30 Multiple Choice Legal Questions. Easy $10



Week 3 Chapter Questions

Student ______________________________


Chapter 8

1. Contracts are:

___A. legally enforceable promises.


___B. always required to be written.



___C. a form of a circular.



___D. enforceable only in the supreme court.



___E. informal agreements.



2. A(n) _____ is an agreement containing mutual promises.

___A. unilateral contract


___B. quasi-contract



___C. express-in-fact contract



___D. bilateral contract



___E. implied-in-fact contract



3. The courts enforce the concept of _____ to remedy situations of unjust enrichment.

___A. illusory contracts


___B. implied-in-law (quasi) contracts



___C. divisible contracts


___D. bilateral contracts



___E. unilateral contracts



4. The ultimate purpose of a contract is the creation of an agreement that courts will order parties to perform or to pay consequences for the failure of performance. When courts uphold the validity of such promises, the resulting agreement is a(n) “_____ contract.”

___A. absolute


___B. differentiated



___C. void



___D. relative



___E. enforceable



5. A(n) _____ contract is an agreement when one party has the right to withdraw from the promise made without incurring any legal liability.

___A. executory


___B. voidable



___C. void



___D. implied-in-fact



___E. reciprocal



6. According to the mirror image rule, _____.

___A. the acceptance must exactly match the offer


___B. to be enforceable, a contract must be accepted in writing by both the parties involved



___C. the acceptance of an offer involves changing the terms of offer or adding new terms



___D. terms of contract must be definite to be clear and enforceable



___E. the contract becomes enforceable by performing a requested act, not by making a promise



7. Valid consideration can include any promise to do something one has no obligation to do, refrain from doing something one has the right to do, or in the case of a unilateral contract, a performance when there is no obligation to do so. This is called as a(n) _____.

___A. accord


___B. legal detriment



___C. release



___D. negotiation



___E. promissory estoppel











8. An important exception to the rule requiring consideration to support a promise is the doctrine of _____. This doctrine arises when a promisee justifiably relies on a promisor’s promise to his or her economic injury.

___A. firm offer


___B. consideration



___C. termination



___D. promissory estoppel



___E. accord and satisfaction







9. Which of the following terms refers to a person’s ability to be bound by a contract?

___A. Legality


___B. Capacity



___C. Usability



___D. Negotiability



___E. Measurability



10. Which of the following involves an intentional misstatement of a material fact that induces one to rely justifiably to his or her injury?

___A. Duress


___B. Misrepresentation



___C. Undue influence



___D. Mutual mistake



___E. Fraud



Chapter 9

11. Which of the following is true in cases where only one party drafts the contracts, which contain terms that appear vague and ambiguous to the other party?

___A. The court will give the terms the meaning as per trade usage.


___B. The court will reject the non-drafting party’s attempt to reinterpret the terms after the contract has been signed.



___C. The court will declare the drafting party’s behavior as a tort due to intentional ambiguity of terms.



___D. The court will interpret the terms as they mean in the common language.



___E. The court will interpret the ambiguous and vague terms against the party that drafts them.



12. Which of the following states that parties to a written contract may not introduce oral evidence to change written terms?

___A. The statute of frauds


___B. Concurrent conditions



___C. The parol evidence rule



___D. Conditions subsequent



___E. Conditions precedent



13. Most of our everyday purchases involve:

___A. implied concurrent conditions.


___B. express conditions precedent.



___C. express conditions subsequent.



___D. implied conditions precedent.



___E. implied conditions subsequent



14. _____ are court-awarded damages to put the plaintiff in the same position as if the contract had been performed.

___A. Nominal damages


___B. Consequential damages



___C. Liquidated damages



___D. Compensatory damages



___E. Specific damages



15. Which of the following is true of liquidated damages?

___A. A small amount is awarded by the court to the plaintiff for a breach of contract which causes no financial injury to the plaintiff.


___B. Damages awarded by the court arising from unusual losses, which the parties knew would result from breach of contract.



___C. Damages awarded by the court to put the plaintiff in the same position as if the contract had been performed.



___D. Damages specified in the contract, where real damages for breach of contract are likely to be uncertain.



___E. Courts will enforce these “liquidated” damages to penalize the defendant.



16. The purposeful reduction of damages, usually the responsibility of the nonbreaching party, is known as _____.

___A. mitigation


___B. negotiation



___C. waiver



___D. release



___E. novation






17. Principals hire _____ to do tasks and represent them in transactions.

___A. contractors


___B. agents



___C. third parties



___D. organizations



___E. suppliers



18. _____ can be inferred from the acts of an agent who holds a position of authority or who had actual authority in the previous situation.

___A. Principal authority


___B. Legal authority



___C. Situational authority



___D. Implied authority



___E. Apparent authority



19. _____ occurs when a principal voluntarily decides to honor an agreement, which otherwise would not be binding due to an agent’s lack of authority.

___A. Novation


___B. Ratification



___C. Negotiation



___D. Release



___E. Waiver  

20. An agent who causes harm to a third party may create legal liability owed by the principal to the third party. This liability is known as:

___A. product liability


___B. contractual liability



___C. principal liability



___D. professional liability



___E. vicarious liability






Chapter 14

21. “Creation” means:

___A. the legal steps required to form a particular business organization.


___B. the concept of a business.



___C. the intent to create a business.



___D. a paradigm shift in a business.



___E. the relation of the organization’s existence to its owners.



22. In a(n) _____, the shareholders are taxed only on income distributed.

___A. limited partnership


___B. corporation



___C. Limited liability company



___D. sole proprietorship



___E. S corporation



23. When one person, or a very few persons, own all the shares of stock in a corporation, it is considered a _____ organization.

___A. publicly held


___B. narrowly held



___C. closely held



___D. tightly held



___E. minority held



24. When a court finds that the shareholders of a corporation are using the corporate structure to shield themselves from liability when acting for purely personal purposes, the court may disregard the corporate structure and impose personal liability on the shareholders treating them like partners. This is called:

___A. cracking the corporate shell.


___B. piercing the corporate veil.



___C. breaking the corporate shield.



___D. breaching the corporate defense.



___E. rupturing the corporate law.




25. If a corporate entity is disregarded by officers or directors so that there is such a unity of ownership and interest that separateness of the corporation has ceased to exist, the corporate veil may be pierced based on the:

___A. alter-ego theory.


___B. negligent conduct theory.



___C. corporate confusion theory.



___D. corporate envelopment theory.



___E. corporate doppelganger theory.





26. Which of the following is a taxable entity?

___A. A partnership


___B. An S corporation



___C. A limited liability company



___D. A corporation



___E. A sole proprietorship



27. Which of the following is an activity that a limited partner may NOT engage in?

___A. Acting as an agent of the partnership


___B. Approving an amendment to the partnerships’ certificate



___C. Participating in management



___D. Inspecting any of the partnership’s financial records



___E. Advising or consulting with a general partner



28. Which of the following is true about an S corporation?

___A. It has the same legal characteristics as any other corporation except for the issue of taxation.


___B. It is the official designation for a corporation with 500 or less employees.



___C. It is the same as any other corporation except for management participation by stockholders.



___D. It is exactly the same as any other corporation.



___E. It need not file an information return with the IRS since it does not pay any taxes.





29. An LLC is created through filing the _____ with a state official, usually the secretary of state.

___A. articles of confederation


___B. articles of incorporation



___C. articles of organization



___D. articles of association



___E. articles of integration



30. The owners of LLCs are called:

___A. shareholders.


___B. partners.



___C. proprietors.



___D. members.



___E. directors.





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