MGMT 331 Exam 3 Study Guide

T/F: A bargain by a candidate for public office to make a certain appointment following the election is legal

False

T/F: A contract can be valid without consideration

False

T/F: Emancipated minors have no ability to avoid contracts based upon their minority

False

T/F: In general, a minor may only disaffirm a contract after he has reached the age of majority

False

T/F: In order to be sufficient, an agreement required to be written under the statute of frauds must be signed at the bottom and notarized.

False

T/F: Pat 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 decides to buy the car, Pat is under no duty to tell the correct figure unless asked.

False

T/F: Sixteen-year-old Todd's parents provide adequate food, lodging, and clothing for him, but he sees a sweater he wants and purchases it. In all states, the sweater is considered a necessary since it is an item of clothing.

False

T/F: Stuart promises to act as a guide on a fishing trip for a group of visiting dignitaries. The dignitaries agree to pay him $200 for his services. Stu guides them, but when they discover that Stu does not have a fishing license, they refuse to pay him. The agreement between Stu and the dignitaries is an illegal one, which is not enforceable.

False

T/F: Under the common law, payment of a lesser sum of money than is owed in consideration of a promise to discharge a fully matured, undisputed debt is legally sufficient to support the promise of discharge.

False

T/F: The word "parol" literally means release

False; it means "speech" or "words"

T/F: Fraud in the inducement will render an agreement void.

False; it will render it voidable

T/F: Dana gives care to Marnie's dog when Dana finds Marnie's dog ill on the side of the road. After Marnie locates her dog, Marnie promises to reimburse Dana for the cost of treating the dog. Marnie's promise is binding, because there is a bargained-for-exchange.

False; past-consideration (an act done before the contract is made is not consideration)

A misrepresentation that deceives the other party as to the nature of a document evidencing the contract renders the agreement void

Fraud in the Execution

Can you enforce payment if you perform services for which you are not licensed?

If the law is for revenue purposes only, agreements for unlicensed services are enforceable

Fourteen-year-old Marsha bought $120 worth of video games and DVDs at a local store, using her own money. Her parents insisted that she return the items and get her money back. Which of the following is true?

In a majority of jurisdictions, Marsha may get her money back even if she cannot return the merchandise.

Mary agrees to sew Georgia's prom dress for $50 plus costs. Georgia decides that she wants ruffles around the neck and calls Mary who says it will now cost $60. When Mary finishes the dress (with ruffles), Georgia must pay:

$60, since the modified agreement is supported by additional consideration

Ratification can occur in which ways?

(All of the above) - Through express language - As implied from conduct - Through failure to make a timely disaffirmance

Short Answer: What is the legal definition of partnership?

- A legal form of business operation between two or more partners who share management and profits (or losses) - Partners are jointly and severally liable for the partnership's debts

Short Answer: What is the criteria for an activity to be considered unrelated business income?

- A trade or business (profit motive) - Regularly carried on - Not substantially related to furthering the organization's tax-exempt purpose

Short Answer: Define Private Benefit

- An individual cannot unjustly benefit himself at the expense of the organization - An individual can benefit as a member of a charitable class

Short Answer: Give examples of inurement

- Excessive compensation - Use earnings to provide goods or services - Pay more than FMV for goods/services provided by the insider - Possible issue - investing in the insider's business

Short Answer: Describe a legal consideration for nonprofits operating in Papua, New Guinea as compared to a nonprofit?

- Legal Consideration - foreign corrupt practices - bribery is generally acceptable in Papua, New Guinea. Because of the foreign corrupt policies act, bribes to foreign officials for business purposes are not allowed to be made by U.S. based non-profits.

Short Answer: Is materiality of bribery an issue or not (according to the Foreign Corrupt Practices Act.)?

- Materiality is not an issue. Any value, even non-cash is considered - Concerned with intent to bribe, not the amount

Short Answer: What is the common understanding/buzzwords of partnership?

- Working together - Cooperation - Teamwork - A connection or affiliation between organization with shared goals

Short Answer: Give examples of unrelated business income

- a non-profit rents out tennis court for tournaments during the summer when their primary goal is for to make use of the court for underprivileged children - A church notices that their building is close to a new sports stadium. To make extra money, church leaders decide to sell parking during events. Since selling parking spaces is unrelated to the church's primary mission of being a faith institution, these funds would be subject to the UBIT.

Short Answer: Define Inurement

A similar issue to private benefit, but states that earnings cannot "inure" (accustom) to the benefit of private shareholders or individuals (also called insiders - directors or officers)

Sam, a shopkeeper, dies unexpectedly at the age of 46. His lifelong business associate, Paul, is appointed the administrator of the estate. Sam had a personal debt of $8,000 which he owed to Art's Appliance Store. Paul says to Art, "If there isn't enough money in the estate, I'll personally see that the bill is paid." Which of the following is correct?

An oral statement such as this is not enforceable because this promise is within the statute of frauds.

Which of the following results in a void contract?

Duress by physical force.

Jason's mother would like him to go to college, so in June he enrolls at State University. He also quits his job and tells his mother his plans to continue taking classes. His mother says, "I'm so happy that you are going to college that I want to pay for your books." Jason then sends her a bill for $485. Which of the following is true regarding his mother's promise?

It is unenforceable, because Jason had already enrolled in school and there is no consideration.

Nell gives Al $50 in return for Al's promise to defame Sara. Nell hopes to ruin Sara's chances at a promotion. Nell finds out that Al did not hold up his end of the agreement. Which of the following statements is true?

Legally, Nell can neither get the money back nor force Al to do as he promised

Which of the following promises does NOT have to be evidenced by writing in order to be enforceable?

Mindy's agreement with Susan to buy her bike for $400

Short Answer: Define a non-profit

Public Charity 501(c)(3): There is no owner. Conducts business for the benefit of the general public without shareholders and without a profit motive. They can make a profit, but that profit remains in the organization

Robert Briscoe is 17 years old. He lies to Bouyers Auto in order to induce them to sell him a new pickup truck. Bouyers falls for this lie and sells him the pickup. Under the prevailing view, which of the following is correct?

Robert may disaffirm and get his money back.

Which of the following is untrue with regard to the interpretation of contracts?

Technical terms will always be given technical meaning even where a different intent is manifested by the parties

William agrees to drill a well up to 200 feet deep for John's rural cabin. The contract price is $3,000. After drilling 100 feet, William strikes solid granite rock. He talks to John and explains that this is highly unusual for the area and could not have been anticipated at the time of entering into the contract. He offers to get a special drill, but says it will cost him more money, so that he will be unable to complete the project for the agreed price. Because John is anxious to have the well, he agrees to pay William an additional $1,000 to complete the job. However, once the well is finished, he changes his mind and now says he will pay only the originally agreed-upon amount.

The parties have agreed to a substitute contract which discharges the original contract. John is obligated to pay the additional $1,000.

Albert found a stone in his yard and took it to Bob, a jeweler, for evaluation. Bob wasn't sure as to the nature of the stone, but told Albert he thought it was a topaz. Bob then offered to buy the stone for $25 and Albert agreed. Later Albert found out the stone was an uncut diamond worth about $700. This:

This contract can be voided based upon fraud in the inducement. OR is a valid contract that should be enforced by the law, because neither party knew the exact nature of the stone at the time of the sale.

Carl and Ron are both engaged in road construction work. They know that several jobs are going to be up for public bids, and agree between themselves that Carl will bid on one job and Ron will bid on the other, so that they both have work for the summer. When the bids are opened, Carl realizes that Ron has bid on both jobs. Ron is awarded both contracts. Carl now wants to sue Ron for breach of contract.

This is an agreement in violation of public policy that will not be enforced by the courts.

T/F: A covenant not to compete is a type of restraint of trade that courts today will enforce under certain circumstances.

True

T/F: A disaffirmance must come either during a minor's minority or within a reasonable time after he reaches majority.

True

T/F: A gratuitous promise is a promise made without consideration

True

T/F: An exculpatory clause attempts to excuse one from liability for her own tortious conduct.

True

T/F: 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 are a carbon and a contract of sale for a portion of the failing catering business. Lorna signs the papers; her signature is transferred to the sales contract. This is a void contract because it was entered by fraud in the execution.

True

T/F: B& B, Inc. pays an attorney to draft and lobby for a bill which will greatly lessen B & B's tax liability to the state and federal governments. B&B gives the attorney $20,000 in cash to pay legislators for taking the time to listen to him. This is an agreement which is a violation of public policy.

True

T/F: Clara types a letter to David setting forth the terms of a contract between the two of them that falls within the statute of frauds. At the end of the letter, she types her name but does not sign her signature to it. If David wants to use the letter to satisfy the writing requirement, he may do so.

True

T/F: E-Sign was enacted by Congress in 2000 and makes electronic records and signatures valid and enforceable across the United States for many types of transactions in or affecting interstate or foreign commerce

True

T/F: Improper threats (economic and social coercion) render contracts voidable

True

T/F: In general, minors have liability for their torts.

True

T/F: Joe is mentally impaired from the effects of a prescribed medication. If he makes a contract while under this impairment, the contract would be voidable if he cannot comprehend the subject of the contract, its nature, and its probable consequences, even if the other party does not know or have reason to know of his mental condition.

True

T/F: Ratification need not be express; it may be implied from the minor's conduct

True

T/F: Sally goes away to college at 17, lives on her own and pays her own rent and electric bills. If she makes a contract to buy a television set, in most jurisdictions, she may assert her minority status and set aside the contract

True

T/F: The minority of states require that the minor, when effecting a disaffirmance of the contract, pay at least a reasonable amount for the use of the property or the amount by which the property depreciated while in the hands of a minor

True

T/F: Where a stipulation in restraint of trade is a part of the contract for the sale of a business, it may be valid if the restraint is within reasonable limitations to protect the business's goodwill.

True

T/F: a mental condition that impairs a person's ability to act in a reasonable manner one type of mental incompetence

True

T/F: a minor may disaffirm a contract at any time before reaching the age of majority and within a reasonable time after coming of age as long as she has already ratified the contract

True

T/F: intoxicated persons liable in quasi contract for necessaries purchased during their incapacity

True

T/F: Hal holds a gun to Irving's head and tells him to sign the contract. Irving signs the contract, because he fears for his personal safety. The contract is void, because it was entered into under duress.

True; Physical Duress renders contracts void

Rorzex Inc entered into a contract with Denzil under the terms of which Denzil would receive $20,000 if he stole trade secrets from the leading competitor of Rorzex. Denzil performed his end of the agreement by delivering the trade secrets. Rorzex now refuses to pay Denzil for his services. Denzil

Will be unable to recover, because this is an illegal contract

Aunt Ellie promises her 21-year-old nephew, Robbie, that she will pay him $100 if he quits smoking for a month. If Robbie does, is there a binding contract?

Yes, because Robbie gave up a legal right

Don has an employment contract with Dunkirk Ice Cream. He sells ice cream and novelty ice cream products. He has nine children and doesn't make enough money, so he decides to see if another dairy will hire him, too. "After all," he reasons, "most stores carry four or five different brands." His employment contract prohibits him from competing. If Don sells for another dairy in addition to Dunkirk, will he be in trouble under his contract?

Yes, it is likely to be enforceable during employment

A mutually agreed-upon exchange

a bargained-for-exchange

Ben and Kate had been negotiating Ben's employment contract in conversations over the phone for a couple of weeks. Finally, they agreed on some contract terms. Kate offered to create a draft of the contract for Ben to read over. On the same day Ben was fired from his job. Afraid he would be unemployed, Ben signed Kate's draft without reading it. In this example Ben:

cannot avoid the contract because of economic duress or failure to read

Under the UCC, a(n) __________ is a sequence of previous conduct between the parties to an agreement which may be fairly regarded as establishing a common basis of understanding for interpreting their conduct under the contract.

course of dealing

The exercise of the power to avoid a contract is known as:

disaffirmance

Which of the following is correct regarding duress?

duress by improper threats is the most common form of duress

Archie bets his friend Jerry $100 that the Packers will win the next Super Bowl. This is an:

illegal wagering agreement

Rose is working hard on Arlin's mayoral campaign. She thinks that just a few more votes could win the election, so she promises to pay her friend Violet $50 if she will register and vote for Arlin. Violet does so, but Arlin loses the election, and Rose now refuses to pay. Rose's agreement to pay Violet:

is unenforceable and opposed to public policy.

Melody, age 17, makes a contract with Seung, who is an adult. Melody:

may exercise the power of avoidance, called disaffirmance, while still a minor, and thereby be released from any liability on the contract.

When both parties misunderstand their manifestation of mutual assent, it is termed: ...

mutual mistake

Short Answer: Give examples of okay and not okay charitable classes

okay: - Financial literacy education for public - Shelter for homeless - Bible translation for speakers of world languages not okay: - Group promoting ownership of lakefront property in prime vacation spot

What has been a significant impediment to e-commerce?

the questionable enforceability of contracts entered into through electronic means, such as the Internet or e-mail, because of the writing requirements under contract and sales law (statute of frauds).

If a person with a mental condition that impairs her ability to act in a reasonable manner enters a contract that is grossly unfair, the contract is ______________

voidable