Deck 23: The Legal Environment: Business Law and Government Regulation

Question 1

To have an agreement,a contract must have:

A)a promise by one party to do something in the future.
B)the ability to contract.
C)an intention to be bound by the contract.
D)an offer and an acceptance.

Answer 1

D

Question 2

The ________ rule says that an offeree's acceptance must be the mirror image of the offeror's offer.

A)mirror image
B)promissory estoppel
C)mailbox
D)consideration

Answer 2

A

Question 3

Something of legal value that the parties exchange as part of a bargain.

A)Contract
B)Legality
C)Agreement
D)Consideration

Answer 3

D

Question 4

The owner of a small auto repair shop knowingly installs a used water pump in your car and tells you it is "brand new." This is:

A)fraud.
B)duress.
C)innocent misrepresentation.
D)breach of contract.

Question 5

On October 1,Althea writes Katherine a letter offering her a job at her travel agency.Katherine mails Althea a letter on October 2 accepting the offer.On October 3,before she receives Katherine's acceptance,Althea calls Katherine to rescind the offer.In terms of contract law:

A)there is no contract since Althea calls to rescind the offer before she receives Katherine's acceptance.
B)a contract is formed on October 2 when Katherine mails the letter of acceptance to Althea.
C)no contract is formed since Katherine does not respond by the fastest means available-telephone.
D)None of these are correct.

Question 6

Maria writes a letter offering to sell some office furniture to Lee.Lee,in a distant city,sends a telegram to Maria accepting the offer.Because of an error in the Western Union Office,the telegram never reaches Maria.What is the result?

A)There is no contract since Lee responds by telegram instead of by mail.
B)There is no contract since Maria never actually receives Lee's acceptance.
C)A contract is formed as soon as Lee gave the telegram to the Western Union office.
D)A contract is formed as soon as Maria writes the letter to Lee.

Question 7

Which of the following statements is correct?

A)A service mark is any distinctive word,phrase,symbol,or trade dress that a company uses to identify the origin of a product or to distinguish it from other goods on the market.
B)A trademark is any distinctive word,phrase,symbol,design or trade dress that a company uses to identify the origin of a product or to distinguish it from other goods on the market.
C)A service mark identifies and distinguishes the source of a service.
D)Both B and C

Question 8

Al voluntarily becomes intoxicated at a local bar.He sells his car for half of its value simply to irritate his wife.Later when sober,Al and his wife want the car back.This contract:

A)is void because of a lack of genuineness of assent.
B)is voidable.
C)is unenforceable due to duress and undue influence.
D)cannot be voided by Al or his wife.

Question 9

________ law governs the rights and the obligations between people and the parties they made promises to or agreements with.

A)Agency
B)Contract
C)Freedom of contract
D)UCC

Question 10

The courts use the presence or absence of a(n)________ to distinguish between serious promises and those that are not serious.

A)consideration
B)contractual capacity
C)agreement
D)written communication

Question 11

In terms of contractual capacity:

A)a minor can disaffirm and walk away from a contract even if already executed and the minor has benefited from it.
B)intoxicated individuals are generally always held liable for their contractual obligations,regardless of their condition upon execution of the contract.
C)an insane person can never have contractual capacity by definition.
D)if a minor benefits from a contract and then disaffirms it,he/she must fulfill the duty of restoration.

Question 12

Rupert,a very old man,suffers from bouts of senility.During a lucid moment,he contracts to buy a new freezer from a local appliance dealer.This contract is:

A)void.
B)voidable.
C)enforceable.
D)illegal.

Question 13

Toni wants to buy software from Bill that she can modify in order to hack into her boyfriend's e-mail account to see if he's writing to another woman.When Bill discovers why Toni wants the software,he refuses to sell it to her.Toni sues Bill in small claims court.Is the contract valid?

A)Yes,because a verbal contract is binding.
B)No,because of the principle of legality.
C)Yes,because of promissory estoppel.
D)No,because Toni is clearly crazy.

Question 14

A contract entered into by a(n)________ person can be void,voidable,or valid,depending on the mental state of the person.

A)minor
B)insane
C)intoxicated
D)All of the above

Question 15

To have a valid offer,there must be:

A)an intention to be bound by the offer.
B)a simple lack of disagreement by the offeree.
C)a written communication of the offer.
D)significant and substantial consideration.

Question 16

A(n)________ is a promise or a set of promises for the breach of which the law gives a remedy,or the performance of which the law recognizes as a duty.

A)agreement
B)UCC
C)warranty
D)contract

Question 17

________ serves as a check on the parties' agreement,verifying that it is genuine and not subject to mistakes,misrepresentation,fraud,duress,or undue influence.

A)An attorney
B)Notary public
C)Genuineness of assent
D)None of the above

Question 18

In most cases dealing with the issue of consideration,courts:

A)still consider a promise binding even if made without a consideration.
B)do not evaluate the adequacy of the consideration.
C)consider offers of "love and affection" to be valuable consideration.
D)weigh the value of the consideration in ruling on the validity of the contract.

Question 19

The terms of the ________ must be defined and reasonably certain.

A)offer
B)consideration
C)payment
D)None of the above

Question 20

What are,if any,the possible defenses against a valid contract which may cause it to be unenforceable?

A)Genuineness of assent and form
B)Control and offer
C)Agreement and legal
D)Agreement and offer

Question 21

Sonny is buying a computer system for his college's administrative functions.The negotiated price of the system is $475,000.He receives a contract for $375,000 with no explanation as to the change and gladly signs it and sends it back to the vendor.He receives a phone call from the vendor explaining that the secretary in typing the figures into the contract hit the 3 instead of the 4 on her keyboard.Sonny wants to hold the vendor to the contract.Is the contract legally binding on the contractor?

A)Yes,because it constitutes a written offer.
B)No,because of a lack of genuineness of assent on the part of the vendor.
C)Yes,because of the law of agency covers the secretary as well as the salesperson.
D)No,because this constitutes a mistake of fact that Sonny should have immediately recognized.

Question 22

Today,when it comes to product liability,the courts:

A)practice the caveat emptor rule.
B)rule that the scope of warranties include any person incurring personal or property loss due to a faulty product.
C)hold that the rule of caveat venditor is valid in all cases.
D)hold that only the parties directly involved in the execution of the contract are bound by the law of sales warranties.

Question 23

The UCC requires that:

A)the sale of all goods and services be warranted.
B)only written contracts for the sales of goods over $1,500 are enforceable.
C)verbal contracts are as enforceable as written contracts,regardless of the amount of the consideration.
D)no new consideration need be offered if a contract is modified in good faith.

Question 24

What type of warranty does a seller create when making statements about the condition,quality,and performance of the good that the buyer substantially relies on?

A)Sales warranty
B)Verbal warranty
C)Express warranty
D)Warranty of merchantability

Question 25

When Fred Goodman sued Wendy's over his broken tooth due to bone fragments in his hamburger,he sued them on the basis of:

A)breach of implied warranty of merchantability.
B)negligent manufacturing.
C)failure to warn and negligent design.
D)implied warranty of fitness.

Question 26

If a contract for the sale of goods omits the place for delivery,the Code states that delivery will take place at:

A)the seller's place of business.
B)the seller's residence.
C)the buyer's place of business.
D)the buyer's residence.

Question 27

Which of the following contracts would be covered by the Uniform Commercial Code?

A)The sale of accounting services
B)The sale of real estate
C)The sale of furniture
D)All of the these

Question 28

Which of the following phrases is sufficient to disclaim an implied sales warranty?

A)"No warranties"
B)"Seller makes no warranties on this product whatsoever"
C)"As is"
D)None of the above.A merchant cannot disclaim sales warranties.

Question 29

A(n)________ insures a buyer that the goods will be of average quality and that they are fit for the ordinary purposes for which such goods are used.

A)implied warranty of merchantability
B)implied warranty of fitness for a particular purpose
C)express warranty
D)warranty of title

Question 30

A ________ is a promise or statement of fact by the seller about a product.

A)sales warranty
B)sales contract
C)copyright
D)contractual capacity

Question 31

The damages the parties to a contract specify in case of breach are called:

A)liquidated damages.
B)monetary damages.
C)compensatory damages.
D)consequential damages.

Question 32

The Uniform Commercial Code:

A)significantly revised Merchant Law.
B)is based on case law and overturns much of the common law that merchant law was based on.
C)makes minor changes to merchant law,largely making the law more uniform and consistent.
D)is the most significant revision of commercial law since the Napoleonic Code.

Question 33

A(n)________ assures the buyer of a product that it will be of average quality,not the best and not the worst.

A)implied warranty
B)warranty of exclusivity
C)express warranty
D)warranty of merchantability

Question 34

Jack started his business in the year 2000.Due to lack of planning and bad cash flow,Jack files for bankruptcy and the business ceases to exist.This is a form of:

A)liquidation.
B)reorganization.
C)repayment plan.
D)temporary repayment plan.

Question 35

Under the UCC,when the innocent specifies their own damages for a potential breach of a sales contract and they are reasonable and not punitive,these damages are called:

A)consequential damages.
B)liquidation damages.
C)compensatory damages.
D)specific damages.

Question 36

Ansel,a sugar manufacturer,agrees to sell Keith 10,000 pounds of sugar at the "usual price." A shortage forces the price of sugar up and Ansel charges Keith nearly 50% more for the sugar.In response,Keith disaffirms the contract.Which ruling is correct?

A)The modification is enforceable because Ansel has the right to unilaterally modify the contract.
B)The Code would confirm the contract and assign a price reasonable at the time of shipment.
C)Keith would be permitted to void the contract since he has not agreed to the price increase.
D)This contract is not covered by the Code,therefore,the common law applies and the modification is unenforceable.

Question 37

The statute of limitations for a breach of contract suit is ________ years from the time the breach occurred.

A)2
B)3
C)4
D)7

Question 38

Billy Bob's swamp racers are the fastest swamp mud racing machines in the country.Unfortunately drivers have to be careful because they are easily tipped over due to their high center of gravity.This is unfortunate because most swamp mud racers consider stability an important quality in their racers.Billy Bob has installed numerous decals in prominent places that state,"This sucker turns over easily but goes really fast." Still,Billy Bob could be sued for product liability under:

A)negligent manufacturing.
B)failure to warn.
C)implied warranty to perform.
D)negligent design.

Question 39

________ is a remedy for breached contracts that deal with unique items and is designed to make the injured party "whole again."

A)Consequential damage
B)Specific performance
C)Remedy at law
D)Monetary damage

Question 40

Gusti agrees to maintain Mrs.Poppendraius's yard,pulling weeds,cutting the grass weekly,and trimming the shrubbery once during the summer for $30 a month.Gusti makes a half-hearted attempt at pulling weeds,cuts the lawn once all summer and never touches the shrubbery.No damage is done except that Mrs.Poppendraius's yard appears neglected and unkempt.In terms of contract law:

A)Gusti is not contractually obligated because he is a minor.
B)Mrs.Poppendraius may collect compensatory damages.
C)Gusti is in breach of contract.
D)Mrs.Poppendraius may collect consequential damages.

Question 41

A ________ is a grant giving the inventor of a product the exclusive right to make,use,or sell it for a specific time.

A)patent
B)copyright
C)trademark
D)warranty

Question 42

The Clayton Act prohibits:

A)fair trade agreements.
B)sales contracts and warranties.
C)any corporation purchasing the stock of another corporation.
D)interlocking directorates.

Question 43

A ________ is any distinctive work,symbol,name,logo,etc. ,that a company uses to identify the origin of a product or to distinguish it from other products.

A)patent
B)copyright
C)trademark
D)warranty

Question 44

The ________ forbids contracts that restrain trade or create monopolies.

A)Clayton Act
B)Sherman Anti-Trust Act
C)Robinson-Patman Act
D)Miller-Tydings Act

Question 45

This act was passed by Congress to supplement the Clayton Act,providing the power to prevent "unfair methods of competition in commerce or unfair or deceptive acts in commerce."

A)The Federal Trade Commission Act
B)The Sherman Act
C)The Robinson-Patman Act
D)The Miller-Tydings Act

Question 46

________ was passed to strengthen the Clayton Act,specifically to address price discrimination because many businesses were circumventing the original rules.

A)The Federal Trade Commission Act
B)The Sherman Act
C)The Robinson-Patman Act
D)The Miller-Tydings Act

Question 47

The author of a hit song could apply for a ________ to protect that work from unauthorized use by others.

A)patent
B)trademark
C)servicemark
D)copyright

Question 48

An agent's duties when executing agency include:

A)reimbursement of the principal for all expenses incurred in the execution of the agency.
B)indemnification of the principal for any authorized payments or any loss incurred by the agency.
C)performance of duties according to the principal's instruction and notification of the principal of all facts concerning the subject matter of the agency.
D)All of the above

Question 49

In 1938,Congress passed the ________ creating an agency responsible for establishing standards for drugs,inspecting food and drug manufacturers,performing food-and drug-related research,etc.

A)Miller-Tydings Act
B)Consumer Product Safety Act
C)Agricultural Marketing Act
D)Food,Drug,and Cosmetics Act

Question 50

The first step in receiving a patent for the invention is to:

A)document the device.
B)search existing patents.
C)establish the invention's novelty.
D)prove the origination of the idea.

Question 51

We Love Pets manufactures a pet carrier that is known to suddenly come apart if the pet shakes itself at the same time the owner picks the carrier up.It seems the combination of actions make the hinge pins fall out.WLP could be liable under:

A)negligent manufacturing.
B)failure to warn.
C)implied warranty to perform.
D)negligent design.

Question 52

A ________ bankruptcy provides a small firm a second chance;it protects a firm from creditors while a reorganization plan is formulated.

A)Chapter 7
B)Chapter 11
C)Chapter 13
D)Chapter 21

Question 53

In a Chapter 7 bankruptcy:

A)a small firm gets a second chance by being protected from creditors while a reorganization plan is formulated.
B)every piece of property the bankrupt debtor owns is subject to court attachment.
C)loss is limited to $100,000 in unsecured debt and to $350,000 in secured debt.
D)a debtor simply declares all of his firm's debts,and turns all assets over to a trustee who then sells and distributes them to settle both secured and unsecured debts.

Question 54

________ is the most common type of bankruptcy,accounting for nearly 70% of all bankruptcies.

A)Chapter 7
B)Chapter 11
C)Chapter 13
D)Chapter 21

Question 55

A Chapter 11 filing can be

A)involuntary.
B)voluntary.
C)Both A and B
D)None of the above

Question 56

The Robinson-Patman Act focuses on:

A)price discrimination.
B)product warranty.
C)product liability.
D)unsafe products.

Question 57

The FTC forbade the practice of:

A)interlocking directorates.
B)mergers.
C)acquisitions.
D)price discrimination.

Question 58

The act that is the foundation on which antitrust policy in the United States is built is:

A)the Clayton Act.
B)the Sherman Anti-Trust Act.
C)the Robinson-Patman Act.
D)the Miller-Tydings Act.

Question 59

The duration of a ________ is indefinite but can be lost if it loses its unique character.

A)patent
B)copyright
C)trademark
D)warranty

Question 60

________ states that a seller cannot require a buyer to purchase only his/her product to the exclusion of other competitive sellers' products.

A)The Clayton Act
B)The Sherman Act
C)The Robinson-Patman Act
D)The Miller-Tydings Act

Question 61

Generally,the absence of consideration does not affect the obligation,i.e. ,the contract is still binding,even if there's no apparent consideration.

Question 62

A contract is simply a promise or set of promises regarding a duty and for which there is a remedy if the agreement is breached.

Question 63

A missing quantity term in an offer usually defeats a contract.

Question 64

To be enforceable,a contract must be written.

Question 65

In the 1950s,a group of legal scholars compiled the Uniform Commercial Code to replace the hodge-podge collection of confusing,often conflicting state laws that government basic commercial transactions with a document designed to provide uniformity and consistency.

Question 66

The courts hold that a contract entered into by an intoxicated person or an insane person is always voidable.

Question 67

Under the Truth-In-Lending Act,the owner of a stolen credit card who notifies the credit card company of the theft before any unauthorized use of the card is liable for:

A)none of the unauthorized charges.
B)only $50 of any unauthorized charges.
C)a total of $100.
D)all of the charges.The owner has unlimited liability.

Question 68

Common law requires that an acceptance of an offer be made by the means specified by the offeror and it must reach the offeror in order to be effective.

Question 69

The Uniform Commercial Code has been adopted,at least in part,by all 50 states.

Question 70

Failure to perform as agreed in a contract constitutes breach.

Question 71

In breach of contract,the injured party may only recover compensatory damages,moneys which place him/her in the same position he/she would have been had the contract been performed.

Question 72

Only mistakes of fact permit a contract to be voided.

Question 73

The ________ requires lenders and sellers who extend credit to disclose fully the terms and conditions of credit arrangements to enable consumers to "shop around."

A)Fair Credit Reporting Act
B)Truth-In-Lending Act
C)Consumer Product Safety Commission
D)Equal Credit Opportunity Act

Question 74

Courts judge a party's subjective,personal intentions to enter into a contract when a dispute about a contract's existence arises.

Question 75

The more terms that are specified in a proposed offer,the more likely it is that an offer exists.

Question 76

A minor can void a contract at the minor's option but the adult cannot void a contract simply because it is with a minor.

Question 77

It is possible for a small business to win a lawsuit but still go out of business due to the costs of the suit.

Question 78

If two parties exchange promises to form a contract,valuable consideration exists.

Question 79

For a contract to be enforceable,it must be legal.

Question 80

The Truth-In-Lending Act:

A)applies to all installment contracts with more than two payments.
B)prohibits discrimination in granting credit.
C)requires a lender to disclose the total cost of credit or a loan.
D)prohibits certain behavior on the part of a lender when trying to collect bad debts.