practice test 3
Able Co. entered into a contract with Baker Co. for the sale of goods. Both parties are merchants under the UCC and each party used its own form as an offer and acceptance. On the reverse of each form, there were minor terms that conflicted with each other. What is impact of these minor differences in terms in the forms on the contract?
A contract does exist and it includes the terms agreed upon plus gap-fillers from the UCC
Which of the following is the first step in the contract formation process?
An offer in definite terms
situation in which one person induces the formation or modification of a contract by threatening another person's economic interests
Economic duress
A partnership is an income tax-paying entity for federal income tax purposes. True or False?
False
A sole proprietorship is a legal entity separate from its owner. True or False?
False
No formalities are required in order to establish a partnership. True or False?
False
Which of the following is NOT a basic element of a contract?
Goods
a partnership that has elected to obtain limited liability for its partners by filing with the secretary of state
Limited liability partnership
Jimmy and Pat had a long-standing professional relationship. In 2001, Jimmy's business began experiencing financial strain. The two friends discussed Jimmy's personal problems and financial difficulties, and Pat was concerned about his friend's depressed mental state. In 2003, Pat flew from Atlanta to New York to meet Jimmy. Prior to Pat's flight, Jimmy's employee had faxed copies of various construction contracts and correspondence relating to Jimmy's controversial projects for Pat to review. In late 2005, Pat billed Jimmy for a $40,000 balance that Jimmy owed on the alleged oral contract. In a letter to Pat, Jimmy stated: "I have paid you plenty and will not pay you any more. I have not called for any professional advice since then." Pat filed suit against Jimmy for breach of contract. Will Pat succeed?
No, because it was a friendly advice and not an actual contract.
Which of the following actions constitutes the acceptance of an offer?
Offeree reflected assent to the terms of the offer in the requisite manner
Linda wanted to replace the old carpet in her home. She entered into a contract with Carpet Co., for the purchase and installation of a new carpet. The price of the carpet was $3,000 and the cost of the labor to install the carpet was $150. Later, Linda became dissatisfied with this transaction and now wants to sue Carpet Co. Linda wants to apply the contract rules of the UCC, but Carpet Co., wants to apply the contract rules of the common law. Which source of law should govern this case?
The contract rules of the common law apply, because the contract included services, which are governed by the common law.
Which of the following actions is considered to reflect a counteroffer?
a demand for additional terms
To qualify as a contract, a set of promises must be based on a voluntary agreement, which is made up of an offer and a(n) _____ of that offer.
acceptance
to adjudge; settle by judicial decree
adjudicate
the ability to incur legal obligations and acquire legal rights
capacity
an order charging all or part of the partner's transferable partnership interest with payment of the unsatisfied amount of the judgment
charging order
a contract in which one person (the guarantor) agrees to pay the debt or obligation that a second person (the principal debtor) owes to a third person (the obligee) if the principal debtor fails to perform. the guarantor pays only if the principal debtor fails to do so
collateral contracts
Which of the following is an advantage of a sole proprietorship?
complete control over the business
The ____ of a fact through some active conduct intended to prevent the other party from discovering the fact is considered to be the equivalent of an assertion.
concealment
active hiding of a fact
concealment
a form of business organization that is owned by owners, called shareholders, who have no inherent right to manage the business, and is managed by a board of directors that is elected by the shareholders
corporation
A person who commits fraud may be liable for damages, possibly including punitive damages, for the tort of
deceit
a party's exercise of his power to avoid a contract entered before the party reached the age of majority; a minor's cancellation of his contract
disaffirmance
the failure to volunteer information
disclosure
wrongful coercion that induces a person to enter or modify a contract
duress
the termination of a parent's right to control a child and receive services and wages from him
emancipation
The part performance doctrine is based on both ____ and _____ considerations.
evidentiary and reliance
Sometimes, Article 2 of the UCC holds merchants to standards different from the standards it applies to nonmerchants. True or False?
false
Under the common law, an offer for a unilateral contract:
is accepted by full performance of the act requested by the offer
the oral contract for the sale of land that has been completely performed by the seller is "taken out of the statute of frauds" meaning
it is enforceable without a writing
__ ___ occurs when someone relies on a statement made by another party, and takes steps based on that statement that costs them money.
justifiable reliance
a business form intended to combine the nontax advantages of corporations with the favorable tax treatments of partnerships.
limited liability company
a partnership that has elected to obtain limited liability status for all of its partners, including general partners, by filing with the secretary of state
limited liability limited partnership
A _____ is a partnership whose partners have elected limited liability status.
limited liability partnership
a form of business organization that has one or more general partners who manage the business and have unlimited liability for the obligations of the business and one or more limited partners who do not manage and have limited liability
limited partnership
a fact will be considered to be ______ if it is likely to play a significant role in inducing a reasonable person to enter the contract or if the person asserting the fact knows that the other person is likely to rely on fact
material
a contract clause providing that the written contract is the complete expression of the parties' agreement
merger clause
an assertion that is not accord with the truth
misrepresentation
a belief about a fact that is not in accord with the truth
mistake
An S corporation:
must have at least 100 shareholders
both parties of the contract have erroneous assumptions about the same fact
mutual mistake
something that is essential for the minor's continued existence and general welfare that has not been provided by the minor's parents or guardian
necessaries
A(n) _____ is a separate contract in which an offeror agrees not to revoke her offer for a stated time in exchange for some valuable consideration.
option
written or spoken statements that are not contained in the written contract
parol evidence
when parties enter a written contract that they intend as a complete integration (a complete and final statement of their agreement), a court will not permit the use of evidence of prior or existing statements to add to, alter, or contradict the terms of the written contract.
parol evidence rule
When the vendee (purchaser of land) does an act in clear reliance on an oral contract for the sale of land, an equitable doctrine commonly known as the ___ ___ ___ permits the vendee to enforce the contract notwithstanding the fact that it was oral.
part performance doctrine
partners' contribution
partnership capital
a partner's ownership interest in a partnership which embodies the partner's transferable interest and the partner's management and other rights
partnership interest
Thorp overpowers Grimes, grasps his hand, and forces him to sign a contract. what kind of duress is this?
physical compulsion
formed by filing with the secretary of state and is managed by a board of directors, unless a statute permits it to be managed like a partnership
professional corporation
The legal principle that a promise is enforceable by law when the promisor (person making the promise) makes a promise to the promisee (person being promised) who relies on it to his or her detriment.
promissory estoppel
a writing that does not indicate the ___ of goods to be sold would not satisfy the uniform commercial code's writing requirement.
quantity
the doctrine by which courts imply, as a matter of law, a promise to pay the reasonable value of goods or services when the party receiving such goods or services has knowingly done so under circumstances that make it unfair to retain them without paying them.
quasi-contract
____ of a voidable contract means that a person who had the right to rescind has elected not to do so.
ratification
_____ ends the right to rescind.
ratification
the act of affirming the contract and surrendering the right to avoid the contract. makes a contract valid from its ineption
ratification
the other partners must pay the creditor the amount due on the judgment against the partner in order to
redeem the charging order
modification of the written instrument to express the agreement that the parties made but failed to express correctly
reformation
a person pursues some course of action because of his faith in an assertion made to him
reliance
The contract was induced by an improper threat. The victim had no reasonable alternative but to enter the contract.
requirements for duress
When a contract is considered voidable, it means that the person whose consent was not real has the power to ____ the contract.
rescind (cancel)
states that a person's fault in failing to know or discover facts before entering the contract will not bar relief unless his fault amounted to a failure to act in good faith.
restatement (second) of contracts
fraud is a type of misrepresentation that is committed knowingly, with the intent to deceive. what is the legal term for this knowledge of falsity that distinguishes fraud from innocent misrepresentation?
scienter
a remedy whereby the court orders the breaching party to perform his contract
specific performance
the part performance doctrine will not permit the vendee to collect damages for breach of contract, but it will permit him to obtain the equitable remedy of:
specific performance
Ashley says to Ford, "I'd like to buy your house," and Ford responds, "You've got a deal". This exchange lacks _____.
specificity
Greg signed a contract to work as an auto-parts manager for Jones Chevrolet. This contract is governed by:
state common law
the position one is in before the creation of a contract
status quo
any contract that creates or transfers an interest in land is within the
statute of frauds
the partner's share of profits and losses and his right to receive partnership distributions. only part of the partnership interest that may be transferred to another person
transferable interest
The essence of a contract is that it is a legally enforceable promise or set of promises. True or False
true
unfair persuasion, involves wrongful pressure exerted on a person during the bargaining process. pressure is exerted through persuasion rather than coercion
undue influence
exists only when one of the parties makes a mistake about a basic assumption on which he made the contract
unilateral mistake
Contracts induced by misrepresentation, fraud, mistake, duress, or undue influence are generally considered to be:
voidable
Bill is 25 years old. His uncle had promised in writing to pay him $2,000 if Bill would refrain from drinking alcohol for one year. Bill refrained from drinking alcohol for one year. However, his uncle now refuses to pay Bill as agreed-upon. The uncle claims that because Bill suffered no detriment by refraining from alcohol, his non-drinking does not constitute legal consideration and therefore no contract was formed. If Bill sues his uncle, Bill will:
win because Bill had a legal right to drink alcohol.
