Business Law - Exam 2

__________ is what each party to a contract gives up to the other in making their agreement. a. Contract under seal b. Promissory estoppel c. Consideration d. None of these are correct.

Consideration

The law very carefully scrutinizes contracts between those in a relationship of trust and confidence that is likely to permit one party to take unfair advantage of the other. Which of the following is not an example of that type of relationship? a. Agent and principal. b. Hair dresser and client. c. Parent and child. d. Doctor and patient.

Hair dresser and client.

__________ is an intentional misrepresentation of material fact by one party to the other, who consents to enter into a contract in justifiable reliance on the misrepresentation. Fraud in the inducement renders the contract __________ by the defrauded party. a. Silence; void b. Fraud by concealment; void c. Fraud in the execution; voidable d. Fraud in the inducement; voidable

Fraud in the inducement; voidable

Jamal negligently injures Gayle, for which Gayle may recover damages in a tort action. Jamal promises Gayle $10,000 if Gayle forbears from bring suit against him. Gayle accepts by not suing. What legal detriment, if any, has Gayle incurred in this case? a. Gayle has not incurred a legal detriment. b. Gayle promised to refrain from bring suit against Jamal. c. Gayle's injuries are the legal detriment that she suffered. d. Gayle had no legal right to sue Jamal for the injuries he caused, prior to the $10,000 payment.

Gayle promised to refrain from bring suit against Jamal

__________ is an unenforceable promise under the law of contract because of a lack of consideration. a. Fraud b. Mutual mistake c. Gift d. Justifiable reliance

Gift

Which of the following would generally be considered to be a regulatory licensing law? a. A statute requiring that doctors be licensed after finishing medical school. b. A statute requiring that salespeople be licensed, but not establishing any educational or training requirements. c. A statute requiring plumbers to be licensed, but not establishing any standards of competence. d. A statute that requires flag makers to register with the state before selling flags.

a. A statute requiring that doctors be licensed after finishing medical school.

Ordinarily, courts do not consider the __________ of the consideration given for a promise. a. legality b. assumption of the risk c. modification d. adequacy

adequacy

Sometimes a party makes misrepresentations, which if untrue, could constitute a material misrepresentation. Which of the following fits that description? a. "This is the one that I would buy." b. "This is the best tablet on the market." c. "These tires will wear like iron." d. "This car has a new engine."

"This car has a new engine."

Debra delivers a package to Jackie and requests Jackie to sign a receipt for the package, holds out a simple sheet of paper that says "Receipt," and shows a line where Jackie is supposed to sign. The line, which appears to be at the bottom of the receipt, is actually a promissory note for a $10,000 loan. Jackie signed the line, as indicated by Debra and did not know that she was signing a note. This scenario is an example of: a. Undue Influence. b. Fraud in the inducement. c. Duress. d. Fraud in the execution.

. Fraud in the execution

__________ means doing that which the promise was under no prior legal obligation to do. a. Bargained-for exchange b. Legal detriment c. Bilateral d. illusory

. Legal detriment

In the case of Denney v. Reppert,did the court allow the employees of a bank to collect a reward, because they supplied information that led to the arrest and conviction of a man who robbed their bank? a. Yes, the bank wants to encourage other employees to step forward in the future. b. No, the employees were under a pre-existing duty to the bank and to the public. c. Yes, the reward was offered and they had the information that was needed to identify the robber. d. No, they didn't physically arrest the robber.

. No, the employees were under a pre-existing duty to the bank and to the public.

Darryl contracted with Right Builders to build an addition to his house for $25,000. After digging the foundation, Darryl decides he wants to have the house done earlier than was originally agreed. Right Builders agree, but say that it will need to charge an additional $5,000 for the job. Assuming Darryl agrees, which of the following is correct? a. Darryl will only have to pay $20,000. b. This is a contract under seal which is enforceable. c. This is the settlement of a disputed debt that requires no additional consideration on the part of Right Builders. d. This is a modification of a preexisting contract, but Right Builders has provided additional consideration since they are expediting the completion of the project.

. This is a modification of a preexisting contract, but Right Builders has provided additional consideration since they are expediting the completion of the project.

In DiLorenzo v. Valve and Primer Corporation, the court considered which of the following issues? a. Whether the board resolution occurred if only DiLorenzo had documentation of it. b. Whether Valve & Primer conditioned the alleged stock option on DiLorenzo's promise to remain in its employment. c. Whether DiLorenzo supplied consideration in exchange for the stock option. d. Whether other companies were attempting to hire DiLorenzo away from Valve and Primer.

. Whether DiLorenzo supplied consideration in exchange for the stock option.

To establish fraud, the misrepresentation must have been known by the one making it to be false and must be made with an intent to deceive. That knowledge is known as: a. scienter. b. negligent misrepresentation. c. sales puffery. d. All of these are correct.

. scienter

In some situations the courts will enforce new promises to perform an obligation that originally was not enforceable. Which of the following would be that sort of promise? a. An illusory promise. b. A new promise to pay a debt barred by the statute of limitations. c. A promise to supply all of the materials a manufacturer will need for the production of a certain item for a specified period of time. d. In the majority of states, a promise by a father to pay someone who rendered emergency services to his injured son before the father had arrived at the accident scene.

A new promise to pay a debt barred by the statute of limitations.

All of the following will serve as adequate consideration except? a. Forbearance to do an act. b. Performance of services. c. An illusory promise. d. A promise to perform.

An illusory promise.

A convenience store robbery has occurred. The merchant's association has offered a $2,000 reward for information leading to the arrest and conviction of the robber. Several people are claiming they are entitled to the money. Which of the following people would not be eligible for the reward? a. A customer of the store. b. An off-duty game warden from a county other than the one where the arrest occurred. c. An on-duty sheriff's deputy in the county where the arrest occurred. d. All of these individuals would be eligible.

An on-duty sheriff's deputy in the county where the arrest occurred.

Annie wants to buy a vehicle that will tow a camper. She gives the specific measurements and weight of the trailer to the salesman. The salesman tells her that the SUV Annie sees on the car lot would be just perfect to tow the trailer. Annie test drives the vehicle and then buys it. In this case: a. the element of scienter is missing. b. the salesman is in a confidential relationship with Annie. c. Annie was not justified in relying upon the salesman's representation that the car would tow the trailer. d. Annie has a valid cause of action for fraud.

Annie was not justified in relying upon the salesman's representation that the car would tow the trailer.

BigOil promises Gasnow as many barrels of oil as they shall chose at $50 per barrel. In this case: a. BigOil has made an illusory promise. b. BigOil's promise is legally sufficient unless BigOil knows they are running out of oil. c. BigOil has made a conditional promise which is not sufficient to form consideration. d. BigOil's promise is legally inadequate and the courts will therefore not enforce it.

BigOil has made an illusory promise.

Mike, a 75-year-old mechanic, returned Carrie her car after fixing the brakes. Mike told Carrie: "I put some new brakes on her—she should brake with complete ease!" When Carrie drives away, she cannot stop her car and crashes into a dumpster. It is later discovered that Mike failed to reconnect one of the brake lines. There is no indication that Mike knew that he failed to reconnect the brake line. If Carrie sues Mike for fraud, and the court sides with Mike, what would be the court's reason? a. Mike's statement was not a fact. b. Carrie did not experience duress. c. Mike lacked scienter because he did not make the statement with the intent to deceive. d. Mike was puffing.

Mike lacked scienter because he did not make the statement with the intent to deceive.

Moe is Larry's attorney. Larry is a high school dropout with a tenth-grade education and no job. Moe graduated from an elite law school and is a highly-skilled attorney. Larry recently inherited a substantial amount of money from his mother. Rather than continue to utilize his late mother's financial management company (Golden Wealth), Moe successfully persuades Larry--after hours of closed door meetings and very high-level talks about the stock market, tax law, and legal jargon--to move his money from Golden Wealth and enter into a 10-year management agreement with Stooge Wealth Management, which is owned by Moe's best friend Curly. If Larry seeks to later void his agreement with Stooge Wealth Management, what would be his winning argument? a. Larry was under duress to enter into an agreement with Stooge Wealth Management. b. Moe and Larry experienced mutual mistake. c. Moe exerted undue influence on Larry to switch from Golden Wealth to Stooge Wealth. d. Larry experienced unilateral mistake.

Moe exerted undue influence on Larry to switch from Golden Wealth to Stooge Wealth.

Ned's father orally promises to give him a car for his twenty-first birthday. Using the rule in most states, can Ned legally enforce this promise? a. Yes, Ned can sue his father based on the promise. b. Yes, Ned can sue his promise based on the statute of frauds. c. No, a gratuitous (or gift) promise is unenforceable. d. No, Ned should have gotten the promise in writing.

No, a gratuitous (or gift) promise is unenforceable.

Alan finds Marcia's dog on the side of the road. He then takes the dog home and treats the dog's injuries. When he calls Marcia to tell her he has found the dog, she promises to reimburse Alan for the cost of treating the dog. Is Marcia's promise binding? a. Yes, because she should be grateful to him. b. Yes, because Marcia promised to pay him. c. No, because Alan is not a health care professional. d. No, because there was no bargained-for exchange.

No, because there was no bargained-for exchange.

Andrew received a bill for $500 from Jeff for a tune-up Jeff performed on Andrew's SUV. Andrew called Jeff and told him, "The car runs no better now than before the tune-up. I am sending you $200 and no more." Jeff received the $200 check which was marked "paid in full SUV repair" and cashed it. Is Andrew still liable to Jeff for the remaining $300? a. Yes, Andrew is liable for the full amount of the repair. b. Yes, only a court can order that the amount was unfair. c. No, customers can pay the amount they think is fair. d. No, if the check is marked "paid in full" and references the transaction.

No, if the check is marked "paid in full" and references the transaction.

In the case of Berardi v. Meadowbrook Mall Company, the court found economic duress, such as that found renders a contract void. Is this statement correct? a. No, economic duress cannot occur between two people in business. b. Yes, the court ruled that there was economic duress and overturned the lower court's summary judgment. c. Yes, Meadowbrook took unfair advantage of Berardi to collect its debt. d. No, the court affirmed the summary judgment.

No, the court affirmed the summary judgment.

The Acme Corporation contracts with the ToysandMoretoys Corporation to sell to ToysandMoretoys its entire production. After signing the agreement, if Acme increases its production from one shift to two shifts will ToysandMoretoys have to buy all of the doubled production? a. Yes, they take the risk that Acme will increase production. b. Yes, they are lucky to get the chance to handle the product exclusively. c. No, there are good faith limitations on output contracts. d. No, ToysandMoretoys always has the right to limit how much they buy.

No, there are good faith limitations on output contracts.

Billy freely agrees to sell Roger a painting for $100. Billy thinks the painting is ugly and a piece of junk. Neither Billy nor Roger are art aficionados or knowledgeable about art. After the sale is made, however, Billy discovers that the painting is worth $10,000. If Billy tries to void his agreement for lack of consideration with Roger and loses, what would be the best reason under these facts? a. Billy was under no duress at the time of the sale. b. The consideration, although disproportionate, is nevertheless adequate because he was done freely. c. Billy made a unilateral mistake. d. None of these are correct.

The consideration, although disproportionate, is nevertheless adequate because he was done freely.

Which of the following would be material to the sale of a racehorse? a. The horse's coloring is chestnut. b. The horse's running time in the last race was the fastest in the circuit. c. The horse was ridden by Josh Jockey in the last race. d. All of these are correct.

The horse's running time in the last race was the fastest in the circuit

Stephanie induces Wanda to purchase 100 shares in Zazzy Corporation at a price of $100 per share. Stephanie tells Wanda that she paid $150 for them the previous month. In fact Stephanie only paid $50. How can this representation of a past event be characterized? a. The fact that was misrepresented was not material. b. This is a mutual mistake of fact. c. The representation of a past event is a misrepresentation of fact. d. The representation is a misrepresentation of law.

The representation of a past event is a misrepresentation of fact.

Sam agrees to sell Gina a BMW automobile, both believe to be inoperable, purely for parts. The contract price is $500. Prior to the delivery of the BMW, Sam discovers that the car was simply out of fuel, runs like a dream, and refuses to deliver the automobile to Gina. The value of the operable BMW is now at $3,000. if the court allows Sam to rescind the contract, what would be the reason? a. All of these are correct. b. This is a case of unilateral mistake on Sam's part. c. Sam was under duress. d. This is a case of material mistake by both parties.

This is a case of material mistake by both parties.

In the Maroun v. Wyreless Systems, Inc. case, the court considered which of the following reason to grant summary judgment in Wyreless Systems' favor? a. Wyreless Systems' complained-of statements by Maroun were based on future events, and thus could not be a basis for misrepresentation. b. Wyrless Systems properly exercised the business judgment rule. c. Wyreless Systems was merely puffing its terms to Maroun. d. Wyreless Systems is not liable for duress.

Wyreless Systems' complained-of statements by Maroun were based on future events, and thus could not be a basis for misrepresentation

Jacqueline entered into an employment contract with The Umbrella Corporation that contained a covenant not to compete, as well as other provisions involving salary, a severance package, holiday compensation, and other employment-related benefits. If the court finds only the covenant not to compete illegal, what effect will such a ruling have on the remainder of the contract? a. Because this is a partially illegal contract, the remainder of the contract may be enforced. b. Because the covenant not to compete is illegal, the entire contract is illegal. c. Because this is a partially illegal contract, Jacqueline is entitled to liquidated damages on the remainder of the contract. d. None of these answers are correct.

a. Because this is a partially illegal contract, the remainder of the contract may be enforced.

George and Laura make mutual promises to marry, but unknown to Laura, George is already married to Barbara. In the state where George and Laura live, bigamy (marriage to more than one person) is illegal and makes a bigamous marriage void. If Laura sues George for damages and wins, what principle may she use? a. Excusable ignorance. b. Duress. c. Unconscionability. d. None of these answers are correct.

a. Excusable ignorance

Which of the following, if any, are requisites for fraud in the execution? a. False representation as to the very nature of the contract. b. Signing party does not know the character or essential terms of the contract. c. Renders the transaction void. d. All of these are correct.

a. False representation as to the very nature of the contract. b. Signing party does not know the character or essential terms of the contract. c. Renders the transaction void. d. All of these are correct.

Leo tells Nora "I promise to pay you $5,000 next year." Next year, Leo fails to pay Nora and Nora sues. Is Leo's promise enforceable? a. No, this promise is unsupported by consideration. b. No, because Nora is not undertaking anything to her legal detriment. c. No, because Leo's promise is a gratuitous promise made without consideration. d. All of these are correct.

a. No, this promise is unsupported by consideration. b. No, because Nora is not undertaking anything to her legal detriment. c. No, because Leo's promise is a gratuitous promise made without consideration. d. All of these are correct.

Madeline, age 17, ordered a pair of diamond earrings on the installment plan. She paid $50 every month until she turned 18, the age of majority. The next day, she sold them to Samantha and disaffirmed the contract. What is the result? a. Samantha is still liable because selling the earrings amounted to a ratification. b. Samantha is still liable since she had to disaffirm before her 18th birthday. c. Samantha is not liable because earrings are not necessaries. d. Samantha is still liable because she used the earrings.

a. Samantha is still liable because selling the earrings amounted to a ratification.

When it is said that a contract made by a minor is voidable, which of the following is true? a. While still a minor, he can disaffirm the contract and return the property. b. At any time before he turns 21, he can disaffirm the contract and return the property. c. Within 72 hours of the contract a minor can disaffirm the contract. d. None of these are correct.

a. While still a minor, he can disaffirm the contract and return the property.

Courts allow a minor a certain amount of time to disaffirm a contract when he turns 18 years of age. That time period is: a. a reasonable period of time after reaching the age of majority. b. 30 days from learning of his or her right to disaffirm. c. Ten days from his 18th birthday. d. one year from the date of the agreement.

a. a reasonable period of time after reaching the age of majority.

A buyer of a business may negotiate a __________ contract clause to keep the seller from running a competing business. a. covenant not to compete b. good faith c. contract in restraint of trade d. None of these are correct.

a. covenant not to compete

A noncompete agreement may be held invalid, the courts insist that the employer demonstrate that the restriction is __________ to protect the employer's legitimate interest without overly restricting the employee's ability to find another job. a. reasonable and necessary b. unconscionable c. exculpatory d. usurious

a. reasonable and necessary

One issue before the court in the First State Bank of Sinai v. Hyland case was: a. whether the contract between Hyland's father and the Bank was void due to alcohol-related incapacity. b. whether the note was discharged in Randy Hyland's bankruptcy. c. whether the bank knew that Mervin Hyland was incapacitated by liquor. d. whether a person committed to alcoholism treatment is automatically incompetent.

a. whether the contract between Hyland's father and the Bank was void due to alcohol-related incapacity.

Sean and John are business associates. At dinner, Sean has only one beer over the course of three hours. Sean is a light drinker and normally feels severely intoxicated after three beers. At the end of dinner, Sean and John enter into a multi-year agreement worth potentially millions of dollars. Later, if Sean attempts to void the contract on the basis of intoxication and loses, what would be the reason for it? a. Sean's intoxication was unable to understand the nature and consequences of his actions. b. Sean's slight intoxication did not destroy his capacity to contract. c. Intoxication is insufficient to void a contract. d. Sean was without reason or understand when entering into the contract.

b. Sean's slight intoxication did not destroy his capacity to contract.

Buyer and Seller have entered into a contract for the sale of several goods worth hundreds of thousands of dollars. In the contract, seller includes an "as is" warranty clause that is in extremely small print and inconspicuous. If the court finds this clause procedural unconscionable, what would be the reason? a. Such a clause is oppressive. b. Seller obscured this warranty clause. c. Such a clause is grossly unfair because it takes away any legal defenses that Buyer has. d. None of these answers are correct.

b. Seller obscured this warranty clause

The court, in ruling on Dunnam v. Burns,applied what reasoning to the matter? a. The court reviewed the contract and found that Dunnam drafted the document. b. The court reasoned that a document that contains an absolute obligation to repay a loan together with interest in excess of the allowed amount is usurious on its face. c. The court noted that agreements to pay a set amount, rather than an interest rate, are per se usurious. d. The court observed that Dunnam's default on the loan waived any objection to the usurious interest rate.

b. The court reasoned that a document that contains an absolute obligation to repay a loan together with interest in excess of the allowed amount is usurious on its face.

On his 17th birthday, David makes a contract to purchase a moped. In a state in which the age of majority is 18, which of the following actions would be a ratification of the contract? a. One week before his 18th birthday, David telephones the seller and says, "I intend to keep my promise to you in our contract." b. Three days after his 18th birthday, David telephones the seller and says, "I intend to keep my promise to you in our contract." c. Before his birthday David behaves as though he intends to be bound by the contract, but two days after his 18th birthday, he calls the seller and says, "The deal's off." d. None of these answers are correct.

b. Three days after his 18th birthday, David telephones the seller and says, "I intend to keep my promise to you in our contract."

__________ means contrary to the dictates of the conscience; unscrupulous or unprincipled; exceeding that which is reasonable or customary; inordinate, unjustifiable. a. Usury b. Unconscionable c. Exculpatory d. Illusory

b. Unconscionable

Marilyn sells her highly successful travel agency to Adelle. In the sales contract, Marilyn agrees never to open a travel agency in the state. Which of the following best describes this contract clause? a. Binding as fair protection. b. Unenforceable as a violation of public policy. c. Valid as a reasonable restraint on trade. d. Void as an illegal violation of a statute.

b. Unenforceable as a violation of public policy.

The type of substance ingestion that could lead a court to find one lacking in capacity is: a. the person is a chronic alcoholic. b. because of mental impairment, the person does not comprehend that a contract is being made or understand its consequences. c. the person is a drug addict. d. All of these are correct.

b. because of mental impairment, the person does not comprehend that a contract is being made or understand its consequences.

A given agreement may not violate any statute but may still be so offensive to society that courts feel that enforcing the contract would be: a. fraudulent. b. contrary to public policy. c. illegal lobbying. d. unfair to merchants.

b. contrary to public policy.

A minor may avoid or __________ a contract by any expression of an intention to repudiate the contract. a. ratify b. disaffirm c. incapacitate d. restitute

b. disaffirm

Every adult is presumed to have capacity unless: a. they cannot read and write. b. it is proven that capacity is lacking or there is status incapacity. c. they understand the full legal meaning of the contract being made. d. there was a clause of the contract they did not understand.

b. it is proven that capacity is lacking or there is status incapacity.

A(n) __________ is a measure designed to raise money by requiring the purchase of a license. a. exculpatory clause b. revenue license c. regulatory license d. usury statute

b. revenue license

Fred operates a fledgling remodeling business and is in desperate need of a certain type of drywall. He obtains the material from Megaworks, but is charged a grossly unreasonable price and is forced to buy other material he does not need. In view of the buyer's unequal bargaining power and unreasonable terms of the contract, this may be a case of: a. discrimination. b. substantive unconscionability. c. supervening illegality d. restraint of trade.

b. substantive unconscionability.

One issue before the court in the In Re The Score Board, Inc. case was: a. whether the contract with Scoreboard supplied sufficient consideration for Bryant's autographs. b. whether Kobe Bryant, by his actions, ratified a contract with Score Board after reaching the age of majority. c. whether the deal made for Bryant to sign autographs was a good opportunity. d. whether a person playing in the NBA needed protection during the time before he reached the age of majority.

b. whether Kobe Bryant, by his actions, ratified a contract with Score Board after reaching the age of majority.

One issue before the court in Payroll Advance, Inc. v. Yates case was: a. whether Yates's new employer was in competition with Payroll. b. whether the covenant not to compete between a check cashing company and its former employee was reasonable in scope and duration. c. whether there was any consideration to Yates for signing the noncompetition provision. d. whether Yates was trying to recruit clients away from Payroll.

b. whether the covenant not to compete between a check cashing company and its former employee was reasonable in scope and duration.

When a minor's guardian furnishes her with an adequate wardrobe would a new hoodie be a necessary (in the majority of states)? a. Yes, the hoodie is a necessary because it is clothing. b. Yes, it is a necessary if the minor decides she needs it. c. No, necessaries are items not provided by the guardian. d. No, the minor is not stuck with clothing of the guardian's choice.

c. No, necessaries are items not provided by the guardian.

What is the effect of slight intoxication on the capacity of a person to enter into a contract? a. If an intoxicated person is unable to understand the nature and consequences of his act, then the contract is voidable. b. The effect of intoxication is generally the same as that given to contracts that are voidable because of incompetency. c. Slight intoxication will not destroy one's contractual capacity. d. To make a contract voidable, a person need not be so drunk that he is totally without reason or understanding.

c. Slight intoxication will not destroy one's contractual capacity.

__________ is a set of oppressive or grossly unfair contract terms or exclusions. a. Procedural unconscionability b. An exculpatory clause c. Substantive unconscionability d. Tortious conduct

c. Substantive unconscionability

Buyer and Seller have entered into a contract for the sale of several goods worth hundreds of thousands of dollars. In the contract, which was prepared by Seller, Seller included a clause that stated conspicuously "If Seller sues Buyer for any and all claims related to this contract, Buyer hereby waives all available defenses in law and equity." If the court finds this clause substantively unconscionable, what would be the reason? a. This was unfair negotiation process. b. Seller obscured this waiver clause. c. Such a clause is grossly unfair because it takes away any legal defenses that Buyer has. d. None of the answers are correct.

c. Such a clause is grossly unfair because it takes away any legal defenses that Buyer has.

Sam agrees to sell Gina a BMW automobile, both believe to be inoperable, purely for parts. The contract price is $500. Prior to the delivery of the BMW, Sam discovers that the car was simply out of fuel, runs like a dream, and refuses to deliver the automobile to Gina. The value of the operable BMW is now at $3,000. If the court allows Sam to rescind the contract, what would be the reason? a. Sam was under duress. b. This is a case of unilateral mistake on Sam's part. c. This is a case of material mistake by both parties. d. All of these are correct.

c. This is a case of material mistake by both parties.

Juan sold his gas station business in San Antonio, Texas to Fred and promised Fred not to enter the gas station business in Texas for the next twenty-five years. If the court finds this agreement unreasonable and invalid, what grounds would support the court's decision. a. Unreasonable in time only. b. Unreasonable in geography only. c. Unreasonable in both time and geography. d. None of these answers are correct.

c. Unreasonable in both time and geography.

__________ is when money is loaned at a higher rate of interest than the law allows. a. Lotteries b. In pari dilecto c. Usury d. Adhesion

c. Usury

The court in Keser v. Chagnon examined which of the following issues? a. Whether Chagnon damaged the Edsel during the course of his possession of the vehicle. b. Whether Keser should have insisted that someone cosign the contract with Edsel. c. Whether Chagnon ratified the contract for the purchase of the Edsel by delaying his disaffirmance of the contract. d. Whether Keser should have been more careful in documenting Chagnon's age before entering into the contract.

c. Whether Chagnon ratified the contract for the purchase of the Edsel by delaying his disaffirmance of the contract.

Maggie owns a valuable show dog, which she knows is suffering from a disease only discoverable by a competent veterinarian. Maggie offers to sell this show dog to Naomi but does not inform her about the dog's condition. Naomi, who is not a veterinarian, makes a reasonable examination of the dog and concludes that the dog is in normal condition and purchases it from Maggie. If Naomi later discovers that the show dog suffers from the disease, can he have the sale set aside? a. No, because Naomi should have conducted a more rigorous examination of the dog. b. No, because Maggie and Noami already agreed to the sale. c. Yes, because the dog has a hidden defect that would not be discovered in an ordinary examination and Maggie failed to disclose it. d. None of these answers are correct.

c. Yes, because the dog has a hidden defect that would not be discovered in an ordinary examination and Maggie failed to disclose it.

The sole hospital in a city offers a standard patient care agreement. The contract is prepared on a standard form and offers terms on a take-it-or-leave-it basis. Such a contract is called: a. exculpatory. b. a usurious contract. c. an adhesion contract. d. an illegal restraint of trade.

c. an adhesion contract.

A __________ is an essential element for a promise or agreement to binding. An agreement without this is unenforceable and contrary to public policy. a. licensing statute b. past consideration c. legal objective d. All of these are correct.

c. legal objective

Bertha was an alcoholic, and one weekend while she was extremely intoxicated, her son took her to the store and had her purchase an expensive computer. If Bertha wishes to rethink this contract, Bertha: a. may return the computer, but cannot get her money back. b. cannot ratify the contract it is void and without meaning. c. must sober up and ratify the contract as a whole. d. may at any time keep the computer, but doesn't have to pay for it as the store should have known better than to do business with an intoxicated customer.

c. must sober up and ratify the contract as a whole.

Once __________ a minor cannot avoid a contract. a. processed b. signed c. ratified d. voidable

c. ratified

For the issue of capacity, a court will examine whether a party to the contract lacked contractual capacity when: a. the time set for performance of the contract. b. the time the value of the bargain becomes clear. c. the time the contract was made. d. the time the plaintiff expresses dissatisfaction with the contract terms.

c. the time the contract was made

Mabel is 88 years old and under the court ordered legal guardianship of her daughter. One day Mabel receives a telephone call from a health insurance salesman and purchases a $400-a-month Medigap insurance policy. The contract is: a. valid. b. voidable. c. void. d. unconscionable.

c. void.

In a __________, the parties stipulate that one shall win and the other lose depending on the outcome of an event in which their only interest is the possibility of such gain or loss? a. monopoly b. usury c. wager d. All of these are correct.

c. wager

Wendy is taking a prescribed medication which makes her drowsy and inattentive. If she enters into a contract when she is in that condition, the contract: a. would be void. b. would be unaffected as long as she took the medication exactly as prescribed by her doctor. c. would be voidable if, when she makes them, she is unable to comprehend the subject, nature, and consequences of the contracts. d. would be void only if the medication impaired her ability to act in a reasonable and rational way.

c. would be voidable if, when she makes them, she is unable to comprehend the subject, nature, and consequences of the contracts.

Contracts induced by threats of __________ are not voidable, unlike threats of __________ regardless of whether the coerced party had committed an unlawful act. a. civil prosecution; criminal prosecution b. criminal prosecution; civil prosecution c. tortious conduct; civil prosecution d. None of these are correct.

civil prosecution; criminal prosecution

A minor can avoid a contract to purchase a car if: a. the car has been destroyed. b. the car has been damaged. c. he grows tired of it. d. All of these are correct.

d. All of these are correct.

What is the capacity of a person adjudicated incompetent by a court order? a. A merchant might be able to recover the fair value of any necessaries. b. The person's own contracts are void. c. The guardian may be able to ratify contracts made by the ward. d. All of these are correct.

d. All of these are correct.

Which of the following is most likely to be classified as a necessary for which a minor will be held liable on a contract? a. A television. b. School supplies. c. Education. d. Food.

d. Food.

Juliet has wagered $500, which Lance, as her bookie, is holding, on a prize fight. If, before the race starts, Juliet wants to take back her money and withdraw from the transaction: a. Lance can successfully sue for breach. b. Juliet, by law, cannot withdraw from the transaction. c. Lance, by law, cannot withdraw from the transaction. d. Juliet cannot sue to recover any money because the contract to wager is illegal and unenforceable.

d. Juliet cannot sue to recover any money because the contract to wager is illegal and unenforceable.

Ryan, a 15-year-old, negligently crashed into Crystal's car and caused extensive damage and severely injured Crystal. Which statement is correct? (p. 7) a. Ryan can disaffirm liability for the damage to Crystal's car and resulting damages because he is a minor. b. Ryan can disaffirm liability for the damage to Crystal's car and resulting damages unless he has automobile liability insurance. c. Ryan can disaffirm liability for the damage to Crystal's car and resulting damages unless he was intoxicated. d. Ryan cannot disaffirm liability for his negligence.

d. Ryan cannot disaffirm liability for his negligence.

Veronica has not been declared incompetent by a court, but she suffers from delusions that a Martian visits her every evening at 6 p.m. to tell her that the future of the human race depended on her buying a tract of land in Lackawanna County. Today, Veronica entered a contract to purchase a large tract of land in Lackawanna County on the Martian's advice. Which of the following statements is true about the contract? a. The contract to purchase the land is valid, because the seller had no knowledge that the Martian suggested the purchase. b. The contract to purchase is void, because it was made on a Martian's advice. c. None of these answers are correct. d. The contract to purchase the land is voidable, because Veronica has not been adjudicated insane, and possible could still have understood the contract.

d. The contract to purchase the land is voidable, because Veronica has not been adjudicated insane, and possible could still have understood the contract.

When the court ruled on Alcoa Concrete & Masonry v. Stalker Bros. what law did the court use for its ruling? a. The court based the ruling on the law of contractual interpretation. b. The court examined the matter under the laws of unjust enrichment. c. The court determined whether Alcoa had a construction lien on the property involved in the jobs assigned by Stalker. d. The court reviewed the matter under the case law and statutes in the state on enforcement of the contracts of unlicensed contractors.

d. The court reviewed the matter under the case law and statutes in the state on enforcement of the contracts of unlicensed contractors.

The court in Anderson v. McOskar Enterprises, Inc .ruled on which of the following issues? a. Whether Anderson was contributorily negligent in her operation of the Curves equipment. b. Whether Anderson had a medical release from her doctor to use the equipment at Curves. c. Whether the injury Anderson suffered stemmed from a pre-existing medical condition. d. Whether the exculpatory clause in the Curves contract released the club from liability for negligence.

d. Whether the exculpatory clause in the Curves contract released the club from liability for negligence.

Nila is working hard on Sam's election campaign for the legislature. She thinks that just a few more votes could win the election, so she promises to pay her friend Daphne $50 if she will register and vote for Sam. Daphne does so, but Sam loses the election, and Nila now refuses to pay. This: a. agreement is enforceable. b. is an unconscionable contract covered by the UCC. c. is an agreement to obstruct the administration of justice. d. agreement is unenforceable and opposed to public policy.

d. agreement is unenforceable and opposed to public policy.

Mary is a person who experiences hallucinations and other psychotic episodes. She has been adjudicated incompetent and a guardian has been appointed to care for her. Any contracts from this point forward are: a. valid. b. enforceable. c. voidable. d. void.

d. void.

Alma enters into a contract while drinking a highly intoxicating beverage that causes memory loss. The resultant contract is: a. always unenforceable. b. always enforceable. c. always void. d. voidable if Alma can establish she was so intoxicated she didn't understand the nature and consequences of her actions and/or was unable to act in a reasonable manner.

d. voidable if Alma can establish she was so intoxicated she didn't understand the nature and consequences of her actions and/or was unable to act in a reasonable manner.

Sometimes the law imposes a duty of disclosure. When a fiduciary is silent, silence may constitute fraud. A fiduciary is one who: a. has the same duty of disclosure to the other party to the relationship as one who is not a fiduciary. b. must deal at arm's length with the other party to the relationship. c. is in a confidential relationship who owes a duty of trust and loyalty to another. d. All of these are correct.

is in a confidential relationship who owes a duty of trust and loyalty to another.

Cinnful Buns, Inc. entered into a contract with Darius under the terms of which Darius would receive $10,000 if he stole the trade secret recipe from the leading competitor of Cinnful Buns. Darius performed his end of the agreement by delivering the recipe. Cinnful Bunns now refuses to pay Darius for his services. Darius has this option, he: a. may recover based upon the express contract of the parties. b. may recover based upon a quasi-contractual theory in order to prevent the unjust enrichment of Cinnful. c. will be able to recover based upon promissory estoppel, because he has detrimentally relied upon the promises made by Cinnful. d. will be unable to recover, because this is an illegal contract.

d. will be unable to recover, because this is an illegal contract.

Which of the following can be consideration for a promise? a. Refraining from assaulting one's roommate. b. Promising to refrain from stealing from the boss. c. Refraining from using a controlled substance. d. Refraining from smoking cigarettes.

d.Refraining from smoking cigarettes.

The fact that the consideration turns out to be disappointing __________ the binding character of the contract. a. does affect b. does not affect c. sometimes affects d. None of these are correct.

does not affect

A person should not be held to an agreement he has not entered voluntarily. Accordingly, the law will not enforce any contract induced by: a. puffery. b. duress. c. mistake. d. All of these are correct.

duress.

A resulting contract is void when it is brought about by: a. fraud in the execution. b. fraud in the inducement. c. innocent misrepresentation. d. All of these are correct.

fraud in the execution.

A person is not entitled to relief from fraud, unless she can show that she: a. was unduly influenced. b. justifiably relied on the misrepresentation. c. was physically forced to comply. d. All of these are correct.

justifiably relied on the misrepresentation.

As an exception to the rule on courts inquiring as to the adequacy of the consideration, a court will take evidence to establish: a. one party clearly has the better of the deal. b. one party claims to have been defrauded. c. one party has more business experience than the other. d. one party shows a much lower price nationally-advertised on television.

one party claims to have been defrauded

A contract based on __________ is not enforceable. a. legal detriment b. legal benefit c. past consideration d. unequal consideration

past consideration

Patrick held a baseball bat to Eric's head to compel him to sign a contract advantageous to Patrick. This contract was entered under: a. undue influence. b. physical duress. c. false representation. d. improper threats.

physical duress.

Baxter, a plumber, wants to submit a bid on a city sewer project. He computes the cost, but mistakenly omits the cost of one item. Accordingly, he submits a bid of $430,000 to the city. The next highest bid is $675,000, and the rest of the bids are even higher. The city is happy to have such a low bid, so it accepts Baxter's bid and awards him the contract for the job, even though the city engineer is of the opinion the job cannot be done for less than $650,000. In this case: a. Baxter must perform for the agreed upon price, because he has made a unilateral mistake. b. the city was aware of Baxter's mistake. When it accepted the bid, with knowledge of Baxter's mistake, the city sought to take an unconscionable advantage of Baxter's error. c. there is a case of mutual mistake. d. All of these are correct.

the city was aware of Baxter's mistake. When it accepted the bid, with knowledge of Baxter's mistake, the city sought to take an unconscionable advantage of Baxter's error.

Francisco is a concert violinist who is scheduled to perform at the Kennedy Center for the first time. He buys what he is told is a Stradivarius violin from a well-known, reputable dealer in quality violins, and he pays the going rate for a Stradivarius. He later learns the violin is an imitation, sold by the dealer who was trying to make quick money. In this case: a. the dealer has committed fraud in the inducement. b. the sale may be rescinded, because the dealer has made a nonfraudulent misrepresentation. c. Francisco has made a unilateral mistake and cannot avoid the contract. d. the sale is voidable by the seller for mutual mistake.

the dealer has committed fraud in the inducement

When only one party is mistaken as to a fact or facts of the transaction, it is termed: a. negligent misrepresentation. b. unilateral mistake. c. subjective concealment. d. mutual mistake.

unilateral mistake.

One issue before the court in Vanegas v. American Energy Services case was: a. whether the sale of the company was contingent on the continued presence of the Vanegas and the other original employees. b. whether AES was bound by a promise to pay at-will employees 5% of the value of the sale of the company if they continued their employment after the sale. c. whether the employees who remained with AES were sufficiently compensated for their work. d. whether AES would have failed had the original employees not continued their employment.

whether AES was bound by a promise to pay at-will employees 5% of the value of the sale of the company if they continued their employment after the sale.

One issue before the court in New England Rock Services, Inc. v. Empire Paving, Inc.case was: a. whether the NER did a poor job of bidding the job due to lack of preparation on their part. b. whether Empire was operating in good faith during the course of the conduct. c. whether the purchase order signed to modify the contract was a sufficient writing under the statute of frauds. d. whether the modified agreement between NER and Empire was valid and enforceable as supported by sufficient consideration.

whether the modified agreement between NER and Empire was valid and enforceable as supported by sufficient consideration.

One issue before the court in Neugebauer v. Neugebauer case was: a. whether Lincoln's actions toward his mother in securing the land contract were fraudulent. b. whether the real estate contract in the case should be rescinded on the grounds of undue influence. c. whether the actions of Lincoln in arranging the purchase of his mother's land were unconscionable. d. whether the price for the land was adequate consideration.

whether the real estate contract in the case should be rescinded on the grounds of undue influence