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Unit 2 of 5

Unit 2: Contracts

Study guide for CLEP CLEP Introductory Business Law — Unit 2: Contracts. Practice questions, key concepts, and exam tips.

73

Practice Questions

10

Flashcards

4

Key Topics

Key Concepts to Study

Elements of a valid contract: offer, acceptance, consideration
Capacity, legality, and statute of frauds
Contract performance, breach, and remedies
Third-party rights and assignment

Sample Practice Questions

Try these 5 questions from this unit. Sign up for full access to all 73.

Q1HARD

Which is a type of contract that can be terminated at any time by either party?

A) Bilateral contract
B) Unilateral contract
C) Executory contract
D) At-will contract
E) Implied contract
Show Answer

Answer: D — At-will contract is correct because at-will contracts can be terminated by either party..

Q2MEDIUM

A company's board of directors has decided to implement a new policy that requires all employees to sign a non-disclosure agreement before accessing confidential company information. Which of the following is the primary purpose of this policy?

A) To protect the company's trade secrets and prevent employee theft
B) To comply with federal regulations regarding employee privacy
C) To increase employee morale and job satisfaction
D) To reduce the company's liability for employee negligence
E) To enhance the company's competitive edge through employee recruitment
Show Answer

Answer: A — The primary purpose of a non-disclosure agreement is to protect confidential information, such as trade secrets.

Q3MEDIUM

Under the UCC, a firm offer

A) Must be in writing to be enforceable
B) Requires consideration to be binding
C) Is irrevocable for the time stated in the offer
D) Automatically terminates after 30 days
E) Can only be made by a merchant
Show Answer

Answer: C — Is irrevocable for the time stated in the offer is correct because a firm offer is irrevocable..

Q4EASY

A valid contract requires

A) Offer, acceptance, and breach
B) Offer, acceptance, and consideration
C) Offer, consideration, and legality
D) Acceptance, consideration, and capacity
E) Legality, capacity, and breach
Show Answer

Answer: B — Offer, acceptance, and consideration is correct because a valid contract requires offer, acceptance, and consideration. Breach is not a requirement.

Q5HARD

Which statement about parol evidence is accurate?

A) It can always be used to contradict a written contract
B) It is admissible when a contract is partially written and partially oral
C) It can never be used to interpret a written contract
D) It can be used to establish a contract's consideration
E) It applies only to contracts for the sale of goods
Show Answer

Answer: B — It is admissible when a contract is partially writ... is correct because parol evidence can be used when a contract is partially written..

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Study Tips for Unit 2: Contracts

  • 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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