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Unit 1 of 5

Unit 1: The Legal System

Study guide for CLEP CLEP Introductory Business Law — Unit 1: The Legal System. Practice questions, key concepts, and exam tips.

261

Practice Questions

15

Flashcards

4

Key Topics

Key Concepts to Study

Sources of law: constitutional, statutory, administrative
Court systems and jurisdiction
Civil vs criminal procedure
Alternative dispute resolution: mediation and arbitration

Sample Practice Questions

Try these 5 questions from this unit. Sign up for full access to all 261.

Q1MEDIUM

What is a design defect in product liability?

A) A flaw in the manufacturing process
B) A problem with the product's instructions
C) A breach of contract
D) A failure to warn consumers about potential hazards
E) A flaw in the product's design that makes it unreasonably dangerous
Show Answer

Answer: E — A flaw in the product's design that makes it unreasonably dangerous is correct because a design defect refers to a flaw in the product's design that creates an unreasonable risk of harm to consumers.

Q2HARD

A US company agrees to arbitrate disputes in London under the New York Convention. What is the likely outcome?

A) The arbitration will be governed by US law
B) The arbitration will be governed by English law
C) The arbitration will be governed by the law of the contract
D) The arbitration will be heard in a US court
E) The arbitration will not be enforceable
Show Answer

Answer: C — The arbitration will be governed by the law of the contract is correct because the New York Convention typically applies the law of the contract.

Q3EASY

Which constitutional principle is based on the idea that power should be divided among the branches of government?

A) Federalism
B) Individual rights
C) Checks and balances
D) Separation of powers
E) Judicial review
Show Answer

Answer: D — Separation of powers is correct because this principle, as outlined in the Constitution, divides power among the legislative, executive, and judicial branches to prevent any one branch from becoming too powerful.

Q4HARD

What is the difference between a counterclaim and a cross-claim?

A) A counterclaim is filed by a plaintiff, while a cross-claim is filed by a defendant
B) A counterclaim is filed in response to a complaint, while a cross-claim is filed in response to an answer
C) A counterclaim is filed in federal court, while a cross-claim is filed in state court
D) A counterclaim is filed by a defendant against a plaintiff, while a cross-claim is filed by one defendant against another defendant
E) A counterclaim is filed by a judge, while a cross-claim is filed by a jury
Show Answer

Answer: D — A counterclaim is filed by a defendant against a plaintiff, while a cross-claim is filed by one defendant against another defendant is correct because it highlights the key difference between the two types of claims.

Q5MEDIUM

What type of breach occurs when a party indicates that they will not perform their contractual duties?

A) Material breach
B) Non-material breach
C) Anticipatory breach
D) Fundamental breach
E) Total breach
Show Answer

Answer: C — When you hire a contractor to build your dream home and they suddenly tell you they won't show up to start work, you're facing a situation where a party indicates they won't perform their duties. This is an example of an Anticipatory breach, where one party explicitly states they will not fulfill their contractual obligations. In contrast, a Material breach, which might seem like a plausible answer, occurs when a party actually fails to perform their duties, not just announces their intention not to.

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Study Tips for Unit 1: The Legal System

  • Focus on understanding concepts, not memorizing facts — CLEP tests application
  • Practice with timed questions to build exam-day speed
  • Review explanations for wrong answers — they reveal common misconceptions
  • Use flashcards for key terms, practice questions for deeper understanding

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