Bus 250 Test 2 Schafer Ch. 13 2
Florian, a busy surgeon, reads about a new state-of-the-art surgical mask developed by Myriad Medical Devices (M.M.D.) and thinks it would be useful for his practice. Florian enters into a contract with M.M.D. in which M.M.D. agrees to sell the doctor all the masks he needs in the next six months. Shortly thereafter, a fire burns down Florian's practice, and he will be unable to see patients for at least 9 months. Florian will not need a single mask until the practice is back up and running. If M.M.D. sues Florian for breach of contract when Florian does not order any masks, will M.M.D. win? a. Yes. This is a requirements contract based on an illusory promise. b. No. This is a requirements contract and Florian acted in good faith. c. Yes. This is an output contract, which the UCC permits for the sale of goods. d. No. The consideration for this agreement was based on a preexisting duty, and therefore this was not a valid contract.
B
If Rudy offers Oscar $200 for his laptop valued at $600 and Oscar agrees, a court will probably a. set aside the agreement as being unfair. b. not set aside the agreement based on the adequacy of the consideration. c. not set aside the agreement because of the UCC. d. set aside the agreement because the consideration is inadequate.
B
Jamie is building a house on her lot. She invites Earnie of Earnie's Excavation to bid on the excavation job. Earnie observes that the lot next to Jamie's is also under excavation and the soil in that lot is normal and not excessively rocky. Based on the assumption that the soil in Jamie's lot will be similar, he and Jamie agree that the excavation will cost $3,000. When Earnie starts digging, he learns there is solid rock under Jamie's lot. Earnie says it will cost an extra $2,500 for the excavation work. Jamie agrees just to get the job done but later refuses to pay a dime more than $3,000. If Earnie sues, the most likely result would be a. Jamie wins as Earnie was not acting in good faith and just wanted to put Jamie in a situation where she didn't have a choice but to agree to more money. b. Earnie wins, as the modification was due to unforeseen difficulties. c. Jamie wins, as Earnie was under a preexisting duty to dig the basement. d. Earnie wins as this modification is governed by the UCC and consideration is not required to enforce a modification of the agreement.
B
Sarah, a fashion designer, enters into an output contract with a department store under which the department store will pay Sarah $100 per dress for one year. Six months later, a local boutique offers to pay Sarah $150 per dress. Sarah may a. sell a portion of her dresses to the boutique as long as she continues to meet the department store's demands. b. not sell to the boutique because, pursuant to the output contract, Sarah must sell 100 percent of her dresses to the department store. c. increase the price per dress under the output contract to $150 per dress.
B
Upon graduating from college, Kathy announced her plans to enter law school the following fall and to marry Rick in December. Kathy's father was afraid that marriage during her first year in law school might cause her to fall behind in her studies or cause her to drop out of school. He called Kathy and promised her $10,000 if she postponed her wedding until after completion of her first year of law school. Kathy agreed and postponed the wedding for a year. Kathy successfully completed her first year of law school, but soon thereafter, Kathy's father died. The administrator of her father's estate claimed she was not entitled to the $10,000 because there was no consideration for her father's promise. If Kathy sues the estate, she will probably be a. unsuccessful because it was merely fatherly advice not to get married during the first year of law school. b. successful, as there was consideration. c. unsuccessful because her father received no benefit. d. unsuccessful because her father's death terminated the contract.
B
What are the requirements for accord and satisfaction? a. Liquidated debt b. Unliquidated debt c. Debtor pays the agreed upon amount d. Creditor deposits debtor's payment e. Debtor provides different performance f. Creditor agrees to accept as full payment the exact amount the debtor claims is owed g. Creditor agrees to accept as full payment a sum less than the amount creditor claims
B,C,G
Under the UCC, which of the following are ways that organizations can prevent accord and satisfaction? a. By providing debtors with a clearly written and understandable written notice at the time the debt is incurred stating that no settlements for less than the full amount will be accepted b. Within 90 days of cashing a "full payment" check, repaying the same amount to the debtor c. Within 90 days of cashing a "full payment" check providing debtors with notification that there has been not satisfaction and accord d. Notifying debtors that offers to settle for less than the full debt must be made to a particular official
B,D
Which of the following are the two basic elements of consideration? a. Fair market value b. Value c. Exchange of money d. Bargained-for exchange e. Leverage
B,D
Amy, a baker, has found her dream home, but cannot afford the down payment. Amy's brother agrees to loan her $30,000 for the down payment, and Amy agrees to pay him back in one year. Next year, Amy offers to bake her brother's wedding cake for his wedding next month instead of paying back the loan, so that she can buy new equipment for her bakery. Amy's brother agrees. How much money does Amy owe her brother? a. $30,000 because agreements to accept less than full payment of liquidated debt are non-binding. b. $30,000 less the cost of the wedding cake because agreements to accept less than full payment of liquidated debt are non-binding. c. $0 because an agreement to accept different performance in lieu of full payment of liquidated debt is binding. d. $0 because there has been accord and satisfaction.
C
Helena shares with her family her two goals for her senior year in college: join a synchronized swim team and shoot a bald eagle. Helena's cousin Anika is concerned about the utility of both of these goals and urges Helena to spend the year looking for a job, promising, "If, upon graduation, you have secured a job, have refrained from synchronized swimming, and have not shot any bald eagles, I will give you $10,000." Helena immediately accepts the terms of the agreement and at graduation has met all three criteria, but Anika refuses to pay. What argument will be most helpful for Anika in court? a. Helena gave no consideration, so the agreement is not binding on Anika. b. The entire agreement is invalid because Anika did not benefit from it, only Helena benefitted. c. The element of the agreement about the bald eagle is not enforceable, because shooting bald eagles is illegal. d. There was no way for Anika to know if Helena would actually go through with the deal because Helena made an illusory promise; therefore, the agreement is invalid.
C
If Becky promises not to drink alcohol until she becomes a legal adult in exchange for Ben's promise of $1,000, the agreement is a. not enforceable because Becky is a minor and could disaffirm the contract. b. enforceable because Becky is giving up the right to do something she would otherwise be entitled to do. c. not enforceable because Becky does not have a legal right to drink alcohol. d. enforceable because the agreement accomplishes Ben's goal of keeping Becky from drinking.
C
In January, Alex promised to pay Y-K Inc. $5,000 if it would refrain from filing suit against him on a breach of contract action. Y-K agreed and accepted a $5,000 check from Alex. Which of the following statements is correct? a. This is an accord and satisfaction, and Y-K cannot sue. b. Y-K's promise to refrain from suing Alex was not supported by legal consideration. c. Y-K's promise to refrain from suing Alex was supported by legal consideration and is enforceable. d. The courts would apply promissory estoppel in this situation.
C
In March, Louisa's Hamburger Stand contracts with HydrationCorp to buy 100 bottles of lemonade for $100 and an additional 100 bottles of lemonade for $115 on May 1. After the purchase and delivery of the 100 lemonades in March, Louisa speaks with a HydrationCorp representative and they agree that on May 1 HydrationCorp will instead sell Louisa 100 bottles of iced tea for $115. What result? a. The new terms are binding because the parties created an accord and satisfaction by check. b. The new terms are not binding because contract modifications must be in writing. c. The new terms may be binding because an oral modification may be binding under the UCC. d. The new terms are not binding. An oral modification is only permissible when it is supported by consideration.
C
Maybelline falls down a well and is saved when her neighbor Ruben makes a very daring rescue. Ruben hoists her to safety and Maybelline hugs him and promises him a check for $100,000 for his kindness. Ruben is delighted and when Maybelline visits him the next day and again mentions the $100,000, he tells her that he is going to quit his job as a preschool music teacher and use the money to start a business. Two days later he resigns from the nursery school and calls Maybelline and asks when he can expect his money. He is startled when she replies that she is not going to give him a cent. Will a court enforce Maybelline's promise? a. No, because the promise is supported by past consideration. b. No, because Ruben did not know about the $100,000 before he rescued Maybelline. c. Yes, because Ruben relied on the promise. d. Yes, because Ruben provided moral consideration.
C
Melnick built a house for Gintzler, but the foundation was defective. Gintzler agreed to accept the foundation if Melnick guaranteed to repair any damage that was caused by the defects in the future. Melnick agreed but when Gintzler called Melnick two years later to repair water damage resulting from the foundation defects, Melnick refused to make any repairs. Gintzler sued, and Melnick argued that his promise to make future repairs was unsupported by consideration. Who will win the suit? a. Melnick will win because the deal was not supported by consideration. b. Melnick will win because his promise was illusory. c. Gintzler will win because he gave consideration. d. Gintzler will win because the foundation was defective.
C
Police Officer Paul apprehends a wanted criminal and then demands the $10,000 reward offered by Crime Stoppers. Which of the following statements is true? a. Police Officer Paul is not entitled to the reward because past consideration is never valid consideration. b. Police Officer Paul is not entitled to the reward but may have an argument under promissory estoppel. c. Police Officer Paul is not entitled to the reward because he was under a pre-existing duty to make the arrest. d. Police Officer Paul is entitled to the reward because he puts his life on the line every day.
C
Tim's Lumber Co. agrees to provide Deckbuilders, Inc. with all of the wood that Deckbuilders requires for the next five years. Deckbuilders agrees not to buy wood from any other vendors. What is the primary restriction on how much wood Deckbuilders may demand? a. All changes in Deckbuilders' demand must be approved by Tim's Lumber Co. b. Deckbuilders cannot increase its demand more than 10% from the previous year's demand. c. Deckbuilders' demand for wood must be made in good faith. d. There is no restriction.
C
"I'll sell you my car if I decide to sell it" is an example of a. a unilateral contract. b. an unliquidated offer. c. a conditional offer. d. an illusory promise.
D
Bernie owes an undisputed amount to Wilde's Heating & Air Conditioning. Which of the following is true? a. If the parties agree to settle for less than the full amount, their agreement is governed by the ruling in Henches v. Taylor. b. The undisputed amount is also known as an unliquidated amount. c. If Wilde's agrees to accept less than the full amount, the agreement is only binding if it is in writing and signed by Bernie. d. If Wilde's agrees to accept less than the full amount as full payment, the agreement is not binding.
D
CeCe Hylton and Edward Meztista, partners in a small advertising firm, agreed to terminate the business and split its assets evenly. Meztista gave Hylton a two-page document showing assets, liabilities, and a bottom line of $35,235.67, with half due to each partner. Hylton questioned the accounting and asked to see the books. Meztista did not permit Hylton to see any records and refused to answer her phone calls. Instead, he gave her a check in the amount of $17,617.83, on which he wrote "Final payment/payment in full." Hylton cashed the check, but she wrote on it, "Under protest—cashing this check does not constitute my acceptance of this amount as payment in full." Hylton then filed suit, demanding additional monies. Meztista defended on the grounds that the parties had made an accord and satisfaction. What is the likely result? a. Meztista still owes the money to Hylton because Hylton's notes on the check prevent accord and satisfaction. b. Meztista still owes the money to Hylton because writing "Final payment/payment in full" on a check does not settle the debt. c. Meztista still owes the money to Hylton and must give the books to Hylton to review. d. Hylton's debt is discharged because there has been an accord and satisfaction.
D
For seven years, Stanford Owens has run a successful practice that helps small businesses file their taxes, become incorporated, and perform other legal tasks. Stanford moves his practice to NYC, and is happy to find his first local client, DiggyWerx, almost immediately. They negotiate a flat fee of $5,500 for six months of Stanford's services. A month later, Stanford is more familiar with the local business landscape and realizes that most people offering his services in NYC charge around $13,000 for six months of work because of the higher costs to do business in NYC. Is the deal between Stanford and DiggyWerx enforceable? a. No, because it is unconscionable due to the difference in bargaining power. b. No, because there is insufficient consideration. c. Yes, because Stanford is still receiving a fair price for his services. d. Yes, because Stanford and DiggyWerx each receive a benefit and incur a detriment.
D
If Crosby and Dash are in disagreement as to the exact amount of money that Crosby owes Dash, then they may choose to form a new agreement at a set amount. If they both perform the new agreement, their conduct would be an example of a. a preexisting duty. b. a contract modification. c. a rescission. d. an accord and satisfaction.
D
Lisa makes hand-crafted beads. Lisa approaches Julia, a successful jewelry maker, and offers to sell her beads exclusively to Julia if Julia agrees to buy all of the beads that Lisa makes. Julia agrees to buy all of the beads Lisa produces each month if, after inspecting them, Julia thinks they will sell well. Do Lisa and Julia have an enforceable contract? a. No, Lisa has made an illusory promise. b. Yes, Lisa and Julia have a valid requirements contract. c. Yes, Lisa and Julia have a valid output contract. d. No, Julia has made an illusory promise.
D
Mary owes $3,800 on her credit card. She sends the credit card company a check for $800 with the notation "payment in full" on the check. If the credit card issuer cashes the check, a. Mary's balance will automatically be paid in full regardless of whether the amount of $3,800 was liquidated or unliquidated. b. Mary's balance will automatically be paid in full if the $3,800 amount was an unliquidated debt. c. Mary's balance will automatically be paid in full if the $3,800 amount was a liquidated debt. d. the check may be subject to a UCC exception to the general rules for accord and satisfaction cases involving checks.
D
Richard hires Paul to paint his kitchen in two eight-hour days of work for $500. At the end of the first day, the kitchen is 85 percent complete. Richard asks Paul to stay late and finish. Paul agrees to stay and complete the painting if Richard pays him a total of $750 for the job. Richard agrees. Does Richard owe Paul the additional $250? a. No, Paul was already required to paint the kitchen, so there was no consideration b. No, because the agreement was not signed in writing c. Yes, but only if the parties agreed prior to the start of work that additional hours would require additional pay d. Yes, Paul provided the additional consideration of working overtime and completing the work in a shorter time period than originally agreed
D
Walter worked nights as a clerk in a fast-food store. On his last work shift, Walter's boss told him, "I'm really grateful for the year that you have worked here. I am going to give you a bonus of $1,000 in your last paycheck." When Walter got his last paycheck, there was no bonus. If Walter sues, the likely result will be a. Walter will win, as the promise is enforceable. b. Walter will win, as no consideration is required to modify an employment contract. c. Walter will lose unless the promise was in writing. d. Walter will lose, as he gave no consideration.
D
T/F A completed act can be the basis for consideration.
False
T/F An illusory promise is valid consideration.
False
T/F Billy owes a liquidated debt of $3000 to Rayna, his personal weight trainer. Billy sends Rayna a check for $300 on which he has marked, "Payment in Full." If Rayna cashes the check she will not be able to successfully sue Billy for the remainder of the debt.
False
T/F Consideration is a requirement for contracts to be enforceable, unless the parties agree otherwise in writing.
False
T/F Contracts generally do not require bargaining that leads to an exchange between the parties.
False
T/F Contracts in which one party agrees in good faith to buy all his requirements of certain goods from the other party are generally unenforceable because there is no definite amount.
False
T/F If a contract for the sale of goods specifies that modifications must be made in a writing signed by the parties, a verbal agreement by the parties to different terms may be enforced.
False
T/F Pursuant to the "peppercorn rule", courts will refuse to enforce contracts that are economically unfair if the parties did not have equal bargaining power.
False
T/F The UCC requires consideration for agreements modifying contracts for the sale of goods.
False
T/F The two basic elements of consideration are intention and agreement.
False
An agreement where one party has no obligation to perform or receives all the benefit.
Illusory Promise
The parties do not dispute the amount owed.
Liquidated Debt
The UCC allows -- of existing contracts for the sale of goods without additional consideration.
Modification
An agreement under which a seller sells 100% of products made by the seller to a single buyer, and the buyer accepts the full quantity.
Output Contract
A completed act.
Past Consideration
A promise to perform an obligation that the promisor is already legally required to perform.
Pre-Existing Duty
A service that someone is already obligated to do.
Pre-existing Duty
An agreement under which a buyer purchases 100% of goods from a single seller, and the seller provides for buyer's reasonable needs.
Requirement Contract
Parties may -- an agreement to terminate all of their respective obligations under the contract.
Rescind
T/F A contract needs more than an offer and acceptance.
True
T/F A debt that is disputed because the parties disagree over its existence or amount is an unliquidated debt.
True
T/F A promise to act or forbear in the future counts as consideration.
True
T/F A property owner hires a contractor to renovate a building, which both believe does not have asbestos, a hazardous material. After beginning the project the developer discovers asbestos in the walls. A subsequent agreement that the property owner will pay additional money to the contractor for asbestos removal is enforceable.
True
T/F Agreeing not to open a competing business could be consideration.
True
T/F Courts distinguish between mere gifts between parties and legally binding commitments by the element of consideration.
True
T/F Critics of "moral consideration" argue that it gives judges leeway to enforce promises whenever they feel that it is just.
True
T/F Pursuant to the UCC, a creditor who cashes a check on which a debtor has written "full settlement" generally loses the right to claim any more money from the debtor.
True
A situation different from what the parties anticipated.
Unforeseen Circumstances
The parties dispute whether any money is owed or how much is owed.
Unliquidated Debt
A promise by Derkin Restaurants to buy all of the produce it needs this next year at an established price from Elfredo's Produce would be an a. enforceable requirements contract. b. unenforceable, illusory contract. c. unenforceable promise based on past consideration. d. enforceable output contract.
A
After going through her old clothes, Farra asks her friend Michelle if she would like to buy any of them, stating she is hoping to get at least $50. Michelle responds that she will pay $5 for each piece that she would like to buy. The next day, Michelle tells Farra that she does not want any of the clothes. Has Michelle violated the agreement with Farra? a. No, because of Michelle's illusory promise, she and Farra did not have an enforceable agreement. b. No, if she genuinely did not like any of the clothes, she does not have to buy any of them. c. Yes, because she knew Farra was expecting to receive $50 for the clothes. d. Yes, because she did not reserve the right not to purchase any of the clothes.
A
American Bakeries had a fleet of over 3,000 delivery trucks. Because of the increasing cost of gasoline, the company was interested in converting the trucks to propane fuel. It signed a requirements contract with Empire Gas, in which Empire would convert "approximately 3,000" trucks to propane fuel upon American Bakeries' potential request, and would then sell American Bakeries all required propane fuel to run the converted trucks. American Bakeries never requested a single conversion. Empire sued for lost profits. Who wins? a. American Bakeries wins because this was a requirements contract which does not require any purchase from Empire. b. Empire wins because this was a requirements contract and American Bakeries agreed to convert the trucks. c. Empire wins based on a preexisting duty requiring all the trucks to be converted. d. American Bakeries wins because there was no consideration.
A
In Hamer v. Sidway, if the court had agreed with the uncle that his promise was not supported by consideration, what would be legal consequence? a. The nephew and the uncle would not have an enforceable contract. b. The uncle would be obligated to pay the nephew if the nephew did not drink, smoke, or gamble. c. The nephew would have had a legal obligation not to drink, smoke, and gamble. d. The nephew would have had a legal right to drink, smoke, and gamble.
A
Rodolfo hires Tessa to paint the exterior of his house. Two days into the project, smoke from a nearby forest fire blows onto the property and stains her work. Tessa will have to start again. Tessa asks Rodolfo to pay for the additional labor and materials and Rudolfo agrees. Tessa completes the job, but Rodolfo refuses to pay the additional fee. Tessa sues. What outcome? a. Rodolfo owes Tessa the additional money because Tessa promised to re-paint the stained areas of the house and needed more paint to do the job. b. Rodolfo owes Tessa no additional money, because she had a preexisting duty to complete the project. c. Rodolfo owes Tessa the additional money because he had a preexisting duty to pay her for the job. d. Rodolfo owes Tessa the additional money because Tessa has done additional work.
A
The court in Hamer v. Sidway found for the below optoins. a. nephew because he had refrained from engaging in certain lawful actions. b. nephew because the actions that the nephew refrained from were especially valuable and enjoyable for the nephew. c. uncle because the nephew had already received the benefit of an improved quality of life by not drinking, smoking, or gambling. d. uncle because the nephew could not demonstrate that he had been harmed by refraining from drinking, smoking, or gambling.
A
Under the Uniform Commercial Code, an agreement modifying a contract a. may not require consideration. b. requires consideration only when the sale of goods is involved. c. requires consideration only when one of the parties is incompetent. d. always requires consideration.
A
While visiting Sarah's art gallery, Mark spots what he believes is an original painting by the artist Vincent Van Gogh and agrees to buy the painting from Sarah for $1,000,000. Upon returning home, Mark has the painting appraised and learns that it is not a Van Gogh and is worth only $100,000. Mark sends Sarah a letter saying that he bought the painting under false pretenses and will pay only the fair market value of the painting, enclosing a check for $100,000 with "payment in full" written in the memo line. Before depositing the check, Sarah crosses out Mark's note and writes "first partial payment" over it. The next day Sarah learns that Mark's check has bounced. If Sarah sues Mark, will the court find in her favor? a. Yes, as there was no satisfaction of the debt because Mark's check bounced. b. Yes, as there was no accord for the settlement of the debt because Sarah changed Mark's "payment in full" notation on the check. c. Yes, because there can be no accord and satisfaction of liquidated debt. d. No, because there was accord and satisfaction of the debt.
A
Zero, Inc. agreed to build Millie a storage building for $8,000. After beginning the project, Zero realized that it could not complete the job and make a profit. Zero demanded $9,500 to complete the building. Millie agreed to pay the $9,500. When the project was complete, Millie tendered $8,000 to Zero for the job. If Zero sues Millie for the remaining $1,500, a. Zero will lose because there was no legal consideration to support the additional $1,500. b. Zero will win because there was consideration for the additional $1,500. c. Zero will win because Millie had a pre-existing duty to pay any additional amounts. d. Zero will lose because the UCC does not require consideration to modify an existing contract.
A
Different types of promises can serve as consideration in the formation of a contract. Which of the following are types of circumstances that can serve as the basis for consideration? a. Unforeseen circumstances b. Additional work c. Preexisting duty d. Illusory promise
A,B
Certain particular types of contracts and rules of consideration are governed by the UCC. Which of the following are items that are governed by the UCC? a. Requirement contracts b. Contracts for pre-existing duties c. Modification of sale of goods contract d. Output contracts e. Agreements to accept additional work
A,C,D
A party agrees to do something above and beyond what he is obligated to do.
Additional Work
Courts will enforce a contract for a pre-existing duty if the promisor agrees to provide --.
Additional Work
An unliquidated debt can be described as a. a debt in which both its existence and amount is in dispute. b. a debt in which the existence or amount is in dispute. c. a debt undisputed by either party. d. a debt disputed by the creditor but not the debtor.
B
As reflected in the holding in Snider Bolt & Screw v. Quality Screw & Nut, the current majority view on non-compete agreements is that a. they are unconscionable. b. they are supported by consideration in the form of continued employment by the employer in exchange for the employee's promise not to compete. c. they are not supported by consideration because the employer has already hired the employee. d. they are only enforceable if accompanied by monetary compensation, even if only one dollar.
B
As the court's holding in Henches v. Taylor demonstrates, a creditor who alters a debtors "full payment" or similar notation on a check before depositing the check a. prevents accord and satisfaction. b. does not prevent accord and satisfaction and loses his right to recover any more money from the debtor. c. is liable for fraud. d. may collect the remainder of the outstanding debt from the debtor only if the creditor files suit within 30 days of the depositing the check.
B
