practice test 3

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

A contract does exist and it includes the terms agreed upon plus gap-fillers from the UCC

Which of the following is the first step in the contract formation process?

An offer in definite terms

situation in which one person induces the formation or modification of a contract by threatening another person's economic interests

Economic duress

A partnership is an income tax-paying entity for federal income tax purposes. True or False?

False

A sole proprietorship is a legal entity separate from its owner. True or False?

False

No formalities are required in order to establish a partnership. True or False?

False

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

Goods

a partnership that has elected to obtain limited liability for its partners by filing with the secretary of state

Limited liability partnership

Jimmy and Pat had a long-standing professional relationship. In 2001, Jimmy's business began experiencing financial strain. The two friends discussed Jimmy's personal problems and financial difficulties, and Pat was concerned about his friend's depressed mental state. In 2003, Pat flew from Atlanta to New York to meet Jimmy. Prior to Pat's flight, Jimmy's employee had faxed copies of various construction contracts and correspondence relating to Jimmy's controversial projects for Pat to review. In late 2005, Pat billed Jimmy for a $40,000 balance that Jimmy owed on the alleged oral contract. In a letter to Pat, Jimmy stated: "I have paid you plenty and will not pay you any more. I have not called for any professional advice since then." Pat filed suit against Jimmy for breach of contract. Will Pat succeed?

No, because it was a friendly advice and not an actual contract.

Which of the following actions constitutes the acceptance of an offer?

Offeree reflected assent to the terms of the offer in the requisite manner

Linda wanted to replace the old carpet in her home. She entered into a contract with Carpet Co., for the purchase and installation of a new carpet. The price of the carpet was $3,000 and the cost of the labor to install the carpet was $150. Later, Linda became dissatisfied with this transaction and now wants to sue Carpet Co. Linda wants to apply the contract rules of the UCC, but Carpet Co., wants to apply the contract rules of the common law. Which source of law should govern this case?

The contract rules of the common law apply, because the contract included services, which are governed by the common law.

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

a demand for additional terms

To qualify as a contract, a set of promises must be based on a voluntary agreement, which is made up of an offer and a(n) _____ of that offer.

acceptance

to adjudge; settle by judicial decree

adjudicate

the ability to incur legal obligations and acquire legal rights

capacity

an order charging all or part of the partner's transferable partnership interest with payment of the unsatisfied amount of the judgment

charging order

a contract in which one person (the guarantor) agrees to pay the debt or obligation that a second person (the principal debtor) owes to a third person (the obligee) if the principal debtor fails to perform. the guarantor pays only if the principal debtor fails to do so

collateral contracts

Which of the following is an advantage of a sole proprietorship?

complete control over the business

The ____ of a fact through some active conduct intended to prevent the other party from discovering the fact is considered to be the equivalent of an assertion.

concealment

active hiding of a fact

concealment

a form of business organization that is owned by owners, called shareholders, who have no inherent right to manage the business, and is managed by a board of directors that is elected by the shareholders

corporation

A person who commits fraud may be liable for damages, possibly including punitive damages, for the tort of

deceit

a party's exercise of his power to avoid a contract entered before the party reached the age of majority; a minor's cancellation of his contract

disaffirmance

the failure to volunteer information

disclosure

wrongful coercion that induces a person to enter or modify a contract

duress

the termination of a parent's right to control a child and receive services and wages from him

emancipation

The part performance doctrine is based on both ____ and _____ considerations.

evidentiary and reliance

Sometimes, Article 2 of the UCC holds merchants to standards different from the standards it applies to nonmerchants. True or False?

false

Under the common law, an offer for a unilateral contract:

is accepted by full performance of the act requested by the offer

the oral contract for the sale of land that has been completely performed by the seller is "taken out of the statute of frauds" meaning

it is enforceable without a writing

__ ___ occurs when someone relies on a statement made by another party, and takes steps based on that statement that costs them money.

justifiable reliance

a business form intended to combine the nontax advantages of corporations with the favorable tax treatments of partnerships.

limited liability company

a partnership that has elected to obtain limited liability status for all of its partners, including general partners, by filing with the secretary of state

limited liability limited partnership

A _____ is a partnership whose partners have elected limited liability status.

limited liability partnership

a form of business organization that has one or more general partners who manage the business and have unlimited liability for the obligations of the business and one or more limited partners who do not manage and have limited liability

limited partnership

a fact will be considered to be ______ if it is likely to play a significant role in inducing a reasonable person to enter the contract or if the person asserting the fact knows that the other person is likely to rely on fact

material

a contract clause providing that the written contract is the complete expression of the parties' agreement

merger clause

an assertion that is not accord with the truth

misrepresentation

a belief about a fact that is not in accord with the truth

mistake

An S corporation:

must have at least 100 shareholders

both parties of the contract have erroneous assumptions about the same fact

mutual mistake

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

necessaries

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

written or spoken statements that are not contained in the written contract

parol evidence

when parties enter a written contract that they intend as a complete integration (a complete and final statement of their agreement), a court will not permit the use of evidence of prior or existing statements to add to, alter, or contradict the terms of the written contract.

parol evidence rule

When the vendee (purchaser of land) does an act in clear reliance on an oral contract for the sale of land, an equitable doctrine commonly known as the ___ ___ ___ permits the vendee to enforce the contract notwithstanding the fact that it was oral.

part performance doctrine

partners' contribution

partnership capital

a partner's ownership interest in a partnership which embodies the partner's transferable interest and the partner's management and other rights

partnership interest

Thorp overpowers Grimes, grasps his hand, and forces him to sign a contract. what kind of duress is this?

physical compulsion

formed by filing with the secretary of state and is managed by a board of directors, unless a statute permits it to be managed like a partnership

professional corporation

The legal principle that a promise is enforceable by law when the promisor (person making the promise) makes a promise to the promisee (person being promised) who relies on it to his or her detriment.

promissory estoppel

a writing that does not indicate the ___ of goods to be sold would not satisfy the uniform commercial code's writing requirement.

quantity

the doctrine by which courts imply, as a matter of law, a promise to pay the reasonable value of goods or services when the party receiving such goods or services has knowingly done so under circumstances that make it unfair to retain them without paying them.

quasi-contract

____ of a voidable contract means that a person who had the right to rescind has elected not to do so.

ratification

_____ ends the right to rescind.

ratification

the act of affirming the contract and surrendering the right to avoid the contract. makes a contract valid from its ineption

ratification

the other partners must pay the creditor the amount due on the judgment against the partner in order to

redeem the charging order

modification of the written instrument to express the agreement that the parties made but failed to express correctly

reformation

a person pursues some course of action because of his faith in an assertion made to him

reliance

The contract was induced by an improper threat. The victim had no reasonable alternative but to enter the contract.

requirements for duress

When a contract is considered voidable, it means that the person whose consent was not real has the power to ____ the contract.

rescind (cancel)

states that a person's fault in failing to know or discover facts before entering the contract will not bar relief unless his fault amounted to a failure to act in good faith.

restatement (second) of contracts

fraud is a type of misrepresentation that is committed knowingly, with the intent to deceive. what is the legal term for this knowledge of falsity that distinguishes fraud from innocent misrepresentation?

scienter

a remedy whereby the court orders the breaching party to perform his contract

specific performance

the part performance doctrine will not permit the vendee to collect damages for breach of contract, but it will permit him to obtain the equitable remedy of:

specific performance

Ashley says to Ford, "I'd like to buy your house," and Ford responds, "You've got a deal". This exchange lacks _____.

specificity

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

state common law

the position one is in before the creation of a contract

status quo

any contract that creates or transfers an interest in land is within the

statute of frauds

the partner's share of profits and losses and his right to receive partnership distributions. only part of the partnership interest that may be transferred to another person

transferable interest

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

true

unfair persuasion, involves wrongful pressure exerted on a person during the bargaining process. pressure is exerted through persuasion rather than coercion

undue influence

exists only when one of the parties makes a mistake about a basic assumption on which he made the contract

unilateral mistake

Contracts induced by misrepresentation, fraud, mistake, duress, or undue influence are generally considered to be:

voidable

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

win because Bill had a legal right to drink alcohol.