Contracts and Commercial Transactions
Test Preparation
Course Introduction
This course explores the foundational principles of contract law and their practical applications in commercial transactions. Students examine the formation, performance, and enforcement of contracts, with an emphasis on key doctrines such as offer and acceptance, consideration, capacity, and remedies for breach. The course also addresses issues relevant to modern business, including the regulation of sales of goods under the Uniform Commercial Code (UCC), the role of electronic contracting, and the impact of international commercial standards. Through analysis of case law, statutes, and real-world scenarios, students develop essential skills for understanding, drafting, and negotiating commercial agreements.
Recommended Textbook
Business Law Text and Exercises 7th Edition by Roger
LeRoy Miller
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Chapter 1: Introduction to the Law and Our Legal System
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Q1) Rupert is a victim of Sara's violation of a criminal law.Criminal law is con?cerned 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.
D)wrongs committed against the public as a whole.
Answer: D
Q2) Damages is a remedy at law.
A)True
B)False
Answer: True
Q3) Many different laws may apply to a single business transaction.
A)True
B)False Answer: True
Q4) Law consists of enforceable rules governing relationships among indi?viduals and between individuals and their society.
A)True
B)False Answer: True
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Chapter 2: Ethics in Business
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Q1) Business ethics is a special kind of ethics,which is separate from traditional ethics philosophy that focuses on what constitutes right and wrong behavior.
A)True
B)False
Answer: False
Q2) The legality of an action is always clear.
A)True
B)False
Answer: False
Q3) Lyle,vice-president of sales for Mi-T Electric,Inc.,adheres to Judeo-Christian re?lig?ious ethical standards.With respect to their application,these standards are A)absolute.
B)analytical.
C)discretionary.
D)utilitarian.
Answer: A
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Chapter 3: The Courts and Alternative Dispute Resolution
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Sample Questions
Q1) Arbitration is always legally binding.
A)True
B)False
Answer: False
Q2) Emil wants to initiate a suit against Fast Credit Company by filing a com?plaint.The complaint should include
A)an explanation of the proof to be offered at trial.
B)a motion for judgment on the pleadings.
C)a writ of certiorari.
D)a statement of the grounds for the court to exercise jurisdiction.
Answer: D
Q3) A deposition is a generic term that refers to any evidence verified by oath.
A)True
B)False
Answer: True
Q4) Concurrent jurisdiction exists when both federal and state courts have the power to hear a particular case.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Constitutional Law
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Sample Questions
Q1) The Arkansas state legislature enacts a statute that prohibits the advertising of video games "because the games might be harmful to minors." Despite this new statute,the president of Games Marketing,Inc.(GMI),orders GMI marketers to place ads in any media.When a GMI ad appears on HDTV,a local television station,GMI and HDTV are charged with violating the statute.What is the defendants' best defense against a conviction?
Q2) A law that restricts people of a certain national origin from doing something will be carefully examined to make sure it promotes a compelling government interest before it is allowed to stand.
A)True
B)False
Q3) Harbor Town enacts an ordinance to allow only a few street vendors to op?er?ate in certain areas,for the purpose of reducing traffic.A court would likely review this ordinance under the principles of A)the commerce clause.
B)the equal protection clause. C)the due process clause.
D)the First Amendment.
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6
Chapter 5: Torts and Cyber Torts
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Q1) The Class Action Fairness Act of 2005
A)shifted jurisdiction over certain class-action lawsuits from the state courts to the federal courts.
B)shifted jurisdiction over certain class-action lawsuits from the federal courts to the state courts.
C)made forum shopping punishable by large fines.
D)limited the amount of damages that could be awarded in a medical malpractice suit.
Q2) Nico is a passenger in a car driven by Owen,whose reckless driving causes an accident,injuring himself.Nico,uninjured,accompanies Owen to Parkside Hospital in an ambulance.The ambulance is hit by a car driven by Quin,injuring Nico.Nico files a suit against Owen,alleging negligence.The element most likely to be a question for the court to decide is
A)causation in fact.
B)proximate cause.
C)the duty of care.
D)the injury requirement.
Q3) Under the theory of negligence,the duty of care requires a careless act.
A)True
B)False
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Page 7
Chapter 6: Intellectual Property and Internet Law
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Q1) Gas Up,Inc.,designs,makes,and sells a fuel injection system that copies Hybrid Corporation's design without Hybrid's permis?sion.This is most likely
A)copyright infringement.
B)patent infringement.
C)trademark infringement.
D)a theft of trade secrets.
Q2) Caramello Chip & Cookie Corporation (4C) obtains,and gives its employees,a list of the customers of Sugar & Spice Sales,Inc.(3S).Under the law that applies to trade secrets,4C's conduct is actionable provided
A)consumers are confused.
B)4C's conduct is intentional.
C)4C uses the list.
D)4C does not have 3S's permission to use the list.
Q3) A generic term is not protected under trademark law unless it acquires a secondary meaning.
A)True
B)False
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8
Chapter 7: Criminal Law and Cyber Crime
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Q1) Under the exclusionary rule,illegally obtained evidence may not be included in any criminal prosecution.
A)True
B)False
Q2) Robert uses television transmissions to defraud hundreds of people.He is found guilty of wire fraud.He can be punished by
A)imprisonment for up to fifty years.
B)imprisonment for up to five years and fines of up to $1,000.
C)fines up to $5 million.
D)death.
Q3) Alan,the president of Bayside Investments,Inc.,and Colin,Bayside's accountant,are charged with a crime,after the police search Bayside's offices.Under the exclusionary rule
A)certain Bayside records are excluded from subpoena.
B)certain parties to a criminal action may be excluded from a trial.
C)illegally obtained evidence must be excluded from a trial.
D)persons who have biases that would prevent them from fairly decid?ing the case may be excluded from the jury.
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Chapter 8: Introduction to Contracts
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Sample Questions
Q1) Following negotiations with Coastal Distribution Company,Briggs Trucking,Inc.,enters into an informal contract.This means that the parties' contract
A)requires no special form.
B)is not enforceable.
C)is a quasi contract.
D)is voidable.
Q2) Some promises create moral,but not legal,obligations.
A)True
B)False
Q3) Cory believes that he and Dian agreed that he would act as her personal sports trainer for seven workout sessions.In a later dispute,the existence of any contract can be judged by
A)the parties' statements at the time of their alleged contract.
B)what the defendant claims was the parties' intent.
C)what the plaintiff claims was the parties' intent.
D)what the parties agree they intended.
Q4) Informal contracts require a special form or method of creation.
A)True
B)False
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Chapter 9: Offer and Acceptance
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Q1) Tomato Farms (TF) offers to sell Unified Grocers,Inc.,a boxcar load of tomatoes.The offer is sent via fax.An acceptance is re?quired urgently.It would be most reasonable for Unified to accept via
A)a fax,a letter,or a phone call to TF within two weeks.
B)a fax sent to TF as soon as the offer is received.
C)a letter mailed to TF within two days.
D)a phone call to TF within five business days.
Q2) Gayla tells Francisco that she will pay him $50 to haul the trimmed tree limbs and other lawn debris from her property.Francisco's acceptance is complete
A)as soon as he says he will do the job.
B)once he starts to work.
C)only after he hauls away the debris.
D)when he hears the offer.
Q3) Under the mailbox rule,no acceptance is valid until it is received.
A)True
B)False
Q4) When an offeree makes a counteroffer,he or she becomes the offeror.
A)True
B)False
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Chapter 10: Consideration
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Sample Questions
Q1) In general,courts consider the fairness of a contract when deciding if the contract is binding.
A)True
B)False
Q2) Sandra promises to pay Jay $50 per month if he will let her park her car in his parking space at work.Sandra's consideration is
A)the destruction of a legal relationship.
B)the creation of a legal relationship.
C)a forbearance.
D)an exchange of money.
Q3) Refer to Fact Pattern 10-2."Adequacy" of consideration refers to A)"how much" consideration is given.
B)legally sufficient value in the eyes of the law.
C)the intangible value to a contracting party of a thing exchanged.
D)the substantiality of the consideration exchanged.
Q4) Consideration is always money.
A)True
B)False
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Page 12
Chapter 11: Capacity
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Sample Questions
Q1) Olivia,a minor,signs a contract to buy a bike from Phil,the owner of SuperCycles Bike Store.Olivia's right to disaffirm the contract
A)does not change the fact that Phil is bound by the contract.
B)does not yet exist because Olivia is still a minor.
C)gives Phil,an adult,the right to disaffirm the contract.
D)is not valid because a bike is a "necessary."
Q2) Contracts formed between parties that lack contractual capacity are usually unenforceable.
A)True
B)False
Q3) Jody,a minor,is living at home with her parents,but signs a lease with Idyll Grove Apartments,a land?lord,to rent an apartment.Jody can
A)disaffirm the lease because her parents can be held liable for it.
B)disaffirm the lease without liability.
C)not disaffirm the lease because an apartment is a "necessary."
D)not disaffirm the lease because she intended to live on her own.
Q4) Contractual capacity refers to the legal ability to enter into a contract.
A)True
B)False
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Chapter 12: The Legality of Agreements
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Q1) SuperBumperCars,Inc.requires all customers to sign a release that contains a clause that releases SuperBumperCars from all liability in the event of an injury occurring during a bumper car ride,no matter who is at fault.This is an example of
A) a covenant not to compete.
B)an adhesion contract.
C)an exculpatory clause.
D)none of the choices.
Q2) An electrical company can avoid liability for negligent maintenance of its lines if it has an exculpatory clause in its contract.
A)True
B)False
Q3) A covenant not to compete is enforceable only if it is reasonable in dura?tion and geographic area.
A)True
B)False
Q4) An illegal contract is valid if the parties to it were unaware of the illegality.
A)True
B)False
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14
Chapter 13: Mistakes and Other Contract Defects
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Q1) Hank,a salesperson for Ideal Autos,promises Jennie a certain car will give her a "smooth ride." Hank offers a test drive,which Jennie de?clines.She buys the car but soon realizes its suspension is in poor condi?tion.Jennie A)can rescind the contract on the ground of fraud. B)can rescind the contract on the ground of misrepresentation. C)can rescind the contract on the ground of mistake. D)was not defrauded.
Q2) Multi Investments,Inc.,offers to buy Nano Toy Corporation.On May 1,Nano provides copies of its financial statements for the pre?vious year,showing an inventory of $10 million.On May 15,Nano discovers that the previous year's inventory is overstated by $5 million,but does not inform Multi.On June 1,Multi,relying on the fi?nancial statements,buys Nano.On June 10,the buyer discovers the inven?tory over?statement.Can Multi succeed in a suit against Nano for fraud?
Q3) A general contractor who knows that a subcontractor's bid is a mistake cannot enforce the bid.
A)True
B)False
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Chapter 14: Written Contracts
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Sample Questions
Q1) Under the Statute of Frauds,oral contracts are void.
A)True
B)False
Q2) There are exceptions to the Statute of Frauds.
A)True
B)False
Q3) A party's oral agreement to pay another's debt is never enforceable.
A)True
B)False
Q4) Refer to Fact Pattern 14-1.Lucas later disputes some of the provisions of the deal with Kelly.If the dispute results in litigation,a court will most likely exclude evidence that A)buttresses the written terms.
B)contradicts the written terms.
C)duplicates the written terms.
D)reinforces the written terms.
Q5) A contract involving property of any kind must be in writing to be enforceable. A)True B)False
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Chapter 15: Third Party Rights
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Sample Questions
Q1) Ron makes a contract with Stu that indirectly benefits Tim,although nei?ther Ron nor Stu intended that result.Tim is
A)a delegatee.
B)an assignee.
C)an incidental beneficiary.
D)an intended beneficiary.
Q2) If a contract benefits a third party only incidentally,the third party will not have the power to enforce the contract.
A)True
B)False
Q3) Evan's sale of rights he has under a contract with Federated Retail,Inc.,to buy the retailer's clothing overstock is
A)a delegation.
B)an assignment.
C)a third party beneficiary contract.
D)not a delegation,an assignment,or a third party beneficiary contract.
Q4) An insurance policy is an example of a right that can be assigned.
A)True
B)False
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Chapter 16: Contract Discharge and Remedies
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Q1) In a contract for a sale of goods,the usual measure of compensatory dam?ages is the difference between the contract price and the market price.
A)True
B)False
Q2) Fashion Retail Center enters into a contract with Great Promotions,Inc.,to provide Fashion with a plan to retool its merchandising strategy.If Great Promotions breaches the contract,Fashion has a duty to
A)reduce the damages that Fashion might otherwise suffer.
B)reduce the loss that Great Promotions might otherwise suffer.
C)punish Great Promotions and deter others from similar acts.
D)take no action.
Q3) Mona and Nero want to discharge their contract by executing and per?forming a new agreement.They can best accomplish this by A)accord and satisfaction.
B)novation.
C)reinvention.
D)specific performance.
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Chapter 17: E-Contracts
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Q1) National Shipping Corporation and Office Software Company (OSC) make a deal for OSCs products,communicating entirely online.Under the UETA,an electronic record is considered sent
A)only at a midway point between the sender and recipient.
B)only on coming into the recipient's control.
C)only on leaving the sender's control.
D)when it leaves the sender's control or comes into the recipient's control.
Q2) Bret enters into a contract with Collegiate University over the Internet to take an online course titled "Internet Law." This is an e-contract because
A)the contract was entered into in e-commerce.
B)the contract was formed between a student and a university.
C)the contract will be performed online.
D)the subject matter of the contract is "Internet Law."
Q3) Browse-wrap terms are arguably not enforceable.
A)True
B)False
Q4) E-signatures are NOT legally effective or enforceable.
A)True
B)False
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Chapter 18: Introduction to Sales and Lease Contracts
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Q1) The rules governing firm offers apply to all merchants.
A)True
B)False
Q2) Article 3 of the UCC governs contracts for sales of goods.
A)True
B)False
Q3) Wilbert has a lot of property that he wishes to sell.He sells his car to John for $5,000.He sells his bike to Shelby for $600.He sells his extensive DVD collection to Dixie May for $1,000.He sells a patent to a device for organizing digital music files to Gary for $400.Which of Wilbert's sales is NOT covered by Article 2 or 2A of the UCC?
A)The sale of the car
B)The sale of the bike
C)The sale of the DVD collection
D)The sale of the patent
Q4) Under the UCC,an agreement modifying a contract needs no considera?tion to be binding.
A)True
B)False
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Page 20
Chapter 19: Title and Risk of Loss
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Q1) In the following situations,two parties claim the same goods.Who is most likely to prevail in each circumstance? Explain.
(a) Olan steals Phil's television set and sells it to Quincy,an innocent purchaser,for value.Phil learns Quincy has the set and demands its return.
(b) Riley takes his television set for repair to Slick,a merchant who sells new and used television sets.By accident,one of Slick's employees sells the set to Tuna,an innocent purchaser-customer,who takes possession.Riley wants his set back from Tuna.
Q2) Elizabeth buys a car from Silas,who is 16 years old.Elizabeth then wants to sell the car to her neighbor,John.Elizabeth's title to the car is
A)valid.
B)voidable.
C)void.
D)good.
Q3) In contracts involving a sale of unborn animals to be born within twelve months,identification takes place when the animals are born.
A)True
B)False
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Chapter 20: Performance and Breach
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Q1) If,before the time for performance,a buyer communicates an intent not to perform,the seller can consider the buyer in breach and pursue a remedy.
A)True
B)False
Q2) The doctrine of commercial impracticability only extends to problems that are unforeseen.
A)True B)False
Q3) If goods identified to a contract are destroyed through no fault of either party,both parties are excused from performance.
A)True
B)False
Q4) Once the seller has tendered delivery,the buyer is obligated to accept the goods and pay for them.
A)True B)False
Q5) An installment contract is breached if a buyer accepts any nonconforming goods. A)True B)False
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Chapter 21: Warranties and Product Liability
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Q1) Jack's Pet Houses,Inc.sells shelters for animals under "limited" warranties.Under the Magnuson-Moss Warranty Act,this means that the warranties on shelters from Jack's Pet Houses
A)do not meet one of the requirements of a full warranty.
B)are only good for one year.
C)are illegal.
D)are oral.
Q2) A failure to exercise reasonable care is negligence.
A)True
B)False
Q3) Barry buys a bulldozer from Big Sandbox Equipment Company.Barry is unaware that there is a lien against the bulldozer when he buys it.Under the UCC,if the creditor reposes the bulldozer,Barry
A)can recover from Big Sandbox Equipment for breach of warranty.
B)can do nothing.
C)can file criminal charges against Big Sandbox Equipment.
D)can recover damages from the creditor.
Q4) Warranties of title do not arise in most sales contracts. A)True
B)False
Page 23
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Chapter 22: Consumer Protection
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Q1) To generate sales,Yakkity-Yak,Inc.,uses phone solicitation.Under federal law and Federal Trade Commission regulations,in soliciting business,Yakkity-Yak's telemarketers must
A)disclose that a call is a sales call.
B)identify the seller's name (only if asked).
C)refrain from calling consumers who have not requested a call.
D)speak clearly and conspicuously.
Q2) Blythe's application to Community Bank for a credit card is denied.Blythe can obtain information on her credit history in a credit agency's files under
A)no federal law.
B)the Equal Credit Opportunity Act.
C)the Fair Credit Reporting Act.
D)the Fair Debt Collection Practices Act.
Q3) The most significant consumer protection provision of the Uniform Commercial Code is the one that recognizes unconscionability.
A)True
B)False
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Chapter 23: The Essentials of Negotiability
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Q1) Alpha Company issues a trade acceptance with itself and Beta Company as parties. A trade acceptance is
A)a draft.
B)an order to accept delivery of money.
C)a promise to accept delivery of goods.
D)a promise to deliver goods.
Q2) With an interest-bearing instrument,it is necessary to know the exact interval during which the interest will accrue.
A)True
B)False
Q3) An instrument does not need to be portable to be negotiable.
A)True
B)False
Q4) Todd indorses a check,"Pay to Interstate Trucking if they deliver the lumber by May 1,2016." This is
A)a blank indorsement.
B)a qualified indorsement.
C)a restrictive indorsement.
D)a special indorsement.
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Chapter 24: Transferability and Liability
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Q1) A person cannot become an HDC if a defense against payment is appar?ent on the face of the instrument.
A)True
B)False
Q2) A person whose name is forged on an instrument is liable to pay only a holder in due course the value of the forged instrument.
A)True
B)False
Q3) Primary liability is unconditional.
A)True
B)False
Q4) A person who in good faith acquires a negotiable instrument from a thief can become an HDC.
A)True
B)False
Q5) A holder cannot take an instrument for value by performing the promise for which the instrument was issued.
A)True
B)False
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Chapter 25: Checks and Banking in the Digital Age
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Q1) If a customer does not have sufficient funds to pay a check available in his or her checking account and the bank dishonors the check,then the bank is liable to the customer.
A)True
B)False
Q2) E-Bank,an online financial institution,gives financial information about Paula and other customers to a federal agency without the cus?tomers' permission.E-Bank may be liable under
A)the Federal Trade Commission Act.
B)the Financial Services Modernization Act.
C)the Right to Financial Privacy Act.
D)the Uniform Electronic Transactions Act.
Q3) A customer must examine a bank statement and report any discovered forged signa?ture to recover from the bank for the forgery.
A)True
B)False
Q4) The incompetence of a customer revokes a bank's authority to pay an item.
A)True
B)False
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Chapter 26: Agency
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Q1) An agency coupled with interest is a relationship created for the benefit of the principal.
A)True
B)False
Q2) A power of attorney can be given only to an actual attorney.
A)True
B)False
Q3) Lenore is the sole proprietor of Mall Kiosks.With respect to contracting for her own business interests,Lenore is
A)an agent and has the authority.
B)an agent but does not have the authority.
C)not an agent and does not have the authority.
D)not an agent but does have the authority.
Q4) Bayou Development Corporation (BDC) hires Gulfview Brokerage Associates to sell the condominiums in a building at BDC's coastal resort.The agency will terminate
A)after the condos have been sold.
B)if the prices of the condos must be reduced to sell them.
C)once BDC obtains insurance to cover the property.
D)when BDC pays Gulfview its first commission.
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Chapter 27: Employment and Immigration Law
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Q1) Which of the following is NOT a common form of electronic surveillance of employees in the workplace?
A)Reviewing employees' emails
B)Requiring employees to wear electronic location monitoring bracelets
C)Video-recording job performance
D)Listening to employees' telephone conversations
Q2) Eduardo is an employee of Free-Flo Plumbing Corporation.With respect to the workplace,under federal health and safety statutes,Free-Flo
A)has a duty to maintain it free from recognized hazards.
B)can discharge an employee who files a complaint of a violation.
C)can discharge an employee who refuses to work in a high-risk area.
D)does not have to report work-related injuries until there have been eleven "events."
Q3) Tyrone is seventeen years old. Under the Fair Labor Standards Act,he
A)cannot work in a hazardous occupation.
B)cannot work during school hours.
C)must obtain a permit to work.
D)none of the choices.
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Chapter 28: Discrimination and Labor Law
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Q1) Clerical Workers Union represents the employees of Miracle Medical Research Company.The management of the firm refuses to bargain with the union over the hiring of unnecessary workers.This violates A)federal labor law.
B)state right-to-work laws.
C)federal employment discrimination law.
D)no federal or state law.
Q2) Elections for union officers are regulated by A)the Labor-Management Relations Act.
B)the Civil Rights Act.
C)the Labor-Management Reporting and Disclosure Act.
D)no federal law.
Q3) Lack of discriminatory intent is a complete defense to a charge of unlawful employment discrimination.
A)True
B)False
Q4) The Norris-LaGuardia Act effectively declared a national policy permitting employees to organize.
A)True
B)False
Page 30
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Chapter 29: Sole Proprietorships,partnerships, Limited
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Q1) Leigh wants to go into the business of construction contracting.Among the reasons that would probably convince Leigh to set up his business as a sole proprietorship would be
A)its greater organizational flexibility.
B)its limited liability.
C)its perpetual existence.
D)the ease of transferring the business to other family members.
Q2) For most purposes,the law recognizes a partnership as an independent entity. A)True
B)False
Q3) Sara is a partner in the general partnership Big Cookies.Sara does NOT owe Big Cookies a duty to devote A)time.
B)compassion.
C)skill.
D)energy.
Q4) In a sole proprietorship,the owner receives 90 percent of the profits and the government receives 10 percent. A)True
B)False
Page 31
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Chapter 30: Formation and Termination of a Corporation
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Q1) A corporate name must include the word Corporation,Incorporated,Company,or Limited.
A)True B)False
Q2) Like the bylaws of other corporations,the bylaws of Retail Sales,Inc.,
A)establish the operating name of the corporation.
B)establish the value and classes of corporate stock.
C)were adopted at its first organizational meeting.
D)were submitted for approval to the public official in charge.
Q3) O.K.Oil holds itself out to others as being a corporation but makes no attempt to incorporate.In this circumstance,O.K.is most likely
A)a corporation by estoppel.
B)a de facto corporation.
C)a de jure corporation.
D)ultra vires.
Q4) A corporation whose shares are all held by a single person is called a close corporation.
A)True B)False
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Chapter 31: Management and Ownership of a Corporation
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Q1) Dave is an officer for Sweet Somethings Candies,Inc.In 2012,chocolate hearts were very popular.Acting within his managerial authority and the powers of the corporation,Dave signs a contract for an increase in chocolate heart production for 2013.In 2013 chocolate hearts do not sell well and Sweet Somethings Candies loses money.Dave is most likely
A)liable for breach of duty of care.
B)liable for breach of duty of loyalty.
C)none of the choices.
D)liable for violation of the business judgment rule.
Q2) Natalie is a shareholder of Off-Road Vehicle Company.As a share?holder,Natalie does not have
A)a right to compensation.
B)dividend rights.
C)inspection rights.
D)preemptive rights.
Q3) Refer to Fact Pattern 31-1.Ray's suit is a shareholder's
A)business-judgment rule suit.
B)derivative suit.
C)duty-of-care suit.
D)duty-of-loyalty suit.
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Chapter 32: Secured Transactions
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Q1) The payment of Mo's debt to Neil is guaranteed by Mo's personal prop?erty.This is governed by
A)the Uniform Commercial Code.
B)the Federal Trade Commission.
C)the U.S.Constitution's commerce clause.
D)the Bankruptcy Reform Act of 2005.
Q2) A financing statement cannot be the same as the security agreement.
A)True
B)False
Q3) Summit Credit Corporation lends funds to Toby,a consumer,to apply to the cost of a sport utility vehicle (SUV),which is the collateral for the loan.An enforceable security interest also requires
A)a written agreement and Summit's possession of the SUV.
B)a written agreement or Summit's possession of the SUV.
C)the vehicle seller's acknowledgement of the loan in writing.
D)Toby's possession of the SUV.
Q4) Proceeds consist of whatever is received when collateral is sold.
A)True
B)False
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Chapter 33: Creditors Rights and Remedies
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Q1) Rob is a surety for Sue's loan from Total Finance Company.Rob's right to "step into the shoes" of Total Finance,after paying Sue's debt,and exer?cise any of the Total Finance's rights against Sue is the right of
A)contribution.
B)redemption.
C)reimbursement.
D)subrogation.
Q2) Consumer Credit,Inc.(CCI),lends $1,000 to Joe. Kay acts as Joe's surety. If Kay pays the loan,she gets
A)any right that CCI had against Joe,but not a right to be repaid by Joe.
B)a right to be repaid by Joe,but not any right that CCI had against Joe.
C)any right that CCI had against Joe and a right to be repaid by Joe.
D)none of the choices.
Q3) A guaranty contract must be in writing to be enforceable,unless the main purpose exception applies.
A)True
B)False
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Chapter 34: Bankruptcy
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Q1) Some student loans are dischargeable in a Chapter 7 bankruptcy.
A)True
B)False
Q2) A student loan is discharged under Chapter 13 unless the creditor can show "undue hardship."
A)True
B)False
Q3) Gert's Horse Farm owes money to High Sierra Saddle & Tack,which has a security interest in Gert's gear.Gert's files for bankruptcy on May 1.To collect on the debt,High tries to take possession of the gear on May 5.High can obtain
A)any of Gert's assets.
B)any of Gert's exempt assets.
C)Gert's gear only.
D)none of Gert's assets due to the automatic stay.
Q4) In order of priority,the claims of all of the creditors in a class must be satisfied before any re?maining amounts can be distributed to the next class.
A)True
B)False
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Chapter 35: Insurance
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Q1) Quality Care Insurance Company provides life insurance policies.Quality Care applies a concept of insuring a large number of people with the knowledge that only a small proportion of them will die in a given year.The large number of premiums provides the funds to pay for the small number of deaths.This concept is known as
A)risk avoidance.
B)risk pooling.
C)risk rating.
D)risk transferring.
Q2) The words used in an insurance contract are given special meaning.
A)True
B)False
Q3) Liability insurance provides indemnity against losses in trade or losses caused by the dishonesty of employees.
A)True
B)False
Q4) Property insurance cannot be canceled for nonpayment of premiums.
A)True
B)False
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Chapter 36: Morgages and Foreclosures
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Q1) A power of sale foreclosure is supervised by a judge.
A)True
B)False
Q2) Tabitha defaults on her mortgage loan and her lender,Top Bank,proceeds to foreclosure.A court supervises the foreclosure process.This is A)forbearance.
B)judicial foreclosure.
C)prepackaged bankruptcy.
D)power of sale foreclosure.
Q3) Humberto and Tiara,who are married,borrow $110,000 from Sterling Credit Union to buy a home.The loan is a fixed-rate mortgage at 5.25 percent with a thirty-year term,subject to an acceleration clause,and secured by the home,which is their principal residence.When Humberto and Tiara have paid off $10,000 of the mortgage-still owing $100,000-they lose their jobs and stop making payments.Sterling Credit makes numerous attempts to contact the couple,but they do not respond.Meanwhile,the market value of their home has declined to $85,000.After six months,Sterling Credit decides to take steps to recover the unpaid amount of the loan.What are the lender's options? Which option seems most likely? Why? What are the steps are involved?
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Chapter 37: Personal Property and Bailments
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Q1) Mallory's sister gives Mallory a leather working kit for Christmas.Mallory uses the kit to make a saddle.Mallory's acquisition of the saddle is by A)a bailment.
B)accession.
C)confusion.
D)production.
Q2) It is presumed that a co-tenancy is a tenancy in common unless it is clear that the parties intended to establish a joint tenancy.
A)True
B)False
Q3) Edna and Flavia buy a boat that they dock in a marina near Gulfport,Mississippi.On the death of either owner,that owner's interest in the boat passes to her heirs.This is A)a joint tenancy.
B)community property.
C)a tenancy in common.
D)ownership in fee simple.
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Chapter 38: Real Property
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Q1) The rights that accompany a fee simple absolute include the right to use the land for whatever purpose the owner sees fit.
A)True
B)False
Q2) Ownership of property exists independently of the legal system.
A)True
B)False
Q3) Phil owns a farm in South Dakota.He does not like it when planes from the local airport fly over his property.Phil is unlikely to win a case claiming that airplanes flying over his land violate his property rights unless
A)the planes fly over more than twice a day.
B)he can prove there are more efficient routes for the planes to take.
C)the flights are low and frequent and cause direct interference with Phil's enjoyment of the land.
D)the planes belong to private individuals.
Q4) Crops that are sold with the piece of land they are growing on are considered real property.
A)True
B)False
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Chapter 39: Landlord and Tenant
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Q1) A property owner can legally discriminate against prospective tenants on the basis of gender.
A)True
B)False
Q2) Elin rents an apartment from Fresh Properties,Inc. A clause in the lease provides that Fresh is not responsible for interruptions in the apartment building's heating.A court would likely hold this clause to be
A)acceptable and enforceable.
B)acceptable but not enforceable.
C)ambiguous.
D)unconscionable.
Q3) A fixed-term tenancy is created by an express contract.
A)True
B)False
Q4) Even after a tenant sublets leased premises,the tenant may be obligated to pay rent.
A)True
B)False
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Chapter 40: Wills and Trusts
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Q1) Don executes a will leaving half of his farm to his spouse Eva and the rest to his sons,Frank and Greg,in equal shares.The will disinherits a third son,Hal.Don and Eva divorce,but Don dies before changing his will.In these circumstances
A)Eva receives half of the farm,and Frank and Greg share the rest.
B)Eva receives half of the farm,and Frank,Greg,and Hal share the rest.
C)Frank and Greg receive the entire estate in equal shares.
D)the state inherits the entire estate.
Q2) A trustee is a person for whose benefit a trust is held.
A)True
B)False
Q3) In an abatement,the legatees receive increased benefits.
A)True
B)False
Q4) A will can be partially revoked.
A)True
B)False
Q5) A decedent is a person who has died.
A)True
B)False
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Chapter 41: Administrative Law
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Q1) The Federal Emergency Management Agency (FEMA) discovers that Goodnuff Trailers,Inc.,is violating a FEMA regulation.If this situation is resolved like most such disputes,the outcome will be
A)a negotiated settlement.
B)a trial and a fine.
C)a trial and an appeal to a higher authority.
D)a trial and the dissolution of the business.
Q2) To challenge an agency action,a party must have standing to sue the agency.
A)True
B)False
Q3) National Ladder 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)Congress,through enabling legislation.
B)the Federal Trade Commission,through the rulemaking process.
C)the president,through an executive order.
D)the U.S.Department of Labor,through a final order.
Q4) State regulations take precedence over conflicting federal regulations. A)True B)False
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Chapter 42: Antitrust Law
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Q1) In determining the legality of a merger,a crucial consideration is market concentration.
A)True
B)False
Q2) Territorial and consumer restrictions are per se violations.
A)True
B)False
Q3) The basic purpose of antitrust law is to regulate economic competition.
A)True
B)False
Q4) A suit is filed against Maxi Corporation,alleging that the firm commit?ted the offense of monopolization.To determine whether Maxi has mo?nopoly power requires looking at A)only Maxi's size.
B)only the relevant geographical market.
C)only the relevant product market.
D)the relevant geographical market and the relevant product market.
Q5) Monopoly power is a minor amount of market power.
A)True
B)False
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Chapter 43: International Law
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Q1) All international sales contracts should have a choice-of-language clause to designate the official language by which the contract will be interpreted.
A)True
B)False
Q2) Quality Energy Company,a U.S.firm,and Royal Petro,a Dutch firm,en?ter into a contract that includes an arbitration clause.This clause must provide that the arbitrator will be
A)any specified third party.
B)the American Arbitration Association.
C)the Dutch Arbitration Organization.
D)the International Chamber of Commerce.
Q3) Few nations have restrictions on imports.
A)True
B)False
Q4) Under the principle of comity,all foreign governments are subject to all U.S.laws.
A)True
B)False
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