Intellectual Property Rights & Business Contracts – Law

Intellectual Property Rights & Business Contracts – Law

These chapters discuss business organizations, business laws, business contracts and intellectual property rights


Landon, an 80-year-old, writes a trust that states that his property is to go to his “great-great-great grandchild” upon his death. At the time of creating the trust, his only child is one year old. In this scenario, which of the following statements is true about the validity of the trust?

The trust is valid, but the property must wait until the great-great-great grandchild is born to be transferred

The trust is invalid due to the rule against eventualities

The trust is valid due to the rule of progression

The trust is invalid due to the rule against perpetuities – Correct

The trust is valid, but the property must wait until Landon’s child dies to be transferred


Which of the following is an example of intangible property?

Cars

Books

Clothing

Securities  Correct

Land


The Homestead Act of 1862 illustrates ownership through

Possession – Correct

Exchange

Gifting

Confusion

Accession


Mike rents a car from Brandy Car Rentals at $40 per day. In this scenario, which of the following statements is true?

This is a bailment for the sole benefit of the bailor

Brandy is the bailee

Mike owes the duty of slight care

Mike is under a duty to use “reasonable care” to take care of the car – Correct

This is a bailment for the sole benefit of the bailee


Which of the following is beyond the scope of zoning ordinances?

To separate commercial districts from residential districts

To specify the number of buildings that can be built on land

To enforce ethnic or gender diversity – Correct

To impose specific color requirements

To specify a specific design for all buildings in an area


Ruth is visiting her granddaughter Marcy and decides to give Marcy her very expensive cameo brooch. The brooch, an heirloom, has been in the family for over 100 years and is the only item in a safe in Ruth’s home. Ruth offers the brooch to Marcy who accepts it. Ruth then gives Marcy the only key to the safe. According to the information given, which of the following statements is true?

This is not a valid gift because there has been no delivery

This is a valid gift because the gift is a physical entity

This is a testamentary gift, and Marcy can claim the gift only after Ruth’s death

This is a valid gift because there has been a constructive delivery – Correct

This is not a valid gift because Ruth must provide a document for chain of custody


Which of the following statements is true about adverse possession?

The practice of adverse possession requires that possession be interrupted to grant ownership

The possessor should have the owner’s permission to be on the land

The practice of adverse possession discourages land use

The practice of adverse possession increases the possibilities of an absent owner to claim rights many years down the road

The most common way to destroy a claim of adverse possession is to sue for trespass – Correct


Danny has five pit bull dogs. They bark constantly and terrify the neighbor, Terry. When Terry tries to sell his house, no one wants to buy the house due to the dogs. In this scenario, if Terry takes Danny to court, what should Danny be held liable for by Terry?

A public nuisance

A private nuisance – Correct

An adverse possession

An eminent domain

An accession


Rachel owns a beach house and wants to build a deck. Zoning restrictions limit decks to 120 square feet, but Rachel wants to build one that is 144 square feet. Which of the following should Rachel do next?

She can go ahead and build it as the law permits that once the deck is built it cannot be brought down

She should ask for a nonconforming exemption

She should ask for a variance – Correct

She must shift to some other location, because once zoning ordinances are in place, they allow for no changes, variations, or exceptions

She should lobby her local zoning board to force them to change the restriction as that is the only plausible recourse


Which of the following statements is true about lost items?

The law distinguishes things that have been lost from things that have simply been mislaid  Correct

The things that have been lost belong to the person who owns the premises where the item was lost

The finder of a lost item becomes the owner of the item even before reducing it to possession

The ownership is lost at the end of a statutory period for the finder of a lost item

The assumption of knowledge about the original owner is irrelevant in determining the ownership of the mislaid item


In the context of contracts formed by promises, which of the following is an agreement containing mutual promises?

Unilateral contract

Quasi-contract

Express-in-fact contract

Bilateral contract – Correct

Implied-in-fact contract


Which of the following statements is true of silence as a method of acceptance?

An offeree’s silence implies that the offeree will make a counter offer

Silence may well imply acceptance if the parties previously dealt with each other – Correct

When an offer specifies that silence indicates acceptance, the offeree has to respond

Silence alone can be acceptance and the basis of a binding contract

Silence leads to acceptance of an offer due to the mirror image rule


The legal mechanism for evaluating the existence of an incentive for a person’s promise to establish a binding contract and acts as a receipt of a legal benefit or the suffering of a legal detriment is

Collusion

Accord and satisfaction

Consideration – Correct

Reversion

Novation


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

Legality

Capacity – Correct

Usability

Negotiability

Measurability


Harry regularly shipped 100 cartons of electronic goods to Keith on the 15th of every month as per the original agreement. He had been continuing this shipment routine for over a year. On the 20th day of one of the months, Keith refused the goods as he did not want Harry to ship those goods to him and had never accepted any such offer of goods. Harry had not received any prior notification to cancel the shipment of goods. Which of the following statements is true of this situation?

Keith can sue Harry based on the doctrine of promissory estoppel

Keith’s prior act of dealing and conduct with Harry confirms acceptance of the offer – Correct

Harry used duress in controlling the terms of the offer

Keith can sue Harry based on the misstatement of the facts of the offer

Harry should have ensured only partial delivery of goods as he received no oral confirmation from Keith about the shipment of goods


A(n) ______ is one that appears to be an agreement but lacks an essential requirement for validity and enforceability.

Voidable contract

Unenforceable contract

Void contract – Correct

Valid contract

Executed contract


The doctrine of quasi-contracts is predominantly based on a(n)

Reciprocal contract

Implied-in-law contract – Correct

Express contract

Bilateral contract

Unilateral contract


In the context of implied warranties as defined by the Uniform Commercial Code (UCC), which of the following refers to the merchantability of goods?

The goods will be of fair average quality and conform to any labeling – Correct

The goods will be suitable for the buyer’s purpose if the seller is aware of it

The goods will be delivered within two weeks of order

The goods will be worth at least $500 or more

The goods will be sold within states and not across states


In the context of contracts formed by interactions of parties, which of the following arises from the conduct of the parties rather than from words?

Express contracts

Implied-in-fact contracts – Correct

Executed contracts

Void contracts

Adhesion contracts


Aria asks Jessica if she can borrow an outfit for an office party and Jessica agrees. When Aria picks an outfit, Jessica refuses to give it to her. Which of the following statements is true of this situation?

Jessica has committed a breach of contract

A bargained-for exchange has not occurred, so Jessica does not have to loan the outfit to Aria – Correct

Jessica has promised Aria something of value, so she must loan her the outfit

The contract between Aria and Jessica is terminated as Aria makes a counteroffer

Jessica has given a valid consideration, thereby making the agreement between her and Aria a binding contract


Jeff signs a contract agreeing to purchase a dishwasher. The printed terms in the contract state that there is no return policy, but the contract has additional typed terms that allow him to return the product within 15 days from the date of purchase. The contract also has handwritten terms that allow him to return the product within 30 days of purchase. Jeff would like to return the dishwasher 20 days after purchase. Which of the following statements is most likely to be true in this scenario?

Jeff cannot return the product after 15 days of purchase

Jeff cannot return the dishwasher at all

Jeff can return the dishwasher after 45 days of purchase

Jeff can return the dishwasher after 20 days of purchase – Correct

Jeff can return the product only after getting an obiter dictum from a court


Kate contracts Office Depot Inc. to install air conditioning units for each office in her company. Kate wanted the work to be done in two days, but Office Depot took three days to complete the work. Which of the following statements is most likely to be true in this scenario?

Kate can sue Office Depot for material breach of contract

Kate can refuse payment to Office Depot

Office Depot is entitled to full recovery under the contract

Office Depot is entitled to a partial recovery under the contract – Correct

Both Kate and Office Depot must consult a neutral third party to resolve their contractual dispute


Salim has entered into a contract with Jenna to buy her land for $50,000. Salim has paid the amount in full. However, Jenna has not transferred the land to Salim. Salim decides to sue Jenna to request a court order to compel Jenna to transfer the land as per the contract. Which of the following remedies is the court most likely to enforce in this case?

Rescission

Consequential damages

Substantial performance

Liquidated damages

Specific performance – Correct


______ is a legal term referring to the transfer of possession from the seller to the buyer.

Performance

Condition

Delivery – Correct

Waiver

Release


An employment contract denies payment of a full month’s salary if an employee does not clock in 160 hours of work. This is a(n)

Condition subsequent – Correct

Concurrent condition

Voluntary arbitration

Implied condition

Mandatory arbitration


______ is a level of performance below what is reasonably acceptable.

Substantial performance

Material breach – Correct

Complete substantial breach

Partial breach

Reasonable breach


Which of the following statements is true in cases where only one party drafts a contract that contains terms that appear vague and ambiguous to the other party?

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

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

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

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

The court will interpret the ambiguous and vague terms against the party that drafts them – Correct


Which of the following is a remedy that provides equitable relief in cases that involve an intellectual property dispute?

Waiver

Assignment

Release

Injunction – Correct

Novation


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

Nominal damages

Consequential damages

Liquidated damages

Compensatory damages – Correct

Specific damages


Kent signed a contract with Turner to exclusively work for Turner. Kent breached the contract by working part time for other people. Turner tried to reach a voluntary settlement with Kent as long as he pays a certain amount to Turner. As this attempt failed, they decided to allow Erika, a neutral third party, to make a decision. Turner and Kent agreed to abide by the decision taken by Erika. Which of the following is depicted in this scenario?

A negotiated settlement

Obiter dicta

Arbitration – Correct

Stare decisis

A free exercise clause


Which of the following statements is true of trade secrets?

A first step involved in protection of trade secrets deals with preservation of secrecy through computer systems

Establishment of the existence of trade secrets is a critical step in the control of valuable knowledge resources – Correct

Two or more trade secrets must be unique

Trade secrets lose property in knowledge-based resources when they come into contact with suppliers, customers, repair technicians, or even “visitors”

Reasonable measures in the preservation of trade secrets exclude physically locking away written material


In the context of patentable subject matter, which of the following refers to doing something through a series of operations?

Claim

Process – Correct

Infringement

Recognizability

Tarnishment


Civil violation of a trademark or a patent is termed

Breach

Infringement – Correct

Repudiation

Copy

Injunction


Which of the following is true of trade dress?

It refers to the utility and non-obviousness of an invention

It can be protected under law even without a registration

It is another form of a patent troll

It is protected by the law from being copied as long as it is distinctive – Correct

It usually excludes distinctive store decorating motifs


A ______ is any form of knowledge or information that has economic value from not being generally known to others or readily ascertainable by proper means and has been the subject of reasonable efforts by the owner to maintain secrecy.

Copyright

Trademark

Patent

Company policy

Trade secret – Correct


Which of the following types of intellectual property can be assigned to the invention of a plant that can be reproduced asexually?

Patent – Correct

Copyright

Trademark

Trade name

Brand mark


______ refers to a colored design or shape associated with a product or service.

Patent

Trade dress – Correct

Copyright

Trademark

Blurring


Which of the following statements is true of design patents?

The duration of a design patent is 14 years from the date of issue – Correct

It is given to products that have undergone new compositions of matter or improvements

It is applied to useful, functional inventions

It also covers all other inventions that are under the purview of plant patents

It excludes the appearance of a product in considering the patent for a product


The Nike “swoosh” and McDonald’s golden arches are examples of which type of intellectual property?

Copyright

Patent

Certification mark

Trademark – Correct

Novelty


Which of the following is true of copyright law?

It deals with invention that is original, nonobvious, and a novelty

It protects ideas and facts

It protects the design, color, or shape that is associated with a particular product from being copied

It protects original, creative expression – Correct

It protects inventors rather than authors


In the context of factors to consider when selecting a business’s organizational form, one of the most significant creation-related issues is

The location of the business

How much paperwork is involved – Correct

How many people are recruited on average in a year by the organization

The organization’s policies

The demographic to which the organization targets its services or products


Which of the following statements is true of the trends in operating business organizations?

Public attention is moving away from the formation of benefit corporations

Shareholders are losing interest and are becoming less active

In comparison to corporations, sole proprietorships are becoming harder to create

In many cases, corporations and individuals reasonably have an equal claim to rights and protections under the law – Correct

Sole proprietorships and partnerships are now being treated as a taxable entity if they generate more than $100,000 in revenue


Which of the following is the characteristic of a sole proprietorship?

It can be publicly held

It is not taxed as an organization – Correct

It is the hardest business organization to create

It is the most expensive business organization to create

It can be created by multiple owners


When organizations are owned by only a few persons, they are said to be

Publicly-held

Legally-held

Closely-held – Correct

Openly-held

Overtly-held


The crucial issue with the continuity factor of a business’ organizational form is

Its management style

The average age of the employees working for the business

The method by which the business can be dissolved – Correct

The method adopted by the business to reach out to its customers

The control exercised by its managers


Which of the following is a characteristic of partnerships?

They cannot operate in more than one state without obtaining a license to do so

They are generally subject to more regulation and governmental supervision than a corporation

They may not use any word in the name that would imply the existence of a corporation – Correct

They are the least expensive form of business organization

They allow unlimited number of people to become partners


Which of the following is a criticism of benefit corporations?

They are the only type of corporation not treated as individuals

They are not treated as taxable entities even though they have shareholders

They place too much emphasis on profit maximization

They may be less accountable to shareholders – Correct

They are exempt from all forms of taxation


While selecting a name for a partnership, if the name is other than that of the partners, the partners must give notice as to their actual identity under the state’s

Fictitious-name certification law

Annexed-name statute

Suppositious-name law

Fictious-name rule

Assumed-name statute – Correct


Which of the following is the disadvantage of the corporate form of organization?

Control of a corporation may be held by those with a minority of the investment

Ownership may be divided into many unequal shares

Shareholders’ liabilities are limited to their investments

The organization cannot have perpetual existence

Corporate income may be subject to double taxation – Correct


Which of the following is the basic difficulty of owning a minority interest in a closely held corporation?

There is no ready market for the minority stock should a shareholder desire to dispose of it – Correct

Stockholders with a minority interest have no rights in a closely held corporation

Buy and sell agreements to own a minority interest are not allowed in a closely held corporation

Minority shareholders have unlimited personal liability for the obligations of a closely held corporation

Minority shareholders risk losing more than their investment amount


A(n) ______ is any change in the ownership of an organization that changes the legal
existence of the organization.

arbitration
rescission
restitution
dissolution – Correct
extradition


Which of the following statements is true of publicly held business organizations?

Publicly held organizations are owned only by a few persons.
Publicly held organizations are only owned by the government.
Shareholders of publicly held organizations can transfer their ownership without interfering
with the organization’s management – Correct
A family-operated business is an example of a publicly held business organization.
Publicly held organizations are free from all legal liabilities to its shareholders, which is the
primary reason for this corporate form being used.


In the context of factors to consider when selecting a business’s organizational form, one of the most significant creation-related issues is

the location of the business.
how much paperwork is involved – Correct
how many people are recruited on average in a year by the organization.
the organization’s policies.
the demographic to which the organization targets its services or products.


The crucial issue with the continuity factor of a business’s organizational form is

its management style.
the average age of the employees working for the business.
the method by which the business can be dissolved – Correct
the method adopted by the business to reach out to its customers.
the control exercised by its managers.


The use of sole proprietorships is very limited because

there is no formal documentation process for its creation.
it gives limited control to the proprietor.
it is the most expensive business organization to create.
multiple owners cannot create a proprietorship – Correct
it is the hardest business organization to create.


Which of the following is the characteristic of a sole proprietorship?

It can be publicly held.
It is not taxed as an organization – Correct
It is the hardest business organization to create.
It is the most expensive business organization to create.
It can be created by multiple owners.


Which of the following forms of organization requires no formal documentation but only
business licenses for formation?

limited partnership
corporation
limited liability company
sole proprietorship – Correct
S corporation


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

limited partnership
corporation – Correct
limited liability company
sole proprietorship
S corporation


The creation of a(n) ______ is automatic based on business conduct and is modified by
agreement.

limited partnership
corporation
partnership – Correct
sole proprietorship
S corporation


Which of the following makes sole proprietorship a less desirable form of organization?

The creation of sole proprietorship is expensive and requires formal documentation.
A proprietorship’s business activity may be more stable than a proprietor’s willingness to remain actively involved in the business – Correct
A proprietor may have to share his or her voice of control and responsibility for the business’ success with the other acting members of the organization.
Sole proprietorships are the hardest forms of organization to create.
Sole proprietorships are subject to double taxation.


Which of the following is an advantage of a sole proprietorship?

A sole proprietor is personally obligated for the debt of the proprietorship.
A sole proprietorship is not taxed as an organization.
In a sole proprietorship, liability is shared with many partners.
A sole proprietorship is the least expensive business organization to create – Correct
A sole proprietorship’s business activity may be more stable than the proprietor’s willingness to remain actively involved in the business.


Jonathan intends to have maximum control over his decisions in his business. Which of the following forms of business organizations is most likely to give Jonathan total control over his business decisions?

sole proprietorship – Correct
partnership
corporation
S corporation
limited liability company


Which of the following is an advantage of partnerships?

A. A partnership is practical because only a limited number of persons can be partners.
B. A partnership is easily formed because it is based on a contract among persons – Correct
C. Each partner’s liability is unlimited.
D. Partners are taxed on their share of the partnership’s profits, whether the profits are
distributed or not.
E. A partnership is dissolved anytime a partner ceases to be a partner, regardless of whether the reason is withdrawal or death.


Which of the following forms of organization is most easily formed at minimal costs?

A. limited liability partnership
B. partnership – Correct
C. corporation
D. S corporation
E. limited liability company


Which of the following is the basic difficulty of owning a minority interest in a closely held corporation?

A. There is no ready market for the minority stock should a shareholder desire to dispose of it – Correct
B. Stockholders with a minority interest have no rights in a closely held corporation.
C. Buy and sell agreements to own a minority interest are not allowed in a closely held
corporation.
D. Minority shareholders have unlimited personal liability for the obligations of a closely held
corporation.
E. Minority shareholders risk losing more than their investment amount.


Technically, a(n) ______ is an agent appointed by a shareholder for the purpose of voting the
shares.

A. officer
B. director
C. proxy – Correct
D. arbitrator
E. signatory


While selecting a name for a partnership, if the name is other than that of the partners, the partners must give notice as to their actual identity under the state’s ______.

A. fictitious-name certification law
B. annexed-name statute
C. suppositious-name law
D. fictious-name rule
E. assumed-name statute – Correct


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

A. A general partnership is dissolved any time there is a change in the partners – Correct
B. A general partnership must have at least one controlling partner.
C. A dissolution does not necessarily destroy the business of a partnership.
D. Unlike proprietorships, partnerships are taxable entities.
E. All partners in a general partnership have only limited liability for their organization’s debts.


To prevent problems that may arise when a partner dies or withdraws from a partnership, the articles of partnership should include a(n) ______.

A. buy and sell agreement – Correct
B. escrow instruction
C. establishment clause
D. commerce clause
E. interest agreement


Which of the following statements is true of managerial control in a general partnership?

A. It is mandatory for each partner to have equal voice in a firm’s affairs.
B. Partners may agree to divide control in such a way as to make controlling partners and minority partners – Correct
C. The differences in the degree of control do not affect a business’s success.
D. The possibility of deadlock is higher when there is a greater number of partners and an odd
number of them.
E. Language governing issues of managerial control need to be made orally clear to all partners.


Which of the following statements is true of liability of partners in a general partnership?

A. Partners have limited liability for an organization’s debts.
B. Partners’ personal assets, which are not associated with the partnership, may not be claimed by the creditors.
C. From a creditor’s perspective, the liability of each partner extends only to a pro rata share.
D. A partner who has to pay beyond his pro rata share will have to make use of his future buyout interest.
E. A partner having unlimited liability will be jointly and severally liable for the partnership’s obligations – Correct


Which of the following is a disadvantage of partnerships?

A. They have a high cost of formation.
B. They are tax-paying entities.
C. They are subject to more governmental supervision than corporations.
D. They need to obtain a license if they wish to operate in more than one state.
E. They will be dissolved any time a partner leaves the partnership – Correct


Which of the following is a characteristic of partnerships?

A. They cannot operate in more than one state without obtaining a license to do so.
B. They are generally subject to more regulation and governmental supervision than a
corporation.
C. They may not use any word in the name that would imply the existence of a corporation – Correct
D. They are the least expensive form of business organization.
E. They allow unlimited number of people to become partners.


A corporation created under the authority of a foreign country may be called a(n) ______.

A. imported corporation
B. offshore corporation
C. alien corporation – Correct
D. distant corporation
E. external corporation


Which of the following statements is true of corporations?

A. Corporations do not have to pay income taxes on their profits.
B. In comparison with partnerships, corporations are more costly to form – Correct
C. A corporation’s organizational structure changes whenever a shareholder sells his or her
stock.
D. In comparison with proprietorships, corporations are easier to form.
E. The law treats a corporation’s existence in tandem with its owners’ status as shareholders.


As a creature of state legislative bodies, a ______ is much more complex to create and to operate than other forms of businesses.

A. sole proprietorship
B. partnership
C. limited partnership
D. corporation – Correct
E. limited liability partnership


A corporate charter is issued following an application made by individuals known as ______.

A. incorporators – Correct
B. arbitrators
C. mediators
D. officers
E. directors


The formal application for a corporate charter is called the ______.

A. articles of confederation
B. articles of incorporation – Correct
C. articles of partnership
D. articles of application
E. articles of integration


In a closely held corporation, the majority shareholders

A. have no influence on management.
B. can control election of a board of directors – Correct
C. cannot be employed by the corporation.
D. have the same impact on policy as minority stockholders.
E. bring derivative suits on behalf of the corporation.


In a closely held corporation, which of the following lawsuits is likely to be brought by a minority shareholder on behalf of a corporation if the majority is acting illegally or oppresses the rights of the minority shareholders?

A. a derivative suit – Correct
B. a preemption suit
C. a petit suit
D. a dissolution suit
E. a termination suit


When organizations are owned by only a few persons, they are said to be ______.

A. publicly held
B. legally held
C. closely held – Correct
D. openly held
E. overtly held


When courts find that a corporate organization is being misused, the corporate entity can be
disregarded. This has been called

A. cracking the corporate shell.
B. piercing the corporate veil – Correct
C. breaking the corporate shield.
D. breaching the corporate defense.
E. rupturing the corporate law.


The ______, by which the corporate veil can be pierced, may also be used to impose personal
liability upon corporate officers, directors, and stockholders.

A. alter-ego theory – Correct
B. negligent conduct theory
C. Med-Arb theory
D. corporate envelopment theory
E. corporate doppelganger theory


Which of the following is a taxable entity?

A. a partnership
B. a limited liability partnership
C. a limited liability company
D. a corporation – Correct
E. a sole proprietorship


Which of the following is an advantage of the corporate form of organization?

A. License fees and franchise taxes are not assessed against corporations.
B. Control of a corporation may be held by those with a minority of the investment – Correct
C. The cost of forming and maintaining a corporation is minimal.
D. A corporation need not be qualified in all states where it is conducting local or intrastate
business.
E. Corporate income is not subject to double taxation.


Which of the following is the disadvantage of the corporate form of organization?

A. Control of a corporation may be held by those with a minority of the investment.
B. Ownership may be divided into many unequal shares.
C. Shareholders’ liabilities are limited to their investments.
D. The organization cannot have perpetual existence.
E. Corporate income may be subject to double taxation – Correct


Which of the following organizations is equally managed by the members unless a manager
is designated?

A. l partnership
B. corporation
C. limited liability company – Correct
D. sole proprietorship
E. S corporation


Which of the following has a perpetual existence so long as the number of shareholders is
limited?

A. limited partnership
B. partnership
C. limited liability company
D. sole proprietorship
E. S corporation – Correct


Which of the following is required to have its organizers file articles of organization with state official for formation?

A. limited partnership
B. partnership
C. limited liability company – Correct
D. sole proprietorship
E. limited liability partnership


Which of the following is essential if limited partners are to be assured of their limited liability?

A. substantial compliance with all the technical requirements of the limited partnership law – Correct
B. signing an agreement according to the limited liability law to dissolve a partnership whenever
a member withdraws
C. using a limited partner’s surname in a partnership’s name
D. inclusion of a limited commerce clause in the partnership agreement
E. participation in an organization’s management


Which of the following statements is true of limited partners?

A. They cannot act as an agent of the partnership.
B. They can control operations of the limited partnership.
C. They cannot vote on the change of the partnership’s name.
D. They can have their surnames used in the partnership’s name.
E. They can act as a guarantor of the partnership’s obligations – Correct


Under the Revised Uniform Limited Partnership Act (RULPA), if a limited partner’s name is used in a firm’s name, that partner

A. does not get his or her contribution returned when the partnership dissolves.
B. cannot advise the general partner.
C. will become personally liable to unsuspecting creditors – Correct
D. must actively participate in management activities to retain his or her status of limited liability.
E. cannot receive any of the partnership’s profits.


Which of the following statements is true of an S corporation?

A. It cannot have more than 100 shareholders – Correct
B. It is the official designation for a corporation with less than 500 employees.
C. It is the least expensive form of organization to create.
D. It does not have shareholders.
E. It need not file an information return with the Internal Revenue Services since it does not pay
any taxes.


A limited liability company is created through filing the ______ with a state official.

A. articles of confederation
B. articles of incorporation
C. articles of organization – Correct
D. articles of association
E. articles of integration


The owners of limited liability companies are called ______.

A. shareholders
B. partners
C. proprietors
D. members – Correct
E. directors


In the context of the continuity of limited liability companies (LLCs), which of the following statements is true?

A. Membership in LLCs is limited to individuals.
B. In an LLC, a business organization can be an owner – Correct
C. An LLC dissolves when the number of shareholders falls below 100.
D. LLCs cannot be dissolved unless the owner of the LLC dies.
E. In an LLC, only the government can dictate when the company can be dissolved.


In a limited liability company, the transferability of a member’s interest

A. is restricted in the fashion of a partner – Correct
B. is not subject to any restrictions.
C. depends on the number of shareholders in the company.
D. depends on the profitability of the company.
E. is similar to the free transferability of a corporate shareholder.


Which of the following statements is true of the trends in operating business organizations?

A. Public attention is moving away from the formation of benefit corporations.
B. Shareholders are losing interest and are becoming less active.
C. In comparison to corporations, sole proprietorships are becoming harder to create.
D. In many cases, corporations and individuals reasonably have an equal claim to rights and protections under the law – Correct
E. Sole proprietorships and partnerships are now being treated as a taxable entity if they generate
more than $100,000 in revenue.


Despite the advantages, there is some concern that the overuse of deferred prosecution agreements could

A. restrict the rights of minority shareholders in limited liability companies.
B. reduce the attractiveness of forming a limited liability partnership.
C. reduce the number of sole proprietorships formed in the country.
D. lead to an environment where corporations are treated unfairly.
E. lead to an overly lenient environment for addressing corporate malfeasance – Correct


A deferred prosecution agreement is used to encourage

A. more derivative suits against majority shareholders who misuse company funds.
B. the reduction in the number of limited liability partnerships formed.
C. self-reporting and remediation of illegal acts before a criminal case is commenced – Correct
D. an environment where corporations are easier to form than sole proprietorships.
E. the use of benefit organization as a corporate form.


Which of the following is a significant trend in corporate organization and control?

A. the inclusion of personal privacy rights for corporations
B. the emergence of benefit corporations – Correct
C. a decline in the use of deferred prosecution agreements by the federal government
D. an increase in the restrictions on sole proprietorships
E. an increase in managerial control for limited partners


Which of the following statements is true of benefit corporations?

A. They are the only type of corporation not treated as individuals.
B. They are not treated as taxable entities even though they have shareholders.
C. They are formed through the use of deferred prosecution agreements.
D. They combine the positive aspects of a limited liability company and a partnership to form an organization that is designed to give the maximum profits to the owners of the organization.
E. They combine aspects of non-profit and profit organizations in a way intended to permit a business to make a profit while pursuing explicit, socially oriented goals – Correct


Which of the following is a criticism of benefit corporations?

A. They are the only type of corporation not treated as individuals.
B. They are not treated as taxable entities even though they have shareholders.
C. They place too much emphasis on profit maximization.
D. They may be less accountable to shareholders – Correct
E. They are exempt from all forms of taxation.


If there is evidence that a word used in a contract has a particular trade usage, courts will

A. give it that meaning – Correct

B. ask the contracting parties to remove that word from the contract.

C. ask the contracting parties to add it as a comment to the contract.

D. ask the contracting parties to add it to the nolo contendere section of the contract.

E. replace the word with its legal equivalent.


When a printed form contract has additional handwritten terms, courts will

A. interpret handwritten terms to control printed ones – Correct

B. replace the handwritten terms with typed terms.

C. disregard both printed terms and handwritten ones.

D. remove the handwritten terms.

E. remove the printed terms.


Jeff signs a contract agreeing to purchase a dishwasher. The printed terms in the contract state that there is no return policy, but the contract has additional typed terms that allow him to return the product within 15 days from the date of purchase. The contract also has handwritten terms that allow him to return the product within 30 days of purchase. Jeff would like to return the dishwasher 20 days after purchase. Which of the following statements is most likely to be true in this scenario?

A. Jeff cannot return the product after 15 days of purchase.

B. Jeff cannot return the dishwasher at all.

C. Jeff can return the dishwasher after 45 days of purchase.

D. Jeff can return the dishwasher after 20 days of purchase – Correct

E. Jeff can return the product only after getting an obiter dictum from a court.


Morgan signs a contract with Shane agreeing to work with him for a movie. Halfway through the production of the movie, Shane decides to quit as he gets another job as a marketing executive. The printed terms in the contract state that when a breach of contract occurs, the breaching party has to pay $20,000 to the nonbreaching party. The contract also has additional handwritten terms that state that in the event of a party being unable to complete the performance required due to unforeseen, unnatural causes, the breaching party does not have to pay any money to the nonbreaching party. Which of the following statements is true in this situation?

A. Shane has to pay Morgan $20,000 as consequential damages.

B. Shane has to pay $20,000 to Morgan for breach of contract – Correct

C. Shane does not have to pay any amount to Morgan because his breach was excused by the contractual terms.

D. Morgan cannot sue Shane for the breach as the liquidated damage is meant to penalize the nonbreaching party.

E. Shane can sue Morgan for compensatory damages.


Which of the following statements is true in cases where only one party drafts a contract that contains 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 – Correct


Which of the following states that parties to a complete and final written contract cannot introduce oral proof in court that changes the intended meaning of the written terms?

A. the statute of frauds

B. the exclusionary rule

C. the parol evidence rule – Correct

D. the statute of limitations

E. the assignor rule


An exception to the parol evidence rule allows

A. evidence of oral agreement that merely explains the meaning of written terms without changing the terms – Correct

B. evidence of oral agreements made on contracts that qualify for mandatory arbitration.

C. evidence of oral agreements made on contracts that qualify for court-annexed mediation.

D. evidence of oral agreements made at the time of or prior to a written contract that changes the meaning of written terms.

E. evidence of oral agreements that are designed to favor the party that drafts a contract


If a contract contains a condition precedent it means that

A. something must take place in the future before a contracting party has a duty to perform – Correct

B. courts will award the nonbreaching party with consequential damages for failure to perform by the breaching party.

C. performance must be completely achieved according to contract specifications or the contract is breached.

D. impossibility of performance will not be an acceptable excuse for nonperformance.

E. both the contracting parties have a simultaneous duty to perform.


Which of the following is the key difference between conditions subsequent and conditions precedent?

A. timing of the duty to perform – Correct

B. number of parties involved in a contract

C. duration of performance

D. quality of performance

E. divisibility of contract


Matthew wants to buy Brian’s car for $3,000. He pays Brian the cash while Brian hands over the car. In this situation, there is a(n)

A. explicit condition on performance.

B. condition precedent of performance.

C. condition subsequent of performance.

D. concurrent condition of performance – Correct

E. express condition on performance.


A condition subsequent in a contract

A. implies that performance must be completely done according to contract specifications or the contract is breached.

B. excuses performance upon the happening of some specified future event – Correct

C. does not allow impossibility of performance as an acceptable excuse for nonperformance.

D. does not allow performance to be excused due to an unexpected event in the future.

E. involves implied concurrent conditions of performance.


An employment contract denies payment of a full month’s salary if an employee does not clock in 160 hours of work. This is a(n) ______.

A. condition subsequent – Correct

B. concurrent condition

C. voluntary arbitration

D. implied condition

E. mandatory arbitration


Most of our everyday purchases involve ______ of performance.

A. implied concurrent conditions – Correct

B. subsequent conditions

C. express conditions

D. implied conditions precedent

E. explicit conditions


______ is a legal term referring to the transfer of possession from the seller to the buyer.

A. Performance

B. Condition

C. Delivery – Correct

D. Waiver

E. Release


According to the Uniform Commercial Code, a ______ requires a seller to get the goods to be shipped and delivered to a specific place of business designated by the buyer.

A. destination contract – Correct

B. tender of performance

C. seller’s contract

D. shipment contract

E. tender of delivery


According to the Uniform Commercial Code, if a contract involving a buyer and a seller makes no statement about delivery, the presumption is

A. the seller will have to personally deliver the goods to the buyer.

B. the seller will have to ship the goods, assuming the risks of damages that take place in transit.

C. the buyer and the seller will have to enter into another contract stating the details of the delivery of the goods.

D. the buyer will have to make arrangements to pick up the goods at the location the seller designates – Correct

E. the contract will be considered void by law, since it contains indefinite, unclear terms


According to the Uniform Commercial Code, which of the following statements is true of a destination contract?

A. A seller satisfies its obligation to ship goods once they are transferred to the shipper for transportation.

B. The risk of loss for damage to the goods remains with a seller until the goods safely arrive at a buyer’s destination – Correct

C. If the purchased goods are damaged in transit, then a buyer is held responsible only if the buyer has paid the full amount for the purchased goods.

D. The risk of loss for damage to the goods is transferred to a buyer when a seller packages the goods for shipment.

E. A buyer assumes the risk of loss for damage to the goods from the point of sale till the goods reach the destination.


An offer to perform an activity under a contract is called a ______.

A. conditional performance

B. qualified performance

C. substantial performance

D. tender of performance – Correct

E. caucus of performance


______ is a level of performance below what is reasonably acceptable.

A. Substantial performance

B. Material breach – Correct

C. Complete substantial breach

D. Partial breach

E. Reasonable breach


Which of the following statements is true of a situation in which a party to a contract substantially performs its obligations to the contract?

A. The contract is said to be materially breached.

B. The party will be entitled to full recovery under the contract.

C. The contract immediately becomes void.

D. The party may be entitled to a partial recovery under the contract – Correct

E. The party’s performance is said to be as good as completed.


Kate contracts Ofc Depot Inc. to install air conditioning units for each office in her company. Kate wanted the work to be done in two days, but Ofc Depot took three days to complete the work. Which of the following statements is most likely to be true in this scenario?

A. Kate can sue Ofc Depot for material breach of contract.

B. Kate can refuse payment to Ofc Depot.

C. Ofc Depot is entitled to full recovery under the contract.

D. Ofc Depot is entitled to a partial recovery under the contract – Correct

E. Both Kate and Ofc Depot must consult a neutral third party to resolve their contractual dispute.


ToughBuilders Corp., a construction company, finishes the construction of a house two days after the contract called for its completion. The delay was caused solely due to low productivity. In this scenario, the level of performance of Tough Builders Corp. is recognized as ______.

A. significant performance

B. implied performance

C. breach due to nonperformance

D. substantial performance – Correct

E. material breach


______ is a middle ground between full performance and a breach due to nonperformance.

A. Inadequate performance

B. Substantial performance – Correct

C. Release of performance

D. Waiver of performance

E. Divisibility of performance


Jessica hires ChromaLite Builders Corp. to construct a house. The contract specifies that grade A+ carpeting is to be installed on the entire second floor. ChromaLite Builders accidentally installs grade A carpeting instead. Few people, except for carpeting experts, can tell the difference. Jessica, however, refuses to pay for the construction citing that ChromaLite Builders has breached the contract. Which of the following statements is true in this

A. The courts are likely to consider ChromaLite Builders’s performance as complete performance, and Jessica will have to pay the full amount to ChromaLite Builders.

B. Jessica can claim a breach of contract and refuse to pay ChromaLite Builders for the construction of the house.

C. The courts are likely to consider ChromaLite Builders’s performance as a substantial performance, and Jessica would be entitled to monetary damages – Correct

D. Jessica has materially breached the contract by refusing to pay ChromaLite Builders; hence, she cannot sue ChromaLite Builders for the use of low-grade carpeting.

E. The courts are likely to declare that ChromaLite Builders has materially breached the contract and will ask Jessica to pay exactly half the cost originally mentioned in the contract


Saddler Inc. makes high quality leather seats for racing bicycles and sells them to many of the top bicycle manufacturers. There are eight available sources of the type of leather that Saddler uses, and all of them are located in the Republic of Anaerobia. Saddler has always dealt with only one company in the Republic of Anaerobia primarily due to its reasonable cost. Zappit Inc. has a contract with Saddler for 10,000 seats. Zappit has just received a letter from Saddler explaining that due to political turmoil in Anaerobia its supplier cannot export the product. Therefore, Saddler cannot complete the contract. Which of the following is most likely to be true in this scenario?

A. Saddler can be excused for nonperformance based on impossibility of performance – Correct

B. Saddler can be excused for nonperformance based on substantial performance.

C. Zappit can sue for material breach, and Saddler cannot be excused for nonperformance.

D. Zappit can sue for specific performance if the seats are typical of all bicycle seats and not special or unique in any way.

E. Zappit can rightfully file a lawsuit, and Saddler will be liable to pay Zappit damages for nonperformance.


In the context of performance, the benefit of divisibility of a contract is

A. that it does not excuse a party’s nonperformance because of impossibility of performance, which may reduce the amount of disputes.

B. to view the duty to perform as a series of smaller contracts, which may reduce the amount of disputes – Correct

C. to view the duty to perform as optional.

D. that it mitigates the harmful effects of rescission.

E. that it completely eliminates the need for arbitration and other alternative dispute resolution techniques.


Great Tires Inc. orders 50 tons of rubber from Bill, a distributor. Bill almost always chooses Ritchie’s Rubber Farm over various other rubber plantations as he gets discounted rates. The delivery of the rubber to Great Tires is due on September 1. On August 1, a fire destroys Ritchie’s Rubber Farm. Which of the following statements is true in this situation?

A. Bill’s performance will be excused due to impossibility of performance.

B. Bill’s performance will be excused due to material breach.

C. Bill’s performance will not be excused if obtaining rubber from another plantation is reasonable and possible – Correct

D. Bill’s performance will not be excused unless he can get the same quantity of rubber at a lesser price from a different source.

E. Bill’s performance will be excused even if Great Tires proves that rubber from other plantations is reasonably available.


A massive crop infestation caused Northfront Corn Corp. to default on their corn delivery contract to Right Foods Corp., a manufacturer of packaged chips. As the infestation spread across the country, Northfront was not able to source from other corn producers. In this case, Northfront is most likely to be excused from performance because of ______.

A. a condition precedent in the delivery contract

B. divisibility of performance

C. commercial impracticability – Correct

D. substantial performance

E. eminent domain


When a party intentionally relinquishes a right to enforce a contract, it is called a(n) ______.

A. agreement

B. waiver – Correct

C. breach

D. disclaimer

E. release


Sheila contracted her friend Susan to paint her house for $3,000. Sheila did this as a favor to Susan as Susan was unemployed. Before she could finish the job, however, Susan got a job at a marketing company, which meant that she could not complete her contract. As Susan is her friend, Sheila decided not to enforce the contract, and she let Susan keep the $1,000. This scenario is an example of a(n) ______.

A. arbitration

B. waiver – Correct

C. condition precedent

D. unjust enrichment

E. delegation of duties


A similarity between a waiver and a release is that

A. there is a liability for a breach of contract in both cases.

B. both always occur before a contracting party fails to perform.

C. both require the payment of liquidation damages.

D. both always occur after a contracting party fails to perform.

E. nonperformance of contract is forgiven in both cases – Correct


A ______ exists when a party to a contract announces that the other party does not have to perform as promised.

A. release – Correct

B. waiver

C. surrender

D. breach

E. tender


Which of the following statements is true of a waiver?

A. It generally occurs when a contracting party announces the other party does not have to perform as promised.

B. It requires a condition subsequent to be present in a contract in order to be evoked by a nonperforming party.

C. It can be granted by the breaching party.

D. It is bargained for and is supported by consideration.

E. It generally occurs after a contracting party fails to perform – Correct


Ian owes Shirley $5,000, which is payable in five installments at an interest. However, after two installments, Ian offers to pay Shirley the entire debt to avoid paying the interest. In this scenario, which of the following will take place if Shirley announces that Ian does not have to pay the debt in further installments?

A. waiver

B. negotiation

C. release – Correct

D. arbitration

E. rescission


Stuart signs a contract that allows him to rent a snowplow from Homer’s Plow Company. The contract stipulates that he has to pay $50 per week. Winter ends sooner than expected, so Stuart wants to return the plow ahead of the due date in order to avoid paying unnecessary rent. Homer’s Plow Company agrees to let Stuart return the plow as long as he signs a contract that requires him to rent the plow again next year. This is an example of a(n) ______.

A. waiver

B. arbitration

C. rescission

D. release – Correct

E. novation


Kent signed a contract with Turner to exclusively work for Turner. Kent breached the contract by working part time for other people. Turner tried to reach a voluntary settlement with Kent as long as he pays a certain amount to Turner. As this attempt failed, they decided to allow Erika, a neutral third party, to make a decision. Turner and Kent agreed to abide by the decision taken by Erika. Which of the following is depicted in this scenario?

A. a negotiated settlement

B. obiter dicta

C. arbitration – Correct

D. stare decisis

E. a free exercise clause


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

A. Nominal damages

B. Consequential damages

C. Liquidated damages

D. Compensatory damages – Correct

E. Specific damages


Rachel contracted with Steven to cater her wedding for $20,000. Steven failed to deliver on the day of the wedding, which forced Rachel to order food from a restaurant that cost her $30,000. What amount in compensatory damages does Steven owe Rachel?

A. $30,000

B. $20,000

C. $10,000 – Correct

D. $50,000

E. No compensatory damages


Daniel’s failure to deliver ice-cream makers and waffle makers on time resulted in a two-week delay in the opening of Sheena’s new ice-cream parlor. Sheena incurred a heavy loss since she had to pay the rent for those two weeks as well as salaries to the personnel hired. In this case, which of the following remedies is a court most likely to award Sheena?

A. liquidated damages

B. consequential damages – Correct

C. nominal damages

D. specific performance

E. differential damages


Consequential damages are awarded

A. only when compensatory damages are not awarded.

B. whenever a contract is released.

C. whenever a contract is waived.

D. only if the consequence was foreseeable – Correct

E. only when the cost of getting a substitute performance was higher.


Frank is the fresh produce supplier to Green Valley, an upscale restaurant. He provides the restaurant with imported meat for which he is paid $1,500 per day. One day, Frank fails to deliver the meat due to personal reasons. This causes the restaurant to order from a neighboring city for $2,500. The delay in shipment results in a foreseeable loss of $1,500 in revenue for Green Valley. If Green Valley decides to sue Frank for damages, the court is most likely to award Green Valley with damages in the amount of ______.

A. $1,000

B. $4,000

C. $2,500 – Correct

D. $8,000

E. $5,500


Salim has entered into a contract with Jenna to buy her land for $50,000. Salim has paid the amount in full. However, Jenna has not transferred the land to Salim. Salim decides to sue Jenna to request a court order to compel Jenna to transfer the land as per the contract. Which of the following remedies is the court most likely to enforce in this case?

A. rescission

B. consequential damages

C. substantial performance

D. liquidated damages

E. specific performance – Correct


Which of the following statements is true of liquidated damages?

A. They are the damages awarded by a court to a plaintiff for a breach of contract that causes no financial injury to the plaintiff.

B. They are the damages awarded by a court arising from unusual losses, which the contracting parties knew would result from a breach of contract.

C. They are the damages awarded by a court to put a plaintiff in the same position as if a contract had been performed.

D. They are the damages specified in a contract when real damages for breach of contract are likely to be uncertain – Correct

E. They are the damages enforced when a party to a contract incurs damages even after getting an injunction.


Which of the following remedies provided by a court to a nonbreaching party requires each party to a contract to return the consideration given to the other?

A. restitution

B. rescission – Correct

C. injunction

D. extradition

E. novation


Which of the following is a remedy that provides equitable relief in cases that involve an intellectual property dispute?

A. waiver

B. assignment

C. release

D. injunction – Correct

E. novation


Which of the following statements is true of rescission?

A. It results in awarding monetary damages to a nonbreaching party that is intended to punish the breaching party of a contract.

B. It arises from unusual losses that were foreseeable.

C. If a party to a contract intentionally relinquishes a right to enforce the contract, a rescission occurs.

D. If a party to a contract choses rescission as a remedy, that party cannot also make a claim for damages – Correct

E. If a party to a contract announces the other party does not have to perform as promised, a rescission exists.


A(n) ______ is a court order for a party to refrain from doing something.

A. injunction – Correct

B. extradition

C. rescission

D. restitution

E. waiver


An injunction is a court order for a party to a contract to

A. do something agreed to under an original contract – Correct

B. pay compensatory damages to the nonbreaching party of the contract.

C. pay consequential damages to the nonbreaching party of the contract.

D. release the nonbreaching party from its contractual obligations.

E. relinquish its right to enforce the contract.


The purposeful reduction of damages, usually the responsibility of a nonbreaching party to a contract, is known as ______.

A. mitigation – Correct

B. negotiation

C. waiver

D. release

E. novation


Lisa is a musician. She signs a contract with a local restaurant allowing it to play her song in its advertisement for two years. The restaurant continues to play her song even after the contract expires. In this scenario, if Lisa sues to stop the restaurant from using her music, the court is most likely to order a(n) ______.

A. mitigation

B. injunction – Correct

C. waiver

D. release

E. discharge


Cyra is a musician who is contracted to perform for Vanta Blue, a local pub. Vanta Blue pays her an advance as part of the contract. But Cyra never shows up to perform at Vanta Blue. Vanta Blue sues Cyra for breach of contract and to request an order that Cyra carry out her contractual obligation. Which of the following remedies is most likely to be sought by Vanta Blue in this case?

A. specific performance – Correct

B. injunction

C. tender performance

D. condition subsequent

E. substantial performance


Which of the following statements is true of mitigation?

A. The victim of a contract breach must mitigate damages when possible – Correct

B. Mitigating damages leads to an impossibility of performance in a contract.

C. A condition subsequent must be met for mitigation to occur.

D. Damages can be mitigated only when concurrent conditions exist in a contract.

E. Whenever a contract gets waived, the breaching party must mitigate the damages incurred.


Anita contracts ValleyHeat Landscaping Corp. to landscape her hotel. Midway through the project, Valley Heat informs Anita that due to internal issues the company is shutting down. To avoid this from delaying the opening of her hotel and causing her loss in hotel revenue, she contracts another landscaping company to finish the project on time. This scenario is an example of ______.

A. mitigation – Correct

B. release of performance

C. liquidation

D. restitution

E. mediation


Contracts are

A. legally enforceable promises – Correct

B. always required to be written as per the Uniform Commercial Code (UCC) law.

C. a form of a circular.

D. enforceable in supreme courts but not in lower courts.

E. always informal agreements


Which of the following statements is true about contract laws?

A. Their application is confined to formally written documents.

B. They must be formal in order to be valid.

C. They enable private agreements to be legally enforceable – Correct

D. They are applicable to all business dealings that are against public policy too.

E. They are invalid in instances that involve implied “promises.”


In the context of contracts formed by promises, which of the following is an agreement containing mutual promises?

A. unilateral contract

B. quasi-contract

C. express-in-fact contract

D. bilateral contract – Correct

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