Question 1 

1. Connie, the president of a company that makes paper,      has a new interest in the environment. She recently went to a seminar on      environmental dangers and has decided to take steps to clean things up.      She started at home and was also committed to change things at work.      Connie had to face the fact that her company has been cheating and is not      in compliance with applicable environmental regulations due to dumping in      a nearby river. Her company has never been cited, however, because it employs      a very large number of people in the community, including the mayor’s wife      and the chief-of-police’s brother.

        On her mission to clean things up, Connie has decided to go even further      than the law requires and install the very latest environmental protections.      When she announced her plan, the chair of the company’s board of      directors, Brooke, had a meeting with Connie. Brooke told Connie to      analyze the situation carefully because the cost of the additional      equipment would mean no dividend to shareholders and no raise for      employees. Furthermore, Brooke told Connie that installing all of the new      equipment would result in higher prices for the company’s paper products      and could bankrupt the company because of foreign competition. Brooke      hinted that Connie could be fired if she persisted. Brooke suggested that      Connie just be concerned with a minimal standard of ethics. Which of the      following would be a stakeholder in the company?

  

The community only

 

The shareholders only

 

Future generations only

 

The community and shareholders   only

 

The community, shareholders, and   future generations

2 points   

Question 2 

1. Which of the following is TRUE regarding the liability      in tort of employers for the actions of employees and independent      contractors?

  

Employers are generally liable in   tort for the actions of their employees, while they are generally not liable   for the actions of independent contractors.

 

Employers are generally liable in   tort for the actions of independent contractors, while they are generally not   liable for the actions of employees.

 

Employers are not generally liable   in tort for the actions of independent contractors or for the actions of   employees.

 

Employers are generally liable in   tort for the actions of independent contractors and also for the actions of   employees.

 

Employers are generally liable in   tort for the actions of independent contractors and the actions of employees,   but only if the employer has agreed to be liable in a written contract with   the employee or independent contractor.

2 points   

Question 3 

1. Which of the following was the result on appeal in the      case of Webster v. Blue Ship Tea Room Inc.—the case in which the      plaintiff sued after getting a bone caught in her throat while eating clam      chowder?

  

That the plaintiff could recover   based upon the implied warranty of merchantability

 

That the plaintiff could recover   based upon the implied warranty of fitness for a particular purpose

 

That the plaintiff could recover   based on an express warranty

 

That the plaintiff could not   recover because she waited too long in which to sue and also because she was   not the direct purchaser of the fish

 

That the plaintiff could not   recover for reasons including that the bone should not have been unexpected

2 points   

Question 4 

1. A partnership in which the partners divide      profits and management responsibilities and share unlimited personal      liability for the partnership’s debt is called a __________.

  

general partnership

 

limited partnership

 

limited liability partnership

 

corporation

 

limited liability company

2 points   

Question 5 

1. A person who contracts with another to do something for      him or her but who is not controlled by the other nor subject to the      other’s right to control with respect to his or her physical conduct in      the performance of the undertaking is a(n) __________.

  

employee

 

independent contractor

 

authorized contractor

 

task-specific contractor

 

partial contractor

2 points   

Question 6 

1. Which of the following occurs when a party to a      contract transfers his or her rights to a contract to a third party?

  

Assignment

 

Referral

 

Disgorgement

 

Privity

 

Transfer

2 points   

Question 7 

1. Penny is investigating what she needs to do to legally      to open a dog grooming business in her city. Which of the following would      govern the business?

  

State statutes

 

City ordinances

 

Model laws

 

State statutes, city ordinances,   and model laws

 

State statutes and city   ordinances, but not model laws

2 points   

Question 8 

1. Sally agrees to mow Paul’s yard for $300 for the      summer. Paul wishes to assign the contract to his grandmother. Sally      objects because Paul’s yard is very small while the grandmother’s yard is      over an acre. Which of the following is the correct legal outcome for the dispute      between Sally and Paul?

  

Sally will win because Paul’s   attempted assignment would increase the duties to which she agreed.

 

Sally will win because all   assignments are invalid without the obligor’s consent.

 

Sally will win unless Paul paid   her the $300 in advance in which case Paul will win.

 

Paul will win because he may   validly assign the contract without Sally’s consent.

 

Paul will win so long as he tells   Sally about the assignment prior to the time she begins any performance   whatsoever.

2 points   

Question 9 

1. Which of the following is FALSE regarding a sole proprietorship?

  

A sole proprietorship requires few   legal formalities.

 

A sole proprietor has complete   control of the management of the business.

 

The sole proprietor keeps all the   profits from the business.

 

Profits are taxed as the personal   income of the sole proprietor.

 

A sole proprietor is not   personally liable for obligations of the business.

2 points   

Question 10 

1. If the plaintiff wants a court order that requires the      defendant to fulfill the terms of the contract, the plaintiff is seeking      __________.

  

specific performance

 

directive

 

instructional edict

 

demand

 

injunction

2 points   

Question 11 

1. Gretchen offers $100 to anyone who can return her lost      dog, Sparky. Haley returns the dog and requests the money. Gretchen says      that there is no binding contract. Which of the following is TRUE      regarding Gretchen’s statement?

  

Gretchen is incorrect because   there is a binding bilateral contract.

 

Gretchen is incorrect because   there is a binding unilateral contract that Haley accepted by performing.

 

Gretchen is correct because there   is no binding bilateral contract.

 

Gretchen is correct because there   is no binding unilateral contract.

 

Gretchen is correct because Haley   acted incorrectly by her manner of attempted acceptance.

2 points   

Question 12 

1. Stewart, the owner of ABC Construction, agreed with      Joan, the owner of XYZ Hotel, that he would complete renovations on her      upscale hotel on the beach in Florida by October 1. The amount due to      Stewart under the contract was $250,000. The contract contained a clause      by which Stewart would pay Joan $50,000 for each day he was late on      completing the project. Unfortunately, a strong earthquake shook the area,      and while the earthquake did not damage the hotel itself, Stewart      encountered significant difficulty in getting supplies due to the high      demand for building material following the earthquake. Because he believed      that traveling, himself, to other states to obtain supplies would be      prohibitively expensive, he delayed the project for two weeks while      waiting for local stores to have sufficient supplies available. Stewart      finished renovations six days late. Joan told Stewart that she owed him      nothing but that he owed her $50,000. Stewart told Joan that he was suing      for the entire $250,000 because it was not his fault the earthquake      delayed matters. Which of the following is the appropriate term for the      agreement that Stewart would pay Joan $50,000 for each day he was late in      completion?

  

Mitigated damages term

 

Liquidated damages clause

 

Stipulated damages

 

Acknowledged damages clause

 

Approved and acknowledged damages   clause

2 points   

Question 13 

1. Which of the following are the two primary kinds of      performance?

  

Partial and significant

 

Partial and complete

 

Partial and substantial

 

Complete and substantial

 

Complete and significant

2 points   

Question 14 

1. The “public disclosure” test is also known as      the __________ test.

  

television

 

Powell

 

self-conscious

 

golden

 

primary

2 points   

Question 15 

1. Which of the following is FALSE regarding a limited      liability partnership?

  

A limited liability partnership is   considered a separate legal entity.

 

Limited liability partnerships are   fairly new.

 

The business name must include   “Limited Liability Partnership” or an abbreviation in the name.

 

The parties must file a form with   the secretary of the state to create a limited liability partnership.

 

Each partner pays taxes on his or   her share of the income of the business.

2 points   

Question 16 

1. Positive abstractions that capture our sense of what is      good or desirable are __________.

  

ethical ideas

 

values

 

conscience demands

 

desirable principles

 

action goals

2 points   

Question 17 

1. Which of the following is TRUE regarding the      mirror-image rule and the UCC?

  

The mirror-image rule applies   under the UCC the same as it is applies under common law.

 

The mirror-image rule that applies   under common law does not apply under the UCC.

 

The mirror-image rule that applies   under the common law applies under the UCC only if a lease is involved.

 

The mirror-image rule that applies   under the common law applies under the UCC only if a sale of goods is   involved.

 

The mirror-image rule under the   UCC does not apply to common law.

2 points   

Question 18 

1. Which of the following provides that a portion of a      copyrighted work may be reproduced for purposes of criticism, comment,      news reporting, teaching, scholarships, and research?

  

The limited-use doctrine

 

The copyright-use doctrine

 

The fair-use doctrine

 

The trade-use doctrine

 

None of these because there is no   such provision

2 points   

Question 19 

1. __________ are investor-owners of a corporation.

  

Profit owners

 

Profit and loss owners

 

Approved investors

 

Limited partners

 

Shareholders

2 points   

Question 20 

1. Which of the following is FALSE regarding trade-secret      protection?

  

Competitors may not legally   discover trade secrets by doing reverse engineering.

 

Competitors may discover secrets   by going on public tours of plants and observing the use of the trade secret.

 

Lawful discovery of a trade secret   means there is no longer a trade secret to be protected.

 

An invention may be considered a   trade secret.

 

A design may be considered a trade   secret.

2 points   

Question 21 

1. Mistakes in contracts may be classified as __________.

  

void and voidable

 

enforceable and voidable

 

unilateral and void

 

mutual and enforceable

 

unilateral and mutual

2 points   

Question 22 

1. Kitty, who had a love of baking, decided to open her      own bakery. She decided that she did not need and did not want to pay for      a lawyer to advise her on different forms of ownership. Unfortunately,      Kitty had not paid attention in business law class. She proceeded, with      little thought, to simply open her business called Kitty’s Baking. Bobby      came in to order some cookies for his girlfriend, Bitsy, who was allergic      to peanuts. Bobby told Kitty that he needed some cookies for Bitsy, but he      explained that Bitsy had allergies to peanuts. Kitty told him not to worry      because she would make up a special batch just for him. Kitty had hired      some assistants because she was so busy. She told an assistant, Cathy, to      make up several batches of cookies for different customers, including      Bobby, and to leave out the peanuts in Bobby’s order. Cathy, however,      forgot the instruction and proceeded to make Bobby’s cookies with crushed      peanuts. Bobby picked up the cookies and gave one to Bitsy in the car      while they were on the way to the movie in Bobby’s new car. Bitsy became      violently ill, vomited in Bobby’s car, and had to have her stomach pumped.      Bobby and Bitsy sought recovery from Kitty who told them that Bitsy’s      doctor bill and Bobby’s car-cleaning bill were business debts, that the      business was new and not making any money at the moment, and that she had      no personal liability. Following the incident involving Bobby and Bitsy,      Kitty discussed with her parents her problems with the bakery. Kitty’s      parents would like to invest in her business and share in any profits, but      they do not want to share in the management responsibilities. What type of      business did Kitty initially set up?

  

A limited liability company

 

A sole proprietorship

 

An individual proprietorship

 

A general company

 

An S corporation

2 points   

Question 23 

1. The __________ is the supreme law of the land.

  

United States Constitution

 

Declaration of Independence

 

United States Code

 

model law

 

Uniform Commercial Code

2 points   

Question 24 

1. Which of the following are types of warranties?

  

Express and unknown

 

Implied and understood

 

Acknowledged and express

 

Express, implied, and acknowledged

 

Express and implied, but not   acknowledged

2 points   

Question 25 

1. A breaching party’s right to provide conforming goods      when nonconforming goods were initially delivered is known as __________.

  

substantial impairment

 

usage of trade

 

cure

 

perfect tender rule

 

course of dealing

2 points   

Question 26 

1. Heather innocently misrepresented the status of a puppy      as being a full-blooded Pomeranian when actually it was a mixed breed.      Brad had contracted to purchase the dog, but the problem was discovered      prior to his paying for the dog and picking it up. Nevertheless, Brad was      very angry and felt that Heather should have been more careful. He said      that he planned to rescind the contract and also sue her for damages to      punish her and deter others from behaving similarly. Which of the      following is true regarding the remedies available to Brad?

  

Because Heather violated the   contract to provide a full-blooded Pomeranian, Brad is entitled to rescind   the contract and also to the damages he seeks.

 

Because Heather violated the   contract to provide a full-blooded Pomeranian, Brad is entitled to rescind   the contract, but he is not entitled to the damages he seeks.

 

Because Heather is not guilty of   any wrongdoing, Brad is entitled to no remedy, and Heather has an additional   30 days in order to honor the contract.

 

Because Heather is not guilty of   any wrongdoing, Brad is entitled to no remedy, and Heather has an additional   60 days in order to honor the contract.

 

Because Heather is not guilty of   any wrongdoing, Brad is entitled to no remedy, and Heather has an additional   90 days in order to honor the contract.

2 points   

Question 27 

1. Monique was licensed to train massage therapists. A new      federal agency, the Aesthetic and Massage Commission, was committed to      enforcing the statute that licensed massage therapists must refrain from      “any act or conduct indicating bad faith, incompetence, dishonesty,      or improper dealing.” Monique, while driving home late one night from      a party, was stopped by the police and arrested for driving under the      influence of alcohol. She pled guilty to the offense. When the Aesthetic      and Massage Commission discovered the offense, the officials of the agency      met, decided that Monique might drink on the job, and concluded that she      might pose a danger to students. Accordingly, her license to teach massage      therapy was revoked. Monique threatened to sue to retain her license and      was told by the agency head that she had no right to appeal to court      because of the nature of the Aesthetic and Massage Commission, and that,      in any event, action by an agency is always upheld. Which of the following      is TRUE regarding the statement of the agency that Monique had no right to      appeal to court?

  

The agency representative was   wrong, and if Monique cannot resolve the issue within the agency, she may   appeal to court for judicial review.

 

Because the agency was set up to   protect the safety of the public, the agency representative is correct unless   Monique can establish that she entered into a separate contractual   arrangement with the agency when she was hired that gave her the right to   appeal decisions to court.

 

Further information is needed   regarding whether the agency was an executive agency or an independent agency   because while actions of an independent agency may be appealed to court,   actions of an executive agency may not be appealed to court.

 

Further information is needed   regarding whether the agency was an executive agency or an independent agency   because while actions of an executive agency may be appealed to court,   actions of an independent agency may not be appealed to court.

 

Because the agency was set up to   protect the safety of the public, the agency representative is correct, and   Monique has no right to a court action and no right to enter into a   contractual agreement with the agency regarding appeal rights.

2 points   

Question 28 

1. Which of the following refers to the right of an      offeror to revoke an offer?

  

The offeror is the   “originator of his offer.”

 

The offeror is the “master of   his offer.”

 

The offeror is the “proponent   of his offer.”

 

The offeror is the “adjudicator   of his offer.”

 

The offeror is the “arbiter   of his offer.”

2 points   

Question 29 

1. What was the result in the case in the textbook of Lucy      v. Zehmer involving whether allegations of joking involving the sale      of land prevented the formation of a contract?

  

The court ruled that the contract   would not be enforced because one of the parties was subjectively joking.

 

The court ruled that the contract   would not be enforced because one of the parties was joking, and a reasonable   person should have known that.

 

The court ruled that the contract   would not be enforced because the parties had been drinking although they   were not intoxicated.

 

The court ruled that the agreement   would be enforced because of the outward manifestations of agreement.

 

The court ruled that the contract   would be enforced because of what the parties verbally said regardless of   whether an objective person would have thought joking was involved.

2 points   

Question 30 

1. Jim, who is a bit eccentric, says that he is fed up      with the way a certain employer in his town treats employees and that he      is going to sue that employer in an effort to improve matters. Jim also      says that he is going to start his case at the appellate court level,      skipping over all of those “lesser” judges. Jim says that those      justices will surely hear him out and that he will also seek a jury.      Although he is not a lawyer, Jim believes that the offenses of the      employer are so severe that the justices will appreciate his attempt to      make things better for the employees involved. Will Jim get a jury at the      appellate court level?

  

Only if the opposing party agrees

 

In some states but not in others

 

Only if he is in federal court

 

Only if he is in state court

 

No

2 points   

Question 31 

1. Which of the following is a person who has a duty to      act primarily for another person’s benefit?

  

Principal

 

Employer

 

Fiduciary

 

Trustor

 

Benefitor

2 points   

Question 32 

1. Which of the following is TRUE regarding whether the      shape of a product or package may be a trademark?

  

The shape of a product may be a   trademark if it is nonfunctional, but the shape of a package may not be the   subject of a trademark.

 

The shape of a product may be the   subject of a trademark if it is functional, but the shape of the package may   not be the subject of a trademark.

 

The shape of a product or package   may be a trademark if it is functional.

 

The shape of a product or the   shape of a package may be a trademark if it is nonfunctional.

 

The shape of a package may be a   trademark if it is nonfunctional, but the shape of a product may not be the   subject or a trademark.

2 points   

Question 33 

1. Which of the following BEST determines the obligations      of sellers/lessors and buyers/lessees?

  

Terms the parties outline in   agreements

 

Custom

 

Rules outlined by the UCC

 

Terms the parties outline in   agreements, custom, and rules outlined by the UCC

 

Terms the parties outline in   agreements and custom, but not rules outlined by the UCC

2 points   

Question 34 

1. In a limited partnership, which of the following have      no part in the management of the business?

  

General partners

 

Limited partners

 

Special partners

 

General partners, limited partners,   and special partners

 

General and special partners but   not limited partners

2 points   

Question 35 

1. Patricia, the president of a company that makes      batteries, has a new interest in the environment. She recently went to a      seminar on environmental dangers and has decided to take steps to clean      things up. She started at home and was also committed to change things at      work. Patricia had to face the fact that her company has been cheating and      is not in compliance with applicable environmental regulations due to      dumping in a nearby river. Her company has never been cited, however,      because it employs a very large number of people in the community,      including the mayor’s wife and the chief-of-police’s brother.

        On her mission to clean things up, Patricia has decided to go even further      than the law requires and install the very latest environmental      protections. When she announced her plan, the chair of the company’s board      of directors, Cindy, had a meeting with Patricia. Cindy told Patricia to      analyze the situation carefully because the cost of the additional      equipment would mean no dividend to shareholders and no raise for      employees. Furthermore, Cindy told Patricia that installing all of the new      equipment would result in higher prices for the company’s batteries and      could bankrupt the company because of foreign competition. Cindy hinted      that Patricia could be fired if she persisted. Cindy suggested that      Patricia just be concerned with a minimal standard of ethics. Which of the      following is the minimal standard that a business must meet in a      consideration of business ethics?

  

Decisions must be legal.

 

Decisions must meet the criteria   of a follower of the WPH Framework for Business Ethics.

 

Decisions must meet the   requirements of the most important stakeholders.

 

Decisions must receive a majority   vote of acceptance by employees.

 

Both that decisions must be legal   and that decisions receive a majority vote of acceptance by employees.

2 points   

Question 36 

1. Which of the following is FALSE regarding the agency      relationship?

  

It is a consensual relationship.

 

It may be formed by formal written   contracts.

 

It may usually be formed by   informal oral agreements.

 

It exists when the principal takes   action to ask another individual to act on behalf of the principal.

 

People must be trained in the   field involved in order to qualify as agents.

2 points   

Question 37 

1. Barry, an auctioneer, was holding an auction on a      Saturday morning. At the beginning of the auction, Barry announced that      the auction was being held without reserve. At the auction, Mary saw a      great deal on a used table. She bid $20 on it. No one else bid anything.      Barry announced that $20 was clearly insufficient for the table, that it      was worth much more than that, and that he was taking it out of the      auction. Mary sued Barry, attempting to obtain possession of the table.      What is the likely result in the lawsuit brought by Mary against Barry for      the table?

  

Barry will win because Mary was   simply making an offer that he was free to decline.

 

Barry will win because the price   was clearly insufficient for the table.

 

Barry will win because no   acceptance occurred.

 

Mary will win because the auction   was without reserve, and Barry had agreed to accept the highest bid.

 

Barry will win because he did not   inform attendees in writing that the auction was without reserve.

2 points   

Question 38 

1. Which of the following articles of the Uniform      Commercial Code (UCC) governs sales contracts?

  

2

 

2(A)

 

4

 

4(A)

 

6

2 points   

Question 39 

1. A __________ is a FALSE representation of a material      fact that is consciously false and intended to mislead the other party.

  

negligent misrepresentation

 

fraudulent misrepresentation

 

scienter misrepresentation

 

negligent misrepresentation,   fraudulent misrepresentation, and a scienter
  misrepresentation

 

negligent or fraudulent   misrepresentation, but not a scienter misrepresentation

2 points   

Question 40 

1. Which of the following do NOT meet the UCC definition      of a good?

  

Real estate

 

Corporate stocks

 

Copyrights

 

Neither real estate, corporate   stocks, nor copyrights meet the definition of goods

 

Real estate and corporate stocks   do not, but copyrights do meet the definition of good