BUSINESS LAW MIDTERM

What is the distinguishing characteristic that makes a contract a formal contract?

a legal requirement that the contract be in a specific form

Lisa enters into a contract with Acme Groceries, Inc., in which she promises to purchase groceries "as she determines appropriate in the future" from Acme, and Acme promises to sell such groceries to Lisa. This is an example of:

an illusory promise by Lisa

Every contract has both:

an offeror and an offeree

In an auction when the highest bid has been made and no higher bids are forthcoming, the highest bid is treated as an acceptance in:

auctions without reserve, but not in auctions with reserve

To meet the contractual requirement, consideration must be:

bargained-for and involve a legal detriment to each party

An offeree can form a contract by making a promise if the offer to form the contract is:

bilateral

A contract in which the seller agrees to sell all of its production to a single buyer is known as an "output contract."

TRUE

A contract may be enforceable by a court of law or equity.

TRUE

A contract remains executory as long as any party to the contract has not fully performed.

TRUE

A minor may not affirm one part of a contract and disaffirm another part.

TRUE

A party has given consideration for a contract if that party suffers a legal detriment even if the other party does not receive a benefit.

TRUE

A rejection of an offer is generally not effective until it is received by the offeror.

TRUE

An offer for a unilateral contract cannot be accepted by a mere promise to perform.

TRUE

Death of the offeror terminates an offer even if the offer could still be carried out by the estate of the offeror, such as the sale of property of the offeror.

TRUE

For a person who has alternating periods of sanity and insanity, any contracts made during a lucid interval are enforceable.

TRUE

If an offeree rejects an offer and then attempts to accept that same offer, the offer is now construed as a new offer that the original offeror is free to accept or reject.

TRUE

In an auction without reserve, the seller is the offeror.

TRUE

In certain circumstances, silence can operate as acceptance.

TRUE

In some states, the courts will examine the amount of consideration and will allow a party to avoid a contract where the consideration is so inadequate that it "shocks the conscience" of the court.

TRUE

Offers made to the public may be revoked by communicating the revocation by the same means used to make the offer.

TRUE

Promissory estoppel is an equitable doctrine that prevents the withdrawal of a promise by the promissor if it will adversely affect a promissee who has changed his or her position in justifiable reliance on the promise.

TRUE

Quasi-contracts and implied-in-law contracts are two terms for the same situation.

TRUE

Sandra accepts an out of court settlement in exchange for dropping a lawsuit. The settlement agreement is supported by consideration in the form of forbearance of a legal right.

TRUE

The communication of an offer can be made by the offeror or the offeror's agent.

TRUE

The imposition of a best efforts clause is generally viewed as sufficient consideration.

TRUE

The offeree has the power to create a contract by accepting the offer.

TRUE

Under the law, written contracts are presumed to be supported by consideration.

TRUE

Under the modern law of contracts, there is substantial government regulation of the right to contract.

TRUE

What constitutes a necessity for a minor will depend on the particular minor's own individual circumstances.

TRUE

When a person is adjudged insane, that person loses the ability to enter into contracts.

TRUE

Which of the following will not generally automatically terminate an open offer?

changed economic circumstances

In order for a contract to be valid, it must:

contain an offer, acceptance, and consideration

An offer lapses upon the following except:

detrimental reliance

Lori just purchased a brand new lawnmower for $500. When she got home and tried to use it, it would not work. She became angry and shouted, "I'd sell this thing for $50." Her neighbor heard her and said, "I'll take it," and offered Lori the $50 in cash. Which of the following best describes this situation?

This situation does not result in the creation of a contract.

The main purpose for making contracts involving minors voidable at the minor's option is:

To protect the minor from unscrupulous adultS

The basic concept that both parties to a contract should have agreed to the same terms is referred to as:

mutual assent

A bail bond is an example of what type of formal contract?

recognizances

Which of the following would terminate an offer?

revocation by the offeror, rejection by the offeree, and counteroffer by the offeree

In order for someone to avoid a contract on the grounds of intoxication, the level of intoxication must have been:

so great that he didn't comprehend the nature of the agreement he was entering into

The terms "bilateral" and "unilateral" as applied to contracts are based on:

the number of parties who make a promise in the formation of a contract

A contract is formed by the performance of the requested act in what kind(s) of contract?

unilateral

With mutual assent between the parties, there is no contract.

FALSE

Which of the following would be a valid offer?

John tells Rhoda, "I'll give you $500 for your motorcycle."

Buyer executes a requirements contract with seller for the next year. Which statement is true?

Buyer must purchase all product needed from Seller.

A 1-year lease for an apartment that is 12 pages long, printed, covers all details of the parties' obligations, and contains the dated signature of each party is a formal contract.

FALSE

A law that sets an upper limit on the interest rate that can be charged is unconscionable.

FALSE

A minor may not ratify a contract.

FALSE

All states allow gambling contracts to be enforced in the courts.

FALSE

An offer made in anger, where a reasonable person would not have known that it was made in anger, cannot result in a contract.

FALSE

An unlicensed contractor who performs services is entitled to payment for his services even if the licensing statute in question is regulatory in nature.

FALSE

For the doctrine of promissory estoppel (detrimental reliance) to apply, there still must be a contract with adequate consideration.

FALSE

Generally, a moral obligation is sufficient consideration to bind someone to a contract.

FALSE

In most states, if a minor misrepresents her age when entering into a contract, that contract cannot be disaffirmed.

FALSE

One requirement of an express contract is that it be in writing.

FALSE

The United Nations Convention on Contracts for the International Sale of Goods applies to any contract that involves a buyer and seller in different nations.

FALSE

The level of intoxication allowing a party to disaffirm a contract is the same as that considered too intoxicated to legally operate a motor vehicle.

FALSE

The nonperformance of an accord is called satisfaction by the debtor party.

FALSE

The person who makes an offer to enter into a contract is the "offeree."

FALSE

Two of the four basic contract requirements are agreement and signatures of the parties.

FALSE

A promise to deliver merchandise in the future:

Is consideration because it involves a new legal duty

Two friends, Ann and Mary, are having margaritas at happy hour. There had been no discussion of who would pay for the drinks. After the third round of drinks, Ann said, "I will pay for everything tonight including your drinks." A couple of minutes later, Ann says, "I've changed my mind. I just remembered that they might be having layoffs at my job tomorrow." Mary wants to force Ann to perform on her promise and threatens to sue. In this circumstance, a court would:

Not require Ann to follow through on the promise because it was a gratuitous promise

In which of the following situations have both parties given consideration to support a contract?

Pat, an accounting professor, agrees to tutor one of her students in the study of French for $10 per hour.

If a minor buys an item and then disaffirms the contract, and a court orders the minor to merely return the item in its present condition in order to get a refund, this minor has the duty of:

RESTORATION

If a contract or contract clause is found to be unconscionable, the courts can do which of the following?

REfuse to enforce the contract, refuse to enforce only the unconscionable portion, and limit the application of the unconscionable portion

Which of the following statements is true?

Restitution is placing the other party back in the position it was in prior to the contract.

Sally owns a very expensive fur coat that Mary would like to buy. During the course of conversation, Mary asks how much Sally would take for the coat. Sally replies, "I am not sure I want to sell the coat, but I think it is worth about $3,000." Mary says, "That is a little more than I wanted to spend." Several days later, Mary calls Sally on the telephone and says, "I'll bring over the $3,000 today." Sally refuses to sell the coat, and Mary sues. What results?

Sally wins; there was never any offer for Mary to accept.

Which of the following constitutes legal consideration?

a promise based upon a change in duties and payments

Which of the following can be considered consideration?

a promise to perform a service in the future, payment of cash, and actual performance of a service

To create an enforceable contract, which of the following is(are) needed?

agreement, consideration, contractual capacity, and a lawful objective

Which of the following are necessary to meet the requirements of a definite offer?

identification of the parties, subject matter, and quantity, consideration to be paid, and time of performance

Which of the following are two terms for concept or situation?

implied-in-law contract and quasi-contract

Advertisements are usually considered to be:

invitations to deal

The rejection of an offer:

is effective when received by the offeror, and prevents the offeree from later accepting that offer

What is required for a contract to be an express contract?

it is stated in words

An illusory promise is:

one that a party has to perform if he or she chooses to do so