Week 3 Chapter Questions
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.|
2. A(n) _____ is an agreement containing mutual promises.
3. The courts enforce the concept of _____ to remedy situations of unjust enrichment.
|___B.||implied-in-law (quasi) 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.”
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.
|___E.||accord and satisfaction|
9. Which of the following terms refers to a person’s ability to be bound by a contract?
10. Which of the following involves an intentional misstatement of a material fact that induces one to rely justifiably to his or her injury?
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|
|___C.||The parol evidence rule|
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.
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 _____.
17. Principals hire _____ to do tasks and represent them in transactions.
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.
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.
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:
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.
|___C.||Limited liability company|
23. When one person, or a very few persons, own all the shares of stock in a corporation, it is considered a _____ organization.
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:
26. Which of the following is a taxable entity?
|___B.||An S corporation|
|___C.||A limited liability company|
|___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: