Midterm

Which of the following describes the time period a person has to pursue any legal claim?

Statute of limitations

Reliance means that an individual acts because of an assertion of another party.

True

A fact is considered to be material in a misrepresentation case when:

it plays a significant role in inducing a person to enter into a contract.

Which of the following is true of assignments?

Article 2 of the UCC deals with assignments of rights under a contract for the sale of goods.

Which of the following is also known as an implied-in-law condition since they are imposed by law rather than by agreement of the parties?

Constructive condition

Which statement about the statute of frauds is true?

Contracts for the sale of goods for $500 or more must be in writing in order to be enforced. Contracts for the sale of land for $500 or more must be in writing in order to be enforced.Incorrect All employment contracts must be in writing in order to be enforced. All contracts must be in writing in order to be enforced.

Which types of transactions are governed by the Uniform Commercial Code?

Contracts for the sale of goods.

Which of the following characterizes definiteness standards under classical contract law?

Courts are contract enforcers.

As discussed in the case in the text, Hicks v. Sparks, a person who is harmed by a mutual mistake cannot avoid that contract if he is considered to bear the risk of mistake. Which of the following statements is true?

Courts have the power to allocate risk of a mistake on the adversely affected person whenever it is reasonable under the circumstances to do so. *The adversely affected party does not bear the risk of mistake when he contracts with conscious awareness that he has limited information about a fact.Incorrect A person who is harmed by the mistake can avoid the contract on the basis of mutual mistake even if he is considered to bear the risk of mistake. A buyer is not considered to have accepted the risk when he accepts property "as is."

If it appears that the parties had concluded their negotiations and reached agreement on all the essential aspects of the transaction, most courts would probably find a contract at the time agreement was reached, even though no formal agreement had been signed. Which of the following is an exception to this rule?

During the negotiation process, the parties gave a clear expression of intent that prevents the formation of a contract until both parties have signed.

All terms of contracts, even "fine-print" provisions 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

Pratt, an owner of 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, Stacey. Pratt is considered a merchant under Article 2 of the UCC in selling the books to Stacey.

False

The mutual agreement necessary to create an express contract must be evidenced by a writing.

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 is.

False

When an offer is unclear about the form of acceptance it requires, there cannot be a valid acceptance.

False

Kyle promised to mow Heidi's lawn for $20 and clean her gutters for $50, but only mowed the lawn. Which of the following is true of Kyle?

He can recover the contract price for the activity he performed.

What is the term for a person who candidly paid valuable consideration without any notice of another's claim or any defects in the seller's ability to sell?

Holder in due course Bona fide buyerIncorrect Value buyer Good Faith purchaser

What does "present intent to contract" mean?

Intent to enter the contract upon acceptance

Which of the following is a criticism of the traditional rule of restitution in the case of minors who have disaffirmed a contract?

It is harsh on innocent adults who have dealt fairly with minors.

Which of the following conditions characterizes a firm offer regarding the sale of goods?

It must be made by an offeror who is a merchant.

Patrick, a farmer, leaves 10 bushels of corn with Jackie, the owner of a grocery store, saying "Look this corn over. If you want it, it's $5 a bushel." Jackie sells the corn. Which of the following statements is true?

Jackie impliedly accepted Patrick's offer.

Jim's contract with Frank obligated Jim to pay Frank $10,000. Frank properly assigns the contract to Abel. At that time, Abel notifies Jim about the assignment. Jim, however, forgets and pays the $10,000 to Frank. By this time, Abel is screaming for his money. However, by then, Frank goes into bankruptcy. In this case:

Jim is liable to Abel for $10,000.

Which of the following is used by the majority of courts when there is an acceptance that contains terms that are different from (not merely additional to) the terms of the offer?

Knock-Out Rule

On May 2, Kurtz Co. assigned its entire interest in a $70,000 account receivable due in 60 days from Long to City Bank for $65,000. On May 4, City notified Long of the assignment. On May 7, Long informed City that Kurtz had committed fraud in the transaction out of which the account receivable arose and that payment would not be made to City. If City commences an action against Long, and Long is able to prove that Kurtz acted fraudulently:

Long will be able to successfully assert fraud as a defense.

Amy bought Mississippi State Lottery tickets. Several days later, she learned that someone won the lottery but that the winner had not yet come forward. She searched for her ticket to see if she had selected the winning numbers, but was unable to find it. Although the lottery ticket was gone, Amy still possessed the play slip she had used when she purchased the ticket. She checked the numbers on the play slip and discovered that she had the winning numbers for the lottery. Reasoning that the play slip would satisfy the Lottery Office, Amy presented her claim. The Lottery Office took the position that Amy needed to produce the actual winning ticket as per the rules, and hence denied her claim. Amy sued the Lottery Office for breach of contract and unjust enrichment. Will she succeed?

No, because the rules of the contract prescribed that the ticket must be shown to claim the money. Amy accepted that rule when she entered into the contract and thus she is now precluded from claiming the prize money.

Helga owns an insurance business in Idaho. Her clients are all Idaho residents. She later sells her business to Carlos. As part of the deal, the contract contains a noncompete clause that prevents Helga from operating an insurance business anywhere in Idaho, Washington, or Oregon for a period of five years. Six months after this sale, Helga opens an insurance business in Oregon. If Carlos seeks to enforce the noncompete agreement against Helga, will he probably be successful?

No, because this agreement is not reasonable.

Joe promises to give his brother Bill a $30,000 new car for $50. Which of the following best describes the $50?

Nominal consideration

Which of the following is a type of substituted contract in which the obligee agrees to discharge the original obligor and to substitute a new obligor in his/her place?

Novation

Paco Corp., a building contractor, offered to sell Roy several pieces of used construction equipment. Roy, engaged in the business of buying and selling equipment, accepted the offer. Paco's written offer had been prepared by a secretary who typed the total price as $10,900, rather than $109,000, which was the approximate fair market value of the equipment. Paco learned of the error in the offer and refused delivery of the equipment unless Roy agreed to pay $109,000. Roy sued Paco for breach of contract. Which of the following scenarios is the likely outcome?

Paco will be able to rescind the contract because Roy should have known that the price was erroneous.

Fun Foods fraudulently induces Holly to buy a household products franchise by grossly misstating the average revenues of its franchisees. She discovers the misrepresentation after she resold some products that she received but before she has paid Fun Foods for the products. Holly wants to cancel the franchise contract on the basis of fraud. What is the remedy available to her?

Quasi-contract

Which of the following would not be used to determine whether an acceptance was communicated by reasonable means?

Speed and reliability *Nature of the transaction Incorrect Subjective beliefs Trade usage

The UCC's modified version of the mirror image rule is called the:

Substantive Form Rule. *Last Shot Rule.Incorrect Battle of the Forms. Knock-Out Rule.

In Symons v. Heaton, the case in the text, the court held that:

Symons' unjust enrichment claim failed because, among other things, Symons never expected payment and took care of Plachek because he was his friend.

Which of the following is not a required element to avoid a contract due to mutual mistake?

The mistake relates to a basic assumption on which the contract was made. The mistake was not readily apparent to either party at the time of contract. *The party adversely affected by the mistake does not bear the risk of the mistake.Incorrect The mistake has a material effect on the agreed-upon exchange.

April Roberts ordered one hundred 19-inch color television sets from Carl Soans and requested prompt shipment of the goods. Carl promptly shipped fifty 21-inch color television sets and fifty 19-inch color television sets without informing April that the shipment of nonconforming television sets was an accommodation. Which of the following is true?

There is an acceptance but Carl has breached the contract by shipping nonconforming television sets.

A signature is sufficient to form the basis of authenticity of a written contract.

True

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

True

An agreement that violates legislative and court-made rules and creates a threat to public policy shall be denied enforcement on the ground of illegality.

True

Which of the following is not a factor when a court considers whether an agreement is illegal for public policy reasons?

Whether both parties knew the agreement was illegal.

Section 15 of the Restatement (Second) of Contracts provides that a person's contracts are voidable if she is unable to ____ in a reasonable manner in relation to the transaction and the other party has reason to know of her condition.

speak act plan thinkIncorrect

Hally took advantage of a confidential, trusting relationship with Gwyn when they entered into a contract. Now, Gwyn can seek remedy based on:

undue influence.

Normally, an illegal contract is:

unenforceable

An otherwise valid contract whose enforcement is barred by the applicable statute of limitations is an example of a(n):

unenforceable contract.

When is the revocation of an offer effective?

When received by the offeree

Apple assigns the same contract rights to Enzo, and then to Sam. Sam immediately notifies the obligor of the assignment to him; Enzo never notifies the obligor. When Sam notified the obligor, he did not know about the earlier assignment to Enzo. Sam will have the better right under the:

"English rule."

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 Groceries is entitled to collect:

$80.

In a(n) ______ contract, the distributor must use her best efforts to sell the goods and the manufacturer must use his best efforts to supply the goods.

*implied Incorrect exclusive dealing output requirements

The outer limit on a firm offer's irrevocability is:

3 months.

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

Which of the following promises is subject to the "strict performance" standard? Assume that performance of the promise is not an express condition of the promisee's duty to perform.

A promise to deliver a deed

Which of the following will be legally binding on all parties despite lack of consideration?

A promise to donate money to a charity, which the charity relied upon in incurring large expenditures.

Which of the following is most likely to constitute a misstatement that can give rise to fraud or misrepresentation liability?

An owner of a house gets his ceiling painted to conceal a leaking roof and says, "I got the ceiling painted recently."

Which of the following would satisfy the "untrue assertion of fact" element for misrepresentation and fraud claims?

An untrue fact asserted that is a promise. An untrue fact asserted that is a past or existing fact. *An untrue fact asserted that is an opinion.Incorrect An untrue fact asserted that is a prediction about some future happening.

In the case in the text, Browning v. Poirier, the court held that:

Browning was entitled to judgment in his favor because the statute of frauds did not require the agreement to be in writing.

As demonstrated in the case in the text, Stephen A. Wheat Trust v. Sparks, concealment can provide a basis for a claim of fraud. Which of the following statements about concealment is false?

Concealment is taking active steps to prevent another from learning the truth. Concealment can be the basis for a claim of misrepresentation. Concealment is not used to support a claim of fraud in cases involving the sale of real property. *Concealment is equivalent to an assertion.Incorrect

A contract in which one party to the agreement agrees to buy all of the other party's production of a particular commodity is called a requirements contract.

False

When a minor enters into a contract, who can disaffirm the contract?

Either party A court Incorrect Neither party The minor only

Article 2 of the UCC never applies to mixed goods-services contracts.

False

For an assignment to be valid, the assignee must give some consideration to the assignor.

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

Minors have the capacity to enter into contracts.

False

Mr. Green is a general contractor and is accepting bids from subcontractors for the building of a new hotel. Mr. Blue submits a bid for his work associated with the project. In this instance, Mr. Green was the offeror.

False

The power to delegate under a contract is a universal right and parties may not restrict the power to delegate in the contract.

False

There cannot be subjective standards of personal taste and comfort when determining a promisee's performance.

False

To accept an offer for a bilateral contract, the offeree must perform the requested act.

False

Russell, 45, has been suffering from a mental impairment for a long time. He signs a contract to sell his villa for $1 million to Andre. When Russell's wife Katie, who is also his court-appointed guardian, gets to know of the deal, she wants to ends the contract. Which of the following statements is true?

Katie need not worry because the contract is void.

Milner Developers proposed an offer to Henry Wright, an independent contractor, offering to hire him for their next project. They offered him a certain rate and specified the contract details along with describing the stipulated mode of acceptance but received no response. Wright responded to the offer with a quote for a higher amount than that mentioned by Milner Developers. Do the two parties have a binding contract?

No, because Wright's letter was a counteroffer to the original offer.

Home Décor orders 200 red candlesticks from Scent Co. to be shipped immediately. Scent promptly ships Home Décor 200 red candlesticks, in conformity with its order. That same day, Scent receives an order from a different company to pay double the price Home Décor paid for the same candlesticks. However, Scent is now out of stock and attempts to cancel its shipment to Home Décor. Which of the following statements is true?

Scent cannot cancel the shipment because the shipment amounted to acceptance, which cannot be revoked.

Which of the following statements about the United Nations Convention on Contracts for the International Sale of Goods (CISG) is true?

The CISG permits parties to a written contract to require that any modifications of the contract be in writing. The CISG requires that contracts can only be proven by subsequent agreements. The CISG requires that all contracts must be supported by independent evidence. The CISG requires that all contracts be in writing to be enforceable. incorrect

Which of the following characterizes the statute of limitations?

The recording of the contract stops the running of the statute of limitations. The time period fixed by the statute of limitations is uniform throughout the states. The time period for oral contracts is different from that of written ones. *The time period fixed by the statute of limitations begins when the contract is recorded.

Which of the following statements about governmental contracts is true?

The rules governing governmental contracts give the entity discretion as to who to award the contract to. Governmental contracts are generally covered by statute. *The rules governing governmental contracts allow parties to withdraw bids without penalty.Incorrect Promissory estoppel can be used to allow a bidder to withdraw a bid but impose a penalty.

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

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

Mr. Blue gave his favorite nephew Jim Jr., who is a mechanic, $1,000 in January. Later that year, he needed his car repaired. In the sales contract, Mr. Blue indicated that the amount owed should be deducted from the money already paid. A court will find that Mr. Blue failed to give proper consideration for the contract.

True

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

True

The UCC often creates contractual liability in situations where no contract would have resulted at common law.

True

The origin of the policy against restrictions on competition in the market comes from common law.

True

The rules promulgated by the Restatement (Second) of Contracts often resemble the rules created by Article 2 of the UCC.

True

Fiona owed Lutz $5,000. As the result of an unrelated transaction, Lutz owed Bing that same amount. The three parties signed an agreement that Fiona would pay Bing instead of Lutz and Lutz would be discharged from all liability. The agreement among the parties is:

a novation.

As demonstrated in the case in the text, Garden Ridge, L.P. v. Advance International, Inc., a liquidated damages clause:

can be claimed in addition to consequential damages. *must provide a reasonable calculation of its figure.Incorrect will be enforced, regardless of whether it is reasonable or not. will not be enforced if it serves to penalize the breaching party.

Bing engaged Dill to perform personal services for $2,200 a month for a period of four months. The contract was entered into orally on July 1, 1984, and performance was to commence on September 1, 1984. On August 10, Dill anticipatorily repudiated the contract. As a result, Bing:

can immediately sue for breach of contract.

There must be separate ______ for each promise or act for a contract to be considered divisible.

consideration

Denise contracts with Long Life Insurance Co., agreeing to pay premiums in return for which the company agrees to pay $500,000 to Denise's husband Barn when Denise dies. Barn is a(n):

donee beneficiary.

Patricia is a general contractor performing construction work for ABC Corp. Patricia requested extra payment because abnormal subsurface rock formations made excavation on the construction site far more costly and time-consuming than could have been reasonably expected. The court will:

enforce such modifications in contract.

A contract that involves obligations on the part of manufacturers and distributors is called a(n):

exclusive dealing contract.

A condition subsequent cannot be a valid reason for the discharge of a duty.

false

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

illegal contract.

When a person undertakes an obligation that is not conditioned on the default of another person, and the debt is his own rather than that of another person, his obligation is said to be _______, not collateral.

impliedIncorrect express original secondary

Where no separate consideration is exchanged for the legal and illegal parts of an agreement, the agreement is said to be _____.

indivisible

Daniel owes Casey a debt, the amount of which is subject to a good faith dispute. The parties agree to settle the debt, with Daniel promising to pay Casey $15,000 and Casey promising to release Daniel on a $25,000 debt. The settlement agreement:

is supported by consideration.

The marriage provision in the statute of frauds is inapplicable to agreements that involve:

mutual promises to marry. oral one-sided promises of marriage. postnuptial agreements. prenuptial agreements.Incorrect

A(n) _____ is something that is essential for the minor's continued existence and general welfare that has not been provided by the minor's parents or guardian.

necessary

In determining whether a contract is within the one-year provision of the statute of frauds, courts begin counting time on the day when the:

parties initiated negotiations. parties filed their agreement with the secretary of state. contract comes into existence. offer was sent.

Stewart, who wants to help Marcy establish her own business, promises ABC Bank that he will repay the loan that ABC Bank makes to Marcy if Marcy fails to pay it. In this instance, Marcy is the:

principal debtor.

If a contract is breached, the donee beneficiary will only have a cause of action against the:

promisor.

The Uniform Commercial Code is different from the common law statute of frauds rule, as it:

requires all contracts to be in writing.Incorrect is easier to satisfy. applies to service contracts only. applies to real estate contracts only.

Greg signed a contract to work as an auto-parts manager for Jones Chevrolet. This contract is governed by:

state common law.

To determine _____ unconscionability, courts will scrutinize the contract terms themselves to determine whether they are oppressive, unreasonably one-sided, or unjustifiably harsh.

substantive

When courts decide whether a person had the mental capacity to contract, they determine whether:

the person had sufficient mental capacity to understand the nature and effect of the contract.

Amy is hired by BigMart as a cashier. At the time of hiring, Amy is required to sign an arbitration agreement under which she agreed to settle any and all claims she might have relating to her employment by final and binding arbitration before a neutral arbitrator and in accordance with BigMart's "Dispute Resolution Rules and Procedures" which is a separate ten-page document containing complex procedural details. Under the agreement, Amy is required to pay for all arbitration-related costs, and BigMart can still sue Amy in civil court for claims arising from her employment. A court will most likely view this agreement as:

unconscionable because it is an adhesion contract that is oppressive.