If one or both parties have the ability to withdraw or enforce the contract, then the
contract is _____.
A. voidable
B. rescinded
C. a mistake
D. void
E. unenforceable
Powder Room Mess. For $300,000, Willis agrees to build a new home for Robert, who
is very picky. Willis builds the home to Robert’s specifications with one exception. The
faucets and linoleum flooring in an upstairs powder room are not exactly what Robert
specified. That was a mistake on Willis’ part, but he had not intentionally failed to
follow specifications. When Robert sees the powder room, he goes ballistic and tells
Willis that he will not pay Willis anything for the house. It will take $300 to put in
correct faucets and linoleum. Willis says that he is willing to pay $300 to put Robert in
the position he would have been in had the correct faucets and linoleum been used, but
that is all he is willing to pay. Willis’ offer to put Robert in the position he would have
been in had the proper faucets and linoleum been used is based on the measure used for
what type of damages?
A. Nominal
B. Punitive
C. Compensatory
D. Liquidated
E. Consequential
Which of the following is false regarding the relationship between a principal and an
independent contractor?
A. An independent contractor is not an employee of the principal.
B. The principal does not control the details of the independent contractor’s
performance.
C. An individual who hires an independent contractor cannot be held liable for the
independent contractor’s tortious actions under the doctrine of respondeat superior.
D. A principal is not liable for actions engaged in by the independent contractor, even
extremely dangerous ones.
E. If an independent contractor commits a crime without the authorization of the
principal, the principal is not liable for the agent’s crime.
Which of the following articles of the UCC governs sales contracts?
A. 2
B. 2(A)
C. 4
D. 4(A)
E. 6
In the European Union, which of the following is the source to turn to, in order to
understand how the various member states regulate contracts?
A. The Principles of European Contract Law
B. The European Union Contract Manual for Member States
C. The Elements of Contractual Relation in the European Union
D. European Contract Law
E. None of these because all the member states have their own individual regulations
Which of the following is not a form of authority upon which an agency relationship
may be based?
A. Expressed agency
B. Implied agency
C. Apparent agency
D. Gratuitous agency
E. Ratification
Which of the following provides that a portion of a copyrighted work may be
reproduced for purposes of criticism, comment, news reporting, teaching, scholarships,
and research?
A. The limited-use doctrine
B. The copyright-use doctrine
C. The fair-use doctrine
D. The trade-use doctrine
E. None of these because there is no such provision
Which of the following provides that a revocation is effective only when received by
the offeree?
A. The acceptance rule.
B. The contract rule.
C. The reasonable rule.
D. The mailbox rule.
E. The contract legality rule.
How long does an agent’s apparent authority continue once an agency relationship is
terminated?
A. It ends immediately
B. 24 hours
C. 7 days
D. 30 days
E. Until the principal notifies third parties that the agency relationship has ended
In order to come within the scope of the Truth in Lending Act, a loan must be in the
amount of ______ unless it is secured by a mortgage on real estate.
A. $50,000 or more
B. $50,000 or less
C. $30,000 or more
D. $40,000 or less
E. $25,000 or less
Not So Rich Uncle. Bruce is attempting to convince Sally to marry him. He promises
her that if she will marry him, he will buy a new Mercedes automobile for her within
six months of the marriage and take her on a world tour within a year of the marriage
date. Sally reluctantly agrees, and they sign an agreement by which Bruce agrees to
provide the Mercedes and world tour. Bruce and Sally marry on January 1.
Unexpectedly, on March 1, Bruce’s supposedly rich uncle, Frank, dies. Frank has no
living relatives other than Bruce, and Frank’s will leaves everything to Bruce who is
also appointed executor. In attempting to settle the estate, Bruce agrees orally to pay out
of his own pocket debts of Frank totaling $10,000. Sally is concerned about Bruce’s
doing so. Bruce tells her not to worry because he will get all the money back when the
estate settles. Bruce admits to a number of friends that he agreed to settle the debts out
of his own pocket because he needed to obtain assets from the estate in a hurry. The
assets were needed in large part to satisfy his obligations to Sally. Surprisingly, it later
came to light that prior to his death Frank had signed away all his assets to his girlfriend
in Argentina. There was nothing left in the estate for Bruce to inherit. Bruce disavowed
his agreement to pay $10,000 to various creditors. Which of the following is the most
likely result of Bruce’s attempt to avoid his agreement to pay creditors of the estate out
of his own pocket?
A. He will be able to avoid the agreement because it was not in writing.
B. He will be able to avoid the agreement because a promise to pay the debts of an
estate would never come within the statute of frauds.
C. A promise to pay debts of an estate out of an executor’s own funds would come
within the statute of frauds, but the oral agreement Bruce made will likely be
enforceable under the substantial-purpose rule.
D. A promise to pay debts of an estate out of an executor’s own funds would come
within the statute of frauds, but the oral agreement Bruce made will likely be
enforceable under the main-purpose rule.
E. A promise to pay debts of an estate out of an executor’s own funds would come
within the statute of frauds, but the oral agreement Bruce made will likely be
enforceable under the primary-purpose rule.
Which of the following is needed in order for the implied warranty of merchantability
to be applied?
A. Both parties must be merchants and a sale must be involved.
B. Both parties must be merchants, and either a sale or lease may be involved.
C. The seller must be a merchant and a sale must be involved.
D. A seller or lessor must be a merchant, and either a sale or lease may be involved.
E. The seller must be a merchant, goods valued at over $500 must be involved, and
either a sale or lease may be involved.
College president Wally contracts with Alice to teach business law. Alice does a fine job
teaching but gets mad at Wally and will not turn in grades. What type of order would
Wally seek to require Alice to abide by her contract?
A. An order of specific performance
B. A compensatory order
C. A nominal order
D. A consequential order
E. A demand order
Under Title VII, a successful plaintiff may be awarded _____________.
A. punitive damages
B. remedial seniority
C. compensatory damages
D. reinstatement
E. All of these
New Agency. Debby just got a job as an assistant in a new federal agency called the
Accounting Commission that was set up to regulate the accounting and auditing
profession. The agency is headed by commissioners who serve for fixed terms and
cannot be removed for cause. Additionally, no more than a majority of the
commissioners may be from the same political party. Her agency is getting ready to
issue rules. The enabling legislation that set up the Accounting Commission specified
that the agency could make rules but said nothing about the form of the rules. Debby’s
boss, Blaire, gave her some proposed rules and asked her to be sure that they were
published and to take care of the next step in the approval process. Blaire also told her
that at this point she was not very interested in hybrid rule making. Which of the
following is the most likely type of rule making in which the Accounting Commission
was involved?
A. Informal
B. Formal
C. Legislative
D. Regulatory
E. Procedural
Which of the following represents a lack of genuine assent?
A. Acceptance secured through fraud.
B. Acceptance secured through undue influence.
C. Acceptance secured through misrepresentation.
D. Acceptance secured through fraud or undue influence, but not through
misrepresentation.
E. Acceptance secured through fraud, undue influence, or misrepresentation.
Which of the following is false regarding the Consumer Product Safety Act?
A. It enforces mandatory standards regarding product safety.
B. It has no authority to require a recall of products.
C. It conducts research regarding potentially hazardous products.
D. It educates consumers about product safety.
E. It can ban consumer products from the market.
Which of the following is true regarding the grand jury system?
A. Under the U.S. Constitution, a grand jury is required in state court felony cases.
B. Under the U.S. Constitution, a grand jury is required in federal felony cases.
C. The right to a grand jury may not be waived by a defendant.
D. Under the U.S. Constitution, a grand jury is required in state court felony cases and
in federal felony cases and the right to a grand jury may not be waived by a defendant.
E. Under the U.S. Constitution, a grand jury is required in both state and federal felony
cases, but a defendant may waive the right to review by a grand jury.
Historically, which of the following were considered people with limited or no
capacity?
A. Minors and married women
B. Insane persons, single women, and minors
C. Single women over 18 and insane persons
D. Minors and insane persons
E. Minors, insane persons, and married women
In a merger situation, which of the following is a term for the corporation that does not
continue to exist?
A. The declined corporation
B. The removed corporation
C. The absorbed corporation
D. The concealed corporation
E. The deceased corporation
A false statement of a material fact regarding ownership of business property that
results in a loss of sales is referred to as __________.
A. slander of quality
B. trade libel
C. libel of title
D. slander of title
E. none of these
Once a trademark is registered, when must it initially be renewed?
A. Between the first and second years
B. Between the second and third years
C. Between the third and fourth years
D. Between the fourth and fifth years
E. Between the fifth and sixth years
A(n) _____ is a person who signs an instrument to restrict payment of it, negotiate it, or
incur liability.
A. maker
B. acceptor
C. drawer
D. endorser
E. promisor
How is a limited liability company formed?
A. By filing Articles of Statement with the Internal Revenue Service.
B. By filing a Limited Liability Company form with the Securities and Exchange
Commission.
C. By filing a Certificate of Authority with the county in which the LLC is established.
D. By filing Articles of Organization in the state in which the LLC is established.
E. By filing a Statement of Operation in the state in which the LLC is established.
Under the UCC buyers and lessees may recover goods identified in the contract if the
seller or lessor becomes insolvent within ______ after receiving the first payment due
under the agreement.
A. 5 days
B. 10 days
C. 16 days
D. 30 days
E. 60 days
Multiplication. Phyllis, who is 30 years old, works for We Add for You Accounting.
Phyllis has worked there for a number of years and is considering quitting in order to
spend more time with her three active triplets, Sunny, Fussy, and Perky. She asks her
boss, Bolivar, about the pension plan at We Add for You. Her boss tells her that she has
no entitlement to information until she is at least 60 years old. Phyllis also asks about
retaining her medical insurance protection if she quits and is told that she would have
no right to do so. Bolivar also throws in that he has been monitoring her conversations
and that he particularly enjoys the conversations between her and her single female
friends involving failed dating experiences. He asks her to keep those up. Phyllis tells
him that her personal phone calls are none of his business. Bolivar says that he can
listen if he wants because the phones are his. Phyllis ends up starting her own company
called We Multiply for You, and makes much, much more money. (In answering the
following questions, assume all federal laws apply and that any pension and medical
plan qualifies for regulation under federal law.) Which of the following addresses the
retention of medical benefits upon leaving a job?
A. The Consolidated Omnibus Budget Reconciliation Act (COBRA)
B. The Medical Benefits Retention Act (MBRA)
C. The Health and Maintenance Act (HMA)
D. The Comprehensive Medical Benefits Retention Act (CMBRA)
E. There is no such law.
Congress passed _________________ in an effort to prevent exploitation of small
investors.
A. the Investment Company Act of 1940
B. the Securities Enforcement Remedies and Penny Stock Reform of 1990
C. the Market Reform Act of 1990
D. the Securities Act Amendments of 1990
E. the National Securities Market Improvement Act of 1996
Which of the following is a term for a requirement that a minimum number of directors
be present at a meeting for decisions made at the meeting to be valid?
A. Quorum
B. Substantial group
C. Adequate group
D. Adequate assembly
E. None of these because there are no such requirement so long as all directors had
notice and an opportunity to attend the meeting at issue
Which of the following is true regarding stock certificates?
A. Each certificate includes the corporation’s name.
B. Each certificate includes the number of shares represented by the certificate.
C. A shareholder’s ownership in the corporation does not depend on her possession of
the physical stock certificate.
D. Each certificate includes the corporation’s name, each certificate includes the number
of shares represented by the certificate, and a shareholder’s ownership in the corporation
does not depend on her possession of the physical stock certificate.
E. Each certificate includes the corporation’s name and each certificate includes the
number of shares represented by the certificate, but a shareholder’s ownership in the
corporation does depend on her possession of the physical stock certificate.
The quality of a negotiable instrument that ensures its longevity is known as
_________________.
A. movability
B. allonge
C. relative permanence
D. negotiation
E. alteration