Principles of Business for CSEC®

2nd edition

Chapter 4: Legal aspects of business

The following test paper contains four multiple-choice questions, to help you prepare for
Paper 1, and one essay question, to help you prepare for Paper 2. If you decide to complete the
paper under exam conditions, you should give yourself no longer than 30 minutes to complete
all questions.

1. A legal contract is formed at the point when:

(A) A purchaser is considering buying goods from a seller
(B) An offer has been made by one party
(C) Contractual documents are in the process of being drafted
(D) The offer of one party has been accepted by another party
(1 mark)

2. A specialty contract is so called because:

(A) It is binding on the two parties that form the contract
(B) It is set out on specially prepared paper
(C) It is signed, sealed and delivered
(D) The terms and conditions are set out in the contract
(1 mark)

3. Completion of a contract occurs:

(A) When some of the important terms of the contract have been met
(B) When the offeror is happy that his or her obligations have been completed
(C) When the offeree feels that a guarantee has not been met
(D) When every condition, term and guarantee has been met
(1 mark)

4. A statement of account is:

(A) A document relating to one specific transaction
(B) A document to cover cases where overpayment has been made
(C) A document advising a purchaser that delivery will be made
(D) A document setting out a series of transactions, payments and balances
(1 mark)

1 Principles of Business for CSEC®, 2nd edition © Oxford University Press 2019
Chapter 4: Legal aspects of business

5. John Smith recently opened a dry-cleaning business in the town of Mandeville. Two weeks
after opening the business, it was destroyed by a fire. In conducting the investigation, the fire
chief enquired if Mr Smith had insurance, to which he replied that he did not.
(a) Explain the meaning of the term “insurance”.


(2 marks)

(b) Discuss two (2) principles upon which the concept of insurance is based.


(4 marks)

(c) Advise Mr Smith on three (3) types of insurance that he could use to protect his business.

2 Principles of Business for CSEC®, 2nd edition © Oxford University Press 2019
Chapter 4: Legal aspects of business


(6 marks)

(d) Explain two (2) forms of business documents that Mr Smith is likely to use in his
dry-cleaning business.


(4 marks)

(e) Discuss two (2) ways in which Mr Smith’s dry-cleaning business could benefit from
having insurance coverage.


(4 marks)

(24 marks)

3 Principles of Business for CSEC®, 2nd edition © Oxford University Press 2019