Contracts and Business Law Flashcards
7 cards from real PSI practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Contracts and Business Law flashcards as text
Under contract law, what is the 'mirror image' rule?
Answer: The acceptance must exactly match the offer for a contract to form
The mirror image rule requires that acceptance must exactly match the offer; any variation or addition creates a counteroffer, not an acceptance.
Which type of business entity offers limited liability to all owners while allowing pass-through taxation?
Answer: Limited Liability Company (LLC)
An LLC provides all members with limited liability protection while defaulting to pass-through taxation, avoiding the double taxation of a C-Corporation.
What is the 'parol evidence rule' in contract law?
Answer: Prior or contemporaneous oral agreements cannot contradict a fully integrated written contract
The parol evidence rule bars introduction of prior or contemporaneous oral or written statements to contradict, vary, or add to the terms of a fully integrated written contract.
A seller refuses to deliver goods after signing a sales contract, citing a rise in market price. The buyer covers by purchasing similar goods elsewhere at a higher price. What damages may the buyer recover?
Answer: The difference between the contract price and the cover price, plus incidental damages
Under UCC §2-712, a buyer who covers may recover the difference between the cover price and the contract price, plus any incidental or consequential damages.
What is a 'novation' in contract law?
Answer: Substituting a new party or obligation, releasing the original party from liability
A novation substitutes a new party or obligation for an existing one, with the consent of all parties, and extinguishes the original party's liability.
In a limited partnership, which partners have personal liability for the partnership's debts?
Answer: Only the general partners
In a limited partnership, general partners have unlimited personal liability for partnership debts, while limited partners' liability is limited to their investment.
What legal doctrine prevents a party from asserting rights that are inconsistent with a position they previously took, when another party relied on that position?
Answer: Equitable estoppel
Equitable estoppel prevents a party from taking a legal position inconsistent with a prior representation when another party has reasonably relied on that representation to their detriment.