Chapter 12 BLAW Questions

Who is the promisor in a bilateral contract that benefits a third party?

??

Covenant not to complete

A contractual promise of one party to refrain from conducting business similar to that of another party for a certain period of time and within a specified geographical area.

Reformation

A court-ordered correction of a written contract so that it reflects the true intentions of the parties.

Intended beneficiary

A person who is not a party to a contract but who the contracting parties meant to benefit from the contract and has rights to sue if the contract is not performed.

Third party beneficiary

A person who is not a party to a contract but who will benefit by the performance of the contract.

Incidental beneficiary

A person who is not a party to a contract but who will benefit from the performance of a contract; this person has no right to sue if the contract is not performed.

Rescission

A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made.

Why wouldn't Dave have a contract?

Acceptance only can be given by the person to whom the offer is being made.

Alonzo graduates with a 3.8 GPA in Accounting from a New York university and receives offers of employment from three of the Big Four accounting firms. While considering his options, a mid-sized firm in California calls and offers him twice the starting salary of his top offer. The only caveat is he needs to show up at the Los Angeles office within the next week to start work immediately. Alonzo excitedly decides to take the California job. He refuses the other employment offers, breaks his lease in New York, sells or gives away most of his possessions, buys a new car, and heads for L.A. the next day. When he arrives at the Los Angeles office three days later, the firm apologizes and informs Alonzo that the position is no longer available due to the loss of a major client.

Alonzo could bring a claim against the firm on the theory of promissory estoppel.

Which of the following statements could be a valid offer?

An auction without reserve

In what manner can a party accept an offer?

Both

What facts indicate Judy may not have used a proper mode of acceptance? Judy was asked to respond to _____ and instead she responded to _______.

Bruce; Kristy

All gambling contracts in the United States are illegal.

False

An effective offer requires that a reasonable price be related to market value.

False

When a minor who has entered into a contract opts to avoid that contract, she or he can choose the particular portions of the contract to disaffirm.

False

Emancipation

In regard to minors, the act of being freed from parental control; occurs when a child's parent or legal guardian relinquishes the legal right to exercise control over the child.

Constance tells Jill, her best employee, "Your work is so good, if I like what you do over the next six months, I'll give you a $1,000 bonus." Constance does not give Jill the bonus, so Jill sues. Most likely:

Jill will not win, because this is an illusory promise without consideration.

Dave's acceptance didn't terminate Kristy's offer to Judy because ________ accepted first.

Judy

Who could accept Kristy's offer to sell?

Judy

After Joyce Johnston's death, _____ owned the seventy-eight acres of property.

Judy Olsen and Kristy Johnston

How did Judy unequivocally accept the offer? _____ wrote a letter to ________ accepting the offer.

Judy wrote a letter to Kristy accepting the offer.

Kristy wrote to Judy, offering to buy Judy's interest or to sell her own interest to Judy. The letter said to, "please respond to Bruce Townsend." The offeror is _____________and the offeree is _______________.

Kristy is the offeror; Judy is the offeree

Kristy communicated her offer to Judy through a(n)

Letter

Les agrees to install a new hard drive and software on Marilee's computer in exchange for four of her used textbooks. After he installs the hard drive, Les says he won't install the software unless Marilee gives him two more books. What legal position are the parties in now?

Marilee can sue for breach of contract, because Les had a preexisting duty to do all of the work.

Did Judy use the proper mode of acceptance?

Maybe

A valid offer requires communication. Was Kristy's offer communicated to Dave?

No

Did Dave have a contract?

No

Did Dave's acceptance terminate Kristy's offer to Judy?

No

Did Judy unequivocally accept the offer?

No

Did Judy's acceptance propose new terms or conditions?

No

Did Kristy clearly limit the acceptance to a reply to Bruce?

No

Did the request to respond to Bruce exclude any other mode of acceptance?

No

Sergio contracts to hire Belinda to work for him at $3,000 per month, reserving the right to cancel the contract at any time. Two days before Belinda is scheduled to start work, Sergio exercises his option-to-cancel clause. Will Belinda be successful in a lawsuit against Sergio?

No, because the promise was illusory and, therefore, unenforceable.

WHAT IF THE FACTS WERE DIFFERENT? What if Kristy and Judy were visiting face to face and Kristy made the offer to sell her property to Judy. Dave overheard and chimed in, "I'll buy it!" before Judy could reply. Does Dave have a contract? ______.

No.

_______________ unconscionability occurs if a contract is entered into, or a term becomes part of the contract, because of a party's lack of knowledge or understanding of the contract or the terms.

Procedural

What type of acceptance was required here?

Promise

Past consideration

Something given or some act done in the past, which cannot ordinarily be consideration for a later bargain.

Age of majority

The age at which an individual is considered legally capable of conducting himself or herself responsibly.

Disaffirmance

The legal avoidance, or setting aside, of a contractual obligation.

Ryan sends Michael a letter of intent for the purchase of a tract of land. The letter of intent outlines the purchase price, the legal description, and the financing terms. A paragraph is included that states that the letter of intent is a non-binding agreement and that it is an offer to enter into negotiations.

The letter of intent is an invitation to negotiate, which is not an offer.

Courts in a growing number of states place additional duties on the minor when the minor disaffirms. These duties include:

The minor is responsible for ordinary wear and tear for the returned property The minor is responsible for damages to the property returned. The minor is responsible for the depreciation of that returned property.

Which of the following is not a necessary element for an offer to be effective?

The offer must be fair.

__________ can accept an offer.

The person to whom the offer is made.

What will a court generally not review to determine whether a contract's terms are definite?

The value of the consideration

Agreement is normally evidenced by an offer and an acceptance.

True

An acceptance sent by means not expressly or impliedly authorized normally is not effective until it is received by the offeror.

True

Carmen agrees to cook twenty dinners for Hal. In exchange, Hal will repair all of the plumbing in Carmen's house. Carmen has offered legally sufficient consideration because Carmen has promised something of value.

True

Courts generally assume the existence of contractual capacity.

True

If two parties substitute a new contract for an old one and the court finds that there was a preexisting duty, then the new contract will be invalid because there was no consideration.

True

In contract law, ratification is the act of accepting and giving legal force to an obligation that previously was not enforceable.

True

The requirement that an offer be properly communicated to the offeree means that the offeror must inform the offeree about the offer in some effective way.

True

Which of the following would NOT be an indicator of third party rights vesting in a contract?

When the incidental third party beneficiary becomes aware of the benefit to her.

A valid offer requires an intent to be bound. Did Kristy intend to be bound?

Yes

A valid offer requires communication. Was Kristy's offer communicated to Judy?

Yes

A valid offer requires definite terms. Did the parties know the property offered?

Yes

Did Judy's acceptance of the offer terminate Kristy's offer to Dave?

Yes

Did Judy's reply satisfy the mirror image rule?

Yes

Was Kristy's offer to sell her property interest to Judy a valid offer?

Yes

Without a clear limitation to respond to Bruce, would it be reasonable for Judy to respond to Kristy?

Yes

Would a court likely find that Judy had accepted the offer?

Yes

What language could have been included to make it clear that Judy must respond to Bruce?

You must reply to Bruce Townsend to accept this offer.

Jackson offers to pay Casey $50 for his used business law textbook. Casey agrees to sell it for that amount. They agree to meet one week later to exchange the money for the book. Casey and Jackson have formed:

a bilateral contract

Which of the following is NOT among the types of contracts and clauses that are often held to be contrary to public policy?

a divisible, or severable, contract

A preexisting duty might exist because of ________ and a duty imposed by law.

a duty imposed by a previous contract

Olivia says to Jim, "I think I'll sell my new digital camera for $100 because I'm never going to use it." This statement constitutes:

a statement of future intent

Diana tells Crystal, "I think I'll sell that camping gear I bought for hiking the Pacific Trail for $250. I'm never going to make that trip." This constitutes:

a statement of future intent.

Once an offer is accepted, a _____ is created

a valid binding contract

Which of the following occurrences will NOT terminate an offer?

acceptance

Seven companies agree that they will not compete against each other, will set prices, and not hire each other's employees. Such a contract will be

an illegal contract in restraint of trade

A usurious contract involves

an illegally high rate of interest

A restaurant owner requires new employees to sign a covenant not to compete in the restaurant business in the entire United States for five years. Such a covenant will

be deemed contrary to public policy because of excessive duration and unreasonable geographic restriction

Pascal's new Mercedes won't start one morning and he screams to his passenger, "For a thousand bucks, I'd get rid of this car." The passenger normally cannot buy the car for $1,000:

because a reasonable person would know that a serious offer was not being made.

A creditor beneficiary can sue to enforce a contract ________.

because they are an intended beneficiary.

The type of contract in this case is a ___________ contract.

bilateral

Espinoza is sixteen but looks much older. She purchases a diamond bracelet, but decides nine months later that it was unwise to spend the money, so she:

can return the bracelet and get all of her money back.

Asa has a contract with Phil to personally provide fortune-telling services at Phil's daughter's birthday party. Phil's daughter decides she does not want to have a fortune teller at her birthday party, so Phil tries to assign the right to Asa's services to his neighbor, Steve. Steve:

cannot enforce the contract with Asa, because rights to receive personal services cannot be assigned.

In the interest of fairness and equity, the courts may allow an exception to the preexisting duty rule when ________

contract performance involves unforeseen difficulties

"Please respond to Bruce" asks that Judy respond to Bruce, but ______ say she must respond to Bruce.

does not

You receive a letter telling you that you will start receiving a box of fresh fruit each month and that if you don't want them, you have to reply within seven days. You ignore the offer. Your silence ______

does not constitute an acceptance of the offer

Melissa is a minor who agrees to purchase a particular car from Umberto for $10,000 one month after she turns eighteen years of age. On turning eighteen, Melissa writes to Umberto stating that she still agrees to purchase the car. Melissa's contract with Umberto is:

enforceable, because it has been expressly ratified by Melissa.

Which of the following would NOT be considered an exculpatory clause that a court would hold as contrary to public policy and therefore unenforceable?

exculpatory clauses in bungee-jumping contracts

Adults who enter into contracts with minors can avoid their contractual duties just as the minors can.

false

All covenants not to compete are contrary to public policy and therefore illegal.

false

Because a donee beneficiary is merely receiving a gift, a donee beneficiary cannot win a lawsuit if the contract is not performed.

false

Both intended and incidental third party beneficiaries may sue to enforce a contract, so long as their rights have vested.

false

Covenants not to compete are not permitted when they involve the sale of an ongoing business.

false

Ronald suffers from dementia, which impacts his brain function, but he also has healthy periods when his mind is fully functioning. During one of these healthy periods, Ronald enters into a contract, which he later seeks to avoid. In a majority of states, the contract will not be enforced because of Ronald's dementia.

false

Julius asks Rachel if she would like to sell her boat. Rachel privately has no interest in selling her boat and believes that Julius can't afford her boat anyway. Rachel says, "I'd sell my boat to you for $400." To Rachel's surprise, Julius responds "Ok, it's a deal." Rachel does not want to sell the boat to Julius for any price. Julius and Rachel have:

formed a valid contract, because Rachel's outward expressions showed the formation of a contract.

Sven goes to a bar, drinks eight shots of bourbon, and then goes to an electronics store, where he buys a large flat-screen TV for $2,500. If he later wants to void the contract based on his intoxication when he bought it, he will need to prove that

he lacked the mental capacity to enter into the contract.

Marcy owns a trucking company that hauls goods all over the country. Wilson contracts with Marcy's company to transport ten tractor-trailer loads of goods from Ohio to Texas. After delivery of the goods, Marcy has reason to believe the goods are stolen, but never asks Wilson about it. The contract:

is enforceable, because Marcy's company was justifiably ignorant of the fact that the goods were stolen.

Samantha, a famous artist, has a contract with Alec to paint his portrait for $6,000. Samantha is very busy and wants to delegate her duty to paint the portrait to Patty, her top student and a very talented artist. If Alec objects, a court likely will:

not honor the delegation, because the contract is based on personal skill.

Generally, when minors act on their own, their parents are

not liable for contracts made by their minor children.

Something of legally sufficient value may consist of the performance of an action that one is otherwise not ___________ to undertake. Something of legally sufficient value may consist of the ____________ from an action that one has a legal right to undertake, called a forbearance.

obligated; refraining

In an auction, the auctioneer acts as the

offeree

Something of legally sufficient value may consist of a promise to do something that one has no ______________ legal duty to do.

prior

In determining whether a third party is an intended or incidental beneficiary, courts typically use the _________ test. Factors that indicate a party in an intended beneficiary may include whether performance is rendered ___________ the third party, if the third party has the right to ____________ of performance, and if the third party is ___________ mentioned in the contract.

reasonable person; directly to; control details; expressly

By which of the following methods can a party not terminate an offer?

repudiation

What was their relationship?

sisters

Consideration can be defined as

something of value given in exchange for a promise

Exculpatory clauses release a party from liability in the event of monetary or physical injury no matter who is at fault.

true

If a contract is divisible into legal and illegal portions, a court may enforce the legal portion but not the illegal one, so long as the illegal portion does not affect the essence of the bargain.

true

When one party has no reason to know that a contract is illegal, that party can often recover any benefits conferred in a partially executed contract.

true

When bargains are so oppressive that the court decides to relieve innocent parties of their duties, such bargains are deemed

unconscionable

Shockingly inadequate consideration can indicate the existence of what exceptions? Choose three.

undue influence; duress; fraud

Any contract to commit a crime is in violation of a statute and therefore

unenforceable

Marte hires Pilar to represent her in a lawsuit. Pilar is not a licensed attorney, although she claims to be one, so the contract between Marte and Pilar

will not be enforced