business law exam 3

The statute of frauds does not cover contracts in which marriage is the consideration.

false

To accept an offer for a unilateral contract, the offeree can either perform the requested act or promise to perform the act requested by the offer.

false

Acceptances by instantaneous forms of communication are effective immediately on its communication to the offeror.

true

According to the rules of interpretation of contracts, generally ordinary words are given their usual meaning and technical words are given their technical meaning.

true

An administrator, acting as executor of the estate, makes an oral promise to pay the debts of the deceased. The debts amount to $60,000. This oral promise is enforceable.

true

An advertisement offering a reward for the return of lost property usually is treated as an offer for a unilateral contract.

true

An agreement can be illegal even if no statute specifically states that such an agreement is illegal.

true

Anne induces Ben's consent to contract under duress. Anne later assigns her rights under the contract to Carl. Ben may assert the doctrine of duress against Carl as a ground for avoiding the contract.

true

Bill and Monica make an agreement in which Bill promises to divorce his spouse, Hillary. This is an illegal agreement.

true

Deborah owes a debt to Casey. Sean contracts with Deborah to pay her debt to Casey. Casey is a creditor beneficiary of the contract between Sean and Deborah.

true

If Grant promises to sell his regular season football tickets to Carson on condition that Indiana University wins the Rose Bowl, Indiana's winning the Rose Bowl is an express condition of Grant's duty to sell the tickets.

true

If a term is left open in a sale of goods contract, that open term or "gap" can be filled by inserting a presumption found in the UCC's "gap filling" rules.

true

If the offeree accepts the offeror's terms while complaining about them, it is called a grumbling acceptance.

true

In general, ambiguities in a written agreement are resolved against the party who drafted the agreement.

true

John promises to pay Robert $100 per week, in exchange for Robert's promise not to beat John up. There is no consideration for John's promise.

true

Many states have passed statutes prohibiting or regulating a wage earner's assignment of future wages.

true

Michael and William contracted for Michael to mow William's lawn once a week for 20 weeks, at a price of $20 per week. Later, without terminating the first contract, the parties modify the contract as follows: Michael will mow William's lawn in exactly the same way for exactly the same time period, in exchange for William's promise to pay Michael $22 per week. There is no consideration for William's promise.

true

Mutual mistake is more likely to make a contract voidable than is unilateral mistake.

true

Non-competition clauses in employment contracts are especially unlikely to be enforced where they restrict employees from earning a livelihood.

true

Offeror is said to be the master of the offer. This means that offerors have the power to determine the terms and conditions under which they are bound to a contract.

true

One example of procedural unconscionability is the use of "fine print" in stating a contractual provision.

true

Ordinarily, an item is not considered to be a necessary if a parent or guardian already supplies the minor with similar items.

true

Parol evidence can be used to resolve ambiguities in a completely integrated written contract.

true

How many parties are required for formation of a collateral contract?

3

Which statement about the Statute of Frauds is most true?

Contracts for the sale of goods for $500 or more must be in writing in order to be enforced.

Article 2 of the UCC does not apply to a sale of

Corporate Stock

Which of the following is NOT a basic element of a contract?

Goods

Which of the following is NOT a requirement in the enforceability of a noncompetition clause?

The noncompetition clause must be regarding the sale of goods.

It is important to promptly notify the obligor that an assignment has occurred. Why?

The obligor might perform to the assignor rather than the assignee.

Abby promises to pay Bill $50 if Bill will mow Abby's lawn. Bill does not say that he promises to mow Abby's lawn; however, later that day Bill completely and satisfactorily does mow Abby's lawn. This is an example of a unilateral contract.

True

Anti-assignment clauses in contracts are not enforceable.

false

When determining the presence of the intent to accept, a subjective standard is used.

false

When can the offeror effectively revoke his/her offer?

only before an effective acceptance

Sue wanted to purchase a car. She went to Honest Bob's used car sales. She was interested in a classic 1956 Jaguar XK 140 roadster. Bob told her "this is a great car—it runs like a dream, it is a sweet ride." Bob's statements are legally considered to be

opinion statements

A(n) _____ is a separate contract in which an offeror agrees not to revoke her offer for a stated time in exchange for some valuable consideration.

option

Ted, while he was a minor, failed to disaffirm a contract during his minority or for a reasonable period after becoming an adult. This contract was automatically

ratified

Joe sells his business to Shirley. During the negotiations, Joe negligently tells Shirley that the business has turned a profit for the last five years. In reality, the business operated at a loss for each of those years. However, Shirley did not hear Joe's misstatement. Shirley cannot rescind the contract because

shirley did not actually rely on joe's misstatement

The statute of frauds requires that

some contracts must be evidenced by writing.

For a third person to have the right to enforce a contract, he should prove that

the contract was made to benefit him.

Joe and Jack have a written contract whereby Joe agrees to sell Jack a plot of land for $100,000. Later, without terminating the first contract, the parties modify the deal so that Joe sells Jack the same plot of land for $125,000. The second agreement is not a contract because

there is no consideration for jack's promise

A donee beneficiary of a contract can recover under that contract.

true

When is the revocation of an offer effective?

when received by the offeree

Sue and Joe have concluded their agreement in all substantial matters like price, quantity, mode of delivery etc. However, the formal written agreement is not signed. Is there a contract?

yes, because a contract is formed at the time the agreement was concluded

Chica, a women's clothing store, held a "prize drawing" for a $500 shopping spree on Saturday that it had advertised throughout the week. Participation in the drawing required being at the store by noon and completing an application form that included personal information and placing it in a box. The information would then be put into a database for marketing purposes. Fashion consultants offering merchandise for sale greeted customers arriving at the store on Saturday morning. Joy was the winner of the drawing. Has she given consideration for the prize?

yes, she made an effort to come to the store and give information that was for the store's use

A world-renowned astrologer strongly asserted that the world will come to an end in 2008. Accordingly, Jim gave all his property in donation for the welfare of the poor. This is a misrepresentation of a material fact of a contract.

false

All terms of contracts, even "fine-print" terms of standard form contracts, are always part of the parties' deal and binding on them, because parties have an obligation to read their contracts and are assumed to have done so.

false

Which of the following is the best example of a condition subsequent?

"I promise to do X unless Oprah Winfrey is elected President in 2020."

Sarah is 16 years old. She left home at age 15; her parents no longer support her. Sarah entered into a contract with Best Groceries for the purchase of $100 of groceries on credit. The groceries consisted of basic, necessary items. However, their reasonable value is only $80. If Sarah discovers that she has been overcharged and refuses to pay, Best is entitled to collect

$80

For which of the following contracts, is a party's subjective dissatisfaction sufficient to excuse his performance under a "personal satisfaction" clause in a contract?

A contract to paint someone's portrait.

In the absence of an express condition, which of the following is subject to a "substantial performance" standard?

A promise to build a house.

Which of the following is covered by the statute of frauds?

A real estate mortgage.

Smith and Benson make an oral contract for the sale of some land at a price of $500,000. After paying Smith $400,000 of the purchase price, Benson takes possession of the land. One month later, Smith wants to boot Benson off the land. His argument is that the parties' oral agreement is unenforceable under the Statute of Frauds. Which of the following is most correct?

Smith is incorrect, because Benson paid part of the purchase price and took possession.

Which of the following is not one of the implied warranties that the assignor gives to the assignee?

That the obligor is solvent.

The essence of a contract is that it is a legally enforceable promise or set of promises.

True

Raj went to the Napa Valley Harvest Festival, where he stopped at Tina's booth where she was selling paintings of vineyards. Raj admired a painting of vineyards, which did not appear to be for sale. Raj said to Tina, "I will give you $200 if you give me that painting right now." Tina said nothing in response, but she gave Raj the painting, and Raj gave her $200 in cash. This is an example of a contract that is now

Unilateral and Executed

Which of the following is an example of substantive unconscionability?

Unjustifiably harsh terms

Woody and Mia are friends in Idaho, where gambling is illegal. Woody and Mia bet $1,000 on which day Paradise Creek will flood its banks. They have no financial interest in Paradise Creek. Woody wins this bet. Mia pays Woody the $1,000, but later that day regrets it and sues Woody to get her $1,000 back. The Court would probably rule in favor of

Woody, since the court will "leave the parties where it finds them" in cases like this.

Ahmed promises to sell his boat to Mendel, and Mendel promises to buy it from Ahmed. What type of contract is this?

a bilateral contract

Which of the following is most likely to constitute undue influence?

a clergyman using a parishioner's emotional susceptibility to get the parishioner to contract with the clergyman

Able Co. entered into a contract with Baker Co. for the sale of goods. Both parties are merchants under the UCC. Each party used its own form as an offer and acceptance. On the back of each form there were minor terms that conflicted with each other. What is result of these minor differences in terms on the forms used by the parties?

a contract does result, and it includes the terms agreed upon plus gap-fillers from the ucc

Which of the following contracts is void?

a contract made by a person who has been adjudicated insane and institutionalized or put under a guardian's care

Jack went to the ABC Casino (ABC) to gamble. ABC offers its customers one free spin of the "Million Dollar Wheel" if they fill out an application form. Jack filled out the form, spun the "Million Dollar Wheel", and won. However, now ABC refuses to pay, claiming that because Jack did not purchase his chance at the "Million Dollar Wheel", Jack gave no consideration; therefore, no contract was formed. Identify the accurate statement.

a contract was formed because merely filling out an application can constitute legal consideration

Which of the following actions is considered to reflect a counteroffer?

a demand for additional terms

A court has held that a certain contract violates public policy. This contract will be treated the same as

an illegal contract

The effect of a valid delegation of duties is that it

appoints the delegatee to perform the delegator's duty to the obligee.

Offers that fail to provide a specific time for acceptance

are valid for a reasonable period of time

Able borrowed $10,000 from Baker, promising to return it with $1,000 interest on January 1, 2006. There is no dispute that Able owes Baker $11,000 due on January 1, 2006. On that day, Able gave Baker a valid check in the amount of $10,500 marked "payment in full for loan due January 1, 2006." Baker accepted that check and deposited it into his account. If Baker then sues Able for the unpaid $500, what would the result be?

baker wins, because able gave no consideration in exchange for baker's promise to forgive $500 of the loan

Carlos tells Sally he will sell her his car for $5,000. Sally agrees. The exchange is to take place in ten days. The contract between Carlos and Sally is now

bilateral, executory, and express

Ann wants to download the Adobe Acrobat software from the Internet. Prior to downloading, a standardized online contract appears on the screen that requires her to click on an icon indicating agreement, before she can proceed in the program. Such contracts are called

clickwrap contracts

Which source of law requires the acceptance be an identical or almost identical "mirror image" of the offer in order to form a contract?

common law

Which form of damages is intended to give the victim of the breach of contract the "benefit of the bargain"?

compensatory

Edna is a leading brain surgeon in the United States. She enters into a contract to perform a complicated brain surgery on Ben. However, since Edna is very busy, she wants to assign/delegate this contract to a less experienced surgeon, Charles. This would be Charles' first operation of this type. Ben can object to this assignment/delegation and prevent it because the contract between Ben and Edna is a(n)

contract involving personal skill.

Shipment of non-conforming goods intended as an accommodation to the buyer is a(n)

counteroffer

An important difference between duress and undue influence is that

duress is a wrongful coercion while undue influence is unfair persuasion

In order for the consideration requirement in contracts to be met

each party must give consideration

A contract in which one party to the agreement agrees to buy all of the produced goods of the other party, is called a requirements contract.

false

A contract of adhesion is one that the courts will always enforce because of the strong public policy underlying such contract.

false

A contract to commit a serious crime is a legal contract.

false

A minor has the right to recover property transferred to third parties. This includes even good faith purchasers.

false

A party who has the right to rescind a contract may do so at any time.

false

A promise not to sue another party is not consideration, because the promise does not convey any legal value to the other party.

false

Contracts must always be in writing to be enforceable.

false

Courts look at parties outward manifestations of intent as a requirement to enforce a contract. This is called subjective standard of intent.

false

Duress makes a contract void, while undue influence makes a contract voidable.

false

Generally speaking, advertisements are considered to be offers.

false

Generally, the age of majority for contracting purposes is 21 years.

false

Generally, the terms of a standardized contract are non-negotiable.

false

Gross inadequacy of contract is by itself a sufficient reason to set aside a contract.

false

If there is no time specified in contract by the parties, then it is presumed that performance shall be completed whenever possible.

false

In general, an employee who has been fired and who wants to sue for breach of contract need not do anything to limit or mitigate his damages, such as looking for another job. This would unfairly benefit an employer who has wrongfully breached a contract.

false

In order to satisfy the writing requirement of the statute of frauds, both parties must sign the writing.

false

Misrepresentations made with scienter make a contract void, while negligent misrepresentations make a contract voidable.

false

Once a party properly delegates a duty to the delegatee, that party is relieved of any obligation to perform the duty.

false

Once an assignment has occurred, the assignee cannot assign the contract rights to another.

false

Pat, who owns an appliance store, has a garage sale at his home where he sells old furniture and books. He sells a set of books to his neighbor Judy. Pat is considered a merchant under Article 2 of the UCC in selling the books to Judy.

false

Specific performance is almost never awarded in contracts for the sale of land.

false

Statutes that require proof of character and skill and impose penalties for violation are considered to be revenue-raising in nature.

false

Under the theory that alcohol and drug use should not be rewarded, today most courts say that contracts made by intoxicated people are perfectly binding, no matter how severe the intoxication.

false

Where an offer stipulates a certain means of acceptance, the offeree's acceptance is effective upon dispatch if he uses that means.

false

Which of the following characterizes an auction "without reserve"?

goods cannot be withdrawn after a call for bids has been made

A contract that cannot be performed within one year from the day on which it comes into existence

is within the statute of frauds.

Payne entered into a written agreement to sell a parcel of land to Stevens. At the time the agreement was executed, Payne had consumed alcoholic beverages. Payne's ability to understand the nature and terms of the contract was not impaired. Stevens did not believe that Payne was intoxicated. The contract is

legally binding on both parties

A clearly illegal provision in an agreement:

may be divisible from the rest of the agreement, which means that the court will enforce the agreement without it.

Mike Minor buys some real estate for investment purposes. The contract obligates Mike to make monthly installment payments for ten years. Mike reaches the age of majority one month after making the contract. After this, Mike makes 25 monthly payments under the contract, but then decides that he wants to rescind (disaffirm) the deal. Which of the following is most true?

mike cannot disaffirm because he has already ratified the contract

Percy is a rich boy whose parents supply him with every conceivable necessity of life. While still a minor, Percy buys a coat on credit from a men's store for $5000. After wearing the coat for a while, Percy decides that it bores him and that he'd like to disaffirm. Which of the following is most likely to be true? Assume that the coat is hanging in Percy's closet and Percy is still a minor.

percy can disaffirm the contract, and he must return the coat

Nina has breached a contract between Nina and Milo, but has not materially breached it. This means that Milo can

sue only for damages caused by the breach.

In general, the mailbox rule is beneficial to

the offeree

Kyle sent Tara a letter offering to sell Tara his car. Tara left the letter on her desk, where her roommate, Maggie, saw it. After reading the letter, Maggie wrote to Kyle and stated that she (Maggie) wanted to accept Kyle's offer. Which of the following is true?

there is no contract between kyle and maggie because kyle did not communicate the offer to maggie

A contract made by a person who has been adjudicated to be insane and institutionalized or put under a guardian's care is void rather than voidable.

true

A contract may be voidable even if the person making the misrepresentation believes in good faith that what he/she says is true.

true

A creditor who fails to file suit to collect a debt within the time prescribed by the appropriate statute of limitations loses the right to collect it.

true

A minor's contract for necessaries makes the minor liable for the reasonable value of the necessaries furnished to him.

true

A person who at the time of the contract lacked capacity due to mental impairment can ratify the contract once he regains his normal mental faculties.

true

Some courts allow promissory estoppel to bind parties to oral contracts that otherwise would be unenforceable under the statute of frauds.

true

Sometimes, Article 2 of the UCC holds merchants to standards different from the standards it applies to non-merchants.

true

The UCC says that where an offer is unclear about the form of acceptance it requires, the offer may be accepted in any manner that is reasonable under the circumstances.

true

The only person with the legal power to accept an offer and create a contract is the original offeree.

true

When A owes an unconditional duty to B, then A has to perform his duty unless his performance is excused.

true

The rule on adequacy of consideration reflects the laissez faire assumption of freedom of contract.

true

The three requirements for a valid offer are present intent to contract, definiteness, and communication to the offeree.

true

To encourage people to cancel illegal contracts, courts will allow a person who rescinds such a contract before any illegal act has been performed to recover any consideration that he has given.

true

Under the "American Rule" governing successive assignments, the first assignee in time has the superior right.

true

Under the doctrine of unconscionability, the courts would refuse to grant the equitable remedy of specific performance for breach of contract if the contract is oppressively unfair.

true

Undue influence cases often involve a relationship of trust and confidence between the contracting parties.

true

The Code empowers courts to deal fairly with a contract that is grossly unfair or one-sided by recognizing the concept of

unconscionable contract

Bill is 25 years old. His uncle promised in writing to pay him $2,000 if Bill would not drink alcohol for one year. Bill drank no alcohol for one year. However, his uncle has refused to pay Bill as agreed. The uncle claims that because Bill suffered no detriment by refraining from alcohol, his non-drinking does not constitute legal consideration therefore no contract was formed. If Bill sues his uncle, Bill will

win because bill had a right to drink alcohol

Pip owns Great Expectations, a trendy restaurant in Manhattan. He enters into a contract with Estella, who makes and sells pastries. The contract states that Estella will "supply all of Great Expectation's needs" for pastries for the next year. Is this contract enforceable?

yes, because this is a requirements contract

On Thursday, Trista receives a letter from Charlie in which he offers to sell her a diamond ring. The letter states, "if you choose to accept, you must do so prior to 2:00 p.m. tomorrow." Trista had a telegram of acceptance dispatched before 2:00 p.m. on Friday. The telegram is delivered to Charlie's home at 2:15 p.m. Do Trista and Charlie have a contract?

yes, because trista dispatched the telegram prior to 2:00 pm