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BUSINESS LAW

This exam tests general knowledge of business law as it applies to contracts and the legal system. Topics

covered include: the effect of law on business transactions, contract law, sales contracts, commercial paper,

agency law, and property. (3 s.h.) LAW-201-TE

This is a two-hour examination in which you must answer 100 multiple-choice questions (worth 1 point each).A passing score is 55 out of 100 points.

Here are the topics covered and their approximate importance on the test:

I. INTRODUCTION TO LAW (5%)

II. AMERICAN LEGAL SYSTEM (15%)

A. Legal system and court jurisdiction

B. Constitutional regulation of business

C. Dispute resolution

D. Torts

E. Crimes and business

III. CONTRACTS (30%)

A. Contract law and theory

B. Contractual agreement

C. Consideration

D. Contractual capacity; reality of consent

E. Legality of subject matter; proper form of contracts

F. Contract interpretation; rights of third persons

G. Contractual discharge and remedies

IV. SALES AND LEASES (15%)

A. Sales contract formationB. Title; risk of loss

C. Performance; remedies

D. Warranties; product liability

V. NEGOTIABLES (20%)

A. UCC Articles 3 and 7

B. Negotiability

C. Holders in due course; holders by due negotiation

D. Liability; discharge

E. Bank-customer relations; EFT

VI. AGENCY (10%)A. Creation and termination

B. Liability for contracts

C. Liability for torts and crimes

VIII. PROPERTY PROTECTION (5%)

A. Real property; joint ownership

B. Personal property; bailments

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A textbook to help you prepare:

Davidson, Daniel, Knowles, Brenda, and Lynn Forsythe. Business Law: Principles and Cases in the

Legal Environment. Current edition. South-Western.

SAMPLE QUESTIONS

These questions are similar to ones you will find on the TECEP exam.

1. Which of the following are sources of the law in the American legal system?

a. Constitutionsarbitrationcivil lawcase law

b. Treatiesarbitrationlaw merchantcase law

c. Statutesordinancesadministrative regulationsd. Constitutionsmediationcivil lawequity

2. The law of negligence is based on the

a. concept of fault

b. policy decision regarding who should bear the lossc. obviousness of the hazard

d. doctrine ofrespondeat superior

3. What is the role of a grand jury in the law of criminal procedure?

a. Issuing an arraignment when it believes that the accused has committed a crime

b. Issuing an indictment when it believes that the accused has committed a crime

c. Issuing an information when it believes that the accused has committed a crimed. Determining guilt or innocence in criminal cases

4. One June 1, Southern Co. agreed to sell 100 yards of XL wire to Northern Inc. Delivery was

scheduled for June 20, the delivery location was Star Manufacturing, and payment was

scheduled 30 days after delivery. This contract is

a. unilateral

b. restitutionary

c. informald. bilateral

5. Connie offers her house for sale to Bill. Five days after the offer, a flood destroys Connie'shouse. The destruction of the house automatically causes Connie's offer to

a. extend

b. terminate

c. transform into an option whereby Bill can accept or notd. transform into a firm offer

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6. A suretyship contract is

a. involved with liquidated debtsb. governed exclusively by the UCC

c. rarely enforceable

d. generally a co-signer agreement

7. Why is fraud a more advantageous remedy for the plaintiff to pursue than misrepresentation?

a. Fraud is generally easier to prove.

b. Only fraud can be the basis for recission.

c. Punitive damages may be awarded when fraud is proven.

d. Misrepresentation offers no possibility of punitive damages.

8. Jack agrees to lease his home to Jane for nine months, with the lease to begin six months fromthe signing of the contract. Under the statute of frauds,

a. the lease is required to be in writing

b. the lease is not required to be in writingc. the parol evidence rule renders the contract voidable

d. a contract is not formed, as there is no current agreement

9. Julian hires Evan to paint his portrait. Evan begins the portrait but becomes upset with Julian andrefuses to finish it. If Julian sues Evan to require him to finish the portrait, it will be a suit for

a. an injunction

b. reformation

c. specific performance

d. restitution

10. A buyer and seller enter into a sales contract. Later, the buyer has second thoughts about the

contract and decides to refuse to cooperate with the seller. What can the seller do?

a. The seller can treat the contract as breached by the buyer.

b. The seller can sue the buyer for the tort of failure to cooperate.c. The seller can seek an injunction, because failure to cooperate is an obstruction.

d. The seller can only try to persuade the buyer to cooperate.

11. A seller shipped goods to a buyer by common carrier, using a shipment contract. When thecarrier arrived at the buyer's location, the buyer refused to accept the goods unless the driver

unloaded them inside the buyer's warehouse. The driver refused and the goods were

subsequently damaged. Who bears the risk of loss?

a. The seller, for failing to make a proper delivery contract

b. The buyer, since this was a shipment contract and the seller had completed the performanceobligations

c. The seller, since the buyer did not accept the goods that the seller shipped

d. It depends on whether the buyer's request was reasonable. If it was, the seller bears the riskof loss, otherwise it falls on the buyer.

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12. A seller refused to deliver common goods that are in temporary short supply in the market. The

buyer could not find substitute goods from another seller. In this case, the buyer is allowed toseek the remedy of

a. recoupmentb. specific performance

c. coverd. replevin

13. A cashier's check is a check

a. drawn against the bank cashierb. drawn by a bank against that same bank

c. that requires, as a condition to payment, a countersignature by a person whose specimen

signature appears on the instrumentd. drawn by a bank on another bank

14. A promissory note that is NOT negotiable is

a. covered by Article 3 of the UCC

b. covered by Article 4 of the UCC

c. covered by Article 7 of the UCCd. a contract covered by common law

15. Pam is a holder in due course of a check issued by Pablo. Which of the following defenseswould permit Pablo to avoid paying Pam for the check?

a. Discharge in bankruptcy proceedings

b. Breach of warrantyc. Failure of considerationd. Fraud in the inducement

16. When a customer opens a checking account with a bank, a contract is formed. The terms of that

contract are most likely to be contained in

a. Article 3 of the UCC

b. Article 4 of the UCCc. the signature card

d. state banking regulations

17. If an agency agreement does NOT specify a set date, a set period, or a set occurrence that will

terminate the relationship, that relationship is best described as a(n)

a. resulting agencyb. agency at will

c. illusory agency

d. constructive trust

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18. When an employer is held liable underrespondeat superiorfor a tort committed by their

employee, the

a. employer is entitled to indemnification from the employee

b. employee is not held liable for the injuryc. third party may only recover from the employer

c. third party may only recover one-half the amount from the employer

19. Al and Barb, unrelated parties, jointly purchase a commercial lot. The title probably will betaken as

a. joint tenantsb. tenants by the entirety

c. tenants in common

d. individual fee owners

20. Which of the following is a bailment situation?

a. A conditional sale of goodsb. The lease of an apartment

c. A driver parks and locks his car in a self-service parking lot and takes the keys

d. Property held by a lender as collateral

ANSWERS TO SAMPLE QUESTIONS

1. (c) 2. (a) 3. (b) 4. (d) 5. (b) 6. (d) 7. (c) 8. (a) 9. (c) 10. (a)

11. (b) 12. (d) 13. (b) 14. (d) 15. (a) 16. (c) 17. (b) 18. (a) 19. (c) 20. (d)