BLAW Exam 3

For consideration to exist, there must be: (a) A bargained-for exchange (b) A manifestation of mutual assent (c) Genuineness of assent (d) Substantially equal economic benefits to both parties

A

In December 2012, Eric hires a band to play at a huge graduation party he is planning to hold in May, 2014. The deal is never put into writing. In January 2014, if he wanted to cancel the job, Eric _____________ be able to do so. If he does not cancel, and if the band shows up and plays at the party in May, 2014. Eric ______________ have to pay them. (a) will; will (b) will; will not (c) will not; will (d) will not; will not

A

In a(n) contract, the seller guarantees to sell 100% of its output to one buyer, and the buyer agrees to accept the entire quantity. This kind of arrangement ____________ acceptable under the Uniform Commercial Code. (a) output; is (b) output; is not (c) requirement; is (d) requirement; is not

A

Veronica has a beer and then makes a contract. She continues drinking, and her blood alcohol level eventually rises to .09, which is just above her state's threshold for drunk driving. She makes a second contract while in this condition. Veronica's first contract is ___________________, and her second contract is __________________. (a) valid; valid (b) valid; voidable (c) voidable; voidable (d) voidable; void

A

Which of the following is the first element of a contract? a. An agreement b. Reciprocity c. Adequacy of compensation d. A writing

A

Which of the following is true regarding the effect of an innocent misrepresentation on a contract? a. It permits the party that was misled by the false statement to rescind the contract b. It permits the party who made the false statement to rescind the contract c. It permits either the party that was misled by the false statement or the party who made the false statement to rescind the contract d. It makes the contract void e. It permits either the party that was misled by the false statement or the party who made the false statement to rescind the contract and recover damages in tort.

A

Which of the following requires consideration in order to be binding on the parties? (a) Modification of a contract involving the sale of real estate (b) Modification of a sale of goods contract under the UCC (c) Both (a) and (b) (d) None of the above

A

Bob sells a car to Fred but intentionally fails to mention that the odometer, which reads 39,000 miles, was disconnected 20,000 miles ago. Bob would likely be liable for a. duress. b. fraud. c. puffery. d. undue influence. e. none of the above; no misrepresentation was made.

B

Covenants not to compete are common features of employment contracts. Currently, courts ____________ enforce these clauses. (a) always (b) usually (c) rarely (d) never

B

Jim, about to start a pickup soccer game, asks Desiree if she will hold his wallet while he plays. Desiree, a law student, says, "Sure, if you'll sign this exculpatory clause holding me blameless for negligence." Jim is very surprised, but he signs the paper that Desiree holds out for him. A bailment _________ been created. If Desiree is careless and loses the wallet, she __________ be liable to Jim. (a) has; will (b) has; will not (c) has not; will (d) has not; will not

B

Scarborough's Department Store opens for business on a busy shopping day just before Christmas. A hurried clerk places a sign in the middle of a table piled high with red cashmere sweaters. The sign reads, "SALE - 100% Cashmere - $0.99 Each". The sign, of course, was supposed to read "$99 each." This is a ___________ mistake, and customers ______________ be able to demand that Scarborough's sell the sweaters for 99 cents. (a) unilateral; will (b) unilateral; will not (c) bilateral; will (d) bilateral; will not

B

Shelley celebrates her eighteenth birthday and decides that she no longer wishes to keep a car that she bought when she was seventeen. Her right to disaffirm will depend on whether a. the car is in good condition. b. she acts within a reasonable period of time after reaching the age of majority. c. the other party has the right to disaffirm the contract. d. none of the above.

B

The common law statute of frauds requires that to be "in writing" an agreement must be signed by.... (a) the plaintiff (b) the defendant (c) both A and B (d) none of the above.

B

Manny offers to sell Gina his TV for $100 on January 1. On January 2, Gina writes out a letter of acceptance. On January 3, Gina drops the letter in a mailbox. On January 4, a postal worker gets the letter out of the mailbox and takes it to the post office. On January 5, the letter arrives in Manny's mailbox. When (if ever) was a contract formed? (a) January 2 (b) January 3 (c) January 4 (d) January 5

B. A contract was formed on January 3, when Gina mailed the letter

Frank, an accountant, says to Missy, "I'll sell you my laptop for $100." Missy asks, "Will you give me until tomorrow to make up my mind?" "Sure," Frank replies. Which of the following is true? (a) Frank cannot revoke his offer, no matter what. (b) Frank cannot revoke his offer only if Missy pays him to keep the offer open until tomorrow. (c) Frank can revoke his offer no matter what, because he is not a merchant. (d) Frank can revoke his offer no matter what, because he did not promise Missy anything in writing

B. Frank may choose to keep the offer open, but he is not required to unless Missy pays for an options contract.

A ______ mistake is the result of an error by only one party about a material fact. a. Unclear b. Mutual c. Unilateral d. Clear e. Single

C

Best Goods Company this week makes a new promise to pay its employee a bonus for work that they did the previous year. If Best fails to pay the bonus and the employees sue, the court will likely hold that the promise a. is enforceable because an employer has a moral obligation to do right by its employees. b. is enforceable because it is supported by an event that has already taken place. c. is unenforceable because the promisor received no subsequent material benefit and the promisee rendered no subsequent services; i.e., no current consideration was given. d. none of the above

C

Floyd offers to sell his 1967 Ford Mustang convertible to Tim. Before they conclude their negotiations, Floyd dies. Which of the following is true? a. Floyd's heirs must sell the car to Tim. b. Floyd's heirs must continue to negotiate the offer and sell the car, if a reasonable price can be determined. c. The offer terminates automatically upon Floyd's death. d. There is a contract if Tim accepts before learning of Floyd's death

C

Harry promises to pay Larry not to park in a no-parking zone in front of Harry's house. The agreement is a. enforceable because Larry is giving up the right to do something that he would otherwise do in the absence of the agreement. b. enforceable because the agreement accomplishes Larry's goal that the no-parking zone in front of his house be kept clear. c. not enforceable because Larry has no legal right to park in the no-parking zone. d. not enforceable because the no-parking zone is owned by the city

C

Joe purchased a motorcycle from Big Honkin Bikes on May 1, 2011. Joe's 18th birthday is June 17, 2011. Which of the following actions would not be effective as a ratification of the contract of purchase? a. On June 21, 2011, Joe gave the motorcycle to his sister. b. On June 20, 2011, Joe made an oral promise to Bikes to honor the contract. c. On June 16, 2011, Joe remitted an installment payment. d. As of November 17, 2012, Joe still using the bike.

C

Kent contracted to provide John consulting services for $20. per hour. The fair value of the services was $90. per hour, but Kent badly needed the money due to a debt to a loan shark. John was aware of the debt, although he did not have a special relationship with Kent and had nothing to do with the debt. Kent now wishes to rescind the contract claiming duress. a. Kent will win because John refused to pay fair market value. b. Kent will win because John was aware of Kent's predicament and took advantage of his distress. c. Lose because John's actions did not constitute duress. d. Lose if John can prove Kent had no other offers to purchase Kent's services

C

Nora promises to give Owen $500 because he does not have as much money as other people. Nora's promise is a. enforceable because society wants people to keep their promises. b. enforceable because the redistribution of wealth is a valid social goal. c. not enforceable because Owen has not given consideration in return. d. not enforceable because Nora could have given more.

C

Raul wants to plant a garden, and he agrees to buy a small piece of land for $300. Later, he agrees to buy a table for $300. Neither agreement is put in writing. The agreement to buy the land ____________ enforceable, and the agreement to buy the table ____________ enforceable. (a) is; is (b) is; is not (c) is not; is (d) is not; is not

C

Red announces that he plans to paint his Rolls-Royce pink. Walker, who cannot bear the sight of pink Rolls-Royces, offers to pay Red $500 to paint the car a more traditional color. Red accepts Walker's offer. Walker's promise to pay is a. unenforceable even if Red paints the car a more traditional color. b. unenforceable because Red should not have considered painting the Rolls-Royce pink in the first place. c. enforceable because Red agreed to refrain from doing something that he was legally entitled to do. d. enforceable because Red preferred the pink color to the more traditional color as evidenced by his prior statement.

C

Ricki goes to a baseball game. The back of her ticket clearly reads: "Fan agrees to hold team blameless for all injuries - pay attention to the game at all times for your own safety!" In the first inning, a foul ball hits Ricki in the elbow. She ____________ sue the team over the foul ball. Ricky spends the next several innings riding the opposing team's first baseman. The very nicest thing she says to him is, "You suck, Franklin!" In the eighth inning, Franklin has had enough. He grabs the ball boy's chair and throws it into the stands, injuring Ricki's other elbow. Ricki _____________ sue the team over the thrown chair. (a) can; can (b) can; cannot (c) cannot; can (d) cannot; cannot

C

Ted's wallet is as empty as his bank account, and he needs $3500 immediately. Fortunately, he has three gold coins that he inherited from his grandfather. Each is worth $2500, but it is Sunday, and the local rare coins store is closed. When approached, Ted's neighbor Andrea agrees to buy the first coin for $2300. Another neighbor, Cami, agrees to buy the second for $1100. A final neighbor, Lorne, offers "all the money I have on me" - $100 - for the last coin. Desperate, Ted agrees to the proposal. Which of the deals is supported by consideration? (a) Ted's agreement with Andrea, only (b) Ted's agreements with Andrea and Cami, only (c) All three of the agreements (d) None of the agreements

C

Mandy verbally tells a motorcycle dealer that she will make her son's motorcycle payments if he falls behind on them. Will Mandy be legally required to live up to this agreement? (a) Yes, absolutely. (b) Yes, if her son is under 18. (c) Yes, if Mandy will be the primary driver of the motorcycle. (d) Yes, if the motorcycle is worth less than $500. (e) No, absolutely not.

C. If Mandy drives the motorcycle, she can be held to this oral agreement because she benefits from the "leading object," the motorcycle

KwikFix, a Fortune 500 company, contracts with Allied Rocket, another huge company, to provide the software for Allied's new Jupiter Probe rocket for $14 million. The software is negligently designed, and when the rocket blasts off from Cape Kennedy, it travels only as far as Fort Lauderdale. Allied Rocket sues for $200 million and proves that as a result of the disaster it lost a huge government contract, worth at least that much, which KwikFix was aware of. KwikFix responds that its contract with Allied included a clause limiting its liability to the value of the contract. Is the contract clause valid? (a) The clause is unenforceable because it is unconscionable. (b) The clause is unenforceable because it is exculpatory. (c) The clause is enforceable because both parties are sophisticated corporations. (d) The clause is enforceable because $200 million is an unconscionable claim.

C. The clause is enforceable. There is no unconscionability problem because this is not an adhesion contract and the terms were negotiated by sophisticated corporations that could have taken their business elsewhere if they were dissatisfied with the contract

CPA QUESTION Two individuals signed a contract that was intended to be their entire agreement. The parol evidence rule will prevent the admission of evidence offered to: (a) Explain the meaning of an ambiguity in the written contract (b) Establish that fraud had been committed in the formation of the contract (c) Prove the existence of a contemporaneous oral agreement modifying the contract (d) Prove the existence of a subsequent oral agreement modifying the contract

C. The rule prevents reliance on any oral agreements made while signing the integrated written contract. CPA Examination, November 1991, #23.

Now assume that Vicky has loaned George $50,000. George again mentions that he is going to learn to hang glide during spring break, so Vicki purchases the $100,000 life insurance policy on George's life. If George dies and the insurance company refuses to pay... (a) Vicki will win $100,000 but only if she mentioned animal bites to the insurance agent. (b) Vicki will win $100,000 regardless of whether she mentioned animal bites to the insurance agent. (c) Vicki will win $50,000. (d) Vicki will win nothing.

C. Vicki has an insurable interest in George's life, but only to the amount he owes her.

Angela makes a material misstatement of fact to Lance which he relies on it when he signs Angela's contract. Fraud exists if Angela made the misstatement... (a) intentionally (b) recklessly (c) carelessly (d) A and B only (e) E. A, B, and C

D

City Transport Corporation and Midwest Warehouses, Inc., enter into a short-term lease for a warehouse. To be enforceable, the lease must be in writing if the warehouse is valued at a. $50. b. $500. c. $5,000. d. any of the above

D

If an offer specifies no time limit in which to accept: a. the offeree has 30 days to respond. b. the offeree has 10 days to respond. c. the offer is not valid and therefore it does not matter when the offeree responds. d. the offeree has a reasonable period during which to accept, but revocation may be made prior to acceptance.

D

Linda is adjudicated incompetent by a court and a guardian is appointed, but she subsequently purchases a new car. The contract is a. binding and enforceable. b. binding and enforceable to the extent that the car is a "necessary." c. unenforceable, because persons declared to be mentally incompetent are not permitted to drive cars. d. void.

D

Steven, who is Wesley's guardian and trusted advisor, convinces Wesley that buying a certain parcel of land from Steven's brother-in-law at a price that is greatly inflated is a good deal. If in fact it is not a good deal, Steven may be liable for a. duress. b. fraud. c. puffery. d. undue influence.

D

Which of the following are generally considered to be legal offers? a. Placing an item up for auction. b. Catalog advertisements. c. Price lists. d. None of the above are generally considered offers.

D

Which of the following amounts to an offer? (a) Ed says to Carmen, "I offer to sell you my pen for $1." (b) Ed says to Carmen, "I'll sell you my pen for $1." (c) Ed writes, "I'll sell you my pen for $1," and gives the note to Carmen. (d) All of the above (e) A and C only

D. All of the versions of the offer are valid.

Kerry finds a big green ring in the street. She shows it to Leroy, who says, "Wow. That could be valuable." Neither Kerry nor Leroy knows what the ring is made of or whether it is valuable. Kerry sells the ring to Leroy for $100, saying, "Don't come griping if it turns out to be worth two dollars." Leroy takes the ring to a jeweler who tells him it is an unusually perfect emerald, worth at least $75,000. Kerry sues to rescind. (a) Kerry will win based on fraud. (b) Kerry will win based on mutual mistake. (c) Kerry will win based on unilateral mistake. (d) Kerry will lose.

D. Kerry will lose, based on conscious uncertainty. If Leroy knew the ring was valuable, Kerry could win based on unilateral mistake. If both parties were certain that it was worthless, Kerry could win based on mutual mistake. But here, the parties are aware that it might be priceless and might be worthless. Each has accepted the risk and must live with the results

At a fraternity party, George mentions that he is going to learn to hang glide during spring break. Vicki, a casual friend, overhears him, and the next day she purchases a $100,000 life insurance policy on George's life. George has a happy week of hang gliding. But on the way home, he is bitten by a parrot and dies of a rare tropical illness. Vicki files a claim for $100,000. The insurance company refuses to pay. (a) Vicki will win $100,000 but only if she mentioned animal bites to the insurance agent. (b) Vicki will win $100,000 regardless of whether she mentioned animal bites to the insurance agent. (c) Vicki will win $50,000. (d) Vicki will win nothing.

D. Vicki will win nothing. She has no insurable interest in George's life, and her policy is therefore an unenforceable wagering contract.

Jerry is so mentally ill, that he is unable to understand the nature and consequences of his transactions, but he has not been adjudicated insane. Penny has been adjudicated insane, and a court has appointed a guardian to handle her affairs. Jerry's contracts are _____________, and Penny's contracts are ______________. (a) valid; valid (b) valid; voidable (c) valid; void (d) voidable; voidable (e) voidable; void

E

Arturo hires Kate to work in his new sporting goods store. "Look," he explains, "I can only pay you $9.00 an hour. But if business is good a year from now, and you're still here, I'm sure I can pay you a healthy bonus." Four months later Arturo terminates Kate. She sues. (a) Kate will win her job back, plus the year's pay and the bonus. (b) Kate will win the year's pay and the bonus. (c) Kate will win only the bonus. (d) Kate will win only her job back. (e) Kate will win nothing.

E. Kate will win nothing. The only thing Arturo obligated himself to do was to pay $9.00 an hour while Kate worked. He did not promise her a year's employment. The statement about the bonus was too indefinite to be enforceable: there is no way to measure whether "business is good" or what a "healthy" bonus is

Rebecca, in Honolulu, faxes a job offer to Spike, in Pittsburgh, saying, "We can pay you $55,000 per year, starting June 1." Spike faxes a reply, saying, "Thank you! I accept your generous offer, though I will also need $3,000 in relocation money. See you June 1. Can't wait!" On June 1 Spike arrives, to find that his position is filled by Gus. He sues Rebecca. (a) Spike wins $55,000. (b) Spike wins $58,000. (c) Spike wins $3,000. (d) Spike wins restitution. (e) Spike wins nothing.

E. Spike wins nothing. Although he used the phrase, "I accept," he included a counteroffer, which is a rejection of Rebecca's offer. She has no obligation to him.

A contract is enforceable even if the terms are so uncertainty as to performance that the promisor has not definitely promised to do anything.

F

A later promise to do what one already has a legal duty to do is legally sufficient consideration.

F

An obligation is enforceable only if it is supported by past consideration.

F

An offeror has no right to terminate an offer.

F

Evidence of prior agreements that differ from the terms of a subsequent written contract can be ordinarily be introduced in court to alter the written contract.

F

If the parties to a contract reasonably attach materially different meanings to a contract term, their mutual misunderstanding will prevent the contract from being rescinded.

F

Reliance on a statement of opinion issued by a non-expert will generally entitle the party who relied on the statement to damages or other relief.

F

Under the doctrine of promissory estoppel, every gratuitous promise is binding if the promisee changes position in reliance on the promise.

F

When Olga asks Sven if he wishes to sell his Harley motorcycle, he replies that he would not sell it "for less than $2,000. "Olga replies, "I accept," and hands him $2,000. A contract exists.

F

A contract in which the stronger party has such power that they can dictate the contractual terms is often considered an adhesion contract.

T

A covenant not to compete will be upheld only if it is reasonable with respect to both its duration and geographical scope.

T

A minor who affirmatively misrepresents himself or herself to be an adult will not be able to disaffirm a contract, or will be held responsible in tort, in most states.

T

Generally, contracts calling for the conveyance of an interest in land must be in writing to be enforceable.

T

In seeking to ascertain whether there is a meeting of the minds, the courts look to how a reasonable person would objectively view the language or actions of the parties

T

Undue influence refers to those special relationships in which one person has taken advantage of his or her dominant position in a relationship to unduly persuade the other person.

T