CNA CNA Business Law and Ethics 1 — Questions and Answers
Question 1: Under the Uniform Commercial Code (UCC), a contract for the sale of goods valued at $500 or more must generally be:
- Witnessed by a notary
- In writing to be enforceable (Correct answer)
- Approved by a government agency
- Accompanied by a formal invoice
Correct answer: In writing to be enforceable
UCC Article 2 requires contracts for the sale of goods worth $500 or more to be evidenced by a written record to satisfy the statute of frauds.
Question 2: Which ethical framework judges the morality of an action solely by its outcomes or consequences?
- Deontological ethics
- Virtue ethics
- Consequentialism (Correct answer)
- Divine command theory
Correct answer: Consequentialism
Consequentialism, including utilitarianism, evaluates actions based on their results — an action is ethical if it produces the greatest good for the greatest number.
Question 3: An agency relationship in business law requires which of the following elements?
- A written contract and notarization
- Consent, control, and action on behalf of another party (Correct answer)
- Registration with a state licensing board
- Payment of consideration to the agent
Correct answer: Consent, control, and action on behalf of another party
An agency relationship exists when one party (agent) consents to act on behalf of another (principal) subject to the principal's control.
Question 4: The Sarbanes-Oxley Act (SOX) was enacted primarily to address:
- Foreign corrupt payment practices by U.S. companies
- Corporate accounting scandals and enhance financial reporting integrity (Correct answer)
- Securities trading rules for hedge funds
- Antitrust violations in monopoly markets
Correct answer: Corporate accounting scandals and enhance financial reporting integrity
SOX was enacted in 2002 in response to accounting fraud at Enron, WorldCom, and others, imposing strict requirements on financial reporting and auditor independence.
Question 5: Which type of business entity provides its owners with limited liability protection while allowing profits to be taxed only at the owner level?
- General partnership
- C corporation
- Limited liability company (LLC) (Correct answer)
- Sole proprietorship
Correct answer: Limited liability company (LLC)
An LLC offers limited liability protection similar to a corporation but allows pass-through taxation, avoiding the double taxation of C corporations.
Question 6: In contract law, consideration is best defined as:
- The signature of both parties on the contract
- Something of legal value exchanged by both parties (Correct answer)
- A written description of the goods or services
- A penalty clause for non-performance
Correct answer: Something of legal value exchanged by both parties
Consideration is a bargained-for exchange in which each party gives something of legal value, making a contract legally binding.
CNA CNA Business Law and Ethics 1
Under the Uniform Commercial Code (UCC), a contract for the sale of goods valued at $500 or more must generally be: