Chapter 9: Contracts and Leases

Yogesh drafts a contract that states he offers to purchase goods from a distributor only upon his personal approval and satisfaction, giving him the ability to back out of the deal altogether at any time. This is an example of:

a. A specific performance contract b. Promissory estoppel *c. An illusory promise* d. The statute of frauds

All of the following are basic requirements of a contract, except:

a. An agreement between the parties formed by an offer and acceptance *b. One of the parties lacks the legal capacity to enter into a contract* c. The parties' promises are supported by something of value d. The contract has a legal purpose

Bridgete started a business that sells goods overseas. Her contracts with buyers in Ireland are silent regarding the choice of law provision. It is likely that these contracts will be governed by:

a. Article 2 of the UCC b. The common law *c. The CISG* d. None of these are correct

The following are types of contracts that usually must be in writing to be enforceable, except:

a. Contracts that cannot be performed within one year b. Contracts that involve the transfer of interests in real property *c. Employment contracts that are less than one year in duration* d. Contracts for the sale of goods for $500 or more

Legally astute entrepreneurs work with their counsel to craft contracts that:

a. Increase realizable value b. Facilitate the marshaling of resources c. Appropriately allocate legal and business risk *d. All of these are correct.*

John prepares a term sheet for the financing of his startup with a venture capital investor. Neither party adds any disclaimers to the term sheet. This likely creates a duty to:

a. License each other's intellectual property *b. Negotiate in good faith* c. File the term sheet with the SEC d. All of these are correct

A clause that states "this agreement constitutes the entire agreement of the parties and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties" is called a:

a. Nonreliance clause *b. Integration or merger clause* c. Liquidated damages clause d. None of these are correct

Statements at the beginning of the contract that summarize the parties' intentions and are preceded by the term "whereas" are called:

a. Representations and warranties *b. Recitals* c. Choice of law provisions d. Conditions

Suzy is opening a restaurant that relies on a very specialized type of oven. She contracts for the delivery and purchase price of the oven with Co. X. Her grand opening date is scheduled and she mentions this to Co. X to put them on notice that any delays in the delivery will lead to lost profits and additional losses. Co. X breaches and never delivers the oven. Suzy can recover lost profits as:

a. Specific performance b. Restitution c. Expectation damages *d. Consequential damages*

Most states have adopted a type of legislation called a ____________, that requires parties to put certain types of agreements in writing.

a. Statute of limitations b. Promissory estoppel *c. Statute of frauds* d. UCC article 2

Contracts enable entrepreneurs to:

a. Strengthen relationships b. Increase predictability c. Specify the consequences of nonperformance *d. All of these are correct.*

The primary source(s) of contract law in the United States includes:

a. The CISG b. The common law c. Article 2 of the UCC *d. The common law and Article 2 of the UCC*

John receives an offer to purchase goods at $50 / unit from Phil with a stated delivery date and various other specific terms. John agrees via email and types his name at the bottom of the email. Which of the following is true regarding this scenario:

a. The agreements is enforceable because there was an offer, acceptance and consideration b. The agreement is not enforceable because typing your name in an email is not a valid signature c. The agreement is enforceable because typing your name in an email is a valid signature *d. The agreements is enforceable because there was an offer, acceptance, and consideration, and enforceable because typing your name in an email is a valid signature*

Which of the following should be included in a written contract?

a. The identity of the parties b. The parties' obligations c. Timing issues *d. All of these are correct.*

Sophia signs a contract for her business where she promises to pay for the goods when they are delivered to her warehouse. The seller promises to deliver the goods on a stipulated date at a certain price. This is a:

a. Unilateral contract b. Specific performance contract *c. Bilateral contract* d. None of these are correct

Halley would like to protect herself from a claim of fraudulent inducement before she signs a contract with her business partner. Which type of clause would, if added to the contract, protect her from this claim?

*a. Nonreliance clause* b. Liquidated damages clause c. Warranties clause d. Force majeure clause

Sarah hires several employees to work in her new venture, which is located in Florida. These U.S. employment contracts will be governed by:

*a. The common law* b. Article 2 of the UCC c. The CISG d. All of these are correct

Hadi is concerned that his supplier may breach their contract, resulting in losses. A reasonable estimate of his losses if his supplier breaches would roughly total $10,000. In order for a liquidated damages clause to be legally enforceable, Hadi should stipulate the total amount of liquidated damages in the contract as:

*a. $10,000* b. $50,000 c. $100,000 d. $250,000

A star engineer has just left Hector's startup to join a competitor. Hector is afraid that very valuable trade secrets including business and technical information will be disclosed to the competitor. Hector reviewed the employment contract he asked the engineer to sign and sees that it includes a non-compete provision. Hector's best remedy in this case is to request:

*a. An injunction* b. Consequential damages c. Liquidated damages d. All of these are correct

Lonne receives a written contract that offers to hire him at $80,000 per year salary. He crosses out this number and changes it to $90,000 per year. What is the legal consequence of this action?

*a. Changing the salary amount is a counteroffer and there is no meeting of the minds unless the other party agrees to this change* b. Changing the salary term equals an acceptance and the contract is enforceable c. Changing the salary term has no legal impact on the contract whatsoever d. Changing the salary term creates a duty of good faith bargaining on both parties