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Chapter 1
The Legal Environment
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
1.
The law establishes rights, duties, and privileges that are consistent with
the values of society.
ANSWER: T
NAT: AACSB Reflective
2.
2
TYPE:
AICPA Critical Thinking
=
Law includes enforceable rules governing relationships between individuals
and their society.
ANSWER: T
NAT: AACSB Analytic
3.
PAGE:
PAGE:
2
AICPA Legal
TYPE:
=
A federal law that conflicts with the U.S. Constitution will be deemed
unconstitutional.
ANSWER: T
NAT: AACSB Analytic
PAGE:
5
AICPA Legal
TYPE:
=
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1
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duplicated, or posted to a publicly accessible website, in whole or in part.
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2
UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
4.
Constitutional law includes only the U.S. Constitution.
ANSWER: F
NAT: AACSB Analytic
PAGE:
5
AICPA Legal
TYPE:
=
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CHAPTER 1: THE LEGAL ENVIRONMENT
5.
A state law that conflicts with the U.S. Constitution will be deemed
unconstitutional.
ANSWER: T
NAT: AACSB Analytic
6.
PAGE:
5
AICPA Legal
TYPE:
=
PAGE:
5
AICPA Legal
TYPE:
=
PAGE:
5
AICPA Legal
TYPE:
=
PAGE:
6
AICPA Legal
TYPE:
=
6
AICPA Legal
TYPE:
=
Federal statutes apply to all states.
ANSWER: T
NAT: AACSB Analytic
11.
=
Uniform laws apply in all states, including those in which the laws have not
been adopted.
ANSWER: F
NAT: AACSB Analytic
10.
TYPE:
A state constitution is supreme within the state’s borders so long as it does
not conflict with the U.S. Constitution or a federal law.
ANSWER: T
NAT: AACSB Analytic
9.
5
AICPA Legal
Whether a law is constitutional depends on its source.
ANSWER: F
NAT: AACSB Analytic
8.
PAGE:
The U.S. Constitution is the supreme law of the United States.
ANSWER: T
NAT: AACSB Analytic
7.
3
PAGE:
No state has adopted the Uniform Commercial Code in its entirety.
ANSWER: F
NAT: AACSB Reflective
PAGE:
6
AICPA Legal
TYPE:
+
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12.
FederalInstant
administrative
agencies specify
the powers
of Congress.
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4
UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
ANSWER: F
NAT: AACSB Analytic
13.
TYPE:
=
PAGE:
9
TYPE:
AICPA Critical Thinking
N
PAGE:
9
AICPA Legal
TYPE:
N
PAGE:
9
TYPE:
AICPA Critical Thinking
=
PAGE:
10
AICPA Legal
TYPE:
=
Judges use precedent when deciding a case in a common law legal system.
ANSWER: T
NAT: AACSB Analytic
19.
7
AICPA Legal
A decision on a given issue by a court is not binding on an inferior court.
ANSWER: F
NAT: AACSB Analytic
18.
PAGE:
Common law is a term for the law that is known to most of us.
ANSWER: F
NAT: AACSB Analytic
17.
=
Courts can rely on the common law as a guide to interpreting legislation.
ANSWER: T
NAT: AACSB Analytic
16.
TYPE:
The basis for the U.S. legal system is the natural law school.
ANSWER: T
NAT: AACSB Ethics
15.
7
AICPA Legal
State agency regulations take precedence over conflicting federal agency
regulations.
ANSWER: F
NAT: AACSB Analytic
14.
PAGE:
PAGE:
10 TYPE:
AICPA Legal
=
Stare decisis is a doctrine obligating judges to help persons who have
failed to protect their own rights.
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ANSWER:
F
PAGE:
10
TYPE: N
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duplicated, or posted to a publicly accessible website, in whole or in part.
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CHAPTER 1: THE LEGAL ENVIRONMENT
NAT: AACSB Analytic
20.
10
TYPE:
AICPA Critical Thinking
=
PAGE:
11
AICPA Legal
TYPE:
N
PAGE:
11
AICPA Legal
TYPE:
=
PAGE:
11
AICPA Legal
TYPE:
=
11
AICPA Legal
TYPE:
=
Monetary damages is a remedy at law.
ANSWER: T
NAT: AACSB Analytic
26.
PAGE:
A plaintiff is a person against whom a lawsuit is brought.
ANSWER: F
NAT: AACSB Analytic
25.
=
A defendant is a person against whom a lawsuit is brought.
ANSWER: T
NAT: AACSB Analytic
24.
10
TYPE:
AICPA Critical Thinking
Equity is a branch of unwritten law that seeks to supply remedies of equal
measure to the parties in a legal dispute.
ANSWER: F
NAT: AACSB Analytic
23.
PAGE:
A court may depart from a precedent if the court decides that the precedent
should no longer be followed.
ANSWER: T
NAT: AACSB Reflective
22.
AICPA Legal
Courts do not depart from precedents.
ANSWER: F
NAT: AACSB Reflective
21.
5
PAGE:
In most states, the courts no longer grant “equitable” remedies.
ANSWER: F
NAT: AACSB Analytic
PAGE:
11
AICPA Legal
TYPE:
N
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6
UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
27.
A court’s direction to a party to do or to refrain from doing a particular act
is a rescission.
ANSWER: F
NAT: AACSB Analytic
28.
11
AICPA Legal
TYPE:
=
PAGE:
13
TYPE:
AICPA Critical Thinking
=
PAGE:
14
AICPA Legal
TYPE:
=
PAGE:
15
AICPA Legal
TYPE:
=
International law is the law of a foreign nation and varies from country to
country.
ANSWER: F
NAT: AACSB Analytic
33.
PAGE:
Criminal law focuses on duties that exist between persons.
ANSWER: F
NAT: AACSB Analytic
32.
=
A substantive law creates or defines legal rights and obligations.
ANSWER: T
NAT: AACSB Analytic
31.
TYPE:
How judges apply the law to specific disputes may depend in part on their
personal philosophical views.
ANSWER: T
NAT: AACSB Reflective
30.
11
AICPA Legal
Equitable remedies include injunctions.
ANSWER: T
NAT: AACSB Analytic
29.
PAGE:
PAGE:
17
AICPA Legal
TYPE:
=
A reference to “28 U.S.C. Section 1332” means that a federal court’s
decision can be found on page 28 of section 1332 of the United States
Cases.
ANSWER: F
PAGE: 22
TYPE: =
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NAT: AACSB Analytic
AICPA Research
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duplicated, or posted to a publicly accessible website, in whole or in part.
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CHAPTER 1: THE LEGAL ENVIRONMENT
34.
Rules and regulations adopted by federal administrative agencies are
compiled in the Code of Federal Regulations.
ANSWER: T
NAT: AACSB Analytic
35.
7
PAGE:
23
TYPE:
AICPA Research
=
Most state trial court decisions are not published.
ANSWER: T
NAT: AACSB Analytic
PAGE:
23
TYPE:
AICPA Research
=
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8
UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
MULTIPLE-CHOICE QUESTIONS
1.
Krystal is a federal judge. Krystal’s judicial decisions are part of case law.
This law includes interpretations of primary sources of law. These sources
include
a.
b.
c.
d.
administrative regulations.
articles in law reviews and other legal journals.
compilations summarizing court decisions on particular topics.
legal encyclopedias.
ANSWER: A
NAT: AACSB Reflective
2.
4
AICPA Legal
TYPE:
N
Lewis is a state court judge. Like other judges, Lewis often refers to
secondary sources of law for guidance. These sources include
a.
b.
c.
d.
official comments to statutes.
other states’ statutes.
state constitutions.
the U.S. Constitution.
ANSWER: A
NAT: AACSB Reflective
3.
PAGE:
PAGE:
4
AICPA Legal
TYPE:
N
Under Ohio’s state constitution, the Ohio Environmental Protection Agency
issues a new rule, the Polk County Commission approves a new property
tax measure, and the professors and students at Ohio Law School publish
the results of their most recent legal research. Sources of law do not
include
a.
b.
c.
d.
the measures approved by local governing bodies.
the results of legal scholars’ research.
the rules issued by state administrative agencies.
the states’ constitutions.
ANSWER: B
NAT: AACSB Reflective
PAGE:
4
AICPA Legal
TYPE:
N
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CHAPTER 1: THE LEGAL ENVIRONMENT
4.
In Nebraska, the highest-ranking (superior) law is
a.
b.
c.
d.
a case decided by the Nebraska Supreme Court.
a provision in the Nebraska constitution.
a rule created by a Nebraska state administrative agency.
a statute enacted by the Nebraska legislature.
ANSWER: B
NAT: AACSB Reflective
5.
5
AICPA Legal
TYPE:
=
no one.
the federal government only.
the state of Hawaii only.
the United States Supreme Court only.
ANSWER: A
NAT: AACSB Reflective
PAGE:
5
AICPA Legal
TYPE:
=
The legislature of the state of Missouri enacts a new statute that sets standards for the liability of businesses selling defective products. This statute
applies
a.
b.
c.
d.
only in Missouri.
only in Missouri and its border states.
in all states.
in all states but only to matters not covered by other states’ laws.
ANSWER: A
NAT: AACSB Reflective
7.
PAGE:
Hawaii enacts a state law that violates the U.S. Constitution. This law can
be enforced by
a.
b.
c.
d.
6.
9
PAGE:
6
AICPA Legal
TYPE:
N
The River City Council, the Santa Clara County Board, the Texas state
legislature, and the U.S. Congress enact laws. These laws constitute
a.
administrative law.
b.
case law.
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c.
stare
decisis.
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10
UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
d.
statutory law.
ANSWER: D
NAT: AACSB Reflective
PAGE:
6
TYPE:
AICPA Critical Thinking
=
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one_number&app_absent=0
Send email or WhatsApp with complete Book title, Edition Number and
Author Name.
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CHAPTER 1: THE LEGAL ENVIRONMENT
8.
The U.S. Congress enacts a new federal statute that imposes liability on
businesses emitting significant amounts of a certain pollutant into the
environment. This statute applies
a.
b.
c.
d.
only to matters not covered by state law.
only to those states that adopt the statute.
to all of the states.
to none of the states.
ANSWER: C
NAT: AACSB Reflective
9.
PAGE:
6
AICPA Legal
TYPE:
=
The Federal Trade Commission (FTC) 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.
b.
c.
d.
all law that affects a business’s operation.
the rules, orders, and decisions of the Federal Trade Commission.
statutes enacted by the Georgia state legislature.
ordinances created by the Jackson County Board and the city council
of Peach City, Georgia.
ANSWER: B
NAT: AACSB Reflective
10.
11
PAGE:
7
AICPA Legal
TYPE:
=
Crater Tools Company is subject to regulations issued by the Occupational
Safety and Health Administration (OSHA). Like other federal
administrative agencies, the OSHA was created by
a.
b.
c.
d.
Congress, through enabling legislation.
the Federal Trade Commission, through the rulemaking process.
the president, through an executive order.
the U.S. Department of Labor, through a final order.
ANSWER: A
NAT: AACSB Reflective
PAGE:
7
AICPA Legal
TYPE:
N
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12
UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
11.
The Securities Exchange Commission is an administrative agency. The
chief purpose of such agencies is to
a.
b.
c.
d.
act as liaisons between federal and state governments.
impose uniform laws on the states.
perform specific government functions.
standardize laws for the executive and judicial branches.
ANSWER: C
NAT: AACSB Reflective
12.
TYPE:
N
Ancient Greece.
England.
France.
the natural law school.
ANSWER: B
NAT: AACSB Reflective
PAGE:
9
AICPA Legal
TYPE:
+
As a judge, Potter applies common law rules. These rules develop from
a.
b.
c.
d.
administrative regulations.
court decisions.
federal and state statutes.
proposed uniform laws.
ANSWER: B
NAT: AACSB Reflective
14.
7
AICPA Legal
The federal government and the state governments constitute the U.S. legal
system. This system is based on the legal system of
a.
b.
c.
d.
13.
PAGE:
PAGE:
9
AICPA Legal
TYPE:
=
Jill is an appellate court judge. In this capacity, Jill establishes a rule of
law. Under the doctrine of stare decisis, the principle must be
adhered to by
a.
all courts.
b.
courts of lower rank only.
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c.
that
court and
courts of lower
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CHAPTER 1: THE LEGAL ENVIRONMENT
d.
that court only.
ANSWER: C
NAT: AACSB Reflective
15.
10
AICPA Legal
TYPE:
=
allow the minor the Daphne case to cancel the contract.
disregard the Ben case.
order the minor in the Daphne case to cancel the contract.
require the minor in the Daphne case to fulfill the contract.
ANSWER: A
NAT: AACSB Reflective
PAGE:
10
TYPE:
AICPA Critical Thinking
=
Sam is a judge hearing the case of Local Co. v. National Corp.
Applying the relevant rule of law to the facts of the case requires Sam to
find previously decided cases that, in relation to the case under consideration, are
a.
b.
c.
d.
as different as possible.
as similar as possible.
at odds.
exactly identical.
ANSWER: B
NAT: AACSB Reflective
17.
PAGE:
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 decisis, the trial
court is likely to
a.
b.
c.
d.
16.
13
PAGE:
10
TYPE:
AICPA Critical Thinking
=
In Sales Distribution Corp. v. Consumer Products Co., the
court decides that a precedent is incorrect or inapplicable. The court
a.
may rule contrary to the precedent.
b.
must apply the precedent.
c.
must
ask a download
higher court to rule
the case.
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14
UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
d.
must refuse to decide the case.
ANSWER: A
NAT: AACSB Reflective
PAGE:
10
AICPA Legal
TYPE:
+
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CHAPTER 1: THE LEGAL ENVIRONMENT
18.
Network Corporation files a suit against Omega, Inc., alleging that Omega
breached a contract to sell Network a computer system. Network is
a.
b.
c.
d.
the appellant.
the appellee.
the defendant.
the plaintiff.
ANSWER: D
NAT: AACSB Reflective
19.
11
AICPA Legal
TYPE:
=
not refuse to decide the Eagle case.
postpone deciding Eagle indefinitely.
postpone deciding Eagle until there is binding authority.
refuse to decide Eagle.
ANSWER: A
NAT: AACSB Reflective
PAGE:
11
AICPA Legal
TYPE:
=
In an action against Elin, Frank obtains a remedy. This is
a.
b.
c.
d.
an administrative agency’s enforcement of its rule.
a principle of the law derived from earlier court cases.
a statute enacted by a state legislature or Congress.
the legal means to recover a right or to redress a wrong.
ANSWER: D
NAT: AACSB Reflective
21.
PAGE:
A state trial court has before it Eagle Manufacturing Co. v. Four
Feathers Products Corp., a case with no binding authority. The court
can
a.
b.
c.
d.
20.
15
PAGE:
11
AICPA Legal
TYPE:
N
In Export Co. v. Imports, Inc., there is no precedent on which the
court can base a decision. The court can consider
a.
neither public policy nor social customs and values.
b.
public
policydownload
only.
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16
UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
c.
d.
public policy or social customs and values.
social customs and values only.
ANSWER: C
NAT: AACSB Reflective
22.
=
an injunction.
damages.
rescission.
specific performance.
ANSWER: A
NAT: AACSB Reflective
PAGE:
11
TYPE: =
AICPA Decision Modeling
In a suit against Sandy, Taylor obtains a remedy. In the U.S. legal system,
this remedy will most likely be
a.
b.
c.
d.
an injunction.
damages.
rescission.
specific performance.
ANSWER: B
NAT: AACSB Reflective
24.
11
TYPE:
AICPA Critical Thinking
MaxiMart, Inc., is a discount retailer. MaxiMart’s customer service employees
are on strike. Sixty of the workers block the entrances to one of MaxiMart’s
stores. To get them away from the doors, MaxiMart should seek
a.
b.
c.
d.
23.
PAGE:
PAGE:
11
TYPE:
AICPA Critical Thinking
N
In a suit against Clem, Dona obtains the cancellation of a contract. This is
a.
b.
c.
d.
an injunction.
damages.
rescission.
specific performance.
ANSWER: C
NAT: AACSB Reflective
PAGE:
11
AICPA Legal
TYPE:
+
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CHAPTER 1: THE LEGAL ENVIRONMENT
25.
In a suit against Owen, Phil obtains specific performance. This is
a.
b.
c.
d.
an order to do or to refrain from doing a particular act.
an order to perform what was promised.
a payment of money or property as compensation.
the cancellation of a contract.
ANSWER: B
NAT: AACSB Reflective
26.
11
AICPA Legal
TYPE:
N
a statute of limitations.
the doctrine of stare decisis.
the chancellor’s discretion.
the king’s conscience.
ANSWER: A
NAT: AACSB Analytic
PAGE:
13
AICPA Legal
TYPE:
=
To Cody, the written law of a particular society at a particular time is most
significant. Cody is
a.
b.
c.
d.
a legal positivist.
a legal rationalist.
a legal realist.
a person who adheres to the natural law school.
ANSWER: A
NAT: AACSB Analytic
28.
PAGE:
Grady is a judge. In his court, Grady may bar a suit if it is not filed within a
proper time according to
a.
b.
c.
d.
27.
17
PAGE:
14
TYPE:
AICPA Critical Thinking
=
Beth is a victim of Carl’s violation of a criminal law. Criminal law is concerned with
a.
the prosecution of private individuals by other private individuals.
b.
the prosecution of public officials by private individuals.
c.
the relief available when a person’s rights are violated.
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d.
wrongs
committed
against the
as aat
whole.
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18
UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
ANSWER: D
NAT: AACSB Reflective
PAGE:
15
AICPA Legal
TYPE:
=
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CHAPTER 1: THE LEGAL ENVIRONMENT
29.
When Overseas Exports, Inc., based in New York, does business
internationally, the firm may be subject to international law. The sources of
this law include
a.
b.
c.
d.
the laws of individual nations only.
treaties and international organizations only.
the laws of individual nations, and treaties and international
organizations.
none of the choices.
ANSWER: C
NAT: AACSB Reflective
30.
19
PAGE:
17
AICPA Legal
TYPE:
=
The title of a case appears as “Duck Sales Corp. v. Egret Supply
Co.” The party in whose favor the case was decided
a.
b.
c.
d.
could be either party.
must be neither party.
must be Duck.
must be Egret.
ANSWER: A
NAT: AACSB Analytic
PAGE:
21
TYPE:
AICPA Research
+
Fact Pattern 1-1 (Questions 31–33 apply)
The Texas Supreme Court decides the case of Livewire Co. v. Power Corp.
Of nine justices, five believe the judgment should be in Livewire’s favor. Justice
Bellamy, one of the five, writes a separate opinion. The four justices who believe
the judgment should be in Power’s favor join in a third separate opinion.
31.
Refer to Fact Pattern 1-1. These opinions are collected and published in
volumes called
a.
b.
c.
d.
citations.
codes.
regulations.
reporters.
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ANSWER: D
PAGE: 23
TYPE: N
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20
UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
NAT: AACSB Analytic
AICPA Research
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© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
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CHAPTER 1: THE LEGAL ENVIRONMENT
32.
Refer to Fact Pattern 1-1. Bellamy’s opinion is
a.
b.
c.
d.
a concurring opinion.
a dissenting opinion.
a majority opinion.
a per curiam opinion.
ANSWER: A
NAT: AACSB Analytic
33.
PAGE:
29
TYPE:
AICPA Research
N
Refer to Fact Pattern 1-1. The opinion joined by the four justices who favor
Power is known as
a.
b.
c.
d.
a concurring opinion.
a dissenting opinion.
a majority opinion.
a per curiam opinion.
ANSWER: B
NAT: AACSB Analytic
34.
21
PAGE:
29
TYPE:
AICPA Research
N
Florida public policy is to protect consumers from unfair and deceptive
business practices. A state statute declares unenforceable any waiver of its
provisions, which include a provision for consumer class actions. WISP Inc.
requires its customers to sign an agreement that designates South Dakota
courts and law to govern all disputes. In a suit by a group of Florida
consumers against WISP, the court is most likely to rule that the
agreement is, under the principles discussed in “A Sample Court Case,” Doe
1 v. AOL LLC
a.
b.
c.
d.
enforceable because there is no reason not to enforce it.
enforceable because the parties had equal “bargaining power.”
unenforceable as a violation of Florida policy and law.
unenforceable as a violation of South Dakota policy and law.
ANSWER: C
NAT: AACSB Reflective
PAGE:
29
AICPA Legal
TYPE:
N
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22
UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
35.
Standard Business Company appeals a decision against it, in favor of Top
Flight Corporation, from a lower court to a higher court. Standard is
a.
b.
c.
d.
the appellant.
the appellee.
the defendant.
the plaintiff.
ANSWER: A
NAT: AACSB Reflective
PAGE:
29
AICPA Legal
TYPE:
=
ESSAY QUESTIONS
1.
In a lawsuit between Digital Hardware Corporation and Software
Engineering Associates, Inc., the court applies the doctrine of stare
decisis. What is this doctrine? What does this doctrine have to do with
the American legal system?
ANSWER: In a common law legal system, past judicial decisions are
binding in current disputes with similar facts. This feature of the common
law, which is the basis of the American legal system, is unique because,
unlike the law in other legal systems, it is judge-made law. Within the
common law system, when possible, judges attempt to be consistent and to
base their decisions on the principles suggested by earlier cases. The body
of principles and doctrines that form the common law emerged over time as
judges applied the principles announced in earlier cases to subsequent legal
controversies. The practice of deciding cases with reference to former decisions, or precedents—the cornerstone of the American legal system—is
called the doctrine of stare decisis. Under this doctrine, judges are
obligated to follow the precedents established within their jurisdictions.
This helps courts to be more efficient, and makes the law more stable and
predictable.
PAGES:
10–11
NAT: AACSB Reflective
TYPE:
=
AICPA Legal
2.
Blizzard Entertainment, Inc., one of the owners of the World of Warcraft
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download
byin email
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(WoW)Instant
computer game,
is involved
a lawsuitat
with
MDY Industries, LLC,
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duplicated, or posted to a publicly accessible website, in whole or in part.
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CHAPTER 1: THE LEGAL ENVIRONMENT
23
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. 2009). 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. 2009)—can be found in its entirety in
volume 616 of the Federal Supplement, Second Series, on page 958.
PAGES:
11, 24, 25 & 27
NAT: AACSB Reflective
TYPE:
N
AICPA Legal
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© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
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We Don’t reply in this website, you need to contact by email for all chapters
Instant download. Just send email and get all chapters download.
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