Home › Business Law Mastery › Answer Key

Answer Key: Business Law Mastery

Verify your understanding with the correct answers to all chapter knowledge checks.

This answer key provides the correct answers to the multiple‑choice knowledge check questions at the end of each chapter. Use it to assess your comprehension and identify areas for review.

📘 Chapter 1: Introduction to Business Law and the Legal System

1. B) The U.S. Constitution (supreme law of the land)
2. C) Precedents set by higher courts in the same jurisdiction (stare decisis)
3. B) The parties are citizens of different states and the amount in controversy exceeds $75,000 (diversity jurisdiction)

📘 Chapter 2: The Essentials of a Contract – Offer, Acceptance, and Consideration

1. B) A unilateral offer to the world (Carlill v. Carbolic Smoke Ball Co.)
2. C) Terminated, and a counteroffer is created (mirror image rule / Hyde v. Wrench)
3. B) Something of value exchanged in a bargained‑for manner (definition of consideration)

📘 Chapter 3: Contractual Validity – Capacity, Legality, and Genuineness of Assent

1. B) Disaffirm the contract at any time before reaching majority (minor’s right to disaffirm)
2. C) Zehmer’s outward conduct indicated a serious intent (objective theory; Lucy v. Zehmer)
3. C) Unenforceable as unconscionable (Williams v. Walker‑Thomas Furniture Co.)

📘 Chapter 4: Performance, Breach of Contract, and Legal Remedies

1. B) Substantial performance (Jacob & Youngs v. Kent)
2. B) They were foreseeable at the time of contracting (Hadley v. Baxendale)
3. C) A contract for the sale of a unique piece of real estate (specific performance)

📘 Chapter 5: Fundamentals of Tort Law – Civil Wrongs in a Business Context

1. B) Civil wrong giving rise to a remedy in damages (definition of tort)
2. B) The duty of care in negligence (Donoghue v. Stevenson)
3. C) A manufacturer sells a defective product that injures a consumer (strict product liability)

📘 Chapter 6: Intentional Torts – Harm to Persons and Property

1. B) Actual harmful or offensive contact (battery)
2. B) Reasonable suspicion and a proper investigation (shopkeeper’s privilege)
3. B) Conversion involves such serious interference that the owner is deprived of the property (distinction from trespass to chattels)

📘 Chapter 7: The Doctrine of Negligence – Duty, Breach, Causation, and Injury

1. B) Duty, breach, causation, damages (four elements)
2. B) The injury was not foreseeable, so no duty was owed (Palsgraf v. Long Island Railroad Co.)
3. C) $70,000 (comparative negligence reduces recovery by plaintiff’s fault)

📘 Chapter 8: Strict Liability, Product Liability, and Consumer Protection

1. B) MacPherson v. Buick Motor Co. (broke privity barrier)
2. B) The product was defective and caused injury (elements of strict product liability)
3. B) Design defect (inherently dangerous design)

📘 Chapter 9: The Agency Relationship – Creation and Authority

1. D) Adverse possession (not a method of creating agency)
2. C) The firm’s conduct created apparent authority (Lloyd v. Grace, Smith & Co.)
3. B) Authority to do acts reasonably necessary to carry out express authority (implied authority)

📘 Chapter 10: The Agent’s Role – Duties of Loyalty, Performance, and Care

1. B) The agent must act solely in the principal’s best interests and avoid conflicts of interest (duty of loyalty)
2. B) Secretly negotiating a new lease without disclosing the opportunity to his co‑venturer (Meinhard v. Salmon)
3. B) Recover the profit (disgorgement) and any additional damages caused by the breach (remedies for breach of loyalty)

📘 Chapter 11: The Principal’s Role – Duties to the Agent

1. B) Reimburse the agent for those expenses (duty to reimburse)
2. D) Cooperate (Chamberlain v. Beller)
3. B) Indemnify the agent for legal expenses and any judgment (duty to indemnify)

📘 Chapter 12: Liability of Principals and Agents to Third Parties

1. C) The employee was acting within the scope of employment (respondeat superior)
2. B) The principal only (disclosed principal with actual authority)
3. B) The sailor’s conduct was within the scope of employment and foreseeable (Ira S. Bushey & Sons, Inc. v. United States)

📘 Chapter 13: Terminating Agency and Contractual Relationships

1. C) The principal dies (termination by operation of law)
2. B) The principal failed to notify third parties who had dealt with the agent (Watteau v. Fenwick)
3. C) Give actual notice to third parties who have dealt with the agent and constructive notice to the public if necessary (cutting off apparent authority)

📘 Chapter 14: Intersections in Practice – Case Studies in Business Law

1. B) Apparent authority (Case Study 1)
2. C) Vicarious liability (respondeat superior) and negligent hiring (Case Study 2)
3. C) Voidable at Precision’s option due to fraud (Case Study 3)
4. B) Strict product liability (Case Study 4)

⬅ Previous: Chapter 14 🏠 Home Top ⬆

© 2026 Kateule Sydney / E-cyclopedia Resources. All rights reserved. This work is adapted from open educational resources and original research. For permissions: kateulesydney@gmail.com

Disclaimer: For educational purposes only. Not legal advice. Laws may change. Consult a qualified attorney for specific cases.