Module 2- Exam

Which of the following is true of third-party beneficiaries?

An incidental beneficiary cannot sue under other people's contracts.

Which of the following is true of the liability of an incoming partner?

An incoming partner is liable for the debts of the partnership only to the extent of his or her capital contribution.

Which of the following criteria must be met for a company to be an S corporation?

Nonresident aliens cannot be shareholders.

________ is a term that denotes the return of goods or property received from the other party to undo a contract.

Restitution

________ is a licensing statute with the primary purpose of increasing earnings for the government.

Revenue raising statute

Which of the following is a difference between acceptance and revocation?

Revocation is valid only if the offeree receives it, while an offeree's acceptance is valid when dispatched.

Which of the following is an instance of a mortgage?

Richard gives his country estate as collateral to a bank from where he has borrowed money to buy an apartment.

An employee who has been dismissed improperly accepts a job that is not comparable. Which of the following can be a subsequent course of action?

The employee can sue the prior employer for damages.

________ is a situation in which one person takes advantage of another person's mental, emotional, or physical weakness and unduly persuades that person to enter into a contract.

Undue influence

The ________ establishes uniform legal rules for the formation and enforcement of electronic contracts and licenses.

Uniform Computer Information Transactions Act

The ________ is a model act that provides comprehensive and uniform laws for the formation, operation, and dissolution of LLCs (limited liability companies).

Uniform Limited Liability Company Act

The ________ is a model act that codifies general partnership law.

Uniform Partnership Act (UPA)

Which of the following is true of general and limited partners in a limited partnership?

Limited partners are not personally liable for partnership debts beyond their capital contributions.

Which of the following hold true in a case of liquidated damages?

Liquidated damages are enforceable even if actual damages are later determined to be different.

________ is a preferred stockholder right to be paid a stated dollar amount if a corporation is dissolved and its assets redistributed.

Liquidation preference

Which of the following is true of profits and losses in a general partnership?

Losses are shared equally by all general partners.

________ is a mistake made by both parties concerning an object that is important to the subject matter of a contract.

Mutual mistake of material fact

Which of the following is true of discharge of performance by agreement?

Mutual rescission requires parties to enter into a second agreement that expressly terminates the first one.

Which of the following constitutes duress?

a plaintiff threatening the defendant that he will not drop the lawsuit until the defendant pays him a certain amount of money

Which of the following would be considered an offer to form a unilateral contract?

a reward offer

Jonathan Lopez wants to be his own boss and ventures into retailing fruit in the neighborhood after borrowing some money from his mother. While obtaining a license to carry out business in his city, Jonathan mentions the money he borrowed but forgets to specify what type of business undertaking his store will be. Under which of the following major forms of business is Jonathan's store listed by default?

a sole proprietorship

An offer is terminated on the grounds of "supervening illegality" when ________.

a statute or court decision deems an object of the offer unlawful

Which of the following constitutes duress?

a threat to commit extortion unless someone enters into a contract

Which of the following is an example of a contract contrary to statutes by its very existence?

a usurious loan contract

A(n) ________ is a manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts.

acceptance

James hires Franco for a painting job. Their contract explicitly states that Franco's employment can be terminated if he is employed by another party during the contract period. Two weeks into the job, James finds out that Franco is also working for a painting agency two blocks away and terminates his employment. This is an instance of ________.

condition subsequent

According to priority, which of the following claimants is the last to be paid after assets have been liquidated of a corporation?

common stockholders

In which of the following conditions is a party's absolute duty to perform conditioned on the other party's absolute duty to perform?

concurrent condition

A contract between a retailer and a supplier provides that payment is due upon delivery of goods by the supplier. The retailer's duty to pay and the supplier's duty to deliver constitutes ________.

concurrent conditions

KnockKnock is a manufacturer of stainless steel locks that are well-known for their durability. The company contacts a new stainless steel supplier and enters into a supply contract. The contract states that KnockKnock would purchase only if the steel from the supplier was high-grade Type 102 stainless steel. This is an instance of a ________.

condition precedent

Preprinted forms whose terms the consumer cannot negotiate, and must sign in order to obtain a product or service are referred to as ________.

contracts of adhesion

Which of the following is an exception to the Statute of Frauds?

contracts under promissory estoppel

Gary and Mary are siblings involved in a legal tangle over who gets possession of their ancestral home. Gary threatens to kill Mary's husband if she does not sign papers declaring Gary's sole ownership of their home. This is an instance of ________.

duress

A corporation is a(n) ________ corporation in the state in which it is incorporated.

domestic

An LLC (limited liability company) is a ________ in the state in which it is organized.

domestic LLC

A limited liability limited partnership is a ________ in the state in which it is organized.

domestic LLLP

A corporation in the state in which it was formed is referred to as a(n) ________.

domestic corporation

A limited partnership is a ________ in the state in which it is organized.

domestic limited partnership

A(n) ________ is a contractual provision that relieves one or both of the parties to a contract from tort liability.

exculpatory clause

Intentional misrepresentation is commonly referred to as ________.

fraud

A ________ is a document that is filed with the state that designates a trade name of a business.

fictitious business name statement

Which of the following acts is seen as conclusive proof for the existence of a corporation?

filing the articles of incorporation

Guarantees that establish a debtor-creditor relationship in which the corporation borrows money from the investor to whom a debt security is issued are known as ________.

fixed income securities

An LLC (limited liability company) that is organized in Alabama and is operating in Texas with no operations outside the U.S. is considered a ________ in Texas.

foreign limited liability company

A limited partnership that was organized in Alabama and operating in Texas with no operations outside the U.S. is considered a ________ in Texas.

foreign limited partnership

If a minor entered into a contract, and then ratified the contract after reaching the age of majority, which of the following is he or she exempt from?

infancy doctrine

The ________ is a legal principle that allows minors to cancel most contracts they have entered into with adults.

infancy doctrine

Which of the following constitutes material breach?

inferior performance

In which of the following cases of assent is the rescission of a contract unenforceable?

mutual mistake of value

Any oral or written words outside the four corners of a written contract are termed as ________.

parol evidence

Which of the following rights is generally assignable in the United States?

recovery of debt

Stock that permits a corporation to buy back the preferred stock at some future date is known as ________.

redeemable preferred stock

Owners of a corporation who elect the board of directors and vote on fundamental changes in the corporation are known as ________.

shareholders

Which of the following elects members of the board of directors for a corporation?

shareholders

An act by a corporation that is beyond its express or implied powers is called a(n) ________.

ultra vires act

A(n) ________ is a contract that courts refuse to enforce in part or at all because it is so oppressive or manifestly unfair as to be unjust.

unconscionable contract

Which of the following is a cause for the dissolution of a partnership?

withdrawal of a general partner

Partners who erroneously, but in good faith, believe they have become limited partners can escape liability as general partners by ________.

withdrawing from any future equity participation in the enterprise

A ________ is an order of the court that enables a government officer to seize property of the breaching party and sell it at auction to satisfy a judgment.

writ of attachment

A ________ is an order of the court that orders that wages, bank accounts, or other property of the breaching party held by third persons be paid to the nonbreaching party to satisfy a judgment.

writ of garnishment

Which of the following is mandatory for the addition of a new limited partner to an existing limited partnership?

written consent of all partners

Which of the following is supported by consideration?

written contract

Poweroxi Inc. produces rocket propellant fuel that is used in space shuttles. NASA is an agency that requires rocket propellant fuel to send its rockets to space. NASA enters into a contract with Poweroxi Inc. to purchase all of the propellant fuel it will need that year from Poweroxi. Which of the following conditions would constitute a breach in contract?

if NASA purchased fuel from another seller

Corey in a desperate need to get to the airport decides to take his neighbor Tanner's help. Tanner agrees to help and drives Corey to the airport. Upon arrival at the airport, Corey promises to pay Tanner $25 for the gas fill. Which of the following conditions would have made the contract between Corey and Tanner enforceable?

if the promise to pay gas money had been made before the trip was made

Under which of the following conditions can one convert a gift promise into an enforceable promise?

if the promisee offers a consideration

With regard to unenforceable contracts, an extortion call in which a man agrees to pay money in return for his family's safety would be considered as a(n) ________.

illegal consideration

A contract into which both parties enter but in which one or both of the parties can choose not to perform their contractual obligations is known as ________.

illusory promise

Mary buys a lottery ticket and promises to buy her friend Sharon a new pair of shoes if she checks the lottery results while Mary is away. Sharon agrees to do so, provided she has the time for it. What kind of contract do Mary and Sharon have?

illusory promise

The term ________ refers to a mode of acceptance that is indicated from what is customary in similar transactions, usage of trade, or prior dealings between the parties.

implied authorization

A term in a contract that can reasonably be supplied by the courts is referred to as a(n) ________.

implied term

In a(n) ________ contract, agreement between parties is inferred from their conduct.

implied-in-fact

The person responsible for incorporation of a corporation is known as a(n) ________.

incorporator

A contract between a corporation and a holder that contains the terms of a debt security is known as a(n) ________.

indenture

Kinlin, a furniture retailer, has a contract with William, a carpenter. The agreement states that William must deliver five tables and that Kinlin would pay $2,000 per table. However, William manages to deliver only four tables and Kinlin needs to buy the fifth table from another supplier for $3,000. How much money can Kinlin recover from William?

$1,000

Mary buys a new toaster for $500. The toaster's label bears a disclaimer stating that the manufacturer is not liable for consequential damages. One day, while Mary is using the toaster, it starts emitting sparks and the electrical wiring of the kitchen gets damaged. The electrician tells Mary that the toaster malfunctioned and that the cost of repairs would be $2,000. What monetary damages can Mary recover from the manufacturer of the toaster?

$500

Which of the following is true of a gift promise?

A completed gift promise cannot be cancelled for lack of consideration.

Which of the following is true of covenants and conditions?

A conditional promise becomes a covenant if the condition is met.

What is the key difference between an agreement and a contract?

A contract is always enforceable in the court of law, while an acceptance may or may not be.

Which of the following does the one-year rule state?

A contract that cannot be performed on its own terms within a year should be in writing.

Which of the following is true for a corporation's incorporation in a state?

A corporation can incorporate in only one state.

Which of the following is a definition of a foreign corporation?

A corporation in states other than the one in which it is incorporated.

Which of the following statements is true of a counteroffer?

A counteroffer terminates the existing offer.

Which of the following elements must be established to create an implied-in-fact contract?

A defendant was given an opportunity to reject a property or services provided by a plaintiff but failed to do so.

Which of the following is true of undue influence in entering contracts?

A fiduciary or confidential relationship must have existed between the parties for undue influence to be proven.

Which of the following is true of a minor's right to disaffirm a contract?

A minor can expressly disaffirm a contract orally or in writing.

Which of the following is true of the ratification of a contract by a minor?

A minor can only ratify a contract after reaching the age of majority.

Which of the following is true of misrepresentation?

A misrepresentation is not actionable unless the innocent party relied on the misrepresentation and acted on it.

Which of the following is true of the management of an LLC (limited liability company)?

A nonmember can become a manager of an LLC.

Which of the following is true of compensation offered by an LLC (limited liability company)?

A nonmember manager of an LLC is not entitled to compensation.

Which of the following is true of tort liability of a general partnership?

A partner can be sued even if he or she did not participate in the commission of the tort.

Which of the following is true of the admission of a new general partner to an existing limited partnership?

A limited partnership agreement cannot waive the right of partners to approve the admission of new general partners.

Which of the following is true of capital contribution to an LLC (limited liability company)?

A member's obligation to contribute capital is not excused by the member's death.

Which of the following is true of a minor under the infancy doctrine?

A minor can disaffirm contracts he or she has entered into with adults.

________ is an agreement whereby the parties agree to accept something different in satisfaction of the original contract.

Accord

Which of the following is true of profits and losses of an LLC (limited liability company) whose operating agreement does not contain profit or loss sharing clauses?

All members receive equal shares in profits regardless of the capital contributed.

Which of the following is true of LLC (limited liability company) taxation?

An LLC is not taxed at the entity level.

Which of the following is true of an LLC (limited liability company)?

An LLC is regarded a separate legal entity.

Rudy was working as an applications developer in a software firm in San Jose. His employment contract was for three years at $100,000 a year. Two years into the contract, Rudy's employer fired him as a part of downsizing. Which of the following jobs could Rudy take in order to mitigate damages?

An applications developer job in San Jose for $100,000 a year or more.

Who should provide a notice of assignment to the obligor?

An assignee

Andrew is employed as a chief financial officer of EasyMoney in New York City, for a salary of $200,000 per year on a three-year contract. His employer terminates Andrew with two years left on the contract. Andrew accepts employment as a financial analyst at a different firm that pays $150,000 per year. Which of the following hold true in this scenario?

Andrew can sue his prior employer and recover $100,000.

Which of the following constitutes a case of anticipatory breach?

Anticipatory breach can be derived from the conduct of the breaching party without being expressly stated by that party.

________ occurs when one contracting party informs the other that he or she will not perform his or her contractual duties when due.

Anticipatory repudiation

Which of the following is true of the UCC (Uniform Commercial Code)?

Article 2A of the UCC prescribes a set of uniform rules for the creation and enforcement of contracts for the lease of goods.

________ refer to the formal documents that must be filed at the secretary of state's office of the state of organization of an LLP (limited liability partnership) to form the LLP.

Articles of LLP

________ refer to the formal documents that must be filed at the secretary of state's office of the state of organization of an LLC (limited liability company) to form the LLC.

Articles of organization

Which of the following is true of an illegal consideration?

Contracts based on illegal consideration are void.

After losing her watch, Jennifer had put up a reward offer in the local newspaper for anyone who could find and return her watch. However, after two weeks she decides to buy a new watch and not pay the reward anymore. Betty, who found the watch and saw the reward offer, returns the watch to Jennifer after 20 days. Which of the following would be true about Betty receiving or not receiving the reward?

Betty can claim the reward because Jennifer had not published a notice of revocation.

Gerard and Tony organize an LLC (limited liability company) by investing $55,000 and $45,000 respectively. The operating agreement states that profits are to be shared in the ratio of 55:45 between Gerard and Tony and makes no mention of sharing losses. The LLC incurs a loss of $100,000 in its first year. How is this loss shared?

Both Gerard and Tony have to pay $50,000 each.

Justin and Michael form a limited partnership and start a car dealership. Justin is the general partner and Michael is the limited partner. Seven months after the commencement of the business, Pedro makes an investment and wishes to become a general partner. A week later, Michael's mother wishes to join the partnership as a limited partner. Which of the following is true in this scenario?

Both Pedro and Michael's mother can choose to become either general or limited partners to the partnership.

How are profits and losses shared in the absence of a limited partnership agreement?

Both profits and losses are shared on the basis of the value of each partner's capital contribution.

A famous actor signs a contract with a movie studio where she agrees to star in a comedy. Which of the following is true of assignment of such a contract?

Both the actor and the studio can agree that their contract can be assigned.

Which of the following is a "corporate citizenship" as a social responsibility theory in business?

Businesses are responsible to even helping solve social problems that they did not cause.

Which of the following is true of a limited partnership?

Corporations are allowed to become partners in a limited partnership.

Which of the following is true of a member-managed LLC (limited liability company)?

Each member has equal rights in the management of the business of the LLC.

________ is a type of equity security that represents the value of a corporation.

Common stock

________ place the nonbreaching party in the same position as if the contract had been fully performed.

Compensatory damages

A(n) ________ refers to a condition that requires the occurrence of an event before a party is obligated to perform a duty under a contract.

Condition precedent

A(n) ________ refers to a condition whose occurrence or nonoccurrence of a specific event automatically excuses the performance of an existing contractual duty to perform.

Condition subsequent

Which of the following is true of monetary damages?

Consequential damages are considered monetary damages.

________ is a doctrine that permits judges to make decisions based on fairness, equality, moral rights, and natural law.

Equity

Which of the following is true of the equity doctrine?

Equity is resorted to when an award of money damages would not be the proper remedy.

________ is an ethical theory where a person adheres to rules or commands that are from an outside source, like a book or a central figure.

Ethical fundamentalism

Which of the following is true of a sole proprietorship?

Creditors can recover claims against the business from the sole proprietor's personal assets.

________ is a moral theory which holds that individuals must decide what is ethical based on their own feelings about what is right and wrong.

Ethical relativism

________ is a set of moral principles or values that governs the conduct of an individual or a group.

Ethics

________ is a stipulation in an offer that says the acceptance must be by a specified means of communication.

Express authorization

________ is said to have occurred if a certificate of limited partnership was not properly filed.

Defective formation

________ is the act of a minor to rescind a contract under the infancy doctrine, either orally, in writing, or by the minor's conduct.

Disaffirmance

Which of the following is true of an LLC (limited liability company) formation?

Doctors and lawyers cannot operate practices as LLCs.

Which of the following is an example of a specific term qualifying general term?

Dollars referred to as Australian dollars

________ is a situation in which one party threatens to do a wrongful act unless the other party enters into a contract.

Duress

________ is a duty owed by a member of an LLC (limited liability company) to not act adversely to the interests of the LLC.

Duty of loyalty

________ is a rule that states that if a minor has transferred money, property, or other valuables to the competent party before disaffirming the contract, that party must place the minor in status quo.

Duty of restitution

________ is a rule that states that a minor is obligated only to return the goods or property he or she has received from the adult in the condition it is in at the time of disaffirmance.

Duty of restoration

________ Act is a federal statute that permits private parties to sue companies for fraud on behalf of the government and share in any monetary recovery.

False Claims

Jules Renton, a financial accountant at Valkyrie Aviations, deals with the accounts Valkyrie has with the government. Valkyrie Aviations is in contract with the government to deliver a new bomber plane called Spearhead. While reviewing the Spearhead account, Renton noticed that Valkyrie has been falsely billing the government for Spearhead's production. If Renton chooses to be a whistleblower and expose the scam to the government, what statute enacted by the Congress must he invoke?

False Claims Act

The Whistleblower Statute is also known as the ________.

False Claims Act

________ is a clause in a contract in which the parties specify certain events that will excuse nonperformance.

Force majeure

16-year-old Frank bought a video game console from John for $150. Frank is a minor, while John is a competent adult. A month later, the console started malfunctioning on its own. Frank returned the console to John. If Frank disaffirms his contract with John for buying the console, which of the following will be considered true?

Frank can reclaim full refund on the amount he paid.

________ occurs if a person is deceived as to the nature of his or her act and does not know what he or she is signing.

Fraud in the factum

________ occurs when the party knows what he or she is signing but has fraudulently been led into the contract.

Fraud in the inducement

________ is an event that occurs when one person consciously decides to induce another person to rely and act on a misrepresentation.

Fraudulent misrepresentation

Which of the following is true of general partnership?

General partnerships can be oral or implied from the conduct of the parties.

Sam Mueller and Geoffrey Robinson enter into a limited partnership in which Sam is the general partner and Geoffrey is the limited partner. They borrow $50,000 to start a business. Keeping all rules of naming their businesses in mind, they start a law firm named Robinson-Mueller Legal Associates. Martin Humphrey joins them after eleven months as a general partner but does not include his surname in the name of the business. If the business fails, which of the following is true?

Geoffrey is liable as a general partner as he included his surname in the business with full knowledge.

Which of the following is an apparent disadvantage of utilitarianism?

It treats morality as if it were an impersonal mathematical calculation.

Howard is injured by Penny in a car accident, caused due to Penny's negligence. Which of the following statements holds true for Howard's right to assign?

Howard's right to sue Penny cannot be assigned.

Which of the following statements is true of mitigation of damages?

If an employer breaches a contract, the employee is only required to accept comparable employment.

Which of the following is true of the management of a general partnership?

If the vote is tied, the action being voted on is considered to be defeated.

________ is a promise to refrain from doing an unlawful act, and therefore is a promise that will not support a contract.

Illegal consideration

________ are powers beyond express powers that allow a corporation to accomplish its corporate purpose.

Implied powers

________ refers to the integration made by express reference in one document that refers to and incorporates another document within it.

Incorporation by reference

________ refers to the right of a partner to be reimbursed for expenditures incurred on behalf of the partnership.

Indemnification

Which of the following is true of applying promissory estoppels to a contract?

Injustice would be caused if the promise were not enforced.

Techstate, a hardware manufacturer in the United States, has an existing contract with a client based in the Republic of Karthasia, which is going through a domestic political crisis. The resulting upheaval in that country has led to some of the shipments to the client being destroyed by warring factions. As a sanction against the country, the United States government places an embargo on all exports to that country by U.S. firms. What will be the state of the contract between Techstate and the client in Karthasia after the embargo?

It will be terminated due to supervening illegality.

Hartman, who worked for Aratize Inc. for 25 years, decides to retire. Upon hearing the news of his retirement, the president of Aratize announces a bonus of $250,000 to Hartman for his exceptional services toward Aratize thus far. But upon retiring, Hartman isn't paid the bonus. Hartman decides to sue the president and Aratize to recover the promised bonus. Which of the following is true in this case?

It will not be enforceable in court because of past consideration.

Harry finds an old stereo in his attic. He sells the stereo to Jake for $50 telling him that it is fully functional, which Jake thinks is true. However, it turns out to be broken. Which of the following statements is true in this context?

Jake can rescind the deal but cannot sue Harry for innocent misrepresentation.

Which of the following is true of output contracts?

It assures the seller of a purchaser for all its outputs.

Which of the following is true of the Uniform Computer Information Transactions Act?

It does not become law until a state adopts it as a statute.

Which of the following is a perceived disadvantage of Rawls's social justice theory?

It doesn't consider the fact that people would not want to maximize benefits for the least advantaged persons.

What is the doctrine of in pari delicto with reference to contracts?

It is a situation in which both parties are considered equally at fault in an illegal contract.

Which of the following is true of duress?

It is a threat issued to make another person sign a contract.

Which of the following is true of misrepresentation of a material fact?

It is actionable as fraud if the misrepresentation is of a past or existing material fact.

Which of the following statements is true of the doctrine of quasi contract?

It is an equitable doctrine intended to prevent unjust enrichment.

Which of the following is a perceived disadvantage of Kantian ethics?

It is based on universal rules that have no common consensus.

Which of the following is a necessary condition for a contract to be considered valid?

It is enforceable by at least one of the parties.

Which of the following is true of an accord?

It is enforceable even though no new consideration is given.

George made an offer to Jacob to sell his house for $1 million. The offer was received by Jacob on May 1, 2014, and he stipulated that he had 13 days to accept it. But Jacob could not arrange the money, and on May 16, 2014 he made a counteroffer to buy the house for $850,000. Which of the following is true of the original offer made by George to Jacob?

It is invalid due to lapse of the stated time.

Why does a sole proprietorship not pay taxes at the business level?

It is not a separate legal entity from the owner.

Which of the following is true of a business operating as a sole proprietorship?

It is not considered a separate legal entity from the owner.

In which of the following circumstances is a decree of judicial dissolution granted to a partner?

It is not reasonably practical to carry on the business in conformity with the limited partnership agreement.

Which of the following is true of the Delaware General Corporation Law?

It is the most advanced corporation law in the country.

Which of the following is true of a C Corporation?

It must have more than 100 shareholders.

Which of the following statements is true of a revocation?

It needs to be received by the offeree to be effective.

Which of the following is true of a promissory estoppel?

It permits a court to order enforcement of a contract that lacks consideration.

Which of the following is true of the Uniform Limited Liability Company Act?

It provides uniform laws for the dissolution of limited liability companies.

Which of the following is true of the Restatement of the Law of Contracts?

It serves as a reference for guidance in contract disputes.

Which of the following is true of a limited partnership agreement?

It sets forth the terms and conditions regarding the termination of the partnership.

John, Nathan, and Julio form JNJ, LLC (limited liability company) with an equal capital investment by each. On his way to a business meeting with the clients of JNJ, Nathan accidentally injures a woman named Jessica in a car accident. Which of the following is true in this scenario?

Jessica can claim damages from JNJ, LLC as she was injured in the ordinary course of business.

According to ________, keeping a promise to abide by a contract is a moral duty even if that contract turns out to be detrimental to the obligated party.

Kantian ethics

Consistency is one of the two important principles of ________ upon which its universal laws are based.

Kantian ethics

Portman, who runs a computer hardware store, had signed a contract with Stewie Inc. to deliver 125 computer monitors. He was to deliver it by the 5th of August, but by the 3rd of August, Portman could not arrange for the monitors, as his usual supplier was not available. Portman then decided to go to another supplier who had a higher selling price rather than cancel the contract with Stewie Inc., as he believed it was his duty to do so. Which of the following moral theories matches Portman's behavior?

Kantian ethics

Which of the following moral theories lays emphasis on morality based on one's moral duties?

Kantian ethics

Which of the following moral theories would closely follow the categorical imperative "Do unto others as you would have them do unto you"?

Kantian ethics

________ is a moral theory which states that people owe moral duties that are based on universal rules.

Kantian ethics

Kevin goes to the store to purchase a fully-automatic washing machine. He browses through several models of washing machines, but does not let the salesperson know that he wants a fully-automatic model. While signing the sales contract, he does not notice that the model he is purchasing is a semi-automatic machine. After purchase, which of the following options does Kyle have?

Keep the semi-automatic washing machine as he made a unilateral mistake.

Luke offered to sell his farm to Kent at $75,000, an offer which Kent declined. A week later, Luke offered to sell the farm for $65,000, stating it was the final offer that would be valid for one month only. Two days later, Kent offered to pay $60,000 for the farm. Luke received Kent's offer a week later and he declined it. After ten days, Kent agreed to buy the farm for $65,000, but Luke refused to sell the farm. Kent decided to sue Luke for a breach of contract. The judge ruled in favor of Luke. Which one of the following is the reason for the ruling in Luke's favor?

Kent's counteroffer of $60,000 had rendered the offer for $65,000 invalid.

Which of the following is true for legally claiming a reward?

Knowledge of the reward before completing the requested act is necessary to claim the reward.

A(n) ________ is a special form of partnership in which all partners are limited partners, and there are no general partners.

LLP (limited liability partnership)

Karen borrows $10,000 from Celeste. Karen is to pay Celeste the principal amount, with 8 percent interest, over the next five years in 60 equal monthly payments. After one year of receiving proper payments from Karen, Celeste assigns this right to receive future payments to Larry. Who has the duty to notify Karen about the assignment?

Larry

Laura is an investor and a limited partner in a limited partnership. Two years after she becomes a limited partner, Laura thinks that the general partners are not doing a very good job managing the affairs of the limited partnership and participates in the management of the limited partnership. While she is participating in management, a bank loans $1 million to the limited partnership, believing that Laura is a general partner. If the limited partnership defaults on the $1 million loan, which of the following holds well?

Laura is personally liable if the bank, in good faith, thought she was a general partner.

________ is a general rule of corporate law that provides that generally shareholders are liable only to the extent of their capital contributions for the debts and obligations of their corporation and are not personally liable for the debts and obligations of the corporation.

Limited liability of shareholders

Which of the following constitutes a mutual mistake of a material fact?

Martha and Graham agreeing on the sale of a house, both referring to different houses

Martha contacts a bakery to get a cake for her son's birthday party. She tells the baker that she will pay him $150 for the cake if he delivers the cake on Friday evening. If the baker does not deliver the cake on Friday evening, which of the following will hold true?

Martha cannot sue the baker.

Mary, Harold, Harvey, and William form an LLC (limited liability company) by contributing $20,000, $50,000, $55,000, and $150,000, respectively. The LLC is designated to be member-managed. When a decision is put to vote, Mary, Harvey, and Harold vote "yes," whereas William votes "no." Which of the following is true in this context?

Mary, Harvey, and Harold's decision prevails due to simple majority.

Which of the following is true of the liabilities of LLCs (limited liability companies)?

Members of LLCs are liable to the extent of their capital contribution.

________ stipulates that the contract is a complete integration and the exclusive expression of the parties' agreement.

Merger clause

Which of the following is true of a minor's duty toward a contract for necessaries of life?

Minors must pay the reasonable value of necessaries of life for which they contract.

Which of the following is true of misrepresentation?

Misrepresentation of law is not actionable as fraud.

Which of the following statements is true of the Statute of Frauds?

Most states require contracts to pay compensation for services rendered in negotiating the purchase of a business to be in writing.

Sam Muller and Toby Richardson organize an LLC (limited liability company) in the state of Delaware. In the articles of organization, they specify the duration of the LLC as 25 years from the date of filing the articles of organization. Which of the following is true in this context?

Muller and Richardson have organized a valid term LLC.

Mary buys a lottery ticket and promises to buy her friend Sharon a new pair of shoes if she checks the lottery results while Mary is away. Sharon agrees to do so, provided she has the time for it. If Sharon fails to check the results and Mary wins the lottery, which of the following would be true of the contract between Mary and Sharon?

Neither Mary nor Sharon can claim breach of contract.

Which of the following is true of creating a sole proprietorship?

No government approval is required.

________ damages are awarded when the nonbreaching party sues the breaching party even though no financial loss has resulted from the breach.

Nominal

________ is an action to undo a contract.

Rescission

Which of the following is true of a unilateral mistake?

Only one party is mistaken about a material fact regarding the subject matter of a contract.

Orlando opened a hot dog stand in Brooklyn which unfortunately did not earn him a profit. He had borrowed $5,000 from the bank to set it up, which had to be repaid to the bank in two days. However, Orlando's friend Bob agreed to partner with him starting the subsequent month. From which of the following sources can the bank recover its $5,000 with interest?

Orlando's savings account

________ says that if a written contract is a complete and final statement of the parties' agreement, any prior or contemporaneous oral or written statements that alter, contradict, or are in addition to the terms of the written contract are inadmissible in court regarding a dispute over the contract.

Parol evidence rule

Which of the following is true of enforcing a contract?

Parties may voluntarily perform a contract that is unenforceable.

Which of the following statements is true of contracts?

Parties to an informal contract can use any words they choose to express their contract.

Which of the following statements describes the moral theory of utilitarianism?

People must choose the action or follow the rule that provides the greatest good to society.

Philip and Deborah form an LLC (limited liability company). Philip contributes $50,000 capital, and Deborah contributes $75,000 capital. They do not have an agreement as to how profits are to be shared. If the LLC makes a $100,000 profit in its first year, how will the profit be divided among the members?

Philip gets $50,000, and Deborah gets $50,000.

Which of the following statements is true of the writing requirement of contracts, according to the Statute of Frauds?

Promises made in consideration of marriage must be in writing.

________ is an equitable doctrine that permits enforcement of oral contracts that should have been in writing.

Promissory estoppel

________ is an equity doctrine that permits a court to order enforcement of a contract that lacks consideration.

Promissory estoppel

________ are corporations that have many shareholders and whose securities are often traded on national stock exchanges.

Publicly held corporations

In most states, the formation, operation, and termination of limited partnerships are regulated by the ________.

RULPA

________ is the act of a minor after he or she has reached the age of majority, by which he or she accepts a contract entered into when he or she was a minor.

Ratification

________ is a moral theory which asserts that fairness is the essence of justice.

Rawls's social justice theory

The ________ is an objective test that applies to commercial contracts and contracts involving mechanical fitness.

Reasonable person test

________ refers to an equitable doctrine that permits the court to rewrite a contract to express the parties' true intentions.

Reformation

The ________ Act, enacted by Congress in 2002, requires public companies to adopt codes of ethics and establishes criminal penalties for companies that partake in violations.

Sarbanes-Oxley

The income or loss from a sole proprietorship is reported on ________ which must be attached to the owner's Form 1040.

Schedule C

Mark, who recently won a lottery, tells Sean that he will split his lottery winnings with him if Sean can arrange Mark's interview with his boss. Sean talks to his boss and the meeting is arranged. But when Sean goes to collect half of Mark's lottery winnings, Mark refuses to pay. What is the act of consideration in this scenario?

Sean arranging the interview

________ are the most common form of business organization in the United States.

Sole proprietorships

Which of the following is true of specific performance?

Specific performance of personal service contracts is not granted.

Which of the following statements is true of interpreting contract words and terms?

Specific terms are presumed to qualify general terms.

________ is a social responsibility theory of business which says that a corporation must consider the effects its actions have on persons other than its shareholders.

Stakeholder interest

________ set an upper limit on the interest rate that can be charged on certain types of loans.

State usury laws

The ________ requires certain contracts to be in writing.

Statute of Frauds

________ is a situation in which a party to a contract renders performance exactly as required by the contract.

Strict performance

Which of the following statements is true of a breach of contract?

Strict performance by a party discharges that party's duties under the contract.

Which of the following statements is true of discharge of contracts?

Tender of performance discharges a party's contractual obligations.

Which of the following is true in the event an assignee does not provide a notice of assignment to the obligor?

The assignee cannot sue the obligor to recover payment.

Ellen, who has a good driving record, purchases automobile insurance from an insurance company. Ellen cannot assign her rights to be insured to another driver for which of the following reasons?

The assignment would materially alter the risk and duties of the insurance company.

Which of the following is true of an assignment of a right?

The assignor loses the right to sue the obligor directly for nonperformance in an unconditional assignment.

Which of the following is true of an amendment of the articles of incorporation that does not affect the rights attached to shares?

The board of directors can approve the amendment without shareholder approval.

Which of the following is true in the creation of a general partnership?

The business name selected by the partnership cannot indicate that it is a corporation.

Which of the following is true of a buyer with an output contract?

The buyer is obliged to buy all the goods sold by the seller.

AtlasNow Construction Company, a general contractor, plans to place a bid for building a hospital. It requests bids from subcontractors for plumbing and other construction related services that will be needed for building the hospital. Catapipes Plumbing Company, a plumbing subcontractor, submits the lowest bid for the plumbing work, and AtlasNow incorporates Catapipes's low bid in its own bid for the general contract. Based on all of the subcontractors' bids, AtlasNow submits the lowest overall bid to build the hospital and is awarded the contract. Which of the following condition is required for the two companies to enter into a legally enforceable contract?

The considerations must be bargained-for exchange of a service or product.

Jonas enters into an oral contract with Chelsea to lease his house to her for $100,000. Chelsea pays him $100,000 and moves in. A month later, Jonas learns that his state requires contracts for the lease of goods with payments of $1,000 or more to be in writing. Which of the following options does either party have now?

The contract cannot be rescinded by either party as it has already been executed.

Which of the following is true of a contract where one of the parties is insane but not adjudged insane?

The contract is only voidable by the insane person.

The state of Transas has set a maximum interest rate of 12 percent on loans. Matt borrows $10,000 from Tony to pay off a gambling debt. Both are residents of Transas. They sign a contract, which states that Matt would have to pay $1,500 as interest in one year to pay off the loan. Later, Matt gets to know about the state usury limit and sues Tony. What is the nature of the contract between Matt and Tony?

The contract is void as it violates usury laws.

Which of the following is true of a contract with an adjudged insane person?

The contract is void.

Which of the following is true of an S corporation?

The corporation can have no more than 100 shareholders.

Which of the following must be true for a corporation to elect statutory close corporation status?

The corporation must have 50 or fewer shareholders.

How is the doctrine of unconscionability related to public policy?

The doctrine of unconscionability is based on public policy.

What does the English rule for successive assignments provide?

The first assignee to give notice to the obligor prevails.

What does the American Rule for successive assignments provide?

The first assignment in time prevails, regardless of notice.

Which of the following is true for an auction without reserve?

The goods on sale cannot be withdrawn.

Which of the following statements is true of a guaranty contract?

The guarantor's liability is secondary.

Good Faith Consultants partnered with QuickFind IT Solutions for a period of six months. After three months, they wanted to extend the contract by two years. According to the Statute of Frauds, which of the following is true of the contract?

The modification to the duration of the contract should be in writing.

Which of the following must be included in the articles of incorporation?

The number of shares the corporation is authorized to issue.

Which of the following statements is true of an offer that was not communicated?

The offer cannot be accepted by the offeree if not communicated.

Which of the following is true of an option contract?

The offer cannot be revoked during the option period.

Peter plans to sell his two houses, numbered Lot 1 and Lot 2, at $800,000 each. David, who was interested in buying Lot 2, could not make up his mind on the final offer and asks Peter to give him a week to decide. Peter accepts, but David takes two weeks to decide the counteroffer. Before he could give David a reply to his counteroffer, Peter is killed in a fire that burned down Lot 1. Which of the following would be true in this case?

The offer is terminated due to death of the offeror.

Peter, Preston, and Penny organize an LLC (limited liability company) in the month of January. While composing the operating agreement, they forget to include the amendment clause. Six months later, the situation demands an amendment to the operating agreement. Which of the following would best apply in this scenario?

The operating agreement can be amended if all three members approve.

Which of the following serves as a motive for an organization or venture to qualify as a partnership?

The organization wants to make a profit.

Which of the following is true of a contract, the object of which has become unlawful after the creation of the contract?

The parties of the contract will be discharged from that contract.

If Gerard Koontz retires from being a general partner in a limited partnership, which of the following is true?

The partnership is dissolved according to RULPA norms.

Which of the following happens when a general partner withdraws from a limited partnership?

The partnership is dissolved.

While signing a contract, one of the parties misinterpreted a legal clause. Neither of the parties is a legal professional. Which of the following statements holds well in this scenario?

The party who misinterpreted the law is not actionable for fraud.

Which of the following is true for a corporation's liability on the promoters' contracts if the corporation is never formed?

The promoters have joint personal liability on the contract unless the third party specifically exempts them from such liability.

Which of the following is an illustration of the possession of tangible token rule?

The right of collecting $10,000 is recorded in the assignee's savings account passbook.

Which of the following is true for an auction with reserve?

The seller retains the right to refuse the highest bidder.

Which of the following statements is true of signature on a written contract?

The signature of the person who is enforcing the contract is not necessary.

John buys a watch for $100 at a vintage store. Later, the store learns that the watch was worn by Sean Connery in a James Bond movie and wishes to rescind the sales contract they have with John. Which of the following statements is true in this scenario?

The store cannot rescind or void the contract.

To prove fraud, which of the following elements must be shown?

The wrongdoer intended to deceive the innocent party.

Which of the following statements is true of nominal damages?

They are awarded even when a breach did not result in financial loss.

Which of the following is true of treasury shares?

They cannot be voted by the corporation.

Which of the following is true of corporate bylaws?

They do not have to be filed with any government official.

Which of the following scenarios makes Tim liable for undue influence?

Tim takes advantage of his grandmother's illness and persuades her to sign a will leaving all her property to him.

Which of the following statements is true of contracts?

To have an enforceable contract, there must be mutual assent by the parties.

Which one of the following would constitute a reward?

a person returning a lost item after seeing an ad about it

Which of the following best describes an entrepreneur?

a person who forms and operates a business

________ is a situation in which a partner withdraws from a partnership without having the right to do so at that time.

Wrongful dissolution

Which of the following is considered a real property?

a fixture permanently affixed to a building

Which of the following best defines the term distributional interest?

a member's ownership interest in an LLC that entitles the member to receive distributions of money and property from the LLC

What is recognizance?

a party's acknowledgement in court that he or she will pay a specified sum of money if a certain event occurs

Which of the following cases describes an agreement of ethics and laws?

a person being penalized for bribing a judge to give the verdict in the person's favor

Reversibility is a principle of Kantian ethics which says that ________.

a person must abide by the rule he or she uses to judge the morality of someone else's conduct

James had a contract with Frasier to fix Frasier's plumbing issue at his home. The contract was made for $3,000. But after the work was completed, Frasier refused to pay anything unless James agreed to accept $2,500.In the above scenario, to avoid legal nuisance, Frasier decides to compromise with James. He asks James to fix a tap in the barn for $250, and modify the current contract to include the tap in the barn. James agrees to this, and does as asked while Frasier remakes the contract. Which of the following would this kind of settlement be referred to as?

accord

Toughones, a car part manufacturer, signed a contract to license computer software from Vizera Inc. for $250,000. This software is to be used to keep track of inventory, accounts receivable, and other financial data. After the software was installed, the computer system worked, but it had a few glitches. Toughones refused to pay the full amount mentioned in the contract. To settle the dispute, the parties agree that $180,000 is to be paid as full and final payment for the software. Toughones paid $180,000 as agreed. What kind of agreement did Toughones and Vizera reach in the end?

accord and satisfaction

Instead of suing the partnerships or other partners at law, general partners are given the right to bring a(n) ________ against other partners.

action for an accounting

Involuntary dissolution of a corporation that is ordered by the secretary of state if a corporation has failed to comply with certain procedures required by law is known as ________.

administrative dissolution

Which of the following actions requires voting by all members in a manager-managed LLC (limited liability company)?

admitting new members

An invitation to make an offer or an actual offer is referred to as a(n) ________.

advertisement

A(n) ________ is a voluntary exchange of promises between two or more legally competent persons to do, or refrain from doing, an act.

agreement

A(n) ________ refers to a document that states the terms for converting an existing business to an LLC (limited liability company).

agreement of conversion

A corporation in the United States that has been incorporated in another country is referred to as a(n) ________ corporation.

alien

A corporation that is incorporated in another country is known as a(n) ________.

alien corporation

In which of the following types of offers does the seller offer the goods for sale?

an auction without reserve

Which of the following phrases describes the term covenant?

an unconditional promise to perform

Which of these is an instance of a quasi contract?

an unconscious man being nursed at a hospital, having been brought in by a passer-by

A(n) ________ is used if the obligor does not want to deal with or render performance to an unknown third party.

anti-assignment clause

The ________ is the basic governing document of a corporation which must be filed with the secretary of state of the state of incorporation.

articles of incorporation

A legal right that arises out of a breach of contract is ________.

assignable

A(n) ________ occurs when there is a transfer of both rights and duties under a contract.

assignment and delegation

An obligee who transfers the right to receive performance is called the ________.

assignor

Kimlon Informatics has to recover $5000 from a client for its services. The recovery period is 100 days but Kimlon needs the money immediately. It sells the right of collecting money from its client to Quikcollect, a collection agency. Here, Kimlon Informatics is the ________.

assignor

A(n) ________ LLC (limited liability company) has no specified term of duration.

at-will

To meet contractual legality, considerations must be ________.

bargained-for exchange of promise for performance

Why does an illusory contract lack consideration?

because one or both parties can choose not to perform their contractual obligations

Which of the following activities is permissible for limited partners?

being a contractor of the partnership

Windsor, the owner of Windsor's Sandwiches, contacts a new supplier, Gary. He tells Gary that he will pay him $375 if Gary delivers 20 pounds of cheese the following morning. Gary promises to make the delivery as requested by Windsor. This creates a(n) ________ contract between them.

bilateral

A contract is a(n) ________ if the offeror's promise is answered with the offeree's promise of acceptance.

bilateral contract

A panel of persons who are elected by the shareholders that make policy decisions concerning the operation of a corporation is known as the ________.

board of directors

A long-term debt security that is secured by some form of collateral is referred to as a ________.

bond

Which of the following has a fixed maturity date?

bonds

How are ethical rules established in Kantian ethics?

by a set of universal rules that are based on consistency and reversibility

A detailed set of rules adopted by the board of directors after a corporation is incorporated that contains provisions for managing a corporation are referred to as ________.

bylaws

Alan tells Sherry that he will pay her $5,000 if she runs the Boston Marathon. Once Sherry starts running the marathon, Alan ________.

cannot revoke the contract

A ________ is a document that is filed with the secretary of state upon the dissolution of a limited partnership.

certificate of cancellation

A(n) ________ refers to a document that demonstrates evidences of a member's ownership interest in an LLC (limited liability company).

certificate of interest

A limited partnership is formed when the ________ is filed.

certificate of limited partnership

A(n) ________ is a document that two or more persons must execute and sign that makes a limited partnership legal and binding.

certificate of limited partnership

Which of the following documents does a domestic limited partnership require to be allowed to operate in another state?

certificate of registration

Conch Corporation, a global oil and gas company, has plans to build a subsidized postsecondary vocational school in the town of Cristen, where one of its offices is situated. The plan was put to vote and approved despite some objections from shareholders. The school is being built in collaboration with the local government. The objective is to help the youth of the neighborhood, especially school dropouts, learn vocational skills. What social responsibility theory describes Conch Corporation's initiative to build the school?

corporate citizenship

A(n) ________ is a fictitious legal entity that is created according to statutory requirements.

corporation

Which of the following is a major form of conducting a business?

corporation

A response by an offeree that contains terms and conditions different from or in addition to those of the offer is called a(n) ________.

counteroffer

From the above question, Carl's response to Ron's offer is considered as a(n) ________.

counteroffer

Which of the following contradicts the mirror image rule?

counteroffer

Which of the following is the special court that hears and decides business cases in Delaware?

court of chancery

A ________ is a contract that provides that a seller of a business or an employee will not engage in a similar business or occupation within a specified geographical area for a specified time following the sale of the business or termination of employment.

covenant not to compete

Darren is a certified interior designer with a lucrative client list in the city of Kelsa, situated in the state of Touslon. His business affords him a substantial amount of goodwill from his clients. Darren sells his accounting interior designing business to Glenda. When he sells his business to Glenda, Darren agrees not to open another interior designing firm in the city of Kelsa for a 25-year period. What kind of agreement exists between Darren and Glenda in this case?

covenant not to compete

A(n) ________ is an original creditor who becomes a beneficiary under the debtor's new contract with another party.

creditor beneficiary

Who among the following get first priority in the distribution of assets upon the dissolution of a partnership?

creditors

If a corporation is a general partner to a limited partnership, which of the following would result from the dissolution of the corporation?

dissolution of the limited partnership

A member's ownership interest in an LLC (limited liability company) is called a ________.

distributional interest

The WaterGlove Corporation issues ________ preferred stock that requires payment of a quarterly dividend of $5.00 per share. The WaterGlove Corporation falls behind with four quarterly payments, i.e., $20.00 per share of preferred stock. The next quarter, the corporation makes a profit of $25.00 per share. The corporation must pay $20.00 per share of arrearages to the preferred shareholders plus this quarter's payment of $5.00 per share.

cumulative

Stocks for which any missed dividend payments must be paid in the future to the preferred shareholders before the common shareholders can receive any dividends are known as ________.

cumulative preferred stocks

The designation of ________ is used for businesses that are operating under a trade name.

d.b.a.

A ________ is a long-term unsecured debt instrument that is based on a corporation's general credit standing.

debenture

In a guaranty situation, the original contract is between the ________.

debtor and the creditor

Where there is a valid delegation of duties but the delegatee has not assumed the duties under a contract, the delegation is called a(n) ________.

declaration of duties

If a fire destroys an office building that has been listed for sale, the offer is automatically terminated due to ________.

destruction of the subject matter

Lionel Richmond is a soccer player who has a six-year contract with the Christshire United soccer team. Two years into the contract, he meets with an accident which results in the complete amputation of his right leg. On what basis is Richmond discharged from further performance of the contract?

discharge by impossibility

The change in the relationship of partners in a partnership caused by any partner ceasing to be associated in the carrying on of the business is known as ________.

dissolution

Lucy wants a divorce from her husband but he wants to stay in the marriage. She threatens to bring a false criminal lawsuit claiming physical abuse from him if he does not sign the divorce papers. This is an instance of ________.

duress

Kantian ethics is also referred to as ________ ethics.

duty

A(n) ________ is the obligation partners owe to use the same level of care and skill that a reasonable person in the same position would use in the same circumstances.

duty of care

Competing with the partnership without the permission of other partners violates a general partner's ________.

duty of loyalty

The ________ requires general partners to adhere to the provisions of the partnership agreement and the decisions of the partnership.

duty of obedience

A right to use someone else's land without owning or leasing it is called ________.

easement

Jeffrey became a victim of fraud when he entered a pyramid scheme which turned out to be a scam. In order to claim damages, Jeffrey has to prove which of the following?

economic injury

The term ________ refers to a doctrine that states that the courts will refuse to enforce or rescind an illegal contract and will leave the parties where it finds them.

effect of illegality

The act or process of a minor voluntarily leaving home and living apart from his or her parents is referred to as ________.

emancipation

The ________ says that agents' contracts to sell property covered by the Statute of Frauds must be in writing to be enforceable.

equal dignity rule

Which of the following is used in case of a breach of contract that cannot be adequately compensated through a legal remedy?

equitable remedies

Mandy decided to sell her iPad and made an offer for $250 to her friend Shelly. Shelly told Mandy she was willing to buy the iPad, but she would be glad if Shelly could lower her asking price. Mandy lowered the price to $210 and Shelly bought it. Which of the following would describe Shelly's response to Mandy for her first offer?

equivocal acceptance

A government or political party that strictly derives its ethics and laws based on a specific religious book is an example of ________.

ethical fundamentalism

Charlotte works as a teacher in Africa. Every Sunday, she visits nearby villages and convinces families to send their children to school. She arranges accommodation for these children and helps them with their education. In a recent interview, Charlotte mentioned that she looks up to Mother Teresa not only for inspiration but also to resolve ethical dilemmas. Which of the following theories would support Charlotte's approach to ethics?

ethical fundamentalism

Which of the following moral theories will help an anthropologist study ancient societies with an impartial and unprejudiced mindset, especially when it relates to comparing ethics and customs followed by ancient societies to those being followed by present societies?

ethical relativism

Bobby voluntarily enrolls in a skydiving course at OpenSkies Pvt. Ltd., an adventure firm. He signs a contract that relieves OpenSkies of liability. After receiving proper instruction, he jumps from an airplane. Unfortunately, Bobby is injured when he could not steer his parachute toward the target area while landing. He sues the parachute center for damages. But the court found that the contract protected OpenSkies from damages, as Bobby had voluntarily joined the course knowing all the risks involved. What kind of contractual provision protected OpenSkies from having to pay Bobby damages?

exculpatory clause

A contract that has been fully performed on both sides is called an ________ contract.

executed

Contracts that have been fully performed by one side but not by the other are classified as ________ contracts.

executory

Elizabeth signs a contract to purchase a new car from Spadace Motors. She is yet to pay for the car and thus Spadace Motors has not delivered the car to Elizabeth. This is an example of a(n) ________ contract.

executory

A(n) ________ contract is stated orally or in written words.

express

An oral agreement to purchase a neighbor's bicycle is a(n) ________ contract.

express

Kyle goes to a used-car showroom to buy a sedan. He signs an agreement with the store that bears the name of the car, price, and other details. This is an example of a(n) ________ contract.

express

Joe buys a trailer from a used-car dealership. On enquiry, the dealer tells him that the trailer is in great condition. However, three days later, the trailer breaks down. Investigation by Joe reveals that the trailer had seven previous owners and that the engine has been replaced thrice. An automobile expert tells Joe that the trailer is dangerous. Which of the following frauds would the dealer be liable for?

fraud by concealment

Melissa Harrison, a realtor, sells a house to the Smiths. Before the sale is finalized, Mr. Smith asks Melissa for details of repairs the house has undergone over the years. Melissa gives him details of minor repairs but hides all documents regarding a major plumbing defect that was repaired last year. Three months after the Smiths moved in, the defect reappeared flooding the first floor, damaging their expensive carpet and furniture. Melissa is liable for which of the following frauds?

fraud by concealment

Which of the following occurs when one party intentionally hides a material fact from another party?

fraud in concealment

Alice offers Richard a chance to work in her affiliate marketing program which, she claims, will make him a millionaire in three months. Richard makes the "mandatory investment" of $12,000 and becomes an affiliate. Soon, he realizes that such a program does not exist and that Alice has disappeared with the money. This is an instance of ________.

fraud in inducement

Millie receives a parcel from her aunt in Indonesia. The delivery man asks her to sign an authorization document to receive the parcel. Millie signs without reading the document, as she is in a hurry. However, on the other side of the document are contract terms that transfer all of Millie's property to the delivery man. This is an instance of ________.

fraud in the inception

Which of the following is a way of establishing ethical rules in Rawls's social justice theory?

from an original position of a veil of ignorance

Under partnership law, ________ have the right to manage the affairs of the limited partnership.

general partners

Which of the following partners in a limited partnership invest capital, manage the business, and are personally liable for partnership debts?

general partners

A limited partnership has two types of partners, ________.

general partners and limited partners

An association of two or more persons to carry on as co-owners of a business for profit is known as a(n) ________.

general partnership

An ordinary partnership is also known as a ________.

general partnership

A(n) ________ is a clause that can be included in the articles of incorporation that permits the corporation to engage in any activity permitted by law.

general purpose clause

A ________ is a person who agrees to pay a debt if the primary debtor does not.

guarantor

Nina wants to borrow money from Tina, but Tina refuses to lend the money unless another person promises to pay the money in case Nina cannot clear the debt. James agrees to pay the debt if Nina does not. James is the ________ in this transaction.

guarantor

A(n) ________ occurs when one person agrees to answer for the debts or duties of another person.

guaranty contract

A court order that prohibits a person from doing a certain act is termed as a(n) ________.

injunction

Kinetosphere Automation Inc. (K.A.) makes a mandatory employment contract with all its employees. The contract states that K.A.'s employees are not to work for any other organization while they are employed by it. If K.A. finds an employee who is also serving another company, it can approach the court to obtain a(n) ________ to prevent the employee from working in the other company.

injunction

The term ________ refers to a third party who is not in privity of contract but who has rights under the contract and can enforce the contract against the promisor.

intended third-party beneficiary

Alan is a subject matter expert for First University, with an employment contract of three years. Two years into the contract, Second University—fully aware of Alan's contract—offers him twice the compensation for a similar post. Alan breaches his contract and takes up the offer. First University can recover damages from Second University for which of the following torts?

intentional interference with contractual relations

Which of the following torts arises when a third party induces a contracting party to breach the contract with another party?

intentional interference with contractual relations

Mr. Jacob, who is terminally ill, writes a will transferring all his assets to his daughter Silvia, in the event of his death. The doctors say that Mr. Jacob will live for about six months. A day after the will is written, Silvia wishes to transfer her expected inheritance to her son, Jacob Jr. This assignment will be ________.

invalid

When a party commits an anticipatory breach, the nonbreaching party ________.

is immediately discharged from his or her own duties

Which of the following would generally be considered an express power of a corporation?

issuing notes and bonds

A plaintiff must name the partnership and all of the partners as defendants in a lawsuit in order to pursue a claim for ________.

joint liability

What is scienter?

knowledge that a representation is false

The ________ states that if the main purpose of a transaction and an oral collateral contract is to provide pecuniary benefit to the guarantor, the collateral contract does not have to be in writing to be enforced.

leading object exception

Ida moves to New York from Poland and wants to live in an apartment. However, she does not have sufficient money to buy one. Her colleague Henry said Ida can live in his old apartment for a year, if she pays him $25,000. This contract would be considered a(n) ________.

lease

Which of the following grants a person the right to use real property for a specified period of time?

lease

Which of the following is an informal contract?

lease

According to the RULPA, what liability does a corporation have if it is a general partner to a limited partnership?

liability restricted to debts up to its capital contributions

Which of the following types of liability do limited partners of a limited partnership have for the debts and obligations of the limited partnerships?

liability restricted to debts up to their capital contributions

Which of the following interests in real property transfers to another person after the present holder's death?

life estate

Members of an LLC (limited liability company) have ________ liability.

limited

A ________ is a special type of limited partnership that has both general partners and limited partners, where both the general and limited partners have limited liability and are not personally liable for its debts.

limited liability limited partnership

In which of the following forms of business partnerships are both general and limited partners not personally liable for debts?

limited liability limited partnership

Which of the following partners of a limited partnership invest capital but do not participate in management?

limited partners

A(n) ________ is a document that sets forth the rights and duties of general and limited partners.

limited partnership agreement

A(n) ________ is a clause that can be included in the articles of incorporation that stipulates the activities that the corporation can engage in. The corporation can engage in no other purposes or activities.

limited purpose clause

Parties to a contract agree in advance to pay ________ damages if the contract is breached.

liquidated

The ________ states that an acceptance is effective when it is dispatched, even if it is lost in transmission.

mailbox rule

A ________ is a limited partnership with liquid investment, and whose limited partnership interests are traded on organized securities exchanges such as the New York Stock Exchange.

master limited partnership

A(n) ________ breach of a contract occurs when a party renders inferior performance of his or her contractual obligations.

material

If Steve Templeton decides to close the plant in Kantron, what important business social responsibility will Steve Templeton accomplish?

maximizing profits

The owner of an LLC (limited liability company) is called a ________.

member

Which of the following would constitute legal insanity?

mental retardation

From the above question, Ron's response to sell the computer to Carl is considered as a(n) ________.

mirror image rule acceptance

Which of the following is not actionable as fraud?

misrepresentation of law

Which of the following terms refers to a nonbreaching party's legal duty to avoid or reduce damages caused by a breach of contract?

mitigation of damages

Which of the following is an acceptable consideration for a contract?

money

A social responsibility theory of business which says that a corporation's duty is to make a profit while avoiding causing harm to others is referred to as ________.

moral minimum

According to the theory of ________, if a business corrects the social injury it causes, it has met its duty of social responsibility.

moral minimum

Sinbad Cola, a soft drink manufacturer, recently opened a plant in Buron. The wastages from the plant were dumped in the Buron Sea, situated a mile away from the plant. Dumping of wastes in the sea resulted in water pollution, which negatively affected the Buron fishing business, and also resulted in groundwater contamination. Sinbad Cola compensated by bringing contamination levels down with additional filters and paying damages to the local fishermen. Which theory of business social responsibility did Sinbad Cola meet when they compensated for their harmful wastage disposal methods?

moral minimum

ULab Inc., a biotechnology firm, recently had a fire in one of its offices, which resulted in the office building being fire gutted. The employees were not trained through fire drills, and the 10-story building had no fire escape route. Consequently, many employees were hospitalized for physical injuries, burns, and toxic smoke inhalation. What important social responsibility theory was ULab negligent of by not training its employees through fire drills and not installing a fire exit?

moral minimum

Which of the following is an interest in real property given to a lender as security for the repayment of a loan?

mortgage

QuickClicks, an online advertising company, makes a contract to purchase six computers from Comptail, a local retailer, for $20,000. However, Comptail breaches the contract by not delivering the computers on time. The next day, QuickClicks manages to purchase the computers from another retailer for $18,000 and receives immediate delivery. QuickClicks can bring a lawsuit against Comptail to recover ________ damages.

nominal

A contract in which both parties are mistaken about the value of the object of the contract is considered ________.

non-rescindable

A(n) ________ is a debt security with a maturity of five years or less.

note

Which of the following refers to an agreement that substitutes a new party for one of the original contracting parties and relieves the existing party of liability on the contract?

novation

The ________ states that the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties.

objective theory of contracts

The party to whom a duty is owed is the ________.

obligee

A party who owes a duty of performance under a contract is called the ________.

obligor

Approval clauses require that the ________ approve any assignment of a contract.

obligor

Section 24 of the Restatement (Second) of Contracts defines a(n) ________ as the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.

offer

The legal power to accept an offer belongs to the ________.

offeree

General partnerships that exist for more than ________ must have their general partnership agreement in writing under the Statute of Frauds in order to deal in real estate.

one year

The ________ states that an executory contract which cannot be performed by its own terms within one year of its formation must be in writing.

one-year rule

According to the regulatory licensing statute, ________.

only licensed persons can recover payment for services

A(n) ________ refers to an agreement entered into among members that governs the affairs and business of the LLC (limited liability company) and the relations among members, managers, and the LLC.

operating agreement

An agreement that an offeror will not sell his property for a specified period subsequent to the offeree paying consideration to the offeror is referred to as a(n) ________.

option contract

A contract in which a seller agrees to sell all of its production to a single buyer is known as a(n) ________.

output contract

Which of the following shares have the right to vote?

outstanding shares

The doctrine of ________ allows the court to order an oral contract for the sale of land or transfer of another interest in real property to be specifically performed if it has been partially performed and performance is necessary to avoid injustice.

part performance

A(n) ________ is a partnership created with no fixed duration.

partnership at will

A(n) ________ is a partnership created for a fixed duration.

partnership for a term

Which of the following must be in writing even if it is below the time stipulation of the Statute of Frauds?

partnerships authorized to deal real estate

Corey in a desperate need to get to the airport decides to take his neighbor Tanner's help. Tanner agrees to help and drives Corey to the airport. Upon arrival at the airport, Corey promises to pay Tanner $25 for the gas fill. Corey's promise falls under which of the following contracts?

past consideration

A member's distributional interest in an LLC (limited liability company) is ________ and may be transferred in whole or in part.

personal property

Which of the following groups is legally deprived from directly entering into contracts?

persons adjudged insane

A promise lacks consideration if a person promises to perform an act or do something he or she is already under an obligation to do. This is called a(n) ________.

preexisting duty

Dean Campenella is a detective with the California state police. During the investigation of a missing child, Campenella found new clues that led to the capture of a serial killer involved in another case. Since Campenella was not involved in the serial killer case, and found the clues while investigating another case, Campenella demanded a special reward from the state police department for his help in catching the killer. But his demand was declined citing lack of consideration. Campenella's demand lacks consideration under which of the following?

preexisting duty

James had a contract with Frasier to fix Frasier's plumbing issue at his home. The contract was made for $3,000. But after the work was completed, Frasier refused to pay anything unless James agreed to accept $2,500. James's attempt to make a new contract is void because it lacks consideration under the ________ concept.

preexisting duty

Judicial dissolution of a corporation can be instituted by the attorney general of the state of incorporation if the corporation ________.

procured its articles of incorporation through fraud

A(n) ________ refers to a contracting party who directs that the benefit be conferred on another person.

promisee

Which of the following contracts is required to be in writing in most states?

promises to write a will

AtlasNow Construction Company, a general contractor, plans to place a bid for building a hospital. It requests bids from subcontractors for plumbing and other construction related services that will be needed for building the hospital. Catapipes Plumbing Company, a plumbing subcontractor, submits the lowest bid for the plumbing work, and AtlasNow incorporates Catapipes's low bid in its own bid for the general contract. Based on all of the subcontractors' bids, AtlasNow submits the lowest overall bid to build the hospital and is awarded the contract. If Catapipes Plumbing plans to withdraw its bid, what legal doctrine can help AtlasNow from being meted out injustice due to lack of consideration?

promissory estoppel

A(n) ________ is a person who organizes and starts a corporation, negotiates and enters into contracts in advance of its formation, finds the initial investors to finance the corporation, and so forth.

promoter

A(n) ________ is an equitable doctrine whereby a court may award monetary damages to a plaintiff for providing work or services to a defendant even though no actual contract existed.

quasi contract

Stella gets injured in a motor accident and is brought to the hospital by a passerby. Stella subsequently passes into a coma. The doctors and other staff perform the necessary medical procedures to save her life. Stella comes out of her coma two months later and is released from the hospital after the doctors are satisfied by her recovery. Under the doctrine of ________ contract, Stella has to pay the hospital for its services.

quasi contract

The equitable doctrine of ________ obligates a minor to only pay reasonable value for goods or services received.

quasi-contract

In order for a minor to be bound by a contract with an adult after he or she becomes an adult, he or she must ________.

ratify the contract after reaching the age of majority

According to the objective theory of contracts, the intent to enter into an express or implied-in-fact contract is judged by the ________.

reasonable person standard

Kimberly Inc., a jewelry manufacturer, and JKCent, a retailer, draft a contract that permits JKCent to retail Kimberly's jewelry in its stores. However, the parties discover a minor clerical error six months into the contract and the court rewrites their contract. This is an instance of ________.

reformation

A person or corporation that is empowered to accept service of process on behalf of a corporation is referred to as a(n) ________.

registered agent

Damien, a first-year law student, offers his services to Mr. Jenkins to help draft his will. Mr. Jenkins agrees to Damien's offer, and promises to pay him $400 for his services. Damien completes the draft of the will. But when Damien goes to collect his payment, Mr. Jenkins refuses payment. Damien knew that he had no legal recourse to enforce the contract. What statute had Damien violated in his contract with Mr. Jenkins?

regulatory licensing statute

A(n) ________ is a contract in which a buyer agrees to purchase all of its requirements for an item from one seller.

requirements contract

Poweroxi Inc. produces rocket propellant fuel that is used in space shuttles. NASA is an agency that requires rocket propellant fuel to send its rockets to space. NASA enters into a contract with Poweroxi Inc. to purchase all of the propellant fuel it will need that year from Poweroxi. What would this contract be an example of?

requirements contract

Jenson and Johnson enter into a contract that involves Johnson paying Jenson $1,000 for shoveling the snow from his driveway throughout winter. Jenson, who was paid before work commenced, breached some of the conditions of the contract on the very first day. He should refund $1,000 to Johnson as ________.

restitution

Consistency and ________ are the two principles of Kantian ethics that state that a person must abide by the rule he or she uses to judge the morality of someone else's conduct.

reversibility

A(n) ________ is a withdrawal of an offer by the offeror that terminates the offer.

revocation

Ron uses his status message on his Facebook account to invite his friends to buy his desktop computer. His friend Carl is interested and calls Ron to express his interest. Ron tells him that he is selling the computer for $400. Carl offers to pay $350 and Ron accepts the offer. They decide to complete the sale after three days. The next day, Ron puts up another update on his Facebook account stating he has decided not to sell his computer. Which of the following describes Ron's action of deciding not to sell his computer?

revocation

Which of the following is a right to which every general partner is entitled under the Uniform Partnership Act?

right to return of capital

Inference of the existence of a general partnership is drawn only if profits are received as ________.

share in a partnership

Quentin is a member of the Album of the Month Club and receives a new music CD every month without fail. The Club usually gives its members a time period within which they can reject the selection and stop shipment of the CD, failing which the CD will be shipped. Last month, Quentin received a CD from Album of the Month Club, a copy of which a friend had already gifted him. As he was away, Quentin had not found time to reject the selection and had to buy the CD. What kind of an offer-acceptance model does Album of the Month Club have?

silence as acceptance

Which of the following moral theories matches the dictum "I will keep the rules if everyone else does?"

social contract

In states where an LLC (limited liability company) may be organized by only one member, ________ can obtain the benefit of the limited liability shield of an LLC.

sole proprietors

Limited partnerships are also known as ________.

special partnerships

New general partners can be admitted only with the ________.

specific consent of each partner

An award of ________ orders the breaching party to perform the acts promised in a contract.

specific performance

If Steve Templeton decides to not close the plant in Kantron, what business social responsibility will Steve Templeton be achieving?

stakeholder interest

The injured party loses the right to sue if the lawsuit is not brought within the ________.

statute of limitations

The certificate of interest acts the same as a(n) ________ issued by a corporation.

stock certificate

Poole Contractors makes a contract with Delta Resources to pay $50,000 for the supply of 500 truckloads of sand within a week. Delta Resources delivers the sand two days after the contract was made, and Poole Contractors pays it $50,000 promised in the contract. This is an instance of ________.

strict performance

Nett Labs orders 30 desktop computers from iDeal, a local computer dealer. Nett Labs requires that each computer has a 2.6 GHz processor, 500 GB hard disk, and Windows operating system. iDeal supplies 30 desktop computers, each with a 2 GHz processor, 500 GB hard disk, and Windows operating system. Which of the following terms hold true for iDeal's performance?

substantial performance

Which of the following terms refers to an unconditional and absolute offer by a contracting party to perform his or her obligations under a contract?

tender of performance

A(n) ________ LLC (limited liability company) has a specified term of duration.

term

Which of the following elements has to be proved for a contract to be deemed unconscionable?

that the adhering party had no reasonable alternative

Which of the following is used to resolve a case where the obligee fraudulently makes successive assignments of the same right to a number of assignees?

the English rule

Michael Harrison opens an online store where people from all over the world can purchase and download iPhone apps. Which of the following should Michael consult to know the rules of trading through his online store?

the Uniform Computer Information Transactions Act

If a minor ratifies a contract while still being a minor, ________.

the contract can still be disaffirmed by the minor

The measure of damages from a misrepresentation is ________.

the difference between the value of the property as represented and the actual value of the property

Which of the following best defines the duty of care to which a member of a member-managed LLC (limited liability company) must adhere?

the duty of not engaging in a known violation of law

Which of the following information should a certificate of limited partnership contain?

the latest date of dissolution of the partnership

Which of the following governs a limited partnership, its internal affairs, and the liability of its limited partners?

the law of the state in which it is organized

In which of the following cases can the name of a limited partnership include the surname of a limited partner?

the name is also the surname of a general partner

An offer is terminated on the grounds of "lapse of time" if ________.

the offer is not accepted within a stated time period

The mirror image rule states that ________.

the offeree must accept the terms as stated in the offer

A contract is said to have legal value if ________.

the promisee suffers a legal detriment

Under which of the following conditions is a contract said to have legal value?

the promisor receives a legal benefit

The earnings and losses from a sole proprietorship are reported on ________.

the proprietor's personal income tax filing

From which of the following theories of morality is Rawls's social justice theory fundamentally derived?

the social contract theory

What is "maximizing profits" as a social responsibility theory in business?

the theory that a corporation owes a duty to take actions that increase profits for shareholders

Which of the following phrases explains the term lease?

the transfer of the right to use real property for a specified period of time

According to ethical relativism, ________.

there are no universal ethical rules to guide a person's conduct

What is physical duress?

threatening to physically harm someone if he or she does not sign a contract

A ________ is a person who intentionally or unintentionally causes injury or death to another person.

tortfeasor

Issued shares that have been repurchased by the corporation are referred to as ________.

treasury shares

When Stella Finman found out that she was terminally ill, she drafted a will leaving all her property to her son. During her period of illness, Stella was financially and emotionally supported by her lawyer as her son was mostly away. When the will was read upon her death, it said that her lawyer would get a 20 percent stake in Finman Corp., a company Stella owned. Upon investigation, it was revealed that Stella's lawyer took advantage of Stella's weakness and persuaded her to change the contractual terms. This is an instance of ________.

undue influence

If a contract is required to be in writing under the Statute of Frauds but is not, then the contract is ________.

unenforceable

A contract is ________ if the offeror's offer can be accepted only by the performance of an act by the offeree.

unilateral

Yvonne finds a carpenter to do some repairs for her house and tells him that if he finishes the job within Saturday, she would pay him $1,000. This offer creates a(n) ________ contract.

unilateral

Heather chooses to buy a scarf at Macy's and reads the price on the tag as $50. She uses her credit card to pay for the scarf, but post-purchase, she notices that the price tag actually says $500. This is an instance of a(n) ________.

unilateral mistake

An LLC (limited liability company) is a(n) ________.

unincorporated business entity

Authorized shares that have not been sold by the corporation are known as ________.

unissued shares

The sole proprietor has ________ liability.

unlimited personal

General partners have ________ for the debts and obligations of the partnership.

unlimited personal liability

Which of the following types of liability do general partners of a limited partnership have for the debts and obligations of the limited partnership?

unlimited personal liability

Which of the following moral theory matches Steve Templeton's approach in keeping the plant open?

utilitarianism

An offeror uses blackmail to make an offeree sign a contract that involves the sale of the offeree's house. The contract is ________.

voidable

Contracts involving fraud in inducement are ________.

voidable

Harry in a drunken state agrees to give his car to Ben as a token of friendship. Once sober, Harry asks Ben to return his car. This contract is considered ________.

voidable

Two brothers Sam and Jim were fighting over the division of their ancestral property. After ten years of legal battle, a frustrated Sam contacted a powerful politician who subjected Jim to extreme duress to make him sign a contract of assent in favor of Sam. When Jim takes this contract to court, the contract will be declared ________.

voidable

Dissolution of a corporation that has begun business or issued shares upon recommendation of the board of directors and a majority vote of the shares entitled to vote is known as ________.

voluntary dissolution

Which of the following can end the existence of a corporation?

voluntary termination by shareholder

Which of the following methods are used to appoint a manager of a manager-managed LLC (limited liability company)?

vote of majority of the members

When does a minor breach occur?

when a party renders substantial performance of his or her contractual duties

A person who has alternative periods of sanity and insanity can enter into contracts ________.

when he or she is in a state of sanity

In which of the following situations would the effect of illegality be an exception?

when person is justifiably ignorant of the law or fact that made the contract illegal

In which of the following cases does the conversion of an existing business to an LLC (limited liability company) take effect?

when the articles of organization are filed with the secretary of state

In which of the following cases is parol evidence admitted by a court?

when the evidence explains ambiguous language

Under which of the following conditions does a promissory estoppel provide for the enforceability of an oral contract?

when the promise induces action or forbearance of action by another