BUS 201 Final Exam – Fall 2019

Question 1
The first contract in the movie, The Rainmaker, entails an agreement to cover for medical
bills. The contract is between Donny Ray and his family and an insurance company. The
insurance company fails to honor the terms of the contract and refuses to pay Donny Ray’s
hospital bill. The enforceability of this contract may be challenged if the terms of the contract did
not include the disease that Donny Ray is suffering from. If Leukemia, was not among the
diseases covered in terms of the contract, then the insurance company cannot pay Donny Ray’s
hospital bill. The second contract entails legal representation. The contract involves Donny Ray
and his family, and Rudy Baylor. They sign a contract for Rudy’s services. One of the issues that
could challenge the enforceability of the contract is the fact that Rudy works with a disreputable
firm, and this could affect his services. The third contract entails the will of an old lady. The
contract is between Rudy and an old lady who wants to leave all her riches to a televangelist. the
enforceability of this contract may be challenged by the fact that the woman does not let Rudy
know anything about her fortune. Besides, Rudy has to confront an experienced lawyer from a
great firm, yet he is just a student, from a disrepute firm.
Question 2

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A lawsuit is filed against an insurance company, Great Benefit Life, for acting
fraudulently. Dot and Buddy Black file a suit against Great Benefit Life, for denying their
twenty-two-year-old son Donny Ray insurance coverage. Donny is dying of Leukemia. In spite
of the fact that his family has been paying their premiums promptly and for many years, the
company fails to honor the terms of the contract. The case involves insurance law.
Question 3
Great Benefit life calls Donny’s bone-marrow transplant an uncovered experimental
procedure, which is not covered by the insurance cover as per the terms of the contract. The
company argued that Donny was receiving a procedure whose effectiveness could not be
determined, and thus he could not be paid because that was not included in his insurance cover.
The company lawyers argued that there are less than 200 bone marrow transplants performed in
Tennessee each year. Thus, the lawyer termed the procedure as experimental, and such medical
procedures are not covered as per the insurance policy.
Question 4
Donny Ray‘s family was awarded $50 million in punitive damages. The damages were
meant to cover the company’s bad faith. The company’s refusal to pay had denied their son
medical treatment leading to his death.
Question 5
Rudy Baylor remains a poor lawyer because the jury instructs the insurance company to
pay Donny Ray’s family for damages. the charges for legal representation are then covered
individually by each party. He was innocent and honest in business, hence did not use
unscrupulous means to enrich himself. He had an emotional link with his clients, and this is

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depicted when he takes Donny Ray’s photo to Buddy Black. The attachment could not allow him
to swindle his clients like other lawyers used to do.
Question 6
Bruiser Stone is an experienced attorney with a strong network of connections. He
specializes in personal injury cases and helps Rudy beat the arson charge. He is a shady attorney
and a skanky TV lawyer, but besides that, he helps Rudy get his first job. He is able to get his
first job by offering legal services to Blank and other clients. He wins Blank’s case by unearthing
some of the insurance company’s dirty secrets and how they had refused to cover many patients
that had insured with them. Bruiser makes Rudy his associate. He also gives him help and tips on
how to cross-examine Great Benefit life’s in a move that makes him get evidence that leads the
jury to award Donny Ray’s family not only actual damages but also punitive damages. he wins in
his first case, despite being new in the profession, and fresh from college.
Question 7
A bond refers to a formal written agreement by which an individual undertakes to oblige
to a certain action, such as fulfilling the obligations of a particular contract or making an
appearance in court during the case hearing. Failing to perform the action specified in the
agreement obliges the individual to either forfeit money already paid in the form of a deposit to
the court or to pay a specified amount of money. A collateral note differs from a bond in that it
refers to a pledge made by a borrower to a lender, indicating that specific property will be used
to secure the repayment of a loan. It serves as protection to the lender and the note is used as
proof in case a borrower defaults to in loan repayment under the terms of the lending agreement.
The property pledged in the collateral note is lost in the event the borrower defaults in repaying

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the loan. A real estate mortgage note, on the other hand, refers to evidence or a legal document
that secures the repayment of a mortgage. Since real estate is costly and most people cannot
afford to pay in cash, a real estate mortgage note shows the transaction between the buyer and
the seller where the buyer promises to pay the seller a specified amount of money plus interest
rate that is specified in the note. The time within which the agreement will be honored is also
specified.
A debenture is a debt instrument, usually medium-to-long term, that large companies use
as evidence that a certain named obligator should pay principal installments and interest. It is
evidence of a holder’s rights. The term is used to refer to unsecured debt that is evidenced by a
certificate of debt. Lastly, a certificate of deposit refers to a formal document that is issued by a
bank showing transactions entailing money deposits that pay interest at a fixed rate for a certain
period of time. The bank charges a higher interest rate on a certificate of deposit compared to a
regular savings account because there are brokers involved and they are paid commissions by the
issuing bank.
Question 8
Dennis has not executed a valid power of attorney. A power of attorney is valid if it is
notarized, or at least witnessed by two adults, who are unrelated to the individual, in this case,
Dennis. The two adults must not be named as the attorney-in-fact and must be present to witness
as the individual signs. A power of attorney for Dennis is not valid because no witnesses are
mentioned to have been present during the signing. Jamie is Dennis’ sister and could not have
acted as a witness because she is related to Dennis. Besides, she is mentioned as the attorney in
fact, and thus that disqualified her from acting as a witness. Thus, even though Dennis signed the

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power of attorney while he was of sound mind as required, it is still invalid because it failed to
meet one of the requirements of a valid power of attorney.
Question 9
Employers are liable to damages caused or risks generated by their activity. On the other
hand, the employees are held liable for damage resulting from their negligent or willful acts.
Thus, employees are held liable for gross fault, negligence or fault, and willful misconduct.
Gross negligence is defined as a lack of vigilance, care, and caution. In this case, Comstock
Homebuilding Companies, Inc. lt was not liable for the damages caused. The risks and damage
that occurred were not generated by any activity relating to the company. Heidi had failed to act
out of caution, and her negligent act had caused the damage. Thus, Heidi is liable for the
damages caused to the model home.
Question 10
Misrepresentation occurs when the insured gives a false statement of fact. It occurs when
an individual or company provides false information in applying for coverage, that if truthfully
provided, would have affected the decision made by the insurance company when issuing a
policy. Superior Dispatch, Inc told the insurance company that it transported goods over a short
distance. The goods mentioned include food goods, hauled produce, beer and wine, canned
goods, paper products and textiles. The items mentioned totaled 100 percent, meaning that those
were the only items transported by the company. However, on the day of the accident, the
company was transporting a dump truck. This was not among the items covered by the insurance
company. There was a misrepresentation, and the insurance company’s decision to deny Superior
Dispatch, Inc. Coverage was justified.

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Question 11
Bankruptcy relief shields a debtor from creditors who may attempt to have the debtor pay
debts. Neither ARA nor Paolo and Alicia had the right to continue collecting the debt. The debt
had already been discharged through bankruptcy relief. Heave Action Recovery, Inc did not have
the financial power to continue financing its debts.
Question 12
The dissolution of a corporation alludes to a corporation closing down a business. A
corporation must ensure that it makes a final distribution to the shareholders as well as creditors.
A corporation must pay off all its debts by financing the debts through the sale of assets. In a
situation where a corporation is unable to pay its debts, it undergoes administrative dissolution.
Administrative dissolution may result in limited liability of the shareholders being waived. The
stockholders are thus responsible for any debts in case of administrative dissolution.
Question 13
A sole proprietorship has a low startup cost. However, the owners have unlimited
liability, and this forms one of the main disadvantages of a sole proprietorship. The tax
obligations of a sole proprietorship are minimal. There is ease of dissolution since the proprietor
can easily dissolve the business. The partnership has low startup costs. Partners can easily fund
business and this makes the startup cost to be low. Like a sole proprietorship, the partners have
unlimited liability. Business debts can easily result in partners selling off their personal property
to settle the business debts. The tax obligations are also relatively low.
A limited liability company has high startup costs. One of the advantages is that owners
have limited liability. However, dissolution is a difficult process, while the tax obligations are

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many. Corporations are also difficult to form since the formation involves extensive legal
procedures. The dissolution also involves extensive legal procedures while the tax obligations
are high.
Question 14
The American Tort Reform Association is an organization that was created with the aim
of undertaking comprehensive tort reforms. The organization has dedicated its efforts towards
achieving reforms in the civil justice system. The organization was created in the year 1986. The
organization has worked towards ensuring that justice is served. The aim is to achieve greater
fairness and efficiency in the American civil justice system. Among the key achievement of the
association is the fact that it has led to the enactment of various legislations and reforms through
civic education.
The members of the association include corporations and professional firms.
Municipalities and associations are also important members of the association. The association
was formed by the American Council of Engineering. Later on, the American Medical
Association joined the association. The association’s membership has greatly expanded to
feature nonprofits.
The documentary Hot Coffee is based on Liebeck v. McDonald’s Restaurants. The case
became a focus as many businesses used the case to extort money from businesses. Greedy
lawyers and plaintiffs sued businesses and used the case as a precedent. The association has,
however, helped in making sure that the claims are not unfair.
Question 15

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The class has helped me understand how businesses operate within the legal framework. I
have greatly understood how laws affect daily business operations. Laws help protect businesses
as well as offering the necessary protection to consumers. Businesses that fail to abide by the
existing laws are given legal sanctions. I have greatly understood the different regulations that
affect various businesses. While business is an important part of life, there have to be legal
regulations that govern the businesses. The businesses must strive to operate within the
boundaries of the law. I have appreciated how laws help in preserving healthy competition of
businesses. It is therefore important for all businesses to obey the existing laws.
Extra Credit Question
Streetsuarance is a form of insurance that is extended to the poorest sectors in the United
States. In many instances, health policies are worthless and pay an insignificant amount of
money. In addition, many companies that operate streetusuarance do so outside the legal
parameters. Streetsuarance works by having an individual securing a certain area of business.
A paralawyer is an individual who works in a law office but performs substantive legal
work. Paralawyers perform tasks by applying legal knowledge and skills and receive direction
from lawyers. However, they are not allowed to offer legal services independently. They are in
charge of auxiliary legal services.