Acct324 Review Questions

CHAPTER 1: Connect Questions
Business law consists of _____ that govern commercial relationships.

dominant systems and practices
conventional channels
enforceable rules of conduct
traditional regulatory bodies
Business law consists of the enforceable rules of conduct that govern commercial relationships. In other
words, buyers and sellers interact in market exchanges within the rules that specify the boundaries of legal
business behavior.
A garment manufacturing company wants to shift from being a supplier to a retailer. Which of the
following will govern the legal aspects of this decision?
Corporate law
Business law
Administrative law
Employment law
Business activities must follow legal guidelines. All contracts, employment decisions, and payments to a
supplier are constrained and protected by business law. Each of the six functional areas of business:
management, production and transportation, marketing, research and development, accounting and finance,
and human resource management; sits on a foundation of business law.
Which of the following is an intended and essential purpose of law?
To impose checks on citizens.
To demand respect.
To rely upon the goodwill of others.
To encourage social justice.
The purposes of law include: providing order such that one can depend on a promise or an expectation of
obligations, serving as an alternative to fighting, facilitating a sense that change is possible, but only after a
rational consideration of options, encouraging social justice, guaranteeing personal freedoms, and serving
as a moral guide by indicating minimal expectations of citizens and organizations.
The difference between civil law versus criminal law is that, the guilty defendant of a:
civil case is never incarcerated.
criminal case is always incarcerated.
civil case is either incarcerated or required to pay a fine.
criminal case is never required to pay a fine.
Guilty defendant of a civil case is never incarcerated. Typically, if defendant is found guilty, the victim
receives some sort of compensation
Which of the following laws would govern a dispute between a tenant and a landlord over payment
of rent?
Public law
Private law
Commercial law
Corporate law
Private law regulates disputes between private individuals or groups.
A restaurant regularly overfills trash cans in the alley and improperly disposes left-over meat and
other perishables. Which of the following laws will regulate this incident?
Private law
Criminal and public law
Public and civil law
Public law
Public law controls disputes between private individuals or between groups and their government.
The U.S. Code contains legislative acts passed by the _____.
Senate
U.S. Congress
President
House of Representatives
Legislative acts are written into the United States Code when they are passed by Congress.
Which of the following laws is defined as, A collection of rules and laws put forth by legislating
bodies?
Constitutional law
Common law
Statutory law
Administrative law
A collection of rules and regulations put forth by legislating bodies; considered the primary law under the
constitution.
A collection of rules and decisions made by government agencies is known as _____ law.
corporate
common
agency
administrative
The federal, state, and local governments have dozens of administrative agencies whose task is to perform
a particular government function. Administrative law is the collection of rules and decisions made by all
these agencies.
Wong owned a laundry store in Colorado but had to move to Salt Lake City, Utah for personal
reasons. He wants to establish another laundry store in the new city. He can find information
regarding local taxes if he refers to:
local statutes.
local ordinances.
local codes.
local laws.
Business managers must also be familiar with the local city and county ordinances that govern matters not
covered by federal or state codes. These ordinances address important business considerations, such as
local taxes, environmental standards, zoning, and building codes.
New statutory law can revoke _____ law.
criminal
private
corporate
case
Case law, or common law, is law unless revoked later by new statutory law.
Which of the following laws is especially significant for businesses that operate in multiple legal
jurisdictions?
Trade law
Administrative law
Case law
Restatements of law
Case law is especially significant for businesses that operate in multiple legal jurisdictions. Courts in two
different business locations may interpret similarly worded statutes differently.
A labor union at a match factory protested against the unhealthy conditions in which they were
required to work. Management refused to make changes since all the workers had signed an
employment contract stating that they were willing to work in any condition provided by the factory.
Despite the legal contract, the labor union has decided to litigate. On what grounds would their case,
most likely, be fought?
Tradition
Legal realism
Natural law
Legal positivism
The term natural law describes certain ethical laws and principles believed to be morally right and above
the laws devised by humans. Under natural law, individuals have not only basic human rights but also the
freedom to disobey a law enacted by people if their conscience goes against it and they believe it is wrong.
Not letting morality interfere with the obedience of law comes under which concept?
Natural law
Legal positivism
Tradition
Identification with the vulnerable
The concept of legal positivism sees ones proper role as obedience to duly authorized law. That law is quite
distinct from morality, and moral questions about the law should not interfere with ones inclination to obey it.
Which of the following concepts come under legal realism?
Law can never be enforced with complete consistency.
Past practice was the product of careful thought.
Some higher law or body of moral principles connects all of us in the human community.
Certain ethical laws and principles believed to be morally right and above the laws devised by
humans.
Legal realism is based on the idea that, when ruling on a case, judges need to consider more than just the
law; they also weigh factors such as social and economic conditions, since legal guidelines were designed
by humans and exist in an ever-changing environment. They believe the law can never be enforced with
complete consistency and argue that because judges are human, they will bring different methods of
reasoning to very similar cases.
Business law consists of the enforceable rules of conduct that govern commercial relationships.
True
False
Because of the law, we rely on the goodwill and dependability of one another.
True
False
In the absence of law, we would rely solely on the goodwill and dependability of one another.
True
False
Cyberlaw is based primarily on existing laws.
True
False
Another name for case law is common law.
True
False
Case law, also called common law, is the collection of legal interpretations made by judges.
Case law interpretations are law unless they are revoked later by new statutory law.
True
False
The term stare decisis means reversing the decision.
True
False
The principle of stare decisis refers to standing by their decision, a reference to rulings made in higher
courts that become a binding precedent for lower courts.
The decision of a state supreme court is binding on a lower state court located in the state.
True
False
When an issue is brought before a state court, the court will determine whether the state supreme court has
made a decision on a similar issue, which creates a binding precedent or pattern of law the lower court must
follow.
Constitutions and statutes are complete in the sense of covering the detailed rules that affect
government and business relations.
True
False
Constitutions and statutes never cover all the detailed rules that affect relationships between government
and business.
Presidents claim the power to issue executive orders on the basis of their Article II, Section 1,
constitutional power to take care that the laws be faithfully executed.
True
False
The term natural law is another word for legal positivism.

True
False
The term natural law describes certain ethical laws and principles believed to be morally right and above
the laws devised by humans whereas the term legal positivism focuses on obedience to duly authorized
law.
Which of the following spell out what market participants may and may not legally do?
Constitutions, legislatures, regulatory bodies, and courts
Legislatures only
Courts only
Legislatures and courts, but not constitutions or regulatory bodies
Constitutions, legislatures, and courts, but not regulatory bodies
Which of the following would be relevant areas of business law to a human resource manager?
Contracts, employment and labor law, and employment discrimination
Contracts only
Contracts and labor law, but not employment discrimination
Employment and labor law, but not contracts
None of the above because a human resource manager would be involved in work assignments
only
Relevant areas of business law applicable to human resource management involve agency law,
contracts, employment and labor law, and employment discrimination.
Laws are enforced by which of the following?
State legislatures
Federal Congress
Community consensus
Courts
All the above
A majority of citizens in a democracy can agree to permit certain authorities to make and enforce
rules describing what behavior is permitted and encouraged in their community. These rules are
what we refer to as the ______.
Electoral college
Community standard
Democratic validation
Stare decisis
Law
Assume a businessperson who owns a computer equipment store is delinquent in paying rent to the
landlord. The resulting dispute focuses on ______law.
Public
Preferential
Consensual
Private
Black lette
Private law regulates disputes between private individuals or groups.
If a computer store dumps waste behind its building in violation of local, state, or federal
environmental regulations, the resulting dispute focuses on ______law.
Public
Preferential
Consensual
Private
Black letter
Which type of law delineates the rights and responsibilities involved in relationships between
persons and between persons and their government?
Criminal
Procedural
Civil
Natural
Positive
Civil law delineates the rights and responsibilities implied in relationships between persons and between
persons and their government.
Which type of law involves incidents in which someone commits an act against the public as a unit?
Criminal
Procedural
Civil
Natural
Positive
Assume a restaurant chain is forced to pay damages to a person who suffered food poisoning after
eating at the restaurant. What type of law is involved?
Public law only
Private law only
Civil law only
Public, private, and civil law
Private law and civil law
Civil law identifies the remedies available when someones rights are violated, and private law regulates
disputes between private individuals or groups.
Assume the Securities and Exchange Commission prosecutes someone for insider trading. This
prosecution is an example of ______law.
Criminal
Procedural
Civil and natural
Natural
Positive
Criminal law regulates incidents in which someone commits an act against the public as a whole, such as by
conducting insider trading on the stock exchange.
The______ is the supreme law of the land.
U.S. Constitution
Declaration of Independence
U.S. Code
Model Law
Uniform Code
The rules and regulations put forth by legislatures are referred to as______ law.
Administrative
Statutory
Uniform
Proper
Secondary
Legislative acts passed by state legislatures can be found in the ______.

U.S. Code
State codes
Uniform Register
State Reporter
State Reference Manual
Legislative acts are written into the appropriate state codes when they are enacted by state legislatures.
Legislative acts passed by the U.S. Congress can be found in the ______.
U.S. Code
State codes
Uniform Register
State Reporter
The State Reference Manual
Legislative acts are written into the United States Code when they are passed by Congress.
Reference: Inattentive Driving. Molly decided not to attend class and instead decided to drive off
campus to check on her new dress for the upcoming dance feast. While driving, Molly is busy
talking on her cell phone with her friend Sharon to convince her into going to the dance with Mollys
brother who has a big crush on Sharon. Unfortunately for Molly, there is a statute in her state
outlawing talking on a cell phone while operating a motor vehicle. Molly crashes into the side of
Sams new convertible when she looks down to pick up a can of soda she just dropped onto her new
jeans. A police officer just down the street comes over to investigate. Molly explains to him that it
was difficult to hold the cell phone in one hand, the soda in the other, and also drive. The officer was
not impressed. Around that time, Sam comes along. He is furious regarding the significant dent in
his new car. Molly says that she has insurance, and she will cover the whole incident. Sam says that
is insufficient. The officer is annoyed because it is his lunch break. He tells Molly that she must obey
the law, and proceeds to write several citations to her. The law in Mollys state regulating cell phone
usage would be classified as which of the following?
A statute
A type of common law
An executive order
A uniform law
A negative law
The assortment of statutes, or rules and regulations put forth by legislatures, is what we call statutory law.
The group that urges states to enact model laws to provide greater uniformity of law is called the
______.
Model Law on Uniform State Laws Organization
Federal Uniform Law Commission
National Conference of Commissioners on Uniform State Laws
Model and Uniform Law Consortium
Uniform Statutory Enforcement Commission
When the organization in charge of proposing uniform laws proposes a statute, which of the
following is true?
All states must adopt the uniform statute within one year.
All states must adopt the uniform statute within six months.
The uniform statute automatically goes into effect without any action by state legislatures.
A state legislature is not required to adopt the uniform statute; but if the state legislature decides
to go forward with adoption, all portions of the statute must be adopted.
A state legislature can ignore the proposed uniform law, adopt it in full, or adopt it in
part.
Case law can be revoked by ______.
New statutes
Precedent
Stare decisis
Critical law
None of the above. Case law cannot be revoked
The term ______ involves the use of past decisions to guide future decisions.
Commonality
Precedent
Restatement
Uniformity
Modeling
The ______ is a body of law significant to business activities including sales, banking, and warranty.
Federal Business Code
Model Business Code
Uniform Transactional Model
Uniform Commercial Code
Marketing Transaction Code
The Uniform Commercial Code is a body of law significant for business activities including sales laws and
other regulations affecting commerce, such as bank deposits and collections, title documents, and
warranties.
When courts rely on precedent, they are obeying ______.
Common analysis
Res judicata
Stare decisis
In rem process
Federal law
stare decisis (standing by their decision), in which rulings made in higher courts become binding precedent
for lower courts.
Which of the following cases overturned prior precedent?
Brown v. Board of Education
Wygant v. Jackson Board of Education
Planned parenthood of Southeastern Pennsylvania v. Casey
Plessy v. Ferguson
None of the above because precedent cannot be overturned
Brown v. Board of Education did not follow the precedent established by Plessy v. Ferguson.
Which of the following is true regarding administrative agencies?

There are state administrative agencies, but no federal administrative agencies.
There are federal administrative agencies, but no state administrative agencies.
There are state and federal administrative agencies, but no local administrative agencies.
Administrative agencies exist only at the local county level.
Administrative agencies exist at the federal, state, and local level.
Which of the following is true regarding treaties at the federal level?

A treaty is generally negotiated by the executive branch and must then be approved by
twothirds of the Senate.
A treaty is generally negotiated by the executive branch and must then be approved by twothirds of the House of Representatives.
A treaty is generally negotiated by the executive branch and must then be approved by twothirds of the Senate and also by two-thirds of the House of Representatives.
A treaty is generally negotiated by the executive branch and no approval by the Senate or
House of Representatives is needed.
A treaty is generally negotiated by the executive branch and must then be approved by twothirds of the Senate and also by two-thirds of the state legislatures.
Which of the following can issue executive orders?
The president only
State governors only

The president and state governors
The president, state governors, and Congress
The president, state governors, Congress, and state legislatures
Which of the following contains summaries of common law rules in a particular area of the law?
U.S. Code
State Administrative Codes
Executive Proclamations
Case Reporters
Restatements of the Law
Which of the following is an independent agency?

The Federal Deposit Insurance Corporation
The Consumer Product Safety Commission
The General Services Administration
The Small Business Administration
The Office of Personnel Management
1-5 Major Federal Administrative Agencies reflects that the Consumer Product Safety Commission is an
independent agency.
Which of the following is an executive agency?

The Federal Deposit Insurance Corporation
The Federal Trade Commission
The Securities and Exchange Commission
The Federal Communications Commission
The Nuclear Regulatory Commission
1-5 Major Federal Administrative Agencies reflects that the Federal Deposit Insurance Corporation is an
executive agency.
The concept of ______suggests that individuals should have the freedom to disobey a law enacted
by people if their conscience goes against the law and they believe the law is wrong.
Legal positivism
Natural law
Legal-realism
Conscience reaction
None of the above
Assume a judge writes that she is deciding to enforce a law in question but that her decision does
not mean that she sees the law as the morally correct rule. The judge would have leanings in the
direction of ______.
Legal positivism
Natural law
Legal realism
Conscience reaction
None of the above
The concept of legal positivism sees ones proper role as obedience to duly authorized law. That law is quite
distinct from morality, and moral questions about the law should not interfere with ones inclination to obey it.
In which school of jurisprudence is the concept of stare decisis rooted?
The Historical school
Legal realism
The cost-benefit analysis school
Positivism
Cultural reenactment
Which of the following is reported in the Federal Reporter?

Statutes
Executive orders
Common law
Administrative laws
Local ordinances
The Federal Reporter is a case law reporter
Which of the following is reported in the United States Code?
Statutes
Executive orders
Common law
Administrative laws
Local ordinances
US code of LAWS
Which of the following is reported in the Code of Federal Regulations?
Statutes
Executive orders
Common law
Administrative laws
Code of Federal Regulations
Which of the following is based on the idea that, when ruling on a case, judges consider more than
just the law; they also weigh factors such as social and economic conditions?
Cost-Benefit Analysis
Legal Realism
Historical School
Legal Positivism
Executive Positivism
Legal realism is based on the idea that, when ruling on a case, judges need to consider more than just the
law; they also weigh factors such as social and economic conditions, since legal guidelines were designed
by humans and exist in an ever-changing environment.
Which approach to jurisprudence is based on choosing alternatives that maximize benefits and
minimize costs, and is tied to the pursuit of efficiency?
Cost-Benefit Analysis
Legal Realism
Historical School
Legal Positivism
Executive Positivism
Candy wants to start an Internet business. She is told by the Chinese government that certain items
on her site are objectionable and illegal, and that if she wants to do business in China, she must
remove the objectionable material. Which of the following is true?
Candy is within her rights and should stand her ground. She is a U.S. citizen, and so long as
she obeys U.S. laws, she can do business in China.
Candy is within her rights only if she petitioned her state senator and obtained his or her
permission to proceed.
If Candy wants to do business in China, she must abide by Chinese law.
By international law, there is a set fee of $10,000 that Candy can pay if she wants to obey only
U.S. law. If she pays that amount, she can continue in China without any modification.
By international law, there is a set fee of $5,000 that Candy can pay if she wants to obey only
U.S. law. If she pays that amount, she can continue in China without any modification.
Candy should understand comparative law which studies and compares the laws in different countries. The
Chinese government does not want its citizens to have access to certain information and Web sites; and to
do business there, Candy must conform to the Chinese standards.

What is an ethical dilemma?
Study and practice of decisions about what is good, or right.

Application of ethics to the special problems and opportunities experienced by businesspeople.
A problem about what a firm should do, for which no clear, right decision is available.
The expectations that communities have from businesses.
An ethical dilemma is a problem about what a firm should do, for which no clear, right decision is available.
Reasonable people can expect to disagree about optimal solutions to ethical dilemmas.
Why must firms honor, to some extent, the social responsibility to business?
The community often imposes restrictions on firms that only provide a useful good or services.
Firms are always subject to the implicit threat that legislation will impose social
obligations on them.
The community expects businesses to obey certain standards of fairness, except when the
standards interfere with profit maximization.
Most communities have similar expectations of businesses.
The social responsibility of business consists of the expectations that the community imposes on firms doing
business inside its borders. These expectations must be honored to a certain extent, even when a firm
wishes to ignore them, because firms are always subject to the implicit threat that legislation will impose
social obligations on them.
he legality of a business decision is the _____ standard that must be met.
maximal
moderate
optional
minimal
But the existence of that minimum standard is essential for the development of business ethics.
Acme manufactures food products and is opening a subsidiary in Country Z. The firm discovers that
to obtain raw materials it has to bribe local officials and businesses in Country Z. The second option
is to import raw materials from its own country, which will be expensive in the long-run. In this
situation, Acme:
is faced with an ethical dilemma.
has no social responsibility toward Country Z.
can apply the concept of virtue ethics.
needs to only focus on profitability.
Multinational companies face an ethical dilemma: They must decide whether to pay bribes or find alternative
sources of supplies.
The definition of business ethics refers to _____ of business conduct.
correct decisions
standards
legality
definitive lists
The definition of business ethics refers to standards of business conduct. It does not result in a set of correct
decisions. Business ethics can improve business decisions by serving as a reminder not to choose the first
business option that comes to mind or the one that enriches us in the short run.
A company is caught bribing government officials in foreign countries in order to establish and
maintain its affiliate branches there. The fines levied on the company fall under which act?
Foreign Criminal Practices Act
Sarbanes Oxley Act
International Modernization Act
Foreign Corrupt Practices Act
Multinational giant Siemens AG was ordered to pay the largest Foreign Corrupt Practices Act (FCPA) fine in
history after admitting to acts of bribery worldwide.
Why must multinational companies take into account the different ethical understandings that
prevail in a different country?
Ethical conceptions shape business law and business relationships uniquely in each
country.
Law and business ethics serve as an interactive systeminforming and assessing each other.
Business ethics can never produce a list of correct business decisions that all ethical
businesses will make.
Legal rules that govern the exchange have been shaped in large part by our sense of
commercial ethics.
Increasingly, business leaders require sensitivity to the differences in legal guidelines in the various
countries in which they operate.
Which of the following is a way to take the universalization test for a business owner?
Informing the public of the business decision before it is taken.
Putting himself in the position of the stakeholder and judging the decision.
Taking into account whether God would judge the decision to be correct or not.
Considering the impact on the world if the decision were applied by all businesses.
A third general guideline shares with the other two a focus on the otherthe stakeholders whom our
actions affect. Before we act, the universalization test asks us to consider what the world would be like were
our decision copied by everyone else.
Which of the following is called the television test with regard to the WPH framework?
Universalization
Public disclosure
Golden Rule
Social Responsibility
The public disclosure test is sometimes called the television test, for it requires one to imagine that ones
actions are being broadcast on national television.
What is the intent of the Sarbanes Oxley Act?
Promoting high standards of business ethics.
Setting limitations for Internet usage in business.
Encouraging stakeholders to take a more active role in business.
Apprehending businesses who use unethical trading means.
The Sarbanes-Oxley Act is intended to promote high ethical standards among business managers and
employees through a series of stringent requirements and controls that regulate several different facets of
corporate operation.
Ethical relativism holds that morality is _____.
objective
neutral
relative
divine
Ethical relativism is a theory of ethics that denies the existence of objective moral standards. Rather,
according to ethical relativism, individuals must evaluate actions on the basis of what they feel is best for
them. Morality is relative, and thus no one can criticize anothers behavior as immoral.
Why is ethical fundamentalism difficult to follow?
The unquestionable nature of rules is overly inflexible.
It does not offer specific-enough criteria to be useful in many real-world situations.
It denies the existence of any fixed moral standards.
It does not say how to evaluate someones actions.
Absolutism, or ethical fundamentalism, requires that individuals defer to a set of rules to guide them in the
ethical decision-making process. The unquestionable nature of the rules in most absolutist repositories
seems overly inflexible when applied to different situations.
In response to the trade unions demands, Firm Z holds an executive-level meeting. In the meeting,
the executives weigh the monetary consequences of agreeing to the unions demands. Which theory
of business ethics are they following?
Rule utilitarianism
Consequentialism
Act utilitarianism
Cost benefit analysis
One form of utilitarianism commonly applied by firms and government is cost-benefit analysis. When a
business makes decisions based on cost-benefit analysis, it is comparing the pleasure and pain of its
optional choices, as that pleasure and pain are measured in monetary terms.
Which of the following statements is true according to the categorical imperative of deontology?
A business manager should choose the action which yields the greatest amount of pleasure
over pain for all involved.
A business manager should put himself in the shoes of the person to be affected by his decision
and then decide.
No decision taken by the business manager can be wrong as morality is subjective.
A business decision can be evaluated on the basis that it would be consistent for
everyone in society to take the same decision.
According to the categorical imperative of the deontological perspective, an action is moral only if it would
be consistent for everyone in society to act in the same way.
Which of the following theories of business ethics is most concerned with human relationships?
Virtue ethics
Deontology
Ethics of care
Utilitarianism
The ethics of care holds that the right course of action is the option most consistent with the building and
maintaining of human relationships. Those who adhere to an ethic of care argue that traditional moral
hierarchies ignore an important element of life: relationships.
Ethical conversation is primarily about finding the one and only right thing to do.
True
False
Ethical conversation is less about finding the one and only right thing to do; it is about finding the better thing
to do.
Business ethics is the application of ethics to the special problems and opportunities experienced
by businesspeople.
True
False
The social responsibility of business consists only of the expectations employees have of
employers.
True
False
business inside its borders.
Ethics is not an issue in accounting because of the primarily objective data involved in that field.
True
False
business inside its borders. These expectations must be honored to a certain extent, even when a firm
wishes to ignore them, because firms are always subject to the implicit threat that legislation will impose
social obligations on them.
In some countries, businesses must pay bribes in order to receive legitimate supplies.
True
False
In an ethical analysis using the WPH Framework referenced in the text, owners are the most
important stakeholders and should receive the greatest consideration in decision making regardless
of the type of problem addressed.
True
False
The WPH framework considers who the decision would affect, purpose (values), and how to make ethical
decisions.
The definition of stakeholder is the same as the definition of shareholder.
True
False
The stakeholders of a firm are the many groups of people affected by the firms decisions.
The community in which a firm operates would not be considered a stakeholder of the firm.
True
False
The general community where a firm operates is a stakeholder of the firm.
Situational ethics is the same thing as ethical relativism.

True
False
Unlike ethical relativism, situational ethics allows us to judge other peoples actions.
Consequentialism provides a rigid set of rules to follow regardless of the situation.
True
False
In contrast to absolutism, consequentialism does not provide a rigid set of rules to follow regardless of the
situation.
Utilitarianism is a form of consequentialism.
True
False
Which of the following is the application of ethics to special problems and opportunities
experienced by those in business?
Situational ethics
Consequentialism
Business ethics
Sarbanes-Oxley principles
Business utilitarianism
Which of the following is the study and practice of decisions about what is good, or right?
Morals
Ethics
Consequences
Law
Business
A local Chamber of Commerce plans a seminar on the social responsibility of business in our
community. What does that term reference?
The responsibility of business to make profit for shareholders.
The responsibility of business to have annual meetings.
The expectations that the community imposes on firms doing business inside its
borders.
The expectations of employees regarding wage rates.
The expectations of management in regard to adequate utility resources.
Which of the following is true, as reflected in the case of Rexford Kipps v. James Cailler, regarding
the immunity of public officials?
Public officials are absolutely immune from suit based on their actions.
Government officials are entitled to qualified immunity insofar as their conduct does not violate
clearly established statutory rights of which a reasonable person would have known.
clearly established constitutional rights of which a reasonable person would have known.
Government officials are entitled to qualified immunity insofar as their conduct does not
violate clearly established statutory or constitutional rights of which a reasonable
person would have known.
the First Amendment of the U.S. Constitution.
Which of the following is true regarding a corporate code of ethics?
A corporate code of ethics provides definitive lists of right and wrong decisions.
A well-managed corporation does not need a code of ethics.
A well-managed corporation tries to provide ethical leadership by establishing codes of
ethics.
A corporate code of ethics is legally mandated in all states pursuant to state law.
A corporate code of ethics is required by federal law
Well-managed firms try to provide ethical leadership by establishing codes of ethics for the firm. The
complications associated with managerial decisions do not permit any ethical guide to provide definitive lists
of right and wrong decisions.
What is the system of guanxi used in China?
It refers to a system of relationship building woven together by social ties.
It refers to a system of strict ethical rules.
It refers to a prohibition against criticism of government rules and regulations.
It refers to a system by which business people attempt to avoid strict Chinese regulations.
It refers to a system of smuggling.
What do the letters WPH mean in reference to the WPH Framework for Business Ethics
discussed in the text?
Who, Purpose, and How

When, Plan, and How
Why, Procedure, and Hope
Where, Plan, and Hope
Where, Procedure, and How
The WPH framework addresses whom a decision would affect, the purpose of the decision, and the
guidelines on how to make ethical decisions.
Which of the following is true under the WPH process of ethical decision making?
The interest of management is ranked higher than that of employees when decisions are made.
The interest of owners is ranked higher than that of both employees and management when
decisions are made.
When decisions are made, the interest of the community as a whole is considered last.
The interest of management is ranked higher than that of employees when decisions are made,
but the interest of owners is ranked higher than the interest of any group.
None of the above is true.
The framework addresses whom a decision would affect, the purpose of the decision, and the guidelines on
how to make ethical decisions. There is no reference to ranking stakeholders at a higher level.
Which of the following are stakeholders of a business?
Shareholders
Employees
Customers
Management
All the above
The stakeholders of a firm are the many groups of people affected by the firms decisions.
Positive abstractions that capture our sense of what is good or desirable are called ______.
Ethical ideas
Values
Conscience demands
Desirable principles
Action goals
Which of the following are values in the WPH process of ethical decision making?
Freedom only
Security only
Efficiency only
Freedom and security, but not efficiency
Freedom, security, and efficiency
2-6 Primary Values and Business Ethics outlines an efficient way to apply this second step in the WPH
framework referencing the values of freedom, security, justice, and efficiency.
The idea that we should interact with other people in a manner consistent with the manner in which
we would like them to interact with us is called the ______.
Equalization Rule
Ethical Realization Rule
Silver Rule
Golden Rule
Ten Commandments Rule
What is the name of the law signed by President Bush in the wake of several corporate accounting
scandals?
The Sarbanes-Oxley Act
The Public Accounting Act
The Certified Public Accounting Act
The Whaley-Mallicoat Act
The Corporate Scandal Act
The Corporate and Criminal Fraud Accountability Act, also known as the Sarbanes-Oxley Act, was signed
by President Bush in 2002 in the wake of several corporate accounting scandals.
Which of the following does the Public Company Accounting Oversight Board do?
Ensure that auditors and public accounting firms compile accurate and truthful financial reports
for the companies they audit.
Require that companies devise a system that allows employees to report suspicions of
unethical behavior.
Require that the universalization test be used as the primary ethical guideline.
Ensure that auditors and public accounting firms compile accurate and truthful financial
reports for the companies they audit and also requires that companies devise a system
that allows employees to report suspicions of unethical behavior.
None of the above there is no such board.

According to the text, which of the following may be a part of the how in the WPH process of
decision making?
Public disclosure
Values
Profit maximization
Whistle-blowing
All the above
The public disclosure test for ethical behavior is sometimes referred to as the ______ test.
Television
Powell
Self-conscious
Golden
Primary
The public disclosure test for ethical behavior is sometimes referred to as the television test because it
requires us to imagine that our actions are being broadcast on national television.
The ______ for ethical behavior seeks consideration of what the world would be like if a decision is
copied by everyone else.
Golden rule
Universalization test
Public disclosure
Relevant disclosure
World rule
The universalization test for ethical behavior seeks consideration of what the world would be like if a
decision is copied by everyone else.
Which of the following is true regarding the universalization test for ethical behavior?
It is the same as the public disclosure test.
It has been discredited.
It is the same as the golden rule test.

It has been enacted into law by the Sarbanes-Oxley Act.
None of the above
The ethical theory that requires that we evaluate the morality of an action by imagining ourselves in
the position of the person facing the ethical dilemma is called ______.
Situational ethics
Ethical relativism
Absolutism
Consequentialism
Relativity ethics
How is absolutism different from ethical relativism and situational ethics?

It applies utilitarianism.
It holds that a cost-benefit analysis should be applied.
It holds that whether an action is moral does not depend on the perspective of the
person facing the ethical dilemma.
It applies virtue ethics.
It applies corporate ethics principles.
Unlike ethical relativism and situational ethics, absolutism holds that whether an action is moral does not
depend on the perspective of the person facing the ethical dilemma.
Which of the following is true regarding the relationship between ethical relativism and situational
ethics?
Like ethical relativism, situational ethics requires that we evaluate the morality of an
action by imagining ourselves in the position of the person facing the ethical dilemma.
Like ethical relativism, situational ethics allows us to judge the actions of others.
Both theories hold that once we put ourselves in another persons shoes, we can evaluate
whether that persons action was ethical.
These theories are the same.
There is no relationship between ethical relativism and situational ethics.
Which of the following describes the theory of ethical relativism?
Its only principle is the denial of the existence of objective moral standards.
It holds that individuals must evaluate actions on the basis of what they feel is best for
themselves based upon objective moral standards.
It holds that since morality is relative, we have a basis upon which to criticize the behavior of
others as immoral.
It denies the existence of objective moral standards, it holds that individuals must evaluate
actions on the basis of what they feel is best for them, but it does not hold that morality is
relative.
It denies the existence of objective moral standards; it holds that individuals must
evaluate actions on the basis of what they feel is best for them; it holds that since
morality is relative, no one can criticize anothers behavior as immoral.
Which of the following requires that we see murder as a moral action as long as the murderer
believes that the action is best for him or her?
Absolutism
Deontology
Categorical Imperative
Uncertainty of Thought
Ethical Relativism
Ethical relativism denies the existence of objective moral standards; it holds that individuals must evaluate
actions on the basis of what they feel is best for them; it holds that since morality is relative, no one can
criticize anothers behavior as immoral
Which of the following theory of ethics denies the existence of objective moral standards?
Ethical relativism
Absolutism
Social responsibility
Ethical absolutism
Absolute theory
Which of the following is also referred to as ethical fundamentalism?

Ethical relativism
Absolutism
Social responsibility
Ethical absolutism
Absolute theory
Absolutism, or ethical fundamentalism, requires that individuals defer to a set of rules to guide them in the
ethical decision-making process.
Which of the following tells business managers to examine all the potential actions in each situation
and choose the action that yields the greatest amount of pleasure over pain for all involved?
Deontology
Rule utilitarianism
Act utilitarianism
Absolutism
Virtue ethics
What is the basis of consequentialism?

Deontology
Categorical imperatives
Inquiry into the consequences
Disregard of consequences
Act utilitarianism
Consequentialism is a general approach to ethical dilemmas that requires that we inquire about the
consequences to relevant people of our making a particular decision.
Kantian ethics is involved with which of the following ethical theories?

Deontology
Act utilitarianism
Rule utilitarianism
Absolutism
Situational ethics
An ethical theory that urges managers to take those actions that provide the greatest pleasure after
having subtracted the pain or harm associated with the action in question is called _____.
Deontology
Utilitarianism
Kantian ethics
Absolutism
Ethical relativism
A business manager who deceives everyone because the manager believes that deception
maximizes pleasure over pain in a given situation is acting consistently with which ethical theory?
Act deontology
Ethical relativism
Act utilitarianism
Ethical fundamentalism
Rule utilitarianism
A business manager may consider it wrong to terminate a person whose spouse has terminal cancer
because a firm has an absolute obligation to support its employees when they are vulnerable. The
business manager is acting consistently with which ethical theory?
Deontology
Ethical relativism
Act utilitarianism
Ethical fundamentalism
Rule utilitarianism
A person who believes that they should not cheat on a drug test because if everyone did so, the
drug test would be meaningless is applying a[n] ______.
Ethics of care
Virtual analysis
Cost-benefit analysis
Fundamentalist approach
Categorical imperative
According to the categorical imperative, an action is moral only if it would be consistent for everyone in
society to act in the same way.
Which of the following helps explain why the principle of deontology may be difficult to apply?
People disagree about what duties we owe to one another.
People disagree about whether consequences are positive or negative.
People disagree about the ethics of care.

People disagree about what duties we owe to one another and also whether consequences are
positive or negative.
People disagree about what duties we owe to one another, whether consequences are positive
or negative, and about the ethics of care.
The ethical system in which the development of virtues, or positive character traits such as courage,
justice, and truthfulness, is the basis for morality is called ______.
Absolutism decision
Virtual analysis
Virtue ethics
Fundamentalist approach
Categorical imperative
Virtue ethics is an ethical system in which the development of virtues, or positive character traits such as
courage, justice, and truthfulness, is the basis for morality.
Which of the following consists of acting on the basis of the recognition that certain actions are
right or wrong, regardless of their consequences?
Act utilitarianism
Rule utilitarianism
Situational ethics
Virtue ethics
Deontology
Deontology consists of acting on the basis of the recognition that certain actions are right or wrong,
regardless of their consequences.
What is a difficulty with the application of virtue ethics?
The applicable categorical imperatives.
The lack of agreement about the meaning of the good life.

The applicable principle of rights.
The ethics of care analysis.
Both the applicable categorical imperatives and the lack of agreement about the meaning of
the good life.
The ______ adherents believe that when one individual, the caregiver, meets the needs of one other
person, the cared-for party, the caregiver is helping to meet the needs of all the individuals who fall
within the cared-for partys web of care.
Deontology
Utilitarianism
Absolutism
Virtue ethics
Ethics of care
The ______ holds that the right course of action is the option most consistent with the building and
maintaining of human relationships.
Ethics of care
Principle of virtue ethics
Deontology
Act utilitarianism
Rule utilitarianism

Which of the following statements is true of appellate courts?
Appellate courts hold trials
Appellate courts primarily handle questions of facts
Under the federal system, appellate courts are called district courts
Appellate courts have the power to review previous judicial decisions
Appellate courts have the power to review previous judicial decisions to determine whether trial courts erred
in their decisions. Appellate courts do not hold trials.
Which of the following is true of a bench trial?

Judges cannot decide questions of law.
There is no judge in the trial.
There is no jury in the trial.
Questions of facts are determined by the jury.
In a bench trial(a trial with no jury), the judge decides questions of fact; in a jury trial, the jury decides
questions of fact.
When does a court acquire in personam jurisdiction over a defendant?
When the verdict is passed.
When it gives him or her a copy of the complaints and summons.
When a lawsuit is filed with the court.
When the trial begins.
A court acquires in personam jurisdiction over a person (the plaintiff) when she files a lawsuit with the court.
The court acquires jurisdiction over the person the plaintiff is suing (the defendant) when it gives him a copy
of the complaint and a summons.
Why have most states enacted a long arm statute?
It enables courts to serve defendants outside the state as long as the defendant has
sufficient minimum contacts within the state.
It enables courts to hear cases that fall within their jurisdiction but are geographically located in
a different state.
If a defendant has property in a state, it allows a plaintiff to file suit against the owner instead of
his or her property.
It opens doors to subject-matter jurisdiction that determines which court system can hear a
particular case.
Which of the following cases would fall under concurrent federal jurisdiction?
Federal patent, trademark, and copyright cases
Bankruptcy cases
Cases involving admiralty law
Federal-question cases
Concurrent jurisdiction covers two types of cases: federal-question and diversity-of-citizenship cases.
Federal-question cases require an interpretation of the United States Constitution, a federal statute, or a
federal treaty.
Who may file a motion for the change of venue?

Prosecutor
Defendant
Plaintiff
Jury
If the location of the court where the plaintiff filed the case is an inconvenience to the defendant or if the
defendant believes it will be difficult to select an unbiased jury in that venue, he may request that the judge
move the case by filing a motion for a change of venue. The judge has the discretion to grant or deny the
motion.
Where in the federal court system are bankruptcy cases initially heard?
Federal trial courts
Intermediate appellate courts
U.S. Supreme Court
Special trial courts
A small number of cases, however, do not begin in trial courts of general jurisdiction. For cases concerning
certain subject matter, there are special trial courts. They hear bankruptcy cases, claims against the U.S.
government, international trade and customs cases, and disputes over certain tax deficiencies.
In a case between Mann versus Roberts in the state of Iowa, one party appealed the verdict of the
state trial court. In the absence of an intermediate court of appeal, where would the case be heard?
State Supreme Court
Federal Trials Court
State Trial Court
Federal Circuit court
Appeals from the state intermediate courts of appeal lead cases to the state court of last resort. Most states
call this court the Supreme Court, although some states refer to it as the court of appeals. Because
approximately half the states lack intermediate courts of appeal, appeals from trial courts in these states go
directly to the state court of last resort.
Which of the following is a necessary condition for a justifiable controversy?

Courts rendering an advisory opinion.
Judgment should solve an existing problem.
Plaintiff should have a personal stake in the issue.
The problem should be immediate.
Three criteria are necessary for a case or controversy to exist. First, the relationship between the plaintiff
and the defendant must be adverse. Second, actual or threatened actions of at least one of the parties must
give rise to an actual legal dispute. Third, courts must have the ability to render a decision that will resolve
the dispute.
Usually the issue of _________ arises when one party claims that the case is moot.
personal stake
controversy
ripeness
standing
Usually, the issue of ripeness arises when one party claims that the case is mootin other words, there is
no point in the courts hearing the case because no judgment can affect the situation between the parties.
What is a pretrial motion?
An initial attempt to solve the dispute informally by a negotiation or discussion.
The first formal stage of a lawsuit.
A judgment in favor of the plaintiff if the defendant fails to answer the complaint.
A motion filed by either party to conclude the case early, after the pleading.
The early pleadings establish the legal and factual issues of the case. After the pleadings, the plaintiff or
defendant may file a motion to conclude the case early, eliminate some claims, or gain some advantage. A
party may move, or request, that the court do almost anything pertaining to the case.
What is meant by peremptory challenges?
Written questions that one party sends to the other to answer under oath.
A request for the court to consider that all the facts in the pleadings are true and to apply the
law to those facts.
Claims made by the defendant against the plaintiff that are sent with the answer to the
complaint.
A party can object to a certain number of potential jurors without citing a reason.
In most states, each party has a certain number of peremptory challenges. These peremptory challenges
allow a party to challenge a certain number of potential jurors without giving a reason. Peremptory
challenges, however, may lead to abuse.
What is a directed verdict?

A verdict reached through an informal meeting of the judge with the attorneys representing the
parties where the parties try to work out a settlement.
A verdict for the defendant as the jury would have no legal basis for decision in favor of
plaintiff even if it regarded the plaintiffs claims to be true.
A verdict given by recruited individuals who match the demographics of the jury.
A verdict given in favor of the plaintiff when the defendant fails to answer the summons.
Immediately following the plaintiffs presentation of her case, the defendant may move for a directed verdict.
This motion is a request for the court to direct a verdict for the defendant because even if the jury accepted
all the evidence and testimony presented by the plaintiff as true, the jury would still have no legal basis for a
decision in favor of the plaintiff.
Which of the following motions is filed by the winning party after the trial ends?
Motion for a judgment in accordance with the verdict
Motion for a judgment notwithstanding the verdict
Motion for a judgment as a matter of law
Motion for a new trial
Once the trial ends, the party who received the favorable verdict files a motion for a judgment in accordance
with the verdict. Until the judge enters the judgment, the court has not issued a legally binding decision for
the case.
A _____ is a written argument explaining why an appeal is being made.
verdict
motion
settlement
brief
The appellant then files a brief or written argument, with the court. Appellants file briefs to explain why the
judgment in the lower court was erroneous and why the appeals court should reverse it.
The word jurisdiction comes from the Latin terms juris, meaning law, and diction, meaning
to speak.
True
False
In rem jurisdiction references jurisdiction over a person.
True
False
Courts may have in rem jurisdiction (Latin for jurisdiction over the thing) even over property.
Under federal statutory law, Internet transactions cannot be the basis for a finding of in personam
jurisdiction.
True
False
A federal district court established a sliding-scale standard in the 1997 case Zippo Mfg. Co. v. Zippo Dot
Com, Inc. for determining whether a business that has Internet contact with a plaintiff in a different state
satisfies the minimum-contacts standard.
Subject-matter jurisdiction is a courts power to hear certain kinds of cases.

True
False
State courts have the power to hear all cases not within the exclusive jurisdiction of the federal court
system.
True
False
Concurrent federal jurisdiction means that both state and federal courts have jurisdiction over a
case.
True
False
Once a case is in the proper court system, venue determines which trial court in the system will hear
the case.
True
False
In some cases, the U.S. Supreme Court functions as a trial court of limited jurisdiction.
True
False
A person who has the legal right to bring an action in court has standing.
True
False
Intermediate courts of appeal exist in all states.
True
False
Intermediate courts of appeal, analogous to federal circuit courts of appeal, exist in approximately half the
states.
Under our system of justice, courts may issue advisory opinions.
True
False
The case or controversy (or justiciable controversy) requirement ensures that courts do not render advisory
opinions.
The defendant responds to a complaint with an answer.
True
False
Because of its complicated nature, any complaint should be at least three pages long.
True
False
A defendant who believes that he or she has a claim against the plaintiff would include a
counterclaim with the answer.
True
False
A reply is an answer to a counterclaim.
True
False
A party only has a limited number of challenges for cause in jury selection.
True
False
Peremptory challenges in jury selection may not be racially based.
True
False
In most civil cases, a plaintiff must prove her case beyond a reasonable doubt.
True
False
In most civil cases, a plaintiff must prove her case by a preponderance of the evidence.
Only one party may appeal from a final judgment.
True
False
Either party may appeal the judges decision on posttrial motions or on her or his final judgment.
If an appellate judge agrees with the majoritys decision, but for different reasons, the judge may
write a concurring opinion.
True
False
On average, the U.S. Supreme Court hears 300 cases a year.
True
False
The Supreme Court hears, on average, only 80 to 90 cases each year.
Which of the following do appellate courts primarily handle?
Questions of law
Questions of fact
Questions of law and fact
Cases when they initially enter the legal system
Questions of law and fact, and also cases when they initially enter the legal system
Appellate courts primarily handle questions of law, not questions of fact.
Which of the following is a question of fact?
Whether a vehicle ran a traffic light
Whether premeditation is necessary for a first degree murder conviction
Whether speech is protected by the First Amendment
What is necessary for service of process
Whether a vehicle ran a traffic light and also what is necessary for service of process
A question of fact is a question about an event or characteristic in a case.
Laws which enable the court to serve a defendant outside the state as long as the defendant has
sufficient minimum contacts within the state and it seems fair to assert jurisdiction is called ______.
Minimum contact statutes
Significant contact statutes

Long-arm statutes
In rem statutes
Quasi in rem statutes
Which of the following is the same as attachment jurisdiction?
In rem jurisdiction
Personal jurisdiction
Subject matter jurisdiction
Equitable jurisdiction
Quasi in rem jurisdiction
Courts can gain quasi in rem jurisdiction, or attachment jurisdiction, over a defendants property unrelated to
the plaintiffs claim.
Adult siblings, John, Sam, and Andy, are in disagreement over how to split the proceeds of a piece
of land left to them by a rich uncle who recently died. The uncle was a resident of Georgia, and the
land is in Georgia; but neither John, Sam, nor Andy live there. Which of the following is true
regarding jurisdiction over the dispute?
A court in Georgia would not have jurisdiction. The case would have to be brought in a state in
which at least one of the brothers lives.
A court in Georgia would have in rem jurisdiction over the dispute.
A court in Georgia would have in personam jurisdiction over the dispute.
A court in Georgia would have jurisdiction over the dispute only if all brothers signed a consent
form agreeing to bring the case in Georgia.
A court in Georgia would have original jurisdiction, but appellate jurisdiction would be in a state
in which at least one of the brothers lives.
Courts have in rem jurisdiction (Latin for jurisdiction over the thing) over property.
Susan ran a traffic light and did significant damage to Pauls car. Susan has no insurance and no
assets except for a farm. Which of the following is true?
A court can try the case and following judgment for Paul, exercise quasi in rem
jurisdiction over the farm and authorize its sale. Any excess over Pauls amount of
damages would go to Susan to compensate her for the trouble she had trying the case.
A court can try the case and following judgment for Paul, exercise quasi in rem jurisdiction over
the farm and authorize its sale. Any excess over Pauls amount of damages would go to Paul.
the farm and authorize its sale. Any excess over Pauls amount of damages would go to the
court system for its trouble.
the farm and authorize its sale. Any excess over Pauls amount of damages would be split
between Susan and Paul.
Assuming that Paul obtains a judgment in his favor, he has no rights to proceeds from the farm
because it is real property, not subject to seizure.

Courts can gain quasi in rem jurisdiction, or attachment jurisdiction, over a defendants property unrelated to
the plaintiffs claim. Any excess proceeds are returned to the owner.
Will a plaintiff be allowed to assert jurisdiction over a defendant in the plaintiffs state for a cause of
action arising out of the defendants website?
It depends on the nature and quality of commercial activity that an entity conducts over
the Internet.
Yes, for any type of action.
Yes, but only if the defendant consented to jurisdiction in the plaintiffs home state.
Yes, but only if the defendant has actually physically been in the plaintiffs home state within the
180 days prior to the filing of the complaint.
No, not under any circumstances.
Which of the following is true regarding state and federal court jurisdiction?
State courts begin with exclusive jurisdiction until a federal court intervenes.
In all cases, state courts have concurrent jurisdiction with the federal courts.
Federal courts begin with exclusive jurisdiction until a state court intervenes.
In all cases, state courts have exclusive jurisdiction unless the states Supreme Court grants
jurisdiction to a federal court in the state.
In some cases, state courts have exclusive jurisdiction; in some cases, state courts have
concurrent jurisdiction with the federal courts; and state courts also have the power to
hear all cases not within the exclusive jurisdiction of the federal court system.
State courts have the power to hear all cases not within the exclusive jurisdiction of the federal court
system; state courts also have exclusive jurisdiction over certain cases; and state courts at times have
concurrent federal jurisdiction meaning that both state and federal courts have jurisdiction over a case.
Which of the following is true regarding federal jurisdiction?
There is no exclusive federal jurisdiction in civil matters.
If a case falls within the federal jurisdiction, it may not fall within state jurisdiction.
Some cases fall within both federal jurisdiction and state jurisdiction, but there is no exclusive
federal court jurisdiction.
Some cases fall within both federal jurisdiction and state jurisdiction, but that only occurs in
criminal matters.
Some cases fall within both federal jurisdiction and state jurisdiction, but the federal
court system has exclusive jurisdiction over some cases.
Federal courts have exclusive jurisdiction over claims arising under federal statutes that specify exclusive
federal jurisdiction; federal courts at times have concurrent federal jurisdiction meaning that both state and
federal courts have jurisdiction over a case.
Over which of the following does the federal court system have exclusive jurisdiction?
Admiralty cases only
Bankruptcy cases only
Copyright cases only
None of the above
Admiralty, bankruptcy, and copyright cases
The federal court system has exclusive jurisdiction over very few cases: admiralty cases, bankruptcy cases,
federal criminal prosecutions, lawsuits in which one state sues another state, claims against the United
States, and cases involving federal copyrights, patents, or trademarks.
Which of the following is a courts power to hear certain kinds of cases?
Subject-matter jurisdiction
In kind jurisdiction
In personam jurisdiction
In loco jurisdiction
In area jurisdiction
Which of the following is needed for diversity-of-citizenship?
Only that the plaintiff not reside in the same state as the defendant.
Only that the plaintiff reside in the same state as the defendant.
Only that the controversy concerns an amount in excess of $75,000.
Only that the controversy concerns an amount in excess of $100,000.
The plaintiff and the defendant reside in different states and the controversy concerns an
amount in excess of $75,000.
A diversity-of-citizenship case must satisfy two conditions: (1) The plaintiff(s) does (do) not reside in the
same state as the defendant(s), and (2) The controversy concerns an amount in excess of $75,000.
For purposes of diversity-of-citizenship, where does a corporation reside?
The state of incorporation only.

The state in which the corporation has its principal place of business only.
The state in which the corporation has its principal place of business and the state of
incorporation.
Any state in which the corporation does business.
Any state in which the corporation has done business within the last five years.
The plaintiff can file the case in federal court initially, or the defendant can transfer the case to federal court
by exercising her right of removal if the case is initially filed in state court.
Assume a plaintiff files a case in the state court that could also have been filed in the federal court.
Does the defendant have any choice in the matter?
The defendant has a right to move the case to federal court.
The defendant can have the case moved to federal court only if federal jurisdiction question is
involved.
The defendant can have the case moved to federal court only if the state trial court judge grants
permission.
The defendant can have the case moved to federal court only if the plaintiffs filing expenses in
state court are paid by the defendant.
The defendant has no choice, and the case will stay in state court.
The plaintiff can file the case in federal court initially, or the defendant can transfer the case to federal court
by exercising her right of removal if the case is initially filed in state court.
Which of the following is typically an appropriate venue in a lawsuit?
Only the trial court where the defendant resides.
Only the trial court where the plaintiff resides.
Only the location where the dispute occurred if the lawsuit focuses on a particular incident.
Both the trial court where the defendant resides and the trial court where the plaintiff resides.
The trial court where the defendant resides and also the location where the dispute
occurred if the lawsuit focuses on a particular incident.
Usually, the trial court where the defendant resides is the appropriate venue; if the focus of the case is a
particular incident, the trial court where the dispute occurred is an appropriate venue.
Billy knows that he can bring his case against Bob in a state court in Tennessee. He is unsure,
however, of which county in which to proceed. Which of the following address the proper county?
In personam jurisdiction
Venue
Diversity jurisdiction
Long-arm jurisdiction
Once a court is in the proper court system, venue determines which trial court in the system will hear the
case.
What are the trial courts in the federal court system called?
U.S. district courts
U.S. circuit courts
Federal circuit courts
Federal jurisdictional courts
Preemptory courts
In the federal court system, the trial courts, or courts of original jurisdiction, are the U.S. district courts.
How many circuits does the U.S. Court of Appeals have?
6
50
12
10
13
Assuming there are no vacancies, how many U.S. Supreme Court justices are there?
9
5
15
8
7
Which of the following is true of the Supreme Court in Japan?

It consists of 13 justices.
It hears at least 100 cases per year.
Because of the Japanese emphasis on youth, justices are usually no more than 40 years old.
There is no chief justice.
None of the above are true.
The Supreme Court of Japan, located in Tokyo, consists of 15 justices, including one chief justice. Because
the justices ascend from lower courts, they are usually at least 60 years old. Because proving the
unconstitutionality of a law is extremely difficult, the full bench generally hears fewer than 10 cases annually.
Assume you know that Robert has told a lie about a friend of yours, Yolanda. You tell Yolanda that
she should sue Robert for defamation, but she has no interest in that. Can you sue as the plaintiff on
behalf of Yolanda?
Yes, so long as you give any money received to Yolanda.
Yes, but only if Yolanda signs a permission slip at the court.
Yes, but only if the dispute is for an amount under $25,000.
No, because there is no venue.
No, because you have no standing.
For a person to have standing, the outcome of a case must personally affect him or her.
Which of the following is true regarding state courts of appeal?

States only have an intermediate court of appeal if there is no state Supreme Court.
In states that do not have an intermediate court of appeal, appeals go to the federal court of
appeals.
In states that do not have an intermediate court of appeal, there is no right of appeal to any
court.
All states in this country have intermediate courts of appeal.
Not all states have intermediate courts of appeal; in those states, appeals go to the state
court of last resort.
The ______ requirement ensures that courts do not render advisory opinions.
Attachment
Case or controversy
In rem
In personam
Bob sued Jane over a motor vehicle accident. Bob and Jane settled the case prior to the trial for
$1,000. The lawsuit is now ______.
Ripe
Moot
Cased
Standed
Remanded
A case is ripe if a judges decision is capable of affecting the parties immediately. Usually, the issue of
ripeness arises when one party claims that the case is mootin other words, there is no point in the court
hearing the case because no judgment can affect the situation between the parties.
A[n] ______ is a judgment in favor of the plaintiff that occurs when the defendant fails to answer the
complaint and the plaintiffs complaint alleges facts that would support such a judgment.
Default judgment
Automatic judgment
Delineated response judgment
Dismissal
Pleading judgment
A defendant uses a[n] ______ when her or his answer admits that the facts contained in the
complaint are accurate but also includes additional facts that justify the defendants actions and
provide a legally sound reason to deny relief to the plaintiff.
Secondary answer
Pleading defense
Affirmative defense
Formal answer
Personam answer
The plaintiff must provide the defendant in a lawsuit with a copy of the complaint. That process is
called ______.
Summons issuance
Service of process
Service delivery
Subpoena delivery
In personam service
Which of the following is a document that notifies the defendant of the lawsuit and explains that if
the defendant does not respond to the lawsuit within a certain period of time, a default judgment will
be entered?
Complaint
Answer
Summons
Instructional guide
Transactional analysis
The court may grant a ______ if after reviewing the pleadings, the judge determines that the only
reasonable decision is in favor of the moving party.
Motion for judgment on the pleadings
Motion for summary judgment
Motion for sanctions
Motion for discovery
Motion for production
A motion for judgment on the pleadings is a request for the court to consider that all the facts in the
pleadings are true and to apply the law to those facts. The court grants the motion if, after this process, it
finds that the only reasonable decision is in favor of the moving party.
The court may grant a ______ if after reviewing the evidence in the case, there is no factual dispute
and one party is entitled to judgment prior to trial.
Motion for judgment on the pleadings
Motion for summary judgment
Motion for sanctions
Motion for discovery
Motion for production
The judge grants a motion for summary judgment if, after examining the evidence, no factual disputes are
found.
Which of the following are tools of discovery?
Interrogatories
Depositions
Summary motions
Both interrogatories and depositions, but not summary motions
Interrogatories, depositions, and summary motions
Interrogatories are written questions that one party sends to the other to answer under oath. At a deposition,
attorneys examine a witness under oath.
Which of the following are written questions that one party sends to another to answer under oath?
Interrogatories
Depositions
Inquiries
Subpoenas
Sworn assertions
At a(n) ______, attorneys examine a witness under oath with a court reporter present.
Deposition
Interrogatory
Inquiry
Pre-trial conference
Pre-trial mediation
Billy, a witness to a motor vehicle accident, is gravely ill with cancer. Pat, who was injured in the
accident, would like to preserve his testimony for trial in case he dies before the trial date. What
should Pat do?
Send interrogatories to Billy.
Take Billys deposition.
Send a request to admit to Billy that the accident was the defendants fault.
Have a conference with the judge and Billy.
There is nothing she can do.
The parties may also use depositions when a witness is elderly, moving, or ill such that he may be
unavailable at the time of the trial.
Amber says at trial that Gwen told her that she saw Tom run the traffic light and hit Christys car. On
what basis is Ambers testimony objectionable?
It is not objectionable.
Hearsay
Comprehension
Preponderation
Familiarity
Hearsay is a testimony about what a witness heard another person say. Hearsay is impermissible because
the opposing attorney cannot question the person who made the original statement to determine the
statements veracity.
Attorney Candy represents plaintiff Ann who is suing her neighbor for nuisance claiming that the
neighbor plays music too late at night. Candy puts Ann on the stand and asks her questions. Candy
is involved in which of the following?
Direct examination
Cross-examination
Judicial examination
Specific questioning
Redirect questioning
At a trial, first, the plaintiffs attorney questions the witness in direct examination.
If an appellate judge agrees with the majoritys decision, but for different reasons, the judge may
write a ______opinion.
Dissenting
Referring
Minority
Concurring
Referencing
If a judge agrees with the majoritys decision, but for different reasons, the judge may write a concurring
opinion, stating the reasons used to reach the majoritys conclusion.

A(n) _____ is defined as "a promise or set of promises for the breach of which the law gives a
remedy or the performance of which the law in some way recognizes a duty."
contract
estoppel
taint
trade secret
The Restatement (Second) of contracts defines a contract as a promise or set of promises for the breach of
which the law gives a remedy or the performance of which the law in some way recognizes a duty. Another
way to think of a contract is as a set of legally enforceable promises.
Which element of the contract consists of the bargained-for exchange or what each party gets in
exchange for his or her promise under the contract?
Contractual capacity
Agreement
Consideration
Legal object
A contract consists of four elements that are necessary for it to exist. These elements are the agreement,
the consideration, contractual capacity, and a legal object. Consideration consists of the bargained-for
exchange or what each party gets in exchange for his or her promise under the contract.
Which element of the contract best describes the legal ability to enter into a binding agreement?
Acceptance
Consideration
Legal object
Contractual capacity is the legal ability to enter into a binding agreement. Most adults over the age of
majority have capacity; those under the age of majority, people suffering from mental illness, and intoxicated
persons do not.
Which of the following can be considered a defense to the enforcement of a contract?
Lack of genuine assent
Contract formation via the internet
Lack of an oral agreement
Lack of duress
A contract is supposed to be entered into freely by both parties, but sometimes the offeror secures
acceptance of the agreement through improper means such as fraud, duress, undue influence, or
misrepresentation. In these situations, there is no genuine assent to the contract.
Which of the following theories of contracts best explains the existence of a contract on the parties
outward manifestations of intent and basing its interpretation on how a reasonable person would
interpret it?
The efficiency theory of contracts
The substantive fairness theory
The objective theory of contracts
The bargain theory of consideration
Contract law is based on an objective theory of contracts, which means we base the existence of a contract
on the parties outward manifestations of intent and we base its interpretation on how a reasonable person
would interpret it. Thus, the subjective intent of the parties is not usually relevant.
The law of contracts is primarily:
civil law.
common law.
public law.
administrative law.
Todays law of contracts actually originated in judicial decisions in England, later modified by early courts in
the United States. The law of contracts is primarily common law. Therefore, to find out what the law is, we
could go to the Reporters and read the decisions, but it is easier to go to the Restatement (Second) of the
Law of Contracts.
Which of the following is true of the Uniform Commercial Code (UCC)?
It was drafted by judges through decisions of courts and similar tribunals rather than through
legislative statutes or executive branch action.
UCC is also known as the case law.
The UCC became law in each state that adopted it in whole.
It was drafted to remedy some of the difficulties created by a patchwork of different laws
governing commercial transactions.
To remedy some of the difficulties created by a patchwork of different laws governing commercial
transactions, the National Conference of Commissioners on Uniform State Laws and the American Law
Institute drafted a set of commercial laws that could be applicable to all states. This effort was called the
Uniform Commercial Code.
A contract for the sale of a good falls under:
Article 2 of UCC.
common law.
Article 2A of UCC.
Article 8 of UCC.
All contracts are governed by either the common law or the Uniform Commercial Code (UCC). If the
contract is for the sale of a good, it falls under Article 2 of the UCC; if it is for anything else, it falls under the
common law.
A(n)_____ is commonly defined as a promise in exchange for a promise.

implied contract
unilateral contract
promissory estoppel
bilateral contract
If the offeror wants a promise from the offeree to form a binding contract, the contract is a bilateral contract,
commonly defined as a promise in exchange for a promise. As soon as the promises are exchanged, a
contract is formed and the parties legal obligations arise.
A reward is a most common example of:
a bilateral contract.
a quasi-contract.
a unilateral contract.
a void contract.
In a unilateral contract, the offeror wants the offeree to do something, not to promise to do something.
Perhaps the most common kind of unilateral offer is a reward. The unilateral offer calls for an action, not a
promise.
Which of the following is intended to avoid unjust enrichment?
A bilateral contract
A quasi-contract
A void contract
An express contract
Quasi-contracts are sometimes called implied-in-law contracts, but they are not actually contracts. Rather, in
order to prevent one party from being unjustly enriched at the expense of another, the courts impose
contractual obligations on one of the parties as if that party had entered into a contract.
A void contract:
is in effect not a contract at all, either its object is illegal or it has some defect so serious
that it is not a contract.
is one that contains all the four legal elements of a contract but the law prohibits the courts from
enforcing it.
is one in which both parties have the ability to either withdraw from the contract or enforce it.
arises not from words but from the conduct of the parties.
A void contract is in effect not a contract at all. Either its object is illegal or it has some defect so serious that
it is not a contract.
Sometimes a contract may be valid yet unenforceable when a law prohibits the courts from enforcing it. The
statute of frauds requires that certain contracts must be evidenced by writing before they can be enforced
A contract is _____ if one or both parties has the ability to either withdraw from the contract or
enforce it.
voidable
unenforceable
void
valid
A contract is voidable if one or both parties have the ability to either withdraw from the contract or enforce it.
If the parties discover the contract is voidable after one or both have partially performed, and one party
chooses to have the contract terminated, both parties must return anything they had already exchanged
under the agreement.
A recognizance:
is an agreement by the issuer to pay another party a sum of money on receipt of an invoice and
other documents.
arises when a person acknowledges in court that he or she will perform some specified
act or pay a price upon failure to do so.
is an unconditional written promise to pay the holder a specific sum of money on demand.
arises when a person makes an informal contract to pay the holder a specific sum of money at
a certain time.
A recognizance arises when a person acknowledges in court that he or she will perform some specified act
or pay a price upon failure to do so. A bond used as bail in a criminal case is a recognizance. The person
agrees to return to court for trial or forfeit the bond.
Which of the following is true of the rules that guide the interpretation of contracts?
If the contract contains ambiguity, the judge should interpret it considering the interests of the
drafter.
If there is a conflict between general terms and specific ones, the general terms apply.
If there is a conflict between preprinted and handwritten terms, the preprinted ones prevail.
If numerals and numbers written out in words conflict, the written words prevail.
While interpreting contracts, if there is a conflict between preprinted and handwritten terms, the handwritten
ones prevail. If numerals and numbers written out in words conflict, the written words prevail. If there is a
conflict between general terms and specific ones, the specific terms apply.
The term consideration in relation to contracts involves parties acting in an ethical manner.
True
False
Consideration is the bargained-for exchange or what each party gets in exchange for his or her promise
under the contract.
The Restatement of the Law Second, Contracts is not actually the law itself.
True
False
The Restatement (Second) is not actually the law itself, although judges frequently cite it because it is an
authoritative statement of what the law is.
Whether a contract is bilateral or unilateral depends upon what response the offeror expects from
the offeree.
True
False
If the offeror wants a promise from the offeree to form a binding contract, the contract is a bilateral contract,
commonly defined as a promise in exchange for a promise. In a unilateral contract, the offeror wants the
offeree to do something, not to promise to do something.
Today, courts hold that once an offeree begins performance, the offeror must hold the offer open for
a reasonable time to allow the offeree to complete the performance.
True
False
Quasi-contracts are actual contracts.

True
False
Quasi-contracts are sometimes called implied-in-law contracts, but they are not actually contracts.
If a quasi-contract is imposed, the amount of damages for a breach is based upon the fair market
value of any service provided to the defendant.
True
False
In order to recover under quasi-contract, there is no requirement that enrichment be unjust.

True
False
There are limits to the quasi contract doctrine; specifically, the enrichment must be unjust.
If a contract is valid, then it is enforceable.
True
False
Sometimes, a contract may be valid yet unenforceable when a law prohibits the courts from enforcing it.
Any contract that is not a formal contract is an informal contract, also called a simple contract.
True
False
Any contract that is not a formal contract is an informal contract, also called a simple contract. Informal
contracts may in fact be quite complex, but they are called simple because no formalities are required in
making them.
In the employer/employee context, the purpose of a covenant not to compete is to restrict what an
employee may do after leaving a company.
True
False
Which of the following was the result in the Case Opener in which Hallmark claimed that an
arbitration ruling against a former employee should be upheld?
The former employee was barred from proceeding in court because of the binding arbitration
clause.
The former employee was barred from proceeding in court based on the statute of limitations
which expired while she was pursuing her remedies in arbitration.
The former employee was allowed to proceed in court because she had exhausted her
remedies in the arbitration arena.
The former employee could proceed with an action in court because there was no
consideration for the arbitration agreement and, therefore, no valid agreement.
The former employee could proceed with an action in court because, as a matter of law,
arbitration agreements are barred in the arbitration context.
According to the court, because there was no consideration from Hallmark, there was no binding contract to
submit disputes to arbitration.
A[n] ___________ is a promise or set of promises for the breach of which the law gives a remedy or
the performance of which the law in some way recognizes a duty.
Contract
Offer
Consideration
Acceptance
Legal object
Which of the following consists of an offer by one party and an acceptance of the terms by another
party?
Legal object
Agreement
Coherence
Alliance
Concurrence
The agreement consists of an offer by one party, called the offeror, to enter into a contract, and an
acceptance of the terms of the offer by the other party, called the offeree.
The person who makes an offer is called an _____________.
Offeree
Offeror
Agreeor
Agree
Inquiror
The person who agrees to the terms of an offer by another party is called the ___________.
Offeree
Offeror
Agreeor
Agree
Inquiror
Which of the following is a definition for consideration?

Being cordial in the negotiation of contracts.
Refraining from unethical behavior in the negotiation of contracts.
Being cordial and refraining from unethical behavior in the negotiation of contracts.
A bargained-for exchange.
A contract negotiated in person as opposed to by telephone or e-mail.
Consideration is the bargained-for exchange or what each party gets in exchange for his or her promise
under the contract.
Which of the following represents the legal ability to enter into a binding agreement?
Majority
Emancipation
Contractual knowledge
Informed consent
Which of the following are examples of people who do not have the capacity to enter into legally
binding contracts?
Those under the age of majority.
People suffering from mental illness.
Intoxicated persons.
People under the age of majority and people suffering from mental illness, but not intoxicated
persons.
People under the age of majority, people suffering from mental illness, and intoxicated
persons.
Which of the following references the requirement that a contract not be either illegal or against
public policy?
Consideration
Capacity
Legal object
Illegal prohibition
Ethical requirement
The term legal object means that to be enforceable, the contract cannot be either illegal or against public
policy.
Which of the following represents a lack of genuine assent?
Acceptance secured through fraud.
Acceptance secured through undue influence.
Acceptance secured through misrepresentation.
Acceptance secured through fraud or undue influence but not through misrepresentation.
Acceptance secured through fraud, undue influence, or misrepresentation.
Sometimes, the offeror (the party proposing the contract) secures acceptance of the agreement through
improper means such as fraud, duress, undue influence, or misrepresentation. In these situations, there is
no genuine assent to the contract, and the offeree (the person who agreed to or accepted the contract) may
be able to raise that lack of genuine assent as a defense to enforcement of the agreement.
An attorney who says that a contract lacks the proper form is typically referencing which of the
following?
The agreement lacked a proper offer.
The contract lacked a proper acceptance.
The contract lacked consideration.
The contract lacked a writing.
The contract lacked both an appropriate offer and an appropriate acceptance.
Contract law is said to be based on a[n] ___________ theory, meaning that the existence and
interpretation of the contract is based on the outward manifestations of intent by the parties.
Subjective
Objective
Interpretive
Appearing
Unilateral
As a general rule, the ________ intent of the parties is not relevant when determining whether a
contract exists; rather, what is relevant is how they represented their intent through their actions
and words.
Objective
Subjective
Unilateral
Comprehensive
Considered
If a _____________ misunderstanding between the parties exists, and as a result of that
misunderstanding the parties do not really come to a meeting of the minds, there is no contract.
Mutual
Unilateral
Comprehensive
Subjective
Reasonable
Which of the following are the two most important sources of contract law?
Case Law and the Restatement of Law.
Case Law and the Uniform Commercial Code.
The Uniform Commercial Code and the Convention on Contracts for International Sales of
Goods.
Case Law and the Convention on Contracts for International Sales of Goods.
The Convention on Contracts for International Sales of Goods and the Restatement of the Law,
Contracts.
Todays law of contracts originated from judicial decisions in ________.

France
Italy
Spain
England
Switzerland
Todays law of contracts actually originated in judicial decisions in England, later modified by early courts in
the United States.
The law of contracts is primarily _______________ law.
Comprehensive
Statutory
Common
Restated
Modified
Which of the following was propounded by prominent legal scholars, recruited by the American Law
Institute?
The Restatement of the Law Second, Contracts.
The Convention on Contracts for the National Sales of Goods.
Common Law.
Common Law and the Convention on Contracts for International Sales of Goods.
The Convention on Contracts for the National Sales of Goods and the Restatement of the Law
Second, Contracts.
Prominent legal scholars, recruited by the American Law Institute, organized the principles of the common
law of contracts into the original Restatement of the Law, Contracts. The compilation has been revised and
published as Restatement of the Law Second, Contracts.
Which of the following is the reason the Uniform Commercial Code was drafted?
Different states had different laws governing contracts which did not result in a smooth
flow of interstate commerce.
Some states had no law governing contracts.
Federal law governing contracts was difficult to apply.
The Uniform State Act on laws was not working

The Restatement of the Law Second, Contracts was not being evenly and fairly applied.
Which of the following articles are parts of the Uniform Commercial Code relevant to contracts?
2 and 2A
3 and 4
4 and 1B
5 and 8
6 and 10
A part of the Uniform Commercial Code relevant to contracts is Article 2, which governs contracts for the
sale (exchange for a price) of goods (tangible, movable objects). Also relevant to contract law is UCC Article
2A, which governs contracts for the lease of goods.
All contracts can be categorized as either ___________ or ____________.
Unilateral, complete
Unilateral, trilateral
Bilateral, trilateral
Unilateral, bilateral
Bilateral, complete
A ______________ contract is commonly defined as a promise in exchange for a promise.
Unilateral
Trilateral
Complete
Bilateral
Classified
Harry promises to pay Frank $2,000 for a used car. At what point is there a binding contract?
When the agreement is made.
When the money is paid.
When the car is delivered.
Ten days after the car is delivered and approved.

Twenty days after the car is delivered and approved.
As soon as promises are exchanged, a contract is formed and the parties legal obligations arise.
In a(n) _____________ contract, the offeror wants a performance to form the contract.
Trilateral
Bilateral
Unilateral
Complete
Anticipatory
Which of the following have all their terms clearly set forth in either written or spoken words?
Implied contracts
Express contracts
Liquidated contracts
Bilateral contracts
Unilateral contracts
In which of the following does a contract arise not from words but from the conduct of the parties?
Implied contracts
Express contracts
Liquidated contracts
Bilateral contracts
Unilateral contracts
Which of the following is sometimes referred to as an implied-in-law contract?
Quasi-contracts
Express contracts
Implied-in-fact contracts
Express contracts and implied-in-fact contracts
Express contracts and quasi-contracts

Which of the following is the most likely measure of recovery when a quasi-contract is involved?
The amount set forth in the contract.
The fair market value of the matter involved.
The wholesale price of any good involved.
The amount sought by the plaintiff in the Complaint.
Damages will be computed the same way as they are computed for any other contract.
In situations in which the court imposes a quasi-contract, the amount awarded will probably be based on fair
market value.
[n] _____________ contract is one that contains all the legal elements of a contract.
Voidable
Executed
Formal
Valid
Approved
A valid contract is one that contains all the legal elements of a contract.
A valid contract may be _____________ when there is some law that prohibits the courts from
enforcing it.
Executed
Executory
Unenforceable
Novated
Condoned
Which of the following is in effect not a contract at all?
A voidable contract
An executory contract
An implied contract
An executed contract
A void contract
A contract is _______________if one or both of the parties have the ability to either withdraw from
the contract or enforce it.
Voidable
Executory
Implied
Executed
Void
Which of the following contracts are usually voidable?

Contracts entered into as a result of fraud.
Contracts entered into as a result of duress.
Contracts entered into as a result of undue influence.
Contracts entered into as a result of fraud or duress, but not undue influence.
Contracts entered into as a result of fraud, duress, or undue influence.
Contracts entered into as a result of fraud, duress, or undue influence may be voided by the innocent party.
Once all the terms of the contract have been fully performed, the contract is said to be
_____________.
Executory
Executed
Anticipatory
Ended
Stopped
As long as some of the duties under a contract have not yet been performed, the contract is
considered __________________.
Executory
Executed
Anticipatory
Ended
Stopped
Which of the following is an example of a formal contract?

Contracts under seal.
Executed contracts.
Letters of credit.
Contracts under seal and also letters of credit.
Contracts under seal, letters of credit, and also executed contracts.
The Restatement (Second) of Contracts identifies the following four types of formal contracts: (1) contracts
under seal, (2) recognizances, (3) letters of credit, and (4) negotiable instruments.
The reference to __________________ comes from the days when the contract was literally sealed by
a piece of soft wax into which an impression was made.
Implied-in-fact contracts
Implied-in-law contracts
Contracts under wax
Contracts under seal
Contracts under pressure
How many states still allow a contract without consideration to be enforced if it is under sea
Five
Eight
Ten
Twenty
Thirty
A(n) _______________ arises when a person acknowledges in court that he or she will perform some
specified act or will pay a price upon failure to do so.
Contract under seal
Voidable contract
Recognizance
Implied-in-fact
Informal contract
A ________________ is an agreement by the person who issues a letter to pay a sum of money on
receipt of an invoice and other documents.
Letter of agreement
Letter of credit
Letter of acknowledgement
Negotiated credit instrument letter
Letter of simple contract
Which of the following are written documents signed by a party that makes an unconditional
promise to pay a specific sum of money on demand or at a certain time to the holder of the
instrument?
Negotiable instrument
Informal contracts
Simple contracts
Letters of credit
Formal contracts
Which of the following states that if a writing, or term in question, appears to be plain and
unambiguous on its face, its meaning must be determined from the four corners of the instrument
without resort to intrinsic evidence, with the words being given their ordinary meaning?
The Interpretation Rule
The Simple Rule
The Understandable Rule
The Plain Meaning Rule
The Comprehensive Rule
What was the result on appeal in the case of D.L. Peoples Group, Inc., v. Hawley, in which heirs of
the defendants deceased employee claimed entitlement to workers compensation benefits based
on a contract of employment entered into in Florida by the deceased employee, but the trial court
ruled that Florida law was inapplicable?
Because the last act necessary for the formation of the contract occurred in Florida,
Florida workers compensation law applied.
The workers compensation law of Florida was inapplicable because the last act necessary for
the formation of the contract occurred in a state other than Florida.
The workers compensation law of Florida applied because the defendant performed most of his
work in Florida.
The workers compensation law of Florida was inapplicable because the defendant performed
most of his work outside of Florida.
Florida workers compensation law applied because the contract at issue specifically designated
the application of Florida law.
Because the last act necessary to complete the agreement was performed in Florida, the contract was
made in Florida. Accordingly, Florida workers compensation law was applied.

Which of the following is true of the intent by the offer or to be bound by an agreement?
The courts interpret intent to contract, when the offeror is clearly joking or speaking in anger.
The courts interpret intent to contract by the partys outward manifestations and internal thought
processes.
The courts interpret intent to contract from the offerors internal thought processes.
The courts interpret the parties words and actions the way a reasonable person would
interpret them.
The first element of the offer is intent. We interpret contracts using an objective standard, meaning the
courts are concerned only with the partys outward manifestations of intent, not internal thought processes.
The courts interpret the parties words and actions the way a reasonable person would interpret them.
Which of the following can be considered an offer?
An invitation to negotiate
An expression of possible interest in an exchange
A bid
An auction with reserve
An invitation to negotiate or an expression of possible interest in an exchange is not an offer because it
does not express any willingness to be bound by an acceptance. When a firm or government entity requests
bids for a construction project, the request is just an invitation for contractors to make offers. The bids,
however, would be offers.
Which of the following is true of auctions?

If an auction is with reserve, the auctioneer must accept the lowest bid.
If nothing is stated to the contrary in the terms of the auction, an auction is presumed to be
without reserve.
In an auction with reserve, the seller is treated as making an offer to accept the highest bid and
therefore must accept it.
If an auction is with reserve, the auctioneer may refuse to sell the item if he is not
satisfied with the size of the highest bid.
If nothing is stated to the contrary in the terms of the auction, an auction is presumed to be with reserve,
which means that the seller is merely expressing intent to receive offers. If an auction is without reserve, the
auctioneer must accept the lowest bid; if it is with reserve, the auctioneer may refuse to sell the item if he or
she is not satisfied with the size of the highest bid.
Which of the following must be present for an offer to have a legal effect?
Invitation to negotiate
Definiteness
Invitation to offer
Communicating the intention to make an offer
Under the common law, the terms of the offer must be definite and certain. In other words, all the material
terms must be included. The material terms allow a court to determine damages in the event that one of the
parties breaches the contract. They include the subject matter, price, quantity, quality, and parties.
Ben overhears Adams offer to sell his cat to Shirley for $50. Under these circumstances:
Ben is acting as Shirleys agent in accepting the offer.
Ben cannot form a contract with Adam by accepting the offer to Shirley.
Ben can form a contract and accept the offer to Shirley, ignoring the element of communication.
Ben can neither accept the offer made to Shirley nor make a new contract with Adam.
Under the given circumstances, Ben cannot form a contract with Adam by accepting the offer to Shirley. If
he says to Adam, Ill give you $50 for your cat, he is not accepting the offer but, rather, is making a new
offer. The offer must be communicated to the offeree or the offerees agent. Only the offeree (or his agent
acting on his behalf) can accept the offer.
In a(n) _____ contract, the offeree gives the offeror a piece of consideration in exchange for holding
the offer open for the specified period of time.
option
adhesion
aleatory
void
An offeree who wishes to ensure that an offer will in fact be held open for a set period of time may do so by
entering into an option contract with the offeror. In an option contract the offeree gives the offeror a piece of
consideration in exchange for holding the offer open for the specified period of time.
An offer made by an offeree to his offeror relating to the same matter as the original offer and
proposing a substituted bargain differing from that proposed by the original offer is:
a solicitation.
a rejection.
a revocation.
a counteroffer.
A counteroffer is defined by the Restatement as an offer made by an offeree to his offeror relating to the
same matter as the original offer and proposing a substituted bargain differing from that proposed by the
original offer. A counteroffer terminates the original offer.
Jason sends Sara a letter offering to mow her yard every week during the summer for the price of
$20 per week. Sara tells Jason she would indeed like him to cut her grass every week this summer
but will pay him only $15 each week. Sara makes a(n):
counteroffer.
rejection.
solicitation.
revocation.
Which of the following would terminate an offer without the awareness of the termination event by
the offeree?
An option contract
Incapacity of the Offeror
Physical inability of the offeree to perform
Promissory estoppel
An offer terminates immediately if the offeror dies or loses the legal capacity to enter into the contract, even
if the offeree does not know of the terminating event. If the parties had already entered into an option
contract to hold the offer open for a set period of time, however, the administrator of the offerors estate or
the guardian of the offeror must hold the offer open until it expires in accordance with the option contract.
Which of the following indicates that the terms of the acceptance must reflect the terms of the offer?
The mailbox rule
A counteroffer
The mirror-image rule
An adhesion contract
When a bilateral contract is being formed under the common law, the mirror-image rule applies to the
acceptance. The mirror-image rule says that the terms of the acceptance must mirror the terms of the offer.
If they do not, no contract is formed. Instead, the attempted acceptance is a counteroffer.
Amy offers to paint Louiss house for $1000. The offer was complete and certain as to all material
terms. The offer stated that acceptance by telephone was required. Within a reasonable time, Louis
e-mailed Amy his acceptance. Which is a true statement about this situation?
Louis has not accepted as required by the offeror and there is no contract.
Louis has accepted because a telephone call is a reasonable means of acceptance.
Louis has not accepted the offer within a reasonable time, so the contract does not exist.
Louis has accepted the offer, but can terminate the offer anytime during the contract period.
An offeror has the power to control the means by which the acceptance is communicated, so if the offeror
specifies that only a certain means of communication will be accepted, then only an acceptance by that
means forms a valid contract. If no means of communicating the acceptance is specified, any reasonable
means is generally acceptable.
Which of the following is true of the mailbox rule?
It provides that both acceptance and revocation is valid when the offeree places it in the
mailbox.
It applies to instantaneous communications.
It provides that a revocation is valid when the offeree places it in the mailbox.
It provides that a revocation is effective only when the offeree receives it.
The mailbox rule provides that, an acceptance is valid when the offeree places it in the mailbox, whereas a
revocation is effective only when the offeree receives it. The mailbox rule is not applicable when there is
instantaneous communication, such as over the phone, in person, or by telex.
Which of the following is true of an authorized means of communication?
The means by which the offeree can communicate acceptance to the offeror cannot be implied
from the facts and circumstances surrounding the communication.
A reasonable means of communication is acceptable, though the offer specifies that acceptance
must be communicated by a specific mode.
The means by which the offeree can communicate acceptance to the offeror can be
expressly stated in the offer.
E-mail must be used as a means of communication, if no mode of communication is specified in
the offer.
The means by which the offeree can communicate acceptance to the offeror may either be expressly stated
in the offer, which is called an express authorization, or be implied from the facts and circumstances
surrounding the communication of the offer to the offeree.
If the offer merely authorizes certain modes of acceptance but does not condition acceptance on the
use of those modes, use of an unauthorized means of acceptance, the acceptance is:
void.
not effective upon receipt by the offeror.
effective upon dispatch.

not effective until it is received by the offeror.
Sometimes a rejection is dispatched, but before it is received, the acceptance is communicated to
the offeror. The rejection:
is effective on dispatch.
is not effective until it is received.
is valid and the contract will be terminated.
is illegal.
Courts interpret contracts using an objective standard.
True
False
We interpret contracts using an objective standard, meaning the courts are concerned only with the partys
outward manifestations of intent, not internal thought processes.
Only the offeree to whom an offer is directed can accept the offer.
True
False
Only the offeree (or his agent acting on his behalf) can accept the offer.
Once an offer is made, an offeror has no right to terminate it before receiving a reply.
True
False
The offeror is said to be the master of his or her offer and, as such, can revoke it.
An offer by a retailer to purchase seasonal goods from a wholesaler would not lapse sooner than an
offer to purchase goods that could easily be sold all year long.
True
False
What constitutes a reasonable amount of time for an offer to remain open varies, depending on the subject
matter of the offer. An offer by a retailer to purchase seasonal goods from a wholesaler would lapse sooner
than an offer to purchase goods that could be easily sold all year long.
There are a limited number of circumstances under which silence can be an acceptance.
True
False
There are a few situations in which silence can mean acceptance.
If the subject matter of an offer is destroyed, the offer terminates after 10 days or notice of the death
to the offeree, whichever comes first.
True
False
If an offeree makes a mistake and sends an acceptance to the wrong address, there is an acceptance upon
dispatch.
True
False
If the subject matter of the offer is destroyed or becomes illegal, the offer immediately terminates.
An instructed authorization occurs if the means by which an acceptance can be communicated to
the offeror is expressly stated in the offer.
True
False
If the offeree makes a mistake and sends the acceptance to the wrong address, there is no acceptance on
dispatch.
If an acceptance is received after a rejection is received, the acceptance is still valid.
True
False
The means by which the offeree can communicate acceptance to the offeror may be expressly stated in the
offer, which is called an express authorization.
Under the Mailbox Rule, a valid contract has been formed if a rejection is dispatched, but before it is
received, the acceptance is communicated to the offeror.
True
False
What was the result in the Opening Case in which the plaintiff attempted to buy a jet from Pepsi for
Pepsi points and some additional funds?
The plaintiff prevailed, and Pepsi had to sell the jet as offered because Pepsi failed to
specifically reserve details of the offer to a separate writing.
The plaintiff prevailed, and Pepsi had to sell the jet as offered because Pepsis advertisement
was considered an offer which the plaintiff validly accepted.
The plaintiff prevailed, and Pepsi had to provide the jet as offered because Pepsi did not revoke
the offer soon enough.
The plaintiff did not prevail because the jet was unobtainable as a military aircraft.
The plaintiff did not prevail because Pepsi reserved the details of the offer to a separate
writing, and Pepsi had the authority to reject the plaintiffs offer to purchase.
In the Pepsi case, the court found that the commercial could not be regarded as sufficiently definite to be an
offer, because it specifically reserved the details of the offer to a separate writing, the catalog.
Which of the following is the first element of a contract?

An agreement
An intent
An offer
An acceptance
A writing
The first element of a contract is the agreement, which is made up of an offer and an acceptance.
Constance asks Kathy if Kathy will sell her used business book for $50. What is the status of the
negotiation?
No offer has been made.
An offer has been made, but it may be revoked prior to acceptance.
An offer has been made that may not be revoked prior to acceptance.
A contract has been entered into.
A contract has been entered into, but it may be set aside at the option of either party.
An invitation to negotiate or an expression of possible interest in an exchange is not an offer because it
does not express any willingness to be bound by an acceptance.
If nothing is stated to the contrary in terms of an auction, an auction is presumed to be ________.
Without controls
With controls
Without reserve
With reserve
Without qualifications
If nothing is stated to the contrary in the terms of the auction, an auction is presumed to be with reserve.
In an auction ___________, the seller is treated as making an offer to accept the highest bid.
Without controls
With controls
Without reserve
With reserve
Without qualifications
The __________ terms of a contract are those terms that would allow a court to determine what the
damages would be in the event that one of the parties breaches the contract.
Important
Significant
Material
Adequate
Identifiable
The material terms of a contract allow a court to determine damages in the event that one of the parties
breaches the contract.
Which of the following terms would be considered material terms?
Subject matter
Price
Quantity
Subject matter and price but not quantity
Subject matter, price, and quantity
Material terms include the subject matter, price, quantity, quality, and parties.
In which of the following ways can an offer terminate?
Revocation by the offeror only.
Revocation by the offeror, or rejection or counteroffer by the offeree only.
Revocation by the offeror, rejection or counteroffer by the offeree, or destruction of the
subject matter.
Only by revocation by the offeror after it has been held open for five days.
Only by revocation by the offeror after it has been held open for ten days.
Termination of an offer can occur in one of five ways: revocation by the offeror, rejection or counteroffer by
the offeree, death or incapacity of the offeror, destruction or subsequent illegality of the subject matter of the
offer, or lapse of time or failure of other conditions stated in the offer.
Which of the following refers to the right of an offeror to revoke an offer?

The offeror is the controller 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.

If a person wishes to ensure that an offer will in fact be held open for a set period of time, the person
may do so by entering into a[n] ______________ contract with the offeror.
Clear
Explicit
Unrevokable
Option
None of the above
As a general rule, when is revocation effective?
When it is mailed by the offeror.
When it is received by the offeree.
One day after it is made.
Two days after it is made.
Three days after it is made.
Which of the following is true regarding the termination of an offer based on a rejection?
Regardless of how long an offeror states that an offer will be held open, once the offeree
rejects it, the offer is terminated.
Even on rejection, an offer is not terminated until the expiration of the time period for which it
was originally to remain open.
An offer must remain open for at least two days before it is terminated following a rejection by
an offeree.
An offer must remain open for at least three days before it is terminated following a rejection by
an offeree.
An offer must remain open for at least four days before it is terminated following a rejection by
an offeree.
Which of the following is an offer made by an offeree to an offeror relating to the same matter as the
original offer and proposing a substituted bargain differing from that proposed by the original offer?
A revocation
An acceptance
A counteroffer
A cross offer
A bilateral offer
If a[n] __________ contract exists, the administrator of an offerors estate must hold an offer open
until it expires in accordance with the contract.
Bilateral
Unilateral
Complete
Option
Bilateral or option
If the subject matter of an offer is destroyed, the offer _________.
Immediately terminates
Is extended for seven days
Is extended for fourteen days
Is extended for twenty-one days
Is extended for thirty days
If the subject matter of an offer becomes illegal, what is the result?
The offer immediately terminates.
There is no effect as long as the offer was made at least one day before the subject matter of
the offer became illegal.
There is no effect as long as the offer was made at least ten days before the subject matter of
There is no effect as long as the offer was made at least fifteen days before the subject matter
of the offer became illegal.
There is no effect as long as the offer was made at least thirty days before the subject matter of
In the absence of a time condition in an offer, the offer will expire ___________.
In forty-eight hours
In seven days
In thirty days
In forty-five days
After a reasonable amount of time
Which of the following is presumed to be a reasonable amount of time when considering whether an
offer has expired?
Forty-eight hours.
Seven days.
Thirty days.
Forty-five days.
There is no set amount of time, and what constitutes a reasonable amount of time varies
depending upon the subject matter of the offer.
Which of the following is a way in which an offeree can manifest intent to enter into a bilateral
contract?
By performance only.
By a return promise only.
By performance or by a return promise.
By performance, by a return promise, or by a counteroffer.
By a signed writing only.
In which of the following ways may an offeree accept a unilateral contract?
By making a counteroffer.
By signed writing only.
By either verbal acceptance or a signed writing.
By performance.
By performance, by a verbal acceptance, or by a signed writing.
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 Gretchens statement?
Gretchen is incorrect because there is a binding bilateral contract.
Gretchen is incorrect because there is a binding unilateral contract which 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.
If the offer is for a unilateral contract, the offeree can accept by providing the requested performance.
When acceptance is examined under the common law, how do the basic requirements for a valid
acceptance compare with those for a valid offer?
The basic requirements for a valid acceptance are materially different from those for a valid
offer.
The basic requirements for a valid acceptance parallel those for a valid offer.
The basic requirements for a valid acceptance are different from those for a valid offer only
because an offer must be in writing.
because an acceptance must be in writing.
because an offer must be revoked immediately but acceptance can be withheld for a
reasonable period of time.
Under the common law, the basic requirements for a valid acceptance parallel those for a valid offer. There
should be a manifestation of intent to be bound by the acceptance to the contract, agreement to the definite
and certain terms of the offer, and communication to the offeror.
Which of the following is a requirement for a valid acceptance?

Manifestation of intent to be bound by the acceptance of the contract.
Agreement to the definite and certain terms of the offer.
Communication to the offeror.
Manifestation of intent to be bound by the acceptance of the contract, agreement to the
definite and certain terms of the offer, and communication of that to the offeror.
Manifestation of intent to be bound by the acceptance to the contract and communication of a
counteroffer to the offeror along with a writing specifying all pertinent terms.
Which of the following is false regarding how the Japanese tend to view contracts?
The Japanese tend to view contracts as ongoing relationships.
The Japanese tend to view contracts as relationships in which parties work with each other to
smooth out any problems that arise in performance.
The Japanese tend to be suspicious of long, detailed contracts.
The Japanese have a preference for flexible contracts.
The Japanese do not desire that any terms be left to be decided later.
The Japanese tend to view contracts as ongoing relationships in which parties work with each other to
smooth out any problems that arise in performance of the contract. Often suspicious of long, detailed
contracts, the Japanese have a distinct preference for short, flexible agreements that leave a number of
terms to be decided later.
Which of the following is true regarding the situation that occurs when a party has made a unilateral
offer and another party has begun performance?
The offeror has the right to revoke the offer at any time before performance has been
completed.
The offeror cannot revoke if at least one-third of the performance has been completed.
The offeror cannot revoke if at least one-half of the performance has been completed.
The offeror cannot revoke if at least three-fourth of the performance has been completed.
The offeror must give the offeree a reasonable time in which to complete the
performance.
Inez, wishing to sell a used business law book, calls Janice and tells her that if she does not hear
from her within twenty-four hours, she will assume that Janice wishes to purchase the book for $50.
Which of the following is correct regarding the status of the proposed book sale?
There is no contract because in this situation silence, cannot be used to form a contract.
There can be no contract because the offer was not made in person.
There can be no contract because the offer was not made in writing.
Janice can avoid there being a contract only if she can prove by preponderance of the evidence
that she did not hear about the offer before the stated expiration time.
Janice can avoid there being a contract only if she can prove beyond a reasonable doubt that
she did not hear about the offer before the stated expiration time.
Although there are some exceptions, silence, as a general rule, cannot be used to form a contract.
Which of the following sets forth the common law rule that the terms of an acceptance must mirror
the terms of an offer?
The Matching Rule
The Complete Rule
The Mirror-image Rule
The Exact Rule
The Parallel Rule
Which of the following is generally true if no means of communicating an acceptance is specified in
an offer?
The acceptance must be in writing.
The acceptance must be made verbally either by telephone or in person.
No valid contract may be entered into because the offer must specify a means by which to
accept.
Acceptance may be made by any reasonable means.
Acceptance must be made orally or in writing within twenty-four hours.
Which of the following provides that an acceptance is valid when it is placed in the mailbox?
The Acceptance Rule
The Contract Rule
The Reasonable Rule
The Mailbox Rule
The Contract Legality Rule
Which of the following provides that a revocation is effective only when received by the offeree?
The Acceptance Rule
The Contract Rule
The Reasonable Rule
The Mailbox Rule
The Contract Legality Rule
Tina tells Barry that she will mow his yard for the summer for $800. Barry thinks about it and drops a
note in the mail to Tina telling her that he rejects her offer. He thinks about it, however, and calls her
to tell her that he accepts before she receives his rejection. Which of the following is true under the
mailbox rule?
The offer was no longer outstanding because of the rejection.
Barry could not accept verbally.
Barry validly accepted, but his acceptance was revoked when Tina received the rejection.
The acceptance was invalid because the mailbox rule requires that the time of payment be
specifically set forth before an acceptance is formalized.
The acceptance is valid, and the rejection has no effect.
Sometimes, a rejection is dispatched, but before it is received, the acceptance is communicated to the
offeror. In that case, a valid contract has been formed because the rejection is not effective until it is
received.
Which of the following is true regarding the Uniform Commercial Code?
It does not affect the making of an agreement and only applies after an agreement is formed.
It applies only in situations not addressed at all by the common law.
It applies only to clarify common law in situations in which the common law is unclear.
It applies in all situations involving agreements.
Some elements of a contract under the common law have been modified under the UCC
for contracts for the sale of goods.
Which of the following is true regarding distinguishing an offer from an invitation to negotiate?
Whether an offer in fact existed is a question of law.
Whether an offer in fact existed is a question of fact.
Whether an offer in fact existed is a mixed question of law and fact.
Whether an offer in fact existed depends solely on whether the alleged offer included a specific
price.
Whether an offer in fact existed depends solely on whether an acceptance of the alleged offer
was made immediately so that the offeror knew he or she was bound.
Prudence, a mean business law teacher, offers $50 to any student who will mow her lawn. Sam goes
right over and begins mowing. Just before he finishes, Prudence goes over and tells him that she
revokes her offer. Which of the following is true regarding Sams entitlement to payment?
Sam is not entitled to payment because a bilateral contract was involved that could only be
accepted by full performance prior to revocation.
Sam is not entitled to payment because a unilateral contract was involved that could only be
accepted by full performance prior to revocation.
Sam is entitled to only a proportional recovery based on the amount of work he had done prior
to the revocation because Prudence always retained the right to validly revoke.
Sam is entitled to recover because a unilateral contract was involved, and he was
entitled to a reasonable amount of time in which to complete the job.
Sam is entitled to recover because a bilateral contract was involved, and he was entitled to a
reasonable amount of time in which to complete the job.
The offeror has the right to revoke the offer at any time before it has been accepted. This rule is slightly
modified with respect to unilateral offers so that if one party has begun performance, the offeror must give
the offeree a reasonable time to complete it.
When buying software on the Internet, Molly clicks OK on an agreement governing the transaction
and providing that disputes will be arbitrated. Which of the following is true regarding that type of
agreement?
Molly will not be bound in most states because of state laws prohibiting such agreements.
Molly will not be bound unless she verbally confirmed the agreement with a company
representative.
Molly will not be bound because of a federal law making all such agreements invalid.
Molly will not be bound because of a federal law approving some agreements of that type but
making arbitration clauses contained therein invalid.
None of the above is true.
Which of the following is true regarding the Uniform Electronic Transactions Act?
It eliminates all effects of the mailbox rule.
It provides that offers may not be accepted electronically but otherwise retains aspects of the
mailbox rule.
It provides that acceptances may not be made electronically but otherwise retains aspects of
the mailbox rule.
It seems to create an electronic version of the mailbox rule.
None of the above because there is no such act.

_____ is what a person will receive in return for performing a contract obligation.
Confirmation
Obligation
Consideration
Forbearance
Consideration is required in every contract. It is what a person will receive in return for performing a contract
obligation. Consideration can be anything, as long as it is the product of a bargained-for exchange. In a
business context, it is often (but not always) money.
Joseph agrees to purchase Marys car for $1,000. For Mary, Josephs payment of $1,000 is:
an advance.
a forbearance.
an obligation.
a consideration.
Consideration is what a person will receive in return for performing a contract obligation. Consideration can
be anything, as long as it is the product of a bargained-for exchange.
Here, Joseph agrees to purchase Marys car for $1,000. Josephs payment of $1,000 is the consideration
Mary will receive for the car. Title to and possession of the car are the consideration Joseph will receive in
exchange.
A promise to stay in a job until a particular project is complete is an example of:
a benefit to the promisor.
a detriment to the promisor.
a promise to do something for no consideration.
a promise to refrain from doing something.
Which of the following can be considered an example for a detriment to the promisee?
A promise to your football coach to refrain from riding your motorcycle during football
season even though you love riding it.
A promise to stay in a job until a particular project is complete.

A promise to cook dinner for your roommate for the next six months.
A promise to stop drinking alcohol during exam week.
A promise to stay in a job until a particular project is complete can be considered an example for a benefit to
the promisor. This is a benefit to the employer.
Promissory estoppel occurs when:

the other party refrains from relying on the promise.
the only way to avoid injustice is to enforce the promise.
one party makes a promise without considering the other partys reliance on it.
the other party promised some consideration in exchange.
For a promise to be enforced by the courts, there must be consideration. One exception to the rule requiring
consideration is promissory estoppel. Promissory estoppel occurs when three conditions are met: one party
makes a promise knowing the other party will rely on it, the other party does rely on the promise, and the
only way to avoid injustice is to enforce the promise.
Brian offers to sell Rachel his skis for $500. Rachel responds, Ill look at them in the morning, and if
I like them, Ill pay you. At this point, she has not committed to doing anything. This is an example
of:
a novation.
an illusory promise.
a compromise.
a promise.
The above case is an illusory promise since Rachel has not committed to doing anything. An illusory
promise is not consideration.
Which of the following indicates a promisees performance rendered before the promisors promise
was made?
Illusory promise
Promissory estoppel
Past consideration
Part consideration
A promise cannot be based on consideration provided before the promise was made. For a promise to be
enforceable, there must be bargaining and an exchange. Past consideration is no consideration at all.
Which of the following is true of preexisting duty?

If unforeseen circumstances cause a party to make a promise regarding an unfinished project,
that promise is not a valid consideration.
Performance of an existing contractual duty is a good consideration.
Performance of a duty one is obligated to do under the law is not good consideration.
If a party to a contract agrees to do additional work, the promise to do it is not a valid
consideration.
There are two parts to the preexisting duty rule: performance of a duty you are obligated to do under the law
is not good consideration and performance of an existing contractual duty is not good consideration.
A(n) _____ contract is an agreement whereby the buyer agrees to purchase all his or her goods from
one seller.
requirement
unconscionable
output
adhesion
A requirement contract is an agreement whereby the buyer agrees to purchase all his or her goods from one
seller. No quantity is stated in the contract. Under common law, such a contract would be void because the
buyer has made no commitment and therefore there is no consideration.
Which of the following is an agreement whereby the seller guarantees to sell everything he or she
produces to one buyer?
An aleatory contract
An output contract
A requirement contract
Mostly, in a liquidated debt:
the disputes can be solved by entering into an accord and satisfaction.
there is no dispute that money is owed or how much.
there is a promise to pay consideration subsequently with the consent of the promisee.
there is a dispute about the existence of the debt.
Partial payment of a debt may or may not be valid consideration, depending on whether the debt is
liquidated or unliquidated. In a liquidated debt, there is no dispute that money is owed or how much.
The exception to the above rule regarding liquidated debt occurs when the debtor offers different
performance. The promisee offering the promisor his/her asset in full settlement of the debt is an example
for this.
An unliquidated debt is a debt that:

is unenforceable due to lack of consideration.
has not been paid in full when settled.
involves an honest dispute about the existence or amount of the debt.
is due and certain with no dispute about the amount of the debt.
In an unliquidated debt, the parties either disagree about whether money is owed or dispute the amount.
They can settle for less than the full amount if they enter into an accord and satisfaction.
The ____ is the new agreement to pay less than the creditor claims is owed.
accord
illusory promise
satisfaction
composition
They can settle for less than the full amount if they enter into an accord and satisfaction. The accord is the
new agreement to pay less than the creditor claims is owed.
Which of the following terms best describes a debtors payment of the reduced amount during the
legal settlement of a disputed claim?
Requirement
Accord
Composition
Satisfaction
They can settle for less than the full amount if they enter into an accord and satisfaction. The satisfaction is
the debtors payment of the reduced amount.
Which of the following is true of an accord and satisfaction?
A debtor sending a check with paid in full written on it, does not create an accord and
satisfaction, according to common law.
A debt must be liquidated for an accord and satisfaction to be enforceable.
A debtor must pay the amount they have agreed upon in satisfaction.
A creditor agrees to accept as full payment, not less than he/she claims is owed, for an accord
and satisfaction to be enforceable.

Consideration is optional in every contract.
True
False
In a bilateral contract, the consideration for a promise is a completed act.
True
False
An exception to the rule requiring consideration is promissory estoppel.
True
False
An illusory promise is not a consideration.
True
False
As a rule, past consideration qualifies as consideration.
True
False
In some cases, if past consideration was given with expectation of future payment, the court may
enforce the promise.
True
False
A promise to do something that you are already obligated to do is generally a valid consideration.
True
False
Performance of a duty you are obligated to do under the law is not good consideration.
The UCC permits requirement, but not output, contracts for the sale of goods.
True
False
equirement and output contracts are permitted for the sale of goods.
Partial payment of a debt may or may not be valid consideration, depending on whether the debt is
liquidated or unliquidated.
True
False
A liquidated debt may be the subject of an accord and satisfaction.
True
False
Which of the following is what a person will receive in return for performing a contractual
obligation?
Consideration
Acknowledgement
Approval
Accord
Accession
Sam promises his uncle, Bob, that he will lose 10 pounds and exercise every day during the spring
semester in exchange for having his tuition paid for the fall semester. The uncle agrees; but after
Sam has lost 10 pounds and exercised all semester, Bob refuses to pay saying that no contract
existed. Which of the following is true?
Consideration was present, there was an enforceable contract, and Bob has wrongfully
refused to pay.
There was no consideration present, and Bob has no obligation to pay.
There was no consideration present, but Bob must pay under principles of promissory
estoppels.
There was consideration present, but Bob is not required to pay because the contract was
illusory.
There was consideration present, but Bob is not required to pay because Bob did not receive a
benefit personally.
Consideration may consist of a detriment to the promise.
Which of the following are examples of consideration?
A benefit to the promisor.
A promise to do something.
Both a benefit to the promisor and a promise to do something.
An accepted offer.
A valid counter offer.

Consideration may consist of a benefit to the promisor, a detriment to the promisee, a promise to do
something, or a promise to refrain from doing something.
In a bilateral contract, the consideration for each promise is ______.
A completed act
The beginning of action in acceptance, even if it is not complete
An acknowledgement
A return promise
An agreement
In a unilateral contract, the consideration for a promise is ______.
Action
A return promise
An acknowledgement
Consideration
An agreement
Which of the following is an exception to the rule requiring consideration?

Promissory agreement
Promissory estoppel
Quasi estoppel
Quasi agreement
Promissory performance
Which of the following occurs when three conditions are met: one party makes a promise knowing
the other party will rely on it; the other party does rely on it; the only way to avoid injustice is to
enforce the promise?
Promissory agreement
Promissory estoppel
Quasi estoppel
Quasi agreement
Promissory performance
Which of the following would not be considered an example of consideration?
A promise to stay in a job until a particular project is completed.
A promise to your football coach to refrain from riding your motorcycle during football season
even though you love riding it.
A promise to cook dinner for your roommate for the next six months.
A promise to stop drinking alcohol during exam week.
A promise to pay your employees as required by law.
Which of the following is true regarding the adequacy of consideration?
Courts generally consider the adequacy of consideration in determining whether to enforce a
contract.
Courts consider the adequacy of consideration only if something is sold for less than 90% of its
market value.
market value.
market value.
Courts seldom consider the adequacy of consideration but will do so if fraud is involved.
The court does not weigh whether a person made a good bargain. Conversely, if the court believes
fraud or undue influence occurred, the court may look at the adequacy of consideration.
As discussed in the case of Double AA builders, Ltd. v. Grand State Construction L.L.C., which of the
following may be used to necessitate that a subcontractor perform according to the terms of its bid
because the contractor has relied on the subcontractors bid?
Consideration
Primary consideration
Promissory estoppel
Reality estoppel
Secondary consideration
According to the court, Promissory estoppel may be used to require that the subcontractor perform
according to the terms of its bid to the contractor if the contractor receives the contract award, because the
contractor has detrimentally relied on the subcontractors bid and must perform for a price based on that
reliance.
Which of the following is false under the law in England?
England has requirements for consideration.
England does not recognize the exception of promissory estoppel.

In England, specialty contracts or deeds are an additional exception to the requirement for
consideration.
In England, deeds are used to create enforceable promises of gifts to charity.
In England, a deed is a document that creates a binding obligation between parties without
consideration when certain formalities are honored.
England has the same requirement for consideration as the United States and even shares the exception of
promissory estoppel.
Which of the following is true regarding illusory promises?
Illusory promises are not consideration.
Illusory promises are consideration.
Illusory promises qualify as consideration only when past consideration is at issue.
Illusory promises qualify as consideration only when promissory estoppel is at issue.
Illusory promises are consideration only when a sale of goods is involved.
Sam offers Betty his bicycle for $75. Which of the following is an example of an illusory promise on
the part of Betty?
Ill take it.
Ill take it if I decide to do so.
I wont pay $75, but I will pay $50.
Ill take it if you will let me try it out first and the brakes work well.
Ill take it if you will buy new tires.
An illusory promise occurs when there is no commitment to do anything. An illusory promise is not a promise
at all.
For a court to enforce a promise, ______ must offer consideration.
Only the offeror
Only the offeree
Only the acceptee
Only the acceptor
Both sides
Which of the following was the result in the Case Opener in which the attorney sued to recover the
value of 3 percent of the defendants stock based on the fact that he provided a loan to the
defending company, and the directors later promised the stock to him?
The court ruled that the attorney was not entitled to the value of the stock because it was
offered as a gift.
The court ruled that the attorney was entitled to the value of the stock because it was offered as
a gift.
The court ruled that the attorney was entitled to the value of the stock because it was
consideration provided by the company.
The court ruled that the attorney was entitled to the value of the stock based on promissory
estoppels.
The court ruled that the attorney was entitled to the value of the stock both because it was
consideration provided by the company and also based on promissory estoppels.
Under the ______, promises based on past consideration may be enforceable to the extent
necessary to avoid injustice.
Restatement (Second) of Contracts
Uniform Commercial Code
Restatement (Second) of Remedies
Common law
Civil law
Under the Restatement (Second) of Contracts (a persuasive, though not binding, authority), promises based
on past consideration may be enforceable to the extent necessary to avoid injustice. In some cases, if past
consideration was given with expectation of future payment, the court may enforce the promise.
A promise to do something that you are already obligated to do is ______.
Valid consideration because it is illusory consideration
Valid consideration only in the employment context
Valid consideration because it is past consideration
Valid consideration only if a sale of goods is involved
Not valid consideration
What does the preexisting duty rule mean?

Performance of a duty one is obligated to do under the law is not good consideration.
Performance of an existing contractual duty is not good consideration.
A bilateral contract is not binding without past consideration.
Performance of a duty one is obligated to do under the law is not good consideration,
and performance of an existing contractual duty is not good consideration.
Performance of an existing contractual duty is not good consideration, and a bilateral contract is
not binding without past consideration.
Performance of a duty you are obligated to do under the law is not good consideration.
Yolanda agrees to bathe and groom Wendys dog, Fluffy Puff, for $30. Yolanda agreed to the price
before seeing Fluffy Puff who is a chubby dog with lots of hair. Yolanda tells Wendy that if she is
going to groom Fluffy Puff, the price will be $40. Wendy reluctantly agrees but tells Yolanda that she
should not have been surprised that a dog named Fluffy Puff had lots of hair. Yolanda bathes and
grooms Fluffy Puff, but Wendy will only pay $30. Which of the following is correct regarding
Yolandas entitlement to the extra $10?
Yolanda is entitled to the extra $10 because a valid bilateral contract existed.
Yolanda is entitled to the extra $10 because a valid unilateral contract existed.
Assuming the unforeseen circumstances rule does not apply, Yolanda is not entitled to the extra
$10 because she had a preexisting duty to bathe and groom Fluffy Puff for $30.
Assuming the unforeseen circumstances rule does not apply, Yolanda is not entitled to
the extra $10 because Wendys promise to pay $30 was illusory.
Assuming the unforeseen circumstances rule does not apply, Yolanda is not entitled to the extra
$10 because past consideration was involved.
Under the preexisting duty rule, performance of an existing contractual duty is not good consideration.
Which of the following are exceptions to the preexisting duty rule?
Unforeseen circumstances only.
Additional work only.
Past consideration only.
Unforeseen circumstances and additional work, but not past consideration.
Unforeseen circumstances, additional work, and past consideration.
Sally goes to have her hair trimmed and agrees to pay $40 to the stylist. While there, Sally decides
that she would also like highlights. The stylist informs her that highlights will cost an additional $30.
Sally agrees to the price, gets the highlights, but refuses to pay the extra amount. What is the likely
result in a dispute between Sally and the stylist and why?
The stylist will win because she did additional work in exchange for the extra payment;
and, therefore, Sallys promise was supported by valid consideration.
The stylist will win because she did additional work in exchange for the extra payment; and,
therefore, a valid unilateral contract existed.
The stylist will win unless Sally can show that she had previously received both a trim and
highlights for $40. If she can prove that she previously received both for $40, then the past
expectations rule applies.
Sally will win because the stylist had a preexisting duty to have Sallys hair look as good as
possible.
Sally will win because there was no valid consideration in exchange for the highlighting.
If a party to a contract agrees to do additional work (more than the contract requires), the promise to do it is
valid consideration.
Under Article ______ of the UCC, an agreement modifying a contract needs no consideration to be
binding.
One
Two
Three
Five
None of the above. There is no such rule in the UCC.
Sam, who has a retail clothing store, orders 50 white shirts from XYZ manufacturer. He later calls a
representative of XYZ and requests that blue shirts be sent instead. The representative agrees and
sends a confirmation. Sam gets white shirts and complains. The XYZ representative says there was
no consideration for the contract. Which of the following is the correct resolution of the dispute?
Sam is correct because under the UCC, no additional consideration was needed.
Sam is correct because a valid unilateral contract existed.
The XYZ representative is correct because no additional consideration was provided.
The XYZ representative is correct because no valid bilateral contract existed.
The XYZ representative is correct because no additional consideration was provided, and no
valid bilateral contract existed.
Under Article 2 (sale of goods), an agreement modifying a contract needs no consideration to be binding.
Mary has a pet shop and orders 50 packages of dog food for puppies from a supplier for a total cost
of $1,000. Later she calls the supplier and changes the order to food for adult dogs. When 50
packages of puppy food arrive, Mary complains. The supplier tells her that the modification was not
valid because nothing was put in writing. Mary says there was never an agreement that a writing was
necessary for a modification. Which of the following is the correct resolution of the dispute?
The supplier is correct because modification of orders of over $200 must be in writing.
Mary is correct because under the circumstances, there was no requirement of a writing
to modify the agreement.
Under the UCC, no additional consideration is required for the modification of the agreement to be binding.
Moreover, unless stated otherwise, such an agreement need not be in writing.
A(n) ______contract is an agreement whereby the buyer agrees to purchase all goods from one
seller.
Supply
Use
Requirement
Output
Arranged
A(n) ______contract is an agreement whereby the seller guarantees to sell everything he or she
produces to one buyer.
Supply
Use
Requirement
Output
Arranged
Which of the following is true of a requirement contract under common law?
It is valid so long as there is a writing setting forth the terms signed by the offeror.
It is valid so long as there is a writing setting forth the terms signed by the offeree.
It is valid so long as there is a writing setting forth the terms signed by the offeror and the
offeree.
It is valid so long as more than nominal consideration is provided.
It is not valid because of the lack of consideration.
Under common law, such a contract would be void because the buyer has made no commitment and
therefore there is no consideration.
Which of the following is true of an output contract under common law?
It is valid so long as there is a writing setting forth the terms signed by the offeror.
offeree.
No quantity is stated, and under common law, consideration is lacking.
Which of the following is true of a requirement contract under the UCC?
It is valid so long as the requirement is made in good faith.
offeree.
Because requirement contracts are valued by merchants under the UCC, they are valid with the limitation
that the requirement must be made in good faith. The consideration, then, is that the parties act in good
faith.
Which of the following is true of an output contract under the UCC?
It is valid so long as the output is made in good faith.
offeree.
Because output contracts are valued by merchants under the UCC they are valid, with the limitation that the
output must be made in good faith. The consideration, then, is that the parties act in good faith.
Which of the following is true regarding whether an accepted offer to pay part of a debt is
consideration?
Partial payment is consideration under all circumstances.
Partial payment is not consideration under any circumstances.
Partial payment is consideration if a liquidated debt is involved.
Partial payment is consideration if an unliquidated debt is involved.
Partial payment is consideration if either a liquidated or an unliquidated debt is involved.
In a[n] ______ debt, there is no dispute about the fact that money is owed and the amount of money
owed.
Actual
Acknowledged
Certain
Liquidated
Unliquidated
In a[n] ______ debt, the parties either dispute the fact that any money is owed or agree that some
money is owed but dispute the amount.
Disputed
Unacknowledged
Uncertain
Liquidated
Unliquidated
Which of the following represents an accord and satisfaction?
When a dispute over an unliquidated debt is settled and paid for less than the full
amount.
When a dispute over a liquidated debt is settled and paid for less than the full amount.
When a dispute over an unliquidated debt is settled and paid for the full amount.
When a dispute over a liquidated debt is settled and paid for the full amount.
When a dispute over either an unliquidated or liquidated debt is settled and paid for less than
the full amount.
When an accord and satisfaction is at issue, the ______ is the new agreement to pay less than the
creditor claims is owed.
Satisfaction
Accord
Both satisfaction and accord
Written compromise
Written acknowledgement
In an accord and satisfaction, the accord is the new agreement to pay less than the creditor claims is owed.
When an accord and satisfaction is at issue, the ______ is the payment, by the debtor, of the reduced
amount.
Satisfaction
Accord
Both satisfaction and accord
Fund transfer
Bond
In an accord and satisfaction, the satisfaction is the debtors payment of the reduced amount.
Which of the following is true regarding an accord and satisfaction?
When amounts agreed upon are paid, the debt is fully discharged.
When amounts agreed upon are paid, the debt is fully discharged except for any late charges
due on the initial indebtedness.
When amounts agreed upon are paid, the debt is fully discharged except for any interest due on
the initial indebtedness.
When amounts agreed upon are paid, the debt is fully discharged except for any late charges
and any interest due on the initial indebtedness.
When amounts agreed upon are paid, the debt is fully discharged except for any late charges or
interest due on the initial indebtedness, or attorney fees of the creditor that are due.
Which of the following is true under the UCC regarding checks marked paid-in-full?
If a business inadvertently cashes such a check, the business has 30 days from the date it
cashed that check to offer repayment in the same amount to the debtor and avoid an accord
and satisfaction.
and satisfaction.
If a business inadvertently cashes such a check, the business has 90 days from the date
it cashed that check to offer repayment in the same amount to the debtor and avoid an
accord and satisfaction.
and satisfaction.
The business has no recourse, and the debt is deemed discharged and satisfied.
Which of the following was the result in the case Mast Long Term Care v. Forest Hills Rest Home,
covered in the Case Nugget, in which the defendant's rest home claimed it was not bound by an
agreement to buy all its drugs not commonly stocked from the plaintiff?
The agreement was not enforceable because no price schedule was agreed upon.
The agreement was not enforceable because it was an output contract.
The agreement was not enforceable because it was a requirement contract.
The agreement was enforceable based on promissory estoppel although consideration was
lacking for a binding contract.
The agreement contained sufficient consideration on the part of the plaintiff and
defendant.

As a general rule, any contract entered into by a minor is _____.
void
valid
voidable
unilateral
Today, in all but three states, a minor is someone under the age of 18. As a general rule, any contract
entered into by a minor is voidable by the minor until he or she reaches the age of majority or a reasonable
time thereafter.
In a contract made by a minor:
the minor has the right to disaffirm.
siblings of the minor can disaffirm the contract on his/her behalf.
parents of the minor can disaffirm the contract on his/her behalf.
adult parties to the contract can disaffirm.
Minors have the right, until a reasonable time after reaching the age of majority, to disaffirm or void their
contracts because their contracts are voidable. It is only the minor who has the right to disaffirm, never the
adult with whom the minor entered into the agreement.
A(n) _____ occurs when, after reaching the age of majority, the person states orally or in writing that
he or she intends to be bound by the contract entered into as a minor.
express ratification
diaffirmance
emancipation
implied ratification
Once a person reaches the age of majority, he or she may ratify, or legally affirm, contracts made as a
minor. An express ratification occurs when, after reaching the age of majority, the person states orally or in
writing that he or she intends to be bound by the contract entered into as a minor.
Continuing to act in accordance with the contract, such as continuing to make regular payments
after reaching the age of majority, constitutes:
emancipation.
express ratification.
forbearance.
implied ratification.
An implied ratification occurs when the former minor takes some action after reaching the age of majority
consistent with intent to ratify the contract.
Once a person reaches the age of majority, he or she may ratify, or legally affirm, contracts made as a
minor. Most courts find that continuing to act in accordance with the contract, such as continuing to make
regular payments after reaching the age of majority, constitutes ratification.
If a person has been adjudicated insane and has a guardian appointed, any contract the person
attempts to enter into is:
voidable.
void.
valid.
unilateral.
If a person has been adjudicated insane and has a guardian appointed, that person has no capacity to enter
into contracts and any contract he does attempt to enter into is void. Guardians may also be appointed for
persons who have been adjudicated habitual drunkards. The guardian has the sole legal capacity to enter
into contracts on such a persons behalf.
If a person suffers from delusions that may impair his judgment but he can still understand that he is
entering into a contract and understands the contract, his contract is:
unenforceable.
void.
valid.
voidable.
Persons suffering from a mental illness or deficiency may have full, limited, or no legal capacity to enter into
a binding contract, depending on the nature and extent of their deficiency. If a person suffers from mental
problems yet still understands the nature of the contract and the obligations it imposes, that person may
enter into a binding, legal agreement.
Section 16 of the Restatement of Contracts, provides that contracts of an intoxicated person are
_____ if the other party had reason to know that intoxication rendered the person unable to
understand the nature and consequences of the transaction.
void
voidable
unenforceable
valid
Section 16 of the Restatement of Contracts, provides that contracts of an intoxicated person are voidable if
the other party had reason to know that intoxication rendered the person unable to understand the nature
and consequences of the transaction or unable to act in a reasonable manner in relation to the transaction.
_____ occurs when a party gives a loan at an interest rate exceeding the legal maximum.
Usury
Predatory lending
Slander
Gaming
Usury occurs when a party gives a loan at an interest rate exceeding the legal maximum. The legal
maximum interest rate varies from state to state, but it is easy to determine the rate of any given state.
Almost as widespread as licensing statutes, statutes prohibiting usury are found on the books of nearly
every state.
Which of the following refers to agreements in which parties pay consideration for the chance, or
opportunity, to obtain an amount of money or property?
Predatory lending
Gambling
Defamation
Usury
The term gambling refers to agreements in which parties pay consideration (money placed during bets) for
the chance, or opportunity, to obtain an amount of money or property. Industry officials, however, prefer to
use the term gaming. All states regulate gambling.
Which of the following is true of Sabbath laws?
These laws limit the types of business activities in which parties can legally engage on
Saturdays.
These laws encourage store operations and all work on the Lords day, in all states.
These laws typically do not apply to contracts for obtaining necessities, anything related
to health or survival.
According to this law, an executed or fully performed contract created on the Lords day can
be rescinded.
Sabbath laws limit the types of business activities in which parties can legally engage on Sundays. In
Colonial times, these laws prohibited store operations and all work on the Lords day (Sunday). Today,
these laws vary by state. Some Sabbath laws also make it illegal to enter into any contract on a Sunday.
However, an executed, or fully performed, contract created on a Sunday cannot be rescinded.
There are exceptions to Sabbath laws. Most states allow the performance of charity work on Sundays. In
addition, the laws typically do not apply to contracts for obtaining necessities, including prescription
medication, food, and anything else related to health or survival.
Which of the following refers to a heavily one-sided agreement?
An aleatory contract
An output contract
An express contract
An unconscionable contract
Heavily one-sided agreements are known as unconscionable agreements. The term unconscionable refers
to the fact that the agreement in question is so unfair that it is void of conscience. These are so one-sided
that the courts will not make the innocent party be harmed by fulfilling his or her contractual duties.
Large differences between cost and price in a sales agreement is an example of:
aleatory contract.
substantive unconscionability.
contract under seal.
procedural unconscionability.
Substantive unconscionability occurs when an agreement is overly harsh or lopsided. Examples for
substantive unconscionability include: large differences between cost and price in a sales agreement and
agreements in which one party is prevented from having equal benefit or has little to no legal recourse.
The legal principle of _____ means, both parties are equally responsible for the illegal agreement.
in pari delicto
tu quoque
in aequali jure
pro hominem
When an agreement is deemed illegal, courts will usually label it void. The reason is the legal principle of in
pari delicto, which means both parties are equally responsible for the illegal agreement. In that case, it does
not make sense for the courts to attempt to salvage the agreement or reward either party.
Which of the following is true of severable contracts?
They are also known as indivisible contracts.
They must be enforced or rejected in their entirety.
They require complete performance by both parties.
They are like numerous contracts in one.
Severable contracts, also known as divisible contracts, contain multiple parts that can each be performed
separately and for which separate consideration is offered. In essence, a severable contract is like
numerous contracts in one.
A(n) _____ requires complete performance by both parties, even if it appears to contain multiple
parts. These contracts must be enforced or rejected in their entirety and these are generally
unenforceable.
adhesion contract
severable contract
indivisible contract
unconscionable contract
An indivisible contract, requires complete performance by both parties, even if it appears to contain multiple
parts. Indivisible contracts must be enforced or rejected in their entirety. If declaring parts of a contract void
substantially alters it, the court is not likely to enforce the remaining portions.
Today, married women have been removed from the category of those lacking contractual capacity,
although in a few states their capacity to enter into certain kinds of contracts is still limited.
True
False
Both a minor and the adult with whom the minor contracted may disaffirm a contract based upon the
minors lack of majority.
True
False
It is only the minor who has the right to disaffirm, never the adult with whom the minor entered into the
agreement.
In all states, parents are responsible for the torts of their minor children.
True
False
In most states, minors, not their parents, are liable for a minors personal torts.
As a general rule, parents are not liable for contracts entered into by their minor children.
True
False
If a persons mental deficiencies have resulted in his being adjudicated insane and a guardian has
been appointed for him, he has no capacity to enter into contracts; and any contract he attempts to
enter into is void.
True
False
For purposes of determining capacity, intoxicated persons include those under the influence of
alcohol, but not drugs.
True
False
For purposes of determining capacity, intoxicated persons include those under the influence of alcohol or
drugs.
A contract of an intoxicated person for necessaries will be enforced for the reasonable value of the
necessaries.
True
False
A contract overturned due to having illegal subject matter or being illegal to perform is generally
declared voidable.
True
False
A contract overturned for illegal subject matter or for being illegal to perform is generally declared void.
All exculpatory clauses are unlawful.
True
False
While businesses closely linked to the public interest cannot enforce exculpatory clauses, not all such
clauses are unlawful.
In the law, when both parties are equally responsible for an illegal agreement, it is known as in pari
delicto.
True
False
Which of the following is an element of a legally binding contract?
Inquiry
Acknowledgement
Capacity
Knowledge
Affirmance
A person who has legal ______ to contract is one who has the mental ability to understand his or her
rights and obligations under a contract and, therefore, will presumably be able to understand how to
comply with the terms of the agreement.
Capacity
Understanding
Ratification
History
Consideration
A person who has legal capacity has the mental ability to understand his or her rights and obligations under
a contract and therefore presumably to comply with the terms.
Which of the following is some sort of mental or physical defect that prevents a person from being
able to enter into a legally binding contract?
Immajority
Capacity
Chronic illness
Incapacity
None of the above
Incapacity, or incompetence as it is sometimes called, is the possession of a mental or physical defect that
prevents a natural person from being able to enter into a legally binding contract.
Historically, which of the following were considered people with limited or no capacity?
Minors
Insane persons
Women
Minors and insane persons, but not women
Minors, insane persons, and married women
In most states, a person is given full legal capacity to enter into contracts when he or she becomes
______ before reaching the age of majority.
Emancipated
Freed
Released
Employed
Either released or employed
Which of the following occurs when a minors parents or legal guardians give up their right
to exercise legal control over the minor, typically when the minor moves out of the parents house
and begins supporting himself or herself?
Ratification
Disaffirmance
Emancipation
Legal release
Reaffirmance
In most cases, when a minor marries, she or he is considered ______.
Emancipated
Freed
Released
Disaffirmed
Either freed or disaffirmed depending on the circumstances
Because their contracts are ______, minors have the right, until a reasonable time after reaching the
age of majority, to _____ or avoid their contracts.
Void, disaffirm
Void, affirm
Void, resist
Voidable, disaffirm
Voidable, affirm
Which of the following is the age of majority in Great Britain?

18
19
21
16
None of the above
In Great Britain, there is no magical age at which a young person suddenly acquires the legal capacity to
enter into a contract.
Which of the following is true regarding the obligation of a minor on disaffirmance?
In all states, a minor must return any consideration in his control but is entitled to a full refund of
any purchase price regardless of the condition of the consideration when returned.
In all states, a minor is entitled to a full refund without returning consideration.
In all states, a minor must return any consideration in his control, must make restitution, and
must pay for any loss in value of the collateral.
In all states, a minor only receives a return of half the minors investment.
The obligations of a minor upon disaffirmance vary from state to state.
When must a disaffirmance of a contract based on minority occur?
Before or within a reasonable time of the minor reaching the age of majority.
Within 30 days of the minor reaching the age of majority.
Within one year of the minor reaching the age of majority.
As a general rule, most states will not allow a minor to disaffirm contracts for which of the
following?
Life insurance
Health insurance
Psychological counseling
All of the above
Life insurance and health insurance, but not psychological counseling
Primarily for public policy reasons, in most states, courts or state legislatures have determined that the
minor should not have the right to disaffirm contracts for life insurance, health insurance, psychological
counseling, the performance of duties related to stock and bond transfers and bank accounts, education
loan contracts, child support contracts, marriage contracts, and enlistment in the armed services.
Which of the following is the majority rule regarding a minors misrepresentation of his or her age?
That if a competent party relies on a misrepresentation in good faith, the minor gives up the
right to disaffirm the agreement.
That the minor must restore the competent party to that partys precontract position before
obtaining the disaffirmance.
That the minor may disaffirm but that the competent party has the right to sue the minor in tort
and recover damages for fraud.
That misrepresentation does not affect the minors right to disaffirm the contract.
That misrepresentation results in the minor receiving a return of only half the consideration he
or she supplied.
Which of the following is false regarding contracts for necessaries entered into by minors?
A minor cannot disaffirm contracts for necessaries.
A minor can disaffirm a contract for necessaries, but the minor will still be held liable for the
reasonable value of the necessary.
A contract for a necessary is a contract that supplies the minor with the basic necessities of life.
The purpose of holding minors liable for necessaries is to ensure that minors are able to obtain
the basic necessities of life when their parents will not provide them.
Whether something is considered a necessary is related to whether the minors parents are
willing to provide the item in question for the minor.
Technically, minors can disaffirm contracts for necessaries, but they will still be held liable for the reasonable
value of the necessary.
Which of the following occurs when a person reaches the age of majority and states, either orally or
in writing, that he or she intends to be bound by the contact entered in to as a minor?
Implied ratification
Express ratification
Express novation
Implied novation
Disaffirmance
A[n] ______ occurs when a former minor does not specifically state that he affirms a contract
entered into as a minor but takes some action that is consistent with intent to ratify the contract.
Implied ratification
Express ratification
Express novation
Implied novation
Disaffirmance
Which of the following is true regarding the ability of persons suffering from a mental illness to enter
into a binding contract?
Persons suffering from a mental illness never have capacity to enter into a binding contract.
Persons suffering from a mental illness have full capacity to enter into a binding contract so long
as they do not present a danger to themselves or others.
Persons suffering from a mental illness have full capacity to enter into a binding contract so long
as they inform the other party that they are in treatment.
Persons suffering from a mental illness may have full, limited, or no legal capacity to
enter into a binding contract depending on the nature and extent of their mental
deficiency.
Persons who suffer from a mental illness always have full capacity to enter into a binding
contract.
Guardians may be appointed for which of the following?
Those who are adjudicated insane.
Those who are adjudicated habitual drunkards.
Those whose judgment has been impaired because of a condition such as Alzheimers.
All of the above.
Those who are adjudicated insane and those whose judgment has been impaired because of a
condition such as Alzheimers, but not those who are adjudicated habitual drunkards.
Which of the following is true if a contract is disaffirmed on the basis of intoxication?
Each party to the contract must return the other to the condition he or she was in at the
time the contract was entered into.
The intoxicated person must be returned to the condition he or she was in at the time the
contract was entered into, but that is not true for any other party.
Any party other than the intoxicated person must be returned to the condition he or she was in
at the time the contract was entered into.
So long as the contract was objectively fair, neither party must be returned to the condition he or
she was in prior to the time the contract was entered into.
So long as the contract was subjectively fair in the opinion of the intoxicated party, neither party
must be returned to the condition he or she was in prior to the time the contract was entered
into.
If the contract is disaffirmed on the basis of intoxication, each party must return the other to the condition he
or she was in at the time they entered into the contract.
Because ______ does not favor intoxication, the courts tend to be unsympathetic to intoxicated
parties and will fairly liberally interpret behavior that seems like ratification as ratifying the contract.
Morality
Popular opinion
Medical literature
Religion
Public policy
Which of the following is true regarding an agreement to commit a crime or a tort?
An agreement to commit a crime is enforceable, but an agreement to commit a tort is
unenforceable.
An agreement to commit a tort is enforceable, but an agreement to commit a crime is
unenforceable.
An agreement to commit a crime is unenforceable, and an agreement to commit a tort is
unenforceable unless a business tort is involved in which case the agreement is enforceable.
An agreement to commit a crime is unenforceable except an agreement to commit white collar
crime in which case the agreement is enforceable; and an agreement to commit a tort is
unenforceable unless a business tort is involved in which case the agreement is enforceable.
An agreement to commit a crime is unenforceable, and an agreement to commit a tort is
unenforceable.
If a legal contract is formed and the subject of the contract then becomes illegal under a new statute,
the contract is ______.
Discharged
Enforced
Disregarded
Executed
Executory
How many states have statutes requiring that people working in certain professions obtain a license
before practicing their craft?
50
49
45
30
25
Which of the following is a purpose of licensing statutes?
To give the government some control over which people, and how many people, can perform
certain jobs.
To give the government a source of revenue.
To protect the publics health, safety, and welfare.
All of the above.
To encourage proper performance and to protect the publics health, safety, and welfare; but not
to give the government an avenue by which to regulate specific industries
In addition to the value associated with proper performance, licensing statutes have three main purposes in
addition to indicating this value. The first is to give the government some control over which people, and
how many people can perform certain jobs. Second, by charging for licenses, the government can obtain
revenue. The third purpose of licensing statutes, the protection of the publics health, safety, and welfare, is
related to the public interest.
If a licensing statute is intended to protect the publics health, safety, and welfare, an agreement with
an unlicensed professional is typically deemed _____.
Executed
Enforceable without a fine
Illegal and unenforceable
Enforceable but with a fine
Usury
Which of the following occurs when a party gives a loan at an interest rate exceeding the legal
maximum?
No enforceable legal violation
Interest prohibition
Principle reduction
Usury
Plenary
Which of the following is the maximum interest rate?
20%
15%
12%
10%
It varies depending on the state involved.
How many states engage in at least some regulation of gambling?
50
47
40
35
10
Which of the following is a term for laws that limit the types of business activities in which parties
may legally engage on Sundays?
Sabbath laws
Blue laws
True laws
Sabbath and blue laws, but not true laws
Sabbath laws, blue laws, and true laws
Bob is hired to do computer sales for an electronics store. He agrees that if he leaves his
employment, he will not work for another computer store within 25 miles for a period of two years.
That type of agreement is called a[n] ______.
Covenant not to compete

Employment covenant
Working covenant
Termination agreement
Public policy agreement
A type of permissible restraints on trade is covenants not to compete in employment contracts. Covenants
not to compete in employment contracts are legal in most states, but they must protect a legitimate business
interest.
The term ______ refers to the fact that an agreement is so unfair that it is void of conscience.
Unreasonable
Outrageous
Unconscionable
Unrealistic
Unbelievable
A party who claims that he or she could not understand contractual terms because of tiny, hard-toread print on the back of an agreement and the excessive use of legalese is referring to which of the
following?
Substantive unconscionability
Adhesion conscionability
Procedural unconscionability
Exculpatory clauses
An in pari delicto agreement.
Procedural unconscionability describes conditions that impair one partys understanding of a contract, as
well as the integration of terms into a contract. These conditions can be anything from tiny, hard-to-read
print on the back of an agreement to excessive use of legalese (unnecessarily technical legal language) or
even a persons inability to fully read a contract and ask questions before being required to sign.
Which of the following involves overly harsh or lopsided substance in an agreement?
Substantive unconscionability
Adhesion conscionability
Procedural unconscionability
Exculpatory clauses
An in pari delicto agreement
A[n] ______ contract is a contract created by a party to an agreement that is presented to the other
party on a take-it-or-leave-it basis.
Substantively unconscionable
Adhesion
Outrageous
Procedurally unreasonable
Unreasonable
An adhesion contract is an agreement presented on a take-it-or-leave-it basis or as the only chance the
presented party (the adhering party) will have to enter into it.
A statement releasing one of the parties to an agreement from all liability, regardless of who is at
fault or what the injury suffered is, would be referred to as a[n] ______ agreement.
Substantive agreement
Adhesion agreement
In pari delicto agreement
Exculpatory
Res Ipsa
In the law, when both parties are equally responsible for an illegal agreement, it is known as ______.
In pari delicto
Procedurally unconscionable
A res ipsa contract
A state decisis contract
Which of the following are contracts that contain multiple parts which can each be performed
separately and for which separate consideration is offered?
Independent contracts
Substantive contracts
Adhesion contracts
Justifiable contracts
Severable contracts
Severable contracts, also known as divisible contracts, contain multiple parts that can each be performed
separately and for which separate consideration is offered.
A[n] ______ contract is one requiring complete performance by both parties, even if it appears as if
the contract contains multiple parts.
Adhesion
Divisible
Justifiable
Indivisible
Independent
Which of the following was the result in the case in the text William Cavanaugh v. Margaret
McKenna, the case in which the plaintiff was sued for opening a funeral home after she agreed to
refrain from doing so in her divorce as part of a covenant not to compete with her ex-husband?
That the agreement was invalid because it was not entered into in the context of either an
employment agreement or the sale of a business.
That the agreement was invalid because it was most analogous to the sale of a business and
was unreasonable.
That the agreement was valid because it was most analogous to an employment agreement
and was reasonable.
That the covenant was invalid because it did not contain an explicit time limitation.
That the covenant was reasonable and valid and construed liberally because it was most
analogous to the sale of a business
According to the court: Here, the covenant not to compete contained within the separation agreement is
most analogous to the sale of a business. As such, the covenant not to compete should be construed more
liberally.The Court finds that her covenant not to compete in the funeral business in the town of Wilmington
for as long as Cavanaugh operates his funeral home there is reasonable in time and space.

Without legal assent, a contract can be:
under seal.
voidable.
unenforceable.
void.
To make business transactions smoother and more dependable, courts have developed rules about when
an assent to do something is a legal assent, that is, a promise the courts will require the parties to obey.
Without legal assent, the contract may be voidable.
In contract law, ____ is an erroneous belief about the facts of the contract at the time the contract is
concluded.
a mistake of fact
undue influence
a mistake of law
duress
In contract law, a mistake of fact is an erroneous belief about the facts of the contract at the time the
contract is concluded. Legal assent is absent when a mistake of fact occurs.
Which of the following is true of unilateral mistakes?
A unilateral mistake is the result of an error by one party about a material fact.
A unilateral mistake generally makes a contract void.
Rescission is permitted for all unilateral mistakes.
A unilateral mistake resulting from gross negligence would permit a court to invalidate a
contract.
Mistakes can be unilateral, the result of an error by one party about a material fact, that is, a fact that is
important in the context of the particular contract.
Because courts are hesitant to interfere when one of the parties has a correct understanding of the material
facts of the agreement, a unilateral mistake does not generally void a contract. On rare occasions, however,
rescission is permitted for unilateral mistakes.
In a mutual mistake:
when both parties are mistaken about a current or past material fact, either can choose
to rescind the contract.
rescission is not permitted.
when both parties have mistaken beliefs about the subjective value of an item, the offeror can
choose to rescind a contract.
the agreement is real and valid and performance of the contract is required.
In a mutual mistake, when both parties are mistaken about a current or past material fact, either can choose
to rescind the contract. Rescission is fair because any agreement was an illusion: Ambiguity prevented a
true meeting of the minds.
A(n) _____ results from a false statement about a fact material to an agreement that the person
making it believed to be true.
fraudulent misrepresentation
negligent misrepresentation
innocent misrepresentation
concealment
An innocent misrepresentation results from a false statement about a fact material to an agreement that the
person making it believed to be true. The person had no knowledge of the claims falsity. He or she lacked
scienter.
A(n) _____ is a consciously false representation of a material fact intended to mislead the other
party.
innocent misrepresentation
fraudulent misrepresentation
concealment
negligent misrepresentation
A fraudulent misrepresentation is a consciously false representation of a material fact intended to mislead
the other party. It is also referred to as intentional misrepresentation. Here, scienter is clear that the factual
claim is false or knows there is no basis for it.
In some contract negotiations, one party makes a statement of material fact that he/she thinks is
true, which he/she could have discovered by using reasonable care. The party has made a(n):
concealment.
nondisclosure.
innocent misrepresentation.
negligent misrepresentation.
In some contract negotiations, one party makes a statement of material fact that he thinks is true. If he could
have known the truth by using reasonable care to discover or reveal it, his statement is a negligent
misrepresentation.
Active hiding of the truth about a material fact is:
negligence.
nondisclosure.
duress.
concealment.
Concealment is the active hiding of the truth about a material fact. For fraudulent misrepresentation to be
the basis for a contract rescission, the statement of fact need not be an actual assertion. It can also be an
act of concealment or nondisclosure.
Removing 10,000 miles from the odometer on a car before selling it is an example of:
negligence.
duress.
concealment.
nondisclosure.
Removing 10,000 miles from the odometer on your car before selling it is an example of concealment.
Concealment is the active hiding of the truth about a material fact.
_____ is a failure to provide pertinent information about the projected contract.
Negligence
Duress
Nondisclosure
Concealment
Nondisclosure is a failure to provide pertinent information about the projected contract. The courts have until
recently been hesitant to use nondisclosure as a basis for rescinding a contract because it is a passive form
of misleading conduct.
_____ refers to those special relationships in which one person takes advantage of a dominant
position in a relationship to unfairly persuade the other and interfere with that persons ability to
make his or her own decision.
Duress
Unconscionability
Undue influence
Privity of contract
People bargaining with their attorney, doctor, guardian, or relative are susceptible to being
persuaded by unusual pressures unique to that relationship. This is an example of:
undue influence.
duress.
lack of capacity.
unconscionability.
People bargaining with their attorney, doctor, guardian, relative, or anyone else in a relationship that
includes a high degree of trust are susceptible to being persuaded by unusual pressures unique to that
relationship. This is an example of undue influence. The essential element of undue influence is the
existence of a dominant-subservient relationship.
Contracts that result from undue influence are:

void.
voidable.
unenforceable.
valid.
The assent that results from an undue influence may not be legal consent. The courts may see the undue
influence of the relationship as interfering with the free choice required for an enforceable contract.
Whatever contracts result from undue influence are voidable.
Which of the following occurs when one party is forced into the agreement by the wrongful act of
another?
Duress
Privity of contract
Undue influence
Duty to retreat
Duress is a much more visible and active interference with free will than is undue influence. Duress occurs
when one party is forced into the agreement by the wrongful act of another.
When one party is forced to enter into a contract by the wrongful threat of another, the contract is voidable
by the innocent party due to duress.
Unconscionability leads to _____ contracts.
valid
adhesion
illegal
aleatory
Unconscionability leads to adhesion contracts. When one of the parties has so much more bargaining power
than the other that he or she dictates the terms of the agreement, such an agreement can be rescinded on
grounds of unconscionability.
A mistake of fact is an erroneous belief about the facts of the contract at the time the contract is
concluded.
True
False
Mistakes in contract law result from untrue statements made by one party to the contract.
True
False
For fraudulent misrepresentation to be the basis for a contract rescission, the statement of fact need
not be an actual assertion.
True
False
A negligent misrepresentation results when the party making the statement would have known the
truth about the fact had he used reasonable care to discover or reveal it.
True
False
When a fraudulent misrepresentation is at issue, intent to deceive may not be inferred.
True
False
Intent to deceive can be inferred from the particular circumstances.
Nondisclosure involves the active hiding of the truth about a material fact.
True
False
Concealment is the active hiding of the truth about a material fact. Nondisclosure is a failure to provide
pertinent information about the projected contract.
Scienter is present when the party accused of making the fraudulent assertion believed that the
assertion was false or made the claim without any regard for whether it was true or false.
True
False
Undue influence refers to those special relationships in which one person has taken advantage of
his or her dominant position in a relationship to unduly persuade the other person and interfere with
that persons ability to make his or her own decision.
True
False
Threatening physical harm or extortion to gain consent to a contract is classified as undue
influence.
True
False
Duress occurs when one party threatens physical harm or extortion to gain consent to a contract.
Unconscionability is a concept strictly limited today to the sale of goods.
True
False
Although unconscionability has traditionally been limited to the sale of goods under the Uniform Commercial
Code, many courts have not followed that tradition. When they see contracts written by one party and
presented to the other with the threat to take it or leave it, they sometimes extend the idea of
unconscionability beyond the sale of goods.
Which of the following involves a promise to buy or sell that the courts will require the parties to
obey?
Bilateral assent
A special agreement
Legal assent
Contractual affirmance
Legal affirmance
Without legal assent, a contract may be ______.
Unmarketable
Unchargeable
Chargeable
Illegal
Voidable
When a contract is voidable, it may be _____.
Chargeable
Rescinded
Deassented
Reassented
Uncharged
A voidable contract can be rescinded, or canceled, permitting the person who canceled the contract to
require the return of everything she gave the other party
Which of the following was the result on appeal in the Case Opener involving the claim that Michael
Jordan owed $5 million based on his agreement to pay the plaintiffs mother on the premise that he
was the father although it was later determined that the child was not his?
That the agreement to pay $5 million could be rescinded based on a mistake of fact.
That the agreement to pay $5 million could be rescinded based on the mothers fraud.
That the agreement to pay $5 million could be rescinded based on either a mistake of
fact or based on the mothers fraud.
That the agreement to pay $5 million could not be rescinded because Jordan was aware of a
question about his parentage.
That the agreement to pay $5 million could not be rescinded because Jordan waited too long in
which to complain about the contract.
The trial court agreed with Michael Jordans argument regarding a mutual mistake or fraudulent
misrepresentation in the contract. Knafel appealed, and the court affirmed the lower courts decision.
Which of the following is false regarding European courts?

In general, European courts agree with the reluctance of American courts to interfere with a
contract just because the value of the item in question has changed since the agreement.
The European courts assume parties have accepted the risk when they made the contract that
the value might change later.
European courts take a different approach to mistakes about the value of performance of the
contract.
European courts permit rescission of the contract for a mistake of value when the
mistake involves more than 50 percent of the value at the time of the contract.
None are false. All the above are true.
When a mistake of fact occurs, ______ is absent.
Legal coherence
Bilateral understanding
Joint reasoning
Contractual concurrence
Legal assent
A(n) ______ mistake is the result of an error by one party about a material fact.
Unclear
Mutual
Unilateral
Clear
Single
A unilateral mistake is the result of an error by one party about a material fact, that is, a fact that is important
in the context of the particular contract.
A(n) ______ mistake is a mistake that is shared by both parties to an agreement.

Unclear
Mutual
Unilateral
Clear
Single
Why is it important to distinguish between unilateral and mutual mistakes?

Because it determines which contracts are considered fraudulent.
Because it determines which contracts are voidable.
Because it determines which contracts lack consideration.
Because it determines how much may be awarded in damages under a contract.
Because it determines whether punitive damages may be awarded.
facts of the agreement, a unilateral mistake does not generally void a contract. When both parties are
mistaken about a current or past material fact, either can choose to rescind the contract. Rescission is fair
because any agreement was an illusion.
Although there are some exceptions, a[n] ______ mistake does not generally void a contract.
Unclear
Mutual
Unilateral
Clear
Single
facts of the agreement, a unilateral mistake does not generally void a contract.
In cases where both parties to a contract are mistaken about either a current or a past material fact,
either can choose to ______ the contract.
Uphold
Confirm
Rescind
Refute
Disclaim
When both parties are mistaken about a current or past material fact, either can choose to rescind the
contract. Rescission is fair because any agreement was an illusion.
George offers to sell Penelope a ring that George found in his yard. He and Penelope look at the ring
and decide that they are not sure what it is, probably just a shiny stone. Penelope pays George $10
for the ring. The ring turns out to be a diamond worth much more than $10. George wants the ring
back, and Penelope refuses. What is the most likely result?
The ring will be returned to George because of mutual mistake.
The ring will be returned to George because of unilateral mistake.
The ring will be returned to George because of equity.
The ring will remain with Penelope unless George can establish that she was negligent in not
recognizing the rings true value.
The ring will remain with Penelope because the parties contracted on the assumption
that they did not know the value of the ring.
For a mutual mistake to interfere with legal consent, an adverse effect on a party who did not agree to bear
the risk of mistake at the time of the agreement must be present. Here, the parties agreed that the value
was unknown when the ring was sold.
Which of the following must a mutual mistake involve in order for a mutual mistake to interfere with
legal consent?
A basic assumption about the subject matter of the contract.
A material effect on the agreement.
A basic assumption about the subject matter of the contract and an adverse effect on a party
who did not agree to bear the risk of mistake at the time of the agreement, but not a material
effect on the agreement.
A basic assumption about the subject matter of the contract, an adverse effect on a party
who did not agree to bear the risk of mistake at the time of the agreement, and a material
effect on the agreement.
An admission by one of the parties that a misrepresentation occurred.
A[n] ______ misrepresentation results from a false statement about a fact material to an agreement
that the person making the statement believed to be true.
Wrongful
Innocent
False
Misleading
Illegal
When a person who makes a misrepresentation has no knowledge about the falsity of the claim, it is
said that the person lacked ______.
Information
Premeditation
Planning
Plotting
Scienter
Which of the following is true regarding the effect of an innocent misrepresentation on a contract?
It permits the party that was misled by the false statement to rescind the contract.
It permits the party who made the false statement to rescind the contract.
It permits either the party that was misled by the false statement or the party who made the
false statement to rescind the contract.
The contract is automatically void and of no effect, and the party who was mislead may recover
damages.
It permits either the party that was misled by the false statement or the party who made
the false statement to rescind the contract, and it also makes the contract void and of no
effect.
Innocent misrepresentations permit the misled party to rescind the contract. However, because the other
party had no intent to mislead, the aggrieved party cannot sue for damages.
Which of the following was the result on appeal in the case of Evan Rothberg v. Walt Disney
Pictures, the case in the text in which the defendant allegedly used undue influence to obtain a
release of employee benefits from a person in the hospital dying of AIDS?
The court ruled that the defendant was rightfully entitled to a summary judgment ruling in its
favor because there was no direct evidence of legal undue susceptibility on the part of the
weaker party.
The court ruled that the defendant was rightfully entitled to a summary judgment ruling in its
favor because there was no direct evidence of application of excessive pressure by the stronger
party.
The court ruled that the defendant was subject to summary judgment both because there was
no direct evidence of legal undue susceptibility on the part of the weaker party and also
because there was no direct evidence of application of excessive pressure by the stronger
party.
The court ruled that the plaintiff was entitled to recover as a matter of law because there was
sufficient proof of undue influence.
The court ruled that a jury question was presented as to whether undue influence was
present.
Regarding the element of excessive pressure by the stronger party, the court noted that in most undue
influence cases, such as this case, direct evidence is rarely obtainable and thus the jury must decide the
issue on the basis of inferences drawn from all the facts and circumstances.
Which of the following is true on appeal regarding the case of Mary W. Scott v. Mid-Carolina Homes,
Inc. discussed in the Case Nugget in which the plaintiff sued to recover damages after a
salesperson allegedly mistakenly refused to sell her a mobile home because of a bent frame but later
sold it to someone else?
The court refused to find that the defendant had the right to rescind the contract based
on the alleged unilateral mistake.
The court refused to find that the defendant had the right to rescind the contract because the
plaintiff was presumed to know the law and should have realized the nature of the mistake.
The court refused to find that the defendant had the right to rescind the contract because the
plaintiff had not made a down payment.
The court ruled that the defendant had the right to rescind the contract because a unilateral
mistake was involved.
The court ruled that the defendant had the right to rescind the contract because a mutual
mistake was involved.
In upholding the award to the plaintiff, the state supreme court explained that a contract may be rescinded
for unilateral mistake only when the mistake has been induced by fraud, deceit, misrepresentation,
concealment, or imposition of the party opposed to the rescission, without negligence on the part of the
party claiming rescission; or when the mistake is accompanied by very strong and extraordinary
circumstances that would make it a great wrong to enforce the agreement.
Which of the following was the result on appeal in the case of Ronald Jackson and Willa Jackson v.
Robert R. Blanchard, Helen M. Blanchard, Maynard L. Shellhammer, and Philip Schlemmer, the case
in the text in which the defendants sued the sellers of property after finding well problems, septic
discharge problems, and the presence of underground petroleum storage tanks?
That problems with the well indicated a fraud on the part of the defendants and that the plaintiffs
were entitled to rescission of the contract but that the other complaints failed to establish fraud.
That the problems with the well indicated a fraud on the part of the defendants and that the
other problems established mutual mistakes any of which justified rescission of the contract.
That the plaintiffs were entitled to rescission for the sole reason that the septic discharge
problems established a legal violation existing at the time the exchange occurred.
That the plaintiffs were not entitled to rescission because they could not establish sufficient
damages.
That the plaintiffs were not entitled to rescission because they were unable to establish
issues material to the parties agreement sufficient to establish mutual mistake.
In China, which of the following is true regarding the treatment of fraudulent misrepresentations by
outsiders?
Outsiders have been fined but by law are allowed to continue operation in the country because
of the countrys concern with joint ventures.
Outsiders have been prohibited from doing further business with Chinese firms but not fined
because of the countrys concern with joint ventures.
Outsiders are jailed for at least 20 years by law.
Outsiders are jailed for at least 10 years, fined heavily, and have all property confiscated.
Outsiders have been fined heavily and refused permission to enter into more agreements
with Chinese firms.
In China, accusations of outsiders fraudulent misrepresentation have resulted in heavy fines and even
refusals to allow the fraudulent party to enter into any more agreements with Chinese firms.
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
All the above
Negligent or fraudulent misrepresentation, but not a scienter misrepresentation
Which of the following involves the active hiding of the truth about a material fact?
Concealment
Nondisclosure
Negligence
All the above
Concealment and nondisclosure, but not negligence
Which of the following refers to a failure to provide pertinent information about a projected contract?
Concealment
Nondisclosure
Negligence
All the above
Concealment and nondisclosure, but not negligence
In determining whether a mistake of fact occurred, what of the following is true?
Courts look to determine whether a mistake of fact occurred at the time the contract was
concluded.
Courts look to determine whether a mistake of fact occurred during contract negotiations.
Courts look to determine whether a mistake of fact occurred when the initial offer was made.
Courts look to determine whether a mistake of fact occurred when an advertisement was made.
Courts look to determine whether a mistake of fact occurred after the contract was concluded.
Which of the following is present when a party making a false statement claims or implies that he or
she has personal knowledge of the accuracy of the assertion?
Scienter
Intent to deceive
Solicitation
All the above
Scienter and intent to deceive, but not solicitation
Which of the following refers to special relationships in which one person has taken advantage of
his or her dominant position in a relationship to unduly persuade the other person?
Undue influence
Pressing dominance
Pressing persuasion
Relationship dominance
Undue influence refers to those special relationships in which one person takes advantage of a dominant
position in a relationship to unfairly persuade the other and interfere with that persons ability to make his or
her own decision.
Which of the following is found when one party was forced into an agreement by the wrongful act of
another?
Duress
Negligence
Fraud
All the above
Duress and fraud, but not negligence
Which of the following is involved in a situation in which a person refuses to perform according to a
contract unless the other person either signs another contract with the one making the threat or
pays that person a higher price than was specified in the original agreement?
Fraudulent duress
Contractual duress
Negligent duress
Economic duress
Specific duress
Economic duress occurs when one party threatens the others economic interests. For instance, a person
refuses to perform according to a contract unless the other person either signs another contract with the one
making the threat or pays that person a higher price than specified in the original agreement.
Mary and Jason discuss the fact that a new teacher is being hired for business law and other changes going
on at the school. Jason mentions that he does not yet have a book, and Mary agreed to sell Jason a used
business law book for $30 for the upcoming semester. When the new semester begins, the new business
law teacher announces that a new business law text will be used that is available in the bookstore. Jason
wants a refund. Which of the following is Marys best defense?
That Jason knew of the change of teacher and bore the risk of mistake.
That only a unilateral mistake was involved on Jasons behalf because Mary was aware of the
change and that, therefore, Jason is not entitled to a discharge.
That a mutual mistake was involved and that Jason was, therefore, not entitled to a refund.
That transactions involving goods are not subject to the defense of mistake.
That she did not commit fraud and that, therefore, Jason is not entitled to rescission
For a mutual mistake to interfere with legal consent, there must be an adverse effect on a party who did not
agree to bear the risk of mistake at the time of the agreement.
Which of the following occurs when a party threatens to file a criminal lawsuit unless consent is
given to the terms of a contract?
Duress
Undue influence
Durable fraud
Criminal influence
Duress and undue influence, but not durable fraud
Selma agreed to buy a used car from Hillary for $2,000. Hillary drew up the contract providing that
the exchange would occur the next week. Unfortunately, Hillary was not very good with the keyboard
and typed in $200 as the price of the car. Selma noticed that the contract said $200, not $2,000, and
was very pleased. She signed it without saying anything. When it was time to make the exchange,
Selma gave Hillary $200. In response to Hillarys inquiry regarding an additional $1,800, Selma pulled
out the contract and showed her that it said $200. Selma said that there was no mistake on her part
because she knew exactly what she was doing and that she thought that Hillary had decided to give
her a deal on the car. Which of the following is Hillarys best argument?
That a unilateral mistake was involved and that courts typically allow relief in situations involving
unilateral mistakes as opposed to mutual mistakes.
That the mistake resulted from a sale of goods, as opposed to the provision of services, and
that courts are more likely to grant relief for a mistake when actual physical work is not involved.
That because a bilateral contract, as well as a unilateral mistake was involved, most courts
would grant relief.
That the mistake resulted from an accidental clerical error and that it would be
unconscionable to enforce the contract.
None of the above because there is no argument that would help Hillary.
On rare occasions, rescission is permitted for unilateral mistakes. Rescission is appropriate when the
mistake was caused by a clerical error that was accidental and did not result from gross negligence; or the
mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous.
Which of the following was the result on appeal in the case in the text, Gary W. Cruse and Venita R.
Cruse v. Coldwell Banker/Gruber Real Estate, Inc., in which the court examined the liability of a
realtor when problems were discovered with a home marketed as new?
That the realtor had merely engaged in sales talk when marketing the home as new which could
not be relied upon by the purchasers.
That the plaintiffs were barred from proceeding because they knew that the home builder had
occupied the house.
That the plaintiffs were barred from proceeding because they signed an as is disclaimer.
That as a matter of law the plaintiffs were allowed to recover.
That a jury question was presented on whether the plaintiffs could have justifiably relied
on the defendants misrepresentation
According to the court, the evidence establishes that Graben Real Estate misrepresented a material fact
and creates a jury question as to whether the Cruses could have justifiably relied upon this
misrepresentation in deciding not to closely inspect the house before buying it.
When duress is at issue, the _____ needed for legal consent has been removed by the specifics of
the threat.
Free will
Knowledge
Specifics
Consideration
Realization
The injured party makes the case for duress by demonstrating that the threat left no reasonable alternatives
and that the free will necessary for legal consent was removed by the specifics of the threat.
Which of the following occurs when one of the parties to a contract has so much more bargaining
power than the other that he or she dictates the terms of the agreement?
Unfairness
Cohesiveness
Disconnection
Unconscionability
Unprovable
such an agreement can be rescinded on grounds of unconscionability.
The resulting contract from an agreement reached because one of the parties has so much more
bargaining power than the other that he or she dictates the terms of the agreement is called which of
the following?
An outrageous contract
An out-of-bounds contract
An untrue contract
An unaffirming contract
Which of the following occurs in Australia whenever an illegitimate threat is made to hold on to
goods unless a payment is made or an agreement is entered into?
Unconscionable duress
Duress of goods
Duress of merchandise
Duress of trade
Unreasonable duress
Australia recognizes a special category called duress of goods, which occurs whenever one party makes an
illegitimate threat to hold goods unless another party makes payment or enters into an agreement.
The reasoning in innocent misrepresentation cases resembles the reasoning in a ______ case.
Duress
Unilateral mistake
Mutual mistake
Negligent misrepresentation

Which of the following is true of statute of frauds?
It does not allow time for careful consideration when entering into a contract by the parties.
It attempts to ease contractual negotiations by avoiding writing the contract and other
contractual formalities.
It prevents parties from entering into contracts with which they do not agree.
It prevents unreliable written evidence.

One of the main purposes of the statute of frauds is to prevent parties from entering into contracts with
which they do not agree. That is, it provides some degree of cautionary protection for the parties, who must
carefully consider the terms, agree to them, write them out, and finally, sign the contract. The law assumes
that these steps will allow time for careful consideration.
Another main purpose of the statute of frauds is to prevent unreliable oral evidence from interfering with a
contractual relationship. It attempts to ease contractual negotiations by requiring sufficiently reliable
evidence to prove the existence and specific terms of a contract.
Which of the following contracts fall within the statute of frauds?
Contracts related to negligent misrepresentation
Promises made in consideration of marriage
Contracts for the sale of goods irrespective of the amount involved
Promises related to an interest in acquisition and sale of businesses
Only specific types of contracts are within the scope of the statute of frauds and thus required to be
evidenced by writing. They are (1) contracts whose terms prevent possible performance within one year, (2)
promises made in consideration of marriage, (3) contracts for one party to pay the debt of another if the
initial party fails to pay, and (4) contracts related to an interest in land.
Which of the following is true of contracts to be in writing whose terms prevent possible
performance within one year?
The possibility that a contracts terms could be performed within one year does not remove the
contract from the statutes written requirements.
If a contract can possibly be performed within a year, but such performance is highly unlikely,
then the contract needs to be in writing to be enforceable.
The one-year period begins from the day the contract is entered into.
The test for compliance with the one-year rule, considers the possibility of completing
the contract in one year as defined by the terms of the contract.
The test for compliance with the one-year rule does not consider the likelihood of completing the contract
within one year. Rather, it considers the possibility of completing the contract in one year.
If a contract can possibly be performed within a year, even if such performance is highly unlikely, then the
contract does not need a writing to be enforceable.
A(n) ____ is an agreement two parties enter into before marriage that clearly states the ownership
rights each party enjoys in the other partys property.
coverture
prenuptial agreement
alimony
nondisclosure agreement
A prenuptial agreement is an agreement two parties enter into before marriage that clearly states the
ownership rights each party enjoys in the other partys property. While mutual promises to marry do not fall
within the statute of frauds, prenuptial agreements do.
A(n) _____ occurs when a party outside a primary agreement promises to fulfill one of the original
partys obligations if the original party fails to fulfill it.
privity of contract
collateral promise
primary obligation
illusory promise
A secondary obligation occurs when a party outside a primary agreement promises to fulfill one of the
original partys (primary debtors) obligations if the original party fails to fulfill it. These secondary obligations
are also called secondary promises, collateral promises, or suretyship promises.
Contracts that are required to be in writing by the statute of frauds include:
contracts predicated on a condition precedent.
contracts for the sale of goods irrespective of the amount involved.
contracts for mortgage or lease of land and buildings.
all promises for the international sale of goods.
Contracts transferring other interests in land are within the statute of frauds.
Mortgages and leases are within the statute because they are considered transfers of interest in land. The
statute requires a writing as evidence of the contract, a claim to an oral contract for the sale of land is not
enough to prove such a contract existed.
Agreements for a sale in which the total price is $500 or more are required by the UCC, to be
recorded in a written contract. This writing need only state the:
names of the buyer and seller.
method of payment.
price of the goods.
quantity to be sold.
Agreements for a sale in which the total price is $500 or more are required by the UCC, Section 2-201, to be
recorded in a written contract or a memorandum. This writing need only state the quantity to be sold; buyer,
seller, price, and method of payment do not need to be included.
Which of the following is true of the sufficiency of writing required by the statute of frauds?
One or several documents can together make up the written agreement.
The contract must be signed and the signature needs to be at the end.
Actual invoice must be produced in all circumstances when entering into a contract.
The written evidence must compulsorily be signed by both the parties.
There are no specific requirements for the form of a written contract under the statute of frauds. In fact, one
or several documents can together make up the written agreement under the statute. Required elements
include the identification of the parties to the contract, the subject matter of the agreement, the consideration
(if any), and any pertinent terms.
A(n) _____ is a statement made in court, under oath, or at some stage during a legal proceeding in
which a party against whom charges have been brought admits that an oral contract existed, even
though the contract was required to be in writing.
assignment
spoliation
admission
solicitation
The statute of frauds allows certain exceptions. These exceptions are admission, partial performance, and
promissory estoppel. An admission is a statement made in court, under oath, or at some stage during a
legal proceeding in which a party against whom charges have been brought admits that an oral contract
existed, even though the contract was required to be in writing. All states except Louisiana and California
allow the admission exception.
_____ is the legal enforcement of an otherwise unenforceable contract due to a partys detrimental
reliance on an oral contract that within the statute of frauds is required to be in writing.
Equitable estoppel
Proprietary estoppel
Estoppel by convention
Promissory estoppel
Under certain circumstances, when a party relies on an oral contract that within the statute of frauds is
required to be in writing, the reliance can create a situation in which the contract is nevertheless
enforceable. Promissory estoppel is the legal enforcement of an otherwise unenforceable contract due to a
partys detrimental reliance on the contract.
The common law rule, which makes oral evidence of an agreement inadmissible if it is made before
or at the same time as a writing that the parties intend to be the complete and final version of their
agreement is the:
contract of adhesion.
parol evidence rule.
mailbox rule.
mirror image rule.
Parol evidence rule, a common law rule makes oral evidence of an agreement inadmissible if it is made
before or at the same time as a writing that the parties intend to be the complete and final version of their
agreement. To smooth transactions by limiting the types of evidence admissible in such claims, the courts
rely heavily on the parol evidence rule.
Parol in parol evidence rule means:
silence.
monetary transactions.
speech or words.
written agreement.
Parol evidence rule, a common law rule makes oral evidence of an agreement inadmissible if it is made
before or at the same time as a writing that the parties intend to be the complete and final version of their
agreement. Parol in parol evidence rule means speech or words, specifically words outside the original
writing.
The purpose of the parol evidence rule is to:
prevent evidence that substantially contradicts the agreement in its written form.
include evidence of prior agreements and negotiations.
fill in the missing details in a written document.
avoid considering spoken and written words extrinsic to the original writing as an evidence.
Therefore, evidence of prior agreements and negotiations, as well as contemporaneous agreements and
negotiations, is typically excluded under the parol evidence rule.
Which of the following statements is true of merger clauses?
The merger clauses included in contracts are an attempt by the parties to signal the judges that
the written contract is not the final statement of their agreement.
All courts consider merger clauses to be conclusive proof of a contract.
The merger clauses seek to blend other agreements either into the final agreement or
into something explicitly identified as being outside the final agreement.
The merger clauses in a contract increase the amount of guesswork courts must do in
determining what is the final statement of the agreement.
Sometimes, parties take the initiative and, in a merger clause, attempt to signal to judges that the written
contract is intended to be the final and complete statement of their agreement. In essence, a merger clause
seeks to blend other agreements either into the final agreement or into something explicitly identified as
being outside the final agreement.
When an entire contract is conditioned on something elses occurring first, that first event is known
as a(n) _____.
constructive condition
condition precedent
integration clause
condition subsequent
Evidence of the existence of a condition precedent agreed to orally is admissible, as stated previously,
because the contract is not modified by such evidence; rather, its enforceability is called into question.
There is federal U.S. legislation titled Statute of Frauds.
True
False
There is no federal legislation entitled Statute of Frauds. Rather, the statute exists as legislation at the
state level.
Contracts related to an interest in land fall within the statute of frauds.

True
False
Under the pure dignity rule, contracts that would normally fall under the statute of frauds and need a
writing if negotiated by the principal, must be in writing even if negotiated by an agent.
True
False
In some states, under the equal dignity rule contracts that would normally fall under the statute and need a
writing if negotiated by the principal must be in writing even if negotiated by an agent..
In some states, a promise to pay a debt that has already been discharged in bankruptcy must be in
writing in order to be enforceable.
True
False
Partial performance is an exception to the statute of frauds.
True
False
Although the statute of frauds requires a writing for sales of interests in land, under the partial-performance
exception, if the buyer in an alleged contract for the sale of land has paid any portion of the sale price, has
begun to permanently improve the land, or has taken possession of it, the courts will consider the contract
partially performed and this partial performance will amount to proof of the contract.
In order for the statute of frauds to be satisfied, all parties to a contract must sign the writing.
True
False
While it is standard for both parties to sign the agreement, because the writing is being offered as proof of
an agreement, only the party against whom action is sought needs to have signed it.
If a contracts terms require that modification be in writing, oral modifications are inadmissible and
unenforceable.
True
False
TF The purpose of the parol evidence rule is to prevent attempts to use only oral evidence to prove
agreements.
True
False
The purpose of the parol evidence rule is to prevent evidence that substantially contradicts the agreement in
its written form.
Whenever a written agreement under the statute of frauds contains a serious, and obvious,
typographical error, parol evidence is admissible to demonstrate that the error was indeed an error,
as well as to set forth the proper term.
True
False
When a court deems a contract integrated, parol evidence is admissible.
True
False
When the courts deem a contract integrated, with some exceptions, parol evidence is inadmissible.
Which of the following is false regarding written contracts?
Disputes are easier to settle when contractual terms are solidified in writing.
The moment of writing allows both parties to reconsider terms and ensure what they desire.
In general, written contracts aid in the conduct of smooth business contracts.
The idea of requiring a writing comes from an English act.
All contracts must be in writing in order to be enforced.
Only specific types of contracts are within the scope of the statute of frauds and thus required to be
evidenced by a writing.
In ______, the English Parliament passed the Act for the Prevention of Frauds and Perjuries.
1555
1677
1770
1776
1865
Which of the following is false regarding the statute of frauds?
It relates to fraudulent contracts.
It does not address illegal contracts.
It does not exist at the federal level.

The statute requires that certain contracts be in writing.
It is not a unitary government act.
As discussed in the text, a main purpose of the statute of frauds is to prevent unreliable _____
evidence from interfering with a contractual relationship.
Hearsay
Oral
Irrelevant
Immaterial
Hearsay and irrelevant
Which of the following is a type of contract that falls within the scope of the statute of frauds?
Contracts whose terms prevent possible performance within one year
Contracts involving the provision of services
Contracts involving the provision of any goods
Contracts involving any debt
All of the above
Which of the following is a type of contract that falls within the scope of the statute of frauds?
Contracts related to an interest in land
Promises made in consideration of marriage
Contracts related to any lease
All of the above
Contracts related to an interest in land and promises made in consideration of marriage,
but not contracts related to any lease
Agreements regarding marriage in which one party is gaining something other than a return on his or her
promise to marry are within the statute of frauds and must be in writing. Additionally, within the statute of
frauds, land encompasses not only the land and soil itself but anything attached to the land, such as trees
or buildings; and the statute requires a writing as evidence of the contract.
Under the Uniform Commercial Code, contracts for the sale of goods totaling more than ______
must be in writing.
$200
$300
$500
$600
$1000
Which of the following is true regarding the statute of frauds requirement involving contracts that
cannot be performed within one year?
The one-year period begins to run the day after the contract is created, not when the contract is
scheduled to begin.
Even if it is highly unlikely that a contract will be completed within one year, a contract does not
come within the statute of frauds if it could be completed within one year.
If a party contracts for lifetime employment, the contract does not have to be in writing in order
to be enforceable.
Contracts whose performance, based on the terms of the contract, could not possibly occur
within one year fall within the statute of frauds.
All of the above are true.
The one-year period begins the day after the contract is created, not when it is scheduled to begin. The test
for compliance with the one-year rule does not consider the likelihood of completing the contract within one
year. Rather, it considers the possibility of completing the contract in one year. A contract for lifetime
employment does not need to be in writing.
A[n] ______ agreement is an agreement two parties enter into before marriage that clearly states the
ownership rights each party enjoys in the other partys property.
Preliminary
Planned
Approved
Prenuptial
Arranged
Which of the following is false regarding the statute of frauds and promises made in consideration
of marriage?
Agreements regarding marriage in which one party is gaining something other than a return on
his or her promise to marry are within the statute of frauds and must be in writing.
Mutual promises to marry fall within the statute of frauds.
Prenuptial agreements fall within the statute of frauds.
A prenuptial agreement is not automatically enforceable just because it is in writing.
When one party promises something to the other as part of an offer of marriage, the contract
must be in writing to be enforceable.
Which of the following is a term for contracts within the statute of frauds involving promises to pay a
debt of another if the initial party fails to pay?
Secondary obligations
Primary promises
Primary debts
Third-party debts
Commercial promises
Which of the following are debts incurred in an initial contract?
Secondary obligations
Primary obligations
Secondary promises
Collateral promises
Suretyship promises
Which of the following is an exception as to when a secondary obligation needs to be in writing?
The primary-purpose rule
The resulting-fact rule
The main-purpose rule
The delineated rule
The personal-obligation standard
There is an exception under which a secondary obligation need not be in writingthe main-purpose rule. If
the main purpose for incurring a secondary obligation is to obtain a personal benefit, the promise does not
fall within the statute and does not have to be in writing.
Within the statute of frauds, land encompasses not only the land and soil itself but anything
______ to the land.
Relating
Adjacent
Contracted
Attached
Pertinent
Which of the following is false regarding the statute of frauds provision relating to an interest in
land?
The statute is intended to prevent oral claims to the existence of a contract for the sale of land.
The statute requires a writing as evidence of a contract to sell land.
A claim to an oral contract for the sale of land is not enough to prove a contract of sale existed.
Mortgages are within the statute of frauds.
No leases are within the statute of frauds.
Contracts transferring other interests in land are also within the statute of frauds. Mortgages and leases are
within the statute because they are considered transfers of interest in land.
Which of the following are not considered an interest in land within the statute of frauds?
Promises to sell crops annually.
Agreements between parties for profit sharing from the sale of real property.
Boundary disputes that have been settled through the use of land.
All of the above.
Promises to sell crops annually and agreements between parties for profit sharing from the sale
of real property, but not boundary disputes that have been settled through the use of land.
Which of the following was the result in the case in the text Shelbys, Inc. v. Sierra Bravo, Inc.,
involving the issue of whether an agreement to deposit debris and soil on land and an alleged
agreement to build a landing pad and waterway came within the statute of frauds?
The court ruled that the agreement did not involve an interest in land and did not come
within the statute of frauds.
The court ruled that the agreement did involve an interest in land and, therefore, came within
the statute of frauds.
The court ruled that the agreement did not involve an interest in land but placed it within the
statute of frauds in order to prevent injustice.
The court ruled that the agreement fell within the statute of frauds but that an oral agreement
was sufficient.
None of the above.
The court stated as follows: The contract in this case was not a sale, much less a sale of an interest in
lands. . . . Here, there was no transfer of ownership or title. The written agreement gave Appellant [Sierra]
permission to deposit debris and soil on Respondents land, not the right to do so. The oral contract was for
the construction of a waterway and building pad and passed no interest in the land.
Which of the following sections of the Uniform Commercial Code addresses the requirement of a
writing when a certain amount of goods are sold?
2-201
1-101
3-102
2-305
4-03
Which of the following is needed in order to satisfy the UCCs requirement for a written document?
The contract or memorandum needs only to state the price of the goods.
The contract or memorandum needs only to state the quality of the goods.
The contract or memorandum needs only to state the quantity to be sold.
The contract or memorandum needs to state the price of the goods and the quality of the
goods, but not the quantity to be sold.
The contract or memorandum needs to state the price of the goods, the quality of the goods,
and also the quantity to be sold.
Under the ______ in effect in some states, contracts that would normally fall under the statute of
frauds and need a writing if negotiated by the principal must be in writing even if negotiated by an
agent.
Agency fraud rule
Statute of agency
Equal dignity rule
Proportional agency rule
Statute of responsibility
Which of the following are exceptions to when the statute of frauds would apply although under
normal circumstances it would apply?
Admissions
Partial performance
Promissory estoppel
All of the above
Admission and partial performance, but not promissory estoppel
Like most legal rules, the statute of frauds allows certain exceptions. These exceptions are (1) admission,
(2) partial performance, and (3) promissory estoppel. There are also exceptions under the UCC.
A[n] ______ is a statement made in court, under oath, or at some stage during a legal proceeding in
which a party against whom charges have been brought admits that an oral contract existed, even
though the contract was required to be in writing.
Admission
Submission
Deposition
Interrogatory
Confirmation
All states except ______ adhere to the admission exception to the statute of frauds.
Hawaii and Alaska
Louisiana and New York
Louisiana and California
Kentucky and Florida
North Carolina and Montana
Under ______, if the buyer in an alleged contract for the sale of land has paid any portion of the sale
price, has begun to permanently improve the land, or has taken possession of the land, the courts
will consider the contract partially performed, and this partial performance will amount to proof of
the contract.
Substantial performance
Partial performance
Sales substantiation
The purchase proof rule
The sales proof rule
Which of the following involves the legal enforcement of an otherwise unenforceable contract due to
a partys detrimental reliance on the contract?
Promissory estoppel
Substantial estoppel
Promissory rule
Reliance rule
Promissory reliance
Even if they would normally have to be in writing, if applicable criteria are met, oral contracts for
_____ goods are enforceable.
Retailed
Wholesale
Collateral
Consumer
Customized
Which of the following are required elements for a writing to be considered sufficient under the
statute of frauds?
Identification of the parties to the contract.
Identification of the subject of the agreement.
Identification of the penalties for nonperformance.
All of the above.
Identification of the parties to the contract and the subject of the agreement, but not
penalties for nonperformance.
Which of the following is true regarding a signature on a document falling within the statute of
frauds?
There is no requirement of any signature of either party to satisfy the statute of frauds.
Any party required to sign must sign at the beginning of the document.
Any party required to sign must sign at the end of the document.
Any party required to sign must sign both at the end and at the beginning of the document.
So long as it is meant as a signature, a party required to sign may sign at any place on
the document.
Which of the following parties must sign a document coming within the statute of frauds?
The party against whom action is sought
The offeror only
The offeree only
Only a person who has agreed to pay the debt of another
Any party to the contract
While it is standard for both parties to sign the agreement, because the writing is being offered as proof of
an agreement, only the party against whom action is sought needs to have signed it.
Sam orally agreed to work as a computer programmer for ABC Co. Brandy, the president of ABC Co.
entered into an agreement with Sam regarding his pay, and he signed an employee handbook
including a provision that his employment was at will, meaning that at anytime he could quit or the
company could discharge him. A month later, Sam received a three-year contract for employment
with ABC Co. in the mail incorporating the amount of his salary and other issues he had discussed
with Brandy. Sam signed it and mailed it back, but also changed the vacation provision to three
weeks instead of one week. Bobby, the human resources manager for ABC Co. called Sam up after
Bobby received the agreement and told Sam that the contract was only a draft for discussion
purposes and that he was actually firing Sam because he seemed too focused on vacation.
Assuming the court follows the reasoning of the court in the dispute discussed in the text involving
Michael Gallagher and Medical Research Consultants, which of the following would be the most
likely result in the dispute between Sam and ABC Co. if Sam claims he had a three-year contract of
employment?
ABC Co. will win because even if a three-year oral agreement for employment was made,
it would not have been enforceable because the statute of frauds requires that
agreements that cannot be completed within one year be in writing. Further, the draft
Sam returned was not signed by ABC Co.
ABC Co. will win because even if a three-year oral agreement for employment was made, Sam
reopened negotiations by altering the later contract to provide that he was to receive three
weeks vacation. ABC Co. had not signed that agreement and was free to reject it.
ABC Co. will win because as a matter of law, no other document can alter the provisions of an
employee handbook.
A jury will decide if Brandy orally agreed to a three-year contract; and, if so, Sam gets his job
back along with the extra weeks of vacation.
As a matter of law, since the contract was sent to Sam, he receives a guarantee of employment
for three years; but he does not get the extra weeks of vacation he inserted.
This scenario was similar to the Gallagher case in the text in which the court found that even if the company
involved had orally agreed to a three-year contract with the plaintiff, it would not have been enforceable
because the statute of frauds dictates that agreements incapable of being completed within a year must be
in writing. Further, the court noted that according to the statute of frauds, the draft that the employee faxed
back to the company was also unenforceable because the party being charged must have signed the
document and the company clearly had not.
The ______ rule is a common law rule that addresses the admissibility of oral evidence as it relates
to written contracts.
Oral admissibility
Oral evidence
Parol evidence
Frauds evidence
Deficient evidence
What does the term parol in the parol evidence rule" mean?
Words establishing penalties
Speech or words, specifically words outside the original writing
Speech only outside the original writing
Only another writing outside the original writing
Only untrue speech outside the original writing
What is a purpose of the parol evidence rule?
To restrict oral evidence from being admitted that supports an agreement in its written form.
To restrict written evidence from being admitted that supports an agreement in its written form.
To restrict oral and written evidence from being admitted that supports an agreement in its
written form.
To restrict hearsay from being admitted that supports or contradicts an agreement in its written
form.
To restrict evidence from being admitted that substantially contradicts an agreement in
its written form.
When may a court rule that parol evidence may be admissible to further the courts understanding of
an agreement?
When a court determines that there is significant disagreement regarding the complete and final
version of the agreement.
When a court determines that a written agreement does not represent a complete and
final version of the agreement.
When a court determines that there is disagreement between the parties over performance of
the agreement once performance has actually started.
When a court determines that the plaintiff failed to do sufficient research to determine if signing
the agreement was advisable.
When a court determines that either party failed to do sufficient research to determine if signing
the agreement was advisable.
Which of the following is false regarding the parol evidence rule?

It is not limited to spoken words.
It is a rule of evidence.
It relates to substantive legal issues.
It is not a unitary concept or rule.
It is an amalgamation of different rules and conditions.
The parol evidence rule is also not a rule of evidence; rather, it relates to the substantive legal issue of what
constitutes a legally binding agreement.
The parol evidence rule is also not a rule of evidence; rather, it relates to the substantive legal issue
of what constitutes a legally binding agreement.
The parol evidence rule applies to writings created at the same time as the written agreement.
Writings created at the same time as a written agreement are more readily admitted as part of
the written agreement than is oral evidence regarding conditions or terms in the final
agreement.
As long as contemporaneous written documents do not substantially contradict what is in the
final writing, judges can deem these other writings to be part of the final written agreement.
All of the above.
The parol evidence rule applies to writings created at the same time as the written agreement,
and contemporaneous writings are no more likely to be allowed into evidence than oral
evidence regarding conditions or terms in the final agreement.
Although the parol evidence rule applies to writings created at the same time as the written agreement,
these writings tend to be treated differently than prior or contemporaneous oral agreements. That is, the
writings are more readily admitted as part of the written agreement than is oral evidence regarding
conditions or terms in the final agreement. As long as contemporaneous written documents do not
substantially contradict what is in the final writing, judges can use their discretion to deem these other
writings part of that agreement.
A[n] ______ agreement is a clause parties include in a written agreement within the statute of frauds
that states that the written agreement accurately reflects the final, complete version of the
agreement.
Adhesion
Complete
Parol
Merger
Consolidation
Which of the following are exceptions to the parol evidence rule?

Contracts that have been subsequently modified
Contracts conditioned on orally agreed-on terms
Contracts that are not final as they are part written and part oral
Contracts with ambiguous terms
All the above
Which of the following are written contracts intended to be the complete and final representation of
the parties agreement?
Complete contracts
Integrated contracts
Adhesion contracts
Bilateral contracts
Acknowledged contracts
Integrated contracts are written contracts intended to be the complete and final representation of the parties
agreement.
One way parties can indicate their desire to create an integrated contract is through the use of a[n]
______ clause.
Complete
Merger
Adhesion
Bilateral
Acknowledged

_____ occurs when a party to a contract transfers her rights to receive something under the contract
to a third party.
Novation
Assignment
Third-party contract
Delegation
Assignment occurs when a party to a contractan assignor, transfers her rights to receive something under
the contract to a third partyan assignee. When an assignor transfers her rights to an assignee, the
assignor legally gives up all rights she had to collect on the contract.
Which of the following is true of assignment of contracts?

It represents the transfer of duties to assignees.
The assignee cannot legally demand performance from the other party to the original contract.
The assignor legally gives up all rights he had to collect on the contract, when he
assigns his rights to the assignee.
Rights cannot be transferred in an assignment.
Bob agrees to sell his farm to Joseph for $80,000. He then transfers his right to receive Josephs
payment to Kelly. This is an example of:
third-party beneficiary contract.
novation.
delegation.
assignment.
Which of the following is true of the rights of the assignee?
An assignee cannot be assigned the rights whose assignment would decrease the obligors risk
or duties.
An obligor cannot raise a defense for nonperformance against the assignee.
An assignee cannot decline an assignment under any circumstance.
An assignee cannot be assigned the rights to a contract which is personal in nature.
The rights to a contract cannot be assigned when the contract is personal in nature, meaning the obligor has
promised something specific to the person receiving it. Third parties cannot legally become the recipient in
such situations unless the only part of a contract left to be fulfilled is the payment.
Delegation refers to:

transfer of duties.
transfer of duties involving the delegators personal expertise.
transfer of duties that relieve a delegator of duty to perform.
transfer of rights.
delegation occurs when a party to a contracta delegator, transfers his/her duty to perform to a third party
a delegatee, who is not part of the original contract. Where assignments transfer rights to a contract,
delegations transfer dutie
John contracts with Sara to have her deliver machinery to his factory. Sara then transfers her duty
to Gary, who delivers the machinery to John. This is an example of:
third-party beneficiary contract.
novation.
assignment.
delegation.
Which of the following duties can be delegated?
Duties in contracts that forbid delegations.
Duties that are personal in nature requiring particular skills.
Duties that involve delivering goods.
Duties for which the delegatees performance will vary significantly from the delegators.
Any nonpersonal duties in a contract can be delegated. For example, delivering goods, mowing a lawn,
paying money, and painting a house are all considered nonpersonal duties because they do not require
particular skill or expertise and most people could complete them. Thus, they can all be delegated.
Michelle contracts with David to clean his house. In exchange, David will pay Michelles credit card debt. The
credit card company is the:
assignee.
promisor.
delegator.
third-party beneficiary.
A third-party beneficiary is created when two parties enter into a contract with the purpose of benefiting a
third party, called the intended beneficiary. The beneficiary need not be named in the contract, as long as the
terms of the contract or events occurring after its creation make it clear who he or she is.
A third-party beneficiary:
is created when two parties enter into a contract with the purpose of mutual benefit.
occurs when a party to a contract, transfers his duty to perform to a third party, who is not part
of the original contract.
is created when two parties enter into a contract with the purpose of benefiting a third
party.
occurs when a party to a contract, transfers her rights to receive something under the contract
to a third party.
A(n) _____ is a third party that benefits from a contract in which the promisor agrees to pay the
promisees debt.
promisor
donee beneficiary
creditor beneficiary
incidental beneficiary
There are two types of intended beneficiaries: creditor beneficiaries and donee beneficiaries. A creditor
beneficiary is a third party that benefits from a contract in which the promisor agrees to pay the promisees
debt.
A donee beneficiary:
is a third party beneficiary who cannot recover the value of the promised performance.
is a third-party beneficiary who incidentally benefits from a contract.
is a third-party beneficiary to whom a gift of performance is given.
is a third-party beneficiary who is no longer a part of an agreement.
Third parties who benefit from a contract in which a promisor agrees to give a gift to the third party are
donee beneficiaries. The most common form of donee beneficiary contract is life insurance policies.
In the will, Jakes father has named Jake as the owner of his farm and named him as a beneficiary in his
insurance policy. Jake is:
the assignee by novation.
a donee beneficiary.
a creditor beneficiary.
an incidental beneficiary.
Creditor beneficiary can enforce rights against:
both the promisor and promisee.
only the promisor, in breach of insurance contracts.
only the promisor.
both the promisor and promisee, only for payment of money.
When a donee beneficiary may enforce rights under a contract, he or she may do so only against the
promisor because the promisee has no duty to the donee beneficiary. Conversely, creditor beneficiaries may
sue the promisor or the promisee for performance because both these parties owe him or her a duty.
When the contracting parties do not intend to benefit someone but unintentionally do so, that third
party is a(n):
incidental beneficiary.
promisee.
donee beneficiary.
creditor beneficiary.
When the contracting parties do not intend to benefit someone but unintentionally do so, that third party is
an incidental beneficiary. Creditor and donee beneficiaries are both intended beneficiaries, and according to
the Restatement, intended beneficiaries have the right to enforce a contract.
Which of the following is true of incidental beneficiaries?
Beneficiaries benefit from direct reception of contractual performance.
Beneficiaries do not have the right to enforce the contract.
Contracting parties intended to benefit the third party with their contract.
Beneficiaries can enforce their rights under a contract whenever the contract is valid.
There is no legally required wording to be used or forms to be filled out for assignments to be valid.
True
False
Most countries do not grant third-party rights to contracts.
True
False
Assignment of personal duties is generally permitted.
True
False
Rights to a contract cannot be assigned when the contract is personal in nature, meaning the
obligor has promised something specific to the person receiving it.
Russia has modified the Russian Civil Code to reflect the freedom of assignments found in the
American Uniform Commercial Code.
True
False
Russia has modified its Civil Code to allow the same freedom of assignments of rights and duties found in
the German code.
A contract stating I assign all of my rights under the contract will generally be construed to be an
assignment of rights but not duties.
True
False
When a court cannot clearly tell what the parties intended, it usually considers the assignment to be of both
rights and duties.
An intended beneficiary is a third party to a contract who is intended to be directly benefited from
the contract made by the contracting parties.
True
False
A donee beneficiary is a third party that benefits from a contract in which the promisor agrees to pay
the promisees debt in return for compensation plus interest.
True
False
Donee beneficiaries are third parties who benefit from a contract in which a promisor agrees to give a gift to
the third party.
A donee beneficiary is a type of incidental beneficiary.
True
False
Creditor beneficiaries can enforce their rights under a contract whenever the contract is valid.
True
False
A factor that courts consider in determining whether a party is an incidental or intended beneficiary
is whether the contract directly states that the third party is the benefiting party.
True
False
Parties not in ______ usually do not have rights to a contract.
Acknowledged contract
Diverse contract
Privity of contract
Close contract
Privileged contract
Parties not in privity of contract (anyone other than the contracting parties) usually do not have rights to a
contract.
Which of the following is a contractual party who agrees to do something for the other party?
Obligor
Obligee
Assignor
Assignee
Boundee
Which of the following is a contractual party who agrees to receive something from the other party?
Obligor
Obligee
Assignor
Assignee
Boundee
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
What is the term for the party to a contract who transfers his or her rights to a contract to a third
party?
Transferor
Transferee
Relator
Assignor
Assignee
What is the term for the third party who receives an assignment of contract rights?
Transferor
Transferee
Relator
Assignor
Assignee
Which of the following is false regarding the rights of an assignee and assignor?
Assignees essentially fill in for the assignor as the legal recipient of contractual duties.
Assignees acquire the same contractual duties as the assignor had.
Assignees are offered more protection than assignors.
The obligor may raise any of the same defenses for nonperformance against the assignee that
he would have been able to raise against the assignor.
When an assignor transfers rights to an assignee, the assignor legally gives up all rights he or
she previously had to collect on the contract.
The assignee is offered no additional protections than the assignor when an assignment is made.
Which of the following is needed in order for an assignment to be valid?
UCC 2-301 Form
UCC 4-305 Form
Business 2-547 Form
Business 4-298 Form
None of the above. No form is required.
Which of the following is true regarding oral assignments?
In some cases, assignments may be made orally.
The UCC requires that assignments be in writing when the amount being assigned is greater
than $1,000.
Assignments, regardless of the terms, are not covered by the statute of frauds.
The UCC requires that assignments be in writing when the amount being assigned is greater
than $2,000.
Assignments may be made orally, and the UCC requires that assignments be in writing when
the amount being assigned is greater than $1,000.
Assignments covered by the statute of frauds must be in writing. Because it is difficult to prove the existence
of assignments given orally, it is usually suggested they all be in writing.
Which of the following is an exception to the general rule that rights to a contract cannot be
assigned when a contract is personal in nature?
When the only part of a contract left to be fulfilled is the payment.
When nothing has been done on the contract at all.
When no more than half the contractual duties have been performed.
When no more than three-fourths of the contractual duties have been performed.
There is no exception because rights to a contract that is personal in nature may generally be
assigned.
Rights to a contract cannot be assigned when the contract is personal in nature. Third parties cannot legally
become the recipient in such situations unless the only part of a contract left to be fulfilled is the payment,
because rights to payment can always be assigned.
Sally agrees to mow Pauls yard for $300 for the summer. Paul wishes to assign the contract to his
grandmother. Sally objects because Pauls yard is very small while his grandmothers 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 Pauls attempted assignment would increase the duties to which
she agreed.
Sally will win because all assignments are invalid without the obligors 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 Sallys consent.
Paul will win so long as he tells Sally about the assignment prior to the time she begins any
performance whatsoever.
Rights cannot be assigned when the assignment increases the risk or duties the obligor would face in
fulfilling the original contract.
When parties include a[n] ______ clause in their contract, the parties are attempting to limit their
ability to assign their rights under the contract.
Antiobligation
Antiassignment
Anticontract
Severability
Integration
Which of the following may be assigned even in the presence of an antiassignment clause?
Assignments made by operation of law.
Assignments for the right to receive monetary payments.
Assignments for the right to receive damages for a breach of contract to sell goods or services.
Assignments made by operation of law, and assignments for the right to receive monetary
payments, but not assignments for the right to receive damages for a breach of contract to sell
goods or services.
Assignments made by operation of law, assignments for the right to receive monetary
payments, and assignments for the right to receive damages for a breach of contract to
sell goods or services.
Antiassignment clauses do not affect assignments made by operation of law. If a law necessitates an
assignment, such as in bankruptcy cases, the assignment is effective regardless of any contractual
agreement to the contrary; the right to assign monetary payments cannot be denied; or the right to receive
damages for a breach of contract to sell goods or services are unaffected by antiassignment clauses.
Additionally, antiassignment clauses are not effective when law or public policy forbids assignments.
Which of the following was the result in the case in the text Wesley Locke v. Ozark City Board of
Education, in which an umpire was injured by an angry parent and sued claiming that he was an
intended third-party beneficiary under a contract the defending board of education had with the
Alabama High School Athletic Association requiring police protection which was not provided?
The umpire won as a matter of law because of inadequate police protection.
The umpire won as a matter of law because he was a third party beneficiary to the contract.
The defending school board won as a matter of law because although the umpire was a third
party beneficiary to the contract, it had provided adequate protection.
The defending school board won as a matter of law because the umpire was not a third party
beneficiary to the contract.
The case was remanded for trial on the issue of whether adequate police protection was
provided
Which of the following states that in the case of multiple assignments of the same right, the first party
granted the assignment is the party correctly entitled to the contractual right?
The first-assignment-in-time rule
The last-assignment-in-time rule
The English rule
The French rule
The American rule
Most states use the first-assignment-in-time rule, which gives the contractual right to the first party granted
the assignment.
Which of the following states that in the case of multiple assignments of the same right, the first
assignee to give notice of assignment to the obligor is the party with rights to the contract?
The first-assignment-in-time rule
The last-assignment-in-time rule
The English rule
The French rule
The American rule
A minority of states have adopted the English rule, which states that the first assignee to give notice of
assignment to the obligor is the party with rights to the contract.
A[n] ______ occurs when a party to a contract transfers his or her duty to perform to a third party
who is not part of the original contract.
Transfer
Assignment
Delegation
Performance
Unenforceable occurrence
A party to a contract who transfers his or her duty to perform to a third party who is not part of the
original contract is called a[n] ______.
Delegatee
Delegator
Assignor
Assignee
Transferor
A third party, who is not part of an original contract, but to whom duty to perform contained in the
original contract is transferred is called a[n] ______.
Delegatee
Delegator
Assignor
Assignee
Transferor
Bill contracts with Judy to wash her car and then delegates the duty to Paul. Paul fails to wash the
car. Which of the following is true regarding Bills duty to Judy, if any?
Bill has no duty to Judy so long as she did not expressly object to the delegation.
Bill has no duty to Judy regardless of whether she objected to the delegation.
Bill continues to be bound to Judy to see that her car gets washed.
Bill continues to be bound to Judy to see that her car gets washed only if the contract expressly
prohibited delegation.
Bill continues to be bound to Judy to see that her car gets washed unless he already paid Paul
for the job.
After making a delegation, the delegator is not relieved of his duty to perform.
Paul and Mary have an agreement that Mary will buy Pauls house. Later Mary orally assigns the
right to buy the house to Ally, one of Pauls former girlfriends. When Ally shows up with the money,
Paul says No way! You ditched me to date Rick. Im not ever letting you get anything from
me! Assuming promissory estoppels is inapplicable, which of the following is true?
Ally can only enforce the assignment if the agreement that Paul and Mary had was in writing.
Ally can enforce the assignment.
Ally cannot enforce the assignment because it was not in writing.
Ally cannot enforce the assignment because Paul did not specifically grant Mary the power to
assign the contract.
Ally cannot enforce the assignment because assignments to purchase property cannot ever be
assigned for public policy reasons.
Assignments covered by the statute of frauds must be in writing. Because it is difficult to prove the existence
of assignments given orally, it is usually suggested they all be in writing.
Which of the following is true regarding assignment of rights in China?
Free assignment of rights is permitted.
Free assignment of rights is permitted only when a contract with a state authority is involved.
Free assignment of rights is permitted only when a contract with a private party is involved
unless the contract is one considered for the good of the people.
Assignment of rights is illegal.
When a private party is involved, the assignor must first get the obligors approval
before an assignment is made.
Most centrally planned economies, such as China, permit only limited assignability. When a contract is with
the state, approval by the proper state authority must first be obtained unless the contract allows for
assignments. If the contract is with a private party, the assignor must first get the obligors approval before
an assignment can be made.
A[n] ______ is created when two parties enter into a contract with the intended end purpose of
benefiting a third party.
Third-party beneficiary
Second-party beneficiary
First-party beneficiary
Assignment
Creditor Beneficiary
A[n] ______ beneficiary is a third party to a contract who is intended to be benefited directly from the
contract made by the contracting parties.
Intended
Incidental
Preferred
Collateral
Ancillary
The ______ in a third-party beneficiary contract is the party to the contract who made the promise
that benefits the third party.
Promisee
Promisor
Obligor
Obligee
None of the above. There are no third-party beneficiary contracts, only second-party beneficiary
contracts.
The ______ in a third-party beneficiary contract is the party to the contract who owes something to
the promisor in exchange for the promise made to the third-party beneficiary.
Promisee
Promisor
Obligor
Obligee
None of the above. There are no third-party beneficiary contracts, only second-party beneficiary
contracts.
Which of the following is a type of intended beneficiary?

Creditor
Donee
Incidental
All the above
Creditor and donee, but not incidental
A[n] ______ beneficiary is a third party who benefits from a contract in which the promisor agrees to
pay the promisees debt.
Creditor
Donee
Incidental
Promised
Avowed
A[n] ______ beneficiary is a third party who benefits from a contract in which the promisor agrees to
give a gift to the third party.
Creditor
Donee
Incidental
Promised
Avowed
Which of the following references the maturing of rights such that a party can legally act on the
rights?
Absoluting
Gelling
Forming
Vesting
Finishing
Although an intended beneficiary can enforce rights to a contract, they cannot do so until the rights to the
contract vest, or mature such that they can legally act on them.
Creditor beneficiaries can enforce their rights under a contract whenever the contract is ______.
Fair
Incidental
Valid
Substantial
Recognizable
The state of New York does not grant a donee beneficiary the right to enforce a contract unless the
promisee is connected to the donee through a ______ relationship.
Valid
Recognized
Substantial
Familial
Marital
When a donee beneficiary may enforce rights under a contract, it may be done so only against the
_____.
Promisee
Promisor
Obligor
Promisee and promisor, but not obligor
Promisee, promisor, and obligor

A[n] ______ beneficiary is one who unintentionally gains a benefit from a contract between other
parties.
Incidental
Creditor
Donee
Vested
Accidental
Which of the following is true regarding the rights of an incidental beneficiary to a contract to sue to
recover incidental rights?
An incidental beneficiary may sue to enforce incidental contractual rights so long as those rights
have vested.
An incidental beneficiary may sue to enforce incidental contractual rights only if the incidental
beneficiary was once a creditor beneficiary.
beneficiary was once a donee beneficiary.
beneficiary is also a second-party beneficiary.
An incidental beneficiary cannot sue to enforce a contract which provided incidental
benefits.
Which of the following is a consideration of courts in determining whether a person is an incidental
or intended beneficiary?
The courts ask if a reasonable person in the position of the party in question would
believe the contracting parties intended to benefit the party in question.
The courts ask if it is substantially certain that the contracting parties intended to benefit the
party in question.
The courts ask if it can be proven beyond a reasonable doubt that the contracting parties
intended to benefit the party in question.
The courts ask if the party in question paid something for the rights.
The courts ask if the party in question paid at least $500 for the rights.
Which of the following factors are considered by the court when determining whether a party is an
intended or incidental beneficiary?
Whether performance of the contract is done directly to the third party.
The third partys ability to control the specifics of performance of the contract.
Whether the contract directly states that the third party is the benefiting party.
Whether performance of the contract is done directly to the third party, and the third partys
ability to control the specifics of performance of the contract, but not whether the contract
directly states that the third party is the benefiting party.
Whether performance of the contract is done directly to the third party, the third partys
ability to control the specifics of performance of the contract, and whether the contract
directly states that the third party is the benefiting party.
Which of the following is true regarding an assignees acceptance of assigned rights?
A creditor beneficiary must accept assignment of rights, but there is no requirement that a
donee beneficiary do so.
A donee beneficiary must accept assignment of rights, but there is no requirement that a
creditor beneficiary do so.
An assignee must agree to accept assigned rights, and there is a strict protocol for doing so.
An assignee may decline an assignment if he has not agreed to it and declines in a
timely fashion after learning of it.
An assignee may only decline an assignment if a delegation of duties is also involved.

A _____ is a particular event that must occur in order for a partys duty to arise. If the event does not occur,
the partys duty to perform does not arise.
condition subsequent
constructive condition
condition precedent
concurrent condition
Contracts containing conditions affecting the performance obligations of the parties are called conditional
contracts. A condition precedent is a particular event that must occur in order for a partys duty to arise. If
the event does not occur, the partys duty to perform does not arise.
Which of the following is a future event that terminates the obligations of the parties when it occurs?
Constructive condition
Concurrent condition
Condition precedent
Condition subsequent
A condition subsequent is a future event that terminates the obligations of the parties when it occurs. The
conditions may be either implied by law or expressly inserted into the contract by the parties.
Which of the following best defines a concurrent condition?
It occurs when the parties are required to perform for each other simultaneously.
It is a particular event that must occur in order for a partys duty to arise.
It is a future event that terminates the obligations of the parties when it occurs.
It is intended to bring about justice and is imposed only when a literal interpretation of the
contract would create an injustice.
Concurrent conditions occur when each partys performance is conditioned on the performance of the other.
They occur only when the parties are required to perform for each other simultaneously.
Parties, discharging their duty by making an offer to perform and being ready, willing, and able to
perform is known as a:
novation.
tender.
rescission.
breach.
In most situations, parties discharge their obligations by doing what they respectively agreed to do under the
terms of the contract; this is called discharge by performance. Parties also discharge their duty by making
an offer to perform and being ready, willing, and able to perform. This offer of performance is known as a
tender.
Which of the following occurs when a party unjustifiably fails to substantially perform his
obligations under the contract?
An anticipatory breach
A repudiatory breach
A material breach
A partial breach
A material breach discharges the nonbreaching party from his obligations under the contract. A material
breach occurs when a party unjustifiably fails to substantially perform his obligations under the contract. It is
often difficult to know when the court is going to determine that a breach is material.
In novation:
the parties mutually agree to discharge each other from the contract.
the original parties and a third party all agree that the third party will replace one of the
original parties and that the original party will then be discharged.
the parties mutually agree to discharge each other from the contract by substituting a new
agreement.
the parties agree that one party will perform her or his duty differently from the performance
specified in the original agreement.
In novation, the original parties and a third party all agree that the third party will replace one of the original
parties and that the original party will then be discharged. The original duties remain the same under the
contract, but one party is discharged and the third party now takes that original partys place.
A seller, without knowledge of the buyer, changes the price of the contract. Under these
circumstances:
the contract can be discharged only by mutual agreement.
the contract cannot be discharged, but a third party will replace one of the original parties and
that the original party will then be discharged.
the contract can be discharged by the operation of law due to alteration of contract.
parties can discharge their obligations by doing what they respectively agreed to do under the
original terms of the contract.
The courts wish to uphold the sanctity of contracts. Therefore, if one of the parties materially alters a written
contract without the knowledge of the other party, the courts have held that such alteration allows the
innocent party to be discharged from the contract.
An accord and satisfaction:
is used when parties mutually agree to discharge each other from the contract.
is used when the parties to the agreement want to replace one of the parties with a third party.
is used when parties mutually agree to discharge each other from the contract by substituting a
new agreement.
is used when one of the parties wishes to substitute a different performance for his
original duty under the contract.
An accord and satisfaction is used when one of the parties wishes to substitute a different performance for
his or her original duty under the contract. The promise to perform the new duty is called the accord, and the
actual performance of that new duty is called the satisfaction.
_____ damages are foreseeable damages that result from special facts and circumstances arising
outside the contract itself.
Compensatory
Punitive
Nominal
Consequential
Consequential damages are foreseeable damages that result from special facts and circumstances arising
outside the contract itself. These damages must be within the contemplation of the parties at the time the
breach occurs.
Nominal damages:
are designed to put the plaintiff in the position he would have been in, had the contract been
fully performed.
are designed to punish the defendant and deter him and others from engaging in similar
behavior in the future.
are designed to signify that the plaintiff has been wronged by the defendant.
are foreseeable damages that result from special facts and circumstances arising outside the
contract itself.
In a case where no actual damages resulted from the breach of contract, the court may award the plaintiff
nominal damages. The award is typically for $1 or $5, but it serves to signify that the plaintiff has been
wronged by the defendant.
_____ are damages whose amount the parties designate during the formation of a contract for the
injured party to collect as compensation upon a specific breach.
Consequential damages
Liquidated damages
Punitive damages
Nominal damages
Restitution is:
the return of any property given up under the contract.
an order requiring that the breaching party fulfill the terms of the agreement.
the replacement of one of the parties to a contract.
an order prohibiting a person from doing something.
Restitution is the return of any property given up under the contract. Restitution and rescission are most
frequently awarded in situations in which there is a lack of genuine assent. When a party enters into a
contract because of fraud, duress, undue influence, or a bilateral mistake, the contract is voidable and the
party who wants out may seek to avoid the contract or, in other words, may seek rescission and restitution.
Which of the following can require specific performance?

Sale of a car
Sale of real estate
Anything that can cause irreparable injury
Personal service
Courts are very reluctant to grant specific performance and will do so only when monetary damages simply
are not adequate, typically because the subject matter of the contract is unique. Primarily for historical
reasons, every piece of real property is considered unique. Therefore, an order for specific performance
would often be the appropriate remedy for the breach of a contract for the sale of a piece of real estate.
A(n) _____ is an order either forcing a person to do something or prohibiting a person from doing
something.
delegation
rescission
restitution
injunction
An injunction is an order either forcing a person to do something or prohibiting a person from doing
something. Most commonly, injunctions are prohibitions against actions. Such an injunction might be used,
for example, as a remedy in a contract case involving a personal service.
Jim, an employee with special skills who has agreed not to work for a competitor may be enjoined
from breaching his contract and working for that competitor by:
rescission.
novation.
restitution.
injunction.
An injunction is an order either forcing a person to do something or prohibiting a person from doing
something. Most commonly, injunctions are prohibitions against actions
Under ordinary circumstances, a partys duty to perform the promise agreed to in a contract is
absolute.
True
False
Contractual conditions may be expressly inserted into the contract by the parties but may not be
implied by law.
True
False
Contracts containing conditions affecting the performance obligations of the parties are called conditional
contracts. The conditions may be either implied by law or expressly inserted into the contract by the parties.
Substitution of a party to a contract is called guaranteeing.
True
False
Sometimes the parties to the agreement want to replace one of the parties with a third party. This
substitution of a party is called novation.
The most frequently awarded damages are compensatory damages.
True
False
In a case where no actual damages result from the breach of a contract, the court may award the plaintiff
nominal damages.
True
False
Liquidated damages will be enforced based upon the free-will concept of contracts even if the
liquidated damages amount is unreasonable.
True
False
The courts generally enforce a liquidated damages clause as long as they appear to bear a reasonable
relationship to what the actual costs will be. If the amount specified is so unreasonable as to not seem to
bear any logical relationship to foreseeable costs, the courts declare the clause a penalty clause and do not
enforce it.
Rewriting a contract to reflect what the parties had agreed on is referred to as rescission.
True
False
Reformation occurs when a written contract does not reflect the parties actual agreement or there are
inconsistencies in the contract, and the written document is rewritten to reflect what the parties had agreed
on.
When an enforceable contract does not exist, the court may grant a recovery based on quasicontract in order to prevent an injustice from occurring.
True
False
When an enforceable contract does not in fact exist, the court may grant a recovery based on quasicontract; that is, the court may impose a contract like obligation on a party to prevent an injustice from
occurring.
Restitution is the return of any property given up under the contract.
True
False
A specific performance is an order requiring that the breaching party fulfill the terms of the
agreement.
True
False
Specific performance is sometimes called specific enforcement. It is an order requiring that the breaching
party fulfill the terms of the agreement.
When a partys obligations under a contract are terminated, the party is said to be ______.
Finished
Terminated
Completed
Discharged
Recoursed
By which of the following may a partys contractual obligations be terminated?
Performance
The failure of a condition to occur
Operation of law
All the above
Performance and the failure of a condition to occur, but not operation of law
Discharge may occur through performance, the happening of a condition or its failure to occur, material
breach by one or both parties, agreement of the parties, and operation of law.
Contracts containing conditions affecting the performance obligations of the parties are called
______ contracts.
Uncertain
Conditional
Unreasonable
Voidable
Void
Which of the following are types of conditions?
Precedent
Subsequent
Concurrent
All the above
Precedent and subsequent, but not concurrent
A condition ______ is a particular event that must occur in order for a partys duty to arise.
Precedent
Subsequent
Concurrent
At large
Certain
A condition ______ is a future event that terminates the obligations of the parties when it occurs.
Precedent
Subsequent
Concurrent
At large
Certain
Which of the following conditions occur when each partys performance is conditioned on the
performance of the other?
Precedent
Subsequent
Concurrent
At large
Certain
Which of the following describes conditions explicitly stated in the contract?
Express
Implied
Conditional
Concurrent
Both express and conditional
Express conditions are explicitly stated in the contract and are usually preceded by words such as
conditioned on, if, provided that, or when.
Which of the following describes conditions that are not explicitly stated but are inferred from the
nature and language of the contract?
Express
Implied
Conditional
Concurrent
Both express and conditional
The parties discharge of their obligations by doing what they respectively agreed to do under the
terms of the contract is called ______.
Discharge by tender
Discharge by performance
Discharge by finishing
Discharge by absolution
Discharge by reason
An offer of performance by being ready, willing, and able to perform is known as ______.
Offering
Showing
Tender
Completer
Implied acceptance
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
Which of the following occurs when all aspects of the parties duties under the contract are carried
out perfectly?
Complete performance
Substantial performance
Significant performance
Absolute performance
Approved performance
Complete performance occurs when all aspects of the parties duties under the contract are carried out
perfectly.
A contractual condition of satisfaction is considered a[n] ______ condition that must be met before
the other partys obligation to pay for the performance arises.
Partial
Conditional
Express
Implied
Partial and express
A contractual condition of satisfaction may be judged by either a[n] ______ or ______ standard.
Objective, express
Subjective, express
Objective, absolute
Absolute, express
Objective, subjective
If a contract does not clearly specify that the satisfaction is to be personal, the ______ standard
applies.
Express
Subjective
Objective
Absolute
Unbiased
A _____ occurs whenever a party fails to perform his or her obligations under the contract.
Mishap
Misoccurrence
Breach
Misdeed
Mistake
A[n] _____ discharges the nonbreaching party from his or her obligations under the contract.
Immaterial breach
Substantial breach
Material breach
Delineated breach
Crossed breach
Which of the following occurs when a party unjustifiably fails to substantially perform his or her
obligations under the contract?
Immaterial breach
Substantial breach
Material breach
Delineated breach
Crossed breach
Which of the following occurs when a contracting party refuses to complete the contract before the
actual time of performance?
Preemptive repudiation
Anticipatory repudiation
Advance refusal
Advance repudiation
Preparatory refusal
Which of the following occurs when parties agree that they simply wish to discharge each other
from their mutual obligations and therefore rescind or cancel the contract?
Accord and satisfaction
Novation
Substituted contract
Mutual rescission
Alteration
Which of the following occurs when, instead of canceling a contract, the parties substitute a new
agreement in place of the original?
Novation
Mutual recission
Alteration
Which of the following is used when, by agreement, one of the parties substitutes a different
performance for his or her original duty under the contract?
Novation
Mutual recission
Alteration
Which of the following occurs when the parties to the agreement wish to replace one of the parties
with a third party?
Novation
Mutual recission
Alteration
Which of the following is a way in which a contract may be discharged by operation of law?
Alteration of the contract
Bankruptcy
Objective impossibility of performance
All of the above
Alteration of the contract and bankruptcy, but not objective impossibility of performance
Alteration of the contract, bankruptcy, tolling of the statute of limitations, impossibility, commercial
impracticability, and frustration of purpose are all situations in which a contract may be discharged by
operation of law.
Which of the following is used as a basis for discharge by operation of law when performance is still
objectively possible but would be extraordinarily injurious or expensive to one party?
Frustration of purpose
Commercial impracticability
Anticipatory renunciation
Which of the following doctrine arose from the cases in England in which parties who had
contracted for rooms along a parade route for the kings coronation, received their money back
when the coronation was canceled because the king became ill?
Frustration of purpose
Commercial impracticability
Anticipatory renunciation
Monetary damages are also referred to as ______ damages.
Equitable
Fair
Public
Legal
Injunctive
Monetary damages are also referred to as legal damages or legal remedies.
Which of the following damages are designed to put the plaintiff in the position he or she would
have been in had the contract been fully performed?
Equitable
Compensatory
Public
Legal
Punitive
Compensatory damages are damages designed to put the plaintiff in the position he or she would have
been in had the contract been fully performed.
Which of the following are foreseeable damages within the contemplation of the parties at the time
the contract was made, and that result from special facts and circumstances arising outside the
contract itself?
Consequential
Punitive
Liquidated
Nominal
Repugnant
Which of the following types of damages are designed to punish the defendant and deter him and
others from engaging in similar behavior in the future?
Consequential
Punitive
Liquidated
Nominal
Repugnant
When no actual damages result from the breach of a contract, the court may award the plaintiff
______ damages.
Consequential
Punitive
Liquidated
Nominal
Repugnant
Under which of the following type of damages do the parties specify in advance the damages if there
is a particular kind of breach?
Consequential
Punitive
Liquidated
Nominal
Repugnant
The obligation to use reasonable efforts to minimize damage resulting from a breach is referred as
the duty to ______ ones damages.
Reduce
Remit
Reform
Mitigate
Migrate
To recover damages in a breach-of-contract case, the plaintiff must demonstrate that he used reasonable
efforts to minimize the damage resulting from the breach. This obligation is referred to as the duty to
mitigate ones damages.
From which country did equitable remedies, as applied in the U.S., grow?
France
Italy
England
Spain
Portugal
Why did equitable remedies come into being?
To fashion remedies when the existing laws did not provide any adequate ones.
To supplement compensatory damages with punitive damages.
To provide a way to award nominal damages.
To provide a way to award consequential damages.

To provide a way to award certain parties liquidated damages.
______ is the termination of the contract, and ______ is the return of any property given up under the
contract.
Rescission, restitution
Rescission, reformation
Reformation, restitution
Reformation, rescission
Rescission, compensation
Which of the following is true regarding the result in the case in the text Thrifty Rent-A-Car System
v. South Florida Transport, in which the plaintiffs sued the defendant, the operator of a Thrifty
franchise, for amounts owed but the defendant resisted payment on the basis that several
hurricanes rendered the business operations commercially impractical?
The court ruled that the bad weather completely excused the defendants performance.
The court ruled that the parties had to jointly bear the burden of bad weather and that 50% of
what the defendant owed would be excused.
The court ruled that the defendant was legally entitled to additional time in which to pay, but that
the defendant would be required to pay all amounts owed.
The plaintiffs were entitled to recover because the defendant failed to anticipatorily repudiate
the contract.
The plaintiffs were entitled to recover for reasons including that hurricanes were not
unexpected.
The court ruled that the non-occurrence of hurricanes was not a basic assumption of the parties
agreements. Additionally, there was no evidence that hurricanes made the cost of performance unduly
burdensome, and the defendant was behind on its payments before the arrival of the hurricanes.
College president Wally contracts with Alice to teach business law. Alice does a fine job teaching but
gets mad at Wally and will not turn in grades. What type of order would Wally seek to require Alice to
abide by her contract?
An order of specific performance
A compensatory order
A nominal order
A consequential order
A demand order
Specific performance is sometimes called specific enforcement. It is an order requiring that the breaching
party fulfill the terms of the agreement.
Which of the following requires that the breaching party fulfill the terms of the agreement?
Specific obligation
Specific performance
Absolute obligation
Specific absolute
Absolute performance
Which of the following is an order either forcing a person to do something or prohibiting a person
from doing something?
Specification
Directive
Instructional edict
Demand
Injunction

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CHAPTER 1: Connect Questions

Business law consists of _____ that govern commercial relationships.

The term natural law is another word for legal positivism.

Legislative acts passed by state legislatures can be found in the ______.

Which of the following is true regarding administrative agencies?

Which of the following is true regarding treaties at the federal level?

State governors only

Which of the following is an independent agency?

Which of the following is an executive agency?

Which of the following is reported in the Federal Reporter?

CHAPTER 2: Connect Questions

Study and practice of decisions about what is good, or right.

The definition of business ethics refers to _____ of business conduct.

Situational ethics is the same thing as ethical relativism.

Who, Purpose, and How

None of the above there is no such board.

It is the same as the golden rule test.

How is absolutism different from ethical relativism and situational ethics?

Which of the following is also referred to as ethical fundamentalism?

What is the basis of consequentialism?

Kantian ethics is involved with which of the following ethical theories?

People disagree about the ethics of care.

The lack of agreement about the meaning of the good life.

CHAPTER 3: Connect Questions

Which of the following is true of a bench trial?

Who may file a motion for the change of venue?

Which of the following is a necessary condition for a justifiable controversy?

What is a directed verdict?

Subject-matter jurisdiction is a courts power to hear certain kinds of cases.

Intermediate courts of appeal exist in all states.

Significant contact statutes

because it is real property, not subject to seizure.

The state of incorporation only.

Which of the following is true of the Supreme Court in Japan?

Which of the following is true regarding state courts of appeal?

CHAPTER 13: Connect Questions

A(n)_____ is commonly defined as a promise in exchange for a promise.

Quasi-contracts are actual contracts.

In order to recover under quasi-contract, there is no requirement that enrichment be unjust.

Which of the following is a definition for consideration?

The contract lacked both an appropriate offer and an appropriate acceptance.

Todays law of contracts originated from judicial decisions in ________.

The Uniform State Act on laws was not working

Ten days after the car is delivered and approved.

Express contracts and quasi-contracts

Which of the following contracts are usually voidable?

Which of the following is an example of a formal contract?

CHAPTER 14: Connect Questions

Which of the following is true of auctions?

effective upon dispatch.

Which of the following is the first element of a contract?

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

The offeror is the arbiter of his offer.

Which of the following is a requirement for a valid acceptance?

CHAPTER 15: Connect Questions

A promise to stay in a job until a particular project is complete.

Promissory estoppel occurs when:

Which of the following is true of preexisting duty?

An unliquidated debt is a debt that:

and satisfaction to be enforceable.

A valid counter offer.

Which of the following is an exception to the rule requiring consideration?

England does not recognize the exception of promissory estoppel.

What does the preexisting duty rule mean?