Commercial Law
Review Questions
Course Introduction
Commercial Law is a branch of law that governs the rights, relations, and conduct of individuals and businesses engaged in commerce, trade, and sales. This course examines key legal principles that underpin commercial transactions, including contract law, sale of goods, agency, negotiable instruments, and secured transactions. It also explores legal frameworks for e-commerce, intellectual property, and international trade, providing students with a practical understanding of how legal issues impact the business environment. Through case studies and real-world scenarios, students gain insights into dispute resolution methods and regulatory compliance, preparing them for careers in business, law, or entrepreneurship.
Recommended Textbook
Business Law Text Cases An Accelerated Course 14th Edition by Roger LeRoy Miller
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1368 Flashcards
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Chapter 1: Law and Legal Reasoning
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Sample Questions
Q1) Business decision makers are expected to make decisions that are ethically sound.
A)True
B)False
Answer: True
Q2) Remedies in equity include decrees of specific performance.
A)True
B)False
Answer: True
Q3) Martin Luther King, Jr. played a singular role in the most significant social movement in the history of the United States-the Civil Rights Movement. King has been chronicled in books and movies, and is featured on mementoes, some of which are offered for sale by PriceMart Corp. Under the principles discussed in "A Sample Court Case," Rosa and Raymond Parks Institute for Self-Development v. Target Corp., PriceMart's sale of these items most likely
A) constitutes misappropriation.
B) implies something false about King's legacy.
C) is a qualified privilege.
D) violates the common-law right of publicity.
Answer: C
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Page 3
Chapter 2: Business and the Constitution
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Sample Questions
Q1) The Constitution sets out the authority and the limits of the branches of the government. The term checks and balances means that
A) Congress writes checks and the other branches balance the budget.
B) each branch has some power to limit the actions of the others.
C) the courts balance their authority to the other branches' checklists.
D) the president "checks" the courts, which "balance" the laws.
Answer: B
Q2) Congress enacts the Ad Restriction Act (ARA) to limit advertising in certain circumstances. The ARA will be considered valid if it directly advances a substantial government interest
A) and goes no further than necessary to achieve its purpose.
B) without regard to how "far" it goes.
C) and the parties affected by it can elect how "far" to go in applying it.
D) and goes further than necessary to ensure full coverage.
Answer: A
Q3) The states can establish laws that substantially affect trade and commerce.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Courts and Alternative Dispute Resolution
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Sample Questions
Q1) McHenry, a New York resident, files a suit in a New York state court against OneWorld Inc., a company based in California. OneWorld's only contact with McHenry is the company's app, which McHenry downloaded while traveling across the United States.
According to the sliding-scale analysis, the factor most likely to confer jurisdiction on the New York court is
A) the geographical distance between McHenry and OneWorld.
B) the degree of interactivity via the app between McHenry and OneWorld.
C) OneWorld's location when the app was created.
D) McHenry's location when the app was downloaded.
Answer: B
Q2) Negotiation can involve the parties to a dispute and their attorneys.
A)True
B)False
Answer: True
Q3) Arbitration that is mandated by a court is often binding on the parties.
A)True
B)False
Answer: False
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Chapter 4: Tort Law
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Sample Questions
Q1) Louann pushes Molly, who falls and breaks her wrist. Louann is liable for the injury
A) if Louann intended to push Moly.
B) only if Louann did not intend to break Moly's wrist.
C) only if Louann had a bad motive for pushing Moly.
D) only if Louann intended to break Moly's wrist.
Q2) Dixie, a driver for Express Delivery Company, leaves the truck's motor running in neutral and carelessly forgets to set the parking brake while she makes a delivery. The truck rolls and crashes into a nearby gas station pump, igniting a fire that spreads quickly to a construction site a block away. A burned wall collapses onto a crane, which falls on Fazio, a bystander, and injures him. What must Fazio show to recover damages from Express Delivery?
Q3) Conversion is limited to theft.
A)True
B)False
Q4) A defamatory statement must be communicated to a third party to be actionable.
A)True
B)False
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Chapter 5: Criminal Law and Cyber Crime
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Sample Questions
Q1) Gilda is accused of conspiracy to defraud. She is given an opportunity to object to the charge before a judge. She is also given the opportunity to confront and cross-examine witnesses and to present her own witnesses. These procedures represent A) a reasonable expectation of privacy.
B) the prohibition against double jeopardy.
C) due process of law.
D) the privilege against self-incrimination.
Q2) Using social media to defraud is a federal crime.
A)True
B)False
Q3) Racketeering is a single crime-engaging in financial transactions to conceal the identity, source, or destination of illegally gained funds.
A)True
B)False
Q4) No federal statute specifically addresses cyber crime.
A)True
B)False
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Chapter 6: Business Ethics
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Sample Questions
Q1) Ethical standards would most likely be considered violated if Team Logos Merchandising Corporation deals with a company in a developing nation that A) agrees to produce goods at Team Logos's desired price.
B) goes unnoticed by "corporate watch" groups.
C) routinely violates labor and environmental standards.
D) pays its workers less than the U.S. minimum wage.
Q2) Acting in good faith gives a business firm a better chance of defending its actions in court.
A)True
B)False
Q3) As CEO of Alabama Archery Supplies, Bertrand applies ethical standards derived from religious principles. For businesses, religious principles can be
A) a unifying force for employees.
B) all of the choices.
C) a rallying point to increase employee motivation.
D) the basis for an action that leads to negative publicity.
Q4) Business owners' misbehavior has no negative consequences for their business.
A)True
B)False
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Chapter 7: Nature and Terminology
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Sample Questions
Q1) Francie drives into Gage's Auto Service and asks Gage to replace a tire on her car. After Gage replaces the tire, but before Francie pays for it, any contract between them is A) executed.
B) executory.
C) void.
D) unenforceable.
Q2) Informal contracts are usually based on their substance rather than their form. A)True
B)False
Q3) Evie agrees to work for Far East Shipping, Ltd., as a translator. In determining whether a contract has been formed, an element of prime importance is A) the parties' intent.
B) Far East's base.
C) the work's duration.
D) Evie's capabilities.
Q4) All contracts include an implied covenant of good faith and fair dealing. A)True
B)False
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Chapter 8: Agreement in Traditional and E-Contracts
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Sample Questions
Q1) One necessary element for an effective offer is a reasonable price related to market value.
A)True
B)False
Q2) Bret buys a subscription to the catalog of music provided by Concerto, an online music vendor. Before accessing the catalog, Bret must agree to a provision stating that she will not make and sell copies of the music. This provision is
A) a browse-wrap term.
B) a click-on agreement.
C) a shrink-wrap agreement.
D) a partnering agreement.
Q3) Pastries, Inc., sends its catalogue to Rollo and includes a "personalized" letter inviting the purchase of any item at the advertised price. This is
A) an offer because of the "personalized" letter.
B) an offer because there is no room for price negotiation.
C) an offer only if Rollo previously bought items from Pastries.
D) not an offer.
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10
Chapter 9: Consideration, Capacity, and Legality
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Q1) Ordinarily, minors can disaffirm contracts even when they have misrepresented their age.
A)True
B)False
Q2) To be legally sufficient, consideration must be evidenced by something tangible.
A)True
B)False
Q3) Service Corporation markets its service to less educated consumers. In considering the unconscionability of a Service contract, a court will likely consider all of the following except
A) a buyer's level of education.
B) the parties' relative bargaining power.
C) the price of a service.
D) the seller's level of education.
Q4) Under the doctrine of promissory estoppel, a promise will not be enforced unless it is supported by consideration.
A)True
B)False
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Chapter 10: Defenses to Contract Enforceability
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Sample Questions
Q1) Henry files a suit against Irrigation Services to enforce an oral contract that would otherwise be unenforceable under the Statute of Frauds. The court could enforce such a contract if
A) Henry foreseeably and justifiably relied on Irrigation's promise.
B) Irrigation denies the existence of a contract.
C) neither party has begun to perform.
D) the deal does not involve goods.
Q2) A party's oral agreement to pay another's debt is never enforceable.
A)True
B)False
Q3) Duress is a possible ground for rescission of a contract.
A)True
B)False
Q4) To be enforceable, a memorandum evidencing an oral contract must include the essential terms.
A)True
B)False
Q5) A threat to exercise a legal right ordinarily constitutes duress.
A)True
B)False
12
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Chapter 11: Third Party Rights and Discharge
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Sample Questions
Q1) Steel, Inc., and Transport Company enter into a contract. UniOil Corporation, which will indirectly benefit from the deal, is prevented from having rights under the contract by the principle of A) assignment.
B) delegation.
C) privity.
D) alienation.
Q2) Contractors Service, Inc., enters into a contract to build a restaurant for Dierdre with her payment due on August 1. On August 1, her bank is closed, and for this reason, she claims that she cannot pay on time. In this situation
A) Dierdre's bank is liable to Contractors Service.
B) Dierdre is in breach of contract.
C) the contract is discharged.
D) the contract is suspended.
Q3) The most common way to discharge contractual duties is by breach of contract.
A)True
B)False
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Chapter 12: Breach of Contract and Remedies
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Q1) Sara contracts to work exclusively for Thermal Company during July for $5,000. On June 30, Thermal cancels the contract. Sara finds a similar job for the month of July but earns only $3,000. Sara files a suit against Thermal. As compensatory damages, Sara can recover
A) $3,000.
B) $2,000.
C) $1,000.
D) $0.
Q2) River Vista Inc. enters into a contract with Stable Realty Management to manage and maintain River Vista's commercial real estate. Their contract provides that neither party can recover damages for a non-fraudulent or unintentional breach. This is
A) a limitation-of-liability clause.
B) an exculpatory clause.
C) a liquidated damages clause.
D) a quasi contract.
Q3) Damages that compensate the nonbreaching party for the loss of a bargain are known as consecutive damages.
A)True
B)False
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Page 14
Chapter 13: Intellectual Property Rights
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Sample Questions
Q1) Patent infringement occurs only if all features or parts of a product are copied.
A)True
B)False
Q2) Bubbly Cola features Sparkly Cola's trademark without its owner's permission. Bubbly's use of the mark is actionable provided
A) consumers are confused.
B) Bubbly's use is intentional.
C) Bubbly's use reduces the value of Sparkly's mark.
D) Sparkly's mark is registered.
Q3) Marlo publishes a book titled No Equals, which includes aChapter from Paige's copyrighted book Olympic Champions. Marlo's use of theChapter is actionable provided that
A) consumers are confused.
B) Marlo's use is intentional.
C) Marlo's use reproduces Paige's chapter exactly.
D) Marlo's does not have Paige's permission.
Q4) A person who buys a copyrighted work cannot sell it to someone else.
A)True
B)False
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Chapter 14: Internet Law, Social Media, and Privacy
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Q1) Basso includes in his song "Chords" a few seconds of Dante's copyrighted sound recording "Etudes" without permission. Some federal courts have found that such digital sampling is
A) a violation of copyright law.
B) a "fair use" exception to the provisions of the act.
C) not a "fair use" exception to the provisions of the act.
D) all of the choices.
Q2) Sales & Revenue, Inc., discovers that defamatory statements about its policies and products are being posted in an online forum. TransWeb Inc., the Internet service provider whose users are posting the messages, refuses to disclose the identity of the person or persons responsible. Sales & Revenue files a suit against the anonymous users. The plaintiff can obtain from TransWeb the identity of the persons responsible for the defamatory messages by
A) using the authority of the court.
B) gaining unauthorized access to TransWeb's servers.
C) deceiving TransWeb into revealing the posters' identities.
D) no legal or illegal means.
Q3) Social media posts are routinely included in discovery in litigation.
A)True
B)False
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Chapter 15: The Formation of Sales and Lease Contracts
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Q1) Marine Expeditions, Inc., pays Nate's Boats $4,000 to use an oceangoing vessel for a month. For the purposes of the UCC, this is
A) a merchant's firm offer.
B) an option contract.
C) a lease.
D) a sale.
Q2) Car n' Truck Body & Paint Company orders custom paint from Diverse Hues Inc., but Diverse does not deliver. Car n' Truck will probably be unable to enforce the agreement if the parties omitted
A) a price term.
B) a delivery date.
C) a quantity term.
D) shipping arrangements.
Q3) If the parties to a contract for a sale of goods have not agreed on a price, a court will determine a reasonable price at the time for delivery.
A)True
B)False
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Chapter 16: Performance, Breach, and Warranties of Sales and
Lease Contracts
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Q1) Marcos buys a pneumatic drill from NuTools Inc. Owen leases a table saw from Piecework Tools Sales & Lease Company. Later, Marcos and Owen become aware of defects in the goods that indicate breaches of warranty. An action for breach of warranty accrues when A) the seller or lessor tenders delivery. B) the buyer or lessee becomes aware of the breach. C) the nonbreaching party notifies the breaching party of the breach. D) four years have passed since the breach occurred.
Q2) If goods in every respect conform to a contract, the buyer or lessee does not have a right to reject the goods.
A)True B)False
Q3) If a buyer breaches a contract, the seller can choose to simply cancel the contract. A)True B)False
Q4) General descriptions take precedence over inconsistent samples. A)True B)False
Page 18
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Chapter 17: Agency Relationships in Business
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Q1) Watercraft, Inc., employs Vladimir as a sales agent for a trial period. At the end of the period, Watercraft and Vladimir disagree on the amount of the commissions Vladimir is due for sales that he made. Vladimir may demand
A) a constructive trust.
B) an accounting.
C) nothing.
D) specific performance.
Q2) A principal is not bound to an unauthorized contract unless the principal ratifies it.
A)True
B)False
Q3) A principal is not normally liable for the tort of an agent committed within the scope of the agency or employment.
A)True
B)False
Q4) A principal is not normally liable for the crime of an agent committed within the scope of the agency or employment.
A)True
B)False
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Page 19
Chapter 18: Small Businesses and Limited Liability Companies
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Q1) Without creating a separate business organization, Lou starts up Main Street Motors, a new, pre-owned auto sales enterprise. Lou is
A) none of the choices.
B) a member.
C) a partner.
D) a sole proprietor.
Q2) A partner may not have the right to dissociate from the partnership.
A)True
B)False
Q3) Home Healthcare, LLC's owners are Inez and Jan. For purposes of entering into contracts, Home Healthcare is
A) an aggregate of its owners.
B) a non-entity
C) a legal entity apart from its owners.
D) a non-participating third party.
Q4) When a limited liability company is dissolved, any member, including those who wrongfully dissociated, may participate in the winding up process.
A)True
B)False
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Chapter 19: Corporations
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Q1) Tech Talent, Inc., is a corporation. Techno Talent's implied powers enable it to A) none of the choices.
B) depart significantly from traditional corporate formalities.
C) bind the corporation to an action that will greatly affect its purpose.
D) borrow funds and lend funds.
Q2) Mike is a shareholder of NatGas, Inc. NatGas uses cumulative voting to elect directors. This means that the number of Mike's votes is determined by the number of A) years that he has been a shareholder.
B) members of the board to be elected multiplied by the total number of voting shares that he holds.
C) shareholders present at the shareholders' meeting.
D) shareholders' meetings that he has attended.
Q3) In many states, close corporations have more flexibility in determining their rules of operation.
A)True
B)False
Q4) A corporation cannot be formed for purposes other than making a profit.
A)True
B)False
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