Business Law - Final Exam Questions With Accurate Answers
negligence - correct answer -failure to exercise the standard of care that a reasonable person would
exercise in similar circumstances (also known as the "reasonable person" standard)
proximate cause - correct answer -legal determination that the connection between an act or omission
and a resulting injury (causation in fact) is strong enough to impose liability
foreseeability - correct answer -for a defendant to be liable for negligence under common law tort, the
type of harm caused by the negligence must have been reasonably foreseeable
damages - correct answer -monetary compensation that is awarded by a court in a civil action to a party
who has been injured through the wrongful conduct of another party
res ipsa loquitur - correct answer -a doctrine of tort law under which a defendant may be deemed
negligent if the facts indicate that the defendant had control over the thing that caused the harm, the
injury would not have occurred without negligence, and the plaintiff played no role in causing the injury
(Latin for "The thing speaks for itself.")
principal - correct answer -in an agency relationship, the person for whom an agent is acting
agent - correct answer -in an agency relationship, one who acts on behalf of a principal
apparent authority - correct answer -a principal can be liable for the acts of an agent who is not, in fact
acting with authority if the principal's conduct causes a third party reasonably to believe that the agent
has the authority to act
ratification - correct answer -if a principal accepts the benefit of an unauthorized transaction by an agent
or fails to repudiate it, then the principal is bound by the act as if he or she had authorized it
respondeat superior - correct answer -a doctrine under which a principal is held liable for wrongful acts
committed by an agent acting within the scope of the agent's engagement (Latin for "Let the master
answer.")
at will employment - correct answer -a common law doctrine under which either party may terminate
an employment relationship for an unspecified term at any time with or without reason unless a
contract specifies otherwise
independent contractor - correct answer -someone hired to perform work under a contract while
retaining control over the means and methods by which the work is accomplished; the person who hires
the worker expects to pay for the completed work but has no control over how the worker gets it done
disparate impact - correct answer -discrimination that occurs when an employer's practices or
procedures have an adverse impact that disproportionately affects members of a protected class, even
though the intent of those practices or procedures may be nondiscriminatory
,constructive discharge - correct answer -a termination of employment brought about by making the
employee's working conditions so intolerable that the employee reasonably feels compelled to leave
bona fide occupational qualification - correct answer -an identifiable characteristic reasonably necessary
to the normal operation of a particular business
copyright - correct answer -the exclusive right of an author or originator of a literary or artistic
production to publish, print, sell, or otherwise use that production for a statutory period. Protects the
way an idea is expressed, but not the idea itself
trademark - correct answer -any distinctive word, symbol, or design that a business uses to identify itself
as the source of its products or services and to distinguish them from those made or sold by others
patent - correct answer -a property right granted by the federal government that gives inventors an
exclusive right to make, use, sell, or offer to sell their inventions in the United States for a specified
period, during which time no one else may make, use, sell or offer to sell the invention without the
inventor's permission
trade secret - correct answer -a formula, device, idea, process, or other information used in a business
that gives the owner a competitive advantage in the marketplace
infringement - correct answer -use of intellectual property rights (such as a patent, trademark, copyright
or trade secret) belonging to someone else without obtaining the owner's permission
offer - correct answer -a promise or commitment by someone that is communicated to someone else
and proposes definite terms with the intention of permitting the offeree to create a contract by
accepting those terms
mirror image rule - correct answer -a common law rule that requires the acceptance of an offer to be on
precisely the same terms as the offer for a contract to be formed
mailbox rule - correct answer -a common law rule that acceptance of an offer is effective (thereby
forming a contract) when the offeree sends or delivers it (not when it is received by the offeror)
counteroffer - correct answer -an offeree's response to an offer in which the offeree proposes to change
the terms; it is a rejection that terminates the original offer, which cannot later be accepted unless
revived by the offeror
consideration - correct answer -something of value that one party gives to another in exchange for a
promise or act (in contract law, prerequisite for formation of a valid contract)
pre-exisiting duty - correct answer -a promise to do something the promisor already has a legal duty to
do is not legally sufficient consideration for a new contract
contractual capacity - correct answer -the capacity required by the law for a party who enters into a
contract to be legally bound by that contract
, consent - correct answer -whether a contracting party truly understood what he or she was getting into
and whether he or she made the agreement voluntarily
mistake - correct answer -in contract law, a basis for voiding or rescinding a contract if either or both of
the parties misunderstood one or more material facts regarding the subject matter of the contract
duress - correct answer -use of a threat to do something that the threatening party has no legal right to
do in order to force another party to enter into a contract
adhesion contract - correct answer -a standard form contract prepared by one party and given to the
other on a "take it or leave it" basis
exculpatory clause - correct answer -a contract provision that attempts to release one party from
liability if the other is injured, no matter who is at fault
statute of frauds - correct answer -state statues that require certain types of transactions to be in
writing to be enforceable
ex. real property transfers, contracts that cannot be performed within one year, sales of goods worth
more than $500
parol evidence - correct answer -testimony or evidence of communications between the parties that
contradicts / varies the terms of a written contract but is not included in the contract itself
third party beneficiary - correct answer -a party who is not a party to a contract, but has legal rights
under it and, in some cases, may have the right to enforce the contract
assignment - correct answer -transfer of contract rights to a person who is not a party to the contract
condition - correct answer -a contract provision describing an event that must occur (or not occur)
before a party is either obligated to perform as promised or excused from further performances under
the contract
discharge - correct answer -termination of a party's obligations under a contract
predominant factor test - correct answer -a test used by courts to determine whether "mixed" contracts
involving a combination of goods and services are predominantly for the sale of goods (UCC rules apply)
or for the sales of services (common law rules apply)
implied warranty - correct answer -a warranty that arises by law because of the circumstances of a sale
and not from an express promise by the seller
remedy - correct answer -the relief given to an injured party to enforce a right or compensate for the
loss or harm suffered caused by another party's tort or breach of contract; legal remedies generally take
the form of monetary damages
consequential damages - correct answer -foreseeable damages that result from a breach of contract but
are the result of special circumstances beyond the contract itself, such as profit
negligence - correct answer -failure to exercise the standard of care that a reasonable person would
exercise in similar circumstances (also known as the "reasonable person" standard)
proximate cause - correct answer -legal determination that the connection between an act or omission
and a resulting injury (causation in fact) is strong enough to impose liability
foreseeability - correct answer -for a defendant to be liable for negligence under common law tort, the
type of harm caused by the negligence must have been reasonably foreseeable
damages - correct answer -monetary compensation that is awarded by a court in a civil action to a party
who has been injured through the wrongful conduct of another party
res ipsa loquitur - correct answer -a doctrine of tort law under which a defendant may be deemed
negligent if the facts indicate that the defendant had control over the thing that caused the harm, the
injury would not have occurred without negligence, and the plaintiff played no role in causing the injury
(Latin for "The thing speaks for itself.")
principal - correct answer -in an agency relationship, the person for whom an agent is acting
agent - correct answer -in an agency relationship, one who acts on behalf of a principal
apparent authority - correct answer -a principal can be liable for the acts of an agent who is not, in fact
acting with authority if the principal's conduct causes a third party reasonably to believe that the agent
has the authority to act
ratification - correct answer -if a principal accepts the benefit of an unauthorized transaction by an agent
or fails to repudiate it, then the principal is bound by the act as if he or she had authorized it
respondeat superior - correct answer -a doctrine under which a principal is held liable for wrongful acts
committed by an agent acting within the scope of the agent's engagement (Latin for "Let the master
answer.")
at will employment - correct answer -a common law doctrine under which either party may terminate
an employment relationship for an unspecified term at any time with or without reason unless a
contract specifies otherwise
independent contractor - correct answer -someone hired to perform work under a contract while
retaining control over the means and methods by which the work is accomplished; the person who hires
the worker expects to pay for the completed work but has no control over how the worker gets it done
disparate impact - correct answer -discrimination that occurs when an employer's practices or
procedures have an adverse impact that disproportionately affects members of a protected class, even
though the intent of those practices or procedures may be nondiscriminatory
,constructive discharge - correct answer -a termination of employment brought about by making the
employee's working conditions so intolerable that the employee reasonably feels compelled to leave
bona fide occupational qualification - correct answer -an identifiable characteristic reasonably necessary
to the normal operation of a particular business
copyright - correct answer -the exclusive right of an author or originator of a literary or artistic
production to publish, print, sell, or otherwise use that production for a statutory period. Protects the
way an idea is expressed, but not the idea itself
trademark - correct answer -any distinctive word, symbol, or design that a business uses to identify itself
as the source of its products or services and to distinguish them from those made or sold by others
patent - correct answer -a property right granted by the federal government that gives inventors an
exclusive right to make, use, sell, or offer to sell their inventions in the United States for a specified
period, during which time no one else may make, use, sell or offer to sell the invention without the
inventor's permission
trade secret - correct answer -a formula, device, idea, process, or other information used in a business
that gives the owner a competitive advantage in the marketplace
infringement - correct answer -use of intellectual property rights (such as a patent, trademark, copyright
or trade secret) belonging to someone else without obtaining the owner's permission
offer - correct answer -a promise or commitment by someone that is communicated to someone else
and proposes definite terms with the intention of permitting the offeree to create a contract by
accepting those terms
mirror image rule - correct answer -a common law rule that requires the acceptance of an offer to be on
precisely the same terms as the offer for a contract to be formed
mailbox rule - correct answer -a common law rule that acceptance of an offer is effective (thereby
forming a contract) when the offeree sends or delivers it (not when it is received by the offeror)
counteroffer - correct answer -an offeree's response to an offer in which the offeree proposes to change
the terms; it is a rejection that terminates the original offer, which cannot later be accepted unless
revived by the offeror
consideration - correct answer -something of value that one party gives to another in exchange for a
promise or act (in contract law, prerequisite for formation of a valid contract)
pre-exisiting duty - correct answer -a promise to do something the promisor already has a legal duty to
do is not legally sufficient consideration for a new contract
contractual capacity - correct answer -the capacity required by the law for a party who enters into a
contract to be legally bound by that contract
, consent - correct answer -whether a contracting party truly understood what he or she was getting into
and whether he or she made the agreement voluntarily
mistake - correct answer -in contract law, a basis for voiding or rescinding a contract if either or both of
the parties misunderstood one or more material facts regarding the subject matter of the contract
duress - correct answer -use of a threat to do something that the threatening party has no legal right to
do in order to force another party to enter into a contract
adhesion contract - correct answer -a standard form contract prepared by one party and given to the
other on a "take it or leave it" basis
exculpatory clause - correct answer -a contract provision that attempts to release one party from
liability if the other is injured, no matter who is at fault
statute of frauds - correct answer -state statues that require certain types of transactions to be in
writing to be enforceable
ex. real property transfers, contracts that cannot be performed within one year, sales of goods worth
more than $500
parol evidence - correct answer -testimony or evidence of communications between the parties that
contradicts / varies the terms of a written contract but is not included in the contract itself
third party beneficiary - correct answer -a party who is not a party to a contract, but has legal rights
under it and, in some cases, may have the right to enforce the contract
assignment - correct answer -transfer of contract rights to a person who is not a party to the contract
condition - correct answer -a contract provision describing an event that must occur (or not occur)
before a party is either obligated to perform as promised or excused from further performances under
the contract
discharge - correct answer -termination of a party's obligations under a contract
predominant factor test - correct answer -a test used by courts to determine whether "mixed" contracts
involving a combination of goods and services are predominantly for the sale of goods (UCC rules apply)
or for the sales of services (common law rules apply)
implied warranty - correct answer -a warranty that arises by law because of the circumstances of a sale
and not from an express promise by the seller
remedy - correct answer -the relief given to an injured party to enforce a right or compensate for the
loss or harm suffered caused by another party's tort or breach of contract; legal remedies generally take
the form of monetary damages
consequential damages - correct answer -foreseeable damages that result from a breach of contract but
are the result of special circumstances beyond the contract itself, such as profit
