Question 1

The refusal of courts during the 19th Century to interfere with the freedom of parties to enter into contracts can be traced, in part, to the writings of ________.

Accepted Answer

The writings of Adam Smith, particularly in his book "The Wealth of Nations," influenced the belief in the freedom of parties to enter into contracts without interference from the government or courts. Smith emphasized the importance of the marketplace and the role of individual self-interest in promoting competition and economic growth. This philosophy became known as laissez-faire capitalism and was the dominant economic theory in the 19th century.

Question 2

The ________ states that parties who are legally competent are allowed to enter into whatever contracts they wish.

Accepted Answer

The freedom-to-contract doctrine is the principle that anyone who is legally capable can enter into whatever contracts they choose. This principle is based on the idea of individual freedom and personal autonomy. It is an important element of contract law and is recognized in most legal systems around the world.

Question 3

Which of the following statements is true with regard to the Federal Trade Commission (FTC) staff proving deceptive advertising under Section 5 of the FTC Act?

Accepted Answer

The staff of the FTC need to show that the misrepresentation or omission is material in order to prove deceptive advertising under Section 5 of the FTC Act. This means that the deception is likely to affect a consumer's decision to buy or use a product or service. They also need to show that there is a misrepresentation or omission likely to mislead consumers. They do not need to prove that the consumers are acting reasonably under the circumstances, but they do not need to show the intent of an advertiser to deceive a consumer.

Question 4

________ are defined as corporations or partnerships owned by a family or relatives with more than 80 percent of its assets related to farming operation and a total business debt not exceeding $3,273,000.

Accepted Answer

The answer of ________ are defined as corporations or partnerships...

Question 5

Which of the following is the leading federal consumer protection agency?

Accepted Answer

The Federal Trade Commission (FTC) is the leading federal agency in charge of consumer protection. Its mission is to promote consumer protection and prevent anti-competitive business practices. The other options listed do not have a focus on consumer protection.

Question 6

A company can sue a competitor under the ________, which forbids "false description or representation."

Accepted Answer

The Lanham Act of 1947 forbids "false description or representation" in commercial advertising or promotion, which would include a competitor making false claims about another company's products or services. The other options listed do not specifically address this issue.

Question 7

Which of the following occurs under Chapter 13 of the U.S. Bankruptcy Code?

Accepted Answer

Chapter 13 bankruptcy involves a repayment plan where a portion of the consumer-debtor's earnings is paid into court for distribution to creditors over a period of three to five years. This allows the debtor to catch up on missed payments and ultimately discharge remaining debt.

Question 8

Which of the following is true of Chapter 12 of the U.S. Bankruptcy Code?

Accepted Answer

Chapter 12 of the U.S. Bankruptcy Code allows family farmers and fishermen to file for bankruptcy reorganization. This chapter was specifically created in 1986 to provide relief to farmers and fishermen who may experience financial difficulty due to factors beyond their control, such as natural disasters or fluctuations in commodity prices.

B, C, and D are incorrect statements. A plan for Chapter 12 reorganization should provide for payments to creditors over a period of three to five years, not one year. Chapter 12 does not provide a personal exemption for all farm or fishing equipment, although exemptions may be available under state law. A debtor can convert from a Chapter 12 reorganization to a Chapter 7 liquidation, although this may not be in their best interest depending on their financial situation.

Question 9

The Federal Trade Commission works with the ________ sectors to regulate fraud issues.

Accepted Answer

The Federal Trade Commission is primarily responsible for regulating advertising and sales practices. While they may also work with other sectors such as telemarketing and securities fraud, their main focus is on protecting consumers from false or misleading advertising and unfair sales practices.

Question 10

The ________ seeks to make creditors disclose all terms of a credit arrangement before they enter into an agreement with a consumer-debtor.

Accepted Answer

The Truth-in-Lending Act (TILA) is a federal law that seeks to promote transparency and fairness in lending. It requires creditors to disclose all terms and costs of a credit arrangement before a consumer-debtor enters into an agreement. This includes the annual percentage rate (APR), fees, and repayment terms. The goal is to help consumers make informed decisions about borrowing and to avoid deceptive or unfair practices by creditors. The other options listed (Dodd-Frank Act, Sherman Act, Securities Exchange Act) do not specifically address the disclosure of credit terms to consumers.

Question 11

Chapter 11 of the U.S. Bankruptcy Code allows ________.

Accepted Answer

Chapter 11 of the U.S. Bankruptcy Code allows a business to reorganize and continue to function while it is arranging for the discharge of its debts. This option is typically used by businesses to avoid liquidation and stay afloat.

Question 12

Which of the following is an example of puffery?

Accepted Answer

Puffery is an exaggerated claim that cannot be proved or disproved. Stating that a fast food chain sells the world's finest chicken is a subjective claim and cannot be proven or disproved, making it an example of puffery. The other options make specific claims that can be proven or disproved, making them not examples of puffery.

Question 13

The freedom-to-contract doctrine evolved through ________.

Accepted Answer

The freedom-to-contract doctrine evolved through case law out of the state court systems. This legal principle allows individuals to enter into agreements or contracts freely without government interference, except in cases of fraud, duress, or unconscionable conduct.

Question 14

A professional basketball player states in an advertisement that a particular brand of sports gear will improve one's performance on the court. Which of the following methods of deceptive advertising does this example depict?

Accepted Answer

This example depicts the method of deceptive advertising known as testimonial, which involves using endorsements or recommendations from a celebrity or expert to persuade customers to buy a product. In this case, the professional basketball player is providing a testimonial by stating that the sports gear will improve one's performance.

Question 15

Which of the following is an example of deception?

Accepted Answer

The advertisement is presenting a statistic that may not be entirely accurate, as it is not clear how the dentists were selected or surveyed. This could be seen as a form of deception. The other options are simply subjective opinions or claims without specific evidence to back them up.

Question 16

Puffery involves ________.

Accepted Answer

Puffery involves making an exaggerated recommendation in a sales talk to promote the product. It is a commonly used marketing technique where advertisers use subjective statements, opinions, and exaggerations to promote their product without making false claims or statements.

Question 17

Under the Fair Packaging and Labeling Act, which of the following governmental units promulgates rules governing the labeling and packaging of products?

Accepted Answer

The Department of Health and Human Services promulgates rules governing the labeling and packaging of products under the Fair Packaging and Labeling Act.

Question 18

With reference to the Federal Bankruptcy Code, which of the following is a disadvantage of bankruptcy to creditors?

Accepted Answer

When a company files for bankruptcy and continues to operate, it often results in a decrease in the amount of funds available to distribute to creditors during the liquidation process. This is because the company's expenses continue to accumulate while it is operating, reducing the amount of money available to pay off debts.

Question 19

Which of the following is a purpose of the Fair Packaging and Labeling Act?

Accepted Answer

The purpose of the Fair Packaging and Labeling Act is to ensure that consumers have access to important information about the contents and quantity of the products they buy, and to facilitate price comparison by requiring uniform measures of content on packaged goods.

Question 20

With reference to the Federal Bankruptcy Code, which of the following is an advantage of bankruptcy to debtors?

Accepted Answer

Debtors retain possession of a bankruptcy estate, which means that they can keep their exempted assets and continue to operate the business as they work towards a fresh start. This provides an advantage to the debtor as they are able to maintain control of their assets and business operations. Options A and B are incorrect as they do not represent advantages of bankruptcy to debtors. Option C is incorrect as debtors are subject to legal and accounting expenses in the bankruptcy process.

Quiz 25: Laws of Debtor Creditor Relations and Consumer Protection