Midland University
Business Law I
Test #2
52 Points
Contracts
1. In the context of termination of an offer, ______ occurs when an offeror retracts the offer
before the acceptance.
A. rejection
B. reversion
C. novation
D. revocation
E. rescission
2. 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 ______.
A. collusion
B. accord and satisfaction
C. consideration
D. reversion
E. novation
3. Which of the following terms refers to a person’s ability to be bound by a contract?
A. legality
B. capacity
C. usability
D. negotiability
E. measurability
4. If a minor fails to disaffirm a contract within a reasonable time after reaching majority, the
minor is said to ______ the contract.
A. transcend
B. terminate
C. rescind
D. ratify
E. breach
5. Which of the following statements is true about intoxicated and mentally incompetent persons
in a contract?
A. A court of law legally terms mentally incompetent persons as “infants” to a contract.
B. A court prevents intoxicated persons from making a contract voidable in any circumstance.
C. The capacity to contract is simply lost due to intoxication and mental incompetency even
before a court can adjudge a person of such mental incompetency.
D. A court measures capacity to contract by whether an adult is capable of understanding the
nature and purpose of the contract.
E. The complexity of a contractual transaction and the mental capacity of an adult are irrelevant
in controlling the right to disaffirm a contract.
6. Jason owns a painting company and offers to paint Julie’s house for $2,000 with his crew to
start work this coming Friday. Julie counters with $1,700 with his crew to start work this coming
Friday. Do Jason and Julie have a binding and enforceable contract? Why or why not?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
7. Responding to an online advertisement, Mary buys a vacation home in the Ozarks for
$200,000. She signs the papers, scans them and emails them to the seller who signs them and
sends them back. Mary wires the purchase price of $200,000 to the seller. Mary and her family
arrive at the address of the vacation home and it is a vacant lot. Mary has a legal cause of action
against the seller for: (2 points)
A.
B.
C.
D.
Negligence
Defamation
Fraud
Criminal Trespass
Responding to an online advertisement, Mary buys a vacation home in the Ozarks for $200,000.
She signs the papers, scans them and emails them to the seller who signs them and sends them
back. Mary wires the purchase price of $200,000 to the seller. The seller mails Mary the title and
keys to the house. At closing, the seller had represented to Mary that there were no hazardous
wastes or toxic chemicals buried underground. A year later, Mary discovered that was not true.
What would have to be true for Mary to bring a cause of action for fraud against the seller?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
8. In order for a contract to be enforceable, it must satisfy these three elements: (3 points)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
9. Dr. Smith signed a contract with Resurrection Hospital to begin work at the Hospital in six
months for an annual compensation of $250,000. Prior to his start date, he receives a better offer
from another employer and emails the Hospital that he will not be joining their staff after all.
Did Dr. Smith and the Hospital have a binding and enforceable contract? Why or Why Not? If
yes, what are the Hospital’s potential damages? If no, is Dr. Smith free to accept the new offer
without consequences? (2 points)
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
10. Dr. Johnson signed a contract with Family Practice Associates, LLC, a group of 10 private
practitioners. The contract contains a restrictive covenant which prohibits Dr. Johnson from
practicing medicine for 1 year and within 5 miles of the group’s office. In States that permit
restrictive covenants, is it likely that this covenant would be enforceable? Why or why not? (2
points)
______________________________________________________________________________
______________________________________________________________________________
____________________________________________________________________________
The contract above contained a clause which said that any violation of this restrictive covenant
will result is a mandatory payment to Family Practice Associates, LLC of $250,000, an agreed
upon amount of damages because they could be difficult to otherwise estimate and prove. This
type of remedy is called:
A.
B.
C.
D.
Compensatory Damages
Liquidated Damages
Consequential Dames
Punitive Damages
11. Mary Jones signs a personal services contract with the ABC Manufacturing Company to sell
its medical devices. She is a top salesperson. Her contract contains a covenant not to compete
which restricts her from competing with the Company if she ever leaves it for any reason. As a
general rule, in States where such restrictive covenants are enforceable, they must be reasonable
in two respects. Name them: (3 points)
______________________________________________________________________________
______________________________________________________________________________
If Mary’s contract is governed by Nebraska law and the covenant not to compete is enforceable,
the Company can sue Mary for which of these remedies:
A.
B.
C.
D.
E.
F.
G.
H.
Monetary damages that are provable
Specific performance of a personal service contract
Injunctive relief
Punitive damages
All of the above
A, C and D only
A and C only
A, B and C only
12. Mr. Jackson is an 85-year old senior citizen and resident in the memory care unit of
Tranquility Village. He walks out an unlocked door to a nearby Open House on Sunday
afternoon and signs a contract to buy the house for $350,000. Is this purchase contractually
voidable by Mr. Jackson or his daughter as his legal guardian on his behalf? Why or why not?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Torts
13. Legally, a tort is any civil wrong other than a breach of contract.
___ True ___ False
14. One is not liable for another’s injury unless he or she has a duty toward the person injured.
___ True ___ False
15. In business, negligence can occur when employees cause injury to customers or others.
___ True ___ False
16. To successfully prove a cause of action for negligence, the plaintiff must prove:
A.
B.
C.
D.
E.
Carelessness and damages
Carelessness, causation and damages
Breach and damages
Duty, breach and damages
Duty, breach, causation and damages
17. Jack injures his ankle and is taken to a hospital. Airi, a doctor, applies a cast to Jack’s injured
ankle. Airi warns Jack not to exert pressure on his injured leg until the cast is removed. Jack
ignores Airi’s advice and injures his leg again when playing basketball while still having the
cast. Jack files a malpractice suit against Airi claiming that she did not set the cast properly.
Which of the following defenses is Airi most likely to use in this scenario?
A. contributory negligence
B. private necessity
C. retaliation
D. absolute truth
E. consent
18. Which of the following statements is true of comparative negligence?
A. It completely bars a plaintiff from recovering any damages.
B. It requires a plaintiff and a defendant to settle their dispute through arbitration.
C. It allows a plaintiff to claim only punitive damages but not actual damages.
D. It allows a plaintiff to claim damages without establishing proximate causation and causation
in fact.
E. It compares a plaintiff’s fault with a defendant’s and reduces the damage award
proportionally.
19. Antonio and Fred are playing soccer when Fred accidently kicks Antonio’s shin during a
pass. Antonio is seriously injured and is unable to play for at least six months. If Antonio sues
Fred, which of the following defenses is Fred most likely to use?
A. cause in fact
B. assumption-of-the-risk
C. statute of repose
D. strict liability
E. proximate cause
20. Which of the following statements is true of punitive damages?
A. Juries award punitive damages to all cases tried and proven for negligence.
B. The key to the award of punitive damages is a defendant’s motive.
C. Punitive damages are awarded depending on the degree of suffering endured by a plaintiff.
D. Punitive damages are awarded if a defendant agrees to a rescission.
E. Punitive damages are awarded to a plaintiff only in cases of assault.
21. Mr. Smith is leaving his hotel for dinner. It is located in a high-income neighborhood with
hardly any crime and the hotel has no history of assaults on its premises. Mr. Smith is robbed as
he approaches his car. He sues the hotel for negligence for failing to protect a business invitee.
A. A business has no duty to protect absent knowledge that criminal assaults are taking place
or about to take place and is not liable to Mr. Smith.
B. Mr. Smith should have stayed at the hotel and had dinner at its on-site restaurant.
C. The hotel should have retained mobile security units to monitor its parking lot.
D. A business has a duty in all cases to protect business invitees and is liable to Mr. Smith.
22. The Supreme Court has ruled that punitive damages cannot be unreasonably disproportionate
to awards of compensatory damages and established a general ratio in the State Farm case in
your textbook. What is the ratio: _________________________________________________.
23. Joe drives an over-the-road semi for Walmart. He becomes sleepy because he has exceeded
the maximum number of permissible driving hours per day, as recorded on his truck. This has
happened before and Walmart was aware of Joe’s habit. Joe falls asleep and crashes into Bob
who is driving perfectly safely and injuring Bob and totaling his car. Which of the following is
true:
A.
B.
C.
D.
E.
Joe can be sued for negligence
Walmart can be sued for negligence
Bob can be sued for contributory negligence
All of the above
Both A and B
24. Alex is a professional football player. As he completes a run his momentum takes him to a
concrete surface near the field where he slips and tears his ACL. He misses the next season due
to his injury and recovery needs. The loss of his livelihood has left him depressed and
despondent. He sues relevant parties for negligence. Identify at least three components of his
likely overall claim for damages?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
25. The type of damages that Alex can prove in the question above is called
______________________________________________________________________________
26. Ms. Neinstein attends a baseball game at Dodger Stadium and is hit by a foul ball. She sues
the Dodgers. What legal defense will be asserted by the Dodgers?
___________________________________________________________________________
27. Lucy is driving down Clarkson street in Fremont and accidentally runs a stop sign and
crashes into Mike who was turning onto Clarkson street after an evening at the Corner Bar. Mike
sues Lucy claiming damages to his shoulder and his car. Lucy acknowledges that she ran the stop
sign saying it was covered by a tree branch and she didn’t see it. She also said Mike’s turn was
sharp and erratic and his left low beam headlight was out which made it difficult for her to
determine if a car or a motorcycle was turning. What is the most likely outcome of this case
applying Nebraska law?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
28. You are the HR director for your company. A former employee asks you to provide a written
recommendation and referral for a new job. You send the prospective employer a summary of
the former employee’s dates of employment, position he held, the fact he was disciplined on two
occasions for unexcused absences from work and falsifying expense reports – all to which he had
admitted. He does not get the new job. He sues your company for slander based on the referral.
Does he win or lose the suit?
___ Wins
___ Loses
29. John and Bob are the final candidates for the CEO position at the company. Both are internal
candidates and are interviewed by the Board of Directors. During his interview, Bob lets slip that
he is aware that John is a habitual recreational drug user and he believes that could put the
company in a bad light if John receives this promotion. Bob gets the CEO job. John later finds
out about Bob’s comments and sues him for slander. Describe the considerations that would
affect whether John wins or loses his suit.
______________________________________________________________________________
______________________________________________________________________________
_____________________________________________________________________________
30. Traditional media outlets like newspapers enjoy absolute immunity from defamatory
statements because they are fully protected by the First Amendment and freedom of the press.
___ True
___ False
31. Social media outlets like Twitter cannot be sued for defamatory statements made by its users.
____ True
___ False
32. In Iannelli v. Burger King, discussed in our textbook, the plaintiffs argued that commercial
enterprises like Burger King have a general duty to exercise reasonable care toward its patrons,
including a duty to safeguard against assault when circumstances provide warning signs that the
safety of its patrons may be at risk. What was the holding of the court?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
33. Jim is an employee of Acme Chemical Company. At lunch, Jim gets drunk. While making
his afternoon deliveries, he crashes into another car, killing the driver. Acme Chemical Company
can face punitive damage awards for Jim’s behavior.
___ True
___ False
Arbitration
34. Explain the difference between mediation and arbitration.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
35. Explain the advantages of arbitration over litigation.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
36. Arbitration Case Attached – Ms. Carol Fern (10 points)
Read the arbitration case and answer question 3 only (if you were an arbitrator in this case,
how would you rule and why). To receive full credit your answer must be thorough and include
a complete analysis of the case.
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Purchase answer to see full
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Business Law I
Test #2
52 Points
Contracts
1. In the context of termination of an offer, ______ occurs when an offeror retracts the offer
before the acceptance.
A. rejection
B. reversion
C. novation
D. revocation
E. rescission
2. 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 ______.
A. collusion
B. accord and satisfaction
C. consideration
D. reversion
E. novation
3. Which of the following terms refers to a person’s ability to be bound by a contract?
A. legality
B. capacity
C. usability
D. negotiability
E. measurability
4. If a minor fails to disaffirm a contract within a reasonable time after reaching majority, the
minor is said to ______ the contract.
A. transcend
B. terminate
C. rescind
D. ratify
E. breach
5. Which of the following statements is true about intoxicated and mentally incompetent persons
in a contract?
A. A court of law legally terms mentally incompetent persons as “infants” to a contract.
B. A court prevents intoxicated persons from making a contract voidable in any circumstance.
C. The capacity to contract is simply lost due to intoxication and mental incompetency even
before a court can adjudge a person of such mental incompetency.
D. A court measures capacity to contract by whether an adult is capable of understanding the
nature and purpose of the contract.
E. The complexity of a contractual transaction and the mental capacity of an adult are irrelevant
in controlling the right to disaffirm a contract.
6. Jason owns a painting company and offers to paint Julie’s house for $2,000 with his crew to
start work this coming Friday. Julie counters with $1,700 with his crew to start work this coming
Friday. Do Jason and Julie have a binding and enforceable contract? Why or why not?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
7. Responding to an online advertisement, Mary buys a vacation home in the Ozarks for
$200,000. She signs the papers, scans them and emails them to the seller who signs them and
sends them back. Mary wires the purchase price of $200,000 to the seller. Mary and her family
arrive at the address of the vacation home and it is a vacant lot. Mary has a legal cause of action
against the seller for: (2 points)
A.
B.
C.
D.
Negligence
Defamation
Fraud
Criminal Trespass
Responding to an online advertisement, Mary buys a vacation home in the Ozarks for $200,000.
She signs the papers, scans them and emails them to the seller who signs them and sends them
back. Mary wires the purchase price of $200,000 to the seller. The seller mails Mary the title and
keys to the house. At closing, the seller had represented to Mary that there were no hazardous
wastes or toxic chemicals buried underground. A year later, Mary discovered that was not true.
What would have to be true for Mary to bring a cause of action for fraud against the seller?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
8. In order for a contract to be enforceable, it must satisfy these three elements: (3 points)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
9. Dr. Smith signed a contract with Resurrection Hospital to begin work at the Hospital in six
months for an annual compensation of $250,000. Prior to his start date, he receives a better offer
from another employer and emails the Hospital that he will not be joining their staff after all.
Did Dr. Smith and the Hospital have a binding and enforceable contract? Why or Why Not? If
yes, what are the Hospital’s potential damages? If no, is Dr. Smith free to accept the new offer
without consequences? (2 points)
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
10. Dr. Johnson signed a contract with Family Practice Associates, LLC, a group of 10 private
practitioners. The contract contains a restrictive covenant which prohibits Dr. Johnson from
practicing medicine for 1 year and within 5 miles of the group’s office. In States that permit
restrictive covenants, is it likely that this covenant would be enforceable? Why or why not? (2
points)
______________________________________________________________________________
______________________________________________________________________________
____________________________________________________________________________
The contract above contained a clause which said that any violation of this restrictive covenant
will result is a mandatory payment to Family Practice Associates, LLC of $250,000, an agreed
upon amount of damages because they could be difficult to otherwise estimate and prove. This
type of remedy is called:
A.
B.
C.
D.
Compensatory Damages
Liquidated Damages
Consequential Dames
Punitive Damages
11. Mary Jones signs a personal services contract with the ABC Manufacturing Company to sell
its medical devices. She is a top salesperson. Her contract contains a covenant not to compete
which restricts her from competing with the Company if she ever leaves it for any reason. As a
general rule, in States where such restrictive covenants are enforceable, they must be reasonable
in two respects. Name them: (3 points)
______________________________________________________________________________
______________________________________________________________________________
If Mary’s contract is governed by Nebraska law and the covenant not to compete is enforceable,
the Company can sue Mary for which of these remedies:
A.
B.
C.
D.
E.
F.
G.
H.
Monetary damages that are provable
Specific performance of a personal service contract
Injunctive relief
Punitive damages
All of the above
A, C and D only
A and C only
A, B and C only
12. Mr. Jackson is an 85-year old senior citizen and resident in the memory care unit of
Tranquility Village. He walks out an unlocked door to a nearby Open House on Sunday
afternoon and signs a contract to buy the house for $350,000. Is this purchase contractually
voidable by Mr. Jackson or his daughter as his legal guardian on his behalf? Why or why not?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Torts
13. Legally, a tort is any civil wrong other than a breach of contract.
___ True ___ False
14. One is not liable for another’s injury unless he or she has a duty toward the person injured.
___ True ___ False
15. In business, negligence can occur when employees cause injury to customers or others.
___ True ___ False
16. To successfully prove a cause of action for negligence, the plaintiff must prove:
A.
B.
C.
D.
E.
Carelessness and damages
Carelessness, causation and damages
Breach and damages
Duty, breach and damages
Duty, breach, causation and damages
17. Jack injures his ankle and is taken to a hospital. Airi, a doctor, applies a cast to Jack’s injured
ankle. Airi warns Jack not to exert pressure on his injured leg until the cast is removed. Jack
ignores Airi’s advice and injures his leg again when playing basketball while still having the
cast. Jack files a malpractice suit against Airi claiming that she did not set the cast properly.
Which of the following defenses is Airi most likely to use in this scenario?
A. contributory negligence
B. private necessity
C. retaliation
D. absolute truth
E. consent
18. Which of the following statements is true of comparative negligence?
A. It completely bars a plaintiff from recovering any damages.
B. It requires a plaintiff and a defendant to settle their dispute through arbitration.
C. It allows a plaintiff to claim only punitive damages but not actual damages.
D. It allows a plaintiff to claim damages without establishing proximate causation and causation
in fact.
E. It compares a plaintiff’s fault with a defendant’s and reduces the damage award
proportionally.
19. Antonio and Fred are playing soccer when Fred accidently kicks Antonio’s shin during a
pass. Antonio is seriously injured and is unable to play for at least six months. If Antonio sues
Fred, which of the following defenses is Fred most likely to use?
A. cause in fact
B. assumption-of-the-risk
C. statute of repose
D. strict liability
E. proximate cause
20. Which of the following statements is true of punitive damages?
A. Juries award punitive damages to all cases tried and proven for negligence.
B. The key to the award of punitive damages is a defendant’s motive.
C. Punitive damages are awarded depending on the degree of suffering endured by a plaintiff.
D. Punitive damages are awarded if a defendant agrees to a rescission.
E. Punitive damages are awarded to a plaintiff only in cases of assault.
21. Mr. Smith is leaving his hotel for dinner. It is located in a high-income neighborhood with
hardly any crime and the hotel has no history of assaults on its premises. Mr. Smith is robbed as
he approaches his car. He sues the hotel for negligence for failing to protect a business invitee.
A. A business has no duty to protect absent knowledge that criminal assaults are taking place
or about to take place and is not liable to Mr. Smith.
B. Mr. Smith should have stayed at the hotel and had dinner at its on-site restaurant.
C. The hotel should have retained mobile security units to monitor its parking lot.
D. A business has a duty in all cases to protect business invitees and is liable to Mr. Smith.
22. The Supreme Court has ruled that punitive damages cannot be unreasonably disproportionate
to awards of compensatory damages and established a general ratio in the State Farm case in
your textbook. What is the ratio: _________________________________________________.
23. Joe drives an over-the-road semi for Walmart. He becomes sleepy because he has exceeded
the maximum number of permissible driving hours per day, as recorded on his truck. This has
happened before and Walmart was aware of Joe’s habit. Joe falls asleep and crashes into Bob
who is driving perfectly safely and injuring Bob and totaling his car. Which of the following is
true:
A.
B.
C.
D.
E.
Joe can be sued for negligence
Walmart can be sued for negligence
Bob can be sued for contributory negligence
All of the above
Both A and B
24. Alex is a professional football player. As he completes a run his momentum takes him to a
concrete surface near the field where he slips and tears his ACL. He misses the next season due
to his injury and recovery needs. The loss of his livelihood has left him depressed and
despondent. He sues relevant parties for negligence. Identify at least three components of his
likely overall claim for damages?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
25. The type of damages that Alex can prove in the question above is called
______________________________________________________________________________
26. Ms. Neinstein attends a baseball game at Dodger Stadium and is hit by a foul ball. She sues
the Dodgers. What legal defense will be asserted by the Dodgers?
___________________________________________________________________________
27. Lucy is driving down Clarkson street in Fremont and accidentally runs a stop sign and
crashes into Mike who was turning onto Clarkson street after an evening at the Corner Bar. Mike
sues Lucy claiming damages to his shoulder and his car. Lucy acknowledges that she ran the stop
sign saying it was covered by a tree branch and she didn’t see it. She also said Mike’s turn was
sharp and erratic and his left low beam headlight was out which made it difficult for her to
determine if a car or a motorcycle was turning. What is the most likely outcome of this case
applying Nebraska law?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
28. You are the HR director for your company. A former employee asks you to provide a written
recommendation and referral for a new job. You send the prospective employer a summary of
the former employee’s dates of employment, position he held, the fact he was disciplined on two
occasions for unexcused absences from work and falsifying expense reports – all to which he had
admitted. He does not get the new job. He sues your company for slander based on the referral.
Does he win or lose the suit?
___ Wins
___ Loses
29. John and Bob are the final candidates for the CEO position at the company. Both are internal
candidates and are interviewed by the Board of Directors. During his interview, Bob lets slip that
he is aware that John is a habitual recreational drug user and he believes that could put the
company in a bad light if John receives this promotion. Bob gets the CEO job. John later finds
out about Bob’s comments and sues him for slander. Describe the considerations that would
affect whether John wins or loses his suit.
______________________________________________________________________________
______________________________________________________________________________
_____________________________________________________________________________
30. Traditional media outlets like newspapers enjoy absolute immunity from defamatory
statements because they are fully protected by the First Amendment and freedom of the press.
___ True
___ False
31. Social media outlets like Twitter cannot be sued for defamatory statements made by its users.
____ True
___ False
32. In Iannelli v. Burger King, discussed in our textbook, the plaintiffs argued that commercial
enterprises like Burger King have a general duty to exercise reasonable care toward its patrons,
including a duty to safeguard against assault when circumstances provide warning signs that the
safety of its patrons may be at risk. What was the holding of the court?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
33. Jim is an employee of Acme Chemical Company. At lunch, Jim gets drunk. While making
his afternoon deliveries, he crashes into another car, killing the driver. Acme Chemical Company
can face punitive damage awards for Jim’s behavior.
___ True
___ False
Arbitration
34. Explain the difference between mediation and arbitration.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
35. Explain the advantages of arbitration over litigation.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
36. Arbitration Case Attached – Ms. Carol Fern (10 points)
Read the arbitration case and answer question 3 only (if you were an arbitrator in this case,
how would you rule and why). To receive full credit your answer must be thorough and include
a complete analysis of the case.
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