Business Law Ch 11-14
An obligor required to render a performance under a contract can transfer the duty to perform to another person whenever desired.
False
A life insurance contract is a third-party: a. beneficiary contract. b. assignment contract. c. payment contract. d. performance contract.
a
An agreement to restrain trade may be void on the grounds that it is: a. contrary to public policy. b. unfair to merchants. c. illegal lobbying. d. fraudulent
a
An oral contract can be enforced when it relates to: a. the purchase of a television set for $200. b. a promise to answer for the debt of another. c. the sale of an interest in land for $400. d. managing a factory for five years.
a
The remedy of specific performance will most likely be granted in the case of a(n): a. contract for the sale of a business. b. employment contract. c. contract to buy shares of publicly-traded stock. d. contract for the sale of Florida oranges.
a
The rule of mitigation of damages requires that a party injured by a breach of contract must: a. take reasonable steps to reduce the damages that would otherwise be sustained because of the breach. b. discharge the contract before filing suit for breach. c. take any and all steps possible to reduce the damages that will be sustained because of the breach. d. hire someone else to perform the contract.
a
To avoid litigation over impossibility and impracticability issues, modern contracting parties often contract around the doctrine of impossibility, specifying the failures that will excuse performance in their contracts. The clauses in which they do this are called __________ clauses, and they are generally enforced by courts as written. a. force majeure b. magnum force c. delta force d. force corporeal
a
V3 was a successful singing group that contracted to perform at the "Metalsubstance" rock concert. V3 was aware that the promoter would sustain a substantial loss if the group failed to perform. The members of the group were stricken with a virus that confined them to their beds. The promoter sued for breach of contract. What is the probable result? a. The contract was discharged by impossibility of performance. b. In order to avoid liability for breach of contract, V3 must arrange for another group of comparable quality and reputation to perform on the scheduled date. c. V3 is liable for damages for breach of contract. d. V3 will be deemed to have substantially performed the contract.
a
A counteroffer is a(n): a. rejection of the original offer. b. a revocation of the original offer. c. acceptance of the original offer. d. acceptance of the original offer and an invitation to further negotiate.
a
An oral contract can be enforced when it relates to: a. the purchase of a television set for $200. b. a promise to answer for the debt of another. c. the sale of an interest in land for $400. d. managing a factory for five years.
a
If an exculpatory clause limits liability for damages caused by negligent conduct, the tortfeasor's liability is: a. not limited if the conduct is willful. b. limited if the conduct is grossly negligent. c. limited unless the plaintiff signed a release. d. contributorily negligent.
a
In a bilateral contract, each party will be a promisor and, therefore, each party will: a. be an obligor. b. be able to avoid the contract. c. not be in privity of contract. d. be an agent for the other side.
a
A change of law discharges a contract if the new law: a. requires the use of antipollution devices. b. prohibits the act called for by the contract. c. requires a license and none was required before. d. requires the use of fireproof materials.
b
A contract under which one or both parties have not yet fully performed is termed a(n): a. void agreement. b. executory contract. c. executive contract. d. executed contract.
b
A said to B, "I'll give you $100 for that bracelet." B replied, "$135." A said, "No thanks." B then said that B accepted the $100, but A was no longer interested and said there was no contract. B insists there is a contract. Result? a. A's offer of $100 was open and accepted by B, thereby forming a contract. b. B's counteroffer of $135 terminated A's offer of $100. c. A's offer of $100 was irrevocable. d. B's statement, "$135" was a negotiating statement that did not terminate A's original offer of $100.
b
A third-party beneficiary: a. may be obligated to pay for services rendered. b. may bring suit on and enforce the contract. c. must consent to the contract. d. must be identified by name.
b
If no termination date is specified for an offer, the offer will remain open: a. for six months. b. for a reasonable period of time. c. for one year. d. until someone accepts the offer.
b
In general, an assignee stands: a. in a position subordinate to the assignor. b. exactly in the position of the assignor. c. in a position superior to the assignor. d. in a position similar to, but not equal to, the assignor.
b
Jones has a life insurance policy on his own life that provides that in the event of his death, his mother will receive the proceeds. Jones' mother is a(n): a. incidental beneficiary. b. donee beneficiary. c. creditor beneficiary. d. assignee.
b
The delegator of construction duties remains liable if: a. the delegatee performs the work properly, but the obligee did not approve of the delegation. b. the delegatee performs the work improperly. c. the obligee objects in writing to the delegatee's performance of the work, even if the delegatee performs the work properly. d. the value of the contract is $500 or more and the delegatee performs the work properly.
b
The failure to have a license will not render agreements void if the license: a. is a regulatory license b. is readily obtainable by anyone who offers payment of a required fee c. is based on formal education d. is required for engaging in a particular business or trade
b
The statute of frauds applies to: a. the sale of goods priced at less than $500. b. the cancellation of a written agreement for the sale and purchase of land. c. an employment agreement. d. the lease of an apartment on a month-to-month basis.
b
When money is loaned at a greater rate of interest than is allowed by law, __________ is committed. a. credit malfeasance b. Usury c. credit misfeasance d. petty theft
b
Which of the following is not a third-party beneficiary contract? a. a contract in which A hires B to give A's niece piano lessons b. a contract to repair sewers in front of Macy's Department Store c. a life insurance contract with a named beneficiary d. a contract between X and Y for Y to install a new door on Z's home
b
A contract is created by which the terms are stated to be for consideration in the amount of $3,000. If typewritten in the contract is the term "four thousand dollars," while the amount of $3,000 is printed within the form: a. a compromise settlement amount of $3,500 will be used. b. there is a contract but the courts will not specify the dollar amount, as a conflict exists. c. the contract will be interpreted to be for $4,000. d. the contract will be interpreted to be for $3,000.
c
A contract is interpreted to give effect to: a. what the court believes is a fair contract. b. what the defendant thought the contract meant. c. the intent of the parties. d. what will be best for the economic life of the community.
c
A discharge by operation of law occurs in all of the following situations except: a. statute of limitations. b. bankruptcy. c. accord and satisfaction. d. material changes by a party.
c
A landlord who continuously accepts late rental payments without collecting the late fee provided in the lease: a. will collect the late fee at a later date. b. allows the tenant to repudiate the lease. c. waives the late fee. d. is ignorant of the late fee.
c
A legally binding agreement that can be rejected at the option of one of the parties is called a(n): a. void agreement. b. revoked contract. c. voidable contract. d. optional agreement.
c
A provision stipulating the amount of money damages to be paid in the event of default or breach of contract is known as a __________ damages clause. a. contract b. breach c. liquidated d. nominal
c
An assignment is valid only if: a. it is in a particular form. b. it is written. c. there is a manifestation of the intent to assign. d. the assignment is paid for by the assignee.
c
An assignment of royalties to a song: a. is a contract. b. requires consideration. c. is a transfer of rights. d. is not enforceable.
c
An incidental beneficiary of a contract: a. can sue to enforce the contract. b. cannot sue to enforce the contract. c. is a beneficiary specifically named in the contract. d. is an assignee of the direct beneficiary
c
Failure to mitigate damages limits recovery to: a. damages for consequential loss. b. nominal damages and punitive damages. c. damages that would have been sustained had the plaintiff d. mitigated the damages where it was possible to do so. exemplary damages.
c
If a seller delivers defective goods, the buyer does not lose the right to object to the breach of contract if the buyer: a. accepts the goods. b. agrees to a modification of the contract. c. accepts the goods with a reservation of right. d. accepts the performance without protest
c
The obligation of a cosigner is discharged by: a. the minority status of one of the parties. b. the majority status of one of the parties. c. the payment of the debt. d. the court's declaration of the contract's provision of necessaries.
c
The statute of frauds: a. specifies the punishment of perjury. b. requires full disclosure in the case of consumer sales on credit. c. requires that a contract for the sale of land be evidenced by a writing. d. requires a seller of real estate to obtain a broker's license.
c
When a contract proves to be a bad bargain: a. the contract must be rewritten. b. the injured party is never bound by the terms of the contract. c. parties are generally still bound by the terms of the contract. d. courts will always imply terms that are necessary to avoid hardship.
c
When a contract proves to be a bad bargain: a. the contract must be rewritten. b. the injured party is never bound by the terms of the contract. c. parties are generally still bound by the terms of the contract. d. courts will always imply terms that are necessary to avoid hardship.
c
Which of the following events excuses a promisor from performing his or her contractual obligations? a. an unanticipated increase in the cost of performance b. a shortage of materials necessary for production of goods and/or provision of services called for under the contract c. destruction of the subject matter through no fault of either party d. a riot
c
A contract is created by which the terms are stated to be for consideration in the amount of $3,000. If typewritten in the contract is the term "four thousand dollars," while the amount of $3,000 is printed within the form: a. a compromise settlement amount of $3,500 will be used. b. there is a contract but the courts will not specify the dollar amount, as a conflict exists. c. the contract will be interpreted to be for $4,000. d. the contract will be interpreted to be for $3,000.
c
A contract is interpreted to give effect to: a. what the court believes is a fair contract. b. what the defendant thought the contract meant. c. the intent of the parties. d. what will be best for the economic life of the community.
c
Damages in excess of actual loss are called: a. compensatory damages. b. restitution. c. punitive damages. d. nominal damages.
c
Marquez agrees to buy Dale's pickup truck so he can pull his trailer. Both Marquez and Dale believe that the truck is big enough to do the job. After they complete the deal, Marquez finds that the truck is not strong enough to handle the trailer. The contract between Marquez and Dale can be rescinded because of: a. a defective acceptance. b. negligent misrepresentation. c. a unilateral mistake. d. a mutual mistake.
c
The statute of frauds: a. specifies the punishment of perjury. b. requires full disclosure in the case of consumer sales on credit. c. requires that a contract for the sale of land be evidenced by a writing. d. requires a seller of real estate to obtain a broker's license.
c
A promise to pay a debt must be in writing if: a. the debt owed is the promisor's. b. the debt is for more than $500. c. the debt is now due and payable. d. the promise is to pay the debt of another.
d
A promise to pay a debt must be in writing if: a. the debt owed is the promisor's. b. the debt is for more than $500. c. the debt is now due and payable. d. the promise is to pay the debt of another.
d
A third-party beneficiary contract may be amended: a. without the consent of the beneficiary. b. by operation of law. c. regardless of whether the contract allows modifications without the beneficiary's consent. d. automatically when either party dies.
d
An apparently voluntary agreement may in fact not be voluntary if: a. physical duress is present. b. economic duress is present. c. undue influence is present. d. all of these.
d
Between experienced businesspersons, exculpatory clauses are generally: a. void. b. voidable. c. unenforceable. d. valid.
d
If an offeree dies before the offer has been accepted, the offer: a. may be rejected by the surviving spouse of the offeree. b. may be accepted by the guardian appointed for any minor children of the offeree. c. may be accepted by the surviving spouse of the offeree. d. is automatically revoked by the death of the offeree.
d
In an employment contract, agreements not to compete are: a. illegal b. valid only if the restriction protects the employee c. uniformly held to be in the public interest and therefore legal d. valid, if the restriction is reasonable and necessary for the protection of the former employer
d
In the sale of a business, all the following elements are necessary to create an enforceable noncompete clause, except: a. not unduly burdensome on buyer b. reasonable time limitation c. geographic restriction not overly broad d. estimated value of the seller's business
d
A right of __________ refusal is the right of a party to meet the terms of a proposed contract before it is executed, such as a real estate purchase agreement. a. concomitant b. conditional c. formal d. first
d
A contract can only involve two parties: the promisor and the obligor.
false
A contract made by an incompetent person after a guardian has been appointed is voidable.
false
A father's handshake and oral promise to his daughter and her fiancée made in consideration of their contemplated marriage is binding.
false
A house-painting contract is discharged if continual rain makes it impossible to complete the painting by the time specified in the contract.
false
A party who speaks with a reckless disregard for the truth not knowing of the falsity of his or her words cannot be liable for fraud.
false
A person who has a right to buy on credit can transfer that right to a close relative.
false
A person who is prevented from enforcing a contract because of the statute of frauds also is prevented from recovering the value of services, property, or money furnished the other party to the oral contract.
false
A promise to grant a mortgage on real property does not require a writing because it is not a transfer of land.
false
A promise to pay an attorney a fee owed by a third person can be enforced without a writing.
false
A requirements contract is too vague to be a legally-enforceable agreement.
false
A revocation of an offer is ordinarily effective after the offer has been accepted.
false
A third person automatically has the status of an intended third-party beneficiary regardless of the parties' intentions at the time of contracting.
false
A typical situation where the doctrine of economic frustration applies is when the party suffers a loss when a gain was expected.
false
A void contract is one that is otherwise valid but may be rejected or set aside by one of the parties.
false
Agreements not to compete are always void.
false
Agreements that are contrary to public policy are binding but voidable.
false
An express contract is one in which the agreement is shown by the acts and conduct of the parties.
false
An unlicensed doctor can sue a patient for the doctor's fee if the patient in fact recovered because of the doctor's care.
false
At an auction sale, a statement made by the auctioneer to draw forth bids constitutes an offer.
false
Contract terms may not be implied from the parties' conduct.
false
Damages in excess of actual loss, imposed for the purpose of punishing or making an example of the defendant, are known as compensatory damages.
false
Factual incapacity is imposed because of the class or group to which a person belongs.
false
Fraud requires a misstatement of either a fact or an opinion.
false
Generally, advertisements, catalog prices, and circulars are offers that can be accepted.
false
If a municipality contracts with a contractor to pave a street, the homeowners on that street are third-party beneficiaries of the contract.
false
If an illegal agreement has already been performed, either party can sue for damages.
false
Impossibility of performance applies when the debtor does not have sufficient funds to pay a debt.
false
In a quasi contract the court seeks to enforce the intentions of the parties contained in the agreement.
false
It is necessary that a third-party beneficiary be identified by name.
false
Offers, acceptances of offers, and revocations of offers are all effective when mailed in a properly-addressed envelope bearing the proper amount of postage.
false
Parol evidence is not admissible to show fraud, duress or mistake.
false
The effect of an implied contract is not the same as the effect of an express contract.
false
The law requires parties to be fair and reasonable in the making of a contract.
false
The normal remedy for breach of contract where the plaintiff has suffered a loss is nominal damages.
false
The statute of frauds applies to promises to answer for another party's debt, but does not apply to a promise to answer for another party's default.
false
Under the statute of frauds, an oral contract must be completed within one year after performance begins.
false
When a building contractor has substantially performed a contract to construct a building, the contractor is entitled to recover the full contract price.
false
When a lease is assigned, the assignee becomes the sole obligor for rent payments, and the original lessee is discharged from the lease.
false
When a minor avoids contracts, the minor always must return the other contracting parties to their original financial positions.
false
When a party waives compliance with one provision of a contract, the other party may thereafter ignore other provisions of that contract.
false
A father's handshake and oral promise to his daughter and her fiancée made in consideration of their contemplated marriage is binding.
false
An output contract is too vague to be a legally-enforceable agreement.
false
Generally, when a person of legal age makes a contract with a minor, the contract is voidable by either party.
false
Parol evidence is not admissible to show fraud, duress or mistake.
false
Punitive damages are generally recoverable in contract actions.
false
The "necessaries" of minors are precisely defined by law.
false
A claim of undue influence will be unsuccessful unless the contracting parties have a close relationship of trust.
true
A condition precedent must occur before a party to a contract has an obligation to perform.
true
A factual incapacity may exist when, because of a mental condition caused by medication, drugs, alcohol, illness, or age, a person does not understand that a contract is being made or understand its general nature.
true
A person who makes a promise is the promisor, while a person to whom the promise is made is the promisee.
true
Advertisements that call for an act may be deemed to be a unilateral contract.
true
An agreement may involve the performance of several promises, some of which are illegal and some legal.
true
An agreement that calls for the commission of a civil wrong is illegal and void.
true
An agreement that unreasonably restrains trade is illegal and void on the ground that it is contrary to public policy.
true
An assignee's rights are the same as those that had been possessed by the assignor.
true
An insurance company cannot refuse to pay the fire loss of the buyer of a house on the grounds that the sales contract for the house was signed by electronic signature.
true
An option contract gives one of the parties an absolute right to enter into a second contract at a later date.
true
An otherwise vague contract may be clarified by references in the contract to other documents or agreements.
true
Contractual capacity can exist even though a party does not understand every provision of the contract.
true
For the parties to enter into an accord and satisfaction that discharges the original obligation, there must be a bona fide dispute.
true
Generally, contracts are discharged by the performance of the terms of the contract.
true
If a contract can be interpreted in two ways, one legal and the other illegal, the court will assume that the legal meaning was intended unless the contrary is clearly indicated.
true
If a debtor with multiple debts specifies the debt to which a payment is to be applied and the creditor accepts the money, the creditor is bound to apply the money as specified.
true
If the law is intended to protect one of the parties to an otherwise illegal contract, that party may seek relief in court.
true
In general, one may assign rights if that does not cause the obligor's duties to increase or change materially.
true
In most bilateral contracts, the performances of the parties are concurrent conditions.
true
In some cases the court may require specific performance, whereby the court will order the contractual performance to be carried out.
true
In some cases, third persons, such as third party beneficiaries or assignees, have rights on a contract.
true
In the absence of an agreement to the contrary, weather conditions constitute a risk that is assumed by a contracting party.
true
Negotiable instruments are examples of formal contracts.
true
Ordinarily, a court will not consider whether a contract is fair or unfair.
true
Participation in a free raffle without consideration is lawful, because there is no lottery.
true
Parties to illegal agreements are generally not entitled to help from the courts.
true
Payment by check is a conditional payment.
true
Quasi contracts are fictional contracts.
true
The doctrine of substantial performance is concerned with the issue of whether an imperfect performance will be considered adequate to discharge one's responsibilities under a contract.
true
The parol evidence rule generally excludes words spoken before or at the time a written contract was executed from contradicting the terms of the contract.
true
The parol evidence rule is based on the theory that any oral agreement was abandoned when the contact was written.
true
The parties may agree that the adequacy of performance under a contract is to be determined by a third party.
true
The principle behind the quasi contract is to prevent unjust enrichment.
true
The seller of a painting is bound by the sales contract if the painting purchased was considered of little value and only later discovered to be valuable to the surprise of both buyer and seller.
true
To be enforceable under the statute of frauds, the note or memorandum must be signed by the party sought to be bound by the contract.
true
Under the UCC, an assignment of all the assignor's rights under a contract generally is held to be both an assignment of rights and a delegation of duties.
true
When a contract sets a price for services rendered, a plaintiff will not prevail in a suit for reasonable value.
true
When a party expressly declares before the time for performance arrives that the contract will not be performed, such a declaration is called an anticipatory repudiation.
true
A firm offer is an offer that states that it is to be irrevocable, or irrevocable for a stated period of time.
true
A properly mailed acceptance takes effect when mailed, even if it never is received by the offeror.
true
A reservation of rights is an assertion by a party to a contract that even though a tendered performance is accepted, the right to damages for the nonconformity to the contract is reserved.
true
A unilateral mistake as to a fact does not affect the contract when the mistake is unknown to the other contracting party.
true
An innocent party to an anticipatory repudiation of a contract has the right to treat the repudiation as a present, material breach and may file suit.
true
If an offer is indefinite or vague, no contract arises from an attempt to accept it.
true
In order for fraud liability to arise, the listener must actually rely on the false statement of fact.
true
Ratification consists of any words or conduct of a former minor manifesting an intent to be bound by the terms of a contract made while a minor.
true
To make an offer, the offeror must appear to intend to create a binding obligation.
true
