Final Examination


BAM 317 Business Law

Multiple Choice Questions (Enter your answers on the enclosed answer sheet)

1) Which doctrine was overturned in the case of Brown v. Board of Education?

a. the legality of poll taxes b. the permissibility of separate but equal facilities c. allowing only white males to vote d. the acceptability of paying women less than men for comparable work e. different working hours for male and female factory workers

2) Documents such as the U.S. Constitution, the Magna Carta, and the United Nations Charter reflect what legal theory?

a. the Natural Law school b. the Historical school c. the Sociological school d. the Analytical school

3) Proponents of which school(s) of jurisprudential thought are unlikely to adhere to precedent in making decisions?

a. the Sociological school only b. the Critical Legal Studies school only c. both the Sociological school and the Critical Legal Studies school d. neither the Sociological school nor the Critical Legal Studies school

4) Which of the following is most consistent with the Natural Law School of jurisprudence?

a. Law is based on moral and ethical principles of what are right, and it is the job of men and women, through study, to discover what these principles are. b. The law is a reflection of society, thus the law must change naturally as society changes over time. c. The laws of man are secondary to the laws of nature, and thus the laws of nature take precedence whenever the laws of man are in conflict with the laws of nature. d. By applying the rules of logic to specific cases, the logical, or natural, result will be obtained. e. Laws must first and foremost respect, preserve, and promote the preservation of the environment and life in all its forms.

5) What was the only remedy (relief) available in the law courts of England?

a. specific performance b. fines and imprisonment c. monetary awards for damages d. returning the parties to their positions before the dispute arose




Final Examination

BAM 317 Business Law

6) Which court was eventually combined with the regular court system?

a. law courts b. equity courts c. criminal courts d. merchant courts

7) What is an equity court’s function?

a. To deal with just the law of merchants. b. To issue opinions in cases that later set the precedent for similar cases. c. To investigate the merits of a case and base its decisions on fairness. d. To issue executive orders. e. To set state or federal laws between two or more nations.

8) The ability of Native American Indians to conduct gambling operations on Indian reservations:

a. is determined solely by the respective Indian tribe b. is determined through negotiation by the state and Native Americans within the control of the federal government because of provisions in the U.S. Consti- tution d. has been found by the courts, in many instances, to have been improperly granted

9) The selling of goods or services to a country the United States is at war with is prohibited:

a. by the U. S. Constitution b. by a federal statute passed by Congress c. by treaty d. by executive order

10) The following are examples of limited jurisdiction trial courts except:

a. small claims court b. appellate court c. family law court d. traffic court e. probate court



Final Examination


BAM 317 Business Law

11) The general jurisdiction trial court in the federal system is called the:

a. United States Trial Court b. United States Circuit Court c. United States General Court d. United States District Court e. Federal Chancery Court

12) Which federal court or courts is directly established by the United States Constitution?

a. The Supreme Court only b. Federal trial courts only c. The Supreme Court and federal trial courts d. The Supreme Court and federal courts of appeal e. The Supreme Court, federal courts of appeal, and federal trial courts

13) How are judges for the federal courts selected?

a. by nationwide election b. by election by the voters within the state where they preside c. by the President, subject to confirmation by the Senate d. by the Supreme Court justices e. by the sitting federal judges within the same circuit

14) What happens if the U.S. Supreme Court reaches a tie in a decision?

a. The case will be reconsidered in the following year. b. The decision will be held in abeyance until one of the justices decides to change his or her mind. c. The case will be returned to the Circuit Court of Appeals to reconsider the case in light of the tie decision by the Supreme Court. d. The lower court decision in the case is overturned. e. The lower court decision in the case is affirmed.

15) Which of the following is true with regard to the appellate process?

a. Very important cases are usually initially tried in the U.S. Supreme Court. b. When a case is appealed, the appellate court usually holds a new trial. c. In the federal court system, there are usually two levels of appeal by right. d. The U.S. Supreme Court chooses to review only a small fraction of those cases that it is asked to review. e. The vote of only one justice is needed for the U.S. Supreme Court to hear a case.




Final Examination

BAM 317 Business Law

16) Which of the following kinds of jurisdiction would be necessary and sufficient for a court to hear a case?

a. Subject matter and in personem and in rem. b. Subject matter or in personem or in rem. c. Subject matter and either in personem or in rem. d. In rem and either subject matter or in personam.

17) Someone who is not a party to a lawsuit but has an interest in the outcome and therefore wants to become a party to the suit must:

a. await the outcome of this trial and then file a separate action b. intervene c. counter-sue d. consolidate e. file a cross-complaint

18) Tammi Tenant was a university student in Ohio who rented a house from Loretta, who also lived in Ohio. Upon graduation, Tammi moved to Nebraska. Assuming that one party sued the other in connection with the lease after Tammi had moved to Nebraska, which of the following correctly describes the court(s) with jurisdiction over the defendant?

If Loretta sued, there would be If Tammi sued, there would be personal jurisdiction over Tammi in: personal jurisdiction over Loretta in:

a. Ohio only Ohio only b. Nebraska only Ohio only c. Nebraska or Ohio Nebraska only d. Nebraska or Ohio Nebraska or Ohio e. Nebraska or Ohio Ohio only

19) In a civil case, the party whom the complaint is filed against is the:

a. defendant b. district attorney c. state d. public defender e. A, B, and C

20) Once a complaint has been filed with the court, the court issues a:

a. judgment b. motion for summary judgment c. summons d. both A and D



Final Examination


BAM 317 Business Law

21) Which of the following is one of the major purposes of a settlement conference?

a. to try and make amends among the parties b. licensees only c. to facilitate the settlement of a case d. to contest the local court rules e. All of these are correct.

22) Which amendment guarantees the right to a jury trial in a case in federal court?

a. the fifth amendment b. the sixth amendment c. the seventh amendment d. the eleventh amendment e. the fourteenth amendment

23) In general, an appellate court might typically reverse which of the following?

a. the trial court’s findings of fact b. the trial court’s conclusions of law c. negligence d. both A and B

24) Which of the following is true with regard to arbitration?

a. Rules similar to those followed by federal courts are usually applied at arbitration hear- ings. b. Arbitrators enter awards after reaching a decision. c. The parties often agree to be bound by the arbitrator’s decision and award. d. All of these are correct.

25) Which of the following is true regarding mediation?

a. A mediator often meets with both parties at the same time. b. A settlement agreement is never reached with a mediator. c. A mediator does not make a decision or an award. d. If a settlement agreement is not reached in mediation, then the parties hire a new mediator.




Final Examination

BAM 317 Business Law

26) George has served Mary with a complaint alleging that she trespassed on his property. Mary has never been sued before and as such, she seeks your advice on what to do with the complaint. You advise that she:

a. do not respond and maybe George will drop the lawsuit b. write a letter the to judge saying that George is mistaken c. answer George’s complaint by admitting or denying the allegations George has asserted against her d. do not provide any affirmative defenses that George can use against Mary

27) If Sam was on vacation in Mexico and forgot to serve the lawsuit he wanted to bring against Delia 1 month after the statute of limitations period, what is the most likely result?

a. Sam will lose his right to sue Delia. b. Sam can still sue Delia as Mexico’s law does not apply. c. Sam can make a deal with Delia not to sue her for as much as he originally intended. d. None of these are correct.

28) The number of ________ to which a state is entitled can change over time.

a. Senators b. Representatives c. both Senators and representatives d. Supreme Court justices

29) What is the result of the “effects on interstate commerce” test?

a. The federal government can regulate all interstate commerce that actually crosses state lines. b. Prior to enacting laws, states are required to identify any effects that the law might have on interstate commerce. c. The federal government can regulate a business activity that takes place within a single state if the activity has an effect on interstate commerce even though the regulated activity does not itself involve interstate commerce. d. Commercial speech protections apply only to speech that has an effect on interstate commerce.

30) The Bill of Rights is another name for:

a. the Articles of Confederation b. the U.S. Constitution c. the document that explains the U.S. Constitution d. the first ten amendments to the U.S. Constitution e. the first seven articles of the U.S. Constitution



Final Examination


BAM 317 Business Law

31) Which of the following is true regarding obscene speech?

a. It cannot be prevented, but can be subject to time, place, or manner restrictions. b .Because the definition of obscene is so subjective, it cannot be restricted or prevented. c. Even though the definition of obscene speech is subjective, if speech is determined to be obscene, it loses all constitutional protection. d. Obscene speech and offensive speech receive the same degree of protection. e. The U.S. Supreme Court has set out a clear definition of what speech is defined as obscene and therefore unprotected.

32) In responding to a constitutional challenge to the Computer Decency Act, the U.S. Supreme Court ruled which of the following about the Act?

a. Computers and the Internet were not covered by the free speech provisions of the U.S. Constitution because they did not exist when the Constitution was drafted. b. The Act was constitutional because obscene speech receives no protection. c. Obscene materials could not be available between 6:00 a.m. and 10:00 p.m. local time. d. The Internet deserves the “highest protection” from government intrusion. e. The Internet was similar to television and that restrictions similar to those on television programming were appropriate.

33) Which of the following is correct regarding freedom of religion under the U.S. Constitution?

a. It comes from the Establishment Clause as well as the Free Exercise Clause. b. It applies only to those religions in existence on the date the Constitution became effective. c. It gives practitioners of any religion absolute rights to take part in actions that are based on that religion. d. It allows the government to establish an official religion or religions so long as citizens remain free to practice any other religion they choose.

34) Substantive due process requires that:

a. a notice and hearing be given before one is deprived of life, liberty, or property b. a criminal defendant has an attorney present at all times c. res ipsa loquitur takes place d. a law is sufficiently clear that a reasonable person can understand it in order to comply with it e. a defendant not be tried twice for the same crime




Final Examination

BAM 317 Business Law

35) Assume that a law is passed that establishes airline security screening requirements for male passengers that differ from the requirements for female passengers. In evaluating an equal protec- tion challenge to this law, a court would use:

a. strict scrutiny b. intermediate scrutiny c. limited scrutiny d. the rational basis test

36) Which of the following is true about intentional infliction of emotional distress?

a. Recovery is allowed anytime there is a measurable amount of mental distress. b. There must be some physical contact with the plaintiff. c. The defendant’s conduct must go beyond all possible bounds of decency and be regarded as atrocious and utterly intolerable in a civilized society. d. The plaintiff must have witnessed severe physical injury to a relative or other significant person in the plaintiff’s life.

37) The best statement of the test applied in determining if a defendant was the proximate cause of the plaintiff’s injuries is:

a. Was it foreseeable to the plaintiff that the defendant would engage in this conduct? b. Given this particular injury to the plaintiff, was it foreseeable that the defendant was the cause? c. Should it have been foreseeable to the defendant that the defendant’s conduct could lead to this kind of injury? d. Was the injury foreseeable to the plaintiff prior to the injury’s occurrence? e. Was it foreseeable to the plaintiff that this kind of injury could occur under the particular conditions that the injury did occur?

38) What does a guest statute provide?

a. that a driver who has voluntarily given a ride to a passenger without compensation is not liable to the passenger for ordinary negligence b. that someone serving alcohol to guests in the home is liable if the alcohol causes the guest to become intoxicated and injure another person while intoxicated c. that tavern owners are strictly liable for alcohol related injuries caused by tavern guests who were served alcohol at the tavern d. that homeowners cannot be sued by their social guests for injuries incurred while the guests were in the homeowner’s home with permission



Final Examination


BAM 317 Business Law

39) Which of the following is true about the case against McDonald’s for serving very hot coffee?

a. The plaintiff was burned while driving her car. b. McDonald’s coffee was found to be the same temperature as that served by its competitors. c. McDonald’s had turned down a pretrial offer of settlement which was much lower than the amount awarded by the jury. d. McDonald’s paid the amount to the plaintiff that the jury awarded.

40) Cindy was riding her bicycle on a paved bike path and had an accident with another cyclist. Cindy’s $1,000 bicycle was destroyed in the accident. If the jury determined that Cindy was 60 percent at fault and the other cyclist 40 percent at fault, under which doctrines would Cindy be entitled to recover $400 from the other cyclist?

a. contributory negligence only b. pure comparative negligence only c. partial comparative negligence only d. either form of comparative negligence, but not contributory negligence e. either form of comparative negligence as well as under contributory negligence

41) A reporter appears on television and declares that the head coach of a professional sports team is “the worst coach in the history of sports.” The coach subsequently files a lawsuit against the reporter. A court would most likely determine which of the following?

a. The reporter is liable for a claim of slander. b. The reporter is liable for a claim of libel. c. The reporter is not liable because truth is an absolute defense. d. The reporter is not liable because the statement is an expression of opinion.

42) Which of the following is true in a products liability case?

a. The plaintiff must prove the existence of a duty. b. The plaintiff must have purchased the product from the defendant. c. The plaintiff must prove her case with a preponderance of the evidence. d. The plaintiff will lose if she cannot prove proximate causation.

43) If a manufacturer produces a defective product, sells it to a wholesaler, who sells it to a retailer, who sells it to a consumer, who is injured, which parties in the chain of distribution are potentially liable under strict liability?

a. only the manufacturer b. only the manufacturer and wholesaler c. the manufacturer, wholesaler, and retailer d. only the party at fault




Final Examination

BAM 317 Business Law

44) Who can recover for their injuries under product liability law?

a. someone who purchases a product new b. someone who uses a product with the owner’s permission c. a nonuser such as a bystander d. A and B only e. A, B, and C

45) Which of the following best describes a defect in packaging under products liability?

a. The packaging of a product, such as a bottle or can, causes an injury to the user. b. The packaging of a product is such that it allows the product to spoil. c. The packaging of a product contains misleading or deceptive information about the product contained inside. d. The packaging of a product fails to contain necessary warnings about the dangers asoc- iated with a product. e. The packaging of a product allows children to access a product, such as drugs or poisons, that is generally safe when used as directed, but can be harmful if not used properly.

46) A wholesale distributor who is named in a product liability suit based on strict liability could avoid liability if:

a. the plaintiff had purchased the product causing the injury b. the distributor exercised reasonable care in all ways with respect to the product causing the injury c. this product had been used for many years by other users without injury d. this defect which caused the injury occurred after the product left the distributor e. the product has been redesigned to eliminate the problem which caused the injury in this case

47) Dangerous Products, Inc. is currently the defendant in several products liability cases. Which of the following situations would provide the weakest defense for the manufacturer?

a. The plaintiff had received a recall notice addressing the defect which caused the injury, but did not respond to the recall and continued to use the product. b. The plaintiff was misusing the product, an electric sander, to remove the outer layer of his facial skin in order to improve his facial complexion. c. The plaintiff had taken one of the company’s lawn mowers and modified it to be a ceiling fan which he attached to his bedroom ceiling. d. The injury occurred when a boy used a drill to drill a hole in his younger brother’s arm because the younger brother had broken the older brother’s toy car. e. The plaintiff was misusing an electric wood saw because the owner’s manual said to only use it to cut with (along) the grain of the wood and the plaintiff was using it to cut across the grain, causing it to kick up and injure the plaintiff.



Final Examination


BAM 317 Business Law

48) A doctrine that says a patent may not be granted if the invention was used by the public for more than a certain period of time prior to the filing of the patent application is known as:

a. the public service doctrine b. the public use doctrine c. the unfair doctrine d. the bar to patents doctrine e. None of these are correct.

49) Which of the following was the most recently recognized as a valid subject matter for a patent?

a. machines b. certain types of business plans c. original ideas for community improvement d. processes e. designs

50) One of the provisions of the American Inventors Protection Act of 1999 is that:

a. the power to regulate invention promoters was transferred to the Department of Justice b. the legal life of a patent was extended to 20 years c. the Patent and Trademark Office must make a decision on a patent application within 5 years after its filing d. inventors are able to file a provisional application granting provisional rights pending the filing of a final application within three months

51) Will someone who uses a short section of a copyrighted work in a critical review be subject to copyright infringement?

a. No, because of the fair use doctrine. b. No, if he obtained the original copyrighted work through legitimate means. c. Yes, if he did not pay the author for his use of the material. d. Yes, if he did not obtain permission from the author for his use of the material.

52) The fair use doctrine would allow the following types of use of a copyrighted work without the permission of the copyright holder, except:

a. quotation in a critical review b. use in a parody c. sales of a single chapter of a book that is the only chapter of interest to most persons in a particular locale d. use by a teacher to illustrate a point in a class




Final Examination

BAM 317 Business Law

53) Seattle Paint Company developed a new exterior house paint that can be properly applied even in the rain. How can this formula be protected without filing for a patent?

a. Without a patent, no protection is available. b. If the company takes all reasonable steps to avoid discovery of the secret, it can be protected against some, but not all, methods of discovery of the secret. c. By putting a notice on the cans of paint that the formula is a protected trade secret. d. By registering a trademark for the product specifying that the product is distinctive.

54) In a criminal trial, which of the following is true?

a. To be guilty, the defendant must have had a criminal intent at the time of the crime. b. The accused is presumed guilty once an indictment has been issued. c. The government must prove that the accused is guilty beyond all possible doubt. d. At the trial, the grand jury listens to evidence to determine guilt or innocence.

55) Which of the following is true about crimes?

a. Criminal liability exists only if there is a victim who suffered damages. b. A criminal defendant will be found guilty whenever the jury believes it is more likely than not that the defendant committed the crime. c. Torts always accompany crimes, although the civil case is often not brought. d. Criminal law is based on the conduct or activities of the defendant, rather than on resultant harm.

56) Which is true about jury verdicts in criminal cases?

a. If the defendant is found guilty, the defendant may appeal. b. If the defendant is found not guilty, the government may appeal. c. If the jury cannot agree on guilt or innocence, it is a hung jury and the defendant goes free just as if found not guilty. d. In the case of a tie jury vote, the judge casts a vote to break the tie. e.Both A and B are true.

57) Someone who takes personal property from someone’s home after entering without authorization has committed:

a. extortion b. burglary c. embezzlement d. robbery



Final Examination


BAM 317 Business Law

58) To find someone guilty of receiving stolen property, it is sufficient to prove that the defendant:

a. was in possession of stolen property b. intended to keep the property himself c. paid for the property and intends to keep it himself d. knowingly received the stolen property and intended to deprive the true owner of the property e. took part in the wrongful taking of the property and intended to deprive the true owner of the property

59) What does the Fourth Amendment do?

a. It protects the rights of the people from unreasonable search and seizure by the government. b. It requires the police to obtain a search warrant in all search and seizure cases. c. It prohibits warrantless searches in connection with an arrest. d. It guarantees the defendant the right to an attorney.

60) Every contract has both:

a. a buyer and seller b. an offeror and offeree c. a breaching party and a nonbreaching party d. an initiator and a responder

61) Which of the following is needed to impose a quasi-contract?

a. a benefit having been conferred and injustice if the benefit were not paid for b. actions implying a contract and an agreement as to the price c. a promise asking for action and the requested action having been completed d. a benefit having been conferred and objective intent that it be conferred

62) Otto approaches Edie and says, “If you pick up my new suit for me at the mall tomorrow, I’ll pay you $20.” Edie replies, “I don’t know if I’ll have time to get it, but I’ll see if I get a chance.” As a result of this conversation, which of the following is true?

a. Otto and Edie have formed a bilateral contract. b. Edie has a legal obligation to use her best efforts to pick up the suit. c. A contract will be formed only if Edie picks up the suit. d. The contract which they have formed is voidable because Edie did not obligate herself.




Final Examination

BAM 317 Business Law

63) Frank says to Mary, “If you wash every window in my house today, I’ll pay you $200. I don’t care if you do it, but there is $200 in it for you if you do.” Mary washes 12 of the 20 windows in Frank’s house by 2:00 p.m. At this point, which of the following is true?

a. Frank can revoke his offer to pay Mary the $200 for washing the windows. b. There is a contract in this situation. c. Mary has formed a contract by beginning to wash the windows. d. Mary is obligated to finish washing the windows in order to receive $200.

64) Janet pulls her car into a line for a car wash. Janet says nothing and her car is washed by the employees there. Janet then refuses to pay for the car wash, stating that there is no contract. What would the results be in a lawsuit over this situation?

a. Janet wins; because she said nothing, there can be no contract. b. Car wash wins; this is an express, unilateral contract that has been accepted. c. Janet wins; because the car wash made no promise to wash her car, there is no contract. d. Car wash wins; this is an implied-in-fact contract that has been accepted.

65) Which of the following are necessary to meet the requirements of a definite offer?

a. identification of the parties, subject matter, and quantity b. consideration to be paid c. time of performance d. A, B, and C e. A and B only

66) The communication of an offer can be made by:

a. the offeror only b. the offeror or an agent of the offeror c. the agent of the offeror only d. the offeror, the offeror’s agent, or any other party who learns of an offer

67) What is the legal effect of an auction being with reserve?

a. The seller has the right to reject all of the bids. b. Certain bidders have reserved bids of specified amounts in advance. c. The bidders must be given an opportunity to inspect the items prior to the bidding. d. Bidders must make a cash deposit in advance to show the financial ability to carry through with the purchase of any item for which they are the highest bidder.



Final Examination


BAM 317 Business Law

68) Silence will operate as acceptance in the following circumstances EXCEPT:

a. when the offeree indicates that silence will operate as acceptance b. when the offeror indicates that silence will operate as acceptance c. when prior dealings between the parties indicate that silence is acceptance d. when the offeree signs an agreement that future shipments would be accepted until further notification

69) Pam offers a reward for the return of the pet snake that escaped from her purse while she was having dinner at a restaurant. Fred finds the snake and returns it to her. Which of the follow- ing is relevant in deciding whether Pam must pay the reward?

a. whether Fred is a minor b. whether Fred knew about the reward when he returned the snake c. whether Fred intended to get the reward d. whether the offer for the reward was in writing

70) A promise to deliver merchandise in the future:

a. is not consideration because the merchandise has not yet been delivered b. is not consideration because the person delivering the goods does not necessarily receive a benefit for doing so c. is consideration because it involves a new legal duty d. is consideration so long as the party to deliver the goods received payment before they were delivered

71) Two friends, Ann and Mary, are having margaritas at happy hour. There had been no discus- sion of who would pay for the drinks. After the third round of drinks, Ann said, “I will pay for everything tonight including your drinks.” A couple of minutes later, Ann says, “I’ve changed my mind. I just remembered that they might be having layoffs at my job tomorrow.” Mary wants to force Ann to perform on her promise and threatens to sue. In this circumstance, a court would:

a. not require Ann to follow through on the promise because it was a gratuitous promise b. require Ann to follow through on the promise under the doctrine of promissory estoppel c. require Ann to follow through on the promise if Mary had previously paid a comparable amount for food or drinks consumed by Ann d. require Ann to follow through on the promise if it would be a hardship for Mary to pay for her own drinks e. not require Ann to follow through on the promise because it would encourage Mary to drink




Final Examination

BAM 317 Business Law

72) Caterer agrees with Bride to cater Bride’s wedding reception for $12 per plate. On the wed- ding day, Caterer calls Bride saying that some things have come up, and she will have to charge $16 a plate in order to do the catering. Bride agrees. Which is true?

a. The $16 is not enforceable because the $12 per plate was past consideration. b. The $16 is not enforceable because of a preexisting duty. c. The $16 is enforceable if the reason for it was beyond Caterer’s control. d. The $16 is not enforceable because it means the $12 was an illusory promise. e. The $16 is enforceable if Bride could have found another caterer before the wedding.

73) Cheryl hired Golden Construction Co. to build a house for her. The plans for the house were complex, and expert workmanship was required. After the house was completed, Cheryl liked it so much that she promised to pay Golden a $4,000 bonus. Later, Golden demanded the money, but Cheryl refused to pay it. Golden sues. What is the most probable result?

a. Golden wins; the promise was used to entice Golden to do an outstanding job, which is adequate consideration. b. Cheryl wins; the promise is based on past consideration. c. Golden wins; the promise is based on past consideration, which is legally sufficient. d. Golden wins; the promise is based on changed circumstances which makes it enforceable.

74) Frank is a loyal employee who has spent much time above and beyond the call of duty pro- moting his employer’s company on weekends. Frank’s boss says to him, “Because of all this extra work you have done, you’ll get a $1,000 bonus next month.” Because of this statement, which of the following is true?

a. The company is not obligated to pay him because the consideration is past consideration. b. The company is not obligated to pay because there was a preexisting duty. c. The company is obligated to pay because Frank has performed the extra work. d. The company is obligated to pay because there is an implied-in-law contract.

75) In order for someone to avoid a contract on the grounds of intoxication, the level of intoxica- tion must have been:

a. at or above the legal limit b. only high enough that he was able to notice it c. at least as high as that of the other party d. so great that he didn’t comprehend the nature of the agreement he was entering into



Final Examination


BAM 317 Business Law

76) Marsha bought a car from Indy Auto Sales when she was 16. Marsha’s parents had given their consent for Marsha to purchase the car. However, in order to buy the car, Marsha lied about her age. A few months later, Marsha was intoxicated, driving too fast, and caused an accident with Mr. Jones. Marsha’s car was totally destroyed, and Mr. Jones’ car was badly damaged. Marsha wishes to minimize her liability for this accident. Which of the following best describes this situa- tion?

a. Marsha can disaffirm the auto sales contract, get back all her money, and disaffirm any damage done to Mr. Jones because she is a minor. b. Marsha must place Indy Auto Sales in status quo to disaffirm the contract. c. Because Marsha’s parents consented to Marsha buying the car, Marsha cannot disaffirm the contract. d. Because Marsha’s parents consented to Marsha buying the car, they are liable to both Indy Auto Sales and Mr. Jones.

77) Sally and Jeff are both minors. Sally buys Jeff’s motorcycle for $1,000, its reasonable value. Jeff spends $700 of this money. Later, Sally wrecks the motorcycle and it is a total loss. Sally wants her money back. Which of the following best describes this situation?

a. Because Sally and Jeff are both minors, the contract is valid and fully enforceable. b. If Sally voids the contract, she must give Jeff back the wrecked motorcycle and $1,000. c. If Sally voids the contract, she must give Jeff only the wrecked motorcycle. d. The court will determine the relative sophistication of Jeff and Sally, and the one with the lesser sophistication will be allowed to void the contract. e. If Sally voids the contract, Jeff must return to her the entire $1,000.

78) At age 16, Phil bought a car from Acme Auto Co. for $2,500. Phil drove the car for about six months, and then he had an accident. The damage to the auto was $1,500. In addition, the value of the auto before the accident was only $2,000. The accident was not Phil’s fault. Phil wishes to disaffirm the contract. Which of the following best describes this situation?

a. Because the car was damaged, Phil cannot disaffirm the contract. b. Phil can disaffirm the contract, but he can recover only $500 of his money. c. Phil can disaffirm the contract, but he can recover only $2,000 of his money. d. Phil can disaffirm the contract and recover the entire $2,500. e. Phil can disaffirm the contract, but he must first have the car repaired.




Final Examination

BAM 317 Business Law

79) Arthur had been adjudicated insane. During his period of insanity, Arthur sold some un- improved real estate to Katrina for $5,000, its fair value. Katrina did not know that Arthur was insane. In fact, he acted perfectly normal in every way. Arthur spends this $5,000. Arthur’s guard- ian learns of this transaction and sues to void the contract and recover the land. What results?

a. Because Arthur was acting normally, and because Katrina did not know of his insanity, the contract is valid. b. The guardian can get the land back, but Arthur must pay Katrina the $5,000. c. The guardian can get the land back, but since Arthur has spent the $5,000, Arthur does not need to give anything back to Katrina. d. Because Arthur received the fair value for his land, the contract cannot be voided.

80) The case that involved two ships, both of which were named “Peerless,” is:

a. Raffles v. Wichelhaus b. Konic International Corp. v. Spokane Computer Services, Inc. c. Wilson v. Western National Life Insurance Co. d. Lucy v. Zehmer e. Fisher v. Bell

81) The knowledge that a misrespresentation is false is known as:

a. duress b. undue influence c. scienter d. fraud in the factum e. res ipsa loquitur

82) A party who has been a victim of fraud in the inducement can:

a. rescind the contract only b. collect damages only c. rescind the contract or collect damages d. force the other party to live up to the agreement, but not rescind the contract or collect damages

83) Contracts involving fraud and misrepresentation are:

a. actionable only if in writing b. void c. valid d. inadvisable e. voidable



Final Examination


BAM 317 Business Law

84) Robert is a pastor at United Church. One of the members of his congregation, Mrs. Smith, is a very devout believer. Robert convinces Mrs. Smith to sell him her farm for $5,000. The actual value of the farm is $500,000. Mrs. Smith dies and her estate sues to get her farm back. Which of the following best describes this situation?

a. This is a case of fraud, so the estate can rescind the contract. b. This is a case of undue influence, so the estate can rescind the contract. c. Unless Robert can prove that there was no undue influence, the contract can be rescinded. d. This is not a case of undue influence because there is no fiduciary relationship. e. Mrs. Smith is a competent adult and may dispose of her property in any way, and for any price she sees fit.

85) A written contract in which one person agrees to answer for the debts or duties of another person is:

a. unenforceable under the Statute of Frauds b. unenforceable under the Statute of Frauds because it cannot possibly be performed within one year c. guaranty contract d. A and C only e. A and B only

86) A contract must be in writing under the Statute of Frauds if:

a. according to its terms, it cannot be performed within 1 year b. its actual performance is not completed within 1 year c. no one could perform the duties within 1 year d. it would take no one more than a year to perform e. in the past, no one has performed a similar contract within 1 year

87) In order to satisfy the Statute of Frauds sufficiency of writing requirement, generally a writing must:

a. be a formal, written document b. be any written memorandum containing the essential terms of the parties’ agreement c. be signed by the party against whom enforcement is sought d. B and C e. A and B

88) Which of the following is not a general rule of contract interpretation?

a. Ordinary words are given their ordinary dictionary definition. b. Specific terms qualify or override general terms. c. Handwritten terms prevail over printed terms. d. Ambiguities in a contract are resolved in favor of the party who drafted the contract.




Final Examination

BAM 317 Business Law

89) If a contract is silent about assignment and delegation, which of the following is generally true?

a. The rights can be assigned and the duties can be delegated. b. The rights can be assigned and the duties can be delegated, but neither can occur without the other also occurring. c. The rights can be assigned, but the duties cannot be delegated. d. The rights cannot be assigned, but the duties can be delegated. e. The rights cannot be assigned, nor can the duties be delegated.

90) Under a mutual rescission, the parties to a contract:

a. agree to new terms b. involve a third party in the contract c. agree to undo and cancel a contract d. agree to perform a contract a second time under the same terms as the original

91) Buyer and seller enter into an agreement to sell a mobile home and lot. Before the deed can be signed, the mobile home is destroyed by a tornado. Which of the following doctrines would most likely allow the buyer to avoid his contractual obligations?

a. impossibility b. commercial impracticality c. frustration of purpose d. failure of a condition precedent e. novation

92) ___________________ occurs if a contract becomes impossible to perform.

a. frustration of purpose b. commercial impracticability c. impossibility of performance d. failure of illegality

93) Specific performance is generally awarded:

a. in cases where nominal damages are also awarded b. where the contract involves the sale of property that is unique c. only under the UCC d. when the nonbreaching party requests it e. only if provided for in a liquidated damages clause



Final Examination


BAM 317 Business Law

94) When a court rewrites a contract to express the parties’ true intentions, what remedy has it used?

a. reformation b. restitution c. specific performance d. substituted contract e. quasi-contract

95) Henry took his Porsche to the shop for repairs, but it was not ready on Friday afternoon as had been agreed to. Henry was then unable to rent the car to his sister on Saturday for $400 to use in her wedding. Henry paid $60 to rent a car on Sunday for a trip to the mountains. The car repair shop knew about neither of Henry’s planned uses of the car that weekend. Which is true?

a. Henry can collect for neither amount because the car repair shop was unaware of them. b. Henry can collect for both amounts because the shop was the cause of his losses. c. Henry can collect for the car rental, but not for the money his sister would have paid. d. Henry can collect for both amounts and will likely recover punitive damages as well. e. Henry can collect nothing because his greediness with his sister is against public policy.

96) Michelle is hired as a corporate executive for a large corporation. She signed a three-year contract that will pay her $10,000 per month. Six months into the contract, the company uni- laterally terminates the contract due to concerns over the company’s future. How much money should Michelle be entitled to?

a. $10,000 b. $60,000 c. $300,000 d. $360,000 e. None. The contract was terminated in good faith.

97) Which of the following best describes how e-mail contracts are viewed under the law?

a. E-mail contracts are not usually valid because of the ease of deleting e-mail messages. b. E-mail contracts for goods can be valid, but not e-mail contracts for services. c. E-mail contracts are valid only for contracts less than $500. d. E-mail contracts are valid so long as both parties sign a written copy printed out from the e-mail. e. E-mail contracts are generally treated similarly to contracts negotiated by other means.




Final Examination

BAM 317 Business Law

98) In order to obtain a domain name, one must:

a. obtain clearance that the name is not confusingly similar to another name, and pay the appropriate fee b. apply for the name and, if within the waiting period, there are no objections to the applicant taking the name, pay the appropriate fee c. verify that the name is not already taken, directly notify parties who might object to obtain their waiver of objection, and pay the appropriate fee d. verify that the name is not already taken and pay the appropriate fee or, if already taken, negotiate to purchase the name from its current owner e. apply for the name, state the purpose for which the name will be used, and if the use is approved, pay the appropriate fee

99) A _______________ is a detailed and comprehensive written agreement between a licensor and a licensee that sets forth the express terms of their agreement.

a. licensing agreement b. remote site license c. noncarrier software contract d. periodic use site license

100) Under the Electronic Signature in Global and National Commerce Act, electronic signatures can be verified by the following methods except:

a. by a secret password known by the signatory b. by a digitally encoded smart card belonging to the signatory c. by the use of a device that electronically recognizes fingerprints or parts of the eye d. by the use of a notary public to check digital identifying information