BUS law ch. 12 Contracts (cengage hw)

Assume that Jack, Hal, and Sophia enter into an agreement for the sale of the restaurant. Hal and Sophia get a loan from Fourth National Bank to pay for it. When their first payment is due, they get a letter from Bank of North America stating that they bought the loan from Fourth National Bank. If Hal and Sophia were to default on the loan, who would have rights under the contract to sue Hal and Sophia for non-payment? a. Bank of North America only b. Fourth National Bank only c. Bank of North America and Fourth National Bank acting jointly and severally d. Fourth National Bank or Bank of North America, but not both together

a. Bank of North America only

Suppose that Jack, Sophia, and Hal enter into a contract to close on the business without the non-competition agreement. Jack states that he would probably sign the non-competition agreement if they included an extra $100,000. A month later, Hal and Sophia bring Jack $100,000. What is the result? a. If Jack does not accept the $100,000, there is a valid contract for the sale of the business, without a non-competition clause. b. If Jack does not accept the $100,000, there is no valid contract for the sale of the business or for the non-competition agreement. c. Jack cannot change his mind, since he stated that he would probably accept $100,000 additional for the non-competition agreement. d. If Jack does not accept the $100,000, he may not sell the frozen food, but only for a reasonable amount of time.

a. If Jack does not accept the $100,000, there is a valid contract for the sale of the business, without a non-competition clause.

Suppose that Jack makes an offer to sell the restaurant on July 10th. Hal and Sophia decide to think it over. On July 15th, they mail a letter of acceptance to Jack. On July 16th, Hal and Sophia change their mind and call Jack, stating that they do not want to purchase the business. On July 20th, Jack receives the letter of acceptance. Would there be a valid contract? a. Yes, a valid contract was formed on July 15th when the letter of acceptance was sent. b. Yes, a valid contract was at the time that Jack opens the letter and actually reads it. c. No, because Hal and Sophia informed Jack that they did not want to buy the business prior to Jack receiving the letter of acceptance. d. Yes, a valid contract was formed on July 20th when the letter of acceptance was received.

a. Yes, a valid contract was formed on July 15th when the letter of acceptance was sent.

Suppose at the end of the meeting, Jack makes an offer regarding the restaurant buyout, which includes the non-competition agreement. Prior to Hal and Sophia agreeing to the offer however, Jack changes his mind. Can he do so? a. Yes, as long as he actually communicates the revocation to Hal and Sophia (or their agent) prior to acceptance. b. Yes, and there is no need to actually communicate the revocation to Hal and Sophia (or their agent) prior to acceptance. c. No, once an offer is made, it can never be revoked. d. No, unless the offer states that it is revocable.

a. Yes, as long as he actually communicates the revocation to Hal and Sophia (or their agent) prior to acceptance.

Assume Jack was drunk during the contract negotiations and signing, and that the contract was voidable due to Jack's intoxication. Two years later after the signing, Jack sues to undo the contract. Which of the following would be Hal's and Sophie's best defense against this action? a. That Jack was intoxicated very often. b. That Jack, by waiting two years, ratified the contract. c. That Jack was voluntarily intoxicated at the time of the negotiations and signing of the contract. d. That the contract is void.

b. That Jack, by waiting two years, ratified the contract.

Assume that a contract was entered into for the sale of the restaurant, and that the sale included the covenant not to compete. Which of the following is true? a. The contract for the sale of the business would be valid, but the covenant not to compete will be void. b. The covenant not to compete must be reasonable in geographic scope to be valid. c. The contract would be void as covenants not to compete are only valid when they are part of a valid employment contract. d. The contract would be void, as covenants not to compete are a restraint of trade.

b. The covenant not to compete must be reasonable in geographic scope to be valid.

Suppose that Jack, Hal, and Sophia enter into a contract for the sale of the restaurant. Hal and Sophia inventory the restaurant and find that there is a case of bald eagle meat in the refrigerator, which is illegal to possess. This was unknown to them at the time of the agreement. Which of the following is true? a. The contract would be void due to illegality. b. The illegal part of the contract would be severed from the contract for the sale of the business, which would be enforced. c. The contract would likely be voidable by Jack. d. The contract would be void since the parties are in pari delicto.

b. The illegal part of the contract would be severed from the contract for the sale of the business, which would be enforced.

Suppose that Jack, Hal, and Sophia enter into an agreement for the sale of the restaurant, with Jack stating in the agreement that if he feels comfortable with his finances in his retirement, that he will not sell the frozen food in competition with the restaurant. After the sale, the stock market rises considerably, and Jack's net worth quadruples. He still decides to sell the frozen food. Hal and Sophia sue. What is the result? a. Hal and Sophia would win since the contract mentioned the non-competition agreement. b. Jack would win, unless that Hal and Sophia could prove that Jack was comfortable with his finances in his retirement. c. Jack would win since the promise not to compete was illusory. d. Hal and Sophia would win since Jack's net worth quadrupled.

c. Jack would win since the promise not to compete was illusory.

Suppose that Jack, Hal, and Sophia enter in to a contract for the sale of the business. Jack was drunk at the time that the negotiations took place, and at the time of the signing of the contract. Is the contract valid? a. The contract is voidable by any party. b. The contract is void. c. The contract is valid unless Jack did not know he was entering into the contract, or lacked the mental capacity to comprehend its nature. d. The contract is voidable only if Jack's intoxication was involuntary.

c. The contract is valid unless Jack did not know he was entering into the contract, or lacked the mental capacity to comprehend its nature.

Suppose that Jack, Hal, and Sophia enter into an agreement in regards to the sale of the restaurant. The contract includes the non-competition agreement. A few months later, Jack decides that he will sell the frozen food in violation of non-competition agreement, unless if Hal and Sophia agree to pay him an extra $100,000. Hal and Sophia agree, since they do not want to fight. Six months later, however, they still have not paid and Jack sues. What is the result? a. Jack would win since agreeing to not do something, in this case sell the food, is not valid consideration. b. Hal and Sophia would win since agreeing to not do something, in this case sell the food, is not valid consideration. c. Jack would win since Hal and Sophia agreed to pay the extra $100,000. d. Hal and Sophia would win, since Jack already had a prior existing legal duty to not compete with them.

d. Hal and Sophia would win, since Jack already had a prior existing legal duty to not compete with them.

Suppose that Jack states that he would sell the restaurant with the non-competition agreement for an extra $100,000. Hal and Sophia say they will buy the restaurant, but will only pay an extra $75,000 for the non-competition agreement. Jack says no to this counteroffer. Hal and Sophia then say they will pay $100,000 for the non-competition agreement. Do they now have a valid contract? a. Yes, but only for sale of the restaurant, without the non-competition agreement. b. Yes, for the sale of the restaurant with the non-competition agreement for an extra $100,000. c. Yes, for the sale of the restaurant with non-competition agreement for an extra $75,000. d. There would be no valid contract.

d. There would be no valid contract.