Business Law Quiz with Answers

1) Which of the
following is NOT true?
a. A minor can still
disaffirm a contract for a reasonable time after reaching majority.
b. An adult cannot
disaffirm a contract made with a minor.
c. A minor must pay
the agreed price on a contract for necessaries.
d. What constitutes
a necessary varies over time and can differ from state to state.

2) Usury laws are
concerned with:
a. taxes paid
b. interest charged
c. uses of the labor
force
d. contract purposes

3) Types of
contracts that are commonly invalidated include the following EXCEPT:
a. immoral contracts

b. contracts in
restraint of trade
c. contracts that
impair family relations
d. contracts to
commit a tort
e. contracts which result
in competition with a valid preexisting business

4) Which of the
following is generally true about exculpatory clauses?
a. They are not
valid with respect to intentional acts.
b. The test is if
they are reasonable in time, scope, and geographic area.
c. They are usually
found to be invalid.
d. They are not
valid for ordinary negligence.

5) Which of the
following is NOT one of the needed elements of an unconscionable contract?
a. parties
possessing severely unequal bargaining power
b. the dominant
party’s unreasonable use of that bargaining power to obtain oppressive or
manifestly unfair terms
c. an unreasonably
short period of time for the oppressed party to perform
d. no reasonable
alternative for the oppressed party

6) Mike, who is 16
years old, buys a motorcycle from Cycle Sellers, Inc. Assume that Mike pays
$5,000 and that the fair value of the motorcycle at the time of purchase is
$4,500. Which of the following is true?
a. This is an
illegal contract because Mike is a minor.
b. This contract is
void because Mike is a minor.
c. Even if Mike
signs a statement as part of the contract that states, “I agree not to disaf
firm this contract,” Mike may nonetheless disaffirm when he is 17 years old.
d. There was
probably undue influence involved with this contract since Mike is a minor and
the price charged was greater than the fair market value.
e. If a court
decides that the motorcycle is a necessary, Mike will be obligated to pay the
$5,000.

7) At age 16, Phil
bought a car from Acme Auto Co. for $2,500. Phil drove the car for about six
months, and then he had an accident. The damage to the auto was $1,500. In
addition, the value of the auto before the accident was only $2,000. The
accident was not Phil’s fault. Phil wishes to disaffirm the contract. Which of
the following best describes this situation?
a. Because the car
was damaged, Phil cannot disaffirm the contract.
b. Phil can
disaffirm the contract, but he can recover only $500 of his money.
c. Phil can
disaffirm the contract, but he can recover only $2,000 of his money.
d. Phil can
disaffirm the contract and recover the entire $2,500.
e. Phil can
disaffirm the contract, but he must first have the car repaired.
8) The courts have
very broad powers to enforce or not enforce certain types of contracts. Which
of the following statements best describes this power?
a. Contracts that
are contrary to public policy are well defined by statutes.
b. The determination
of what is unconscionable is very well established and follows very clear
standards.
c. Exculpatory
clauses and noncompete agreements sometimes violate public policy and sometimes
do not.
d. To be contrary to
public policy, the contract must violate a statute.

9) On your first spring
break, you go in a bar after reading a large sign outside saying, “Beers $1.00
each all night long. If you can drink 30, they’re all free?we’ll pay for a
taxi.” You pay for your beers as you drink, and you manage to drink 30 beers.
The bar agrees that you drank 30 beers, but refuses to refund your money. You
sue the bar. Which is most likely true?
a. This contract is
voidable by the bar if you get so intoxicated while drinking the 30 beers that
you don’t comprehend the nature of what you are doing.
b. The sign is an
offer for a bilateral contract because both you and the bar must do something.
c. A court would
ignore this contract on the basis of illegality even if it does not violate a
specific statute.
d. There is no
consideration on your part if you don’t pay for the beer.

10) Gertrude wants
to buy a new car, but is short of money. She promises the salesperson that she
will grant him sexual favors for the next year if he will give her an
automobile. He agrees. She later changes her mind, and he seeks to enforce the
contract. How will a court most likely rule on the matter?
a. It is a valid
contract.
b. It is an illegal
contract in violation of public law.
c. It is a void
contract in violation of public policy.
d. It is a contract that may be voidable by
Gertrude.