Sophia Business Law Final Complete Exam Exam Complete Study Guide With Solution Sophia Business Law Final Complete Exam.pdf
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1
●
In which scenario would strict liability most likely apply?
A baseball manufacturer fails to put an impact warning on its
● baseballs.
A scissor company fails to label its scissors as sharp.
●
A tobacco company fails to put a cancer warning on its cartons of
🔘 cigarettes.
A hardware company fails to label its nails as dangerous to ingest.
●
RATIONALE
Strict liability applies to cigarettes because they have no other use than for smoking, bringing on the risk of
cancer that may not be known to the consumer.
CONCEPT
→ Strict Liability
2
●
A landlord sues a tenant for destruction of property. During the trial, the judge issues instructions to the jury to
clarify what facts it must determine to issue a verdict.
When in the trial process does this occur?
Before the opening statements
●
After the closing arguments
🔘
Following jury selection
●
During cross-examination
●
RATIONALE
After all sides have made their closing arguments, the judge gives instructions to the jury so that it knows what
questions it is charged with answering.
CONCEPT
→ The Trial
3
●
Select the example that is inconsistent with the provisions of the UCC for contract remedies for a seller's breach
of contract.
The sales contract for a company that sells rare antiques includes a
liquidated damages clause in the event of a breach of contract that
●
the courts have deemed reasonable.
In its sales contract, a jewelry maker gives buyers a maximum of 18
● months to raise any concerns relating to breach of contract.
An auto manufacturer's sales contract reduces the statute of
🔘 limitations for breach of contract claims to nine months.
The sales contract for machine parts excludes responsibility for any
● loss of business that may result from a delivery delay.
RATIONALE
The UCC allows parties to agree to reduce the statute of limitations to no less than one year.
CONCEPT
→ Remedies in General Under the Uniform Commercial Code
4
●
Marissa, a principal, hires a new fifth grade teacher for the upcoming school year.
Which type of agent is the new teacher?
Special agent
●
General agent
●
Employee
🔘
Collection agent
●
RATIONALE
An employee works for the employer and has the right to control and direct how the work is to be materially
performed.
CONCEPT
→ Types of Agents
5
●
Select the true statement about common law.
In a common-law system, attorneys do not need to use legal
● reasoning to argue their case.
Rules of law are shaped by the courts through the practice of stare
🔘 decisis.
Common law is binding regardless of jurisdiction.
●
Common law is highly malleable, because precedents are often
● overturned.
RATIONALE
Common law is the body of law created by courts, and, to ensure the law is consistently applied, courts practice
stare decisis to ensure that decisions are made based on legal precedent.
CONCEPT
→ Legislation and Other Sources of Law
6
●
As part of its strategic planning, a fast food corporation considers the societal effects of using poultry treated with
high levels of antibiotics in its supply chain. The Board of Directors ultimately instructs the officers to continue
using the corporation's current poultry suppliers since the levels of antibiotics they use, while high, comply with the
law and are very cheap.
According to stakeholder theory, did the corporation fulfill its duty?
No, because the officers of the corporation are failing to fulfill their
● fiduciary duty to the Board and the corporate shareholders.
Yes, because the corporation is not violating any laws.
●
No, because the company is prioritizing profits over other social
🔘 responsibilities.
Yes, because the corporation has a duty to save money.
●
RATIONALE
Stakeholder theory holds that customers are stakeholders and looks to the overall good a corporation does in a
community.
CONCEPT
→ Corporate Governance
7
●
The new CEO of a large coffee corporation makes fighting sexual harassment a cornerstone of the company's
culture after a series of embarrassing incidents involving several of the company's managers are leaked to the
media. The corporation drafts a new code of ethics with an expanded set of policies related to sexual harassment,
creates a series of mandatory workshops for its workforce, and fires the managers involved in the incidents.
Consider what you have learned about the factors that impact corporate culture. What is the ethical strength of
the corporation in the example?
Weak, because the CEO should have cracked down on the
● employees who were leaking information to the media as well.
Weak, because this focus on matters of social justice has no place
● in capitalism.
Strong, because the corporation must show that it has an ongoing
● process to discourage wrongdoing in order to avoid legal action.
Strong, because the CEO is setting expectations for ethical behavior
🔘 and holding violators accountable.
RATIONALE
The company is showing ethical strength because it has gone beyond merely discouraging wrongdoing and has
taken additional action steps to revise the code of ethics, mandate training for its workforce, and hold
wrongdoers accountable by firing them.
CONCEPT
→ Corporate Culture and Codes of Ethics
8
●
Select the true statement about the relationship between law, ethics, and business.
It is impossible for a business to behave unethically if it follows the
● law.
What is ethical in business is not necessarily required by law.
🔘
Abiding by the law is sufficient for businesses to earn a moral
● reputation.
The law ensures ethical conduct in most areas of business.
●
RATIONALE
This is the only correct response because it recognizes that compliance with the law alone does not ensure
ethical compliance, and vice-versa.
CONCEPT
→ What Is Ethics?
9
●
Which of the following scenarios would likely result in an order for specific performance or an injunction, rather
than a monetary award?
A hospital hires a new CEO who signs a two-year employment
contract. After six months, the CEO quits, and the hospital sues her
●
for breach of contract.
Yolanda's landscaping company orders a new riding mower that is
supposed to be delivered before Yolanda's next big job on Monday.
The mower doesn't arrive until Friday, so Yolanda loses out on that
●
job. Yolanda sues the company that promised her the riding mower
for breach of contract.
A homeowner requests that a fencing company install a particular
brand of vinyl fence. The company ends up installing a different
● brand that looks and performs exactly the same. The homeowner
sues for breach of contract.
Joyce signs a contract to purchase her first home for $180,000 from
Mei. Mei then gets a better offer, and breaks her contract with
🔘
Joyce. Joyce sues Mei for breach of contract.
RATIONALE
Specific performance is awarded where monetary damages cannot compensate a non-breaching party. Real
estate is always unique, and, typically, nothing short of specific performance can compensate for breach of a real
estate sales contract.
CONCEPT
→ Equitable Remedies: Specific Performance and Injunction
10
●
Which of the following is an example of a voidable contract?
A 21-year-old forms a contract with an able-bodied and competent
30-year-old neighbor to drive her to work all year in exchange for
●
gas money.
A 28-year-old adult forms a written contract with an able-bodied
and competent 17-year-old neighbor to cut her lawn for $200 per
🔘
week.
A 21-year-old adult forms a written contract with an able-bodied and
● competent adult neighbor to clean his house for $1 per month.
A 52-year-old forms an oral contract with an able-bodied and
● competent adult neighbor to paint his deck for $1,000.
RATIONALE
A minor is generally not considered competent to consent to a contract, and, therefore, such a contract is
voidable, meaning it may be avoided by the minor.
CONCEPT
→ Different Types of Contracts
11
●
Heidi purchases an original work by one of her favorite sculptors from an art dealer for $8,000. When the
sculpture is delivered, Heidi has it inspected by an art appraiser, who informs her that the sculpture is a fake. When
Heidi calls the art dealer to tell him the news, he is honestly shocked and appalled.
What remedy does Heidi have in this scenario?
Heidi is only entitled to recover the money that she paid for the
● sculpture.
Heidi may sue the art dealer for specific performance and require
● the dealer to secure the original sculpture in any way possible.
Heidi is entitled to recover the purchase price of the sculpture, as
🔘 well as the money she spent to have the sculpture appraised.
Heidi has no recourse in this scenario, because she accepted
● delivery of a non-conforming good.
RATIONALE
Where Buyer accepts non-conforming goods and notifies seller of the non-conformity, Buyer may recover
compensatory damages for the price paid and incidental damages (cost incurred in appraising the goods).
CONCEPT
→ Buyer's Remedies Under the Uniform Commercial Code
12
●
Which of the following laws or agencies protects the public from various forms of investment fraud?
Federal Trade Commission
●
Securities and Exchange Commission
🔘
Civil Rights Act
●
Truth in Lending Act
●
RATIONALE
The objective of the U.S. Securities and Exchange Commission is to protect investors in securities (stocks and
investments) to ensure they are exchanged fairly and properly and to regulate organizations in the securities
markets.
CONCEPT
→ Law in Business
13
●
A 60-year-old man develops lung cancer, and sues the manufacturer of an asbestos-containing material. The man
worked in construction for 45 years, and often used the asbestos-containing material in building projects. He
believes that the asbestos-containing material was unreasonably unsafe, because friends of his in the construction
trade who used alternative materials did not develop lung cancer.
How strong is the negligence case against the product manufacturer?
Strong, because the alternative materials used by his friends were
● much safer.
Weak, because the manufacturer can claim preemption.
●
Weak, because proximate cause is difficult to prove in the absence
🔘 of other, similarly-affected individuals.
Weak, because the employees assumed the risk of working with the
● asbestos-containing materials.
RATIONALE
The negligence case is weak because it is difficult to prove a causal link between the asbestos-containing
material and the illness. A strict liability theory based on a dangerous product may be stronger.
CONCEPT
→ Negligent Products Liability
14
●
Yvette is the owner of a restaurant run by a general manager named Paul, whom Yvette closely supervises. Paul
recently hired two new dishwashers. Unbeknownst to Yvette, Paul pays them less than the minimum wage
because he knows they need the job. The dishwashers eventually obtain legal help and sue Paul and Yvette for
violating minimum wage laws.
Is Yvette criminally liable?
No, Yvette cannot be held liable because she had no knowledge of
● Paul's actions.
Yes, Yvette may be held liable for Paul's actions if the wage
🔘 violations are strict liability crimes in this jurisdiction.
No, Yvette cannot be held liable because a principal is never liable
● for an agent's unauthorized crimes.
No, Yvette cannot be held liable because she could not have
● foreseen that Paul would pay workers less than the minimum wage.
RATIONALE
In general, a principal is not liable for crimes committed by the agent where the crime is one that requires
specific intent as an element of the crime. However, there are strict liability crimes that do not require specific
intent, such as serving liquor to minors, for example. Here, if violating wage and hour laws is indeed a strict
liability crime in their jurisdiction, Yvette could be held criminally liable.
CONCEPT
→ Principal's Tort and Criminal Liability
15
●
Why was the power to confer intellectual property rights given to Congress?
To support capitalism
●
To defend equality
●
To promote progress
🔘
To deter monopolies
●
RATIONALE
Intellectual property rights are given to inventors, authors, artists, etc. in order to promote progress by
encouraging production of creative works.
CONCEPT
→ Intellectual Property
16
●
Which of the following is an example of a general partnership?
Yvonne opens her first business selling sporting goods. She hires a
marketing manager, an accountant, and several sales staff to help
her manage the demand for her goods. When she files her annual
●
taxes, she claims 100% of the profits of the business on her
individual tax return.
Ken and Paul start a graphic design business together. When Ken
fails to deliver on a contract with a customer, Ken and Paul are held
🔘
equally responsible when the customer sues for damages.
Jonathan and Craig's catering business is going through a rough
patch wherein the debts exceed the income. Jonathan is worried
because he is personally liable for the whole of the company's
●
debts, but Craig is only liable for the initial $50,000 that he
invested.
Stefanie's photography business has grown so quickly that she
needs to invest in more equipment. She brings in a partner who
● provides the capital to purchase the new equipment, but who has
no control over the day-to-day operations of the business.
RATIONALE
In a general partnership, at least two partners share profits and losses in the business and are jointly liable,
meaning that one partner can be held liable for actions taken by the other partners.
CONCEPT
→ Sole Proprietorships and Partnerships
17
●
Select the statement that best applies to the new company name "Pep-C."
This name likely cannot be trademarked.
🔘
This name is an example of a certification mark.
●
This name is an example of a collective mark.
●
This name is an example of genericide.
●
RATIONALE
This name is not available for trademark because it is too similar to "Pepsi" and would cause confusion in the
minds of consumers.
CONCEPT
→ Trademarks
18
●
Since corporations are separate legal entities from their shareholders, which of the following is true?
A corporation can only exist for as long as its original owners are
● present.
Shareholders do not need to pay taxes on dividend earnings since
● corporations are taxed independently.
Under no circumstances can the protection of limited liability be
● removed from shareholders.
Shareholders are usually not financially accountable for the actions
of the corporation, but neither do they own the assets of the
🔘
corporation.
RATIONALE
Shareholders are not liable for debts of a corporation unless there is evidence a shareholder used the
corporation as a shell company or alter ego, and shareholders do not have a legal right to property owned by
the corporation.
CONCEPT
→ Corporations
19
●
If ownership of Isaiah's home transfers to his sister upon his death, Isaiah has a __________ in his home.
life estate interest
🔘
reversionary interest
●
possessory interest
●
leasehold interest
●
RATIONALE
A life estate interest terminates upon death of the life tenant and passes to the remainderman (the person
designated in the deed conveying the life estate).
CONCEPT
→ Real Property: Duties, Responsibilities, and Interests
20
●
In which scenario would the non-breaching party lose the opportunity to avoid or limit losses?
A landlord makes no attempt to find a new renter after a tenant
🔘 breaks her lease.
A caterer refuses to deliver a cake she baked for an event that was
● cancelled.
A housepainter stops painting a client's house once he realizes that
● the homeowner can't pay.
A landscaper avoids using a newly-purchased lawnmower that she
● knows is defective.
RATIONALE
A non-breaching party has a duty to attempt to mitigate damages (i.e., offer the rental to another prospective
tenant).
CONCEPT
→ Limitations on Contract Remedies
21
●
Christine hires a deck company to build a deck. The company initially does a terrible job and agrees to rebuild it. A
court requires the company to pay for the cost of the inspection that Christine has done to ensure the rebuilt deck
is structurally sound.
This is an example of which type of monetary award?
Nominal damages
●
Incidental damages
🔘
Consequential damages
●
Punitive damages
●
This study source was downloaded by 1827175 from cliffsnotes.com on 01-08-2026 18:22:58 GMT -06:00
RATIONALE
https://www.cliffsnotes.com//study-notes/6993595
Incidental damages are direct costs incurred by the non-breaching party Christine to avoid incurring additional
damages.
CONCEPT
→ Monetary Awards
22
●
The CEO of Oil Company X is dismayed to learn that oil has been leaking from one of its off-shore rigs into the
Gulf of Mexico for the last five years. In deciding how to proceed, the company identifies a range of stakeholders,
considers how different courses of action would impact each stakeholder, and determines which core values each
decision would satisfy.
According to the Josephson's core values model for ethical decision-making, what should Company X do next?
Weigh the financial cost of each possible course of action against
● the core values that it promotes.
Decide which stakeholders are most important and whose needs
● should be prioritized.
Choose the course of action that is most likely to promote the
🔘 greatest number of core values.
Determine which course of action will be easiest to implement.
●
RATIONALE
After the identification of shareholders, the impact of possible decisions on shareholders, and the identification
of core values, the next step is to determine what decision satisfies the greatest number of core values.
CONCEPT
→ An Ethical Decision Model
23
●
Which of the following conditions always renders a contract voidable?
If a party to the contract fraudulently misrepresents material facts
🔘
If a party to the contract can no longer afford the promised
● consideration
If a party to the contract has changed his or her mind
●
If a party to the contract is in good mental health but
● misunderstands the terms of the contract
RATIONALE
Fraud or misrepresentation are always a defense to contract enforcement.
CONCEPT
→ Unenforceable Contracts
Page 1 of 2 /2026 Sophia Business Law Final Complete Exam.pdf
MILESTONE 24/25
24/25 that's 96% RETAKE
24 questions were answered correctly.
1 question was skipped. These were marked incorrect.
1
●
In which scenario would strict liability most likely apply?
A baseball manufacturer fails to put an impact warning on its
● baseballs.
A scissor company fails to label its scissors as sharp.
●
A tobacco company fails to put a cancer warning on its cartons of
🔘 cigarettes.
A hardware company fails to label its nails as dangerous to ingest.
●
RATIONALE
Strict liability applies to cigarettes because they have no other use than for smoking, bringing on the risk of
cancer that may not be known to the consumer.
CONCEPT
→ Strict Liability
2
●
A landlord sues a tenant for destruction of property. During the trial, the judge issues instructions to the jury to
clarify what facts it must determine to issue a verdict.
When in the trial process does this occur?
Before the opening statements
●
After the closing arguments
🔘
Following jury selection
●
During cross-examination
●
RATIONALE
After all sides have made their closing arguments, the judge gives instructions to the jury so that it knows what
questions it is charged with answering.
CONCEPT
→ The Trial
3
●
Select the example that is inconsistent with the provisions of the UCC for contract remedies for a seller's breach
of contract.
The sales contract for a company that sells rare antiques includes a
liquidated damages clause in the event of a breach of contract that
●
the courts have deemed reasonable.
In its sales contract, a jewelry maker gives buyers a maximum of 18
● months to raise any concerns relating to breach of contract.
An auto manufacturer's sales contract reduces the statute of
🔘 limitations for breach of contract claims to nine months.
The sales contract for machine parts excludes responsibility for any
● loss of business that may result from a delivery delay.
RATIONALE
The UCC allows parties to agree to reduce the statute of limitations to no less than one year.
CONCEPT
→ Remedies in General Under the Uniform Commercial Code
4
●
Marissa, a principal, hires a new fifth grade teacher for the upcoming school year.
Which type of agent is the new teacher?
Special agent
●
General agent
●
Employee
🔘
Collection agent
●
RATIONALE
An employee works for the employer and has the right to control and direct how the work is to be materially
performed.
CONCEPT
→ Types of Agents
5
●
Select the true statement about common law.
In a common-law system, attorneys do not need to use legal
● reasoning to argue their case.
Rules of law are shaped by the courts through the practice of stare
🔘 decisis.
Common law is binding regardless of jurisdiction.
●
Common law is highly malleable, because precedents are often
● overturned.
RATIONALE
Common law is the body of law created by courts, and, to ensure the law is consistently applied, courts practice
stare decisis to ensure that decisions are made based on legal precedent.
CONCEPT
→ Legislation and Other Sources of Law
6
●
As part of its strategic planning, a fast food corporation considers the societal effects of using poultry treated with
high levels of antibiotics in its supply chain. The Board of Directors ultimately instructs the officers to continue
using the corporation's current poultry suppliers since the levels of antibiotics they use, while high, comply with the
law and are very cheap.
According to stakeholder theory, did the corporation fulfill its duty?
No, because the officers of the corporation are failing to fulfill their
● fiduciary duty to the Board and the corporate shareholders.
Yes, because the corporation is not violating any laws.
●
No, because the company is prioritizing profits over other social
🔘 responsibilities.
Yes, because the corporation has a duty to save money.
●
RATIONALE
Stakeholder theory holds that customers are stakeholders and looks to the overall good a corporation does in a
community.
CONCEPT
→ Corporate Governance
7
●
The new CEO of a large coffee corporation makes fighting sexual harassment a cornerstone of the company's
culture after a series of embarrassing incidents involving several of the company's managers are leaked to the
media. The corporation drafts a new code of ethics with an expanded set of policies related to sexual harassment,
creates a series of mandatory workshops for its workforce, and fires the managers involved in the incidents.
Consider what you have learned about the factors that impact corporate culture. What is the ethical strength of
the corporation in the example?
Weak, because the CEO should have cracked down on the
● employees who were leaking information to the media as well.
Weak, because this focus on matters of social justice has no place
● in capitalism.
Strong, because the corporation must show that it has an ongoing
● process to discourage wrongdoing in order to avoid legal action.
Strong, because the CEO is setting expectations for ethical behavior
🔘 and holding violators accountable.
RATIONALE
The company is showing ethical strength because it has gone beyond merely discouraging wrongdoing and has
taken additional action steps to revise the code of ethics, mandate training for its workforce, and hold
wrongdoers accountable by firing them.
CONCEPT
→ Corporate Culture and Codes of Ethics
8
●
Select the true statement about the relationship between law, ethics, and business.
It is impossible for a business to behave unethically if it follows the
● law.
What is ethical in business is not necessarily required by law.
🔘
Abiding by the law is sufficient for businesses to earn a moral
● reputation.
The law ensures ethical conduct in most areas of business.
●
RATIONALE
This is the only correct response because it recognizes that compliance with the law alone does not ensure
ethical compliance, and vice-versa.
CONCEPT
→ What Is Ethics?
9
●
Which of the following scenarios would likely result in an order for specific performance or an injunction, rather
than a monetary award?
A hospital hires a new CEO who signs a two-year employment
contract. After six months, the CEO quits, and the hospital sues her
●
for breach of contract.
Yolanda's landscaping company orders a new riding mower that is
supposed to be delivered before Yolanda's next big job on Monday.
The mower doesn't arrive until Friday, so Yolanda loses out on that
●
job. Yolanda sues the company that promised her the riding mower
for breach of contract.
A homeowner requests that a fencing company install a particular
brand of vinyl fence. The company ends up installing a different
● brand that looks and performs exactly the same. The homeowner
sues for breach of contract.
Joyce signs a contract to purchase her first home for $180,000 from
Mei. Mei then gets a better offer, and breaks her contract with
🔘
Joyce. Joyce sues Mei for breach of contract.
RATIONALE
Specific performance is awarded where monetary damages cannot compensate a non-breaching party. Real
estate is always unique, and, typically, nothing short of specific performance can compensate for breach of a real
estate sales contract.
CONCEPT
→ Equitable Remedies: Specific Performance and Injunction
10
●
Which of the following is an example of a voidable contract?
A 21-year-old forms a contract with an able-bodied and competent
30-year-old neighbor to drive her to work all year in exchange for
●
gas money.
A 28-year-old adult forms a written contract with an able-bodied
and competent 17-year-old neighbor to cut her lawn for $200 per
🔘
week.
A 21-year-old adult forms a written contract with an able-bodied and
● competent adult neighbor to clean his house for $1 per month.
A 52-year-old forms an oral contract with an able-bodied and
● competent adult neighbor to paint his deck for $1,000.
RATIONALE
A minor is generally not considered competent to consent to a contract, and, therefore, such a contract is
voidable, meaning it may be avoided by the minor.
CONCEPT
→ Different Types of Contracts
11
●
Heidi purchases an original work by one of her favorite sculptors from an art dealer for $8,000. When the
sculpture is delivered, Heidi has it inspected by an art appraiser, who informs her that the sculpture is a fake. When
Heidi calls the art dealer to tell him the news, he is honestly shocked and appalled.
What remedy does Heidi have in this scenario?
Heidi is only entitled to recover the money that she paid for the
● sculpture.
Heidi may sue the art dealer for specific performance and require
● the dealer to secure the original sculpture in any way possible.
Heidi is entitled to recover the purchase price of the sculpture, as
🔘 well as the money she spent to have the sculpture appraised.
Heidi has no recourse in this scenario, because she accepted
● delivery of a non-conforming good.
RATIONALE
Where Buyer accepts non-conforming goods and notifies seller of the non-conformity, Buyer may recover
compensatory damages for the price paid and incidental damages (cost incurred in appraising the goods).
CONCEPT
→ Buyer's Remedies Under the Uniform Commercial Code
12
●
Which of the following laws or agencies protects the public from various forms of investment fraud?
Federal Trade Commission
●
Securities and Exchange Commission
🔘
Civil Rights Act
●
Truth in Lending Act
●
RATIONALE
The objective of the U.S. Securities and Exchange Commission is to protect investors in securities (stocks and
investments) to ensure they are exchanged fairly and properly and to regulate organizations in the securities
markets.
CONCEPT
→ Law in Business
13
●
A 60-year-old man develops lung cancer, and sues the manufacturer of an asbestos-containing material. The man
worked in construction for 45 years, and often used the asbestos-containing material in building projects. He
believes that the asbestos-containing material was unreasonably unsafe, because friends of his in the construction
trade who used alternative materials did not develop lung cancer.
How strong is the negligence case against the product manufacturer?
Strong, because the alternative materials used by his friends were
● much safer.
Weak, because the manufacturer can claim preemption.
●
Weak, because proximate cause is difficult to prove in the absence
🔘 of other, similarly-affected individuals.
Weak, because the employees assumed the risk of working with the
● asbestos-containing materials.
RATIONALE
The negligence case is weak because it is difficult to prove a causal link between the asbestos-containing
material and the illness. A strict liability theory based on a dangerous product may be stronger.
CONCEPT
→ Negligent Products Liability
14
●
Yvette is the owner of a restaurant run by a general manager named Paul, whom Yvette closely supervises. Paul
recently hired two new dishwashers. Unbeknownst to Yvette, Paul pays them less than the minimum wage
because he knows they need the job. The dishwashers eventually obtain legal help and sue Paul and Yvette for
violating minimum wage laws.
Is Yvette criminally liable?
No, Yvette cannot be held liable because she had no knowledge of
● Paul's actions.
Yes, Yvette may be held liable for Paul's actions if the wage
🔘 violations are strict liability crimes in this jurisdiction.
No, Yvette cannot be held liable because a principal is never liable
● for an agent's unauthorized crimes.
No, Yvette cannot be held liable because she could not have
● foreseen that Paul would pay workers less than the minimum wage.
RATIONALE
In general, a principal is not liable for crimes committed by the agent where the crime is one that requires
specific intent as an element of the crime. However, there are strict liability crimes that do not require specific
intent, such as serving liquor to minors, for example. Here, if violating wage and hour laws is indeed a strict
liability crime in their jurisdiction, Yvette could be held criminally liable.
CONCEPT
→ Principal's Tort and Criminal Liability
15
●
Why was the power to confer intellectual property rights given to Congress?
To support capitalism
●
To defend equality
●
To promote progress
🔘
To deter monopolies
●
RATIONALE
Intellectual property rights are given to inventors, authors, artists, etc. in order to promote progress by
encouraging production of creative works.
CONCEPT
→ Intellectual Property
16
●
Which of the following is an example of a general partnership?
Yvonne opens her first business selling sporting goods. She hires a
marketing manager, an accountant, and several sales staff to help
her manage the demand for her goods. When she files her annual
●
taxes, she claims 100% of the profits of the business on her
individual tax return.
Ken and Paul start a graphic design business together. When Ken
fails to deliver on a contract with a customer, Ken and Paul are held
🔘
equally responsible when the customer sues for damages.
Jonathan and Craig's catering business is going through a rough
patch wherein the debts exceed the income. Jonathan is worried
because he is personally liable for the whole of the company's
●
debts, but Craig is only liable for the initial $50,000 that he
invested.
Stefanie's photography business has grown so quickly that she
needs to invest in more equipment. She brings in a partner who
● provides the capital to purchase the new equipment, but who has
no control over the day-to-day operations of the business.
RATIONALE
In a general partnership, at least two partners share profits and losses in the business and are jointly liable,
meaning that one partner can be held liable for actions taken by the other partners.
CONCEPT
→ Sole Proprietorships and Partnerships
17
●
Select the statement that best applies to the new company name "Pep-C."
This name likely cannot be trademarked.
🔘
This name is an example of a certification mark.
●
This name is an example of a collective mark.
●
This name is an example of genericide.
●
RATIONALE
This name is not available for trademark because it is too similar to "Pepsi" and would cause confusion in the
minds of consumers.
CONCEPT
→ Trademarks
18
●
Since corporations are separate legal entities from their shareholders, which of the following is true?
A corporation can only exist for as long as its original owners are
● present.
Shareholders do not need to pay taxes on dividend earnings since
● corporations are taxed independently.
Under no circumstances can the protection of limited liability be
● removed from shareholders.
Shareholders are usually not financially accountable for the actions
of the corporation, but neither do they own the assets of the
🔘
corporation.
RATIONALE
Shareholders are not liable for debts of a corporation unless there is evidence a shareholder used the
corporation as a shell company or alter ego, and shareholders do not have a legal right to property owned by
the corporation.
CONCEPT
→ Corporations
19
●
If ownership of Isaiah's home transfers to his sister upon his death, Isaiah has a __________ in his home.
life estate interest
🔘
reversionary interest
●
possessory interest
●
leasehold interest
●
RATIONALE
A life estate interest terminates upon death of the life tenant and passes to the remainderman (the person
designated in the deed conveying the life estate).
CONCEPT
→ Real Property: Duties, Responsibilities, and Interests
20
●
In which scenario would the non-breaching party lose the opportunity to avoid or limit losses?
A landlord makes no attempt to find a new renter after a tenant
🔘 breaks her lease.
A caterer refuses to deliver a cake she baked for an event that was
● cancelled.
A housepainter stops painting a client's house once he realizes that
● the homeowner can't pay.
A landscaper avoids using a newly-purchased lawnmower that she
● knows is defective.
RATIONALE
A non-breaching party has a duty to attempt to mitigate damages (i.e., offer the rental to another prospective
tenant).
CONCEPT
→ Limitations on Contract Remedies
21
●
Christine hires a deck company to build a deck. The company initially does a terrible job and agrees to rebuild it. A
court requires the company to pay for the cost of the inspection that Christine has done to ensure the rebuilt deck
is structurally sound.
This is an example of which type of monetary award?
Nominal damages
●
Incidental damages
🔘
Consequential damages
●
Punitive damages
●
This study source was downloaded by 1827175 from cliffsnotes.com on 01-08-2026 18:22:58 GMT -06:00
RATIONALE
https://www.cliffsnotes.com//study-notes/6993595
Incidental damages are direct costs incurred by the non-breaching party Christine to avoid incurring additional
damages.
CONCEPT
→ Monetary Awards
22
●
The CEO of Oil Company X is dismayed to learn that oil has been leaking from one of its off-shore rigs into the
Gulf of Mexico for the last five years. In deciding how to proceed, the company identifies a range of stakeholders,
considers how different courses of action would impact each stakeholder, and determines which core values each
decision would satisfy.
According to the Josephson's core values model for ethical decision-making, what should Company X do next?
Weigh the financial cost of each possible course of action against
● the core values that it promotes.
Decide which stakeholders are most important and whose needs
● should be prioritized.
Choose the course of action that is most likely to promote the
🔘 greatest number of core values.
Determine which course of action will be easiest to implement.
●
RATIONALE
After the identification of shareholders, the impact of possible decisions on shareholders, and the identification
of core values, the next step is to determine what decision satisfies the greatest number of core values.
CONCEPT
→ An Ethical Decision Model
23
●
Which of the following conditions always renders a contract voidable?
If a party to the contract fraudulently misrepresents material facts
🔘
If a party to the contract can no longer afford the promised
● consideration
If a party to the contract has changed his or her mind
●
If a party to the contract is in good mental health but
● misunderstands the terms of the contract
RATIONALE
Fraud or misrepresentation are always a defense to contract enforcement.
CONCEPT
→ Unenforceable Contracts
Page 1 of 2 /2026 Sophia Business Law Final Complete Exam.pdf
