ABA Business Law & Ethics 2 — Questions and Answers
Question 1: Under the Uniform Commercial Code (UCC), a merchant's firm offer to buy or sell goods is irrevocable for up to how long without consideration?
- 30 days
- 3 months (Correct answer)
- 6 months
- 1 year
Correct answer: 3 months
Under UCC Article 2, a merchant's written firm offer is irrevocable for the stated period or, if no period is stated, for a reasonable time not to exceed 3 months.
Question 2: Which ethical theory holds that the morality of an action is determined solely by its consequences or outcomes?
- Deontology
- Virtue ethics
- Consequentialism (Correct answer)
- Natural law
Correct answer: Consequentialism
Consequentialism judges actions as right or wrong based on their results, with utilitarianism (maximizing overall good) being its most common form.
Question 3: A principal who ratifies an unauthorized act by an agent assumes liability as if the act had been authorized from the beginning under which doctrine?
- Respondeat superior
- Estoppel
- Ratification (Correct answer)
- Disclosed agency
Correct answer: Ratification
Under the doctrine of ratification, a principal who approves an agent's previously unauthorized act is bound to the same extent as if the act had been originally authorized.
Question 4: Which type of business organization provides limited liability to all owners and is NOT required to hold annual meetings or maintain minutes?
- General partnership
- Limited partnership
- Corporation
- Limited Liability Company (LLC) (Correct answer)
Correct answer: Limited Liability Company (LLC)
LLCs provide limited liability to all members and generally do not require the same formalities as corporations, such as annual meetings and minutes.
Question 5: In contract law, 'promissory estoppel' allows enforcement of a promise that lacks consideration when which condition is met?
- Both parties are merchants
- The promisor intended to make a gift
- The promisee reasonably relied on the promise to their detriment (Correct answer)
- The promise was made in writing
Correct answer: The promisee reasonably relied on the promise to their detriment
Promissory estoppel enforces a promise without consideration when the promisee reasonably relied on it, suffered a detriment, and injustice can only be avoided by enforcement.
Question 6: Which federal law prohibits employment discrimination based on race, color, religion, sex, or national origin for employers with 15 or more employees?
- Fair Labor Standards Act
- Civil Rights Act of 1964 (Title VII) (Correct answer)
- Americans with Disabilities Act
- Age Discrimination in Employment Act
Correct answer: Civil Rights Act of 1964 (Title VII)
Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, or national origin for covered employers.
Question 7: A contract clause that pre-establishes the amount of damages in the event of breach is enforceable only if it represents a reasonable estimate of actual damages and is NOT considered which of the following?
- A liquidated damages clause
- A penalty clause (Correct answer)
- An indemnification clause
- A limitation of liability clause
Correct answer: A penalty clause
Liquidated damages clauses are enforceable, but courts will void them if they function as penalties that bear no reasonable relationship to anticipated actual damages.
ABA Business Law & Ethics 2
Under the Uniform Commercial Code (UCC), a merchant's firm offer to buy or sell goods is irrevocable for up to how long without consideration?