Chapter 5: Nature and Classes of Contracts

Which of the following is not a true contract?

A quasi-contract A quasi-contract is not a true contract. One may have rights and obligations imposed by law when no real contract exists. This imposition of rights and obligations is called a quasi-contract. Review the section "Classification of Contracts" in Chapter 5.

Which of the following type of contract is enforced by the courts against all parties?

A valid contract A contract can be defined as a legally enforceable agreement between two or more competent people. An agreement with no legal effect is void. A valid contract is an agreement that courts will enforce against all parties. Review the section "Classification of Contracts" in Chapter 5.

What is the difference between an agreement and a contract?

An agreement exists when two people's minds meet on a certain subject, but a contract only results when the parties intend to be legally obligated by the terms of the agreement. A contract must be an agreement, but an agreement need not be a contract. An agreement exists when two people's minds meet on a certain subject, but a contract only results when the parties intend to be legally obligated by the terms of the agreement. Review the section "Contracts Contrasted with Agreements" in Chapter 5.

Which of the following is an example of a valid contract?

Buying a car by paying money to the seller Buying a car by paying money is a valid contract. In a valid contract, the promise or obligation of each party must be supported by consideration (such as the payment of money, the delivery of goods, or the promise to do or refrain from doing some lawful future act) given by each party to the contract. Review the section "Contracts Contrasted with Agreements" in Chapter 5.

Which of the following classes of contracts is very appropriately described by the adage "actions speak louder than words"?

Implied contracts An implied contract is one in which the duties and the obligations that the parties assume are not expressed but are implied by their acts or conduct. The adage "actions speak louder than words" very appropriately describes this class of contracts. Review the section "Classification of Contracts" in Chapter 5

Which of the following requirements is not necessary to create a valid contract?

It must be fair to both parties. Typically, a contract need not be considered "fair" to both parties to be a valid contract. However, to be valid, a contract must be based on mutual agreement by the parties; be made by competent parties; be supported by consideration from each party; be for a lawful purpose; and in some cases, meet formal requirements. Review the section "Requirements for a Contract" in Chapter 5.

Tim owns a mattress manufacturing company that employs around 250 laborers. After noticing a decline in the quality level of the mattresses and a fault in the quilting machine used to manufacture the mattress covers, he called his employees for a meeting. In the meeting, Tim promised to pay $1,000 to anyone who would repair the quilting machine. Hearing the promise, John, an employee, successfully fixed the machine. Which of the following is true with regard to this scenario?

This is an example of a unilateral contract between Tim and John. Tim made a unilateral contract with John. When an act is done in consideration for a promise, the contract is a unilateral contract. Review the section "Classification of Contracts" in Chapter 5.

Dazzle Cosmetics Inc. is a company which sells the best mineral makeup in New York City. The company holds a very large customer base in the city. The contract of selling mineral makeup by Dazzle to its customers is governed by the:

Uniform Commercial Code Contracts are extremely important in business because they form the very foundation upon which all modern business rests. Business consists almost entirely of the making and performing of contracts. A contract that is a sale of goods is governed by the Uniform Commercial Code. Review the Introduction section in Chapter 5.

Sam and Rachel Smith own a lot in Orchard View, a mobile home park. They have lived there for 10 years and get water, sewer, garbage and snow removal services. For six years, the Smiths paid $60 per month for these services, but then concluded that the quality of services had declined. The Smiths continued receiving the services, but refused to pay anything for them. Orchard View kept supplying the services and billed the Smiths $60 per month. Orchard View finally sued the Smiths for the unpaid balance. Must the Smiths pay for the services, and if so, on what basis?

Yes, a quasi-contract will impose an obligation to pay so that the Smiths will not be unjustly enriched by the receipt of services.

Kelly, a contractor, asked Bob's Lumber to provide building supplies for a home. Kelly completed and signed Bob's credit application, which required the applicant to "pay attorney's fees, costs and any other expense related to the collection of debt." Bob's approved the application and supplied $30,000 worth of lumber to Kelly for the project. After Kelly did not pay for the lumber, Bob's sued Kelly to collect the $30,000 and to recover attorney's fees and costs. The court will only award attorney's fees and costs if there is an enforceable contract providing for them. Was the credit application an enforceable contract?

Yes, because the application was based on mutual agreement by two competent parties and the obligation of each party was supported by consideration. In the given scenario, the credit application is an enforceable contract, because the application was based on mutual agreement by two competent parties and the obligation of each party was supported by consideration. Moreover, the contract was for a legal purpose. Review the section "Requirements for a Contract" in Chapter 5.

At a charity dinner benefiting educational non-profit entities, the master of ceremonies offered to pay $100 to anyone who would come to the podium and recite the Declaration of Independence. Jeremy, an 19 year old college student and history major, proceeded to the podium and recited the entire piece perfectly. Does Jeremy have a valid contract with the master of ceremonies?

Yes, the parties have a valid oral contract. In the given scenario, Jeremy has an oral contract with the master of ceremonies. An oral contract is one in which the terms are stated in spoken, not written, words. Such a contract is usually enforceable. Review the section "Classification of Contracts" in Chapter 5.

A void contract is a(n):

agreement with no legal effect. An agreement with no legal effect is void. An agreement not enforceable in a court of law does not come within the definition of a contract. Review the section "Classification of Contracts" in Chapter 5.

A(n) _____ contract is one in which the terms have not been fully carried out by all parties.

executory An executory contract is one in which the terms have not been fully carried out by all parties. Review the section "Classification of Contracts" in Chapter 5.

Ashton has had his lawn mowed by Nick five times so far out of their total contractual agreement of 10 times. Moreover, Ashton has not yet paid Nick for the last two times. This is an example of a(n):

executory contract. The given scenario is an example of an executory contract. An executory contract is one in which the terms have not been fully carried out by all parties. Review the section "Classification of Contracts" in Chapter 5.

A quasi-contract is not a true contract because:

the parties have not made an agreement. One may have rights and obligations imposed by law when no real contract exists. This imposition of rights and obligations is called a quasi-contract or implied-in-law contract. It is not a true contract because the parties have not made an agreement. Review the section "Classification of Contracts" in Chapter 5.

Jill promises to pay $500 to Jack if he helps her set up the gym equipment at her newly opened gym. Jack helps her set up the gym equipment. This is an example of a(n):

unilateral contract. The given scenario is an example of a unilateral contract. When an act is done in consideration for a promise, the contract is a unilateral contract. Review the section "Classification of Contracts" in Chapter 5.

Janice mistakenly paid her piano teacher $1000 in tuition for the semester, instead of the $750 owed under their contract. The law creates an agreement for repayment of the excess $250, even though no actual agreement exists between the parties, because a failure to so would result in:

unjust enrichment for the piano teacher. Rights and obligations will be imposed when failure to do so would result in one person unfairly keeping money or otherwise benefiting at the expense of another. This is known as unjust enrichment. In this scenario, the law creates an agreement for repayment, even though no actual agreement exists between the parties. Review the section "Classification of Contracts" in Chapter 5.

Anna, age 12, signed a release of liability at an entertainment park run by FunTimes, Inc. Anna was then injured while riding the bumper cars and decided to set aside the release in order to sue FunTimes, Inc. for negligence. The release of liability is an example of a(n) _____ contract.

voidable The release of liability is a voidable contract. A voidable contract would be an enforceable agreement but, because of the circumstances or capacity of one party, one or both of the parties may set it aside. A contract made by an adult with a minor is often voidable by the minor. Such a contract is enforceable against the adult, but not against the minor. Review the section "Classification of Contracts" in Chapter 5.

_____ include contracts under seal, recognizances, and negotiable instruments.

Formal contracts A formal contract must be in a special form or be created in a certain way. Formal contracts include contracts under seal, recognizances, and negotiable instruments. Review the section "Classification of Contracts" in Chapter 5.