Business Law - Chapter 9: Contracts

True/False A person who disaffirms a contract based on intoxication is not legally obligated to return the consideration he or she received under the contract to the other party.

False

True/False A preexisting duty is sufficient consideration to support a new contract.

False

True/False An act of performance is necessary to create a bilateral contract.

False

What two defenses may be raised to enforce the contract?

1) Genuineness of assent 2) Writing and form

True/False Consideration is defined as something of legal value given in exchange for the termination of an offer.

False

True/False Past consideration is sufficient consideration to support a new contract.

False

True/False The infancy doctrine gives adults the right to disaffirm contracts they have entered into with minors.

False

True/False Under the mailbox rule, an acceptance is only effective when it is received.

False

True/False Unless otherwise expressly stated, an auction is considered an auction WITHOUT reserve.

False

True/False To meet the mirror image rule, the offeree must accept the terms of the offer without modification.

True

What are the four basic requirements that must be met for a contract to be enforceable?

1) Agreement 2) Consideration 3) Contractual capacity 4) Lawful object

executory contract

A contract where a party acknowledges in court that he or she will pay a specified sum of money if a certain event occurs

express contract

A contract expressed in oral or written words

implied in fact contract

A contract inferred by from the conduct of the parties

unenforceable contract

A contract that cannot be enforced because of a legal defense

executed contract

A contract that is fully performed on both sides

valid contract

A contract that meets all the essential elements of establishing a contract

informal contract

A contract that requires no special form or method of creation

bilateral contract

A promise for a promise

unilateral contract

A promise for an act

counteroffer

A response by an offeree that contains terms and conditions different from or in addition to those of the offer

Which of the following statements is true about a counteroffer? A. An offeree who makes a counteroffer is still considered the offeree. B. A counteroffer terminates the existing offer. C. A counteroffer can only be made by the original offeror. D. A counteroffer is effective even before it has been received by the original offeror.

B. A counteroffer terminates the existing offer.

Which of the following is true for an auction with reserve? A. The seller retains the right to refuse the highest bid and withdraw the goods from sale. B. An invitation to make an offer is not allowed. C. An auctioned item cannot be withdrawn from the auction after an offer has been made. D. A bid cannot be withdrawn and is legally binding from the moment it is made.

A. The seller retains the right to refuse the highest bid and withdraw the goods from sale.

Kyle goes to a used automobile dealership to buy a truck. He signs an agreement with the dealership that includes a description of the truck, its price, and other details. This is an example of a(n) _________ contract. A. express B. unilateral C. implied-in-fact D. implied-in-law

A. express

A(n) __________ is a contract that courts refuse to enforce in part or at all because it is so oppressive or manifestly unfair as to be unjust. A. unconscionable contract B. contract of attrition C. contract in furtherance of trade D. quasi-contract

A. unconscionable contract

Two brothers, Sam and Jim, were fighting over the division of their ancestral property. After ten years of legal battle, a frustrated Sam contacted a powerful politician who subjected Jim to extreme duress, forcing him to sign a contract in favor of Sam. When Sam takes this contract to court, the contract will be declared __________. A. voidable B. void C. null D. valid

A. voidable

Which of the following is true of a gift promise? A. A gift promise can be enforced by a court of law. B. A completed gift promise cannot be cancelled for lack of consideration. C. A gift promise contains mutual consideration. D. The promisee can take legal action if the promisor does not fulfill the gift promise.

B. A completed gift promise cannot be cancelled for lack of consideration.

In terms of the infancy doctrine, which of the following is true? A. A minor must honor a contract he or she entered into with an adult if the minor had sufficient mental capacity when the contract was formed. B. A minor can disaffirm a contract he or she entered into with an adult. C. A minor cannot enter into a legal contract with another minor. D. A minor cannot elect to enforce a contract he or she has entered into with an adult.

B. A minor can disaffirm a contract he or she entered into with an adult.

In terms of a contract's enforcement, which of the following is true? A. A contract is only considered valid if it is enforceable by both parties. B. Parties may voluntarily perform a contract that is unenforceable. C. An unenforceable contract allows at least one party the option to void his or her contract obligations. D. Void contracts are enforceable in cases involving mutual mistake.

B. Parties may voluntarily perform a contract that is unenforceable.

Which of the following is true of a contract in which one of the parties is insane but not adjudged insane? A. The contract is voidable by the competent party. B. The contract is only voidable by the insane person. C. Only the court-appointed legal guardian of the insane person can modify the contract. D. The sane person must be placed in status quo if the insane person voids the contract.

B. The contract is only voidable by the insane person.

Which of the following is true of a contract with an adjudged insane person? A. The adjudged person is bound by the terms of the contract. B. The contract is void. C. Only the competent party can enforce the contract. D. The competent party is legally obligated to uphold the contract.

B. The contract is void

Which of the following is an example of an informal contract? A. a recognizance B. a lease C. a letter of credit D. a check

B. a lease

A(n) __________ is a contractual provision that relieves one or both of the parties to a contract from tort liability. A. contract of adhesion B. exculpatory clause C. duty of restitution D. fundamental breach

B. exculpatory clause

While Harry was intoxicated, he sold his car to Ben for substantially less than its fair market value. This contract is considered __________. A. valid B. voidable C. void D. unenforceable

B. voidable

In terms of contractual capacity, what is the most commonly-recognized age of majority? A. 19 B. 16 C. 18 D. 21

C. 18

Why does an illusory contract lack consideration? A. Because the consideration promised is unlawful and therefore void. B. Because the person promises to perform an act or do something he is already under an obligation to do. C. Because one or both of the parties can choose not to perform their contractual obligations. D. Because the compensation paid is for work done in the past.

C. Because one or both of the parties can choose not to perform their contractual obligations.

Sally finds a carpenter to do some repairs for her house and tells him that if he finishes the job by Saturday, she will pay him $1,000. Sally's offer created a(n) __________ contract. A. executory B. bilateral C. unilateral D. executed Why? ______________________________

C. unilateral A unilateral contract is a promise for an act.

Martha contacts a bakery to get a cake for her son's birthday party. She tells the baker that she will pay him $150 for the cake if he delivers the cake on Friday evening. If the baker does not deliver the cake on Friday evening, which of the following is accurate? A. Martha can sue the baker but cannot recover damages. B. Martha can sue the baker and recover $150 in damages. C. Martha cannot sue the baker. D. The baker must pay Martha $150 plus the cost of a replacement cake, as he entered into a verbal contract with her and did not perform his legal obligation

C. Martha cannot sue the baker

Which of the following is true for an auction without reserve? A. The bidder is considered the offeror. B. The seller need not accept the highest bid. C. The auctioned item cannot be withdrawn from sale. D. The auctioneer is not allowed to establish a minimum bid.

C. The auctioned item cannot be withdrawn from sale.

The __________ rule states that acceptance is effective when it is dispatched, even if it is lost in transmission. A. silence-as-acceptance B. mirror image C. mailbox D. mutual assent

C. mailbox

Stella is injured in a car accident and is transported to a local hospital by emergency personnel. She subsequently passes into a coma. The doctors and other staff perform the necessary medical procedures to save her life. Stella recovers after two months and is discharged from the hospital. Under the doctrine of __________ contract, Stella must pay the hospital for its services. A. implied-in-fact B. express C. quasi- D. formal

C. quasi-

According to the objective theory of contracts, the intent to enter into a contract is judged by the __________. A. doctrine of equity B. legality of the contract C. reasonable person standard D. common law of contracts

C. reasonable person standard

If a contract is required to be in writing under the Statute of Frauds but is not, the contract is __________. A. executed B. unilateral C. unenforceable D. formal

C. unenforceable

Which of the following is a necessary condition for a contract to be considered valid? A. It can be voided by both parties. B. It can be voided by one of the parties. C. It is enforceable by both parties. D. It is enforceable by at least one of the parties.

D. It is enforceable by at least one of the parties.

Which of the following elements must be established for a contract to be deemed unconscionable? A. The weaker party did not enter the contract under duress. B. The parties had equal bargaining power. C. The dominant party justly used its bargaining power. D. The adhering party had no reasonable alternative.

D. The adhering party had no reasonable alternative.

Which of the following elements must be established to create an implied-in-fact contract? A. The plaintiff provided property or services to the defendant gratuitously. B. The defendant accepted the plaintiff's property or services as payment for an illegal activity. C. The plaintiff made the defendant sign the contract and then changed its terms, identifying the new terms as "retroactively implied." D. The defendant was given an opportunity to reject the plaintiff's property or services but failed to do so.

D. The defendant was given an opportunity to reject the plaintiff's property or services but failed to do so.

Which of the following is true of an option contract? A. If the offeree chooses not to buy the property, the consideration period must be returned. B. The consideration paid for the option cannot be applied to the sale price. C. The death or incompetency of either party terminates an option contract. D. The offer cannot be revoked during the option period.

D. The offer cannot be revoked during the option period.

Candice, the owner of Candice's Cookies, contacts Gary, a new supplier. She promises Gary that she will pay him $375 if Gary delivers 20 pounds of sugar the following morning. Gary promises to make the delivery as requested by Candice. This creates a(n) __________ contract between them. A. executed B. unilateral C. executory D. bilateral Why? ______________________________

D. bilateral A bilateral is a promise for a promise.

An oral agreement to purchase a neighbor's bicycle for $250 is a(n) __________ contract. A. void B. voidable C. implied D. express

D. express

Which of the following is acceptable consideration for a contract? A. a penalty B. an arrest C. a sentence D. money

D. money

Elizabeth signs a contract to purchase a new car from Quickcash Motors. She has not yet paid for the car, and Quickcash Motors has not yet delivered the car to Elizabeth. This is an example of a(n) __________ contract. A. unenforceable B. valid C. void D. voidable

D. voidable

Noelle uses blackmail to force Jeff to sign a contract for the sale of his home. This contract is __________. A. unenforceable B. valid C. void D. voidable

D. voidable

void contract

No contract exists

consideration

Something of legal value given in exchange for a promise

True/False An express contract can be stated orally.

True

revoke

The term for when an offeror withdraws the offer prior to its acceptance

True/False An offer to create a unilateral contract can be revoked by the offeror any time prior to the offeree's performance of the requested act.

True

True/False Providing of services qualifies as consideration for an enforceable contract

True

True/False A counteroffer is considered a rejection of the original offer.

True

True/False A rejection of an offer is not effective until it is actually received by the offeror.

True

True/False An exculpatory clause can relieve a party of liability for ordinary negligence.

True