Essentials of Business Law 8th Edition Liuzzo Test Bank Download

Chapter 012 Legal Purpose of Contracts
Essentials of Business Law 8th Edition

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True / False Questions
1. If the parties to a contract are legally competent and have reached mutual agreement, the
law does not require that the purpose of the agreement be legal.
True False
2. Examples of agreements that violate government statutes, and are enforceable by the
courts, are gambling and wagering agreements.
True False
3. Gambling on Native American reservations is universally legal in all the states.

True False
4. Usury laws are applicable to transactions between corporations in all the states.
True False
12-1
5. In many states, the usury statutes apply to retail installment credit sales and credit card
transactions.
True False
6. Some agreements are unenforceable because they are contrary to the interests of the public,
such as agreements in restraint of marriage.
True False
7. Persons attempting to influence the public officials are exposed and prosecuted every year,
but not the public officials.
True False
12-2
8. All agreements are typically legal and enforceable as long as they fulfill the terms of a
contract, even if it is to wrongfully use one's influence.
True False
9. Monopoly power is the term used to describe a situation in which one or more people or
firms control the market in a particular area or for a certain product.
True False
10. The Federal Antitrust Act, also known as the Sherman Antitrust Act, forbids agreements
that result in certain kinds of product price discrimination.
True False
11. In 1890, Congress passed the Federal Antitrust Act, also called the Robinson-Patman Act.
True False
12. The Robinson-Patman Act of 1936 specifically prohibits sellers from discriminating
among different purchasers of goods of like grade and quality under certain conditions.
True False
13. A private franchise is another form of legal monopoly which is sometimes called natural
monopolies.
True False
14. A community may designate certain areas as zones for such uses as light industrial,
industrial, commercial, and residential.
True False
12-3
15. Zoning regulations may act as legal restraints of trade because they restrict where and how
businesses may operate.
True False
Multiple Choice Questions
16. Broad classifications of illegal agreements include agreements:

A. contrary to the biblical law and other religions.
B. that have been declared illegal by a public ballot.
C. made against the security and welfare of the public.
D. that are made orally between two people.
17. In the case of a divisible agreement that has one part with a legal purpose, the part with a
legal purpose is generally:
A. enforceable.
B. void.
C. unenforceable.
D. disaffirmed.
18. Some state statutes and local ordinances that regulate the creation and performance of
certain types of contracts on Sundays and legal holidays are referred to as:
A. white laws.
B. black laws.
C. blue laws.
D. red laws.
19. Contracts made on a legal holiday can generally be performed on the:

A. same day of the legal holiday.
B. next business day following the holiday.
C. on the day prior to the holiday.
D. within one week from the date of legal holiday.
12-4
20. Contracts involving the payment of a note, the delivery of merchandise, and the repair of
equipment are examples of:
A. gambling and wagering agreements.
B. usurious agreements.
C. unlicensed transactions.
D. agreements made on Sundays or legal holidays.
21. A gambling agreement is one in which performance by one party depends on the
occurrence of a(n):
A. uncertain event.
B. unrequited event.
C. terminated agreement.
D. confirm event.
22. An agreement in which performance by one party depends upon the occurrence of an
uncertain event in the hope of gaining something of value is termed:
A. a speculative agreement.
B. a gambling agreement.
C. an uncertain agreement.
D. an agreement of chance.
23. In certain states, typical office basketball and football pools are examples of:
A. legal restraints of trade.
C. common office sports.
D. illegal gambling.
24. To protect the public, most states require persons engaged in certain businesses,
professions, and occupations to be:
A. contractual.
B. monopolized.
C. licensed.
D. unlicensed.
12-5
25. An agreement to loan money at a higher-than-legal rate of interest is:

A. usurious.
B. unconscionable.
C. adhesive.
D. speculative.
26. If the purpose of the licensing requirement is solely to raise revenue for the jurisdiction,
and not to ensure competency, the absence of a license:
A. does not make the agreement void.
B. makes the agreement void.
C. creates an illegal and unenforceable contract.
D. creates a legal but void agreement.
27. If the purpose of the licensing requirement is solely to raise revenue for the jurisdiction,
and not to ensure competency, the absence of a license does not make the agreement:
A. voidable.
B. void.
C. ratified.
D. disaffirmed.
28. If the purpose of the statute is regulatory and enforcement of the licensing requirements is
clearly in the public interest, then the unlicensed transaction becomes:
A. valid.
B. illegal.
C. voidable.
D. ratified.
29. An agreement made with an intention to defraud creditors or other persons is referred to as
a(n):
A. usurious agreement.
B. wagering agreement.
C. dealership agreement.
D. agreement against public policy.
12-6
30. An agreement to refrain from testifying as a witness in a legal action falls under
agreements that:
A. obstruct or pervert justice.
B. interfere with public service.
C. are in restraint of marriage.
D. are in restraint of trade.
31. An agreement to encourage a lawsuit in which one or more parties have no legitimate
interest is:
A. a subversion.
B. champerty.
C. unlicensed.
D. a transaction.
32. Agreements in restraint of marriage are:

A. valid.
B. void.
C. voidable .
D. enforceable.
33. Agreements to defraud creditors and other persons are void and unenforceable because
they lack the element of:
A. optimum communication.
B. competency of parties.
C. offer and acceptance.
D. legality of purpose.
34. In 1890, Congress passed the Federal Antitrust Act. Similar antitrust statutes have been
passed by most states to prohibit:
A. local anticompetitive practices.
B. racial discrimination.
C. payment of taxes.
D. religious discrimination.
12-7
35. In 1890, Congress passed the Federal Antitrust Act, also known as the:
A. Corporate Oxendale Act.
B. Swiss Antitrust Law.
C. Sherman Antitrust Act.
D. Sarbanes Oxley Act.
36. The ______________ forbids certain agreements that tend to unreasonably inhibit
competition, fix prices, allocate territories, or limit production.
A. Clean Water Act
B. Sherman Antitrust Act
C. Educate America Act
D. Americans with Disabilities Act
37. Two pharmacies agreed to serve a particular section of the town by offering medicines at
lower prices in order to create monopoly and discourage competition among other stores. This
would be a(n):
A. agreement in restraint of trade.
B. non-solicitation agreement.
C. usurious agreement.
D. agreement to defraud creditors.
38. If a federal or state government grants a firm or person a license to conduct a specific
business, then such a firm or person may be known as a:
A. private franchisee.
B. government-granted franchise.
C. reentry permit.
D. work permit.
12-8
39. A __________________ is a special kind of business organization involving a contractual

relationship between the parent firm and the independent company.
A. government-granted monopoly
B. retailer
C. private franchise
D. wholesaler
40. Like zoning regulations, safety and environmental regulations also serve as:
B. foreign protection laws.
C. unfair trade practices.
D. policies encouraging monopolization.
41. Federal and state legislatures have enacted statutes to protect the ____________of the
general population from the effects of pollution of the atmosphere and bodies of water.
A. health and welfare
B. movable property
C. immovable property
D. educational status
Short Answer Questions
42. Give two examples of illegal agreements.
12-9
43. Describe "usurious agreements."
44. What constitutes an "illegal restraint of trade?" Explain and provide an example.
45. What is the legal position of a franchisee in a private franchise agreement?
46. What effects do zoning regulations and environmental and safety regulations have on the
corporate sector?
12-10
Chapter 012 Legal Purpose of Contracts Key
True / False Questions
1. (p. 186) If the parties to a contract are legally competent and have reached mutual agreement,
the law does not require that the purpose of the agreement be legal.
FALSE
Bloom's: Knowledge
Learning Outcomes: 12.1 Discuss legality of purpose in relation to public interest, and classify illegal agreements into three major
categories.
2. (p. 186) Examples of agreements that violate government statutes, and are enforceable by the
courts, are gambling and wagering agreements.
FALSE
Bloom's: Knowledge
Learning Outcomes: 12.2 Identify four kinds of agreements that violate statutes.
3. (p. 187) Gambling on Native American reservations is universally legal in all the states.
FALSE
Bloom's: Knowledge
4. (p. 187) Usury laws are applicable to transactions between corporations in all the states.
FALSE
Bloom's: Knowledge
12-11
5. (p. 187) In many states, the usury statutes apply to retail installment credit sales and credit
card transactions.
TRUE
Bloom's: Knowledge
6. (p. 188) Some agreements are unenforceable because they are contrary to the interests of the
public, such as agreements in restraint of marriage.
TRUE
Bloom's: Knowledge
Learning Outcomes: 12.3 Identify five kinds of agreements that violate public policy.
7. (p. 189) Persons attempting to influence the public officials are exposed and prosecuted every
year, but not the public officials.
FALSE
Bloom's: Knowledge
8. (p. 189) All agreements are typically legal and enforceable as long as they fulfill the terms of a
contract, even if it is to wrongfully use one's influence.
FALSE
Bloom's: Knowledge
9. (p. 191) Monopoly power is the term used to describe a situation in which one or more people
or firms control the market in a particular area or for a certain product.
TRUE
Bloom's: Knowledge
Learning Outcomes: 12.4 Explain the provisions of two major laws governing illegal restraint of trade: the Sherman Antitrust Act and the
Robinson-Patman Act.
12-12
10. (p. 191) The Federal Antitrust Act, also known as the Sherman Antitrust Act, forbids
agreements that result in certain kinds of product price discrimination.
FALSE
Bloom's: Knowledge
11. (p. 191) In 1890, Congress passed the Federal Antitrust Act, also called the Robinson-
Patman Act.
FALSE
Bloom's: Knowledge
12. (p. 191) The Robinson-Patman Act of 1936 specifically prohibits sellers from discriminating
among different purchasers of goods of like grade and quality under certain conditions.
TRUE
Bloom's: Knowledge
13. (p. 192) A private franchise is another form of legal monopoly which is sometimes called
natural monopolies.
FALSE
Bloom's: Knowledge
Learning Outcomes: 12.5 Discuss four instances where restraints of trade are legally enforceable.
14. (p. 192) A community may designate certain areas as zones for such uses as light industrial,
industrial, commercial, and residential.
TRUE
Bloom's: Knowledge
12-13
15. (p. 192) Zoning regulations may act as legal restraints of trade because they restrict where
and how businesses may operate.
TRUE
Bloom's: Knowledge
Multiple Choice Questions
16. (p. 186) Broad classifications of illegal agreements include agreements:

A. contrary to the biblical law and other religions.
B. that have been declared illegal by a public ballot.
C. made against the security and welfare of the public.
D. that are made orally between two people.
Bloom's: Knowledge
categories.
17. (p. 186) In the case of a divisible agreement that has one part with a legal purpose, the part
with a legal purpose is generally:
A. enforceable.
B. void.
C. unenforceable.
D. disaffirmed.
Bloom's: Knowledge
categories.
12-14
18. (p. 186) Some state statutes and local ordinances that regulate the creation and performance
of certain types of contracts on Sundays and legal holidays are referred to as:
A. white laws.
B. black laws.
C. blue laws.
D. red laws.
Bloom's: Knowledge
19. (p. 186) Contracts made on a legal holiday can generally be performed on the:
A. same day of the legal holiday.
B. next business day following the holiday.
C. on the day prior to the holiday.
D. within one week from the date of legal holiday.
Bloom's: Knowledge
20. (p. 187) Contracts involving the payment of a note, the delivery of merchandise, and the
repair of equipment are examples of:
A. gambling and wagering agreements.
C. unlicensed transactions.
D. agreements made on Sundays or legal holidays.
Bloom's: Knowledge
12-15
21. (p. 187) A gambling agreement is one in which performance by one party depends on the
occurrence of a(n):
A. uncertain event.
B. unrequited event.
C. terminated agreement.
D. confirm event.
Bloom's: Knowledge
22. (p. 187) An agreement in which performance by one party depends upon the occurrence of
an uncertain event in the hope of gaining something of value is termed:
A. a speculative agreement.
B. a gambling agreement.
C. an uncertain agreement.
D. an agreement of chance.
Bloom's: Knowledge
23. (p. 187) In certain states, typical office basketball and football pools are examples of:
C. common office sports.
D. illegal gambling.
Bloom's: Knowledge
12-16
24. (p. 188) To protect the public, most states require persons engaged in certain businesses,
professions, and occupations to be:
A. contractual.
B. monopolized.
C. licensed.
D. unlicensed.
Bloom's: Knowledge
25. (p. 188) An agreement to loan money at a higher-than-legal rate of interest is:
A. usurious.
B. unconscionable.
C. adhesive.
D. speculative.
Bloom's: Knowledge
26. (p. 188) If the purpose of the licensing requirement is solely to raise revenue for the
jurisdiction, and not to ensure competency, the absence of a license:
A. does not make the agreement void.
B. makes the agreement void.
C. creates an illegal and unenforceable contract.
D. creates a legal but void agreement.
Bloom's: Knowledge
12-17
27. (p. 188) If the purpose of the licensing requirement is solely to raise revenue for the
jurisdiction, and not to ensure competency, the absence of a license does not make the
agreement:
A. voidable.
B. void.
C. ratified.
D. disaffirmed.
Bloom's: Knowledge
28. (p. 188) If the purpose of the statute is regulatory and enforcement of the licensing
requirements is clearly in the public interest, then the unlicensed transaction becomes:
A. valid.
B. illegal.
C. voidable.
D. ratified.
Bloom's: Knowledge
29. (p. 188) An agreement made with an intention to defraud creditors or other persons is
referred to as a(n):
A. usurious agreement.
B. wagering agreement.
C. dealership agreement.
D. agreement against public policy.
Bloom's: Knowledge
12-18
30. (p. 188) An agreement to refrain from testifying as a witness in a legal action falls under
agreements that:
A. obstruct or pervert justice.
B. interfere with public service.
C. are in restraint of marriage.
D. are in restraint of trade.
Bloom's: Knowledge
31. (p. 188) An agreement to encourage a lawsuit in which one or more parties have no
legitimate interest is:
A. a subversion.
B. champerty.
C. unlicensed.
D. a transaction.
Bloom's: Knowledge
32. (p. 189) Agreements in restraint of marriage are:

A. valid.
B. void.
C. voidable .
D. enforceable.
Bloom's: Knowledge
12-19
33. (p. 190) Agreements to defraud creditors and other persons are void and unenforceable
because they lack the element of:
A. optimum communication.
B. competency of parties.
C. offer and acceptance.
D. legality of purpose.
Bloom's: Knowledge
34. (p. 191) In 1890, Congress passed the Federal Antitrust Act. Similar antitrust statutes have
been passed by most states to prohibit:
A. local anticompetitive practices.
B. racial discrimination.
C. payment of taxes.
D. religious discrimination.
Bloom's: Knowledge
35. (p. 191) In 1890, Congress passed the Federal Antitrust Act, also known as the:
A. Corporate Oxendale Act.
B. Swiss Antitrust Law.
C. Sherman Antitrust Act.
D. Sarbanes Oxley Act.
Bloom's: Knowledge
12-20
36. (p. 191) The ______________ forbids certain agreements that tend to unreasonably inhibit
competition, fix prices, allocate territories, or limit production.
A. Clean Water Act
B. Sherman Antitrust Act
C. Educate America Act
D. Americans with Disabilities Act
Bloom's: Knowledge
37. (p. 192) Two pharmacies agreed to serve a particular section of the town by offering
medicines at lower prices in order to create monopoly and discourage competition among
other stores. This would be a(n):
A. agreement in restraint of trade.
B. non-solicitation agreement.
C. usurious agreement.
D. agreement to defraud creditors.
Bloom's: Knowledge
38. (p. 192) If a federal or state government grants a firm or person a license to conduct a
specific business, then such a firm or person may be known as a:
A. private franchisee.
B. government-granted franchise.
C. reentry permit.
D. work permit.
Bloom's: Knowledge
12-21
39. (p. 192) A __________________ is a special kind of business organization involving a

contractual relationship between the parent firm and the independent company.
A. government-granted monopoly
B. retailer
C. private franchise
D. wholesaler
Bloom's: Knowledge
40. (p. 192) Like zoning regulations, safety and environmental regulations also serve as:
B. foreign protection laws.
C. unfair trade practices.
D. policies encouraging monopolization.
Bloom's: Knowledge
41. (p. 192) Federal and state legislatures have enacted statutes to protect the ____________of
the general population from the effects of pollution of the atmosphere and bodies of water.
A. health and welfare
B. movable property
C. immovable property
D. educational status
Bloom's: Knowledge
12-22
Short Answer Questions
42. (p. 186) Give two examples of illegal agreements.
Gambling, usury, and prostitution are some of the examples of illegal agreements.
Bloom's: Knowledge
categories.
43. (p. 187) Describe "usurious agreements."
If a loan is made at an interest rate higher than that allowed by state law, the lender is guilty of
usury, which is defined as charging interest higher than the law permits. Such usurious
agreements are illegal and void. In some states, usury laws do not apply to transactions
between corporations and in many states, the usury statutes apply to retail installment credit
sales and credit card transactions.
Bloom's: Knowledge
44. (p. 190-191) What constitutes an "illegal restraint of trade?" Explain and provide an example.
The competition of a free market encourages lower prices, improved products, and better
service. Unless specifically permitted by law, agreements to suppress or eliminate competition
are illegal and unenforceable. These kinds of agreements are said to be in restraint of trade.
For example, monopoly is illegal because it results in restraint of trade.
Bloom's: Knowledge
12-23
45. (p. 192) What is the legal position of a franchisee in a private franchise agreement?
In the case of a private franchise, the contractual relationship provides that the franchisor will
supply certain services, such as management consulting, to the franchisee, and will allow the
franchisee to use the franchisor's name, join with others in national advertising, and secure
other benefits.
Bloom's: Knowledge
46. (p. 192) What effects do zoning regulations and environmental and safety regulations have
on the corporate sector?
Zoning regulations are intended to provide security for the citizens of a community. Federal
and State legislatures and other safety regulations protect the health and welfare of the general
population, customers and employees from the effects of pollution of the atmosphere and
bodies of water. Both the regulations serve as legal restraints of trade by restricting where and
how businesses may operate and by placing the limits and restrictions on how a firm may
operate.
Bloom's: Knowledge
12-24

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Chapter 012 Legal Purpose of Contracts

Essentials of Business Law 8th Edition

Test bank: https://testbankpack.com/p/test-bank-for-essentials-of-

Solution manual: https://testbankpack.com/p/solution-manual-

True / False Questions

3. Gambling on Native American reservations is universally legal in all the states.

Multiple Choice Questions

16. Broad classifications of illegal agreements include agreements:

19. Contracts made on a legal holiday can generally be performed on the:

25. An agreement to loan money at a higher-than-legal rate of interest is:

32. Agreements in restraint of marriage are:

39. A __________________ is a special kind of business organization involving a contractual

Short Answer Questions

42. Give two examples of illegal agreements.

43. Describe "usurious agreements."

45. What is the legal position of a franchisee in a private franchise agreement?

True / False Questions

Multiple Choice Questions

16. (p. 186) Broad classifications of illegal agreements include agreements:

32. (p. 189) Agreements in restraint of marriage are:

39. (p. 192) A __________________ is a special kind of business organization involving a

Short Answer Questions

42. (p. 186) Give two examples of illegal agreements.

43. (p. 187) Describe "usurious agreements."

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