MBA 603: FINAL REVIEW EXAM QUESTIONS WITH
ANSWERS
1. A contract that has been fully performed by both parties is known
as:
A) Executory
B) Executed
C) Voidable
D) Unilateral
Correct Answer: B
A contract is executed when all parties have fully performed their
obligations under the agreement. This is distinguished from executory
contracts where some duties remain unperformed.
2. Which of the following is NOT a required element for a valid
contract?
A) Offer
B) Acceptance
C) Consideration
D) Written format
Correct Answer: D
While some contracts must be in writing under the Statute of Frauds,
most contracts can be oral and still be legally enforceable if they contain
offer, acceptance, consideration, capacity, and legality.
,3. A minor enters into a contract for a luxury car. This contract is:
A) Void
B) Voidable at the minor's option
C) Voidable at the adult's option
D) Fully enforceable
Correct Answer: B
Minors have the right to disaffirm contracts they enter into, making
them voidable at the minor's option. The adult party cannot void the
contract.
4. What type of agency relationship exists when the agent has broad
authority to act on behalf of the principal in all matters?
A) Special Agent
B) General Agent
C) Universal Agent
D) Subagent
Correct Answer: C
A universal agent has the broadest authority, authorized to perform any
and all acts that the principal could perform. This differs from general
and special agents who have more limited authority.
5. The Statute of Frauds requires which of the following contracts to
be in writing?
A) Contracts for the sale of goods under $500
B) Contracts that can be performed within one year
C) Contracts to pay the debt of another
D) Employment contracts for any duration
Correct Answer: C
Contracts to pay the debt of another (suretyship agreements) must be
,in writing under the Statute of Frauds. Other contracts requiring writing
include those for land, marriage, and those taking more than one year.
6. An offer that invites acceptance by performance is called:
A) Bilateral contract
B) Unilateral contract
C) Express contract
D) Implied contract
Correct Answer: B
A unilateral contract is one where the offeror promises to pay upon the
completion of a specific act by the offeree. The offeree accepts by
performing, not by promising.
7. Which of the following terminates an agency relationship by
operation of law?
A) Mutual agreement
B) Death of the principal
C) Agency contract expiration
D) Agent's resignation
Correct Answer: B
Death, insanity, or bankruptcy of either the principal or agent
terminates the agency relationship by operation of law without any
action required by the parties.
8. An advertisement in a newspaper is generally considered:
A) An offer
B) An invitation to make an offer
C) A binding contract
D) A unilateral promise
Correct Answer: B
, Advertisements are typically invitations to negotiate or make offers, not
offers themselves. However, they can become offers if they are specific
and definite enough.
9. A person who has been adjudicated insane:
A) Can enter into valid contracts
B) Has voidable contracts
C) Has void contracts
D) Can only enter into contracts for necessities
Correct Answer: C
Contracts entered into by someone who has been adjudicated insane
are void, not merely voidable. This differs from contracts by minors or
those with mental impairment but no adjudication.
10. Consideration must be:
A) Adequate
B) Sufficient
C) Equal in value
D) Monetary only
Correct Answer: B
Consideration need only be sufficient, not adequate. The courts
generally do not evaluate the adequacy of consideration as long as
something of legal value is exchanged.
11. An agent who is authorized to conduct a single transaction is
called:
A) General Agent
B) Special Agent
C) Universal Agent
D) Independent Contractor
ANSWERS
1. A contract that has been fully performed by both parties is known
as:
A) Executory
B) Executed
C) Voidable
D) Unilateral
Correct Answer: B
A contract is executed when all parties have fully performed their
obligations under the agreement. This is distinguished from executory
contracts where some duties remain unperformed.
2. Which of the following is NOT a required element for a valid
contract?
A) Offer
B) Acceptance
C) Consideration
D) Written format
Correct Answer: D
While some contracts must be in writing under the Statute of Frauds,
most contracts can be oral and still be legally enforceable if they contain
offer, acceptance, consideration, capacity, and legality.
,3. A minor enters into a contract for a luxury car. This contract is:
A) Void
B) Voidable at the minor's option
C) Voidable at the adult's option
D) Fully enforceable
Correct Answer: B
Minors have the right to disaffirm contracts they enter into, making
them voidable at the minor's option. The adult party cannot void the
contract.
4. What type of agency relationship exists when the agent has broad
authority to act on behalf of the principal in all matters?
A) Special Agent
B) General Agent
C) Universal Agent
D) Subagent
Correct Answer: C
A universal agent has the broadest authority, authorized to perform any
and all acts that the principal could perform. This differs from general
and special agents who have more limited authority.
5. The Statute of Frauds requires which of the following contracts to
be in writing?
A) Contracts for the sale of goods under $500
B) Contracts that can be performed within one year
C) Contracts to pay the debt of another
D) Employment contracts for any duration
Correct Answer: C
Contracts to pay the debt of another (suretyship agreements) must be
,in writing under the Statute of Frauds. Other contracts requiring writing
include those for land, marriage, and those taking more than one year.
6. An offer that invites acceptance by performance is called:
A) Bilateral contract
B) Unilateral contract
C) Express contract
D) Implied contract
Correct Answer: B
A unilateral contract is one where the offeror promises to pay upon the
completion of a specific act by the offeree. The offeree accepts by
performing, not by promising.
7. Which of the following terminates an agency relationship by
operation of law?
A) Mutual agreement
B) Death of the principal
C) Agency contract expiration
D) Agent's resignation
Correct Answer: B
Death, insanity, or bankruptcy of either the principal or agent
terminates the agency relationship by operation of law without any
action required by the parties.
8. An advertisement in a newspaper is generally considered:
A) An offer
B) An invitation to make an offer
C) A binding contract
D) A unilateral promise
Correct Answer: B
, Advertisements are typically invitations to negotiate or make offers, not
offers themselves. However, they can become offers if they are specific
and definite enough.
9. A person who has been adjudicated insane:
A) Can enter into valid contracts
B) Has voidable contracts
C) Has void contracts
D) Can only enter into contracts for necessities
Correct Answer: C
Contracts entered into by someone who has been adjudicated insane
are void, not merely voidable. This differs from contracts by minors or
those with mental impairment but no adjudication.
10. Consideration must be:
A) Adequate
B) Sufficient
C) Equal in value
D) Monetary only
Correct Answer: B
Consideration need only be sufficient, not adequate. The courts
generally do not evaluate the adequacy of consideration as long as
something of legal value is exchanged.
11. An agent who is authorized to conduct a single transaction is
called:
A) General Agent
B) Special Agent
C) Universal Agent
D) Independent Contractor
