Which contract would ordinarily be considered illegal?
a. Paying a fee for a license in a state where the purpose of the licensing statute was
merely to raise revenue for the state.
b. A contract between a minor and an adult for the sale of real estate.
c. A contract made by an intoxicated person.
d. Paying your state senator $10,000 to vote in favor of a bill you have an interest in.
The federal agency mainly responsible for product safety is the
a. Federal Trade Commission.
b. Food and Drug Administration.
c. Consumer Product Safety Commission.
d. Federal Safety Commission.
A state legislature passed a law making the sale of fireworks illegal. At the time,
Johnson Company had made an offer to sell fireworks to a large city in the state for its
July 4th celebration. The effect of this law on Johnson Company’s offer is
a. to automatically terminate the offer.
b. to act as a rejection of the offer by the offeree.
c. nonexistent.
d. to allow Johnson Company to sue for breach of contract.
The history of a person’s use of credit is contained in a
a. line of credit.
b. bankruptcy petition.
c. credit record.
d. charge account.
A draft made out in the United States calls for payment in German marks. Which of the
following statements is correct?
a. The draft is nonnegotiable since it must be paid in German marks.
b. The draft is nonnegotiable because the rate of exchange fluctuates and it will
interfere with the requirement that the instrument be payable in a fixed sum of money.
c. The draft is negotiable if it satisfies all the requirements of negotiability under Article
3 of the UCC.
d. The instrument is negotiable only if the exchange rate is written on the draft.
The person making a will is called the
a. testator/testatrix.
b. administratrix.
c. executor.
d. intestate.
Which of the following would be unenforceable because the subject matter is illegal?
a. An employer promises not to press criminal charges for stealing money from the
company safe, if the employee agrees to pay back the money
b. A fee paid to an attorney to defend a person in criminal court against an assault
charge
c. A restrictive clause in an employment contract prohibiting a former employee from
using the employer’s trade secrets
d. An arbitration clause appearing in a warranty agreement given to the purchaser of an
iPod in a large retail establishment
Martin was unable to pay $2,000 she owed Farmer on April 10, the due date. Martin
offered her a computer and several programs in full payment instead of cash, and
Farmer accepted. Martin was discharged from her contract by
a. impossibility.
b. accord and satisfaction.
c. tender of performance.
d. substantial performance.
Duress as a legal reason (defense) offered by a primary or secondary party for not
paying a holder the amount due on an instrument is
a. sometimes a personal defense.
b. sometimes a real defense.
c. generally no defense at all.
d. sometimes a personal defense and sometimes a real defense.
Article 2 of the UCC does not cover a contract for
a. services.
b. the sale of growing crops.
c. the sale of a computer.
d. the sale of goods that have been specially manufactured.
A memorandum required to satisfy the statute of frauds should contain
a. the names of the parties.
b. the subject matter of the agreement.
c. the consideration involved.
d. all of these.
A promissory note payable “on the day of the next presidential election” is
a. nonnegotiable.
b. unenforceable.
c. void.
d. negotiable.
A court-ordered process authorizing an employer to seize a portion of a debtor’s wages
is called
a. execution.
b. garnishment.
c. wage assignment.
d. repossession.
A consumer who receives unordered goods
a. must accept and pay for them.
b. must send them back if unwanted.
c. may keep the goods as a gift.
d. may sell them and send the money to the company.
Written acceptance of an offer generally takes effect when it is
a. received by the offeror.
b. properly sent.
c. prepared by the offeree.
d. none of these.
A bailment implied by law
a. is a result of an express agreement.
b. must contain all the essential elements of a contract.
c. occurs when you check a coat with a cloakroom attendant.
d. occurs when you find a lost necklace.
Which agreement is unenforceable because of lack of valid consideration?
a. Johnson agreed to donate $1,000 to the United Hospital Building Fund. Based upon
this and similar promises, construction was started.
b. Davis promised to give his neighbor’s young son $50 if the boy would refrain from
trespassing on his property. Because of Davis’s promise, the boy complied.
c. Boyd agreed to sell his used motorboat to Yates for $300. Yates tendered the $300.
d. Philips promised his nephew $5,000 if the boy would refrain from smoking until he
reached twenty-one years of age. Because of this promise, the nephew complied.
Under Article 2 of the UCC goods sold by merchants may be covered by a warranty. An
example of an express warranty would be a warranty of
a. fitness for a purpose.
b. merchantability.
c. conformity to the description of the purchased goods.
d. conformity to those goods purchased according to usage in the trade.
Of the following, the one that does not terminate an offer is
a. a counteroffer.
b. acceptance.
c. the serious illness of the offeror.
d. impossibility.
An agreement to pay for an item in fixed, regular payments is called
a. a charge account.
b. a bank loan.
c. an installment loan.
d. none of these.
The amount of a promissory note was changed from $750 to $7,500 by the payee. The
maker can be held liable for
a. $750.
b. $7,500.
c. $6,750.
d. nothing.
An agent’s authority to act in an emergency is a type of
a. express authority.
b. apparent authority.
c. implied authority.
d. oral authority.
Holders in due course take an instrument subject to
a. personal defenses only.
b. real defenses only.
c. both real and personal defenses.
d. no defenses.
The plaintiff in a civil action is the state or federal government acting for the person
bringing the lawsuit.
In order to legally avoid contractual liability, a minor must always disaffirm the
____________________ contract.
Bailments can be created only by express agreements of the parties.
If a sole proprietorship or partnership operates under a name that is different from its
owner’s, the name of the business must be registered and the owner identified.
Corporations receive permission to operate from the state or the federal government.
Under the UCC, parties to a sales contract may modify it without new
____________________.
The personal assets of a partner may be seized to satisfy partnership debts.
All crimes that are not punishable by death or by imprisonment in a state penitentiary
are misdemeanors.
Important contracts should be in writing to reduce the possibility of perjury by either
party.