Chapter 1

Chapter 1
Introduction to Law and

Legal Reasoning
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.

+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
A1. The stability and predictability of the law is essential to business activities.
ANSWER: T PAGE: 2 TYPE: =

NAT: AACSB Analytic AICPA Critical Thinking
A2. Law is a body of enforceable rules governing relationships among individuals and
between individuals and their society.

NAT: AACSB Analytic AICPA Legal
A3. A breach of a contract is a failure to perform it.
ANSWER: T PAGE: 3 TYPE: N

NAT: AACSB Ethics AICPA Critical Thinking
A4. Constitutional law includes only the U.S. Constitution.
ANSWER: F PAGE: 4 TYPE: =

1
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whole or in part.
2 TEST BANK A—UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
A5. A state constitution is supreme within the state’s borders.

A6. Whether a law is constitutional depends on its source.

A7. Uniform laws apply in all states, including those in which the laws have not been
adopted.

A8. A state law that conflicts with the U.S. Constitution will be deemed unconstitutional.

A9. Statutory law does not include county ordinances.

NAT: AACSB Reflective AICPA Legal
A10. No state has adopted the Uniform Commercial Code in its entirety.

A11. Common law is a term for law that is common throughout the world.

NAT: AACSB Analytic AICPA Critical Thinking
A12. Damages is a remedy at law.

A13. Remedies in equity include injunctions and decrees of specific performance.
whole or in part.
CHAPTER 1: INTRODUCTION TO LAW AND LEGAL REASONING 3

A14. In most states, the courts no longer grant “equitable” remedies.

A15. A defendant is a person against whom a lawsuit is brought.

A16. Courts do not depart from precedents.

NAT: AACSB Reflective AICPA Critical Thinking
A17. A judge’s function is to make the law.
ANSWER: F PAGE: 13 TYPE: N

A18. Criminal law focuses on duties that exist between persons.

A19. A reference to “28 U.S.C. Section 1332” means that a statute can be found in section
1332 of title 28 of the United States Code.

NAT: AACSB Analytic AICPA Research
A20. Most state trial court decisions are not published.

NAT: AACSB Analytic AICPA Research
MULTIPLE CHOICE QUESTIONS
whole or in part.
A1. The legislature of the state of Mississippi enacts a new statute that sets standards for the
liability of businesses selling defective products. This statute applies
a. only in Mississippi.
b. only in Mississippi and its border states.
c. in all states.
d. in all states but only to matters not covered by other states’ laws.
ANSWER: A PAGE: 4 TYPE: N

A2. Lewis is a state court judge. Like other judges, Lewis often refers to secondary sources
of law for guidance. These sources include
a. official comments to statute.

b. other states’ statutes.
c. state constitutions.
d. the U.S. Constitution.

A3. Hawaii enacts a state law that violates the U.S. Constitution. This law can be enforced
by
a. no one.
b. the federal government only.
c. the state of Hawaii only.
d. the United States Supreme Court only.
ANSWER: A PAGE: 4 TYPE: =

whole or in part.
A4. The Federal Trade Commission is a government agency that issues rules, orders, and
decisions. The Georgia state legislature enacts statutes. The Jackson County Board and
the Peach City Council enacts ordinances. Administrative law includes
a. all law that affects a business’s operation.

b. the rules, orders, and decisions of the Federal Trade Commission.
c. statutes enacted by the Georgia state legislature.
d. ordinances created by the Jackson County Board and the city council of Peach
City, Georgia.
ANSWER: B PAGE: 5 TYPE: =

A5. The Securities Exchange Commission is an administrative agency. The chief purpose
of such agencies is to
a. act as liaisons between federal and state governments.

b. impose uniform laws on the states.
c. perform specific government functions.
d. standardize laws for the executive and judicial branches.
ANSWER: C PAGE: 5 TYPE: =

A6. In a suit against Corbin, Donatella obtains damages. This is
a. an order to do or to refrain from doing a particular act.

b. an order to perform what was promised.
c. a payment of money or property as compensation.
d. the cancellation of a contract.
ANSWER: C PAGE: 7 TYPE: N

A7. In an action against Elin, Frank obtains a remedy. This is
a. an administrative agency’s enforcement of its rule.

b. a principle of the law derived from earlier court cases.
c. a statute enacted by a state legislature or Congress.
d. the legal means to recover a right or to redress a wrong.
ANSWER: D PAGE: 7 TYPE: =

whole or in part.
A8. In a suit against Evan, Floyd obtains an injunction. This is


A9. In a suit against Vladimir over the performance of a contract, Wyler obtains rescission.
This is

ANSWER: D PAGE: 7 TYPE: N

A10. In a suit against Sandy, Tippy obtains damages. In the U.S. legal system, this remedy at
law is
a. equitable.
b. normal.
c. unlikely.
d. unusual.
ANSWER: B PAGE: 7 TYPE: N

A11. Maggie and Nate enter into a contract for the sale of car, but Nate later refuses to
deliver the goods. Maggie asks a court to order Nate to perform as promised. Ordering
a party to perform what was promised is
a. an equitable remedy.
b. an unenforceable demand.
c. a remedy at law.
d. a type of harm.
whole or in part.
whole or in part.
A12. As a judge, Diane applies common law rules. These rules develop from
a. decisions of the courts in legal disputes.

b. regulations issued by administrative agencies.
c. statutes enacted by Congress and the state legislatures.
d. uniform laws drafted by legal scholars.

A13. Craig is a state court judge. In his court, as in most state courts, legal and equitable
remedies have merged. But it is important to distinguish between equitable and legal
remedies
a. because neither type of remedy can be granted today.

b. for no good reason.
c. to negotiate an enforceable business contract.
d. to request a proper remedy.

A14. In Ben v. City Car Dealership, a state supreme court held that a minor could cancel a
contract for the sale of a car. Now a trial court in the same state is deciding Daphne v.
Even Steven Auto Deals, Inc.,, a case with similar facts. Under the doctrine of stare de-
cisis, the trial court is likely to
a. allow the minor to cancel the contract.

b. disregard the previous case.
c. order the minor to cancel the contract.
d. require the minor to fulfill the contract.

whole or in part.
A15. In Export Co. v. Imports, Inc., there is no precedent on which the court can base a
decision. The court can consider, among other things,
a. neither public policy nor social values.

b. public policy only.
c. public policy or social values.
d. social values only.
ANSWER: C PAGE: 10 TYPE: =

A16. A federal statute regulates an employment practice. To resolve a dispute concerning the
practice, Paula, a judge, will most likely apply
a. a common law doctrine that applied before the statute was enacted.
b. a common law doctrine that applies to other, different practices.
c. Paula’s personal philosophy of law.
d. the statute.
ANSWER: D PAGE: 12 TYPE: =

Fact Pattern 1-A1 (Questions A17–A19 apply)

The Texas Supreme Court decides the case of Livewire Entertainment Co. v. Power Play Corp.
Of nine justices, six believe the judgment should be in Livewire’s favor. Justice Bellamy, one
of the six, writes a separate opinion. The four justices who believe the judgment should be in
Power’s favor join in a third separate opinion.
A17. Refer to Fact Pattern 1-A1. These opinions are collected and published in volumes
called
a. citations.
b. codes.
c. reporters.
d. reviews.
ANSWER: C PAGE: 16 TYPE: +

NAT: AACSB Reflective AICPA Research
whole or in part.
A18. Refer to Fact Pattern 1-A1. Bellamy’s opinion is known as
a. a concurring opinion.
b. a dissenting opinion.
c. a majority opinion.
d. a per curiam opinion.
ANSWER: A PAGE: 21 TYPE: +

A19. Refer to Fact Pattern 1-A1. The opinion joined by the four justices who favor Power is
known as
a. a concurring opinion.
b. a dissenting opinion.
c. a majority opinion.
d. a per curiam opinion.
ANSWER: B PAGE: 21 TYPE: +

A20. At a prison in Ohio, inmate Steve recruits other inmates to play Towers & Trolls, a
potentially violent, fantasy, role-playing game. Ryan, the prison’s warden, confiscates
the game materials and bans its play at the prison. Under the principles discussed in “A
Sample Court Case,” Singer v. Raemisch, Ryan most likely acted
a. in violation of Steve’s rights under the First Amendment.

b. reasonably in taking the game materials but not in banning its play.
c. reasonably in banning the game but not in taking the materials.
d. reasonably in the circumstances and under the law.

ESSAY QUESTIONS
A1. Americans with a Better Cause (ABC), a nonprofit organization, files a suit against the
U.S. Department of Justice (DOJ), claiming that a certain federal statute the DOJ is
empowered to enforce conflicts with the U.S. Constitution and with a state constitution.
In each situation, which source of law has priority?
whole or in part.
ANSWER: The U.S. Constitution is the supreme law of the land. A law in violation
of the Constitution, no matter what its source, will be declared unconstitutional and
will not be enforced. Thus, the federal statute does not have priority over the
Constitution. The federal statute would have priority over the state constitution,
however, because under the U.S. Constitution, when there is a conflict between a
federal law and a state law, the state law is rendered invalid.
PAGE: 4 TYPE: =
NAT: AACSB Reflective AICPA Decision Modeling
A2. Blizzard Entertainment, Inc., one of the owners of the World of Warcraft (WoW)
computer game, is involved in a lawsuit with MDY Industries, LLC, the owner of
Glider, a software program that plays WoW for its players while they are away from
their keyboards. Blizzard asks the court to direct MDY to stop selling and distributing
Glider. The court’s opinion in the case is at MDY Industries, LLC v. Blizzard
Entertainment, Inc., 616 F.Supp.2d 958 (D.Ariz. 2010). What is the name for the
remedy that Blizzard is seeking? What type of remedy is it? What court decided this
case? Specifically where can the court’s opinion be found?
ANSWER: The remedy that Blizzard asks the court to provide is an injunction—
defined as an order to do or to refrain from doing a particular act. An injunction is an
equitable remedy. The U.S. District Court for the District of Arizona decided this case
in 2009. The opinion of the court in this case—MDY Industries, LLC v. Blizzard
Entertainment, Inc., 616 F.Supp.2d 958 (D.Ariz. 2010)—can be found in its entirety in
volume 616 of the Federal Supplement, Second Series, on page 958. The case was
decided by the U.S. District Court for the District of Arizona in 2010.
PAGES: 16 & 18–19 TYPE: N

whole or in part.

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Introduction to Law and

N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.

N A question new to this edition of the Test Bank.

ANSWER: T PAGE: 2 TYPE: =

ANSWER: T PAGE: 2 TYPE: =

A3. A breach of a contract is a failure to perform it.

ANSWER: T PAGE: 3 TYPE: N

A4. Constitutional law includes only the U.S. Constitution.

ANSWER: F PAGE: 4 TYPE: =

A5. A state constitution is supreme within the state’s borders.

ANSWER: T PAGE: 4 TYPE: =

A6. Whether a law is constitutional depends on its source.

ANSWER: F PAGE: 4 TYPE: =

ANSWER: F PAGE: 4 TYPE: =

ANSWER: T PAGE: 4 TYPE: =

A9. Statutory law does not include county ordinances.

ANSWER: F PAGE: 4 TYPE: =

ANSWER: F PAGE: 5 TYPE: =

ANSWER: F PAGE: 7 TYPE: =

A12. Damages is a remedy at law.

ANSWER: T PAGE: 7 TYPE: =

A13. Remedies in equity include injunctions and decrees of specific performance.

ANSWER: T PAGE: 7 TYPE: =

A14. In most states, the courts no longer grant “equitable” remedies.

ANSWER: F PAGE: 8 TYPE: =

A15. A defendant is a person against whom a lawsuit is brought.

ANSWER: T PAGE: 8 TYPE: =

A16. Courts do not depart from precedents.

ANSWER: F PAGE: 9 TYPE: =

A17. A judge’s function is to make the law.

ANSWER: F PAGE: 13 TYPE: N

A18. Criminal law focuses on duties that exist between persons.

ANSWER: F PAGE: 14 TYPE: =

ANSWER: T PAGE: 15 TYPE: =

A20. Most state trial court decisions are not published.

ANSWER: T PAGE: 16 TYPE: =

MULTIPLE CHOICE QUESTIONS

ANSWER: A PAGE: 4 TYPE: N

a. official comments to statute.

ANSWER: A PAGE: 4 TYPE: N

ANSWER: A PAGE: 4 TYPE: =

a. all law that affects a business’s operation.

ANSWER: B PAGE: 5 TYPE: =

a. act as liaisons between federal and state governments.

ANSWER: C PAGE: 5 TYPE: =

A6. In a suit against Corbin, Donatella obtains damages. This is

a. an order to do or to refrain from doing a particular act.

ANSWER: C PAGE: 7 TYPE: N

A7. In an action against Elin, Frank obtains a remedy. This is

a. an administrative agency’s enforcement of its rule.

ANSWER: D PAGE: 7 TYPE: =

A8. In a suit against Evan, Floyd obtains an injunction. This is

a. an order to do or to refrain from doing a particular act.

ANSWER: A PAGE: 7 TYPE: N

a. an order to do or to refrain from doing a particular act.

ANSWER: D PAGE: 7 TYPE: N

ANSWER: B PAGE: 7 TYPE: N

ANSWER: A PAGE: 7 TYPE: N