BUSINESS LAW AND COMMERCIAL LAW
TEST 1: PRACTICE QUESTIONS AND PREPARATION ADVICE
1. PREPARING FOR TEST 1
Using practice questions is a great way to prepare for Test 1, in addition to revising your
course materials and your own study notes.
However, practice questions are best used for revision purposes under self-imposed test
conditions. You will get limited or no benefit from simply reading practice questions and
then reading over answer guides. Instead, find a quiet space, give yourself a time limit, work
on your own, type out fully explained answers (in relation to the practice problem questions),
and use the resources that you plan to have with you in the test itself (noting that your test is
open access).
You are welcome to discuss these questions, and your attempted responses, in consultation
times. However, we will not indicate a hypothetical mark that any particular response would
have received. Note too, in the case of the problem question issues guides, that these are not
model answers. They are intended to summarise the content we would expect to see (and to
pose specific questions we would expect to see answered) in a response, but they are not in
the form that you would need to use in your own responses.
In addition to using these questions, your course materials, and your study notes, you might
also like to refer to our (optional) practice multiple choice questions and Skills Assistance for
Business Law materials found with your consolidation activities each week on Moodle.
Relevantly for Test 1, your Skills Assistance for Business Law materials provide assistance in
relation to note-taking, and also in relation to answering an additional hypothetical legal
problem question.
Best of luck with your studies! Your practice questions begin on the next page.
2. PRACTICE MULTIPLE CHOICE QUESTIONS
The Australian legal system
1. The Commonwealth of Australia Constitution Act 1900 was important because it:
A. Ended all legal and political ties between Australia and England, and abolished appeals to
the English courts from State and Commonwealth courts.
B. Granted all law‐making powers to the Queen, with the vesting of absolute authority in the
Commonwealth Governor‐General and in the State Governors.
C. Created the Commonwealth of Australia, and left the States (formerly colonies) as self‐
governing political units with their own constitutions, parliaments, and courts.
D. Created freedom of trade between Australia and the British Commonwealth of nations.
2. Statutory law is a type of law made by:
A. The State and Territory Parliaments, and the Commonwealth Parliament, subject to limits
in their constitutions.
B. All State and Territory and Commonwealth courts.
C. The Prime Minister, and cabinet.
D. The Commonwealth, State, and Territory courts, together with the Commonwealth, State,
and Territory parliaments.
3. Most of the legislative powers of the Commonwealth Parliament are concurrent powers.
However, there are a limited number of exclusive powers. This means that in those limited
areas:
A. The Commonwealth Parliament only can legislate, rather than the State or Territory
parliaments.
B. The State and Territory parliaments only can legislate, to the exclusion of the
Commonwealth parliament.
C. The Commonwealth Parliament, and the State and Territory parliaments, can all make
laws at the same time (provided that they are not inconsistent).
D. The State and Territory parliaments can make laws in certain areas, but only after
obtaining the permission of the Commonwealth Parliament to do so.
4. The doctrine of precedent relates to the ratio decidendi of a case. This Latin phrase refers
to:
A. All of the evidence and facts presented during a court case, which have been recorded by a
court’s official.
B. Identification of whether the case involves civil law, or criminal law.
C. Comments and statements made by the judge or magistrate during the conduct of the case.
D. The reasons for the court’s decision.
5. The rule of law:
A. Is an important feature of Australia’s legal system, however it is of no relevance to the
conduct of business.
B. Is an important feature of Australia’s legal system, however is of limited relevance to the
business world.
C. Is important for the conduct of business, as it ensures that all people and companies are
subject to the law, creating the conditions necessary for business to flourish.
D. Is a key feature of all legal systems around the world.
6. Where an act is both a crime and a tort (civil wrong):
A. The offender may only be prosecuted for the crime.
B. The State may prosecute the offender for the crime, and the victim may bring a civil
action.
C. The State will prosecute the offender for both the crime and the tort.
D. Only a civil action may be taken against the offender.
7. Which of the following is NOT one of the three branches of the Commonwealth
government in Australia:
A. The Governor
B. The executive
C. The judiciary
D. The legislature
8. Which of the following statements about constitutions in Australia is INCORRECT?
A. The Commonwealth Constitution sets out the relationship of the Commonwealth
government with the States.
B. A written constitution is a feature of a federal legal system such as Australia.
C. The Commonwealth Constitution sets out the powers of the Commonwealth government.
D. Australia has one constitution only (States have no constitutions).
9. Which of the following CAN constitute precedent?
A. Cases deciding upon common law issues.
B. Cases deciding upon statutory interpretation issues.
C. Both A and B.
D. Neither A nor B.
Offer and acceptance
10. An offer:
A. Lapses after the time specified in the offer, or if no time is specified, lapses after a
reasonable time.
B. Must be accepted within the time specified in the offer, or within a reasonable time if no
time is specified, in order for there to be an agreement.
C. Must be sufficiently certain in order to lead to a binding contract.
D. All of the above are correct.
11. An acceptance:
A. Can still be effective (leading to a binding contract) even if the offeror seeks to revoke
their offer, provided the acceptance is communicated before the revocation.
B. Is effective if it is communicated in any manner, even if the offer requires acceptance to be
communicated in a particular way, because the offeror still knows that t heir offer has been
accepted.
C. Is able to vary the terms of the offer, provided that it doesn’t vary the offer too much.
D. Must be unconditional, which means that it must be made within reasonable time.
12. Which of the following is the most accurate description of the law, in relation to
advertisements?
A. An advertisement can never constitute an offer.
B. An advertisement constitutes acceptance.
C. Advertisements can constitute offers, and this is usually the case.
D. Advertisements are generally not offers, but can be in particular circumstances.
13. Which of the following is the most accurate description of the law, in relation to goods
displayed for sale in stores?
A. When goods are displayed on store shelves, the store makes an offer, which is accepted by
customers selecting the goods for purchase.
B. When goods are displayed on store shelves, this allows customers to request further
information from the seller.
C. When goods are displayed on store shelves, the display of the goods is usually an
invitation to treat.
D. Displaying goods on store shelves binds a store to sell those goods at the marked price.
14. Which is INCORRECT? Where the offeror has made a promise to keep an offer open for
a period of time, the offeror can revoke the offer prior to the expiration of that time if:
A. The promise to keep the offer open is not an option contract.
B. The offeror has made the promise in writing and signed it.
C. The offeree has not provided consideration for the promise.
D. The offeror has communicated the revocation before the offeree has communicated
acceptance.
15. Samantha is negotiating with Daniel in relation to purchasing a new chocolate moulding
machine for her chocolate business. Daniel tells Samantha that the machine will cost $34,000.
Samantha asks if the machine can automatically wrap the chocolates, and Daniel says that it
can’t. Samantha then tells Daniel that she wants to go ahead and buy the machine, but Daniel
refuses. Which of the following is CORRECT?
A. Samantha and Daniel have a contract, because once Daniel tells Samantha a price,
Samantha is entitled to insist on that price.
B. Samantha and Daniel have a contract, because Samantha’s question was only a request for
information, meaning Samantha could still accept Daniel’s initial offer.
C. Daniel revoked his offer, so Samantha is not able to accept the offer, meaning there is no
contract.
D. Daniel’s statement to Samantha about the price was only a mere puff, so Samantha is not
able to accept, meaning there is no contract.

16. Samantha is also negotiating with Jack in relation to purchasing a chocolate wrapping
machine for her chocolate business. Jack tells Samantha the price of the machine is $7,800.
Samantha tells Jack she would be prepared to pay $7,200, but Jack declines. Samantha then
tells Jack she will go ahead and purchase the machine for $7,800, but Jack now refuses to go
ahead and sell the machine. Which of the following is CORRECT?
A. Samantha and Jack don’t have a contract, because Jack never made an offer.
B. Samantha and Jack don’t have a contract, because there is no valid acceptance of an offer.
C. Samantha and Jack do have a contract, because Samantha accepted Jack’s offer to sell the
machine for $7,800.
D. Samantha and Jack do have a contract, but Samantha’s counter-offer means that Jack has
the right to cancel the contract if he wants.
17. Samantha advertises her chocolates for sale on the radio, with the slogan ‘the best
chocolates you’ll eat in 2023’. What is the best characterisation of this slogan?
A. It is an offer – when consumers buy chocolates, they accept, and a contract is formed.
B. It is an invitation to treat – an invitation for consumers to buy the chocolates.
C. It is a mere puff – exaggerated sales talk that no-one would take seriously, that can’t form
the basis of a contract.
D. It is the provision of information – so can’t form the basis of a contract.
18. Samantha has a special sale at her chocolate store, and places more advertisements on the
radio. This time they say ‘the first five customers to attend our store after we open next
Wednesday morning can purchase a box of chocolates normally worth $25 for just $10 –
we’re serious about our chocolates!’ Which of the following is CORRECT?
A. The radio advertisement is an invitation to treat – it is not an offer, so can’t be accepted by
customers.
B. The radio advertisement is mere puffery – it is not an offer, so can’t be accepted by
customers.
C. The radio advertisement is the provision of information – so customers can accept if they
are one of the first five customers on Wednesday morning.
D. The radio advertisement is an offer – and can be accepted by the first five customers to
attend on Wednesday morning.
19. Samantha has another special sale at her chocolate store, and places more advertisements
on the radio. This time they say ‘special discount sale – come in and buy a box of chocolates
normally worth $40 for just $15 – we’re serious about our chocolates and we want everyone
to try them!’ Which of the following is CORRECT?
A. The radio advertisement is an invitation to treat – it is not an offer, so can’t be accepted by
customers.
B. Radio advertisements can only ever be classified as mere puffery, as advertisements are
never intended to be serious and can never be accepted by customers.
C. The radio advertisement is the provision of information – so customers can accept if they
come into the store.
D. The radio advertisement is an offer – and can be accepted by any customer at any time.
3. PRACTICE MCQ QUESTIONS ANSWER KEY
1. C
2. A
3. A
4. D
5. C
6. B
7. A
8. D
9. C
10. D
11. A
12. D
13. C
14. B
15. B
16. B
17. C
18. D
19. A
4. PRACTICE HYPOTHETICAL LEGAL PROBLEM QUESTIONS
Question 1
Daniel wishes to sell his PlayStation 5 video game console as he does not use it any more. He
advertises it for sale for $600. Hamish phones and says he will buy it at that price. Daniel
says that he has changed his mind about selling, but thinks that he will charge $650 for it if he
decides to sell. Hamish then offers $620, but Daniel says he needs to think about it.
At the football the next day, Daniel offers Paul the PlayStation 5 for $640. When Paul says
no, Daniel says he will keep the offer open for Paul for 7 days in exchange for a lift to the
football next week. Paul agrees to this.
A day later, Daniel is in sudden need of money, and phones Hamish, saying that he accepts
the offer of $620. Hamish says that he has changed his mind and doesn’t want to buy the
console any more.
Analyse each of these communications, and identify the contractual liabilities of Daniel,
Hamish, and Paul. Refer to relevant sources of law (case law and/or legislation) to
support your arguments. Be sure to fully explain your answer.
Question 2
Paula is the managing partner of an accounting firm. Paula meets with Josephine, a taxation
expert, over lunch. They negotiate a contract for Josephine to present a seminar for Paula’s
staff. On his way back to the office, Paula loses a bundle of important papers. She is very
concerned about the possibility of losing sensitive business information. She advertises a
reward of $1,000 in the local newspaper for the return of the bundle of papers. Shazia finds
Paula’s papers, and contacts Paula to return them, finding her details on the header of some of
the papers. She has not seen the advertised reward.
Does Shazia have any contractual rights against Paula in relation to the $1,000 reward?
Question 3
On a community noticeboard outside her regular grocery store, Ming sees a printed flyer
listing a bicycle for sale. The owner, Betty, included a photo of the bicycle on the flyer.
Under the photo Betty wrote the following: “Email me for further information or to enquire
about the price”. She also listed her email address.
Ming needs a bicycle, so she emails Betty. In her email at 10.23AM on Monday, Ming
explains to Betty that she is willing to pay no more than $120 for a used bicycle and indicates
that she will buy the bicycle if Betty agrees to sell it to her at that price.
Betty responds to Ming’s initial email later that day. At 2.56PM on Monday afternoon, Betty
sends Ming an email and informs her that the bicycle has been used once and is practically in
new condition. Betty also explains that the bicycle is an elite racing bicycle, which when
purchased new is worth $1500. Betty explains that she will not sell the bicycle for anything
less than $850 and asks Ming if she would purchase the bicycle for this price.
The following day, on Tuesday, Ming sends Betty two emails. In her first email at 8.38AM
Ming writes to Betty that she is willing to buy the bicycle for $850.
Betty wrote an email in response to Ming at her 11.37AM. She wrote: “Great. So happy you
have decided to purchase the bicycle. Let’s arrange a time to meet at the grocery store where
I can bring you the bicycle and you can pay me.”
Later that day, Ming starts to worry about her upcoming expenses. She panics when she
realises she has not budgeted correctly for the month and so she sends Betty an email at
2.30PM writing: “Urgent – decided not to buy the bicycle. Find another buyer.” Ming was in
such a hurry to email Betty that she did not see Betty had already emailed her at 11.37AM in
response to Ming’s email at 8.38AM.
Do Ming and Betty have an enforceable agreement for the sale of the bicycle? Answer
with reference to case law and also the Electronic Transactions Act (ETA).
5. PRACTICE PROBLEM QUESTIONS ISSUES GUIDES
Question 1
Was Daniel’s advertisement an offer to sell for $600?
No – discuss advertisements generally being invitations to treat, distinguished from offers
(Carlill); need to explain why this advertisement is not an offer based on the facts. Hamish
makes an offer to buy for $600, but this was rejected by Daniel, so no contract exists at this
point in time.
Did Daniel make a counter‐offer?
Discuss Daniel saying he has changed his mind, but thinks if he did decide to sell the price
would be $650. Most likely just a statement of information: Gibson v Manchester.
Distinguish this from a counter-offer (Hyde v Wrench).
Did Hamish make a new offer? Did Daniel accept?
Hamish makes an offer for $620. Daniel does not accept straight away. The offer stays open
for a reasonable period of time. Daniel tries to accept the offer two days later – is this within
a reasonable time? Likely yes, so offer still open and has not lapsed and has not been revoked
before acceptance. A contract likely exists between Daniel and Hamish.
Did Paul accept Daniel’s offer? Is there an option contract between Daniel and Paul?
Paul rejects Daniel’s offer for $640, but agrees to Daniel’s promise to keep the offer open for
7 days. Discuss whether an option contract exists – has Paul provided something of value in
exchange? Does the lift to the football amount to consideration? Likely yes, it is an act that
has some value. Note Goldsborough Mort v Quinn. Discuss the effect of an option contract,
and that the offer still needs to be accepted within the option period: that hasn’t occurred, so
there is no contract yet.
Question 2
Is the advertisement an offer or invitation to treat?
Discuss that advertisements are generally invitations to treat, but can be offers in certain c
circumstances (Carlill). Likely an offer here – explain why by applying the analysis in Carlill
to the facts.
Did Shazia accept the offer?
Unilateral offer, made to the world at large, so acceptance can be by performance of the act
requested by the offeror (Carlill). But, the offeree must still be aware of the offer for
acceptance to take place: R v Clarke. Shazia is not entitled to the reward. Need to explain
why by applying the R v Clarke principle to the facts.
Question 3
Status of the flyer: Is the flyer an offer to sell the bicycle or is it an invitation to treat?
Nothing on the facts to indicate that Betty has an intention to be contractually bound; only an
indication of a willingness to negotiate. Likely an invitation to treat. Carlill v Carbolic Smoke
Ball.
Status of Ming’s email to Betty at 10.23AM on Monday: Offer on clear and certain terms
($120). Explain likely an offer (Carlill v Carbolic Smoke Ball). Consider the impact of the
ETA. What time was the offer made? Given Betty listed her email address on the flyer as
means of communication, consider if this is a designated email address. Offer made when the
email is delivered to Betty’s designated email address, as it is capable of being retrieved at
this time (section 13A ETA).
Status of Betty’s email to Ming at 2.56PM on Monday: Not an acceptance; a counter-offer
to sell the bicycle for $850 (Hyde v Wrench). Consider what time the counter-offer is made?
Counter-offer made at 2.56PM when the email is delivered to Ming’s designated email
address, as it is capable of being retrieved at this time (section 13A ETA).
Status of Ming’s email to Betty at 8.38AM on Tuesday: Consider if there has been
acceptance of the counter-offer. Clear and unqualified assent to the counter-offer. Acceptance
likely (Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd). Time
of acceptance? 8.38AM when the email is delivered to Betty’s designated email address, as it
is capable of being retrieved at this time (section 13A ETA).
Status of Ming’s email to Betty at 2.30PM on Tuesday: Acceptance still valid? Acceptance
is deemed effective when it is communicated to the offeror. As there is a designated email
address, communication of prior acceptance is deemed effective when the 8.38AM email is
delivered, as it is capable of being retrieved at this time (section 13A ETA). It does not matter
that Ming did not see Betty’s email at 11.37AM. This has no impact on the acceptance
communicated at 8.38AM. Ming’s email at 2.30PM does not change that there is an
enforceable agreement between Ming and Betty reached at 8.38AM on Tuesday.