ACCT 324- Exam 1

T/F: the two most important sources of contract law include state common law and the Uniform Commercial Code (UCC).

True, UCC governs contracts for the sale of goods

What two requirements are needed to make a agreement?

a valid offer and valid acceptance (no agreement, no contract)

failure of conditions

offer is withdrawn of the conditions are not met (get a CPA license, you get the job. don't get your CPA license, not job)

Termination of an offer can occur in what ways?

offeror issues: - revocation by the offeror - death or incapacity of the offeror offeree issues: - rejection or counteroffer by the offeree subject matter issues: - destruction or illegality of the subject matter of the offer others: - lapse of time or failure of other conditions stated in the offer (revocation, rejection, counteroffer, death or incapacity, illegality, lapse of time)

voidable contract

one or both parties can withdraw from or enforce contract

_______ occurs when a party to a contract unjustifiably fails to substantially perform his obligations under the contract. a. Substantial performance b. Material breach c. Accord and satisfaction d. Novation

b. Material breach A material breach occurs when a party unjustifiably fails to substantially perform his obligations under the contract. It is often difficult to know when the court is going to determine that a breach is material.

What are the requirements for an accord and satisfaction to be enforceable?

1. The debt is unliquidated (the amount or existence of the debt is in dispute) 2. The creditor agrees to accept as full payment less than it claims is owed 3. The debtor pays the amount they have agreed on

Elements required for contract formation

Agreement (Offer and Acceptance) Consideration (value given by both parties) Contractual Capacity (Legal Ability to Enter Into Binding Contract) Legal Object (contract cannot be illegal or against public policy)

valid contract

All elements of contract formation satisfied

T/F: in an accord and satisfaction the accord is the debtor's payment of the reduced amount and the satisfaction is the new agreement to pay less than the creditor claims is owed.

False accord- the new agreement to pay less than the creditor claims is owed satisfaction- the debtor's payment of the reduced amount

T/F: Past consideration is consideration.

False, Past consideration is no consideration at all (must be bargaining and an exchange)

T/F: revocation is effective once the offeror sends it.

False, revocation is effective when the offeree receives it and should be delivered personally by the offeror.

death or incapacity

If the offeror becomes incapacitated or dies, the offer immediately terminates.

Contracts subject to statute of frauds

M- promises made in consideration of marriage (prenup) Y- contracts that can't be preformed within one year from the date of their making L- land contracts E- executorship (taking over assets, managing real estate in wills) G- goods valued at $500 or more S- suretyship (guarantee the amount someone is paid)

At the time of this agreement you were posting airpods on your social media. You convince Tim to send you airpods with no intention to post them. Mistake or misrepresentation?

Misrepresentation

You agreed to post a picture featuring the airpods on social media. You though Tim meant Instagram (20K) and Tim assumed snapchat (50k). Is this a mistake or misrepresentation?

Mistake

You sign a contract stating that you will post #weareapple posts 10 times a month and get paid $5,000. The duration is one year starting 1/1/2021 and running through 12/31/2021. You signed the contract 1/5/2021. Does the contract have to be in writing?

No, because it will be preformed in one year of the date of making

Tim Cook says "If you wear a pair of airpods in one of your posts I will send you a pair of nee airpods if I like the post." Is there sufficient consideration on Tim Cook's part?

No, because there is no promise at all, so no commitment or consideration. Its an illusory promise.

T/F: Emancipation occurs when a minor's parents or legal guardians give up their right to exercise legal control over the minor.

True

T/F: Instagram influencers and celebrities use contracts to get paid for their posts.

True

You sign a contract stating that you will post #weareapple posts 10 times a month and get paid $5,000. The duration is one year starting 1/1/2021 and running through 12/31/2021. You signed the contract 12/15/2020. Does the contract have to be in writing?

Yes it has to be in writing because it can't be performed in a year (12/16/2021)

After signing the contract, Tim Cook refuses to pay you. He did not sign the contract but admits during a testimony that he indeed agreed to the contract. Is the contract enforceable?

Yes the contract is enforceable because Tim admitted that he agreed to the contract (admission in court)

unliquidated debt

a debt that is disputed because the parties disagree over its existence or amount

When the obligations of a contract are terminated by a future event, that future event is referred to as a condition _______. a. subsequent b. successive c. preceding d. precedent

a. subsequent A condition subsequent is a future event that terminates the obligations of the parties to a contract when it occurs. The party has a duty to perform until the future event occurs (if it does) that will discharge the party from the obligation.

A contract overturned for illegal subject matter or for being illegal to perform is generally declared: _______. a. void b. voidable c. void esse quam videri d. voidable ab initio

a. void

If a person has been adjudicated insane and has a guardian appointed, any contract the person attempts to enter into is a. void b. voidable c. unilateral d. valid

a. void

The Mailbox Rule

acceptance of an offer (agreement) by mail effective when mailed by offeree. revocation of offer (no agreement) by mail effective when received by offeree. (not applicable when instant message is used)

express ratification

after reaching the age of majority, the person states orally or in writing that they intend to be bound by the contract entered into as a minor (stay in contract after 18 by letting someone know)

An agreement in which a party is given an offer without the right to negotiate its terms is called a(n) _______ contract. a. quasi b. unilateral c. adhesion d. bilateral

c. adhesion

If nothing is stated to the contrary in the terms of an auction, the auction is presumed to be _______, which means that the seller is merely expressing intent to receive offers. a. without reserve b. unconditional c. with reserve d. conditional

c. with reserve If nothing is stated to the contrary in the terms of an auction, the auction is presumed to be with reserve, which means that the seller is merely expressing intent to receive offers.

Partial Performance

can see where things have been preformed so if issue of performance there will be an enforceable contract to that extent

Definite and certain terms includes all of the following except ____________. a. parties b. price c. subject matter d. agreement e. quality f. quantity

d. agreement

liquidated debt

no dispute that money is owed or how much

At the time of this agreement you were posting airpods on your social media. You convince Tim to send you airpods with no intention to post them. Is this enforceable?

no, because you lied so Tim can rescind and seek damages

illusory promise

not a promise or consideration. "If I like them, I'll pay you."

Contracts are interpreted using the "____________ Theory" of contacts.

objective

statute of frauds

rule of state law requiring certain types of contracts to be in writing in order to be enforceable to help prevent fraud

Mirror Image Rule

says that the terms of the acceptance must mirror the terms of the offer (attempted acceptance is a counteroffer)

You agreed to post a picture featuring the airpods on social media. You though Tim meant Instagram (20K) and Tim assumed snapchat (50k). Is this an enforceable contract?

sort of. Its a voidable contract meaning either party can rescind because both parties were mistaken

Destruction of Subject Matter

subject gets destroyed, offer terminates, so no acceptance can be made

lapse of time

the offer will expire after a reasonable amount of time, which depends on the subject matter of the offer, unless a specific time condition is given.

rejection

the offeree can reject the offer

revocation

the offeror can revoke the offer at any time unless the offeree entered into an option contract with the offeror (oc- offeree gives a piece of consideration in exchange for the offer being held open longer)

Admission

the party against whom charges have been brought admits during legal proceedings that an oral contract existed, even though the contract was supposed to be in writing

Disaffirmance of the Contract by a minor

their contracts are voidable so minors have the right, until a reasonable time after reaching the age of majority, to disaffirm or void their contracts. No formalities are required (only need to show an intention to rescind it by words or actions)

T/F: silence does not constitute acceptance

true

unenforceable contract

valid, but courts cannot legally enforce it

You are 17 years old and 8 months when the contract with Tim Cook is formed. What type of contract is this?

voidable because there is a capacity issue

You are 17 years old and 8 months when the contract with Tim Cook is formed. After two months, you don't like them and your dog chews them up. Do you have to pay for the price of the airpods since they are now destroyed?

No, because you are still considered a minor and airpods are not a necessity

T/F: Parties can settle for less than the full amount of unliquidated debts if they enter into an accord and satisfaction.

True

T/F: When an offer is terminated, the offeree can no longer accept it to form a binding contract?

True

T/F: preliminary negotiations and ads don't constitute offers

True

Tim Cook, Apple's CEO, sends you airpods with a note saying "If you wear these in one of your posts, you can keep them. If you choose not to, please use the prepaid return envelope...". What type of contract is this?

Unilateral, because Tim Cook is made a promise and you need to complete an action (post the picture)

When a debt is _______, the parties may enter into a(n) _______. Multiple Choice a. unliquidated; civic satisfaction b. liquidated; accord and satisfaction c. unliquidated; accord and satisfaction d. liquidated; civic satisfaction

c. unliquidated; accord and satisfaction When a debt is unliquidated, the parties may enter into an accord and satisfaction.

How is intent determined on the offeror's part?

determined by object and reasonable person standards; meaning the courts don't try and interpret

void contract

has an illegal object or a serious defect

Counteroffer

if the offeree offers a counteroffer, the original offer is terminated (definite terms have changed)

Subsequent Illegality

if the subject matter of the offer becomes illegal, the offer immediately terminates (casino example)

implied ratification

occurs when the former minor takes some action after reaching 18 consistent with intent to ratify the contract (stay in contract after 18 by doing something (making payment))

Types of Consideration:

- a benefit to the promisee: a promise to stay in a job until a particular project is complete - a detriment to the promisor: a promise to refrain from doing something you love - a promise to do something - a promise to refrain from doing something: stop staying out late during exam week

Exceptions to Statute of Frauds Writing Requirements

- admission - partial performance - promissory estoppel

What are the three main purposes for the statute of frauds?

- easy negotiations by requiring sufficiently reliable evidence to prove the existence and specific terms of a contract - prevents unreliable, oral evidence from interfering with contractual relationship - prevents parties from entering into contracts with which they do not agree

Elements of a valid offer:

- manifestation of offeror's intent to be bound - definite and certain terms - communication of the offer to the offeree (or offeree's agent- but only offeree can accept)

Statute of Frauds writing requirements

- name of the parties in the contract - subject matter/purpose of agreement - consideration given by both parties - all relevant contractual terms - signature of party being sued (defendant)

Preexisting Duty rule

- performance of a duty you are obligated to do under the law is not good consideration (police officer's can't cash in on rewards of criminals) - performance of an existing contractual duty is not good consideration exceptions: unforeseen circumstances, additional work & UCC Article 2 (sale of goods)

T/F: Acceptance is a representation of offeror's intent to be bound by terms of offer through either performance or return promise.

False- its representation of offeree's intent to be bound

You are 17 years old and 8 months when the contract with Tim Cook is formed. 5 months later, Tim realizes that you haven't provided the required 12 airpod posts that was agreed upon. Tim says you now must pay. Is he correct?

Yes, because a month is a reasonable time after reaching the age of majority to disaffirm the contract

Tim Cook threatens to use all of Apple's technical savvy to destroy your $500K a year online presence. He'll let your presence survive if you wear airpods in your post. Is this Duress?

Yes, because he threatened your economic interest.

On January 29th Tim Cook sends you an offer, you receive the offer February 1st and immediately reply "yes". On January 31st Tim revokes the offer and you will receive it on February 3rd. Is an agreement made?

Yes, because you won't receive the revocation until after you had already accepted the offer which is immediate. (mailbox rule)

Which of the following conditions must be present for an offer to have a legal effect? a. Definite and certain terms b. Neutral third parties. c. Invitation to negotiate. d. Expression of interest in an exchange.

a. Definite and certain terms Under the common law, the terms of the offer must be definite and certain. In other words, all the material terms must be included. The material terms allow a court to determine damages in the event that one of the parties breaches the contract. They include the subject matter, price, quantity, quality, and parties.

In a contract between Sophia and Carl, Sophia had agreed to pay Carl $30,000 to paint her house and redo her garden. Carl agreed to the terms. After painting the house, Carl decided and convinced Sophia that it would be a better deal for her if he could redo her swimming pool rather than the garden for the original price. Carl's duty under the original contract was discharged only after he performed the new duty. Which of the following methods to discharge a contract does this scenario best illustrate? a. Discharge by accord and satisfaction. b. Discharge by novation. c. Discharge by anticipatory repudiation. d. Discharge by material breach.

a. Discharge by accord and satisfaction. The scenario best illustrates discharge by accord and satisfaction. An accord and satisfaction is used when one of the parties wishes to substitute a different performance for his or her original duty under the contract. The promise to perform the new duty is called the accord, and the actual performance of that new duty is called the satisfaction. Here, Carl is substituting the new duty to redo Sophia's swimming pool rather than the garden for the same price. Carl's original duty under the contract is discharge. The two parties agreed on Carl's new performance (the accord) and when Carl performed the new duty, it satisfied his original obligation under the original contract.

Ronald agrees that he owes a bank $10,000, as claimed by the bank. Ronald explains to the bank that he can only pay the bank $8,000 as full payment toward the money he owes. The bank agrees to accept $8,000 from him. The following month, Ronald receives his new bank statement claiming that he still owes the bank $2,000. Which of the following statements is true of this scenario? a. If Ronald does not agree to pay the remaining $2,000, the creditor may sue Ronald for the balance it believes is owed. b. Both Ronald and the bank can settle their dispute through an accord and satisfaction, as this is a case of an unliquidated debt. c. Ronald cannot be sued by the bank for nonpayment because of the different payment that has already been made by him. d. Ronald can sue the bank on the basis of breach of promissory estoppel.

a. If Ronald does not agree to pay the remaining $2,000, the creditor may sue Ronald for the balance it believes is owed. In this situation, if Ronald does not agree to pay the remaining $2,000, the creditor may sue Ronald for the balance it believes is owed. A creditor's promise to accept less than owed, when the debtor is already obligated to pay the full amount, is not binding.

_______ occurs when one party makes a promise knowing the other party will rely on it, the other party does rely on it, and the only way to avoid injustice is to enforce the promise. Multiple Choice a. Promissory estoppel b. A tort c. A crime d. Forbearance

a. Promissory estoppel Promissory estoppel occurs when one party makes a promise knowing the other party will rely on it, the other party does rely on it, and the only way to avoid injustice is to enforce the promise.

If someone suffering from dementia has been appointed a guardian, which of the following is true regarding that person's ability to enter into a contract? a. When someone has been appointed a guardian, that person's contracts are considered void. b. If the guardian ratifies the contract entered into by the person with dementia, the contract is considered valid. c. Because dementia affects people intermittently, the contract will be voidable by the person suffering from dementia. When the contract is entered into by a person under the age of majority. d. Provided the court approves the contract the person with dementia entered into, the contract is considered valid.

a. When someone has been appointed a guardian, that person's contracts are considered void.

Implied conditions are those conditions which _______. a. are not explicitly stated in the contract but are inferred from the nature and language of the contract b. are explicitly stated in the terms of the agreement c. the parties determine based upon an accord and satisfaction d. the parties may choose to enforce before their obligations to perform under the contract arises

a. are not explicitly stated in the contract but are inferred from the nature and language of the contract Implied conditions are those that are not explicitly stated but are inferred from the nature and language of the contract. If implied conditions are met, the parties could be discharged from the contract.

Maya, a wedding planner, had agreed to use purple orchids for Janet's wedding. However, due to an embargo against the country from where the flowers were to be imported, Maya could not fulfill her promise. In this scenario, the contract between Maya and Janet may be discharged on the basis of a. commercial impracticability. b. condition subsequent. c. novation. d. objective impossibility.

a. commercial impracticability. In this scenario, the contract between Maya and Janet may be discharged due to of commercial impracticability. The doctrine of commercial impracticability is most commonly used in situations in which raw materials needed for manufacturing goods under the contract become extraordinarily expensive or difficult to obtain because of an embargo, war, crop failure, or unexpected closure of a plant.

Suppose that Hannah agrees to purchase Rachel's computer for $500. Hannah's payment of $500 is the _______ that Rachel will receive for her car. a. consideration b. reciprocity c. offer d. agreement

a. consideration

In many states, parents may be liable when a child causes harm if it can be proved that the parents: _____. a. failed to properly supervise the child b. are part-time workers c. failed to complete their college education d. are the legal guardians of the child

a. failed to properly supervise the child

To recover damages in a breach-of-contract case, the nonbreaching party must demonstrate that she sought to _______ her damages. a. mitigate b. rescind c. substitute d. liquidate

a. mitigate Courts do not allow a nonbreaching party to allow her damages to increase when she can use reasonable efforts to mitigate, or lessen, her damages. The nonbreaching party has a duty to mitigate her damages.

Which of the following is a correct statement regarding a competent party's recourse against a minor who disaffirms when the consideration the minor received is damaged or destroyed? a. The competent party may recover the contract price for the consideration from the minor. b. The competent party has no recourse against the minor. c. The competent party has the right to reject or revoke the minor's disaffirmance. d. The competent party may recover the fair market value of the consideration from the minor.

b. The competent party has no recourse against the minor. Most states simply require the minor to notify the competent party and return any consideration received, regardless of its condition

Under common law, if the offeree's acceptance with terms that are not identical to the offeror's terms, then which of the following is true? a. A contract will exist if the material terms of the agreement are largely the same. b. The offeree's attempted acceptance is considered a counteroffer rather than an acceptance. c. The parties have a contract because they both agree in principle on the terms of the agreement. d. The parties have a contract because the offeree accepted substantially all of the offeror's terms.

b. The offeree's attempted acceptance is considered a counteroffer rather than an acceptance. When a bilateral contract is formed under common law, the "mirror-image" rule applies. According to the "mirror-image" rule, if the terms of the acceptance do not mirror the terms of the offer, the attempted acceptance is a counteroffer.

In a novation, the original parties to the contract agree to which of the following? a. The original parties to the contract agree to cancel the contract. b. The original parties to the contract and a third party all agree that the third party will replace one of the original parties and that the original party will then be discharged from his or her obligations under the contract. c. The assignee and delegatee promise to fulfill all the responsibilities of the original parties to the contract. d. The third-party beneficiary agrees to assume both parties obligations under the contract.

b. The original parties to the contract and a third party all agree that the third party will replace one of the original parties and that the original party will then be discharged from his or her obligations under the contract. In a novation, the original parties and a third party all agree that the third party will replace one of the original parties and that the original party will then be discharged. The original duties remain the same under the contract; however, one party is discharged and the third party takes that original party's place by performing the original party's obligations under the contract.

In some cases, if past consideration was given with the expectation of ______ payment, the court may enforce the promise. a. honorary b. future c. no d. gratuitous

b. future

Kevin is offered a job by a reputable company in a different city. To take the new job, Kevin quits his previous job and moves to the new city along with his family. When he shows up at work, he is told that there is no job. Kevin can sue the employer under the theory of a. preexisting duty. b. promissory estoppel. c. recognizance. d. illusory promise.

b. promissory estoppel. Kevin can sue the employer under the theory of promissory estoppel. Promissory estoppel occurs when three conditions are met: one party makes a promise knowing the other party will rely on it, the other party does rely on the promise, and the only way to avoid injustice is to enforce the promise.

In a ________ contract, if one party's consideration is a promise, and the other party's consideration will be an act. Multiple Choice a. bilateral b. unilateral c. multilateral d. third-party contract

b. unilateral In a unilateral contract (a promise for an act), one party's consideration is the promise and the other party's consideration is the act. In a bilateral contract (a promise for a promise), one party's consideration is her promise and the other party's consideration is his return promise.

If the parties dispute either the existence of a debt or the amount of a debt, that debt is called a(n) _______ debt. a. non-valid b. unliquidated c. liquidated d. substituted

b. unliquidated In an unliquidated debt, the parties either disagree about whether money is owed or dispute the amount. They can settle for less than the full amount if they enter into an accord and satisfaction. In a liquidated debt, the parties agree upon the existence of the debt and the amount of the debt.

_______ terms in an offer and its resulting contract allow a court to determine damages in the event that one of the parties breaches the contract. They include the subject matter, price, quantity, quality, and parties. a. Customary b. Nonnegotiable c. Material d. Salient

c. Material Material terms in an offer and its resulting contract allow a court to determine damages in the event that one of the parties breaches the contract. They include the subject matter, price, quantity, quality, and parties.

Covenants not to compete in conjunction with the sale of a business are generally enforceable if which of the following conditions are met? a. Provided the covenant not to compete allows the seller of the business to open a new business within the same county, the covenant will be enforceable. b. Provided the covenant not to compete also involves a covenant not to compete for future employment, the covenant will be enforceable. c. Provided the covenant not to compete is reasonable with regard time and location, the covenant will be enforceable. d. Provided the covenant not to compete does not prohibit the seller of the business from opening a new business within one year, the covenant will be enforceable.

c. Provided the covenant not to compete is reasonable with regard time and location, the covenant will be enforceable.

Freddie offers to sell Lucy five video poker machines. Before Lucy can accept or reject Freddie's offer, the state legislature passes a statute that the purchase, sale, and possession of video poker machines is illegal. In this scenario, Freddie's offer terminates due to which of the following rules? a. Lapse of time b. Unilateral mistake c. Subsequent illegality of the subject matter d. Assumption of the risk

c. Subsequent illegality of the subject matter In this scenario, the offer to sell the five video poker machines terminates due to subsequent illegality of the subject matter. If the subject matter of the offer is destroyed or becomes illegal, the offer immediately terminates.

If a person who suffers from a mental illness or defect yet still understands the nature of the contract and his or her obligations under the contract, which of the following will result? a. The court will have to approve the contract on behalf of the mentally ill person. b. The contract will be deemed void by the person who suffers from the mental illness or defect. c. The contract will be considered valid. d. The contract will be considered voidable by the party who is not mentally ill.

c. The contract will be considered valid.

A "severable" contract is also known as a _______ contract. a. void b. voidable c. divisible d. exculpatory

c. divisible

When a party attempts to ratify an agreement right after reaching the age of majority, there is a(n) a. contract of adhesion b. accent c. implied ratification

c. implied ratification

When the parties agree to discharge each other from the contract, _______ has occurred. Multiple Choice a. mutual repeal b. novation c. mutual rescission d. substituted contract

c. mutual rescission The parties may discharge their contract by agreement. One type of agreement to discharge their obligations under a contract is mutual rescission. The parties simply agree to cancel the contract. Other methods a party may use to discharge their contract by agreement are 1) substituted contract; 2) accord and satisfaction; and 3) novation.

A minor would be most likely able to disaffirm which of the following contracts? a. A contract for psychological counseling b. A contract for enlistment in the armed services c. A contract for a student loan d. A contract for a vacation

d. A contract for a vacation minors cant disaffirm contracts for life insurance, health insurance, psychological counseling, the performance of duties related to stock/bond transfers and bank accounts, education loan contracts, child support contracts, marriage contracts and enlistment in the armed forces.

Amy offers to paint Louis's house for $1,000. The offer stated that acceptance in person was required. Within a reasonable time, Louis e-mailed Amy his acceptance. Which of the following statements is true about this situation? a. The acceptance by Louis will be presumed as an implied contract. b. The agreement between Louis and Amy will be valid but unenforceable. c. Louis has accepted the offer because an e-mail is a reasonable means of acceptance. d. Louis has not accepted the offer as required by the offeror, and there is no contract.

d. Louis has not accepted the offer as required by the offeror, and there is no contract. In this situation, Louis has not accepted the offer as required by the offeror, and there is no contract. An offeror has the power to control the means by which the acceptance is communicated, so if the offeror specifies that only a certain means of communication will be accepted, then only an acceptance by that means forms a valid contract.

In a(n) _______ debt, the parties either disagree about whether money is owed or dispute the amount. Multiple Choice a. illiquid b. fluid c. liquidated d. unliquidated

d. unliquidated In an unliquidated debt, the parties either disagree about whether money is owed or dispute the amount.

Maya pays $5,000 and purchases a car from her friend, Jane. Later, Maya realizes that the car is worth less than $3,000. Which of the following statements will be true if Maya plans to sue her friend? a. Jane will be held guilty because her action is a breach of promissory estoppel. b. The court will hold Jane liable as she made an illusory promise. c. The court will hold the contract to be invalid as it involves falsification of data. d. Maya cannot sue Jane because the court seldom considers adequacy of consideration.

d. Maya cannot sue Jane because the court seldom considers adequacy of consideration. The court does not weigh whether a party in a contract made a good bargain. The court seldom considers adequacy of consideration.

Macon is planning to buy Kevin's car for $15,000. He gives Kevin $1,500 to keep the offer open for 30 days. Kevin will deduct the $1,500 from the price of the car if Macon purchases the car within the 30 days. If Macon does not buy the car during that time, Kevin will keep the $1,500 and may then offer the car to someone else. Which of the following contracts does this scenario best illustrate? a. Quasi-contract b. Unenforceable contract c. Implied contract d. Option contract

d. Option contract The scenario best illustrates an option contract. An offeree who wishes to ensure that an offer will in fact be held open for a set period of time may do so by entering into an option contract with the offeror. In an option contract, the offeree gives the offeror a piece of consideration in exchange for holding the offer open for the specified period of time.

How is an offeror's intent to be bound by an agreement demonstrated? a. The courts determine an offeror's intent based upon what the offeror's belief was at the time negotiations began. b. The courts determine an offeror's intent based upon what that person's subjective principles are. c. The courts determine an offeror's intent based upon his or her demonstrated acceptance of the offer when negotiations began. d. The courts determine an offeror's intent based upon how a reasonable person would interpret the offeror's words and actions.

d. The courts determine an offeror's intent based upon how a reasonable person would interpret the offeror's words and actions. The first element of the offer is intent. Contracts are interpreted using an objective standard, which means the courts are concerned only with the party's outward manifestations of intent, not that person's internal thought processes. The courts interpret the parties' words and actions the way a reasonable person would interpret them.

When a minor enters into a contract, the minor has which of the following rights? a. The minor has a right to ratify the contract before reaching the age of majority if the adult party agrees. b. The minor has the right to disaffirm the contract only after reaching the age of majority. c. The minor may disaffirm part of the contract before reaching the age of majority and then ratify the remaining provisions of the contract after reaching the age of majority.minor can choose to disaffirm only a portion of the contract. d. The minor has the right to disaffirm the contract before or within a reasonable time of reaching the age of majority.

d. The minor has the right to disaffirm the contract before or within a reasonable time of reaching the age of majority. Minors have the right, until a reasonable time after reaching the age of majority, to disaffirm or void their contracts because their contracts are voidable. It is only the minor who has the right to disaffirm, never the adult with whom the minor entered into the agreement. Should a minor choose to disaffirm or ratify a contract, the minor must disaffirm or ratify the entire contract and not simply portions of the contract.

Under the UCC, writing "paid in full" on a check for less than the full amount of the debt owed will not be an accord and satisfaction unless the creditor inadvertently cashes the check and waits longer than 90 days to offer the debtor repayment in the same amount, or unless the a. debt was for medical services. b. check was sent to a credit card company. c. words "paid in full" are written conspicuously with red ink and 14-point font. d. check is sent to a special address for disputed amounts per the creditor's request.

d. check is sent to a special address for disputed amounts per the creditor's request.

Nominal damages are primarily a. designed to compensate the plaintiff for the loss he or she suffered due to a breach of contract. b. granted when parties to a contract need any remedy other than money damages. c. foreseeable damages that result from special facts and circumstances arising outside a contract itself. d. designed to signify that the plaintiff has been wronged by the defendant.

d. designed to signify that the plaintiff has been wronged by the defendant. In a case where no actual damages resulted from the breach of contract, the court may award the plaintiff nominal damages. The award is typically for $1 or $5, but it serves to signify that the plaintiff has been wronged by the defendant.

The terms of an acceptance that reflect the terms of an offer are known as the _______ rule. a. mailbox b. near-privity c. transmissions d. mirror-image

d. mirror-image

Formation of a contract begins when the party initiating the contract, called the _______, makes an offer to another party, called the _______. a. grantor; grantee b. transferor; transferee c. delegator; delegate d. offeror; offeree

d. offeror; offeree

When a court can void the illegal part of an agreement and enforce the rest if the terms represent the main purpose of the original agreement, it is a(n) _______ contract a. quasi b. adhesion c. unilateral d. severable

d. severable

Restitution, as a primary equitable remedy for a breach of contract, is best described as a. an order requiring the breaching party to pay some predetermined amount of money to the injured party. b. the replacement of one of the parties to a contract. c. an order for the breaching party to perform a new duty as a substitution to an old duty. d. the return of any property given up under the contract.

d. the return of any property given up under the contract. Restitution is the return of any property given up under the contract. Restitution and rescission are most frequently awarded in situations in which genuine assent is not present. When a party enters into a contract because of fraud, duress, undue influence, or a bilateral mistake, the contract is voidable and the party who wants out may seek to avoid the contract or, in other words, may seek rescission and restitution.

If a party to a contract asks for an additional amount of money and agrees to do more work than the contract requires, the result is that the promise a. becomes a part of the party's preexisting duty. b. to do the extra work is an illusory promise. c. becomes an option contract. d. to do the extra work is valid consideration.

d. to do the extra work is valid consideration. If a party to a contract agrees to do additional work for an extra amount of money (more than the contract requires), the promise to do it is valid consideration.

As a general rule, any contract entered into by a minor is _______ by the minor until he or she _______. a. void; reaches the age of majority or a reasonable time thereafter b. voidable; reaches the age of majority c. void; reaches the age of majority d. voidable; reaches the age of majority or a reasonable time thereafter

d. voidable; reaches the age of majority or a reasonable time thereafter