Business Law Chapter 9-13 Test (Test #2)

Which is an irrevocable offer? a. A bid to construct a bridge for the city b. An offer to buy stock in the ABC Corporation once it is formed c. A unilateral offer to pay John $30 to mow your lawn at the point that he has completed half the job and indicates he wishes to finish d. All of the above.

D

Which of the following is correct with regard to counteroffers? a. A counteroffer operates as a rejection of the original offer. b. A conditional acceptance is a common type of counteroffer. c. The receipt of a counteroffer terminates the original offer. d. All of the above are correct.

D

Which of the following would most likely be a merchant with respect to the goods in question under the UCC definition? a. Amy is an authorized IBM computer dealer. b. Brian employs two salesmen to sell his homemade furniture. c. Clarence has a store in which he sells used lawn mowers. d. All of the above would be merchants. e. None of the above would be merchants.

D

Which of the following would most probably be considered a valid offer? a. "Would you like to buy this?" b. "I'd give $50 for a cold glass of water." c. "Special sale on VCR's today - $200 each." d. "$100 reward for return of lost white-gold, men's wedding band inscribed with initials 'TEA' to Tony Adams, 350 Main Street, Peoria."

D

True or False: A contract exists when an offer has been accepted.

True

True or False: A valid offer may be in the form of an act for a promise, which is an offer to enter into an inverted unilateral contract.

True

True or False: An offer can be communicated by words or by conduct.

True

True or False: An offer must be communicated to the offeree in order for the offer to be effective.

True

True or False: At the marriage of her daughter, Lorna is given papers to sign which the catering company says are the invoices for the food, service, and decorations. Underneath the invoices is a carbon and a contract of sale for a portion of the failing catering business. Lorna signs the papers, and her signature is transferred to the sales contract. This is a void contract because it was entered by fraud in the execution.

True

True or False: Both the Code and the Restatement provide that an authorized means of accepting an offer is any reasonable means of communication.

True

True or False: Commercial reasonableness is a standard determined in terms of the business judgment of reasonable persons familiar with the practices customary in the type of transaction involved.

True

True or False: Contract law generally places more importance on the intent of the parties to form a contract than on the inclusion of certain terms in the contract.

True

True or False: Death or insanity of either the offeror or the offeree ordinarily terminates the offer.

True

True or False: If an offeror makes an offer to an offeree by letter and it is lost in the mail, no legally sufficient offer has been made.

True

True or False: If the offer specifies it MUST be accepted by telegram, a letter will not be a valid means of acceptance.

True

True or False: In general, an acceptance is effective upon dispatch.

True

True or False: On June 1, a civic club made an offer of $500 to a beer distributor to have ten kegs delivered to the city park for a July 4th fund-raising event. On June 30, the city passed a new law prohibiting consumption of alcohol in the city park. The civic club's offer is terminated on June 30.

True

True or False: On Tuesday morning John sends a letter to Arlene rejecting her offer, but later the same day John changes his mind and sends a letter of acceptance to Arlene. The letter of acceptance will be effective only if it is received by Arlene before she receives the rejection.

True

True or False: The Code's firm offer rule applies only to offers in writing that are made by a merchant offeror.

True

True or False: The person to whom an offer is made is an offeree.

True

True or False: When a bid is made at an auction, it can be revoked if the auctioneer has not yet accepted the bid because the auctioneer has the power of acceptance.

True

If an offer leaves open particulars of performance to be specified by one of the parties, what limitations does Article 2 provide?

Under the Code, any such specification by one of the parties must be made in good faith and within limits set by commercial reasonableness.

True or False: A contract is invalid if all of the terms are not clearly stated.

False

True or False: Silence can never be an acceptance.

False

True or False: An advertisement is usually an offer to sell.

False

True or False: An auctioneer is free to withdraw the goods from sale if the sale is advertised or announced in explicit terms to be without reserve.

False

True or False: An auctioneer is the offeror and each bid is a counteroffer until a final bid is accepted.

False

True or False: An implied contract is not an enforceable contract.

False

True or False: An offer is an indefinite proposal made by one person to another.

False

True or False: An offer is effective as soon as it is dispatched.

False

True or False: An offer must be in one particular form to have legal effect.

False

True or False: George offered to paint Catherine's barn for $4,000. Catherine said she would accept the offer if George would paint the woodshed, too. At this point, they have made a valid and enforceable contract.

False

True or False: Hugh recently purchased a motorcycle for $4,000 but has had extensive problems starting the motor. In disgust at not being able to start the motorcycle, Hugh shouts to his friends, "Any of you want to buy this thing for $20?" A contract will be formed if a friend gives Hugh a twenty-dollar bill.

False

True or False: If Bill tells Sara that he will give her two days to decide if she wants to buy his car, he cannot sell it to anyone else during that time.

False

True or False: If Thomas seemingly offers to sell to Raquel his Toro lawnmower but he intends to offer and believes he is offering her his Murray mower, and she accepts the offer, reasonably believing it was for the Toro, no contract has been formed because there is no mutual assent.

False

True or False: If no time limit is stated, an offer will not terminate until both parties agree.

False

True or False: In an output contract, the seller can operate a factory on a 24-hour-a-day schedule and insist that the buyer take all of the output when that buyer had operated only eight hours a day at the time the contract was made and the buyer had knowledge of the eight-hour-a-day operating schedule.

False

True or False: In order for an offer to end by lapse of time, the offeror must specify the time within which the offer is to be accepted.

False

True or False: Only if the act or threat would affect a person of average strength and intelligence will the act constitute duress.

False

True or False: Pat repeatedly told her friends that her car got 35 miles to the gallon in the city when in reality it only got 20 miles per gallon. When Pat decides to sell and one these friends decide to buy the car. Pat is under no duty to tell the correct figure unless asked.

False

True or False: Ricardo posts a sign in the neighborhood offering $50 for the return of his Saint Bernard. Alicia, who knows nothing of the reward, finds the dog and returns it to Ricardo. Alicia is entitled to the reward.

False

True or False: Ron offers to sell Pete his stamp collection. Pete gives Ron $10 to induce him to keep his offer open for a week. If Ron decides on day four of the week that he really does not want to sell to Pete, he can revoke his offer without fear of a breach of contract lawsuit being filed against him.

False

True or False: The UCC and the Restatement make no provision for supplying terms omitted by the parties' contract.

False

True or False: The common law "mirror image" rule applies to an offer and the acceptance of that offer in a contract for the sale of goods.

False

True or False: The law applies a subjective standard of intent in determining whether there was the requisite intent to enter into a contract.

False

True or False: There is no necessity to distinguish language which constitutes an offer from that which merely solicits or invites offers.

False

True or False: Under the UCC, an acceptance must always be identical to an offer for a valid contract to be formed.

False

What are the three essentials of an offer?

For an offer to be effective, it must be communicated to the offeree, manifest an intent to enter into a contract, and be sufficiently definite and certain.

If an offer requires acceptance by mail and the offeree faxes acceptance: a. there is no contract. b. there is a contract if the acceptance is actually received within the time the authorized means would have arrived. c. under the Restatement, if the acceptance is received within the time the authorized means would have arrived, the acceptance is effective when sent. d. Both (b) and (c) are correct.

D

If there is no time specified for the acceptance of an offer, when does the offer terminate? a. After 24 hours b. After 48 hours c. After two weeks d. After a reasonable period of time

D

James offers to sell four acres of land to Jennifer for $8,000 and further offers to keep the offer open for one month if Jennifer will pay him $100 for the privilege. Jennifer pays James $100. Which statement describes the payment of $100? a. An implied in fact contract has been formed. b. A unilateral contract has been formed. c. This is a formal contract. d. This is an option contract.

D

Jesse makes an offer to Ike, and Ike accepts; then the state legislature passes a law that makes performance of the contract illegal. What is the effect of the new statute on the contract? a. The contract is severed; any portions that are legal must still be performed and any portions that have been made illegal must not be performed. b. The statute has no effect on the contract. c. The statute acts as a condition on the contract. d. The statute discharges the obligations of both parties under the contract.

D

The UCC Battle of the Forms rule: a. changes the mirror image rule. b. may yield different results depending on whether the parties are merchants. c. may result in formation of a contract different from the terms of the offer. d. All of the above.

D

Under the common law, the ____ must be the mirror image of the ____. a. contract, consideration b. contract, offer c. offer, acceptance d. acceptance, offer

D

When does acceptance of an offer to enter into a unilateral contract generally occur? a. Upon notice of intent to accept by the offeree. b. Upon full performance by the offeror with the intention of accepting. c. Upon commencement of performance by the offeree. d. Upon full performance by the offeree with the intention of accepting.

D

Assume an offeree mails a rejection to the offeror on November 1. This rejection arrives at the offeror's place of business on November 5. In the meantime, on November 4, the offeree sends the offeror an acceptance that arrives November 6. Which of the following statements correctly describes the situation? a. There was no contract because when an acceptance follows a prior rejection, the first communication to be received by the offeror is the effective one. b. There was a contract since the acceptance was mailed prior to the time the rejection was received. c. There was no contract because the rejection was mailed first. d. There was no contract because the acceptance was mailed more than three days subsequent to the rejection.

A

Chad has offered to take Miles into his accounting firm as a partner upon payment of $5,000 cash. In response, Miles says, "I'll give you $3,000 cash now and I will pay you the remainder in two months after I see whether things are working out as a partnership." a. Miles has made a counteroffer; hence there is no contract. b. Miles has rejected the terms of the original offer, but there is still a contract. c. Chad is a merchant making a firm offer under Article 2 of the UCC. Hence there is a contract. d. Any indefinite provisions in the contract between Chad and Miles will be supplied by Article 2 of the UCC.

A

Destruction of the subject matter has what effect on the offer? a. The offer is terminated. b. The offer is delayed until additional subject matter can be located. c. This creates an impossibility of fact that does not terminate the offer. d. The offer is merely delayed under the "Hardship Rule."

A

Elvis makes an offer to Miguel, but before Miguel can accept, the state supreme court decides a case that makes the offer illegal. What is the effect of the court decision on the offer? a. The court decision automatically terminates the offer. b. The court decision has no effect on the offer. c. The court decision acts as a condition on the offer. d. The court decision acts as a rejection of the offer by the offeree.

A

For an offer to be valid, which of the following elements must be present? a. The offeree must have knowledge of the offer. b. The offeree must have first-hand knowledge of the offer. c. The offer must be communicated by the offeror. d. The offer must be communicated by words.

A

Hannah, as a joke, offers to sell her violin to Mike. Her statement would have legal effect if: a. the intended jest is so successful that Mike as a reasonable person under the circumstances believes the joke is an offer and he accepts. b. Hannah's intent, determined subjectively, is to enter a contract. c. Hannah's intent, determined objectively, is not to enter a contract. d. Mike did not, but should have realized that Hannah was not serious. e. Both (c) and (d).

A

Jack has been in the business of selling carpeting for 20 years. He calls Bob, who is opening another branch of his furniture stores, and offers to sell him 100 yards of carpet at $20 per yard. Bob agrees and sends back the following letter confirming the deal: Dear Jack: As we discussed on the phone January 3, we accept your offer of 100 yards of Saxony "heather blue" carpeting at the price of $20 per yard. We also reserve the right to purchase any additional yardage we need to carpet our other showroom facilities at the same rate for one year from that date. Very truly yours, Bob Which of the following is true? a. There is a contract for only 100 yards of carpeting. b. There is a contract for 100 yards plus the additional yardage. c. There is no contract since Bob made a counteroffer. d. There is no contract because the additional term is too uncertain to become a contract term.

A

Leonard offers to sell his diamond ring to Emily. Diane overhears the offer and says, "I accept the offer." a. Diane cannot accept the offer, because it wasn't made to her. b. This is a valid acceptance. c. The offer has not been communicated to the offeree. d. This is an invitation seeking offers and not an offer.

A

Maxine offered to sell her video camera to Tom for $200 and also stated to Tom, "I will give you two weeks to accept my offer." One week later Tom learned that Maxine had sold the video camera to Cindy. a. Maxine has revoked her offer to Tom. b. Maxine's offer is a firm offer and she must sell Tom a video camera for $200. c. Maxine must get the camera back from Cindy if Tom accepts within two weeks. d. Both (b) and (c) are appropriate alternatives in this case.

A

The Rogers family has always wanted to buy the beautiful house at the top of the hill. The owners of the house, the Thompsons, decided to sell and called Mr. Rogers. Before he could get back in touch with Mr. Thompson, Mr. Rogers suffered a heart attack and died. Mr. Rogers' adult daughter, to whom the Thompsons had not spoken, still wants the house. a. She may not accept since the offer is terminated. b. She may not accept because she does not have the capacity. c. She may accept since the contract offer is assignable. d. She may accept since the offer cannot be revoked without notice.

A

The way parties usually show mutual assent is by: a. an offer by words or conduct and an acceptance by words or conduct. b. a proposal in words and an acceptance in words. c. an act exchanged for an act. d. an offer and a counteroffer.

A

Wes, who is an art collector, offered to buy a print from Le Monde Gallery. Le Monde balked at the price, sending Wes a letter of rejection. That day it discovered that the print was not as highly valued as originally thought. Le Monde immediately telephoned Wes to accept his offer. Is there a contract? a. Yes, since the acceptance was received before the rejection b. No, because the rejection was effective upon dispatch c. No, because the rejection terminated the offer d. Yes, because the acceptance is always effective upon dispatch

A

How does the UCC Battle of the Forms provision vary from the common law mirror image rule?

A definite expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

Bart sends Carla an offer by express mail. Carla receives it at 10 a.m. on Tuesday. At 11 a.m. on Tuesday, Carla delivers an acceptance to Federal Express, but due to an error, the letter is not sent out by the company until Wednesday at 8 a.m. At what time does the law consider the acceptance to be effective? a. At 10 a.m. on Tuesday b. At 11 a.m. on Tuesday c. At 8 a.m. on Wednesday d. At the time Bart receives the letter

B

Elmer wrote a letter to his friend Fred offering to sell Fred an 80-acre farm for $200,000. After mailing the letter, Elmer learns that the farm is actually worth $300,000 and changes his mind about selling. a. Elmer has made a firm offer to Fred which cannot be revoked. b. Elmer can revoke his offer at any time before acceptance, because there is no consideration to keep the offer open. c. Elmer must keep the offer open, because this is an option contract. d. Elmer is prohibited from revoking his offer to Fred under the doctrine of promissory estoppel.

B

Gary mails an offer to Brian on June 15. Brian receives the offer on June 16. Gary mails a revocation of the offer on June 17. Brian mails a letter of acceptance on June 18 and Gary receives the acceptance on June 20. Brian receives the revocation on June 19. Was a contract formed? a. Yes, on June 16 b. Yes, on June 18 c. Yes, on June 20 d. No, the offer was revoked before acceptance

B

In order to form a contract, the parties must: a. manifest their agreement subjectively. b. manifest their agreement objectively. c. indicate solely through written word their intent. d. create a formal document called a contract.

B

Lynn offers to sell his house to Dennis for $95,000. Dennis responds, "I will pay you $95,000 if you will paint the second floor." This response could best be described as: a. an acceptance. b. a counteroffer. c. a rejection. d. an invitation.

B

An ad in a newspaper or a circular describing goods and stating prices would generally be considered a(n): a. firm offer if made by a merchant. b. offer if made by a merchant, but not a firm offer. c. offer irrespective of who made the offer. d. invitation to buyers to make an offer to buy goods.

D

How does one distinguish between an offer and an invitation seeking offers?

An offer is an indication of willingness to enter into a contract. It is a definite undertaking or proposal made by one person to another indicating a willingness to enter into a contract. Invitations seeking offers are merely indications of willingness to be offered something. They lack intent to enter a contract. There is no contract involved until an offer has been made and accepted.

An offer need not take any particular form to have legal validity. To be effective, however, it must: a. be spoken directly to the offeree. b. always contain the price of the product or service offered. c. always contain the place of delivery. d. be communicated to the offeree.

D

Alice offers to sell her computer, monitor, and printer to Bradley for $300. Bradley says he will accept provided that Alice includes her word processing software. What is the status of their discussions? a. There is a valid contract for the computer, the monitor, the printer, and the software. b. There is no contract, because Bradley has made a counteroffer. c. There is no contract, because the time for delivery has not been decided. d. There is no contract, because the offer has been revoked by the offeror.

B

An agreement of a seller to supply a buyer with all of the buyer's requirements for certain goods is known as: a. an output contract. b. a requirements contract. c. a firm offer. d. promissory estoppel.

B

An offer under Article 2 of the UCC that is irrevocable even though no consideration is given to keep it open is known as a(n): a. option. b. firm offer. c. requirements contract. d. output contract.

B

Gail sent a letter of acceptance to an offer that has expired. Gail has made: a. a contract. b. a rejection. c. a revocation. d. an offer.

D

Shirley hears about a reward being offered by the local television station for information leading to the arrest and conviction of a local rapist. She supplies the requested information, and the suspect is then arrested and convicted. a. Shirley cannot collect the money unless the offer was specifically made to her by the station. b. The offer by the television station was an offer made to the general public to enter into a unilateral contract, which offer Shirley has accepted. c. Because Shirley failed to notify the station of her intention to supply the information before actually doing so, she has not accepted their offer. d. Shirley was just doing her duty as a citizen and has no right to the payment of any money.

B

To be effective, notice of revocation of an offer: a. must be communicated directly to the offeree before the offeree has accepted. b. may be communicated indirectly to the offeree through a third person. c. must be dispatched before the offeree accepts; when notice actually reaches the offeree is not important. d. is not addressed in the Restatement.

B

A ____ is an offeree's refusal to accept an offer. a. revocation. b. counteroffer c. rejection d. statutory irrevocability

C

In general, which of the following will not terminate an offer? a. The death of the offeree b. The death of the offeror c. An inquiry by the offeree as to size or materials d. An acceptance that adds a material term

C

Marilyn read an ad in the school newspaper offering a thousand dollar swimming scholarship to anyone who could swim 500 laps in the school pool. Marilyn called the advertiser and began swimming. She has reached lap number 460; she feels great and is sure she can make it all the way. a. The advertiser may revoke the offer since there has not yet been an acceptance. b. The advertiser may not revoke the offer since Marilyn has already accepted it. c. The advertiser must permit Marilyn the opportunity to finish her attempt to swim the 500 laps, or pay damages if he interferes with the completion of the laps. d. The advertiser must pay Marilyn $920, because she has performed 92% of the offer.

C

Michelle's Boutique places an ad in the Sunday paper for beautiful, top-of-the-line designer suits for $3.00. Irene sees the ad in the paper and goes to the store to stock up on business suits for her new job. Michelle apologizes for the misprint. Irene has just finished a class in contract law and insists that the store sell her 5 suits for $15.00. Irene threatens to sue Michelle for breach of contract. a. This is a valid contract, and Irene will win if she sues. b. The ad in the newspaper is an offer to sell. c. The ad in the newspaper is a solicitation seeking offers, but is not an offer to sell; therefore, Irene will not be able to successfully sue for breach of contract. d. None of the above.

C

The UCC provides that a merchant is bound to keep a written offer open for a stated period but no longer than: a. ten days. b. two months. c. three months. d. a reasonable time.

C

The case in which the court held that a newspaper advertisement was an offer because it contained a promise of performance in definite terms in return for a requested act was: a. Catamount Slate Products, Inc. v. Sheldon. b. Newman v. Schiff. c. Lefkowitz v. Great Minneapolis Surplus Store, Inc. d. Osprey L.L.C. v. Kelly-Moore Paint Co., Inc.

C

Which of the following would NOT be a merchant under Article 2 of the UCC? a. The owner of a hardware store which sells paint b. A car mechanic who fixes used cars and sells them in his spare time c. A person who inherits three speedboats and wants to sell them to buy a car d. Both (b) and (c).

C

Albert read Gem City's ad in the local newspaper advertising a one-quarter carat diamond ring for $89. Albert rushed to the store to buy the ring only to be told by the salesperson that the ad was a misprint and the price should have been $289. Albert gave the salesperson $89 plus sales tax and demanded the ring. a. The ad is a firm offer by the merchant, and the ring must be sold for $89. b. The ad is a contract and the store must abide by terms stated in the contract. c. The store must accept the price stated in the ad, but only if Albert has a copy of the ad with him. d. Albert is merely making an offer to Gem City to buy the ring for $89 plus sales tax.

D

In situations where the UCC Battle of the Forms provision applies and writings exchanged between the parties differ as to terms, how are the terms of the contract determined?

In such cases, the terms of the particular contract consist of those terms on which the writings of the parties agree. Whether other terms become part of the contract depends on whether they are additional or different terms, whether the terms materially alter the offer, and whether the parties are merchants. If both offeror and offeree are merchants, additional terms become part of the contract unless they materially alter the agreement or are objected to within a reasonable period of time. If both parties are not merchants or if the additional terms materially alter the offer, the additional terms are construed as proposals to the contract. Different terms proposed by the offeree will not become part of the contract unless the offeror accepts them.

If a person, without knowing of an advertised reward for information leading to the return of a lost dog, gives information that leads to its return, is she entitled to the reward?

No. The finder's act was not an acceptance of the offer because she could not accept something of which she had no knowledge.

Distinguish between a rejection of an offer and a revocation of an offer.

Revocation and rejection are both methods of terminating an offer, but they differ in who does the termination. Revocation of an offer is the cancellation or the withdrawal of an offer by an offeror before its acceptance. The rejection of an offer is the refusal of an offeree to accept an offer.

Discuss silence as acceptance of an offer.

Silence or inaction does not ordinarily indicate acceptance of an offer because an offeree is generally under no legal duty to reply to an offer. In some cases, by custom, usage, or course of dealing, the offeree's silence or inaction may operate as an acceptance. If an offeror sends unordered or unsolicited merchandise to a person and states that the goods may be purchased at a specified price and that the offer will be deemed to have been accepted unless the goods are returned within a stated period, the federal government and most states have enacted statutes providing that the recipient of the goods may keep them as a gift and is under no obligation to return or pay for them.

How do Article 2 of the UCC and the Restatement deal with definiteness of contract terms?

Terms of a contract must be reasonably certain so courts have a basis for determining the existence of a breach and for giving an appropriate remedy. Missing terms may be supplied by course of dealing, usage of trade, or inference. In agreements for the sale of goods, Article 2 of the UCC provides standards by which omitted terms may be determined as long as the parties intended to enter into a binding contract. The UCC provides missing terms in such instances as where the contract fails to specify the price, the time or place of delivery, or payment terms. The Restatement has adopted an approach similar to the UCC's in supplying terms the parties have omitted from their contracts.

What is the common law mirror image rule?

The common law mirror image rule states that an acceptance cannot deviate from the terms of the offer.

What are the ways in which an offer may be terminated?

acceptance. lapse of time. revocation. rejection. counteroffer. death or incompetency of the offeror or offeree. destruction of the subject matter. subsequent illegality.