2001 Business Law
1) When parties exchange goods for goods, it is defined
as a barter.
2) Patents are classified as tangible personal property.
3) A sale and a contract to sell are synonymous terms.
4) The donor cannot recover property actually
transferred by gift.
5) A promise to give someone a gift may be
enforceable.
6) A change in a contract after the agreement is made is
called a counteroffer.
7) An unconscionable contract is a contract that is
grossly unfair to one party
8) An offer that cannot be withdrawn until a specific
time is called a firm offer.
9) The statute of limitations states that all contracts for
personal property must be evidenced in writing.
10) Usury is the practice of charging excessively high
interest rates.
11) Ratification is the process a minor uses to honor a
contract.
12) The act of the parties giving and receiving in a
contract is called consideration.
13) Withdrawal of an offer prior to acceptance is called
revocation.
14) A woman who makes a will is called a testator.
15) A will entirely in the handwriting of the one writing
it is a holographic will.
16) Wills are validated in federal district court.
17) Dying without a will is called testamentary.
18) The party who orders the check to be paid is the
drawee.
19) A stale check is a draft that is over three months old.
20) A personal check that is guaranteed by the bank is a
certified check.
21) Drawers can be held responsible for altered checks if
their negligence contributed to the forgery.
22) A contract offer must be definite, be communicated,
and be intended to create a legal obligation.
23) Children may be held responsible for their own torts.
24) Past consideration may not be used as consideration
for a present contractual promise.
25) A delegation of a duty is the same as an assignment.
Page 1
a) True
b) False
a) True
a) True
a) True
b) False
b) False
b) False
a) True
b) False
a) True
b) False
a) True
b) False.
a) True
b) False
a) True
b) False
a) True
b) False
a) True
b) False
a) True
b) False
a) True
b) False
a) True
a) True
b) False
b) False
a) True
a) True
a) True
b) False
b) False
b) False
a) True
a) True
b) False
b) False
a) True
b) False
a) True
b) False
a) True
a) True
b) False
b) False
a) True
b) False
2001 Business Law
26) In the eyes of the law, a legal entity or artificial
person is called a __________.
27) A corporation chartered in a particular state is a/an
__________ corporation in that state.
28) Written evidence of a shareholder’s ownership and
rights in a business is called a __________.
29) Fixed dividends are guaranteed if the stock is
__________.
30) A business partner known to the public but not active
in its management is known as a __________
partner.
31) When two corporations cease to exist and a new
corporation is formed, it is called a __________.
32) When a partner ceases association with the
organization due to his/her death, it is called a
__________.
33) Which of the following is NOT a duty of a partner?
34) Farmers would use __________ bankruptcy plans to
reorganize their debts.
35) Another name for “straight bankruptcy” is
__________ bankruptcy.
36) Which of the following obligations would NOT be
affected by a bankruptcy discharge?
37) To file for bankruptcy, a city or town would file for
__________.
38) When an agency is created by circumstance, it is
called __________.
39) When an agent is lawfully appointed by another
agent, he/she is called a/an __________.
40) When serving as a discretionary agent, one is classed
as a/an __________.
41) Which law gives one the opportunity to ask for an
explanation of a credit report?
42) Claude Brown took out an insurance policy on his
home. He purposely did not tell the insurance agent
that he was beginning a new business in his garage.
Soon after he started his auto repair business, a fire
caused massive damage to his entire home. Which of
the following statements will probably apply?
Page 2
a) sole proprietorship
b) partnership
c) corporation
d) cooperative
a) alien
b) domestic
c) foreign
d) native
a) certificate of title
b) bill of sale
c) stock certificate
d) bill of lading
a) preferred
b) arbitrary
c) common
d) directed
a) limited
b) silent
c) dormant
d) secret
a) merger
b) consolidation
c) takeover
d) reorganization
a) dissolution
b) disaffirmance
c) special partnership
d) partnership in tenancy
a) Always use your best
skill and judgment in
handling the firm’s affairs.
a) Chapter 7
b) Refrain from any nonpartnership business.
d) Put the firm’s interests
ahead of self-interests.
b) Chapter 11
c) Always act in good faith
and in the best interest of
the partnership.
c) Chapter 12
a) Chapter 7
b) Chapter 11
c) Chapter 12
d) Chapter 13
a) Child support
b) Alimony
c) Taxes
d) All of the above
a) Chapter 7
b) Chapter 9
c) Chapter 12
d) Chapter 13
a) ratification
b) agency by estoppel
c) power of attorney
d) an express agency
a) general agent
b) agent’s agent
c) subagent
d) special agent
a) agent’s agent
b) subagent
c) general agent
d) special agent
a) Equal Employment
Opportunity Act
a) Co-insurance will cover
the damage.
b) Fair Credit Reporting
Act
b) Inland marine insurance
will cover the damage.
c) Fair Debt Collection
Practices Act
c) His policy will be void.
d) Truth In Lending Act
d) Chapter 13
d) His policy will be valid
for this special loss.
2001 Business Law
Page 3
43) Jacob Burman took out a $100,000 life insurance
policy on himself and named his wife as beneficiary.
The $100,000 is called the __________.
44) Coverage against loss to a rock band’s equipment
while being transported is called __________.
45) Rachel Jacobson spends time in two homes—one in
Florida and one in Utah. To provide insurance
protection for personal property used in both of these
homes, she would need a policy called a
__________.
46) When leaving your suit at the cleaners for dry
cleaning, there is a/an __________ taking place.
47) Micah Bivens went to Paoli Peaks for a ski trip and
rented skies at the local ski shop establishing a/an
____.
48) Jacob Green’s act of borrowing neighbor Josh
Brown’s car is
a) principal
b) dividend
c) premium
d) face value
a) fidelity insurance
b) marine insurance
c) inland marine insurance
d) indemnity insurance
a floater
b) homeowner’s
c) preferred provider
d) binder
a gratuitious bailment
b) consignment bailment
c) mutual benefit bailment
d) extraordinary bailment
a) gratuitious bailment
b) consignment bailment
c) mutual benefit bailment
d) extraordinary bailment
a) a bailment for the sole
benefit of the bailor.
b) a bailment for the sole
benefit of the bailee.
49) A person who refuses to return property at the end of
the bailment period is called a/an __________.
50) Wilbur Walters ordered a set of cookbooks from a
door-to-door salesperson. The cooling off period for
Wilbur to cancel his purchase is __________
business days.
51) Jeffrey Alan went to Cost Plus to purchase a new
stereo system for the advertised price of $295. Upon
Jeffrey’s arrival, the clerk described all the
shortcomings of this model and encouraged Jeffrey
to buy the deluxe model for $695. Cost Plus is
practicing __________.
52) When two parties reach a binding agreement to avoid
going to court, it is called __________.
53) The Bay Shore Shop received a binding order to stop
a false advertising practice. This is called a/an
_____.
54) An oral or written guarantee by a manufacturer is
known as a/an __________.
55) Warranty of merchantability is made by
a) Thief
b) tortuous bailor
c) a bailment for the
mutual benefit of the bailor
and bailee.
c) tortuous bailee
d) not a bailment but an
example of an agency
contract.
d) assignee
a) Two
b) three
c) five
d) ten
a) express advertising
b) telemarketing fraud
c) a standard sales practice
d) bait and switch
a) Negotiation
b) arbitration
c) mediation
d) litigation
a) cease and desist order
b) cancellation order
c) revocation order
d) prohibition order
a) implied warranty
b) encumbrances warranty
d) express warranty
a) Circuit City selling a
television.
a) bait and switch
b) Tom Wade selling his
television.
b) a loss leader
c) merchantability
warranty
c) Easy Pawn selling a
television.
c) absorption
56) Handy Market is advertising a gallon of milk for
$1.01 (which is below their cost) to attract customers
to their market is __________.
d) All of the above
d) clever advertising
2001 Business Law
Page 4
57) A class action suit is brought on behalf of a/an
__________.
58) Unfair methods of competition are prohibited by the
a) individual
b) a class of students
a) Department of Revenue.
59) Laws enacted by both the state and federal
governments to prevent monopolies are known as
__________.
60) Orally repeating malicious untruths about someone is
categorized as __________.
61) While a guest in your home, a person takes one of
your valuable pieces of jewelry. What type of tort
action is involved?
62) __________ means being denied the right to recover
damages in a tort action because the person was
partly responsible for his/her own injuries.
63) To have the capacity to contract means that the
individual
a) antitrust laws
b) Federal Trade
Commission.
b) competition laws
a) Gossip
c) a specific group
similarly affected
c) Federal Reserve Board.
c) sales restriction acts
d) community of
neighbors
d) Department of Unfair
Trades.
d) monopoly statutes
b) slander
c) libel
d) extortion
a) Extortion
b) Fraud
c) Embezzlement
d) Conversion
a) Comparative negligence
b) Contributory negligence
c) Negligence
d) The reasonable man
rule
a) is at least 18 years of
age.
b) can read and write
English.
d) meets all of the these
three requirements.
64) Luke found the perfect used car at a great price. To
a) Counteroffer
keep the offer for the sale of the car open for a week,
Luke paid the owner $50. This agreement is called
a/an __________.
65) A life insurance policy that is in effect for a definite
a) endowment policy
period of time and then expires is called a/an
________.
66) __________ is the failure to complete the terms of a
a) Cancellation
contract as previously agreed.
67) In tort actions, the damages agreed to in the original
a) liquidated damages
contract are referred to as __________.
68) An agreement to accept less consideration than stipulateda) nominal consideration
in the contract is called __________.
69) Contracts can be discharged by impossibility of
a) a person dies and his/her
performance when
personal service was
required.
70) Examples of intangible property are __________.
a) Automobiles
71) When a price is quoted for goods “FOB destination,” a) the buyer must pay the
freight.
b) option
c) is capable of
understanding his/her
contractual decisions.
c) finder’s fee
b) universal policy
c) term policy
d) whole life policy
b) Revocation
c) Restitution
d) Breach
b) mitigated damages
c) compensatory damages
d) punitive damages
b) forbearance
c) past consideration
d) token consideration
b) subject matter of the
contract is destroyed.
c) the person obligated on
the contract goes into
bankruptcy.
c) promissory notes
c) freight is not charged.
d) Either A or B occurs.
72) Risk of loss remains with the seller when products
are shipped __________.
73) Shares of stock with a stated value are known as
__________.
a) FOB destination
b) FOB shipping point
c) bulk transfer
d) boats
d) freight charges occur
only if shipped aboard a
plane.
d) as attachments
a) option stock
b) common stock
c) par stock
d) no par stock
b) houses
b) the shipper must pay the
freight.
d) quasi-contract
2001 Business Law
74) The legal transfer of the possession of property but
not the title is a/an __________.
75) The purpose of a bankruptcy proceeding is to
Page 5
a) bailment
b) sale
c) gift
d) assignment
a) discharge all debts of all
creditors.
b) allow persons to borrow
and spend with no
obligation to repay.
b) past consideration
c) protect certain rights of
debtors and creditors.
c) nominal consideration
d) allow persons to
purchase out of business
bargains.
d) caveat venditor
b) blank endorsement
c) special endorsement
d) restrictive endorsement
b) silent partner
c) dormant partner
d) secret partner
b) Car
c) Land
d) Television
b) enforce the contract
without the
unconscionable clause.
b) buyer
c) limit the application of
the unconscionable clause.
d) enforce the complete
contract with both parties.
c) merchant
d) contractor
b) vendor
c) casual seller
d) wholesaler
b) bill of particulars
c) bill of sale
d) bill of attainment
b) $500
c) $700
d) $900
b) Crude oil
c) Wheat
d) Canned fruit
b) collect on delivery
b) Caveat Emptor
c) call on delivery
c) Caveat Puffing
d) credit on delivery
d) Caveat Warranty
b) Warranty of fitness for
purpose
b) Warranted
c) Warranty of conformity
to seller’s statement
c) Voluntary
d) Warranty against
encumbrances
d) Involuntary
b) duress
c) senility
d) incompetence
76) Although no consideration is involved, a promise
a) promissory estoppel
may still be enforced under certain conditions under
the doctrine of __________.
77) Signing only the endorser’s name on the back of a
a) qualified endorsement
check or draft is called a __________.
78) A business partner unknown to the public is called a
a) limited partner
__________.
79) Which of the following is NOT classed as tangible
a) Clothing
personal property?
80) If a court rules that a clause in a contract is
a) refuse to enforce the
unconscionable, it may do any of the following
contract.
EXCEPT
81) In a sales contract, the vendee is also known as the
a) seller
__________.
82) One who sells goods only occasionally is classed as a a) merchant
__________.
83) A receipt that serves as written evidence of the transfer ofa) bill of lading
ownership of goods is a __________.
84) Under the statute of frauds, sales of goods for
a) $300
__________ or more must have written evidence to
be enforceable.
85) Which of the following would NOT be classified as a a) Automobile
fungible good?
86) In a COD sale, the COD means __________.
a) cash on delivery
87) The Latin term for “let the buyer beware” is
a) Caveat Venditor
__________.
88) Which of the following sale of goods’ warranties is
a) Warranty of title
NOT implied by law in all sales?
89) Which of the following is NOT one of the basic types a) Ordinary
of bailments?
90) Mary Sue Smith is persuaded by one of her nephews
a) undue influence
to make her will directing that the bulk of her estate
go to him at her death. Upon Mary Sue’s death, the
other family members could possibly get the will
declared void based on __________.
2001 Business Law
Page 6
91) A minor disaffirms a contract for necessaries. The
minor is
a) not required to pay
anything to the seller.
b) required to pay the sales
price to the seller.
b) 16
c) required to pay the
reasonable value of the
goods to the seller.
c) 18
d) required to pay the
reasonable value to the
parents.
d) 21
92) In most states, a minor is one who is under the age of
_____.
93) A contract that requires the performance of an act
prohibited by law is __________.
94) Tom and Jerry may create an agency relationship for
__________.
a) 12
a) Void
b) voidable
c) valid
d) enforceable
a) any purpose
b) a business purpose only
c) any legal purpose
95) George orders a quantity of materials from Xavier
Products and accepts them when they are delivered.
George’s later withdrawal of his acceptance is called
__________.
96) Except for goods that are shipped COD, a buyer is
entitled to the right of __________.
97) Which of the following warranties does NOT arise in
a sales contract?
a) Nullification
b) termination
c) cancellation
d) any legal purpose so
long as it is evidenced in
writing
d) revocation
a) Inspection
b) rejection
c) acceptance
d) accommodation
a) Warranty of title
b) Warranty of habitability
c) Implied warranty of
merchantability
98) The U.S. Constitution gave Congress the power to set
standards of weights and measures, and Congress in
turn created the
99) The law concerned with the power and actions of
governmental agencies and their regulations is
________.
100)
An order to produce a witness or an object such
as a document is a/an __________.
a) Division of Weights and
Measures.
b) National Bureau of
Standards.
c) Division of Scales and
Measurement.
d) Implied warranty of
fitness for a particular
purpose
d) National Board of
Measurement.
a) historical law
b) common law
c) statute law
d) administrative law
a) summons
b) subpoena
c) request
d) injunction