. 128-29]
49.
50.
White Collar Crimes 51. Which of the following would constitute the crime embezzlement? a. A self-serve gasoline customer drives away without paying for the gas. b. The cashier at a grocery store takes money from his own cash register. c. A receptionist who works in a bank lobby distracts a teller and takes money from the teller without the teller’s knowledge. d. A roofing contractor takes a lawnmower from a homeowner while doing a job for the homeowner. e. An electrician working in a client’s home takes $100 from the homeowner’s desk drawer. B [difficult p. 129] Identity fraud typically occurs when: a. Someone uses a fictitious name in place of her real name. b. Someone steals a ticket with a name associated with it, such as an airline ticket, and uses it in place of the original owner.
52.
83
c. d. C 53.
Someone uses the name and other identifying information of another person to engage in fraudulent activity. Someone operates under two or more different names, at least one of which is fictitious. [moderate p. 130]
Which of the following is true about the crime of bribery? a. Only the person who receives the bribe can be convicted. b. Only the person who gives a bribe and is successful at having it accepted can be convicted. c. Only the person who offers the bribe can be convicted, but that person is guilty whether or not the bribe is accepted. d. A party who actually accepts a bribe can be convicted, as well as the person offering the bribe, whether or not it is accepted. e. A party who even considers accepting a bribe can be convicted, as well as the person offering the bribe, whether or not it is accepted. D [moderate p. 130] Under The Racketeer Influenced and Corrupt Organizations Act: a. Racketeering activity is narrowly defined to include only offenses commonly engaged in by organized crime such as money laundering. b. To constitute a pattern under the statute the conduct must be engaged in at least once a year for five consecutive years. c. Only corporations and individuals are subject to its provisions. d. As few as two acts in a ten year period can amount to a pattern under the statute. e. Only organized crime organizations and their members can be convicted under the statute. D [moderate p. 132]
54.
To prove a pattern of racketeering under RICO, at least _________ predicate acts must be committed by a defendant within a 10-year period. a. 1 b. 2. c. 3. d. 5 A [easy p. 132] Inchoate Crimes 56. Which of the following is true regarding inchoate crimes? a. One can be found guilty only if the related crime was committed. b. They do not require any level of intent. c. One can be charged and found guilty of some inchoate crimes even if one did not try to commit the related crime. d. Because the sentence is usually less than that for the related crime, guilt need not be proven beyond a reasonable doubt. C [moderate p. 134] What is RICO? a. Rural Income Corporate Organization Act. b. Rural Inchoate and Corrupt Organization Act. c. Racketeer Influenced and Corrupt Organization Act.
55.
57.
84
d. C
Racketeer Information and Corporate Organization Act. [easy p. 132]
Corporate Criminal Liability 58. Which is true about corporate criminal liability? a. Corporations have always been just as subject to criminal liability as individuals. b. Because a corporation cannot be sent to prison, they generally cannot be held criminally liable for the actions of their officers. c. If the criminal conduct can be traced to a specific person or persons, those persons will be liable and not the corporation. d. There can be liability for both the individuals who commit crimes and for the corporation on whose behalf the crimes were committed. D [easy p. 135]
Constitutional Safeguards 59. What does the Fourth Amendment do? a. It protects the rights of the people from unreasonable search and seizure by the government. b. It requires the police to obtain a search warrant in all search and seizure cases. c. It prohibits warrantless searches in connection with an arrest. d. It guarantees the defendant the right to an attorney. A [easy p. 126] In the U.S. Supreme Court’s decision in 2000 regarding warrantless searches at traffic stops in Indianapolis, the Court held that: a. Any warrantless searches at traffic stops were unconstitutional. b. A traffic stop, without suspicion, to check sobriety was unconstitutional. c. Roadblock checkpoints to look for drugs in the possession of the persons stopped were unconstitutional. d. Roadblocks near the U.S. border were found to unconstitutionally discriminate against aliens. C [difficult pp. 138-139]
60.
61.
Which of the following statements is true? a. The Fifth Amendment guarantee against self-incrimination does not prohibit the taking of fingerprints against a suspect’s will. b. The guarantee has been extended to include all business records and documents. c. Even if immunity from prosecution has been granted, the defendant may still refuse to testify. d. The attorney-client privilege is the only privilege that has been recognized under the Fifth Amendment. A [difficult p. 140] The Miranda decision requires that a criminal suspect be notified of the following except: a. The right to a trial by jury. b. The right to have a lawyer present during interrogation. c. The fact that anything the suspect says may be used against the suspect. d. The right of the suspect to remain silent.
62.
85
e. A 63.
The right to have an attorney appointed if the suspect cannot afford one. [difficult p. 140]
All of the following privileges have been recognized under the Fifth Amendment except: a. Psychologist/psychiatrist-patient. b. Minister-penitent. c. Accountant-client. d. Parent-child. e. Spouse-spouse. C [moderate, p 141] Because of the prohibition against double jeopardy: a. Criminal defendants are never tried twice on the same charge. b. All criminal defendants are entitled to an attorney. c. The prosecution cannot appeal when a verdict of “not guilty” is rendered. d. Persons are allowed one phone call when arrested. e. A jury’s verdict in a criminal case is final and cannot be appealed. C [difficult p. 141]
64.
65.
The Sixth Amendment right to a public jury trial includes the following rights except: a. The right to be tried in the same state or district where the alleged crime was committed. b. The right to a speedy trial. c. The right to have the assistance of a lawyer. d. The right to know the identity of the jurors deciding the case. e. The right to confront the witnesses testifying against the defendant. D [moderate p. 142] 66. The Federal Antiterrorism Act of 2001 includes the following provisions except: a. The authorization of a Special Intelligence Court. b. Allowing nationwide search warrants. c. Permitting roving wiretaps. d. Allowing the detention of noncitizens for up to seven days without filing charges if the person has been certified as being under suspicion of involvement in terrorist activities. e. Taking away the right to court-appointed attorneys for terrorism defendants who cannot afford to pay for their own attorneys. E [moderate p. 143]
MULTIPLE CHOICE QUESTIONS—FACTUAL APPLICATION
Crimes Affecting Business 67. Mary was at a party given by friends of her boyfriend. It was summer and the guests spent most of the time outdoors. Mary fell in love with a crystal serving dish being used, and when no one was looking, slipped it into her purse. She took the dish home and placed in her kitchen cabinet. Under the definitions under common law, what crimes has Mary committed? a. Burglary and larceny b. Robbery and burglary
86
c. d. e. D
Larceny and receiving stolen property Larceny Larceny and Robbery [moderate p. 127]
68.
Jan saw an item at a local department store, which she considered purchasing but did not. After getting home, she changed her mind. Her roommate was going to the same store, so Jan asked the roommate to pick up the item for her. Jan gave her credit card to the roommate and said, “Just sign my name; you know they never check the signature.” The roommate purchased the item with Jan’s credit card and signed Jan’s name. Has the roommate committed forgery? a. Yes, because the roommate misrepresented that she was Jan. b. Yes, because forgery occurs whenever one person signs the name of another. c. No, because the store did not realize that the roommate was not Jan. d. No, because the roommate did not intend to defraud either Jan or the store. e. No, because Jan is always liable for charges on her credit card. D [difficult p. 128] Sean works for a defense contractor. This contractor has a contract to sell 2 million pocket flashlights per year to the military at a price of “one dollar more than the cost to produce.” The contractor has elaborate and detailed reports on the cost of making these flashlights. Copies of these reports are submitted to the government. Sean knows that some of the information in these reports calculating a cost per flashlight of $243.00 is false. Which of the following is true? a. Because of Sean’s knowledge, he is equally guilty as the corporation of committing fraud. b. Sean can report this information to the government, but Sean cannot gain financially by doing so. c. Sean could file a suit against the contractor under the Civil False Claims Act, and if the case is successful, receive a portion of the recovery. d. Sean could possibly receive a portion of the recovery, but only if the government chooses to not intervene in the suit. e. If Sean reports this information to the government, Sean is entitled to receive a reward whether or not the government is able to recover any money from the contractor. C [difficulty pp. 128-29]
69.
Inchoate Crimes 70. Dean and Mary agree to sell fake stock to investors and disappear into the mountains with the proceeds. They print the stock and send offers to persons through the mail and make offers in person, but are unable to sell any of the fake stock. Dean and Mary are afraid they will get caught and go stay with Mary’s friend Kathleen in another state. Kathleen gives Dean and Mary her car to escape, but the car breaks down a few blocks from Kathleen’s house. Mary and Dean are picked up by the police as they try to get Kathleen’s car running. Which of the following is true?
87
a. Dean and Mary have committed no crime because no one purchased the fake stock. b. Dean and Mary became guilty of conspiracy when they agreed to sell the fake stock. c. Kathleen did not commit a crime because her unreliable car did not help Dean and Mary escape. d. Dean and Mary have committed conspiracy and at least one other crime. D [difficult pp. 129-34] 71. Jean, a nurse practitioner, is sitting at home one afternoon when an old friend comes knocking on her door looking very frightened. The friend said to Jean, “I don’t know what got into me, but I just stole $200 from a convenience store. I don’t know what to do, I want to return the money, but also fear the cops are on my trail.” Jean says, “Don’t worry, go hide in that secret room downstairs until we see what happens. Which convenience store was it? I’ll put the $200 in an envelope and send it back.” Just after Jean gets the envelope sealed and addressed, a police officer knocks on Jean’s door. The officer warns Jean that there might be a robber in the neighborhood, and asks Jean if she has seen anyone unfamiliar. Jean says that she has not seen a single unfamiliar person, and the police officer leaves. Has Jean committed a crime? a. Yes, she has committed the crime of aiding and abetting. b. Yes, she has committed the crime of conspiracy. c. She has committed no crime because she did not take part in the robbery. d. She has committed no crime, but only if she actually returns the $200. e. She has committed no crime because Jean was telling the truth in saying that she had not seen an unfamiliar person. A [difficult p. 134]
Constitutional Safeguards 72. A Rocky Mountain state has extensive safety regulations covering the design, operation, and maintenance of ski lifts. One day a state inspector arrives at the Powdermania Ski Resort to inspect the lifts. The inspector does not have a search warrant and does not expect to find any violations, but finds several criminal violations. Which best describes this situation? a. This was an illegal search made without a warrant and without probable cause. b. The constitutional protection would not apply in this case because it was an inspector, rather than a police officer who conducted the inspection. c. Assuming that Powdermania Ski Resort is a corporation, it does not receive any Fourth Amendment protections due to its status as a corporation. d. Assuming the inspection was conducted in accordance with state law, a search warrant was not needed because the lift operation aspect of the business is highly regulated. D [moderate p. 139]
73.
Roger intentionally set his residence on fire in order to collect insurance proceeds. While the fire was being fought, the police arrived to help with the crowds of onlookers. Roger realized he had done something wrong and went to one of the police officers and told the officer that he had started the fire intentionally. The police officer did not give Roger the
88
Miranda warnings. What is the most likely outcome if Roger tries to have the confession excluded from evidence at trial? a. Because the Miranda warnings were not given, the confession must be excluded. b. Because Roger was not in custody, was not a suspect, and was not being questioned about the fire, the Miranda warnings did not need to be given and the confession may be admitted as evidence. c. Because the police did not have an arrest warrant, the confession cannot be admitted because the Miranda warnings were not given. d. Because the Fifth Amendment requires exclusion of any incriminating evidence, the confession cannot be used. B [difficult p. 140] 74. Kim robbed a bank. Kim used a gun and attempted to murder the teller because the teller screamed upon seeing Kim’s gun. The teller was injured. Bank robbery is a federal offense, and attempted murder is a state law offense. A trial is held on the state law charge of attempted murder and results in a hung jury. This is the only lawsuit Kim has faced up to this point arising from this incident. What is the complete list of legal actions that could be brought against Kim at this point arising from the bank robbery? a. State criminal case, and federal criminal case b. State criminal case, federal criminal case, and a civil case by the teller for damages c. Federal criminal case, and a civil case by the teller for damages d. Either a state or federal criminal case, but not both, and a civil case by the teller B [difficult p. 141]
ESSAY QUESTIONS—ETHICS AND POLICY
75. Assume that a CPA working as an internal auditor embezzles $50,000 from the bank over the course of a year. The CPA has no previous criminal record. An unemployed auto mechanic in the same town who has tried to find work unsuccessfully for 18 months robs a bank and gets away with $50,000. He used a gun in the robbery to threaten bank employees, but the gun was not loaded and therefore he obviously did not fire it. No one was injured. The mechanic has no previous criminal record. Which of these persons deserves the greater sentence? How much greater should it be? In general, should whitecollar criminals receive stronger or more lenient sentences than the more traditional criminal for roughly equivalent crimes? Be sure to clearly state all your reasons for the conclusions you reach. There is a wide perception that white collar criminals receive softer punishments for their crimes. On one hand, the CPA did not threaten anyone, but on the other hand, the CPA has a good job with a good salary, whereas the mechanic might have been desperate. [moderate] In 2000, the U.S. Supreme Court ruled that police roadblocks where people were stopped without individualized suspicion in order to discover and intercept drugs were unconstitutional. In its opinion, the Court acknowledged its earlier 1990 decision in which sobriety checkpoints were constitutional even though drivers were stopped without individualized suspicion. Are the outcomes in these two cases consistent? How do you think they should have been decided?
76.
89
Although they are similar, the sobriety checkpoints are intended to prevent driving while in a condition that could cause immediate and severe harm to others. The drug searches were not aimed at preventing such immediate harm. There are differing views on whether this difference is significant enough for one search to be constitutional and the other not. [moderate] 77. Many persons believe that the Antiterrorism Act of 2001 improperly interferes with constitutional protections and civil liberties. Do you think it does? What risks are there associated with limiting the rights of persons charged in connection with international terrorism? As always, constitutional issues involve a balancing. On one hand, some have argued that ironically the September 11, 2001 terrorists used the civil liberties of the United States in orchestrating the attacks on the United States. On the other hand, the legal system of the United States has long had a reputation for fairness. If the protections are cut back too much, in the court of world opinion, a conviction in the United States will not have much respect and may be viewed as unfair. [difficult]
ESSAY QUESTIONS—FACTUAL APPLICATION Crimes Affecting Business 78. Barry is the computer systems director for a medium-sized consulting firm. One night Barry is at happy hour at a local bar talking about his job with some people he has just met. Barry mentions that he needs to buy computers for the three new persons the firm has recently hired. One of the persons he has just met, Tom, asks Barry what kind of computers he plans to purchase. Barry says, “I’m not sure. I’m still checking out what’s available.” Tom says, “Well, I can get you anything you want for much less than the stores.” A week later Barry calls Tom and says he is interested in the Cybermega 4000 model, and would order three if the price was right. Tom quotes a price, which is about half the normal price. Three days later Tom comes to Barry’s office with the three computers. Barry is curious why only one is in a box and Tom replies, “Oh, I thought you wouldn’t want the trash in your office. I also already sent in the warranty cards for you to save you the trouble.” Later it is learned that the computers were stolen a few days before Tom took them to Barry. Is Barry or the consulting firm guilty of receiving stolen property? The elements can be proven by circumstantial evidence, which are probably present here. A jury would likely find that Barry should have known the property was likely stolen, even if he did not know with certainty. The firm could also have criminal liability for the crimes committed on its behalf. [moderate]
White Collar Crimes 79. John is a sales associate for Neptune Cyber Solutions, a manufacturer of medium size computer operating systems. John is overseas in the nation of Megalopia hoping to secure a contract with a large manufacturing firm. Because the firm has technology contracts with the Megalopia’s military, any contract with the manufacturer must be approved by the Defense Department of Megalopia. John makes a cash payment of
90
$10,000 to the Megalopia representative who is negotiating the contract. Of this amount, $3,000 is to cover the standard published fee that the government charges for these approvals, $2,000 is for an additional $2,000 to be paid to the government officials to expedite the approval, and $5,000 is a “thank you” to the manufacturer’s representative for choosing the Neptune system. The $2,000 for expediting the approval is consistent with what is customary in Megalopia to pay for an expedited approval. Has John violated the Foreign Corrupt Practices Act? The $3,000 is likely not a violation, as it is a published fee, and would likely be considered part of the written laws of Megalopia. The $5,000 was not paid to a government official and is thus not a violation of the Act. The $2,000 payment, even though not paid directly to a government official, might be a violation. More would need to be know if the “expediting” is really simply a speeding up of the approval process (and thus more ministerial and not a violation) or something paid to change the outcome of the approval process, in which case it is likely a violation. [moderate] Inchoate Crimes 80. Hank, a Web page designer, recently discussed with his friend, Frank, how easy it would be to defraud people over the Internet. They decide to set up a fraudulent online casino. The next day Hank makes prints of the homepages of a dozen online casinos. Before either Hank or Frank does anything further, they are arrested for conspiracy. Are they guilty of conspiracy? There was conspiracy by Hank and Frank because there was agreement, and Hank’s prints of existing online casinos would be an overt act. [moderate]
CHAPTER 7 ETHICS AND SOCIAL RESPONSIBILITY OF BUSINESS
TRUE/FALSE QUESTIONS
Law and Ethics 1. Businesses organized in the United States are subject to the laws of other countries in which they operate. T [easy, p. 149] All ethical standards have been enacted as law. F [easy p. 149] If something is legal, it is also ethical. F
2.
3.
[easy p. 149]
Moral Theories and Business Ethics
91
4.
Under ethical fundamentalism, persons look internally and decide for themselves whether a course of action is appropriate. F [easy p. 150] Ethical fundamentalism does not permit a person to determine right and wrong for himself. T [easy p. 150] Utilitarianism requires taking the course of action that provides at least some good to the greatest number of people. F [moderate p. 151] One advantage of utilitarianism is that there is no need for measuring the good of an action for society. F [moderate p. 151] A Michigan appellate court ruled that statements made by General Motors to keep a factory open if it received certain tax incentives was not a legally enforceable promise. T [easy p. 151] Deontology is based on universal rules that require that all similar cases be treated alike with no exceptions. T [easy p. 151] The concept of reversibility under Deontology allows that the rules be reversed when doing so would make the particular situation more just. F [moderate p. 152]
5.
6.
7.
8.
9.
10.
11.
The universal duties under Kantian ethics were agreed upon, with some modification, shortly after being proposed by Kant. F [moderate p. 151] John Locke and Jean-Jacques Rousseau both proposed a social contract theory of morality under which each person is presumed to have entered into a social contract with all others in society to obey moral rules that are necessary for people to live in peace and harmony. T [moderate p. 152] Under the social contract theory of societal justice, members of society are obligated to obey the moral rules of society regardless of whether others obey those rules. F [moderate p. 152] The distributive justice theory has been criticized because its principles of justice are supposed to be chosen by persons who do not know their position in society, something that is unrealistic. T [easy p. 152] Under Rawls’s distributive justice theory, every individual has the same responsibility to use her own efforts to realize her potential. F [moderate p. 152]
12.
13.
14.
15.
92
16.
Ethical relativism allows an individual to evaluate the ethics of his actions based on his own feelings about what is ethical. T [moderate p. 153] John Stuart Mill is the best known proponent of duty ethics. F [easy p. 151] “Deontology” is another name for duty ethics. T [easy 151]
17.
18.
The Social Responsibility of Business 19. One limitation of the ethical principles of the Caux Round Table is that they are based only on Western principles and thus are not accepted by many Eastern nations. F [easy p. 155] Under the maximizing profits theory of the social responsibility of business, it is improper for a business to undertake charitable acts for the benefit of society if doing so reduces profits. T [easy p. 156] Under the maximizing profits theory of the social responsibility of business, a business should never voluntarily reduce its prices. F [easy p. 156] Under the moral minimum theory of the social responsibility of business, businesses are presumed to operate in order to generate profits and thus have minimal moral obligations. F [easy p. 158]
20.
21.
22.
23.
Under the moral minimum theory of the social responsibility of business, it is acceptable for a business to injure others so long as the business adequately compensates those who are injured. T [moderate p. 158] Under the stakeholder interest theory of the social responsibility of business, a business has obligations to both shareholders and employees, but not to others. F [moderate p. 158-159] A criticism of the stakeholder interest theory of the social responsibility of business is that it is often impossible to determine how the interests of the different stakeholders should be balanced. T [easy p. 159] Under the corporate citizenship theory of the social responsibility of business, a business has multiple obligations, but these obligations are only to those who have some direct interest or connection with the business. F [moderate p. 160]
24.
25.
26.
93
27.
The corporate citizenship theory of social responsibility argues that businesses have the responsibility to do good for society. T [easy p. 160] Social audits have recently become mandatory for publicly-traded corporations. F [easy p. 160]
28.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Law and Ethics 29. Which of the following statements is true regarding the relationship of law and ethics? a. The legal requirements will almost always be the same as the ethical requirement because the law is based on the ethical standards. b. In some cases ethics will require a higher standard of conduct than the law, but never vice versa. c. In some cases the law will require a higher standard of conduct than ethics, but never vice versa. d. Depending on the circumstances, the law can require a higher, lower, or the same standard of conduct as ethics demands. D [moderate p. 149] The Houston-based energy company that filed for Chapter 11 bankruptcy and whose business conduct is one of the grossest examples of corporate greed and fraud in America was: a. Shell Oil Company. b. Exxon Corporation. c. Houston Oil and Gas Corporation. d. Enron Corporation. e. Mobil Oil Company. D [moderate p. 150]
30.
31.
Which of the following is correct with regard to the relationship between law and ethics? a. The rule of law and the golden rule of ethics demand the same response. b. The law may not .permit something that would be ethically wrong. c. Lawful conduct is always ethical conduct. d. Although much of law is based on ethical standards, not all ethical standards have been enacted as law. D [moderate p. 149]
Moral Theories and Business Ethics 32. Someone who makes moral decisions based on the guidance of an outside source, such as another person, is applying which moral theory? a. Ethical relativism b. Utilitarianism c. Ethical fundamentalism d. Kantian ethics
94
e. C 33.
Rawls’s distributive justice theory [easy p. 150]
The moral theory of ethical fundamentalism can best be characterized by: a. the consultation of an outside source, such as a book or person, for ethical guidance. b. the belief that the moral rules should be determined by persons who have a “veil of ignorance” about their place or station in society. c. the belief that a person must decide what course of action is proper based on that person’s own set of beliefs or feelings. d. determining which course of action produces the greatest amount of good for the greatest number of people. e. a set of universal rules based on reasoning which must be applied in all situations and is characterized by reversibility. A [moderate p. 151] Someone who believes that moral decisions should be made such that the greatest amount of good in total results from the actions, believes in which moral theory? a. Ethical relativism b. Utilitarianism c. Ethical fundamentalism d. Kantian ethics e. Rawls’s distributive justice theory B [easy p. 151] Which of the following is a frequently raised criticism of “utilitarianism”? a. Under utilitarianism moral and ethical rules are too rigid and fixed over time. b. Under utilitarianism actions taken must harm the smallest number of people thereby failing to consider the effect on the majority. c. Decisions made using utilitarianism require the measurement of qualities that are not subject to precise measurements. d. Decisions made using a utilitarian analysis are not allowed to take into account an individual’s station or place in society. C [moderate p. 151]
33.
34.
35.
Which course of action would utilitarianism require be taken? a. The one that provides at least some good to the greatest number of people. b. The one that provides the greatest overall good to society, even if the benefit of that alternative flows to only one person. c. The one that harms the smallest number of individuals. d. The one that places the greatest number of people in a better position than they were in previously. B [moderate p. 151] Which of the following best characterizes “utilitarianism”? a. Consultation of an outside source, such as a book or person, for guidance. b. The belief that the moral rules should be determined by persons who have a “veil of ignorance” about their place or station in society. c. The belief that a person must decide what course of action is proper based on that person’s own set of beliefs or feelings.
36.
95
d. e. D 37.
Determining which course of action produces the greatest amount of good for society. A set of universal rules based on reasoning which must be applied in all situations and are characterized by reversibility. [moderate p. 151]
What did the appeals court rule when General Motors was sued in Ypsilanti, Michigan? a. General Motors had to reduce the wages of its employees contrary to a collective bargaining agreement so that the factory would remain profitable. b. General Motors had to lay off a portion of the workforce at one of its other factories. c. General Motors could not outsource work currently being performed in its own factory. d. The promises made by General Motors to maintain continuous employment at its Willow Run plant were merely expressions of hope and did not amount to an enforceable promise. e. General Motors was contractually bound to the City of Ypsilanti to keep its Willow Run factory open. D [moderate p. 151] The golden rule, “Do unto others as you would have them do unto you,” is most directly reflected in which moral theory? a. Ethical relativism b. Utilitarianism c. Ethical fundamentalism d. Kantian ethics e. Rawls’s distributive justice theory D [moderate p. 151]
38.
39.
Kantian ethics can best be characterized by: a. The consultation of an outside source, such as a book or person, for guidance. b. The belief that the moral rules should be determined by persons who have a “veil of ignorance” about their place or station in society. c. The belief that a person must decide what course of action is proper based on that person’s own set of beliefs or feelings. d. Determining which course of action produces the greatest amount of good for the greatest number of people. e. A set of universal rules based on reasoning which must be applied in all situations and is characterized by reversibility. E [moderate p. 151] Deontology is another term applied to:
40.
96
a. b. c. d. e. D 41.
Ethical relativism Utilitarianism Ethical fundamentalism Kantian ethics Rawls’s distributive justice theory [moderate p. 151]
Which of the following is not a part of the beliefs of Kantian Ethics? a. All cases should be treated alike. b. The applicability of “do unto others as you would have them do unto you.” c. Choosing a course of action based on what does the greatest good for society. d. Abiding by the rules applied to others in making decisions. C [moderate p. 151] When the city of Ypsilanti, Michigan sued General Motors Corporation for reneging on its implied promise to stay in town in return for tax breaks, what did the appellate court find? a. The agreement was generally unethical and illegal. b. GM made no promise to stay put in Ypsilanti as a quid pro quo for tax abatements. c. Tax abatement agreements provide societal benefits. d. There would be a gross inequity if GM were allowed to close its plant in Ypsilanti. B [moderate, p 182] What does the “veil of ignorance” require under Rawls’ distributive justice theory? a. That ethical obligations are decided by less intelligent members of society so that they can be understood by all. b. That ethical obligations in society not be made public because if they were, individuals would strive to merely do the minimum c. That ethical obligations be determined by persons who do not know their place in society. d. That persons who have suffered an injustice not be able to learn the identity of the person causing the injustice, at least when it is practical to keep this information from the person who was harmed. C [easy p. 152]
42.
43.
44.
Rawls’s social justice theory includes which of the following? a. The consultation of an outside source, such as a book or person, for guidance. b. The belief that the moral rules should be determined by persons who have a “veil of ignorance” about their place or station in society. c. The belief that a person must decide what course of action is proper based on that person’s own set of beliefs or feelings. d. Determining which course of action produces the greatest amount of good for the greatest number of people.
97
e. B 46.
A set of universal rules based on reasoning which must be applied in all situations and are characterized by reversibility. [moderate p. 152]
Someone who believes that the principles of justice and moral duties are based on universal rules, and that the actor must abide by the same rules being applied to others, believes in which moral theory? a. Ethical relativism b. Utilitarianism c. Ethical fundamentalism d. Kantian ethics e. Rawls’s distributive justice theory E [easy p. 152] What is the Japanese concept of “ kyosei”? a. The theory that requires that businesses should maximize profits for shareholders. b. The concept that a business has a duty to maximize profits while avoiding harm to others. c. The rule that businesses must avoid illicit operation. d. The concept of living and working together for the common good. B [difficult p. 155] Someone who makes moral and ethical decisions based on his own beliefs is applying which moral theory? a. Ethical relativism b. Utilitarianism c. Ethical fundamentalism d. Kantian ethics e. Rawls’s distributive justice theory A [easy p. 153] Which two philosophers proposed a social contract theory of morality? a. John Locke and Jean Jacques Rousseau. b. Jeremy Bentham and John Stuart Mill. c. Karl Marx and Joseph Story. d. Milton Friedman and Henry Ford. e. R.J. Rehnolds and Arthur Anderson. A [moderate p. 152]
47.
48.
49.
50.
The moral theory of ethical relativism can best be characterized by: a. The consultation of an outside source, such as a book or person, for guidance. b. The belief that the moral rules should be determined by persons who have a “veil of ignorance” about their place or station in society.
98
c. d. e. C 51.
The belief that a person must decide what course of action is proper based on that person’s own set of beliefs or feelings. Determining which course of action produces the greatest amount of good for the greatest number of people. a set of universal rules based on reasoning which must be applied in all situations and is characterized by reversibility. [moderate p. 153]
Which of the following is a criticism of ethical relativism? a. moral and ethical rules are too rigid and fixed over time. b. some persons would take actions which they believe to be moral, but which most persons in society believe to be immoral. c. decisions require the measurement of qualities which are not subject to precise measurements. d. decisions are not allowed to take into account a particular person’s station or place in society. B [moderate pp. 153-154] Which ethical theory holds that individuals must decide what is ethical based on their own feelings as to what is right or wrong? a. Ethical fundamentalism. b. Ethical relativism. c. Utilitarianism. d. Kantian ethics. B [moderate p. 154]
52.
The Social Responsibility of Business 53. Which of the following is not one of the Caux Round Table Principles for International Business? a. Avoidance of Illicit Operations. b. Support for Multilateral Trade. c. Promotion of Multiculturalism. d. Respect for the Environment. e. Responsibility of Business Beyond Shareholders Toward Stakeholders. C [moderate pp. 155-156] The theory of business social responsibility that holds that a business owes duties solely to produce the highest return for its shareholders is: a. The moral minimum theory. b. The maximizing profits theory. c. The stakeholder interest theory. d. The corporate citizenship theory. e. The social audit theory. B [easy p. 156] Which social responsibility theory has been advocated by Novel Prizewinning economist Milton Friedman? a. Maximizing profits. b. Moral minimum.
54.
55.
99
c. d. e. A 56.
Stakeholder interest. Corporate citizenship. Corporate social audit. [moderate p. 156]
Which of the following actions is consistent with the maximizing profits theory of the social responsibility of business? a. Raising wages because it is expected to lower employee turnover and long-term overall compensation expenses. b. Raising wages because it is believed that workers are underpaid relative to the industry average and that employee relations will be improved even though overall compensation expenses will increase. c. Raising wages to avoid a strike that would cost more than the increased costs of the wage increase. d. A and C only e. A, B and C D [moderate p. 156] What was the outcome of the case against the R.J. Reynolds Tobacco Company for its use of the Joe Camel character in promoting its cigarettes? a. The court found that the company had engaged in unfair business practices. b. The court ruled that the use of the character was unethical, but not illegal. c. The plaintiffs dropped the case because of the cost of litigating against a large corporation. d. Prior to trial, the company agreed to end the use of the Joe Camel character. D [moderate p. 157] One of the outcomes in the car repair fraud case against Sears was: a. Sears had to cease its car repair business for a period of time. b. Sears had to refund amounts customers had paid for certain car repairs during a specified period of time. c. Sears had to provide free car repairs in the future for customers who had paid for certain car repairs during a specified period of time. d. Sears had to provide coupons toward Sears products and services for customers who had paid for certain car repairs during a specified period of time. D [moderate p. 153] The theory of business social responsibility that holds that the obligation of a business is to earn a profit while not harming others, or if it does cause harm, to compensate the victims for the harms caused, is: a. The moral minimum theory. b. The maximizing profits theory. c. The stakeholder interest theory d. The corporate citizenship theory. A [easy p. 158]
57.
58.
59.
60.
The Foreign Corrupt Practices Act prevents each of the following except:
100
a. b. c. d. D 61.
Bribes to foreign officials. Bribes to foreign political party officials. Bribes to candidates for office in foreign nations. Bribes to foreign officials if the payment is legal under the local written laws. [moderate pp. 156, 161]
The theory of business social responsibility that holds that a business owes duties to the various constituencies such as customers and employees in addition to the shareholders is: a. The moral minimum theory. b. The maximizing profits theory. c. The stakeholder interest theory. d. The corporate citizenship theory. C [easy pp. 158-159] The theory of business social responsibility that holds that a business has a duty to generally do good for society is: a. The moral minimum theory. b. The maximizing profits theory. c. The stakeholder interest theory. d. The corporate citizenship theory. D [easy p. 161] The four theories of social responsibility of business discussed in the text can best be described as: a. Laws, only one of which applies in each state. b. Laws, more than one of which can apply in a particular state. c. Mutually-exclusive policies on which laws should be based. d. Policies on which laws should be based, more than one of which might be proper. D [difficult pp. 155-162] A business that is concerned solely with the financial implications of alternate courses of actions is applying which theory of the social responsibility of business? a. Moral minimum. b. Maximizing profits. c. Stakeholder interest. d. Corporate citizenship. B [moderate pp. 156, 161]
62.
63.
64.
65.
A business that is willing to sacrifice some income in order to avoid harm to others is applying which theory of the social responsibility of business? a. Moral minimum. b. Maximizing profits. c. Stakeholder interest. d. Corporate citizenship. A [moderate p. 158, 161]
101
66.
A business that undertakes activities that benefit persons who are in no way connected with the business is applying which theory of the social responsibility of business? a. Moral minimum b. Maximizing profits c. Stakeholder interest d. Corporate citizenship D [moderate pp. 160-161] Which of the theories of the social responsibility of business includes obligations of a business to parties other than shareholders? a. Corporate citizenship only. b. Stakeholder interest only. c. Stakeholder interest and corporate citizenship. d. Moral minimum and stakeholder interest. e. Moral minimum, stakeholder interest and maximizing profits. C [difficult pp. 158-159, 161] Constituency statutes most directly relate to which theory of the social responsibility of business? a. Moral minimum b. Maximizing profits c. Stakeholder interest d. Corporate citizenship C [moderate pp. 158-159, 161] A procedure which can be used to assess the moral health of a corporation is the: a. Social audit. b. Valdez checkup. c. Corrupt practices inventory. d. Minimum moral assessment. A [easy p. 160]
67.
68.
69.
MULTIPLE CHOICE QUESTION—FACTUAL APPLICATION
Moral Theories and Business Ethics 70. Mary owns her own business and has just attended a cash flow management seminar where it was suggested the businesses should delay paying their suppliers as long as absolutely possible even if doing so violates the stated payment terms. Mary decides to continue paying her suppliers on time in accordance with their payment terms because Mary would like her customers to pay her on time. Mary has reached her decision in accordance with: a. Ethical relativism. b. Utilitarianism. c. Ethical fundamentalism. d. Kantian ethics. D [difficult, pp. 151-152]
102
71.
Peter runs an auto air conditioning repair shop. Because of the phase-out of the ozonedepleting refrigerants used in older auto air conditioners, auto air conditioning repairers have become subject to numerous new laws and regulations, some of which are costly and burdensome to comply with. Although it costs him more, Peter decides to follow all the statutes and regulations so long as everyone else does the same. Peter has reached his decision in accordance with: a. Ethical relativism. b. Utilitarianism. c. Ethical fundamentalism. d. Kantian ethics. e. Rawls’s distributive justice theory. E [difficult pp. 152-153] Peter runs an auto air conditioning repair shop. Because of the phase-out of the ozonedepleting refrigerants used in older auto air conditioners, auto air conditioning repairers have become subject to numerous new laws and regulations, some of which are costly and burdensome to comply with. This results in much higher costs for air conditioning repairs for many owners of older cars. By not following some of these regulations, Peter can repair these older cars at a much lower cost. Peter believes that the good that comes from the reduced repair costs outweighs the resulting incremental damage to the environment, and thus decides to not follow the regulations. Peter has reached his decision in accordance with: a. Ethical relativism. b. Utilitarianism. c. Ethical fundamentalism. d. Kantian ethics. e. Rawls’s distributive justice theory. B [difficult pp. 151] A famous psychologist has written a highly acclaimed book targeted at victims of domestic abuse. This book gives practical advice on getting out of such abusive relationships and avoiding further injury prior to getting out of the relationship. Pat thinks the book is excellent, but knows that many persons who could benefit from the book are unaware of its existence and unable to afford its $39.95 price. Pat is considering photocopying significant portions of the book and selling the photocopied portions to such persons at the cost of photocopying, which is much less than $39.95. In using a utilitarianism approach to decide whether to undertake this, Pat would: a. Look to an outside source regarding the photocopying and selling. b. Look for a universal rule about photocopying and selling such material. c. Try to determine the fairest thing to do. d. Determine if the total good to the world would be increased if Pat were to undertake the photocopying and selling of the copied book sections. D [difficult p. 151]
72.
73.
103
The Social Responsibility of Business 74. Big Green Company is considering introducing a new product to replace an existing product. The new product would result in increased revenues, but slightly lower overall profits because the product will cause injury to a few users and Big Green will compensate persons who are injured. The introduction of this product would be the proper decision under: a. Both the moral minimum theory and the profit maximization theory. b. Neither the moral minimum theory nor the profit maximization theory. c. The moral minimum theory, but not under the profit maximization theory. d. The profit maximization theory, but not under the moral minimum theory. C [difficult p. 158]
ESSAY QUESTIONS—ETHICS AND POLICY
75. The increasing use of the Internet and computers generally has made it much easier for businesses to gather, process and distribute information about its customers, as well those who are not customers. To what extent should business be able to gather and sell this information? This widespread practice raises questions about privacy and the growing problem of identity theft. Under the moral minimum theory, one must ask if a business causes harm by merely gathering and selling information. Under stakeholder interest the business should consider customers’ interests. [moderate] Beginning in about 1990, many credit card issuers began marketing more aggressively to college students on the basis that they have considerable future earning potential even though their current income is not very high. Prior to 1990, most credit card issuers required co-signers, who would typically be the student’s parent. This has led to far more students incurring excessive debt. This has required some students to work longer hours while in college and to have more debt-related problems after getting out of college. Furthermore, employers are increasingly using credit information in the hiring selection process so that some students’ debt problems adversely affect their ability to find a job. Evaluate the propriety of these marketing efforts. One question is who causes these problems. If the cause is the cardholder’s unwise decisions, then the issuer has done no wrong. But if the issuer is part of the cause, then the issuer might have violated the moral minimum theory because it has caused harm. Any such harm would be difficult to quantify. Utilitarianism would ask if the overall good increased from these credit cards. [moderate] A company is planning to promote its services heavily via telemarketing. The company has learned that the majority of those to be called are strongly opposed to receiving telemarketing calls. In addition, many of the persons who will be called are elderly who might decide to purchase the product even though they do not really need it or cannot afford it. Discuss the appropriateness of proceeding with this plan under the different theories of the social responsibility of business.
76.
77.
104
The telemarketing plan is presumably aimed toward maximizing profits. Whether the plan meets the moral minimum would depend on whether the company is the cause of any harm due to unwanted telemarketing calls or elderly customers purchasing unneeded products. Under stakeholder interests, the company would need to consider the needs of its customers, many of whom might be better served by other marketing methods. Under corporate citizenship, being a good corporate citizen might include avoiding such marketing methods. [moderate] 78. Assume that a drug company has recently developed a new weight-loss drug that is available only by doctor’s prescription. This drug has some significant side effects, but is quite effective for helping individuals lose weight. The drug is being heavily advertised directly to the public, resulting in large numbers of individuals contacting their doctors in order to get a prescription for the drug. Because of the side effects, this drug is intended only for persons who are severely overweight. Some of the advertising for this drug emphasizes the happiness and beauty that can result when one is slender, leading to many doctors over-prescribing the drug. Discuss the drug company’s actions in light of the theories of the social responsibility of business. The company’s actions are presumably aimed at maximizing profits. It is likely that the moral minimum is being violated as there is likely injury that is not being compensated. The patients’ needs are possibly not being addressed under the stakeholder interest theory, and the promotion of the “skinniness is godliness” belief might violate corporate citizenship. [moderate] The government has proposed demolishing 800 of 2,000 units in a low-income public housing project that has become crime-ridden and in poor repair. These 800 units will be replaced with 300 units, half of which will be for low-income families, and half for moderate-income families, resulting in fewer low-income housing units in total. Evaluate this proposal under utilitarianism. There might be more overall good if crime and other problems are reduced, but crime, as well as residents, might simply be displaced to other parts of the community. Other factors in evaluating what amounts to the overall good include the demand for low-income housing, other options for those displaced, and the current project vacancy rate, which would affect the actual numbers displaced. [moderate] Compare and contrast the views held by Milton Friedman regarding the ethical responsibility of a corporate business to that of someone following the stakeholder interest theory of social responsibility. Milton Friedman asserted that in a free society, “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits as long as it stays within the rules of the game. “ To Friedman, following the “rules of the game” meant engaging in open and free competition without deception and fraud. Someone who follows the stakeholder interest theory of social responsibility would say that although a corporation does have an obligation to its shareholders, there are also others to whom the corporation/business owes an obligation. These others include employees, customers, suppliers, creditors and the local community. [moderate]
79.
80.
105
CHAPTER 8 INTERNATIONAL AND COMPARATIVE LAW
TRUE/FALSE QUESTIONS
The United States and Foreign Affairs 1. At the international level, there is no single international world court responsible for enforcing and interpreting international law, nor is there a world executive branch to enforce international laws. T [moderate p. 166] In the Constitution, the power over international affairs is primarily, though not exclusively, vested in the states. F [easy p. 166] The Commerce Clause grants Congress the power to regulate commerce with foreign nations. T [easy p. 166] A state may not enter into a treaty with a foreign nation even if the treaty does not conflict with any other treaties and does not interfere with foreign commerce. T [moderate p. 166] A Massachusetts statute banning the state from doing business with companies who also did business with the nation of Myanmar was found to violate the Foreign Commerce Clause. T [easy pp. 167-168]
2.
3.
4.
5.
Sources of International Law 6. The Statute of the International Court of Justice identifies the four sources of international law that courts are required to turn to in resolving international law disputes. F [moderate p. 167] Treaties differ from conventions in that treaties are usually agreements directly between the signatory nations. T [moderate p. 168] The World Intellectual Property Organization is a special agency of the United Nations that can enforce, but not develop treaties and conventions affecting intellectual property rights. F [moderate p. 168] Under international law, in order to be considered a custom, a practice must be followed because of legal obligation. T [moderate p. 168]
7.
8.
9.
106
10.
11.
In an international dispute, a general principle of law would be applied in settling the dispute only if the principle is part of the law of both nations involved in the dispute. T [moderate p. 169] As a source of international law, past judicial decisions are not required to be followed, but are often referred to in reaching a decision. T [easy p. 169] The rule of comity is a rule of law guiding most international law court decisions. F [moderate p. 167]
12.
The United Nations 13. The General Assembly of the United Nations has representatives from only 15 member nations. F [easy p. 169] The International Monetary Fund is part of the United Nations. T [moderate p. 170] A nation involved in a dispute before the International Court of Justice may not have a judge from that nation on the panel of judges hearing the dispute. F [moderate p. 170] A class action lawsuit filed against Swiss banks by survivors of the holocaust of World War II resulted in a decision by the International Court of Justice to return certain assets to survivors of victims. F [moderate p. 171]
14.
15.
16.
International Regional Organizations 17. The European Court of Justice can hear only disputes that involve nations as a party. F [difficult p. 172] The North American Free Trade Agreement was formed in 1992 with only three nations. T [easy p. 172]
18.
The World Trade Organization 19. The World Trade Organization was established by the Untied Nations in 1995. F [moderate p. 175] China did not become a member of the World Trade Organization until 2002. T [moderate p. 175] One criticism of the World Trade Organization is that it does not have an appellate process for its decisions. F [moderate p. 177] The World Trade Organization recently ordered that certain United States income tax laws be changed because they amounted to impermissible favorable tax subsidies.
20.
21.
22.
107
T
[moderate p. 178]
Jurisdiction of National Courts to Decide International Disputes 23. In order to prevent bias, international disputes generally cannot be heard by the national courts of any party to the dispute. F [moderate p. 179] A choice of forum clause automatically determines that the forum nation’s laws are applied in settling a dispute. F [moderate p. 179] The United States does not recognize sovereign immunity for commercial activities of foreign nations. T [moderate p. 181]
24.
25.
International Arbitration 26. Many nations have signed an international convention that provides for the enforcement of international arbitration awards. T [easy p. 182]
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
The United States and Foreign Affairs 27. Which of the following are characteristics of international law? a. No single legislative body b. No single court to settle disputes c. No single body to enforce court decisions d. All of the above. e. A and C only D [moderate p. 166] Which of the following is not true regarding international law? a. Enforcement is a problem because there is no “executive branch” to enforce it. b. The United Nations is the body that has the power to enforce most court decisions involving international law disputes. c. International law comes from multiple sources. d. There is no single court system for dealing with all international disputes. B [moderate p. 166] What are the primary sources in the U.S. Constitution of the federal government’s power over international affairs? a. The Commerce Clause and the Treaty Clause b. The Commerce Clause and the Privileges and Immunities Clause c. The Treaty Clause and the Police Power Clause d. The Treaty Clause and the War Powers Clause
28.
29.
108
e. A
The Privileges and Immunities Clause and the Supremacy Clause [moderate p. 166]
30.
Which of the following is correct about the states’ powers regarding foreign affairs? a. The states have no power over foreign affairs because the U.S. Constitution grants that power exclusively to the federal government. b. The states can pass laws and enter into treaties with foreign nations so long as they do not unduly burden foreign commerce. c. The states can pass laws affecting foreign commerce and enter into treaties with foreign nations so long as they first obtain the consent of the Senate. d. The states can pass laws so long as they do not unduly burden foreign commerce, but the states have no authority to enter into treaties with foreign nations. e. Because of the sharing of powers between the federal government and the states, states have powers over foreign affairs equal to the powers of the federal government. D [difficult p. 166] What was the holding of the U.S. Supreme Court in its 2000 decision regarding a Massachusetts law affecting firms doing business with the nation of Myanmar (formerly Burma)? a. The state of Massachusetts was prohibited from conducting business with firms based in Myanmar. b. The Massachusetts law prohibiting the state government from purchasing goods or services from firms doing business with Myanmar violated the Supremacy Clause. c. Massachusetts was acting properly within its power in limited sales only within Massachusetts of firms conducting business with Myanmar. d. The state of Massachusetts was ordered to not discriminate against firms from Myanmar. B [difficult pp. 166-167]
31.
Sources of International Law 32. Which of the following is not one of the general sources of international law? a. A treaty between countries b. A convention among countries c. Custom d. United Nations resolutions e. Judicial teachings D [easy pp. 167-168] Which of the following lists, in descending priority, of sources considered by most courts in settling questions of international law? a. Treaties, customs, conventions, comity b. Treaties, customs, general principles of law, judicial decisions and teachings c. Conventions, comity, customs, general principles of law d. Conventions, treaties, comity, customs e. Treaties, customs, conventions, comity B [moderate pp. 168-169]
33.
109
34.
35.
An agreement sponsored by an international organization that is signed and ratified by two or more nations is called a: a. treaty. b. convention. c. custom. d. charter. e. Statute. B [easy p. 168] Under international law, what is the difference between a treaty and a convention? a. A treaty is an agreement, and a convention is typically the meeting at which the treaty was drafted. b. The two terms have the same meaning, thus there is no difference between them. c. A treaty is an agreement negotiated directly be the signatory nations, whereas a convention is first drafted by a sponsoring international organization, after which, nations can decided whether to be bound by it. d. Conventions usually have only a few signatory nations whereas treaties usually have many. C [moderate p. 168] What two conventions did the World Intellectual Property Organization issue in the late 1990s? a. The Internet Treaty and the Web Page Convention b. The Copyright Treaty and the Software Protection Treaty c. The Music Reproduction Treaty and the Authors’ Rights Treaty d. The Domain Name Registration Treaty and the Internet Trade Name Convention e. The Copyright Treaty and the Phonogram Treaty E [moderate p. 168] Which of the following is true about general principles of law as a source of international law? a. The “general principles” refer to principles that both common law legal systems and civil law legal systems share. b. The “general principles” in a given dispute can include legal principles from any nation with a developed legal system. c. The “general principles” must be part of the law of each nation that is a party to the dispute. d. The “general principles” must be agreed to by the disputing parties before the principles can be used as a basis to settle the dispute. e. The “general principles” must come from constitutions or statutes. C [difficult p. 169] What is comity under international law? a. The system of rules for determining which nation has jurisdiction over a matter. b. The requirement that a nation’s laws, if applicable outside that nation’s borders, apply in the same manner within its borders as outside its borders. c. The enforcement mechanism for the decisions of international tribunals. d. The system of reaching a compromise law to apply to a dispute when the relevant laws of the disputing nations differ. e. Voluntary courtesies that nations use in choosing not to apply their own laws to a dispute. E [moderate p. 169]
36.
37.
38.
110
The United Nations 39. The following are governing bodies of the United Nations except: a. The Secretariat. b. The General Assembly. c. The World Trade Organization. d. The Security Council. C [easy p. 169]
40.
Which of the following is not true about the United Nations? a. It was founded in 1918 at the end of World War I. b. Most nations of the world are members. c. There are only five permanent members of the Security Council. d. It contains a number of autonomous agencies that deal with specialized problems. e. Its headquarters are in New York City. A [moderate p. 169] In what year was the United Nations founded? a. 1918 b. 1939 c. 1941 d. 1945 e. 1959 D [easy p. 169] The body of the United Nations that includes permanent members from only five nations is the: a. Security Council. b. Secretariat. c. General Assembly. d. World Senate. e. International Monetary Fund. A [moderate p. 169] Which of the following is not a permanent member of the Security Council of the United Nations? a. China b. France c. Germany d. United Kingdom e. Russia C [easy p. 169] Which of the following is not an agency of the United Nations? a. United Nations Educational, Scientific and Cultural Organization b. International Monetary Fund c. International Organization for Trade Equalization d. International Fund for Agricultural Development e. United Nations International Children’s Emergency Fund
41.
42.
43.
44.
111
C 45.
[moderate pp. 169-170]
Which of the following is true about the International Court of Justice? a. It is the appellate court for decisions of the World Court. b. It can hear cases involving governments, businesses or individuals of nations that are members of the United Nations. c. No nation can have more than one judge among the 15 sitting judges. d. A nation that is a party to a dispute may appoint one judge on an ad hoc basis for the particular case. D [moderate p. 170] What was the outcome of the litigation against a number of Swiss banks over their handling of assets that had belonged to victims of the Holocaust in Germany? a. The principle of comity required that the matter be left for Swiss courts to decide. b. A trial was held in which the victims won the right to recovery of assets held by the Swiss banks. c. The plaintiffs’ claims were barred by the statute of limitations. d. A settlement was reached prior to trial providing for a substantial settlement fund. e. The World Court ruled that United States courts did not have jurisdiction to hear the case. D [moderate p. 171]
46.
International Regional Organizations 47. Which of the following is not true about the European Union? a. A common currency has been introduced. b. The Union has established the EU Commission and delegated certain powers to it. c. A majority vote is needed to admit a new member. d. The gross economic output of EU nations is greater than that of the United States. e. The Union was created in 1957. C [moderate p. 172] Which of the following is true about the European Union? a. Member nations have not given up any sovereignty to the EU. b. Customs tariffs have been eliminated between member nations and nonmember nations. c. An EU central bank has been established. d. The EU includes a couple of nations from Northern Africa with European ties. e. Its primary purpose is military defense. C [moderate p. 172] The European Court of Justice: a. Hears only commercial disputes involving at least one member nation. b. Is responsible for enforcing its own judgments. c. Has developed its own body of common law. d. Follows the common law of the nation that filed the complaint. e. Includes one judge from each member nation. E [moderate p. 172]
48.
49.
112
50.
The purpose of the European Court of First Instance is: a. To relieve some of the European Court’s caseload. b. To decide cases in new and emerging areas of the law such as Internet technology. c. To be the first court for all cases before they are heard by the European Court of Justice. d. To enforce decisions of the European Court of Justice. e. To serve as the first court for European disputes before being heard in the World Court. A [easy p. 172] Negotiators from which nations signed the North American Free Trade Agreement in 1992? a. The United States and Canada b. The United States and Mexico c. The United States, Canada and Mexico d. The United States, Mexico and Panama e. The United States, Canada, Mexico, Guatemala and Panama C [easy p. 172] Which of the following was not a provision of NAFTA at the time of its signing? a. An immediate 50 percent reduction of Mexican tariffs on vehicles b. An immediate elimination of trade restrictions on textiles and apparel c. A 15-year period to phase out tariffs on import-sensitive American industries d. A nation’s ability to reimpose tariffs where a surge of imports hurts its economy or workers e. Increased protection for intellectual property rights B [difficult p. 173] ASEAN was formed by which nations in 1967? a. Thailand, Japan, Indonesia, Singapore, and the Philippines b. Thailand, Indonesia, the Philippines, Malaysia and China c. Indonesia, Malaysia, the Philippines, Singapore and Thailand d. Japan, China, Singapore, Malaysia and Vietnam e. Thailand, Malaysia, Indonesia, Japan and South Korea C [moderate p. 174] Which of the following is not a member of the Association of South East Asian Nations? a. Japan b. Vietnam c. Singapore d. Indonesia e. Cambodia A [easy p. 174] The MERCOSUR Common Market consists of nations from which Continent? a. Africa b. Europe c. South America d. Asia e. North America
51.
52.
53.
54.
55.
113
C 56.
[easy p. 174]
Which of the following is not one of the economic communities of the Americas? a. The Central American Common Market b. The South American Free Trade Organization c. The MERCOSUR Common Market d. The Caribbean Community e. The Andean Common Market B [moderate p. 174] What did 55 African nations sign in 1991? a. The Treaty Establishing the African Economic Community b. The Treaty Establishing Mutual Defense of the African Continent c. Sub-Saharan Economic Free Trade Zone Agreement d. Resolution for the Unity of South Africa e. The African Economic Leadership Organization A [moderate p. 174]
57.
The World Trade Organization 58. The World Trade Organization was created by: a. the United Nations. b. the North American Free Trade Agreement. c. the International Monetary Fund. d. negotiations on the General Agreement on Tariffs and Trade. e. the European Union. D [moderate p. 175] Which of the following is not one of the provisions agreed to by China in order to open its markets as part of the 1999 bilateral trade treaty between China and the United States? a. Allowing foreign ownership of up to 50 percent of Chinese telephone companies. b. Allowing up to 20 United States films into China each year. c. Allowing foreign firms to sell directly to Chinese consumers. d. Allowing foreign majority interest ownership of Chinese Internet businesses. e. Allowing foreign auto manufacturers to sell and finance sales to Chinese customers. D [difficult pp. 175-176] Which of the following is correct about the World Trade Organization (WTO)? a. The WTO was created in the 1940s. b. The WTO adopted a judicial-based dispute resolution system to replace the politically oriented system in place previously. c. Only a few nations have a representative on the WTO dispute settlement body. d. Parties to a dispute have a veto power over any decision reached by the WTO. e. China has not been admitted to the WTO. B [difficult pp. 176-177] Today, most international trade disputes are settled by: a. The General Agreement on Tariffs and Trade. b. The Security Council of the United Nations.
59.
60.
61.
114
c. d. e. D 62.
The American Arbitration Association. The World Trade Organization. The International Court of Justice. [moderate pp. 176-177]
What can a nation do if it disagrees with a decision made by the dispute settlement body of the World Trade Organization? a. Appeal to the World Court. b. Nothing, as these decisions are final. c. Appeal to that nation’s own national court system. d. Appeal to the appellate body within the WTO. e. This situation would not arise because of the veto power held by the parties to a dispute being resolved by the WTO. D [moderate p. 177]
63.
What was the outcome when the World Trade Organization (WTO) heard a dispute involving United States tax law provisions that provided certain tax breaks to U.S. corporations when they processed paperwork for transactions through certain nations in the Caribbean region? a. The WTO could not hear the case because it involved a United States tax matter rather than a trade issue. b. The WTO heard the case and ruled in favor of the United States because this was an internal tax matter. c. The WTO heard the case and ruled against the United States holding that the tax provision was actually an illegal trade subsidy. d. The WTO heard the case and ruled against the United States, but the decision was overturned upon its appeal to the World Court. e. The WTO could have heard the case, but chose to invoke the doctrine of comity and thus did not actually hear it. C [moderate p. 178]
Jurisdiction of National Courts to Decide International Disputes 64. What is the purpose of a choice of forum clause in an international contract? a. To give the parties a choice of nations in which to bring a lawsuit under the contract. b. To determine in advance where any lawsuits under the contract will be brought. c. To determine who will choose the location of any lawsuit which is brought under the contract. d. To determine which nation’s law will apply in settling disputes that arise under the contract. B [moderate p. 179] The courts of one nation cannot question the actions undertaken by another nation within the other nation’s borders under: a. the act of state doctrine. b. the sovereign immunity doctrine.
65.
115
c. d. e. A 66.
the extradition doctrine. the expropriation doctrine. the comity doctrine. [easy p. 180]
In which of the following circumstances would a foreign government not be subject to suit in a U.S. court according to the Federal Sovereign Immunities Act? a. If the foreign government has explicitly waived immunity. b. If the foreign government has impliedly waived immunity. c. If the action is based on a tort committed by the foreign government. d. If the action is based on commercial activity by the foreign government. e. B and C only C [difficult p. 181] Under which of the following processes is the party whose property is taken compensated? a. Expropriation only b. Confiscation only c. Both expropriation and confiscation d. Neither expropriation nor confiscation A [easy p. 182]
67.
International Arbitration 68. Under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards: a. Businesses in signatory nations are required to submit international contract disputes to arbitration. b. Arbitration awards are recognized only if they were granted by an organization approved by the United Nations. c. Property of the loser that is located in a signatory nation can be attached in order to enforce an arbitration award. d. Arbitration awards granted in foreign nations will be valid only if separately recognized in the nation of the losing party. C [difficult pp. 182-183]
International Law 69. Jewish law is a complex legal system based on ideology and theology of: a. The Torah. b. The Koran. c. The Smitris d. The Veda. A [moderate p. 184] The Islamic law system is derived from: a. The Koran. b. The Sunnah. c. Reasonings by Islamic scholars. d. All of the above. D [moderate p. 184]
70.
116
MULTIPLE CHOICE QUESTION—FACTUAL APPLICATION
The United Nations 71. Mabel, a citizen of England, and Pierre, a citizen of France, have been doing business for many years. Pierre now wants to sue Mabel. Which of the following is true? a. Pierre can sue Mabel in the World Court because the dispute is commercial. b. Pierre cannot sue Mabel in the World Court because the dispute is commercial. c. Pierre cannot sue Mabel in the International Court of Justice under any circumstances. d. Pierre can sue Mabel in the International Court of Justice only if Mabel consents. C [difficult p. 170]
International Regional Organizations 72. An Austrian auto component manufacturer supplies parts to a German automaker under contract. The contract contains a choice of law clause stating that German law applies to any disputes arising under the contract. In a dispute involving the contract, the Austrian supplier could sue: a. In either the International Court of Justice or the European Court of Justice. b. In neither the International Court of Justice nor the European Court of Justice. c. In the International Court of Justice, but not the European Court of Justice. d. In the European Court of Justice, but not the International Court of Justice. B [difficult p. 170]
Jurisdiction of National Courts to Decide International Disputes 73. Janet and Henry were married in Bulgaria when they were each 14 years old. The marriage is valid in Bulgaria. They have now moved to the United States, and there is some question whether their marriage is valid in the United States. Which of the following doctrines would prevent a United States court from questioning the validity of their marriage? a. Sovereign immunity b. Comity c. Act of state d. Diplomatic Immunity e. A United Nations Convention C [moderate p. 180]
117
74.
A farmer’s cooperative in North Dakota entered into a contract to sell wheat to the government of Thailand. If a dispute arises under the contract, the farmers’ cooperative can: a. Sue in a United States court because neither the act of state doctrine nor sovereign immunity would apply. b. Not sue in a United States court because the act of state doctrine. c. Not sue in a United States court because of sovereign immunity. d. Not sue in a United States court because of comity. A [difficult pp. 180-181]
International Arbitration 75. A Japanese computer maker entered into a contract with a United States disk drive manufacturer. The contract contains an arbitration clause that all disputes would be arbitrated by the American Arbitration Association. A dispute under the contract was arbitrated resulting in the American disk drive maker being ordered to pay $50,000 to the Japanese computer manufacturer. Which of the following is true? a. The disk drive maker can appeal the decision to the International Court of Justice. b. The disk drive maker is not obligated to pay the judgment because arbitration awards are not binding. c. The disk drive maker has the option to provide $50,000 worth of disk drives in place of the cash payment. d. The Japanese company can get a United States court to attach the property of the disk drive maker if it does not pay the award of $50,000. D [difficult pp. 182-183]
ESSAY QUESTIONS—ETHICS AND POLICY
76. Large protests have appeared at many recent meetings of the World Trade Organization. What are some of the claims made by the protesters? Do you agree with these claims? How do such protests affect the future and effectiveness of the World Trade Organization? Some have claimed that the World Trade Organization principles are damaging to the environment because the lack of trade barriers allow companies in nations with strict environmental laws to move production to nations with weak environmental laws. Other claims are based on labor abuses. A more general claim is that by giving up sovereignty to the WTO, nations become limited in their ability to pass certain laws, especially ones providing worker protections. Nations’ willingness to abide by decisions of the WTO might be affected by such protests. [moderate] Arbitration clauses appear in many international contracts specifying that arbitration be used for the settlement of disputes. A number of international organizations exist that arbitrate disputes arising under these contracts. What special characteristics of international contracts might make arbitration even more advantageous than in the case of domestic contracts? Compare mediation and arbitration as means of settling international contract disputes.
77.
118
Arbitration avoids the question of which nation’s courts should hear a dispute. In many cases, the arbitrator will be far more neutral than the courts of either nation. Arbitration can avoid many of the problems of working in a court system that is unfamiliar to one of the parties. Mediation is often less desirable in the international contract setting because of the active involvement (often including face-to-face meetings) of the parties that is usually necessary in mediation. [moderate] 78. Under the European Union Directive on Data Protection, broad protections are provided for consumers relative to information collected on them by businesses. What are some of these protections? Should similar protections be available in the United States? What are some of the difficulties if each nation has its own rules on the collection and dissemination of information on customers? Among the protections, companies must show customers their consumer profile upon request, and companies cannot use the information for cross-marketing without the consent of the customer. When the information is originally gathered, the company must explain the reason that it is being gathered. With different rules and regulations, companies need to classify its customers by nation, and then would have many different rules on the allowable means of gathering information and uses that it could make of that information. When the gathering of information is done over the Internet, determining a person’s nation of citizenship can be difficult. [moderate]
ESSAY QUESTIONS—FACTUAL APPLICATION Jurisdiction of National Courts to Decide International Disputes 79. Magnum Enterprises has operated a subsidiary in a South American nation for several years. Over the course of this period, the subsidiary has acquired substantial property, including land and a couple of factories. In addition, it has acquired considerable equipment. Two months ago, the government of this nation took over all the assets of the subsidiary. The government paid the subsidiary the fair value for its land, but paid only a fraction of the value of the buildings. No money was paid for any equipment or other personal property taken. Discuss Magnum’s legal situation and its possible recourse in this situation. The nationalization of Magnum’s property is called expropriation where, for the land, it received fair value, and confiscation where, for the other assets, it received less than fair value. Magnum has little recourse, except possibly through diplomatic intervention. Magnum could possibly recover under any political risk insurance policies that it carries. [moderate] The government of Germany enters into a multi-year contract with a French farmers’ cooperative for the purchase of a quantity of wine. This cooperative is a quasigovernmental agency. After purchasing a substantial quantity of the wine, the British government concludes that the French government has subsidized the cooperative contrary to regulations of the European Union and contrary to other international trade agreements. The farmers’ cooperative disagrees and wants to compel the German government to pay for all wine that it has already received. Discuss the cooperative’s options in this case.
80.
119
There are public law issues in connection with the claimed trade violations and contract law issues in connection with this specific contract. The trade issue could possibly be addressed by the World Trade Organization. Because the parties are both members of the European Union, the European Court of Justice and the Court of First Instance might be available. Because this dispute involves a commercial activity, the sovereign immunity doctrine might not apply to an action brought in the national courts of either nation. [difficult]
CHAPTER 9 NATURE OF TRADITIONAL AND E-COMMERCE CONTRACTS
TRUE/FALSE QUESTIONS
Definition of a Contract 1. The person who makes an offer to enter into a contract is the “offeree.” F [easy p. 191] The fact that a contract is legally enforceable means that the police can be called to make the other party live up to the terms of the contract. F [easy p. 191] There must be at least three parties in order for a contract to be valid. F [easy p. 191] In order for an offer to be valid, an offeror must promise to undertake some affirmative action. F [moderate p. 191] Two of the four basic contract requirements are agreement and signatures of the parties. F [easy pp. 191-192] In the early days of our nation’s history, contracting was largely left up to the individual parties with little government regulation or oversight. T [moderate p. 192] The Industrial Revolution led to greater government regulation in the area of contracts. T [easy p. 192]
2.
3.
4.
5.
6.
7.
Sources of Contract Law 8. The federal common law of contracts is the most important common law source with state common law relative to contracts filling in gaps in the federal common law. F [moderate p. 192] There is some variation in contract law from state to state. T [easy p. 193]
9.
120
10.
The Uniform Commercial Code is a source of contract law that has been adopted by only a minority of the states. F [easy p. 193] The Restatement of the Law of Contracts is the highest priority source of contract law. F [easy p. 193] The Uniform Information Transactions Act was passed by Congress in 1999. F [moderate pp. 193-194]
11.
12.
Classifications of Contracts 13. Offers for both bilateral and unilateral contracts involve a promise by the offeror. T [moderate p. 194] An offer for a unilateral contract cannot be accepted by a mere promise to perform. T [easy p. 194] An offer for a unilateral contract can always be revoked at any time prior to the offeree’s completion of the requested act. F [moderate pp. 194-195] One requirement of an express contract is that it be in writing. F [moderate p. 195] An implied-in-fact contract is one based on the conduct of the parties. T [moderate p. 195] The objective theory of contracts provides that it is the offeror who determines whether or not a contract has come into existence. F [easy p. 196] Quasi-contracts and implied-in-law contracts are two terms for the same situation. T [easy p. 197] Quasi-contract law attempts to prevent unjust enrichment where no contract actually existed. T [easy p. 197] A valid informal contract is just as enforceable as a valid formal contract. T [moderate p. 198] A one-year lease for an apartment that is 12 pages long, printed, covers all details of the parties’ obligations, and contains the dated signature of each party is a formal contract. F [moderate pp. 198, 200] A voidable contract is one that neither party can perform. F [moderate pp. 198, 200] A contract remains executory as long as any party to the contract has not fully performed.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
121
T Equity 25.
[moderate pp. 199, 200]
Equity courts, whether separate or merged into law courts, can decide contract disputes. T [easy p. 200] The United Nations Convention on Contracts for the International Sale of Goods applies to any contract that involves a buyer and seller in different nations. F [easy p. 201]
26.
MULTIPLE CHOICE QUESTIONS—LEGAL CONCEPTS
Definition of a Contract 27. Which of the following is true? a. Contracts can be classified as either voluntary or involuntary. b. All contracts are legally enforceable. c. The terms of a valid contract become private law between the parties. d. Contract promises are generally not enforced by the courts. C [easy p. 191] Which of the following is not characteristic of a valid contract? a. It can be viewed as private law between the parties. b. The parties must have the contract’s terms approved by the appropriate court. c. A court will enforce its terms if the parties do not voluntarily perform. d. It will have at least two parties. B [moderate p. 191] Every contract has both: a. A buyer and seller. b. An offeror and offeree. c. A breaching party and a nonbreaching party. d. An initiator and a responder. B [easy p. 191] To create an enforceable contract, which of the following is(are) needed? a. Agreement b. Agreement and consideration c. Agreement, consideration and contractual capacity d. Agreement, consideration, contractual capacity and a lawful objective D [moderate pp. 191-192] Which of the following is not needed in order to have a valid contract? a. Contractual capacity b. An agreement c. A signed written document d. Consideration e. A legal object C [easy pp. 191-192]
28.
29.
30.
31.
122
32.
The most important historic event for the government to begin taking a proactive role in the regulation of the right to contract was: a. The United States becoming independent from Great Britain. b. The Civil War. c. The Industrial Revolution. d. The widespread ownership of radio. e. The development of the Internet. C [moderate p. 192]
33.
How has the government role in contract regulation changed since the founding of the United States? a. There is greater state and federal government involvement today than in the past. b. There is less state and federal government involvement today than in the past. c. There is approximately the same degree of state and federal government involvement today as in the past. d. There is less state, but more federal involvement today than in the past. e. There is less federal, but more state involvement today than in the past. A [easy p. 192]
Sources of Contract Law 34. Common law as a source of law for contracts: a. Comes primarily from federal law. b. Comes exclusively from state law. c. Comes primarily from federal law. d. Comes primarily from state law. e. Comes equally from state and federal law. D [easy p. 192] The Uniform Commercial Code was first drafted in: a. 1910. b. 1933. c. 1945. d. 1952. e. 1976. D [easy p. 193] The Uniform Commercial Code has been adopted by: a. fewer than half of the states. b. most, but not all states. c. at least in part by all states. d. in its entirety by all states. C [easy p. 193] The original source of the Uniform Commercial Code was: a. The U.S. Constitution. b. Congress. c. The state legislature of Delaware.
35.
36.
37.
123
d. e. E 38.
The United Nations. The National Conference of Commissioners on Uniform State Laws. [easy p. 193]
Which of the following best describes the Restatement of the Law of Contracts? a. It is the supreme legal authority for contract law. b. A law which has been adopted, at least in part, by every state. c. A summary of the constitutional provisions affecting contract law. d. A compilation of contract law that is not itself contract law, but is often referred to by judges. D [easy p. 193] What is the name of the act recently drafted by the National Conference of Commissioners on Uniform State Laws in response to the growth in business conducted over the Internet? a. The Uniform Computer Information Transactions Act b. The Standard Internet Commerce Act c. The Uniform Computer Transaction Code d. The New Millennium E-Commerce Act A [moderate p. 194] What is the purpose of the Uniform Computer Information Transactions Act? a. To ensure that credit card companies process transactions promptly. b. To establish uniform rules for the formation and enforcement of electronic contracts and licenses. c. To convert existing contract law so that all contracts are interpreted as if they were negotiated over the Internet. d. To provide consumers certain rights in their contracts with Internet service providers. B [easy p. 194]
39.
40.
Classifications of Contracts 41. Which of the following is true in a unilateral contract? a. The offeror requests an act as acceptance of his offer. b. The offeror cannot revoke the offer once the offeree has begun performance or has substantially completed performance. c. The offeror will treat either a promise to perform or the actual performance of the act as acceptance of his offer. d. A and B only e. B and C only D [moderate p. 194] The terms “bilateral” and “unilateral” as applied to contracts are based on: a. The number of parties in a contract. b. The number of attempts made to form a contract. c. The number of parties who make a promise in the formation of a contract. d. The number of promises that are made in connection with a contract. e. The number of attempts it took for a contract to be successfully performed. C [difficult p. 194]
42.
124
43.
An offeree can form a contract by making a promise if the offer to form the contract is: a. Bilateral. b. Unilateral. c. Trilateral. d. Either A or B e. Neither A, B, nor C A [moderate p. 194] A contract is formed by the performance of the requested act in what kind(s) of contract? a. Bilateral b. Unilateral c. Both A and B d. Neither A nor B B [moderate p. 194] When can an offer to form a unilateral contract be revoked? a. Before the offeree begins performance. b. After the offeree begins performance, but before the performance is completed. c. After completion of performance. d. Both A and B e. A, B and C A [moderate p. 195] What is the common name for an agreement to protect one from having others disclose confidential information or ideas? a. A proprietary secrecy agreement. b. A silence or be-penalized agreement. c. A mute thoughts agreement. d. A hold-information-close agreement. e. A nondisclosure agreement. E [easy p. 195] What is required for a contract to be an express contract? a. It is stated in words. b. It is written. c. It is written and signed. d. It is performed immediately after formation. e. It is performed for mutual benefit. A [moderate p. 195] What kind of contract is based on the conduct of the parties? a. Express. b. Action-oriented. c. Implied-in-fact. d. Implied-in-law. e. Quasi-contract. C [moderate p. 197] Which of the following is not required in order to create an implied-in-fact contract? a. The plaintiff having provided property or services to the defendant. b. An expectation of payment by the plaintiff. c. The plaintiff having not provided the services gratuitously.
44.
45.
46.
47.
48.
49.
125
d. e. D 50.
An agreement between the parties on the amount of the payment. An opportunity by the defendant to reject the goods or services, followed by the defendant not rejecting the goods or services. [difficult p. 195]
51.
Which of the following does not need to be proven by a plaintiff who is claiming that an implied-in-fact contract exists? a. The plaintiff provided property or services to the defendant. b. The plaintiff and defendant communicated with each other about the property or services. c. The plaintiff expected to be paid by the defendant for the property or services and did not intend to provide the property or services gratuitously. d. The defendant was given an opportunity to reject the property or services provided by the plaintiff but failed to do so. B [difficult, p 195] In the case in the text where an author discussed an idea for a book on strategy for the board game Scrabble, what was the outcome of the case? a. Because there was no express contract, there was no basis for the author to recover. b. The court found that an implied-in-fact contract existed so that the author won the suit. c. The court found that an implied-in-law contract existed so that the author won the suit. d. Because the offer was for a unilateral contract, there was no contract until the book was completed. B [difficult p. 196] Under the objective theory of contracts, whether or not a contract exists is based on: a. The reasonable person standard. b. The rules of unilateral offers. c. The existence of the contract’s principal object. d. The intent of the offeror. e. The intent of the offeree. A [moderate p. 196] The reasonable person standard is used to decide whether an express contract exists under the: a. Quasi-contract rules. b. Objective theory of contracts. c. Standard offer requirements. d. Contract existence standard guidelines. e. Nondisclosure rules. B [moderate p. 196] Under the objective theory of contracts, a contract could result from an offer made: a. In jest. b. In anger. c. Due to a need to sell an item quickly. d. Due to undue excitement. C [moderate p. 196]
52.
53.
54.
126
55.
In the case in the text where someone purchased a used safe at an auction for $50, but was later found by the buyers to contain more than $30,000 in cash, how did the court rule? a. There was no contract because the buyer was unjustly enriched. b. There was no contract because the act of opening the safe was not completed before the buyers took the safe. c. This was an implied-in-fact contract and the buyers were required to pay the fair value for the safe and its contents. d. There was objective intent that the parties intended that the safe, and whatever might be in it, be sold for a price of $50. D [moderate p. 196] The doctrine that applies when one person confers a benefit on another who retains the benefit in a situation where it would be unjust to allow the recipient to retain the benefit without paying for it, is known as: a. Quasi-contract. b. Pseudo-contract. c. Unjust-contract. d. Unilateral-contract. A [easy p. 197] Which of the following are two terms for concept or situation? a. Implied-in-law contract and implied-in-fact contract. b. Implied-in-law contract and quasi-contract. c. Implied-in-fact contract and quasi-contract. d. Unilateral contract and informal contract. e. Formal contract and implied-in-law contract. B [moderate p. 197] Which of the following is needed to impose a quasi-contract? a. A benefit having been conferred and injustice if the benefit were not paid for. b. Actions implying a contract and an agreement as to the price. c. A promise asking for action and the requested action having been completed. d. A benefit having been conferred and objective intent that it be conferred. A [moderate p. 197] What is the distinguishing characteristic that makes a contract a formal contract? a. A signature by both parties. b. The contract being in writing. c. A legal requirement that the contract be in a specific form. d. All possible scenarios are addressed in the contract terms. C [easy p. 198] Which of the following is not a formal contract? a. Contract under seal. b. Recognizance. c. Negotiable instrument. d. Letter of credit. e. New car purchase contract. E [moderate p. 198] Which of the following is true regarding contract validity?
56.
57.
58.
59.
60.
61.
127
a. b. c. d. e. B 62.
A void contract is one where a party has the option to avoid his/her contractual liability. A voidable contract is one in which a party may avoid his/her obligation under that contract. A voidable contract is one that has no legal effect because one of the essential elements is missing. An executory contract is also unenforceable. A unilateral contract is unenforceable. [difficult p. 198]
Over time, most contracts are: a. executory at one time and executed at another time. b. bilateral at one time and unilateral at another time. c. valid at one time and void at another time. d. implied at one time and express at another time. A [difficult pp. 198-200]
MULTIPLE CHOICE QUESTIONS—FACTUAL APPLICATION
Classifications of Contracts 63. Otto approaches Edie and says, “If you pick up my new suit for me at the mall tomorrow, I’ll pay you $20.” Edie replies, “I don’t know if I’ll have time to get it, but I’ll see if I get a chance.” As a result of this conversation: a. Otto and Edie have formed a bilateral contract. b. Edie has a legal obligation to use her best efforts to pick up the suit. c. A contract will be formed only if Edie picks up the suit. d. The contract which they have formed is voidable because Edie did not obligate herself. C [moderate p. 194] Jean says to Joan, “If you’ll promise to feed my dog each day while I am out of town next week, I’ll pay you $100.” Joan replies, “I’ll absolutely do that, I hope you have a nice trip.” Joan then feeds the dog, after which Jean paid her. At what point did a contract come into existence? a. When Jean made the offer to Joan. b. When Joan said that she would feed Jean’s dog. c. When Joan started feeding Jean’s dog. d. When Joan completed the final feeding of Jean’s dog. e. When Jean paid the $100 to Joan. B [moderate p. 194] Frank says to Mary, “If you wash every window in my house today, I’ll pay you $200. I don’t care if you do it, but there is $200 in it for you if you do.” Mary washes 12 of the 20 windows in Frank’s house by 2:00 p.m. At this point: a. Frank can revoke his offer to pay Mary the $200 for washing the windows.
64.
65.
128
b. c. d. D 66.
Mary is obligated to finish washing the windows. Mary has formed a contract by beginning to wash the windows. There is no contract yet in this situation. [difficult pp. 194-195]
Janet pulls her car into a line for a car wash. Janet says nothing and her car is washed by the employees there. Janet then refuses to pay for the car wash, stating that there is no contract. What would the results be in a lawsuit over this situation? a. Janet wins; because she said nothing, there can be no contract. b. Car wash wins; this is an express, unilateral contract that has been accepted. c. Janet wins; because the car wash made no promise to wash her car, there is no contract. d. Car wash wins; this is an implied-in-fact contract that has been accepted. D [moderate p. 195] Lori just purchased a brand new lawnmower for $500. When she got home and tried to use it, it would not work. She became angry and shouted, “I’d sell this thing for $50.” Her neighbor heard her and said, “I’ll take it,” and offered Lori the $50 in cash. Which of the following best describes this situation? a. This is an enforceable bilateral contract. b. This is an express contract. c. If Lori sells the lawnmower for $50, it would be a case of unjust enrichment. d. This situation does not result in the creation of a contract. D [moderate p. 196] Mr. Smith awakens one morning to the sound of construction in his back yard. When he looks out the window, he sees Ajax Construction Co. apparently erecting a garage on his property. He had not spoken or contracted with Ajax for this service. However, Mr. Smith really wanted a new garage, so he let them continue. Later, it was discovered that the garage was intended to go next door. Ajax sues Mr. Smith for the value of the garage. What is the probable result? a. Ajax wins; this is a case of a contract implied-in-fact, and Mr. Smith implicitly agreed to pay for the garage. b. Smith wins; there was no contract upon which Ajax could recover, and people are not liable for benefits that are thrust upon them. c. Ajax wins; although there is no real contract, this is a case of unjust enrichment, and because Mr. Smith accepted the garage, he must pay for it. d. Smith wins; unjust enrichment does not apply here because Mr. Smith had no duty to tell Ajax that they had the wrong house. C [difficult p. 197] Mike and Ike agreed orally that Mike would tutor Ike in geology for $10 per hour for three hours. After Mike has done the three hours of tutoring, but before Ike pays him next week, this contract is: a. Executed. b. Implied-in-fact. c. Executory. d. Performed. e. Quasi-executed. C [moderate p. 199]
67.
68.
69.
129
70.
Jana and Annie enter into a written agreement whereby Jana promises to sell and Annie promises to buy a certain parcel of land for $5,000. There is adequate consideration, the contract is legal and both parties have contractual capacity. The contract is fully performed by both parties on January 1. Which of the following best describes this contract as of January 2? a. Bilateral, express, executed, valid b. Unilateral, express, executed, valid c. Unilateral, express, executory, valid d. Unilateral, implied, executory, valid A [difficult pp. 194-199] Jean says to Joan, “If you’ll promise to feed my dog each day while I am out of town next week, I’ll pay you $100.” Joan replies, “I’ll absolutely do that, I hope you have a nice trip.” Joan then feeds the dog, after which Jean paid her. At what point did this become an executed contract? a. When Jean made the offer to Joan. b. When Joan said that she would feed Jean’s dog. c. When Joan started feeding Jean’s dog. d. When Joan completed the final feeding of Jean’s dog. e. When Jean paid the $100 to Joan. E [moderate p. 199]
71.
ESSAY QUESTIONS—ETHICS AND POLICY
72. In the case involving the maker of the board game Scrabble, the court found that there was an implied-in-fact contract that if the maker of Scrabble used the author’s information in writing a book on winning strategies for the game that it would compensate the author. How might an inventor or author use express contracts in situations such as this to avoid the situation in that case? What terms should be in these contracts? What other practical problems are there when inventors or authors want to protect their work, but are trying to sell it at the same time? This is a situation where nondisclosure agreements provide protection. This protection is not absolute because the other party can steal the ideas and subject the victim to high litigation costs. At some point in a negotiation process, the party disclosing the information will have to make a “leap of faith” in trusting the other party to live up to the terms of any nondisclosure agreement. [moderate] Which type of contract, bilateral or unilateral, is more common in business? Why? Under what circumstance would someone prefer one or the other? What are the advantages of each type for the offeror? For the offeree? Bilateral contracts are more common in business because of the certainty that they provide regarding the other party’s performance. An offer for a unilateral contract gives the offeree the option to perform the act or not, while an offer for a bilateral contract will allow the offeror to know, once the return promise has been made, that the offeree is obligated to perform the act. [moderate]
73.
130
74.
Under the objective theory of contracts it is possible that one can be in a contract against her will. What are the advantages of the objective theory of contract formation? The objective theory of contract formation prevents a party from being able to make it appear that he has entered a contract, yet be able to say that he was not serious, was simply joking, etc. If one could avoid a contract on the basis of subjective intent, no one would ever truly be bound to a contract. [difficult]
ESSAY QUESTIONS—FACTUAL APPLICATION Classifications of Contracts 75. Hilda Homeowner said to her neighbor, Paulette Painter, “If you paint my house, I’ll pay you $1,500. All you must do is finish by the end of the next month. My price assumes that you will pay for all of the paint and any needed supplies.” Paulette decided to paint the house. She purchased some supplies as well as enough custom-colored paint to complete the job. On the morning that Paulette was about to begin painting, Hilda told her that she had changed her mind and would not pay Paulette to paint the house. Discuss the rights of the parties in this situation. This is a unilateral contract because Hilda seeks the act of having her house painted, not a promise that it will be painted. The contract is not formed until Paulette has completed the painting, but Hilda loses any right to revoke her offer once Paulette has begun to perform, including steps in preparation. [difficult] Ron took his car to the muffler shop to have the left muffler of his dual exhaust system replaced. From the waiting room he sees that the worker is preparing to remove the right muffler. Ron says nothing, hoping that he’ll get a free muffler for the right side. Discuss this situation. Because Ron could have avoided the mistake, he will be liable, under the doctrine of quasi-contract, for any benefit he received. [moderate]
76.
131
You May Also Find These Documents Helpful
-
ｄ: The following is the reason. The advertisement and website created an express warranty that the trip would include all expenses, three meals a day, and a room with a queen bed.Jones entered into the contract based on a mistake of material fact which the hotel knew to be untrue and under the UCC written disclaimers must be conspicuously displayed to be valid.…
- 486 Words
- 2 Pages
Satisfactory Essays -
Scott entered into a unilateral contract with Hume. Scott used the large signboard to offer $1000 to the ballplayer who hit a homerun over the sign. This is a promise for an act. Hume completed the performance of the act by hitting the homerun over the sign and therefore the unilateral contract between them was formed.…
- 317 Words
- 2 Pages
Satisfactory Essays -
Fiduciary Duty after Francis Pusateri retired; he met with Gilbert J. Johnson, a stockbroker with E. F. Hutton & Co., Inc., and informed Johnson that he wished to invest in tax-free bonds and money market accounts. Pusateri opened an investment account with E. F. Hutton and checked a box stating that his objective was “tax-free income and moderate growth.” During the course of a year, Johnson churned Pusateri’s account to make commissions and invested Pusateri’s funds in volatile securities and options. Johnson kept telling Pusateri that his account was making money, and the monthly statement from E. F. Hutton did not indicate otherwise. The manager at E. F. Hutton was aware of Johnson’s activities but did nothing to prevent them. When Johnson left E. F. Hutton, Pusateri’s account—which had been called the “laughingstock” of the office—had shrunk from $196,000 to $96,880. Pusateri sued E. F. Hutton for damages.…
- 447 Words
- 2 Pages
Good Essays -
Nicole recently entered into a contract to sell her house in Canberra to Lakeview Developments Pty Ltd for $750,000. She was told by the receptionist in Lakeview's office that Lakeview Developments is a development company which plans to demolish the house and build some apartments. The contract was signed by Nicole and was also signed 'for and on behalf of Lakeview Developments Pty Ltd' by Anthony Blunt, who showed her his business card describing him as the 'Developments Manager' of Lakeview Developments.…
- 813 Words
- 4 Pages
Good Essays -
Aquaman is president of a marine research company called Underwater Leagues, Inc. When his company conceived a dramatic new invention, he held off announcing the discovery until he bought 50,000 shares of Underwater Leagues at $10 per share. After the announcement, the share price skyrocketed to $50 per share.…
- 2996 Words
- 8 Pages
Powerful Essays -
In the case in the text where someone purchased a used safe at an auction for $50, but…
- 2135 Words
- 9 Pages
Good Essays -
2) Is Bright entitled to specific performance because of the unique nature of the goods?…
- 359 Words
- 2 Pages
Satisfactory Essays -
The following situations are similar (all involve the theft of Makoto’s laptop computer), yet they represent three different crimes. Identify the three crimes, noting the differences among them.…
- 255 Words
- 2 Pages
Satisfactory Essays -
80. As courts decide cases involving the Internet and new kinds of issues not addressed previously, what role, if any, does precedent play? What role should it play? What difficulties could arise?…
- 394 Words
- 2 Pages
Good Essays -
Law by definition is, “The principles and regulations established in a community by some authority and applicable to its people, whether in the form of legislation or of custom and policies recognized and enforced by judicial decision.” To make this simple in means rules established by a country for the wellbeing of their citizens. This is considered a major principal in the eyes of the U.S. people because without law our country would erupt in mad chaos.…
- 1490 Words
- 6 Pages
Good Essays -
Answer: Now a day technology is growing rapidly. Electronically communications (e-mail) is one of the technology we use it in our everyday life in business or personal life therefore; using technology has advantages and disadvantages. In this case low expectation of privacy mean to me it has less confidentiality. However, even if low expectation of privacy existed we still use all kinds of electronic communication. The implication in business professional use of internet fundamentally on cautiously keeps the stability of individual right and common duties.…
- 1370 Words
- 6 Pages
Good Essays -
There are several ethical issues that Frank needs to by aware off, the first is his own personal integrity. Frank needs to understand that ultimately his reputation is as much at risk as Acme’s. While Frank is acting as an agent for Acme, he is also always acting as an agent for himself. Frank’s participation in Acme’s bribery could come back to him in the form of a reputation in his industry, which could impede his future employability. Frank also needs to be aware that he is setting a precedent in the way he sells. This could be a future problem for Frank in that he will not develop the necessary skills he needs for ethical sales, which will mean that he will most likely have to revert to a “bribery technique” to get the job done, thus stunting his future potential.…
- 767 Words
- 4 Pages
Good Essays -
I am Ivy from class SUD11, Sunderland of University. I write this memo to you in order to aid you comprehend my work easier.…
- 7390 Words
- 30 Pages
Powerful Essays -
Nancy Johnston, appellant, brought suit against her employer, Del mar Distributing Co., Inc., appellee, alleging that her employment had been wrongfully terminated. Del Mar filed a motion for summary judgment in the trial court alleging that appellant’s pleadings failed to state a cause of action. After a hearing on the motion, the trial agreed with Del Mar and granted its motion for summary judgment.…
- 343 Words
- 1 Page
Good Essays -
Should the students wish to meet the staff outside the consultation hours, they are advised to make appointment in advance.…
- 2477 Words
- 13 Pages
Satisfactory Essays