Introductory Business Law CLEP Prep Practice Exam

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Prepare for the CLEP Business Law Exam with flashcards and multiple-choice questions. Each question comes with hints and explanations to help you succeed. Master the content and pass your exam!

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What is a formal contract?

A contract that is written and signed by both parties
A contract that is written but not signed by both parties
A contract that is verbal only
A contract that is entered into without consideration

The correct answer is: A contract that is written and signed by both parties

A formal contract is a legal document that outlines an agreement between two or more parties in a written and signed form. This ensures that all parties are aware of and agree to the terms and conditions of the contract. Option B is incorrect because a contract must be signed by all parties involved to be considered formal. Option C is incorrect because a verbal contract is not considered formal and can be difficult to enforce. Option D is incorrect because a contract must have consideration, or something of value being exchanged, to be considered valid and formal.