Bus law, exam one, chapters 1,2,5,6,8,9,1011,12, page # 1

1. The United States Supreme Court has the power to:

a. appoint judges to serve on the Supreme
Court.
b. declare an act of Congress
unconstitutional.
c. issue executive orders.
d. ratify treaties.
2. The President of the United States:
a. creates federal common law.
b. can veto Congressional legislation.
c. determines the constitutionality of statutes.
d. passes statutes.
3. The notion of civil disobedience is founded on what principle?
a. Legal Positivism.
b. Natural Law.
c. Legal Realism.
d. Foreseeability.
4. Which school of jurisprudence is based on the philosophy that what matters is not what is written as law,
but who enforces the law and by what process?
a. Legal positivism.
b. Natural law.
c. Legal realism.
d. Sovereign selection.
5. The observation that "The one and only social responsibility of business is to increase its profits" can be
attributed to:
a. Justice Potter
Stewart. b. John
Akers.
c. Milton Friedman.
d. Jeffrey Sachs.
6. E-presto, Inc. has established an Ethics Line. Ethics Line is a toll-free phone number that employees can
call any time of the day, any day of the week to discuss ethics and report suspected unethical or improper
conduct. Why would E presto establish the Ethics Line?
a. Ethical behavior improves productivity.
b. Ethical behavior increases job stability.
c. Unethical behavior can destroy a business.
d. All of these are reasons that would justify establishing an Ethics Line.
7. Charlie Sheen's drug use and violent behavior:
a. were bad enough that to warrant CBS's firing of him from a hit

Bus law, exam one, chapters 1,2,5,6,8,9,1011,12, page # 2

TV show. b. have no impact on his job as an actor.

c. enhance his reputation as a ''tough guy" and should be tolerated.
d.
8. The Chief Executive Officer of Ticor, Inc. must decide about the disposal of toxic waste materials.
Which of the following considerations should help the CEO reach an ethical business decision?
a. Toxic waste disposal law.
b. The harm the disposal could cause to the environment.
c. The impact on the business if the decision is publicly disclosed through the
news media.
d. All of these.
9. Don runs a construction company. He hires people to work on his projects and tells them they are all
"independent contractors." Legally, they are not independent contractors since Don tells the workers when
to come to work, how long to work, what days to work, what they are to do each day, and so forth. At the
end of each week, Don pays his workers in cash rather than with a check. Also, he does not withhold any
state, federal or local withholding tax
(since he claims the workers are independent contractors). Which statement is correct?
a. Don has committed both unethical and illegal conduct.
b. Don has committed unethical conduct, but it is legal.
c. Don has committed ethical conduct but it is illegal.
d. Don has committed both ethical and legal conduct.

10.

Lois is running for political office. She trails the incumbent and decides to start running a series of "attack
ads." The attack ads are very effective and one week before the election it appears that she has drawn
even with her opponent. Lois admits that the attack ads were exaggerations and contained some
distortions. Which statement is correct?
a. Lois has engaged in unethical behavior.
b. Lois has engaged in ethical behavior since she has an obligation to her supporters to run a campaign
that will help her get elected.
c. It is not possible to determine whether Lois's attack ads were ethical or unethical.
d. Assuming Lois's attack ads were unethical, her conduct is justified and proper if she gets elected.

11. Nortron Corporation wants to create an ethical environment in its company. Which of the following has
been found to help foster a sense of ethics within an organization?
a. The company may develop a formal, written ethics code.
b. The company may institute a formal ethics training program for the employees.
c. The top executives may provide good examples by behaving ethically themselves.
d. All of these alternatives have been used by U.S. companies to create an ethical
environment in their organizations.
12. Jim told his manager, Lana, that a co-worker, Diane, had been in prison for theft. Lana checked into the
matter and, when she learned that Diane had served time in prison for theft, fired her.

Bus law, exam one, chapters 1,2,5,6,8,9,1011,12, page # 3

a. Jim is liable to Diane for defamation.

b. Jim is liable to Diane for defamation unless he can show a legitimate reason for having to tell Lana
about
Diane's prison history.
c. Jim is liable to Diane for defamation only if she is a
public figure.
d. Jim is not liable to Diane for defamation.
13. Which of the following elements is not necessary to apply the doctrine of res ipsa loquitur?
a. An ultrahazardous activity is involved.
b. The defendant had exclusive control of the thing that caused the
harm. c. The harm would normally not have occurred without
negligence.
d.The plaintiff had no role in causing the harm

14. Adam decided to play a practical joke on Linda, a co-worker. As Linda was leaving the office one night,
Adam, wearing a mask, stepped out from behind some bushes. He pointed a handgun made out of licorice
at her and demanded her purse. He then pushed the candy gun to her head and told her if she told
anybody he'd kill her. Linda was very scared during the whole incident. She did not think it was funny
when Adam pulled the mask off and took a bite out of the gun as he gave her the purse back. Which
statement is correct?
a. Adam committed an assault but not a battery.
b. Adam committed a battery but not an assault.
c. Adam committed an assault and a battery.
d. Adam committed neither an assault nor a battery since he used a candy gun and was only playing a joke on
Linda.
15. The United States and Argentina have signed the Convention on Contracts for the International Sale of
Goods (CISG). Oxtron, Inc., a U.S. company, and Leer, an Argentinean company, have entered into a
contract under which Oxtron is to ship medical devices to Leer. The contract does not include a choice
oflaw provision. The contract will be governed by:
a. the CISG.
b. the UCC.
c. the domestic contract law of Argentina.
d. the domestic contract law of the United States.
16. The United States and Singapore have signed the Convention on Contracts for the International Sale of
Goods (CISG). Notren, Inc., a U.S. company, and SWT, a Singapore company, have entered into a
contract under which SWT is to ship party supplies to Notren. One of the terms of the contract states,
"The validity and performance of this contract will be governed by the Uniform Commercial Code (UCC)

Bus law, exam one, chapters 1,2,5,6,8,9,1011,12, page # 4

of the state of New York, not the Convention of the International Sale of Goods (CISG)." The contract will
be governed by the:
a. CISG.
b. Uniform Commercial Code of New York.
c. common law.
d. World Trade Law.
17.

If a foreign company "dumps" goods on the United States market:

a. the goods will be considered illegal goods and not be allowed to be sold in the
United States.
b. the United States will issue trade sanctions against the country that allowed the
dumping.
c. a "dumping duty" will be imposed on the dumped goods if the Commerce
Department determines the goods are being sold at less than fair value and that this
harms an American industry.
d. All of these are correct.

18. Zebra Toy Company, located in Chicago, sells $500,000 worth of toys to a London, England, wholesaler.
This contract could be governed by:
a. Illinois's Uniform Commercial Code.
b. English law.
c. the CISG.
d. All of these are correct.
19. The primary goal of the North American Free Trade Agreement (NAFTA) is to:
a. allow Canada, the United States, and Mexico to compete as a common economic entity against
other countries in the world.
b. allow for the free and unrestricted movement of people from one country to another to improve the
labor market of all three counties.
c. eliminate almost all trade barriers between the three nations.
d. All of these are correct.
20. Kjell is the vice president of international sales for Oxtren, Inc, a U.S. company. To secure a multimillion
dollar contract for his company, Kjell paid a Mongolian governmental officer $10,000. Kjell:
a. has violated the Foreign Corrupt Practices Act.
b. has not violated the Foreign Corrupt Practice Act because the payment was a grease payment.
c. has not violated the Foreign Corrupt Practices Act because the government official was from
Mongolia, not the United States.
d. has not done anything illegal because Congress has not ratified the Convention of Combatting Bribery
of
Foreign Public Officials in International Transactions.
21. What is not required to establish promissory estoppel?

Bus law, exam one, chapters 1,2,5,6,8,9,1011,12, page # 5

a. A promise made by the defendant.

b. A promise made by the plaintiff in response to the defendant's promise.
c. Reliance on the defendant's promise.
d. Enforcing the promise is the only way to avoid injustice.
22. Which of the following represents a unilateral offer?
a. "I will pay you $50 if you mow my lawn."
b. "I will pay you $50 if you promise to trim that tree."
c. "I will pay you $50 for your CD player."
d. "I will pay you $50 for your backpack."
23. Jennifer has offered to sell her laptop computer for $750 to Jack. She tells Jack that the computer is
only six months old but, in fact, it is three years old, and Jennifer wants to unload the lemon. Jack
agrees to buy the computer based on Jennifer's representations. This contract is:
a. a void agreement because of the fraud involved.
b. a voidable contract, one that Jack can void.
c. a voidable contract, one that Jennifer can void.
d. a void contract because of the UCC.
24. Which of the following types of property would be goods under the Uniform Commercial Code?
a. A promissory
note. b. A stock.
c. A patent.
d. A computer.
25. Regency Construction placed an order for two hundred 2 x 4s from Lumber Jack. If the place of delivery
and time for shipping the goods are not specified, the UCC provides:
a. gap fillers to supply missing terms if a contract was intended.
b. there is no contract because having more than one open term made the offer too
indefinite.
c. both A and Bare correct.
d. neither A nor B is correct.
Floyd offers to sell his 1967 Ford Mustang convertible to Tim. Before they conclude their negotiations,
26.
Floyd dies.
Which of the following is true?
a. Floyd's heirs must sell the car to Tim.
b. Floyd's heirs must continue to negotiate the offer and sell the car, if a reasonable price can be
determined.
c. The offer terminates automatically upon Floyd's death.
d. There is a contract if Tim accepts before learning of Floyd's death.

Bus law, exam one, chapters 1,2,5,6,8,9,1011,12, page # 6

27.

Which of the following offers are considered to be irrevocable for a given period?
a. Finn offers.
b. Option contracts.
c. A writing signed by a merchant offering to hold open an offer for the sale of goods for a stated period.
d. All of these.

28. If an offer specifies no time limit in which to accept:

a. the offeree has 30 days to respond.
b. the offeree has 10 days to respond.
c.
the offer is not valid and therefore it does not matter when the offeree responds.
the
D
offeree has a reasonable period during which to accept.
29.

In January, Alex promised to pay Y-K Inc. $5,000 if it would refrain from filing suit against him on a
breach of contract action. Y-K agreed and accepted a $5,000 check from Alex. Which of the following
statements is correct?
a. Y-K's promise to refrain from suing Alex was not supported by legal consideration.
b. Y-K's promise to refrain from suing Alex was supported by legal consideration and is
enforceable.
c. This is an accord and satisfaction, and Y-K cannot sue.
d. The courts would apply promissory estoppel in this situation.

30.

Walter worked nights as a clerk in a fast-food store. On his last work shift, Walter's boss told him, "I'm
really grateful for the year that you have worked here. I am going to give you a bonus of $1,000 in your
last paycheck." When Walter got his last paycheck, there was no bonus. If Walter sues, the likely result
will be:
a. Walter will win, as the promise is
enforceable.
b. Walter will lose, as he gave no
consideration.
c. Walter will lose unless the promise was in writing.
d. Walter will win, as no consideration is required to modify an employment contract.

31.

If Rudy offers Oscar $200 for his laptop valued at $600 and Oscar agrees, a court will probably:
a. set aside the agreement as being unfair.
b. set aside the agreement because the consideration is inadequate.
c. not set aside the agreement based on the adequacy of the
consideration.
d. not set aside the agreement because of the UCC.

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32. Under the Uniform Commercial Code, an agreement modifying a contract:

a. always requires consideration.
b. requires consideration only when the sale of goods is
involved.
c. may not require consideration.
d. requires consideration only when one of the parties is incompetent.
Mary owes $3,800 on her credit card. She sends the credit card company a check for $800 with the
33.
notation
"payment in full" on the check. If the credit card issuer cashes the check:
a. Mary's balance will automatically be paid in full if the $3,800 amount was a liquidated debt.
b. Mary's balance will automatically be paid in full regardless of whether the amount of $3,800 was
liquidated or unliquidated.
c. the check may be subject to a UCC exception to the general rules for accord and satisfaction
cases involving checks.
d. Mary's balance will automatically be paid in full if the $3,800 amount was an unliquidated debt.
34. Marco agrees to sell Clowns R Us some balloons. The contract states that Clowns may buy as many
balloons as it wishes. This agreement is:
a. a requirements contract.
b. an output contract.
c. an illusory contract.
d. an enforceable contract.
35.

Which of the following exculpatory clauses will most likely be enforceable?

a. An exculpatory clause that relieves a riding stable of negligence.
b. An exculpatory clause that relieves a riding stable of gross negligence.
c. An exculpatory clause that relieves a riding stable from intentional torts.
d. A riding stable's exculpatory clause that is hidden in an eight-page document that all riders are
required to slgn.

36. Barb has been a children's day care provider for several years in the small town of Sallton. She has decided
to give it all up and move to the big city for excitement and adventure. She sells her business to Ken,
agreeing not to open a competing business within five miles of Sallton for a period of nine months. After five
months of the big city life, Barb is broke and moves back to Sallton. She opens a small day care business.
Ken sues on the non-compete clause. What is the most likely result?
a. Ken wins. The agreement is enforceable.
b. Barb wins. The agreement is denying her the right to do the only thing she knows how to do.
c. Barb wins. The agreement is not enforceable because it is not ancillary to a legitimate bargain.
d. Barb wins. The agreement is not reasonable as to time.

Bus law, exam one, chapters 1,2,5,6,8,9,1011,12, page # 8

37. In the case of Worldwide Insurance v. Klopp, the Supreme Court ofDelaware found that:
a. a contract provision requiring arbitration and then permitting appeal by either party was
void as unconscionable.
b. the contract provision requiring arbitration was clear, unambiguous, and fair to both parties.
c. the arbitration clause in Klopp's auto insurance contract was valid because it furthered the state policy
favoring the use of arbitration to resolve disputes.
d. the automobile insurance policy was governed by UCC, Article 3.
38. To be valid, a noncompete clause must be:
a. ancillary to a legitimate bargain.
b. reasonable in time, geographical area, and scope of activity when ancillary to the sale of a business.
c. necessary to protect trade secrets, confidential information, or customer lists developed over an
extended time when ancillary to an employment contract.
d. All of these.
39. The Tavern's secret recipe for its pizza sauce would be considered:
a. a trade secret, and an employment noncompete clause would be enforceable to protect it.
b. a trade secret, and an employment noncompete clause would NOT be enforceable to protect it. c. just
a secret recipe and not something the Tavern could protect in a noncompete clause.
d. an exculpatory clause and not enforceable.
40. Wendell, new to the area, selects a doctor from the telephone book and visits that doctor to have a
splinter extracted. Unbeknownst to Wendell, the doctor has never passed the state licensing exams. Later,
when Wendell discovers the truth, he refuses to pay his bill. If the doctor sues for recovery of the fee, will
the court support the doctor's claim?
a. Yes, it was up to Wendell to verify the doctor's qualifications prior to having the splinter extracted.
b. No, the court is likely to take the position that it is not in the public's best interests to enforce
contracts with unlicensed doctors.
c. It depends on whether Wendell's injury healed properly.
d. No, but the doctor could probably recover under quasi-contract.
41. Larry has the largest pizza business in the city. He learns that Henry is thinking of opening a competing
pizza and pasta delivery business. Larry gives Henry $25,000 to not open his proposed business in the
same city. Which statement is correct?
a. The contract is voidable at Larry's option.
b. The contract is void for lack of
consideration.
c. The contract is illegal and void.
d. The contract is enforceable.
42. Which of the following is an example of an exculpatory clause?
a. Creditor charges 38% interest on a loan.
b. Seller is not responsible for property damage regardless of the cause of the injury.

Bus law, exam one, chapters 1,2,5,6,8,9,1011,12, page # 9

c. Buyer agrees to pay any costs oflitigation.

d. Employee agrees to never work for a competing company.
43. In the case of Worldwide Insurance v. Klopp, the Supreme Court ofDelaware found that:
a. a contract provision requiring arbitration and then permitting appeal by either party was
void as unconscionable.
b. the contract provision requiring arbitration was clear, unambiguous, and fair to both parties.
c. the arbitration clause in Klopp's auto insurance contract was valid because it furthered the state policy
favoring the use of arbitration to resolve disputes.
d. the automobile insurance policy was governed by UCC, Article 3.
44. Mark works as a bartender at The Little Nipper, a local bar. Under state law, bartenders are required to be
licensed. The licensing requires filling out an application and submitting a $50 application fee. The application
does not require any special education or experience, just the $50 fee. Craig enters Mark's bar, orders a round
of drinks for the house, then notices that Mark's license is not on display behind the bar. Craig learns that Mark
is not licensed and refuses to pay for the round of drinks. The Little Nipper sues. What result?
a. Since this is an illegal contract, the courts will not enforce it.
b. Since Mark violated a regulatory statute, the contract is unenforceable.
c. Since this is a revenue-raising statute, The Little Nipper wins.
d. Since this is a revenue-raising statute, the licensing law is unconstitutional. Craig wins.
45.

Fundamental rights include all EXCEPT the right to:

a. drive.
b. vote.
c. free speech.

d. travel.
46. Judicial review can best be described as the power of federal courts to:
a. review state court decisions. b.
review state executive action.
c. review state and federal legislative and executive action.
d. none of these.
47. The issue of the constitutional protections afforded flag burning was addressed in:
a. Texas v. Johnson.
b. United States v. Lopez.
c. Marbury v. Madison.
d. Palmore v. Sidoti.
48. The "dormant" aspect of the Commerce Clause:
a. is also known as the "negative" aspect.
b. means that there are many unused powers still available to the government to regulate trade between the
states.
c. guarantees that Congress has the power to regulate trade with foreign countries that have not yet
developed trade practices with the United States.
d. guarantees that the states have the power, even if unused, to impose regulations affecting interstate

Bus law, exam one, chapters 1,2,5,6,8,9,1011,12, page # 10

commerce.
49. Which of the following limitations does not apply to the government in civil proceedings to take a person's
liberty or property?
a. Procedural Due Process.
b. The Takings Clause.
c. Substantive Due Process.
d. The Equal Protection Clause.
50.

The Supreme Court's approach during the period from the 1950s through the 1970s in deciding cases on
constitutional grounds is described as:
a. judicial restraint.
b. judicial activism.
c. judicialreview.
d. the dormant aspect of its judicial power.