Contracts Law
Textbook Exam Questions
Course Introduction
Contracts Law explores the foundational principles governing legally binding agreements, emphasizing the formation, interpretation, performance, and enforcement of contracts. This course covers essential topics such as offer and acceptance, consideration, capacity, legality, and remedies for breach of contract. Students will analyze case law and statutory frameworks to understand how contractual disputes are resolved and how contracts operate in various commercial and personal contexts. The course aims to develop students critical thinking and problem-solving skills as they apply legal doctrines to real-world scenarios involving contractual relationships.
Recommended Textbook
Business Law Text and Cases 14th Edition by Kenneth W. Clarkson
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Page 2
Chapter 1: Law and Legal Reasoning
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Q1) The Regional Counties Commission approves a new property tax measure, and the professors and students at State Law School publish the results of their most recent legal research. Sources of law include
A) measures approved by governing bodies.
B) legal scholars' research.
C) measures approved by governing bodies and legal scholars' research.
D) neither measures approved by governing bodies nor legal scholars' research.
Answer: A
Q2) Jack enters into a contract with Jill's Farm to provide water for Jill's irrigation needs. Jack fails to deliver. Jill initiates a suit against Jack, asking the court to order Jack to perform. Jill is
A) the plaintiff.
B) the defendant.
C) the binding authority.
D) the persuasive authority.
Answer: A
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3
Chapter 2: Courts and Alternative Dispute Resolution
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Q1) Tyler, a citizen of Utah, files a suit in a Utah state court against Virtual Sales Corporation, a Washington state company that does business in Utah. The court has original jurisdiction, which means that
A) the case is being heard for the first time.
B) the court has a unique method of deciding whether to hear a case.
C) the court has unusual procedural rules.
D) the subject matter of the suit is interesting and new.
Answer: A
Q2) Generally, a foreign court's decision can be enforced in the United States.
A)True
B)False
Answer: True
Q3) Sforza files a suit against Thieu. If this suit is like most cases, it will be A) dismissed during a trial.
B) settled before a trial.
C) resolved only after a trial.
D) appealed to a higher court.
Answer: B
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4
Chapter 3: Court Procedures
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Q1) In most states, if neither party requests a jury, the court presumes the parties waive this right.
A)True
B)False
Answer: True
Q2) Ballpark Sportsfield, Inc., files a suit against Concessions & Tailgate Services. The document that informs Concessions & Tailgate that it must file an answer within a specified time period is
A) the answer.
B) the complaint.
C) the respondent.
D) the summons.
Answer: D
Q3) A trial begins with the plaintiff's attorney's direct examination of the first witness.
A)True
B)False
Answer: False
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Chapter 4: Business and the Constitution
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Q1) The Eighth Amendment prohibits excessive bail and fines.
A)True
B)False
Q2) The checks and balances in the U.S. Constitution prevent any one branch of government from exercising too much power.
A)True
B)False
Q3) State laws protect individuals' privacy rights.
A)True
B)False
Q4) Ryan, a follower of a certain religion, sells an article to Sunday! magazine in which he insists that Congress base all federal law on his religious principles. The First Amendment guarantees Ryan's
A) freedom of religion.
B) right to engage in interstate commerce.
C) right to due process.
D) right to privacy.
Q5) A law that has any impact on religion is unconstitutional.
A)True
B)False
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Chapter 5: Business Ethics
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Q1) The legality of an action is always clear.
A)True
B)False
Q2) Management's behavior sets the ethical tone of a firm.
A)True
B)False
Q3) Brick & Mortar Construction & Masonry Corporation's ethics committee is asked a question: Should the firm bid low to obtain a contract that it knows it can fulfill only at a higher price? A practical method of investigating and answering this question involves all of the following steps except
A) absolution.
B) decision.
C) inquiry.
D) justification.
Q4) If an action is legal, it is ethical.
A)True
B)False
Q5) Bribery of foreign government officials is both an ethical and a legal issue. A)True
B)False
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Chapter 6: Tort Law
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Q1) 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?
Q2) Unintentionally causing a party to break a contract may constitute wrongful interference with a contractual relationship.
A)True
B)False
Q3) In a tweet to Clyde, a reporter for the site Blast, Ethan accuses Financial Services Corporation of cheating on its taxes. If false, making this statement is A) defamation.
B) not defamation because it is an opinion.
C) not defamation because it was not communicated orally.
D) not defamation because it was communicated to only one person.
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Chapter 7: Strict Liability and Product Liability
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Q1) Sea & Sail Corporation makes boats and boating supplies. Theresa files a product liability suit against Sea & Sail, alleging a design defect. In deciding whether to hold the boat maker liable, the court may consider an available alternative design based on the design's
A) popularity among industrial designers.
B) attractiveness to consumers.
C) commonality of use.
D) effect on the product.
Q2) Safe-T Company makes electrical cords and other connectors for electronic devices. Tina files a product liability suit against Safe-T, alleging a warning defect. In deciding whether to hold Safe-T liable, the court may consider
A) consumers' general failure to read the product's warnings.
B) the plaintiff's specific failure to read the product warnings.
C) the obvious risks of other products.
D) the obvious risks of this product.
Q3) A statute of repose places outer time limits on product liability actions.
A)True
B)False
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Chapter 8: Intellectual Property Rights
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Q1) A personal name is not protected under trademark law if it acquires a secondary meaning.
A)True
B)False
Q2) To succeed in a lawsuit alleging trademark dilution, the plaintiff must prove that consumers are likely to be confused by the unauthorized use of a mark.
A)True
B)False
Q3) The process behind the production of "Account Inc.," a suite of business accounting and inventory software, is protected by
A) copyright law.
B) patent law.
C) none of the choices.
D) trade secrets law.
Q4) States do not have trademark statutes.
A)True
B)False
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Chapter 9: Internet Law, Social Media, and Privacy
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Q1) Federal law permits the intentional accessing of stored electronic communication even if the accessing is unauthorized.
A)True
B)False
Q2) 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.
Q3) Federal law prevents a provider of communication services-such as a cell phone company-from divulging private communications to certain entities and individuals.
A)True
B)False
Q4) Online conduct gives rise to only a narrow variety of legal actions.
A)True
B)False
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11
Chapter 10: Criminal Law and Cyber Crime
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Q1) A kickback for a special favor or service is a form of bribery in some situations.
A)True
B)False
Q2) A cyberterrorist might target a government agency, but not a business.
A)True
B)False
Q3) A person's intent to return embezzled property-or its actual return-is not a defense to the crime of embezzlement.
A)True
B)False
Q4) Rose commits an act via e-mail against Savers Bank, a business in Texas, where the act is a cyber crime. Rose resides in Utah where the act is not a crime. Prosecution of Rose in Texas involves questions of A) jurisdiction.
B) "maximum contacts."
C) the immunity of Internet service providers.
D) encryption.
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Page 12
Chapter 11: Nature and Terminology
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Q1) Vicky asks Walt, a cobbler, to repair a pair of boots. There is no discussion of a price, and Vicky and Walt do not sign any documents. After the repair, Walt hands Vicky a bill. With respect to Vicky's obligation to pay the bill, this is
A) an express contract.
B) an implied contract.
C) a quasi contract.
D) no contract.
Q2) A promise is a declaration that something will or will not happen in the future.
A)True
B)False
Q3) Contract law assures the parties to private agreements that the promises they make will be enforceable.
A)True
B)False
Q4) The element of intent is of prime importance in determining whether a contract has been formed.
A)True
B)False
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Chapter 12: Agreement in Traditional and E-Contracts
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Q1) If no time for acceptance is specified in an offer, the offer terminates after a reasonable length of time.
A)True
B)False
Q2) Fabien offers to sell his Graphic Signs, LLC, business to Hanna for $100,000. Hanna replies, "The price is too high. I will buy it for $75,000." Hanna has
A) accepted the offer.
B) made a counteroffer without rejecting the offer.
C) rejected the offer and made a counteroffer.
D) rejected the offer without making a counteroffer.
Q3) An offer may invite an acceptance to be worded in specific terms but that cannot make the contract definite.
A)True B)False
Q4) A preliminary agreement cannot constitute a binding contract.
A)True B)False
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Chapter 13: Consideration
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Questions
Q1) Frisco offers to buy a Gibson guitar owned by Hayden for twice what Hayden paid for it. She accepts and hands the guitar to Frisco. Her delivery of the guitar is
A) not consideration because her voluntary consent may be lacking.
B) not consideration because the exchange is not a bargain.
C) consideration.
D) not consideration because the value is not legally sufficient.
Q2) Rose questions whether there is consideration for her contract to perform with Saxophone Symphony. To constitute consideration, there must be A) a payment.
B) a performance.
C) a bargained-for exchange.
D) serious thought underlying each party's intent to contract.
Q3) Refer to Fact Pattern 13-2. A court is most likely to evaluate the adequacy of consideration if
A) a thing exchanged has no intangible value to one of the parties.
B) something exchanged is not of direct economic or financial value.
C) the items exchanged were of unequal value.
D) there is a gross disparity in the value of the consideration exchanged.
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Chapter 14: Capacity and Legality
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Q1) At age seventeen, Eve enters into a contract with Fit Health Club. Two years later, when Eve attempts to disaffirm the contract, Fit files a suit against her. The court will most likely consider the contract ratified if it is A) executed.
B) executory.
C) disaffirmed. D) rescinded.
Q2) A contract involving an unlicensed practitioner is generally illegal and unenforceable.
A)True
B)False
Q3) Bay City Mall requires its tenants to sign a lease that includes a clause releasing Metro from liability in the event of monetary or physical injury no matter who is at fault. Coco's Chocolate signs a lease with Bay City that contains the clause. This is A) a covenant not to compete.
B) an adhesion contract.
C) an exculpatory clause.
D) an illusory promise.
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16
Chapter 15: Mistakes, Fraud, and Voluntary Consent
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Q1) Refer to Fact Pattern 15-4. On learning the truth, Sam confronts Riley, who says he was not trying to fool Sam-he was only trying to make a sale. This is
A) a mistake of value.
B) a valid defense to a charge of fraud.
C) misrepresentation.
D) unconscionable.
Q2) If a contractor's bid contains a mistake in addition when totaling the estimated costs, the contract may not be enforceable.
A)True
B)False
Q3) A mistake of fact cannot be unilateral.
A)True
B)False
Q4) Intent to deceive is an element of fraud.
A)True
B)False
Q5) Voluntary consent is never lacking because of a mistake.
A)True
B)False
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Chapter 16: The Writing Requirement in Our Digital World
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Q1) A unilateral promise to make a monetary payment in consideration of marriage need not be in writing to be enforceable.
A)True
B)False
Q2) An integrated contract is a contract with more than one subject or part.
A)True
B)False
Q3) 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.
Q4) If a party against whom enforcement of an oral contract is sought admits under oath that a contract for sale was made, the contract will be enforceable.
A)True
B)False
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18
Chapter 17: Third Party Rights
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Q1) Paolho and Roth agree that Paolho will fix Roth's boat dock in exchange for $5,000. Paolho spends half of the amount due under the contract to acquire the materials for the job from Sav-U Economy Lumber. Sav-U is
A) a delegatee.
B) an intended beneficiary.
C) an incidental beneficiary.
D) an assignor.
Q2) Giving notice is legally necessary to establish the validity of an assignment.
A)True
B)False
Q3) A special form is required to create a delegation of duties.
A)True
B)False
Q4) Refer to Fact Pattern 17-1. Delta will realize a profit from the sale of products to Four-Square to remodel Carol's store. Delta is A) a delegatee.
B) an assignee.
C) an incidental beneficiary.
D) an intended beneficiary.
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Chapter 18: Performance and Discharge
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Q1) If no time for performance is stated in a contract, a reasonable time is implied.
A)True
B)False
Q2) Only personal contracts can be discharged by agreement of the parties. A)True
B)False
Q3) Even-Bilt Construction contracts to build a warehouse for Discount E-Sales Company. Even-Bilt completely performs. Discount E-Sales is entitled to A) damages.
B) nothing more.
C) to be excused from performance.
D) suspend performance.
Q4) Quest Resources, Inc., contracts with Ring Communications Corporation (RCC) for RCC to design and build an all-weather communications system for Quest's field operations. RCC builds the system, but it functions effectively only in good weather. Is this a breach of the contract? If so, what remedies does Quest have?
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Chapter 19: Breach of Contract and Remedies
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Q1) The most common remedies available to a nonbreaching party include damages, rescission and restitution, and specific performance.
A)True
B)False
Q2) Restitution is limited to rescission cases.
A)True
B)False
Q3) The measure of compensatory damages often varies by type of contract.
A)True
B)False
Q4) Forest Lumber Company orally contracts with Gail for the purchase of five acres of Gail's timberland. Gail makes the transfer but Forest Lumber does not pay the price. Gail could most likely recover on a theory of A) reformation.
B) restitution.
C) liquidated damages.
D) quasi contract.
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21
Chapter 20: The Formation of Sales and Lease Contracts
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Q1) Goods associated with real estate often fall within the scope of Article 2.
A)True
B)False
Q2) Under the UCC, parties to sales and lease contracts are free to establish whatever terms they wish.
A)True
B)False
Q3) UCC Article 2 applies to sales transactions between all buyers and sellers.
A)True
B)False
Q4) Under the UCC, prompt shipment of goods is considered an acceptance of an offer to buy the goods.
A)True
B)False
Q5) A firm offer by a merchant may be oral.
A)True
B)False
Q6) The UCC requires a contract modification to be supported by new consideration. A)True
B)False
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Chapter 21: Title, Risk, and Insurable Interest
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Q1) Generally, all contracts are assumed to be shipment contracts if nothing to the contrary is stated in the contract.
A)True
B)False
Q2) When the risk of loss for goods passes from a seller to a buyer is generally determined by the contract between the parties.
A)True
B)False
Q3) In a destination contract, the seller is required or authorized to ship goods by carrier.
A)True
B)False
Q4) If a seller is not a merchant, and the goods are not to be moved, the risk of loss passes to a buyer on tender of delivery.
A)True
B)False
Q5) Under the UCC, the risk of loss necessarily passes with title.
A)True
B)False
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Chapter 22: Performance and Breach of Sales and Lease Contracts
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Q1) Refined Mills orders "Grade A" oats from Sweet Valley Farm to grind and sell to Town Co-op Grocery. Sweet Valley ships "Grade B" grain, which Refined Mills accepts. To recover damages for the nonconformity, Refined Mills must give notice of the breach within a reasonable time to A) Sweet Valley.
B) Town Co-op.
C) no one.
D) the appropriate state government agency.
Q2) The doctrine of commercial impracticability only extends to problems that are unforeseen.
A)True
B)False
Q3) A buyer who rightfully rejects nonconforming goods may obtain cover or cancel the contact, but may not seek damages.
A)True
B)False
Q4) Tender must occur at a reasonable hour and in a reasonable manner.
A)True
B)False
24
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Chapter 23: Warranties
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Q1) Express warranties can be found in a seller's samples.
A)True
B)False
Q2) Federal law imposes no requirements on warranties.
A)True
B)False
Q3) Trucks & Trailers, Inc. (T&T), and United Express Service enter into a contract for a lease of vehicles. T&T is a merchant who deals in goods of the kind leased. Under the UCC, an implied warranty of merchantability arises
A) automatically in most contracts for a lease of goods.
B) only if the lessee asks for it.
C) only if the lessor expresses such a warranty.
D) only in conjunction with sales, not lease, contracts.
Q4) A warranty of title cannot be disclaimed.
A)True
B)False
Q5) A full warranty requires free repair or replacement of any defective part.
A)True
B)False
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Chapter 24: International and Space Law
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Q1) According to the Foreign Sovereign Immunities Act, a foreign state that waived its immunity by implication is subject to the jurisdiction of the U.S. courts.
A)True
B)False
Q2) A foreign citizen can bring a civil suit in a U.S. court for a violation of an international tort law.
A)True
B)False
Q3) The Outer Space Treaty declares that internationally recognized political boundaries extend from Earth into the farthest reaches of space.
A)True
B)False
Q4) Dumping is the exporting of environmentally polluting goods to a foreign market. A)True
B)False
Q5) International law is a body of law that governs relations among nations. A)True
B)False
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Chapter 25: Negotiable Instruments
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Q1) Refer to Fact Pattern 25-3. The instrument that Bea signed is most likely
A) a certificate of deposit.
B) a draft.
C) an order to pay.
D) a promissory note.
Q2) Camille signs an instrument in favor of Donald that states it is "subject to a certain agreement between Camille and Enzo." This instrument is
A) negotiable.
B) not negotiable, because it is made subject to a separate agreement.
C) not negotiable, because it refers to a separate agreement.
D) nonnegotiable, because Camille and Enzo are not the same persons.
Q3) An instrument that promises to pay "in goods" can be negotiable.
A)True
B)False
Q4) Refer to Fact Pattern 25-1. With respect to Erin's check, Foodland is A) the drawee.
B) the drawer.
C) the maker.
D) the payee.
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Chapter 26: Transferability and Holder in Due Course
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Q1) On the back of a check payable to Nero, he writes "Pay to Odell, without recourse" and signs it. This
A) does not effect the check's negotiability or any party's liability.
B) relieves Nero of liability on the check.
C) relieves Odell of liability on the check.
D) renders the check nonnegotiable.
Q2) Calvert buys a promissory note from Darin. The note is due on December 5. December 5 is a Sunday. The note is
A) payable anytime the week of December 6.
B) payable December 6.
C) payable on December 5 only.
D) considered defective.
Q3) Often, whether a holder will be able to obtain payment on an instrument will depend on whether he or she is a holder in due course.
A)True
B)False
Q4) A holder takes an instrument for value if he or she inherits an instrument.
A)True
B)False
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Chapter 27: Liability, Defenses, and Discharge
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Q1) A drawer's liability does not arise without notice of dishonor.
A)True
B)False
Q2) The key to liability on a negotiable instrument is a signature.
A)True
B)False
Q3) A person who signs an instrument without authorization can be held personally liable for payment by a holder in due course.
A)True
B)False
Q4) An unauthorized signature binds the person whose name is signed.
A)True
B)False
Q5) The dishonor of an instrument relieves secondary parties of liability.
A)True
B)False
Q6) The general law of agency does not apply to negotiable instruments.
A)True
B)False
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Chapter 28: Banking in the Digital Age
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Q1) Dalton presents an uncertified check for payment more than six months after its date. The check was drawn by Emma on her account in First Bank. If the bank follows the usual banking practice in such a case, it will
A) cash the check.
B) refuse to cash the check.
C) ask Dalton what he would prefer.
D) consult Emma.
Q2) State Bank agrees to accept a check by setting aside sufficient funds to cover the amount. This check is considered
A) deposited.
B) cashed.
C) certified.
D) a provisional credit.
Q3) A forged signature is effective as the signature of a drawer to the extent that is resembles the drawer's actual signature.
A)True
B)False
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Chapter 29: Creditors Rights and Remedies
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Q1) Countryside Bank provides Dhani with a standard mortgage with an unchanging rate of interest to buy a home. Payments on the loan remain the same for the duration of the mortgage. This is
A) a fixed-rate mortgage.
B) an adjustable-rate mortgage.
C) a workout agreement.
D) a violation of the law.
Q2) The roof in Rosalyn's house springs a leak. She contracts with Shelter Roofing & Restoration Company to repair the roof and fix the damage to the house. Rosalyn pays 10 percent of the price in advance. Shelter Roofing does the work, but Rosalyn refuses to pay the rest of the price. What can Shelter Roofing do, and how is it done?
Q3) Refer to Fact Pattern 29-1. If Tina signs the application but fails to condition her signature on Petro's agreement to pursue its legal remedies against Slick before looking to her, then Tina is
A) a surety.
B) a lienor.
C) a guarantor.
D) a creditor.
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Chapter 30: Secured Transactions
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Q1) A security interest that provides for a security interest in collateral subject to future advances is a floating lien.
A)True
B)False
Q2) A financing statement cannot be the same as the security agreement.
A)True
B)False
Q3) Refer to Fact Pattern 30-1. Suppose that two weeks after GLC takes possession of the equipment, Business Finance and Commercial Bank file financing statements, with Interstate filing first. In that circumstance, the party with priority to the equipment is A) GLC.
B) Business Finance and Commercial Bank proportionately.
C) Business Finance only.
D) Commercial Bank only.
Q4) A security interest is enforceable only if the collateral is in the secured party's possession.
A)True
B)False
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Chapter 31: Bankruptcy Law
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Q1) Once a discharge is granted, it may not be revoked, even if, for example, a debtor concealed property to defraud a creditor.
A)True
B)False
Q2) If the assets in a debtor's estate in bankruptcy are insufficient to pay fully all creditors, the debtor is liable for the difference.
A)True
B)False
Q3) Larry has fifteen creditors. To force Larry into bankruptcy proceedings, at least three creditors must join the petition and their unsecured claims must add up to at least
A) $500.
B) $15,325.
C) $100,000.
D) $500,000.
Q4) In the distribution of the debtor's estate, unsecured creditors take priority over secured creditors.
A)True
B)False
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Page 33
Chapter 32: Agency Formation and Duties
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Q1) Ingmar asks Jessie to contract with Jessie's high school classmates to babysit Ingmar's new baby. Jessie orally agrees to do so. This is
A) an agency by agreement.
B) an agency by estoppel.
C) an agency by ratification.
D) not an agency relationship.
Q2) Ray is a delivery driver for Sicilian Pasta Company. Ray does exactly what the company tells him. Ray is
A) an employee.
B) a work for hire.
C) an independent contractor.
D) a principal.
Q3) Jill agrees to act on Kit's behalf, subject to Kit's control, and Kit trusts Jill to so act. This describes a relationship between
A) an employee and an agent.
B) a work for hire and a worker.
C) an employer and an independent contractor.
D) a principal and an agent.
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34
Chapter 33: Agency Liability and Termination
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Q1) Without authorization, Lars contracts on behalf of Mina to have Nemo paint the interior and exterior of Mina's house. If Mina decides to ratify the contract, she must affirm
A) all of the contract.
B) any part of the contract, with Lars liable to Nemo for the difference.
C) any part of the contract before performance begins.
D) any part of the contract at any time.
Q2) Chuck hires Danielle, a real estate broker, to act as his agent to sell his land for $150,000. Oil is discovered beneath the land, causing its market value to increase considerably. The agency agreement is likely
A) continued with a proportionate increase in Danielle's sales commission.
B) continued until Danielle tells prospective buyers of the discovery.
C) terminated by act of the parties.
D) terminated by operation of law.
Q3) A partially disclosed principal is liable to a third party for a contract made by the agent acting within the scope of his or her authority.
A)True
B)False
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35
Chapter 34: Employment, Immigration, and Labor Law
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Q1) National Auto Parts Company runs an after-market auto parts-replacement company. Most of National Auto Parts's business is done during the spring and summer. The company hires a large temporary workforce during its busiest times. Occasionally, a position opens for an individual with highly specialized skills, particularly to operate and maintain the company's inventory control systems. Can National Auto Parts hire noncitizens for its temporary, seasonal work? Can the company hire a noncitizen with special skills for certain jobs? If so, what procedures must the employer follow in both situations to do this hiring? If not, how can National Auto Parts be assured that it is hiring only citizens?
Q2) Minnie, an employee for Nursing Home, Inc., goes out on strike with other employees. Nursing Home hires replacements for the striking workers. The replacement workers can be considered permanent if the strike is A) an economic strike. B) a sit-down strike. C) a wildcat strike. D) an unfair labor practice strike.
Q3) Any employee who works more than six hours per day must be paid overtime. A)True B)False
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Page 36
Chapter 35: Employment Discrimination
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Q1) There is no way for an employer to avoid liability for online harassment.
A)True
B)False
Q2) Sara believes that she was rejected for a position at Trek Travel Agency on the basis of her race. Sara files a suit against Trek under Title VII of the Civil Rights Act. To establish a prima facie case of employment discrimination, Sara must show all of the following except that
A) she is a member of a protected class.
B) she applied and was qualified for the job in question.
C) she was rejected for a position by Trek.
D) other persons of her race hold similar positions with similar employers.
Q3) Emily, an employee of Farm Supplies, Inc., files a suit against her employer, alleging sexual harassment by her supervisor Gowan. The employer may be liable if it had effective harassment policies and complaint procedures that were followed by A) none of the employees.
B) Emily.
C) all of the employees except Emylee.
D) Gowan.
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Chapter 36: Small Businesses and Franchises
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Q1) A sole proprietor does not own the entire business.
A)True
B)False
Q2) Mucho Tacos, Inc., sells franchises. Mucho Tacos imposes on its franchisees standards of operation and personnel training methods. What is the potential pitfall to Mucho Tacos if it exercises too much control over its franchisees?
Q3) Some states require the termination of a franchise when there is no "good cause" for it to continue.
A)True
B)False
Q4) Mai-Lin's Martial Arts, Inc., grants a franchise to Naomi to operate a Mai-Lin's school. Mai-Lin's may require Naomi to pay the franchisor a percentage of her A) annual sales or volume of business.
B) weekly payroll expense.
C) monthly overhead savings.
D) income from unrelated business activities.
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Page 38
Chapter 37: All Forms of Partnerships
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Q1) Refer to Fact Pattern 37-2. Kristin signs a contract with Nature's Best Chocolate, a candy maker, apparently on Mobile's behalf. The contract is binding on
A) Kristin, Lindsey, and Mobile.
B) Kristin only.
C) Mobile only.
D) Nature's Best only.
Q2) Olivia is a partner in Pacific Traders. In the majority of states, with respect to any partnership obligations that Olivia does not participate in, know about, or ratify, she would be liable for
A) none of the obligations.
B) all of the obligations, jointly and severally.
C) all of the obligations, jointly but not severally.
D) only the contractual obligations.
Q3) On a partner's dissociation, his or her right to participate in the management and conduct of the business terminates.
A)True
B)False
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Chapter 38: Limited Liability Companies and Special Business Forms
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Q1) Licensed fishing outfits in Bayou City form a business organization to provide, without profit, an economic service to its members. This is
A) a business trust.
B) a cooperative.
C) a corporation.
D) a joint stock company.
Q2) Lauren, Maria, and Nina form a syndicate to buy a professional soccer franchise. This syndicate could be set up as A) a joint venture.
B) a corporation.
C) a sole proprietorship.
D) a limited liability company.
Q3) Trans-Pacific Company and USA Export, Inc., form a business organization to engage in importing and exporting. Its property is held in the names of the members and its shareholders have personal liability. This organization is A) a business trust.
B) a joint stock company.
C) a joint venture.
D) a syndicate.
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Chapter 39: Corporate Formation and Financing
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Q1) Agents and employees of Deco Arts Corporation and Echo Imitations Inc. are convicted of conspiring to violate a federal law that is punishable by a term of imprisonment and a fine. Can the corporations be held liable for these crimes? If so, how can they be punished?
Q2) The true ownership of a corporation is represented by common stock.
A)True
B)False
Q3) Equestrian Stables Corporation's articles list an incorrect address for its incorporator. Under this circumstance, Equestrian Stables is most likely
A) a corporation by estoppel.
B) a de facto corporation.
C) a de jure corporation.
D) ultra vires.
Q4) Ned and Olsen want to form and do business as a corporation-Pastries & Pies Inc. Its existence depends generally on
A) city or county corporate codes.
B) the Entrepreneur's Corporate Handbook.
C) the federal Administrative Procedure Act.
D) state law.
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Chapter 40: Corporate Directors, Officers, and Shareholders
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Q1) A new position on a board of directors can be created by an amendment to the bylaws.
A)True B)False
Q2) A dividend is a right given by a company to buy stock at a stated price by a specified date.
A)True B)False
Q3) Power Products Corporation permits its directors to be elected by cumulative voting. This
A) allows minority shareholders to be represented on the board.
B) assures directors that they will be selected by their peers.
C) guarantees Thor's executive officers of the final choice.
D) insures against persons who may "cloud" the corporate direction.
Q4) Corporate officers can normally be removed by the board of directors without cause.
A)True B)False
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Chapter 41: Mergers and Takeovers
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Q1) A short-form merger is the legal combination of two or more corporations online.
A)True
B)False
Q2) A merger between Blended Beverage Corporation and Cowland Creamery Inc. can be expressed as Blended Beverage + Cowland Creamery = A) Cowland Creamery.
B) Delite Dairy Corporation.
C) Delite Dairy Corporation + EZ Stir & Sip Inc.
D) EZ Stir & Sip Inc.
Q3) Avery wants to go into business as Boom! to make and market fireworks. When deciding which form of business organization would be most appropriate, Avery would normally take into account all of the following except
A) the liability of the owners.
B) the forms of competitors' business organizations.
C) tax considerations.
D) the need for capital.
Q4) Each state establishes specific procedures for a consolidation.
A)True
B)False
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Chapter 42: Investor Protection, Insider Trading, and Corporate Governance
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Q1) Household Products Corporation wants to make an offering of securities to the public. The offering is not exempt from registration under the Securities Act of 1933. Before the firm sells its securities, it must provide investors with A) a forward-looking financial forecast.
B) an investment contract.
C) a prospectus.
D) samples of its products.
Q2) Trend Clothing Corporation is a public company whose securities are traded among investors. Under the Securities Act of 1933, a security is A) almost any stake in the ownership or debt of a company.
B) an investment that is guaranteed to make a profit.
C) only such common forms of debt and equity as bonds and stocks.
D) whatever a company represents to the public as a security.
Q3) Insider trading occurs when persons buy or sell securities on the basis of information that is not available to the pubic.
A)True
B)False
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Page 44
Chapter 43: Administrative Agencies
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Q1) The judicial branch exercises control over administrative agencies through the courts' review of agency actions.
A)True
B)False
Q2) Closed meetings of the U.S. Forest and Wildlife Service and other federal administrative agencies are permitted when
A) the subject of the meeting concerns accusing a person of a crime.
B) open meetings would frustrate the implementation of future actions.
C) the subject of the meeting involves matters relating to future litigation or rulemaking.
D) all of the choices.
Q3) Tools & Hardware Company is subject to a decision by the Consumer Product Safety Commission. Tools & Hardware is opposed to the decision and wants a court to review it. First, however, the company must
A) refuse to comply with the agency decision.
B) petition other interested parties to oppose the decision.
C) exhaust all possible administrative remedies.
D) publish its opposition in the Federal Register.
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Chapter 44: Consumer Law
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Q1) Credit can be denied solely on the basis of marital status.
A)True
B)False
Q2) Marilyn receives an unsolicited credit card in the mail and tosses it on her desk. Without Marilyn's permission, her roommate Nancy uses the card to buy a new laptop for $1,800. Marilyn is
A) liable for $1,000.
B) liable for $500.
C) liable for $50.
D) not liable for any amount.
Q3) Credit can be denied if a person receives a certain form of income.
A)True
B)False
Q4) A credit-card company may increase the interest rate on a customer's credit-card balance at any time.
A)True
B)False
Q5) Obvious exaggerations are not permissible in advertising. A)True
B)False
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Chapter 45: Environmental Protection
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Q1) County Water District operates a public water supply system. The district must send to every household that it supplies with water an annual statement describing
A) the district's financial situation and material facts that might affect it.
B) other operations, such as irrigation and water conservation, in which the district is involved and to what extent.
C) parties who might be held liable if pollution problems arise.
D) the source of the water, and any contaminants and health concerns.
Q2) Those who knowingly violate the Clean Air Act may be subject to civil penalties but not criminal penalties.
A)True
B)False
Q3) Regional Disposal Center operates a recycling plant. Stan and other citizens file a suit, alleging injuries from the plant. To succeed, they must show that the defendant failed to use reasonable care if the suit is based on
A) a negligence theory.
B) a nuisance theory.
C) any theory.
D) a strict liability theory.
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Chapter 46: Antitrust Law
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Q1) Size alone determines whether a firm is a monopoly.
A)True
B)False
Q2) Clear View Corporation offers to sell its flat-panel display monitors to Best Computer & Video, Inc., only if Best agrees to buy Clear View's servicing of its products along with the monitors. This is
A) an exclusive-dealing contract.
B) a tying arrangement.
C) price discrimination.
D) business acumen.
Q3) Omni Discount Company and Price-Lo Stores, Inc., agree to abide by the decisions of Quality Marketing Corporation as to their respective levels of production, markets, and prices, effectively reducing competition and increasing profits. This is most likely
A) a common, legal, time-honored type of business arrangement.
B) an illegal restraint on trade.
C) an innovative, legally efficient approach to doing business.
D) an outdated, but legal business trust.
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Chapter 47: Professional Liability and Accountability
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Q1) Lauren is an attorney. Like the conduct of all attorneys, Lauren's conduct is governed by rules of professional conduct established by the state in which she is licensed, and the Model Rules of Professional Conduct of
A) the Securities and Exchange Commission.
B) the American Bar Association.
C) the American Institute of Certified Public Accountants.
D) the International Accounting Standards Board.
Q2) Refer to Fact Pattern 47-1. OPI may be entitled to
A) payment from Nelson of the amount of the penalties in damages.
B) specific performance of any future contract with Nelson.
C) an injunction against future breaches of contract by Nelson.
D) no damages or other relief because Nelson is not liable.
Q3) Penalties for aiding or assisting in the preparation of false tax returns are limited to one penalty per taxpayer per tax year.
A)True
B)False
Q4) The competency of professionals' service is never an issue.
A)True
B)False
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Chapter 48: Personal Property and Bailments
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Q1) What is required to transfer or acquire property is determined by whether the property is classified as tangible or intangible.
A)True
B)False
Q2) Nan asks Otto if she can store her car in his garage while she serves in the U.S. Army. He agrees. This is
A) a bailment.
B) accession.
C) a gift.
D) abandoned property.
Q3) Constructive delivery is not necessary for gifts of intangible personal property.
A)True
B)False
Q4) A hotel owner is not liable for loss or damage to its guests' personal property under any circumstances.
A)True
B)False
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Chapter 49: Real Property and Landlord-Tenant Law
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Q1) Chita owns the land on which Downwind Farm is situated, plus the farmhouse, barn, and other structures permanently attached to the land. Chita's brother Elvin owns everything else on the farm-implements, seed, and livestock. The real property is owned by
A) Chita and Elvin.
B) Chita only.
C) Downwind Farm.
D) Elvin only.
Q2) To terminate a periodic tenancy. a landlord must give at least one period's notice to the tenant.
A)True
B)False
Q3) Manhattan Developers, Inc., pays Northeast Trust Company to release its claim to a strip of waterfront property. Northeast gives Manhattan a deed that conveys only whatever interest Northeast has in the strip. This deed is
A) a grant deed.
B) a quitclaim deed.
C) a special warranty deed.
D) a warranty deed.
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Chapter 50: Insurance
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Q1) Gus obtains a health insurance policy for his family from Healthway Insurance Company. The policy includes an incontestability clause. Under such a clause, after a policy has been in force for two or three years
A) Gus cannot contest Healthway's insurable interest.
B) Gus cannot contest Healthway's refusal to pay a claim under the policy.
C) Healthways cannot contest Gus's eligibility for continued coverage.
D) Healthways cannot contest Gus's statements in the application.
Q2) An insurance company may cancel an insured's policy for any reason and at any time.
A)True
B)False
Q3) Kailyn obtains an insurance policy that protects her against liability for property damage resulting from the operation of her vehicle. This is A) disability insurance.
B) liability insurance.
C) malpractice insurance.
D) automobile insurance.
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Chapter 51: Wills and Trusts
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Q1) A gift of real estate other than by will is a devise.
A)True
B)False
Q2) Jill handwrites what she intends to be her will on a blank sheet of paper in ink. If Jill has capacity, this "will" is valid
A) under no circumstances.
B) if Jill signs it, without more.
C) if Jill signs it and at least three witnesses sign it.
D) if Jill signs it, at least three witnesses sign it, and it is filed in the appropriate state or county office.
Q3) A holographic will is a will expressed in 3D.
A)True
B)False
Q4) An "X" can qualify as a signature on a will.
A)True
B)False
Q5) A will can be partially revoked.
A)True
B)False
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Chapter 52: The Legal Environment of Business
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Q1) Security Patrols Inc. requires its employees to respond to work-related text messages delivered via their company-issued smartphones while on duty in the workplace and while off duty elsewhere. Security's employees might successfully sue their employer for
A) ownership of the company's smartphones.
B) a decrease in the quality of life.
C) a violation of the right to disconnect.
D) unpaid overtime.
Q2) Bailey patents a device that allows its user to pretend to imitate the ability of a superhero copyrighted by Comic Cons, Inc. Bailey and Comic Con enter into a licensing agreement to make and sell the device as a toy to the public. Under the terms of the license, the licensee agrees to pay Bailey royalties of 4 percent. Their contract does not specify an end date. According to a majority of the United States Supreme Court in Kimble v. Marvel Entertainment, LLC, Comic Con can legally stop the payments
A) immediately.
B) never.
C) when the copyright expires.
D) when the patent expires.
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Page 54
Chapter 53: Torts and Crimes
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Q1) Jody and Kyle take photos of themselves in intimate moments. When their relationship ends, Kyle posts the photos online without Jody's consent in an attempt to humiliate her. Included with the photos are Jody's name, Facebook page, address, workplace, and phone number. This could be a ground for a civil suit on the basis of A) defamation.
B) false imprisonment.
C) invasion of privacy.
D) no traditional tort theory.
Q2) Pay-to-Buy.com, Inc. obtains a patent on an online payment system. The patent is vaguely worded and overly broad. In evaluating the patent, a court is most likely to A) have difficulty, resulting in Pay-to-Buy being targeted by patent trolls.
B) apply the patent broadly.
C) issue a vaguely worded protection order.
D) hold that Pay-to-Buy's business practices are illegal.
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Chapter 54: Contracts and E-Contracts
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Q1) Robin and Simon exchange offers and counteroffers via e-mail. These exchanges can constitute a valid contract
A) if the e-mails contain all of the necessary elements of a contract.
B) unless only the receiving party believes that there is an agreement.
C) unless the parties believe that the e-mails are only negotiations.
D) under no circumstances.
Q2) Copa Mundo Fantasy Sports League involves soccer games in which the participants compile imaginary teams consisting of real athletes. These games would be considered gambling in a state that finds the outcome of a game is determined
A) unpredictably by factors outside the participants' control.
B) more than 50 percent by the participants' skill.
C) at the end of a full professional season.
D) almost entirely by the participants' judgment.
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Chapter 55: Domestic and International Sales and Lease Contracts
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Q1) Home Grown Inc. is a firm based in the United States that does business overseas. When entering into a business contract, when deciding which terms to include, and when choosing a method to resolve a dispute, Home Grown should
A) rely solely on legal principles rather than the business relationship.
B) assume that a party in another country has the same contractual expectations as a party in the United States.
C) be alert to cultural influences.
D) stay inflexible in the face of others' social and cultural practices.
Q2) National Sales Company and Omni Supply Corporation are businesses located in different countries. Representatives of National Sales and Omni Supply transact a deal over their cellphones. Under the United Nations Convention on the Use of Electronic Communications in International Trade (ECC), which National Sales's country has adopted, this deal is
A) as valid and enforceable as a contract on paper.
B) invalid because Omni Supply's country has not adopted the ECC.
C) invalid because it is not a contract on paper.
D) invalid because the businesses are located in different countries.
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Page 57
Chapter 56: Negotiable Instruments
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Q1) A digital invoice is
A) an electronic version of a paper bill that can be paid online.
B) an online view of a paper bill that cannot be paid online.
C) a statement for a subscription service that makes B2B payments.
D) a supplemental record of a transaction payment.
Q2) Virtual currency is stored in a digital wallet and identified by public keys. To access virtual currency requires corresponding sequences of private keys. Unlike real currency, virtual currency is
A) not issued or backed by any government or bank.
B) subject to special digital transaction fees.
C) risk-free.
D) required to be accepted in payment or exchange.
Q3) Apple Pay and other phone-based payment systems enable mobile devices to
A) link from a digital wallet to another app within a single phone.
B) entail more security risks than carrying a physical wallet.
C) communicate wirelessly with point-of-sale systems.
D) work with existing magnetic-strip credit-card machines.
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Chapter 57: Creditors Rights and Bankruptcy
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Q1) Robert borrows $15,000 from State College to help pay for his education. He signs a note payable to the school for the amount of the loan plus interest. Robert defaults, and the school transfers the note to a collection agency. This means that A) additional costs to collect payment can be added to the unpaid principal. B) additional requirements can be imposed on the borrower to graduate.
C) none of the choices.
D) Robert may have to accept a job offer from a select list of employers.
Q2) Rita borrows $20,000 from the U.S. Department of Education to help pay for her education at State University. She signs a note payable to DOE for the amount of the loan plus interest. The loan may be discharged if
A) Rita does not graduate from State University within six years of the loan. B) Rita does not find employment in her program of study after graduation. C) in bankruptcy, repayment would cause Rita undue hardship.
D) any of the choices.
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Chapter 58: Agency and Employment
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Q1) Rob, a taxi driver for Swift Cab Company, and other cabdrivers file a suit in a Texas state court against Uber, alleging unfair competition. If the result in this suit is like the result in similar suits, the court will most likely rule in favor of
A) Rob.
B) Swift Cab.
C) the state of Texas.
D) Uber.
Q2) In Pakistan, Mohammad, an employee of Noor, enters into a contract with Hassan. Under the principles of sharia law, liability for any breach of the contract may lie with Noor
A) in all circumstances.
B) if Hassan was aware of Mohammad's employee status.
C) if Mohammad entered into the contract on Noor's direct order.
D) under no circumstances.
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Chapter 59: Business Organizations
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Source URL: https://quizplus.com/quiz/22621
Sample Questions
Q1) Outlier Inc. hosts client accounts in servers located in foreign countries. The U.S. government issues a warrant to obtain e-mails related to a drug case from one of those accounts. Outlier refuses to comply. On the government's appeal, it is most likely that a court will
A) order the owner of the account to "stand and deliver."
B) order Outlier to comply with the warrant.
C) order the government to abide by Outlier's refusal.
D) order the foreign countries to seize Outlier's servers.
Q2) Bill starts Castaway to market a new line of uniquely designed fishing gear. Delta Bank loans $50,000 to Bill for the project. The bank is most likely to recover the amount of the loan from Bill's personal assets
A) if Bill provides a complete, accurate record of business transactions.
B) if the loan is not subject to an agreement that imposes personal liability.
C) if Bill's business is a sole proprietorship.
D) under no circumstances.
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Chapter 60: Government Regulation
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12 Verified Questions
12 Flashcards
Source URL: https://quizplus.com/quiz/22622
Sample Questions
Q1) Eve is an attorney. With respect to client information, under the American Bar Association's Model Rules of Professional Conduct, Eve, like other attorneys
A) is required to guarantee that a breach of confidentiality will never occur.
B) has an ethical duty to safeguard the information.
C) does not need to be concerned with keeping the information secure.
D) does not own the data.
Q2) In response to the growth in native advertising, the Federal Trade Commission has issued guidelines for those who use the ads. The focus of the guidelines is whether consumers are able to
A) differentiate advertising from other content.
B) block traditional online ads.
C) access the ads on small screens, such as those on phones.
D) click a widget to be taken to a different site.
Q3) A business that acts to take advantage of the economic and political opportunities offered by the climate change is acting
A) legally and ethically.
B) legally, but unethically.
C) illegally, but not unethically.
D) illegally and unethically.
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Page 62
Chapter 61: Property and Its Protection
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8 Verified Questions
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Source URL: https://quizplus.com/quiz/22623
Sample Questions
Q1) Carrie starts Dance & Diet Nutrition, a weight-loss products enterprise, before marrying Edgar. To legitimat4ely protect Carrie's business assets from Edgar's claims if the spouses divorce, Carrie could use
A) a prenuptial agreement preceded by fully disclosing the business assets.
B) a postnuptial agreement without fully disclosing the business assets.
C) conceal the business assets.
D) all of the choices.
Q2) According to the United States Supreme Court,
A) Metro City can take a parking lot for a privately owned sports stadium.
B) all of the choices.
C) Laborville can condemn a vacant field for a private manufacturing plant.
D) Sleepyton can take residential property for a private corporate complex.
Q3) Bay City condemns private, residential property and conveys it to Commercial Construction Corporation to develop a shopping, dining, and entertainment complex on the city's waterfront. According to the United States Supreme Court,
A) a state can prohibit taking for economic development.
B) eminent domain may be used to further development.
C) a state can permit taking for redevelopment of slum areas.
D) all of the choices.
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