BUL Final Exam
In ______ the English Parliament passed the Act for the Prevention of Frauds and Perjuries.
1677
How many states engage in at least some regulation of gambling?
50
How many states have statutes requiring that people working in certain professions obtain a license before practicing their craft?
50
Under the Uniform Commercial Code, contracts for the sale of goods totaling more than ______ must be in writing.
500
Which of the following was involved when the government, in attempting to help AIG, agreed with AIG to lend AIG up to $85 billion in exchange for nearly 80 percent of AIG's stock?
A bilateral contract
Which of the following types of insurance should a business manager purchase to obtain protection against a broad range of risks?
A commercial general liability policy
Assuming no exception applies, which of the following is true regarding the effect of a debtor offering to pay less money than is owed as full payment on a debt for which there is no dispute over the amount or existence of the debt, and the creditor agrees?
A liquidated debt is involved, and there is neither a satisfaction nor an accord.
Which of the following is false regarding contracts for necessaries entered into by minors?
A minor cannot disaffirm contracts for necessaries.
Which of the following is a payment made by an insolvent debtor that gives preferential treatment to one creditor over another?
A preferential payment
Which of the following is not an example of consideration? A. A promise to stay in a job until a particular project is complete. B. A promise to your football coach to refrain from riding your motorcycle during football season even though you love riding it. C. A promise to cook dinner for your roommate for the next six months. D. A promise to buy skis for $300 if you like them. E. A promise to stop staying out late at night during exam week.
A promise to buy skis for $300 if you like them.
Insurance is defined as a contract in which the insured party makes payments to the insurer in exchange for the insurer's promise to make payment or transfer goods to another party in the event of injury or destruction to the insured party's property or life.
FALSE
Life insurance protects a person who is unable to work due to disability.
FALSE
Mistakes in contract law result from untrue statements made by one party to the contract
FALSE
Nondisclosure involves the active hiding of the truth about a material fact.
FALSE
Once an offer is made, an offeror has no right to terminate it before receiving a reply.
FALSE
One consideration in determining whether consideration is sufficient to support a contract for the sale of goods under the UCC is whether both parties received a good deal under UCC rules and principles.
FALSE
Premiums for whole-life insurance are generally smaller than those for term-life insurance.
FALSE
Retirement funds in an IRA are not exempt in a Chapter 7 bankruptcy proceeding.
FALSE
Rewriting a contract to reflect what the parties had agreed on is referred to as rescission
FALSE
The Uniform Electronic Transactions Act reflects the decision that electronic transactions do not constitute a written copy because the electronic transaction is not technically a written document.
FALSE
The purpose of the parol evidence rule is to prevent attempts to use only oral evidence to prove agreements.
FALSE
The term "consideration" in relation to contracts involves parties acting in an ethical manner.
FALSE
There is federal U.S. legislation titled "Statute of Frauds".
FALSE
Threatening physical harm or extortion to gain consent to a contract is classified as undue influence.
FALSE
Unconscionability is a concept strictly limited today to the sale of goods.
FALSE
When a court deems a contract integrated, parol evidence is admissible.
FALSE
Congress passed the Uniform Electronic Transactions Act (UETA).
FALSE - The National Conference of Commissioners on Uniform State Laws proposed this piece of legislation, which almost every state has adopted.
Quasi-contracts are actual contracts.
False - "Implied in law"
Set forth the elements of an offer under the common law.
The elements of an offer are (1) serious intent by the offeror to be bound to an agreement, (2) reasonably definite terms, and (3) communication to the offeree.
Which of the following is the most likely measure of recovery when a quasi-contract is involved?
The fair market value of the matter involved.
What was the ruling of the court in the Case Opener involving a lawsuit by fans seeking a refund based upon the Tyson and Holyfield fight being stopped in the third round because Tyson bit off a piece of Holyfield's ear?
The fans were not allowed to recover because they were incidental beneficiaries.
Under which of the following may a court presume that an individual is abusing the bankruptcy provisions of Chapter 7 when an individual's debt is primarily consumer debt and the individual's income is above the median income in his or her state?
The means test
Which of the following is true regarding the law that is relevant to bankruptcy claims?
While bankruptcy law is federal law, state law applies to bankruptcy cases in the sense that state laws regarding debtor's property and creditor claims may apply.
"Powder Room Mess." For $300,000, Willis agrees to build a new home for Robert, who is very picky. Willis builds the home to Robert's specifications with one exception. The faucets and linoleum flooring in an upstairs powder room are not exactly what Robert specified. That was a mistake on Willis' part, but he had not intentionally failed to follow specifications. When Robert sees the powder room, he goes ballistic and tells Willis that he will not pay Willis anything for the house. It will take $300 to put in correct faucets and linoleum. Willis says that he is willing to pay $300 to put Robert in the position he would have been in had the correct faucets and linoleum been used, but that is all he is willing to pay. Which of the following is true regarding the breach, if any, that occurred?
Willis breached the contract.
What was the result in the case discussed in the text Andrus v. State Department of Transportation, and City of Olympia in which the plaintiff sued because a job offer was allegedly revoked?
The defendant won because the purported job offer contained insufficient information to be considered reasonably certain in regard to its terms.
All exculpatory clauses are unlawful.
false
Assignment of personal duties is generally permitted
false
Consideration is optional in every contract.
false
Contractual conditions may be expressly inserted into the contract by the parties but may not be implied by law.
false
For purposes of determining capacity, intoxicated persons include those under the influence of alcohol, but not drugs.
false
When a contract is voidable, it may be ______.
rescinded
An intended beneficiary is a third party to a contract who is intended to be directly benefited from the contract made by the contracting parties.
true
Any contract that is not a formal contract is an informal contract, also called a simple contract.
true
As a general rule, parents are not liable for contracts entered into by their minor children
true
Courts interpret contracts using an objective standard.
true
For fraudulent misrepresentation to be the basis for a contract rescission, the statement of fact need not be an actual assertion.
true
If a person's mental deficiencies have resulted in his being adjudicated insane and a guardian has been appointed for him, he has no capacity to enter into contracts; and any contract he attempts to enter into is void.
true
If a quasi-contract is imposed, the amount of damages for a breach is based upon the fair market value of any service provided to the defendant.
true
In a case where no actual damages result from the breach of a contract, the court may award the plaintiff nominal damages.
true
In the law when both parties are equally responsible for an illegal agreement, it is known as in pari delicto.
true
Most countries do not grant third-party rights to contracts.
true
Only the offeree to whom an offer is directed can accept the offer.
true
Partial payment of a debt may or may not be valid consideration, depending on whether the debt is liquidated or unliquidated.
true
Restitution is the return of any property given up under the contract.
true
The Restatement (Second) of the Law of Contracts is not actually the law itself.
true
The most frequently awarded damages are compensatory damages.
true
There are a limited number of circumstances under which silence can be an acceptance.
true
There is no legally required wording to be used or forms to be filled out for assignments to be valid.
true
Today, married women have been removed from the category of those lacking contractual capacity, although in a few states their capacity to enter into certain kinds of contracts is still limited.
true
When an enforceable contract does not exist, the court may grant a recovery based on quasi-contract in order to prevent an injustice from occurring.
true
When parties include a[n] ______ clause in their contract, the parties are attempting to limit their ability to assign their rights under the contract.
Antiassignment
From what country did equitable remedies, as applied in the U.S., grow?
England
Which of the following references the requirement that a contract not be either illegal or against public policy?
Legal object
A ________________ is an agreement by the person who issues a letter to pay a sum of money on receipt of an invoice and other documents.
Letter of credit
A[n] ______ agreement is an agreement two parties enter into before marriage that clearly states the ownership rights each party enjoys in the other party's property.
Prenuptial
If a contract is valid, then it is enforceable.
false
For how many days prior to the filing of a Chapter 7 bankruptcy petition is a debtor assumed insolvent?
90
Under ordinary circumstances, a party's duty to perform a promise agreed to in a contract is absolute.
true
In order for the statute of frauds to be satisfied, all parties to a contract must sign the writing
FALSE
In order to recover under quasi-contract, there is no requirement that enrichment be unjust.
FALSE
In a unilateral contract, the consideration for a promise is a[n] ____.
Action
The ______ rule is a common law rule that addresses the admissibility of oral evidence as it relates to written contracts.
Parol evidence
Which of the following is a definition for consideration?
The bargained-for exchange.
Sam offers Betty his bicycle for $75. Which of the following is an example of an illusory promise on the part of Betty?
"I'll take it if I decide to do so."
"Dream Home." Maurice finds a dream home on the lake. He wants to buy it but is unsure whether he can get a loan. He signs a contract with the seller that he will buy the home provided that he can get a loan. Maurice also includes a contractual clause in the contract with the seller that if he loses his job before the date the purchase contract is signed, the seller will release him from any obligation. After getting a loan and buying the home, Maurice decided that he wanted new windows. He entered into a contract with a window contractor. The window contractor visited the home, but Maurice was always gone. The contractor made several attempts to reach Maurice, but Maurice would not return phone calls and made no attempt to assist the contractor with installation. The provision that Maurice did not have to buy the house unless he was able to get a loan is referred to as which of the following?
A condition precedent
"Dream Home." Maurice finds a dream home on the lake. He wants to buy it but is unsure whether he can get a loan. He signs a contract with the seller that he will buy the home provided that he can get a loan. Maurice also includes a contractual clause in the contract with the seller that if he loses his job before the date the purchase contract is signed, the seller will release him from any obligation. After getting a loan and buying the home, Maurice decided that he wanted new windows. He entered into a contract with a window contractor. The window contractor visited the home, but Maurice was always gone. The contractor made several attempts to reach Maurice, but Maurice would not return phone calls and made no attempt to assist the contractor with installation. The provision that the seller will release Maurice from any obligation if he lost his job is referred to as which of the following?
A condition subsequent
Which of the following is an offer made by an offeree to an offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer?
A counteroffer
"Beauty Shop Woes." When Janice went to work as a hair stylist in Rick's beauty shop, she entered into an agreement with Rick whereby if she left she would not work for another beauty shop within 50 miles for 2 years. Rick trained Janice in a number of new techniques. After nine months, Janice was offered a great job down the street at a new beauty shop, she quit Rick, and had a number of customers follow her down the street to her new job. Rick claimed that she had signed a contract and had no right to go to work at the new shop. Janice disagreed and told Rick that no judge in the country would enforce such an agreement. Janice told Rick that she was more worried about a customer who was threatening to sue her because her hair turned green after Janice worked on it. Janice said that she knew that the customer's hair was damaged; but that she told the customer that odd results could result from a dye attempt, and had her sign a contract that she released Janice from all liability and would not sue. The customer, however, sued anyway. The agreement Rick and Janice entered into is referred to as which of the following?
A covenant not to compete
Which of the following is a meeting of all creditors listed in the Chapter 7 required schedules for liquidation?
A creditors' meeting
Which of the following is false regarding bankruptcy cases?
A jury is not allowed in a bankruptcy proceeding.
Which of the following is true regarding the effect of a debtor offering to pay a different type of payment, for example, goods instead of money, on a debt for which there is not a dispute over the amount or existence of the debt, and the creditor agrees?
A liquidated debt is involved, and there is an accord and satisfaction.
"Not So Rich Uncle." Bruce is attempting to convince Sally to marry him. He promises her that if she will marry him, he will buy a new Mercedes automobile for her within six months of the marriage and take her on a world tour within a year of the marriage date. Sally reluctantly agrees, and they sign an agreement by which Bruce agrees to provide the Mercedes and world tour. Bruce and Sally marry on January 1. Unexpectedly, on March 1, Bruce's supposedly rich uncle, Frank, dies. Frank has no living relatives other than Bruce and has a will leaving everything to Bruce who is also appointed executor. In attempting to settle the estate, Bruce agrees orally to pay out of his own pocket debts of Frank totaling $10,000. Sally is concerned about Bruce's doing so. Bruce tells her not to worry because he will get all the money back when the estate settles. Bruce admits to a number of friends that he agreed to settle the debts out of his own pocket because he needed to obtain assets from the estate in a hurry and did not want anything to slow down probate. The assets were needed in large part to satisfy his obligations to Sally. Surprisingly, it later came to light that prior to his death Frank had signed away all his assets to his girlfriend in Argentina. There was nothing left in the estate for Bruce to inherit. Bruce disavowed his agreement to pay the $10,000 to various creditors of Frank. Which of the following is the most likely result of Bruce's attempt to avoid his agreement to pay creditors of the estate out of his own pocket?
A promise to pay debts of an estate out of an executor's own funds would come within the statute of frauds, but the oral agreement Bruce made will likely be enforceable under the main-purpose rule.
Which of the following would not be considered an example of consideration?
A promise to pay your employees as required by law.
Which of the following is an agreement by which the debtor agrees to pay a debt even though it could be discharged?
A reaffirmation agreement
In a bilateral contract, the consideration for each promise is ____.
A return promise
As discussed in the text, which of the following is true regarding Japanese law and consumers?
A special Consumer Contracts Law was developed to place consumers and businesses on a more equal footing in transactions.
Which of the following is in effect not a contract at all?
A void contract
Brandy, the president of ABC Communication., and Sam orally agreed that Sam would work as a computer programmer for ABC Co. for a three-year period. Their oral agreement also covered other matters such as his pay and the availability of one week of paid vacation. On the day he talked with Brandy, Sam signed an employee handbook including a provision that his employment was at will, meaning that at any time he could quit or the company could discharge him. A month later, Sam received a three-year contract for employment with ABC Co. in the mail incorporating the amount of his salary and other issues he had discussed with Brandy. Sam signed it and mailed it back, but he changed the vacation provision to three weeks instead of one week. Bobby, the human resources manager for ABC Co., called Sam up after Bobby received the agreement and told Sam that the contract was only a draft for discussion purposes and that he was actually firing Sam because he seemed too focused on vacation. Assuming the court follows the reasoning of the court in the dispute discussed in the text involving Michael Gallagher and Medical Research Consultants, which of the following would be the most likely result in the dispute between Sam and ABC Co. if Sam claims he had a three-year contract of employment?
ABC Co. will win because even if a three-year oral agreement for employment was made, it would not have been enforceable because the statute of frauds requires that agreements that cannot be completed within one year be in writing. Further, the draft Sam returned was not signed by ABC Co.
"Wild Things." Image Company, a company specializing in photography of exotic and wild animals, took out a life insurance policy through ABC Insurance on its president Bruno and also on a company-owned jeep that he drove. Bruno got a better offer from Wild Things Company, another company specializing in the photography of exotic animals, and went to work for them. He parted on good terms with Image Company and taking the jeep with him under the mistaken idea that the jeep was part of his severance benefits. Neither of the insurance policies was cancelled by Image. Unfortunately, while photographing a lion for Wild Things Company, Bruno was attacked and eaten. His jeep was then stolen by an unknown bystander who apparently saw the attack and took the opportunity to take the jeep. Image Company had been in the process of contacting Bruno in an attempt to obtain possession of the jeep but had not reacquired it at the time of his death. Image Company had renewed the policy on the jeep reaffirming to the insurer that its purpose was for use by Image employees because Image planned to have possession of the vehicle shortly. Image Company filed a claim to collect on the life insurance policy and also on the vehicle policy. ABC Insurance denied both claims. Which of the following is true regarding the contention of ABC Insurance that it is not required to pay to Image Company the amount for which Bruno's life was insured?
ABC Insurance Company is correct because Image Company no longer had an economic interest in Bruno's life.
How is a determination made regarding the identity of the trustee in a Chapter 7 proceeding?
The creditors elect the trustee.
"Wild Things." Image Company, a company specializing in photography of exotic and wild animals, took out a life insurance policy through ABC Insurance on its president Bruno and also on a company-owned jeep that he drove. Bruno got a better offer from Wild Things Company, another company specializing in the photography of exotic animals, and went to work for them. He parted on good terms with Image Company and taking the jeep with him under the mistaken idea that the jeep was part of his severance benefits. Neither of the insurance policies was cancelled by Image. Unfortunately, while photographing a lion for Wild Things Company, Bruno was attacked and eaten. His jeep was then stolen by an unknown bystander who apparently saw the attack and took the opportunity to take the jeep. Image Company had been in the process of contacting Bruno in an attempt to obtain possession of the jeep but had not reacquired it at the time of his death. Image Company had renewed the policy on the jeep reaffirming to the insurer that its purpose was for use by Image employees because Image planned to have possession of the vehicle shortly. Image Company filed a claim to collect on the life insurance policy and also on the vehicle policy. ABC Insurance denied both claims. Which of the following is true regarding whether ABC Insurance will be required to provide coverage on the jeep?
ABC will likely not be required to provide coverage on the jeep because Image made material misrepresentations in the renewal of the policy that would have prevented its renewal.
"Cheap Motorcycle." Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has a nice motorcycle that is for sale. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass and, in the next sentence, says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here! Take it or leave it!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 which Peter signs. Peter does some research and finds that Tony has had several arrests for driving under the influence in a nearby town. As an act of revenge, Peter tells Tony that unless Tony sells Peter his new Mustang convertible for $50, he is publishing the facts about the arrests in the school newspaper. Tony reluctantly agreed to the deal. Which of the following is an appropriate term for the contract drawn up by Tony?
ADHESION
A[n] ______ is a statement made in court, under oath, or at some stage during a legal proceeding in which a party against whom charges have been brought admits that an oral contract existed, even though the contract was required to be in writing.
Admission
In most states, which of the following are exceptions to when the statute of frauds would apply?
Admissions, partial performance, and promissory estoppel
In the absence of a time condition in an offer, the offer will expire _________.
After a reasonable amount of time
Which of the following consists of an offer by one party and an acceptance of the terms by another party?
Agreement
Which of the following occurs when a contracting party refuses to complete the contract before the actual time of performance?
Anticipatory repudiation
A[n] ______ clause states that the insured has a grace period in which to make an overdue payment during which time the insurance is effective.
Antilapse
The law of contracts is primarily _______________ law.
COMMON
A person who has legal ______ to contract is one who has the mental ability to understand his or her rights and obligations under a contract and, therefore, will presumably be able to understand how to comply with the terms of the agreement.
Capacity
A[n] ______ contract is a contract created by a party to an agreement that is presented to the other party on a take-it-or-leave-it basis.
Adhesion
Which of the following is an element of a legally binding contract?
Capacity
Which of the following is generally true if no means of communicating an acceptance is specified in an offer?
Acceptance may be made by any reasonable means.
Which of the following may represent a lack of genuine assent?
Acceptance secured through fraud, duress, undue influence, or misrepresentation
When an accord and satisfaction is at issue, the ______ is the new agreement to pay less than the creditor claims is owed.
Accord
Which of the following is not a way in which a contract may be discharged by operation of law?
Accord and satisfaction
Which of the following is used when, by agreement one of the parties substitutes a different performance for his or her original duty under the contract?
Accord and satisfaction
"Prudence's Imprudence." Unfortunately, Prudence failed to act prudently. She had a bad day after failing a business law test and breaking up with her boyfriend. While drinking a mocha and talking on the cell phone with her best friend, she slammed into the back of George's car. Shortly thereafter she received notice of a lawsuit setting forth George's claims for personal injury and property damage. Prudence was very busy studying for her next business law test and hanging out with her boyfriend with whom she had reconciled. Also, she just did not feel like dealing with a pesky lawsuit. Several months later, Alice, a new agent with the insurer called Prudence and told Prudence that she had just heard something about a lawsuit from the plaintiff's lawyer. Alice told Prudence that although investigation would be difficult after so many months, she would like to talk with Prudence because the trial was scheduled for the next week. Prudence told Alice that she had no time to meet at the moment and that just before court, she would meet with the lawyer the company appointed to represent her. Alice told Prudence that the insurance company was going to deny coverage. Alice also told Prudence that vehicle insurance did not typically provide for legal representation and that, in any event, no lawyer would be provided. Finally, Alice told Prudence that her insurance was cancelled immediately because she was a real jerk and failed to help, that insurance would not pay for accidents that were the fault of Prudence anyway, and that the insurer wanted nothing more to do with her. Which of the following is true regarding the assertion of Alice that the insurer was not liable for accidents that were the fault of the insured?
Alice is incorrect.
Which of the following is false regarding written contracts?
All contracts must be in writing in order to be enforced.
"Exemptions." Sidney is injured in an automobile accident and cannot work. She cannot pay her bills and files for bankruptcy relief under Chapter 7. Federal exemptions apply, and she lists as exempt $25,000 in equity in her residence; interest in a vehicle of $2,000; interest in jewelry of $400; and retirement funds in her individual retirement account. Her creditors filed an objection to all claimed exemptions except for the home equity claim. Once the petition is filed, which of the following forms Sidney's bankruptcy estate?
All her prepetition assets.
Paul and Mary have an agreement that Mary will buy Paul's house. Later Mary orally assigns the right to buy the house to Ally, one of Paul's former girlfriends. When Ally shows up with the money, Paul says "No way! You ditched me to date Rick. I'm not ever letting you get anything from me!" Which of the following is true in regard to the dispute between Paul and Ally?
Ally cannot enforce the assignment because it was not in writing.
Which of the following is true regarding writings created at the same time as a written agreement?
Although the parol evidence rule applies to writings created at the same time as the written agreement, these writings tend to be treated differently than prior or contemporaneous oral agreements in that the writings are more readily admitted as part of the written agreement than is oral evidence.
The resulting contract from an agreement reached because one of the parties has so much more bargaining power than the other that he or she dictates the terms of the agreement is called which of the following?
An adhesion contract
Which of the following is true regarding an agreement to commit a crime or a tort?
An agreement to commit a crime is unenforceable, and an agreement to commit a tort is unenforceable.
Which of the following is true regarding an assignee's acceptance of assigned rights?
An assignee may decline an assignment if he has not agreed to it and declines in a timely fashion after learning of it.
Which of the following, if any, is a moratorium for almost all creditor litigation against a debtor in a Chapter 7 bankruptcy?
An automatic stay
"Dream Home." Maurice finds a dream home on the lake. He wants to buy it but is unsure whether he can get a loan. He signs a contract with the seller that he will buy the home provided that he can get a loan. Maurice also includes a contractual clause in the contract with the seller that if he loses his job before the date the purchase contract is signed, the seller will release him from any obligation. After getting a loan and buying the home, Maurice decided that he wanted new windows. He entered into a contract with a window contractor. The window contractor visited the home, but Maurice was always gone. The contractor made several attempts to reach Maurice, but Maurice would not return phone calls and made no attempt to assist the contractor with installation. The responsibility of Maurice to make arrangements to give the window installer access to the home is referred to as which of the following?
An implied condition
Which of the following is true regarding the rights of an incidental beneficiary to a contract to sue to recover incidental rights?
An incidental beneficiary cannot sue to enforce a contract which provided incidental benefits.
"Hawaiian Adventure." Beverly decides to go on a great trip to Hawaii. She needs someone, however, to take care of her two dogs, Creaky and Toady, while she is gone. She hires Frank three months in advance and they reach a contractual arrangement whereby he will be paid $200 for keeping the dogs for two weeks. Frank comes over two months before Beverly is set to leave, takes one look at Creaky and Toady, and declares that they are too creepy to be around. Beverly hires Alice who agrees to care for Creaky and Toady. Two weeks before Beverly is set to leave, however, Alice calls and tells her that she just broke both her legs in an automobile accident and has been put on bed rest for two months. Finally, Beverly hires Betty to care for the dogs and heads off to Hawaii where she has a great time. Unfortunately, when Beverly returns home, she finds that Betty has absconded with Creaky and Toady. They were later found in good health in an exclusive resort visited by Betty. Betty refuses to return Creaky and Toady to Beverly claiming that they were all enjoying the resort and that she had become quite attached to them. What will Beverly seek in order to get Creaky and Toady returned from Betty?
An injunction
Which of the following is false in regard to an insurer's right to cancel a policy of insurance?
An insurer who rightfully cancels a policy is not required to a refund of premium payments covering future time periods.
Which of the following means that bankruptcy relief is ordered and that the bankruptcy proceedings can continue?
An order of relief
College president Wally contracts with Alice to teach business law. Alice does a fine job teaching but gets mad at Wally and will not turn in grades. What type of order would Wally seek to require Alice to abide by her contract?
An order of specific performance
Assuming no exception applies, which of the following is true regarding the effect of a debtor offering to pay less money than is owed as full payment on a debt for which there is a dispute over the amount of the debt, and the creditor agrees?
An unliquidated debt is involved, and there is an accord and satisfaction.
Which of the following is true regarding the effect of a debtor offering to pay less money than is owed as full payment on a debt when the debt itself, in its entirety, is in dispute, and the creditor agrees?
An unliquidated debt is involved, and there is an accord and satisfaction.
"Powder Room Mess." For $300,000, Willis agrees to build a new home for Robert, who is very picky. Willis builds the home to Robert's specifications with one exception. The faucets and linoleum flooring in an upstairs powder room are not exactly what Robert specified. That was a mistake on Willis' part, but he had not intentionally failed to follow specifications. When Robert sees the powder room, he goes ballistic and tells Willis that he will not pay Willis anything for the house. It will take $300 to put in correct faucets and linoleum. Willis says that he is willing to pay $300 to put Robert in the position he would have been in had the correct faucets and linoleum been used, but that is all he is willing to pay. Which of the following is true regarding the appropriate amount of damages, if any?
Any damages awarded would be in the range of $300, the amount it would take to fix the breach.
Which of the following is the part of the Uniform Commercial code governing contracts for the sale of goods?
Article 2
What is the term for the third party who receives an assignment of contract rights?
Assignee
Which of the following is false regarding the rights of an assignee and assignor?
Assignees are offered more protection than assignors.
Which of the following occurs when a party to a contract transfers his or her rights to a contract to a third party?
Assignment
Which of the following is true regarding whether a contract may be assigned even in the presence of an antiassignment clause?
Assignments made by operation of law, assignments for the right to receive monetary payments, and assignments for the right to receive damages for a breach of contract to sell goods or services may be assigned even in the presence of an antiassignment clause.
What is the term for the party to a contract who transfers his or her rights to a contract to a third party?
Assignor
In the U.S., which of the following are the two most important sources of contract law?
Case law and the Uniform Commercial Code.
Sally has a large farm and significant other assets. She agreed to loan her nephew Todd $100,000 with payments of principle and interest to be made yearly. A few years later she and Todd got into a dispute because Sally did not like his new girlfriend, Polly. Soon thereafter Todd got notice that Sally was suing him for not paying interest on the note. Todd defended on the basis that two years after the initial loan agreement was entered into, he and Sally entered into an oral agreement that he would perform services on her farm in lieu of paying interest on the note. If the court follows the reasoning of the court in the Case Opener involving Monroe Bradstad and Jeanne Garland, which of the following is the most likely result of the dispute between Sally and Todd involving whether he owes past interest amounts?
Assuming the court credits Todd's account of events, Todd will not be required to pay the interest amounts because the oral agreement will be considered a separate enforceable agreement.
Yolanda agrees to bathe and groom Wendy's dog, Fluffy Puff, for $30. Yolanda agreed to the price before seeing Fluffy Puff who is a chubby dog with lots of hair. Yolanda tells Wendy that if she is going to groom Fluffy Puff, the price will be $40. Wendy reluctantly agrees but tells Yolanda that she should not have been surprised that a dog named Fluffy Puff would have lots of hair. Yolanda bathes and grooms Fluffy Puff, but Wendy will only pay $30. Which of the following is correct regarding Yolanda's entitlement to the extra $10?
Assuming the unforeseen circumstances rule does not apply, Yolanda is not entitled to the extra $10 because she had a preexisting duty to bathe and groom Fluffy Puff for $30.
Within the statute of frauds, "land" encompasses not only the land and soil itself but anything ______ to the land.
Attached
Congress first addressed bankruptcy relief in the ____.
Bankruptcy Act of 1898
Once a voluntary liquidation proceeding under Chapter 7 is filed, the debtor's prepetition assets form the ____.
Bankruptcy estate
"Used Car Sales." Walter sells used cars. He is seeking a way to increase sales and profits because he would like to take his girlfriend on a nice diving trip to the Grand Cayman Islands. The first thing that Walter does is say that during the first week of December, he will give a $500 rebate on used cars that are under two years old. To spice things up, he also offers to sell any car on the lot that is over five years old for $1,000 to the first three customers who can hula hoop ten hours straight on December 7th. (Hula hooping was a practice popular some years ago in which a large hoop would be swung around by a person, usually around the waist.) Walter was not very concerned about the hula hooping issue because he thought that no one would be able to hula hoop for ten hours straight. Walter put an advertisement pertaining to the rebate and the hula hoop opportunity in the local newspaper. The promotion went over very well. Although Walter had several cars available, he ran out of cars under two years old within one day. During the rest of the week shoppers were told that no cars of that description were available. Sam was very angry at Walter for not having a car available that was under two years old so that he could get a good deal and a $500 rebate. On December 7th, while Walter was watching the hula hoopers, Sally was shopping for a car. She was in college and did not have much money. She saw one, an older car, a real clunker, that she liked; but she really did not know if it could be repaired sufficiently to be dependable. Walter had not even put a price on it because he planned to have it crushed. Sally was going to talk to her parents about it. Walter eventually approached her, and Sally asked him if he would take $450 for the car. Walter said, "Yes, sold." Sally tried to explain that she needed to talk to her parents first, but Walter would not hear of it. While Walter was still fuming from his encounter with Sally, Zack walked up and started to criticize the nature of Walter's inventory. Walter told him that he had great cars. Zack pointed at an old jalopy that was banged up, had 200,000 miles on it, and a cracked windshield. Zack said, "Sure, I'll pay $100,000 for that car!" Walter said, "Sold." Zack said, "Wait a minute. I was only kidding." Walter said, "No way." Meanwhile all the hula hoopers dropped out well prior to ten hours of hula hooping except for Barbara. She completed the hula hooping and asked for her car for $1,000. Walter refused saying that the offer was revoked. Sam and Barbara sued Walter, and Walter sued Zack and Sally. Under the applicable law in Walter's state, common law will be applied, and there are no state statutes impacting the situation. What is the most likely result in the lawsuit brought by Barbara against Walter?
Barbara will win because she properly made an offer that was accepted by Walter when she did the hula hooping.
Why is it important to distinguish between unilateral and mutual mistakes?
Because it determines which contracts are voidable.
"Book Sale." Beverly offered to sell Rick a used business law book for $50. She told him that he could use it in his upcoming business law class the next semester. In fact, there was a problem with the book; it was several editions old. Rick was not aware of that fact, and neither was Beverly. When Rick took the book to class and realized the problem, he went back to Beverly requesting a refund. Beverly refused to return his money. She claimed that subjectively she thought that the book was correct, that she did not commit fraud, and that a binding contract existed. The book, however, is outdated and cannot be appropriately used in the class. Which of the following would be the correct analysis of the effect of the discovery that Rick has a book that is not appropriate for the class?
Because the parties had a mutual misunderstanding, the parties did not come to a meeting of the minds, and there is no contract.
When must a disaffirmance of a contract based on minority occur?
Before or within a reasonable time of the minor's reaching the age of majority.
A[n] ______ is a term identifying the person who receives insurance proceeds in the event of injury or damage.
Beneficiary
Which of the following conditions occur when each party's performance is conditioned on the performance of the other?
Concurrent
"Refusal to Pay." Business law teacher Debby needed some yard work done. She told her class that she would give $50 to the first person who mowed her yard. She also entered into an agreement with Betty who agreed to trim some shrubbery for $40. Max went to mow Debby's yard. Unfortunately, just as he finished mowing, a neighborhood dog bit him, and he had to go to the emergency room for a couple of stitches. Debby refused to pay Max because she said that he had angered the neighbors and their dog, and that he was more trouble than he was worth. Secretly, Debby was glad about the dog bite because she felt it gave her an excuse not to pay. Max refused to pay the emergency room because he said that they did not have a binding, bilateral contract. Betty refused to trim the shrubbery because she got a better offer and claimed that she was not bound on the contract until she started to perform. Which of the following is correct regarding Betty's statement that there was no contract?
Betty is incorrect because there was a bilateral, express agreement.
A[n] ______________ contract is commonly defined as a promise in exchange for a promise.
Bilateral
Bill contracts with Judy to wash her car and then delegates the duty to Paul. Paul fails to wash the car. Which of the following is true regarding Bill's duty to Judy, if any?
Bill continues to be bound to Judy to see that her car gets washed.
"Painted House." Billy had a contract to paint Jan's house for $800 including the duty to clean up any debris. The contract between Billy and Jan did not address assignment in any way. Billy, who was very busy, assigned the contract, specifying that it included the right to receive the money and the duty to paint the house, to Richard who was interested in making some extra money and had experience painting. Billy did not tell Jan about the assignment because he did not want any trouble nor did Richard mention the assignment to her. In fact, Richard never met Jan because he painted while she was at work. After Richard did a good job painting the house, Jan sent a check to Billy for $800. Billy needed the money to pay some bills, so he spent it. He thought he would have money coming in with which to pay Richard, but that did not happen. Richard asked Jan for $800 when it was not forthcoming from Billy. Jan refused. Richard said that he was going to sue her. Jan called Billy and told him that he had no right to assign the contract. Another problem involved disposal of debris. Although Richard was a good, competent painter, he forgot and left some old paint cans at Jan's house. Jan demanded that Billy come and properly dispose of the paint cans because they could not simply be put in the trash. Billy refused and told her that she would have to get Richard to dispose of the paint cans because that was his responsibility. Jan called Richard who told her that he was busy and that clearing out the paint cans was Billy's responsibility. Which of the following is true regarding Billy's claim that he had no duty to pick up the paint cans?
Billy is incorrect because his delegation did not affect his obligation to Jan.
A[n] ______ is an agreement between an applicant and an insurance company that gives temporary insurance until the company decides to accept or reject the insurance application.
Binder
Which of the following is a term for laws that limit the types of business activities in which parties may legally engage on Sundays?
Blue laws
"Exemptions." Sidney is injured in an automobile accident and cannot work. She cannot pay her bills and files for bankruptcy relief under Chapter 7. Federal exemptions apply, and she lists as exempt $25,000 in equity in her residence; interest in a vehicle of $2,000; interest in jewelry of $400; and retirement funds in her individual retirement account. Her creditors filed an objection to all claimed exemptions except for the home equity claim. What is the status of the exemptions she claimed in the car and jewelry?
Both exemptions will likely be granted because their type and value are within allowable federal exemptions.
"Teenage Driver." Sally bought a new car, a yellow convertible. She also had a teenage son at home, Bobby, but she did not plan to let him drive the car. She was annoyed because Bobby had run her last car into the lake. Sally decided to change insurers because she thought her previous insurance agent was annoyed over Bobby's antics. She went to ABC Insurance to apply. She got an application from Mark. Sally was a little nervous because the application asked about other drivers in the home. It also asked if there were any teenagers in the home. Sally answered "no" on both counts because she had no plans to let Bobby drive. Sally got full coverage on the car, and the policy was issued shortly after she completed the application. She renewed the policy without revising any of the information she provided. Thirteen months later, Sally really needed some gas in the car for the next day. Under the belief that he had sufficiently matured, Sally sent Bobby to get some gas at the station just down the street. Unfortunately, a drunk driver who had no insurance hit the car and totaled it. Sally immediately called Mark. When Mark reviewed the police report, however, he told Sally that there would be no coverage on the car because Bobby was driving. Sally said that was completely unfair and that she would appeal to the jury. Sally told Mark that ABC issued the policy and that she was relying on the incontestability clause. Mark told Sally that she was wrong and that based on how disputes were handled under the policy, she would not even see a jury. Which of the following, if any, will ABC Insurance most likely be required to prove in order to deny coverage based on the discrepancy between the application and Bobby's driving?
Both that Sally's misrepresentation was material and that knowledge of the misrepresentation would have resulted in the refusal to provide insurance.
A _____ occurs whenever a party fails to perform his or her obligations under the contract.
Breach
Contracts containing conditions affecting the performance obligations of the parties are called ______ contracts.
Conditional
"Prudence's Imprudence." Unfortunately, Prudence failed to act prudently. She had a bad day after failing a business law test and breaking up with her boyfriend. While drinking a mocha and talking on the cell phone with her best friend, she slammed into the back of George's car. Shortly thereafter she received notice of a lawsuit setting forth George's claims for personal injury and property damage. Prudence was very busy studying for her next business law test and hanging out with her boyfriend with whom she had reconciled. Also, she just did not feel like dealing with a pesky lawsuit. Several months later, Alice, a new agent with the insurer called Prudence and told Prudence that she had just heard something about a lawsuit from the plaintiff's lawyer. Alice told Prudence that although investigation would be difficult after so many months, she would like to talk with Prudence because the trial was scheduled for the next week. Prudence told Alice that she had no time to meet at the moment and that just before court, she would meet with the lawyer the company appointed to represent her. Alice told Prudence that the insurance company was going to deny coverage. Alice also told Prudence that vehicle insurance did not typically provide for legal representation and that, in any event, no lawyer would be provided. Finally, Alice told Prudence that her insurance was cancelled immediately because she was a real jerk and failed to help, that insurance would not pay for accidents that were the fault of Prudence anyway, and that the insurer wanted nothing more to do with her. On which of the following legal theories would the insurer likely attempt to deny coverage?
Breach of contract
Tina, an experienced pool contractor, and Bruce agree on a price for Tina to build a pool in Bruce's backyard. While the area is not known for rocks, unfortunately Tina unexpectedly encounters a significant problem with solid rock in the backyard when she starts to dig. She tells Bruce that unless she receives an extra $5,000, she cannot complete the job. Bruce agrees thinking to himself that he has a way out. When Tina finishes the pool, Bruce refuses to pay the additional $5,000. Which of the following is the most likely result of their dispute?
Bruce will be required to pay because unforeseen circumstances are an exception to the preexisting duty rule.
Tina, an experienced pool contractor, and Bruce agree on a price for Tina to build a pool in Bruce's backyard. Tina discovers that she did not initially figure in enough of a charge for labor. She tells Bruce that unless she receives an extra $5,000 with which to hire workers, she cannot complete the job. Bruce agrees thinking to himself that he has a way out. When Tina finishes the pool, Bruce refuses to pay the additional $5,000. Which of the following is the most likely result of their dispute?
Bruce will not be required to pay because he provided no additional consideration, and the preexisting duty rule applies.
In which of the following ways may an offeree accept a unilateral contract?
By performance only.
A workers' compensation insurance policy is an example of which of the following types of insurance?
Casualty
If a policy of insurance protects a person or property from accidental injury, the insurance is referred to as ______ insurance.
Casualty
Which of the following chapters is used as a reorganization of the debtor's financial affairs under supervision of the bankruptcy court?
Chapter 11
Which of the following provides for adjustment of debts of family farmers?
Chapter 12
Which of the following chapters recognizes insolvency proceedings pending in a foreign country and relief for foreign debtors?
Chapter 15
Which of the following chapters is used for a sale of a debtor's assets by a trustee and the distribution of money to creditors?
Chapter 7
"Useless Friend." Charles, who is very gullible, is friends with Bobby. Bobby, who cannot be trusted, decides to try to bind Charles to a contract in Bobby's favor. Bobby has Charles sign a contract promising to wash Bobby's car once a week for a month for $80 per month in payment. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Charles for one year to cook dinner for Bobby, do his laundry, and clean his apartment. Bobby is also very angry with his former girlfriend, Tessa, and decides to start rumors, that would constitute the tort of defamation, such as that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to enlist the help of Charles in smearing Tessa but knows that Charles would be hesitant to assist in his endeavors. One evening, however, Charles drank too much beer and was clearly intoxicated - a fact apparent to Bobby. Bobby had him sign a contract agreeing to defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and that he has no intention of defaming Tessa, who also happens to be Charles' new girlfriend. He also finally takes a look at the contract involving work for Bobby and tells Bobby that the contract is outrageous. Which of the following is true regarding Charles' claim that he had no obligation to defame Tessa?
Charles is correct in that he could not be legally obligated to commit defamation.
"Leaky Tub and Flaming Watercraft." Charles finished college, got a good job, and decided to sell some used toys and buy newer ones. A used hot tub with a leak in it and a personal watercraft were at the top of the list. Charles offered to sell to Constance the hot tub for $500. Constance was interested but not willing to pay $500. She said "I'll give you $400." Charles said that he would think about it. Later, the same day, Charles offered to sell Donna the hot tub for $500. Donna said "Would you consider $450?" Charles said he would think on it. A few minutes later, Everett who had heard that Charles wanted to sell the hot tub accepted Charles' offer to sell for $500, and they agreed that the transfer would be made the next day. A few minutes later, Constance called saying that she accepted Charles' offer to sell the hot tub for $500. A few minutes after that, Donna called and told Charles that she accepted his offer to sell the hot tub for $500. Charles told Constance and Donna that he had already sold it, and they are angry, threatening to sue. Charles offered to sell the personal watercraft to Joan for $800. She said that she would think it over and let him know the next day. Unfortunately, through no fault of anyone, there was a fire at Charles' home that night and the personal watercraft burned. Joan called the next day and accepted before Charles could tell her the watercraft burned. When she found out about the fire, Joan told Charles that he had better come up with another watercraft, or she was going to sue. What effect does the accidental destruction of the personal watercraft have on the deal between Charles and Joan?
Charles is not in breach of contract because of destruction of the subject matter.
"Leaky Tub and Flaming Watercraft." Charles finished college, got a good job, and decided to sell some used toys and buy newer ones. A used hot tub with a leak in it and a personal watercraft were at the top of the list. Charles offered to sell to Constance the hot tub for $500. Constance was interested but not willing to pay $500. She said "I'll give you $400." Charles said that he would think about it. Later, the same day, Charles offered to sell Donna the hot tub for $500. Donna said "Would you consider $450?" Charles said he would think on it. A few minutes later, Everett who had heard that Charles wanted to sell the hot tub accepted Charles' offer to sell for $500, and they agreed that the transfer would be made the next day. A few minutes later, Constance called saying that she accepted Charles' offer to sell the hot tub for $500. A few minutes after that, Donna called and told Charles that she accepted his offer to sell the hot tub for $500. Charles told Constance and Donna that he had already sold it, and they are angry, threatening to sue. Charles offered to sell the personal watercraft to Joan for $800. She said that she would think it over and let him know the next day. Unfortunately, through no fault of anyone, there was a fire at Charles' home that night and the personal watercraft burned. Joan called the next day and accepted before Charles could tell her the watercraft burned. When she found out about the fire, Joan told Charles that he had better come up with another watercraft, or she was going to sue. Which of the following is correct regarding the final status of the negotiations between Charles and Constance?
Charles made an offer which was rejected by Constance when she made a counteroffer for $400.
Which of the following is true regarding the rating the World Bank gives China in relation to the ease of doing business there?
China is rated in the top 10.
Which of the following is false regarding Chapter 12 of the bankruptcy code?
Congress modeled Chapter 12 after Chapter 7 relief.
Which of the following are foreseeable damages within the contemplation of the parties at the time the contract was made, and that result from special facts and circumstances arising outside the contract itself?
Consequential
"Saturday Auction." Barry, an auctioneer, held an auction on a Saturday morning. At the beginning of the auction, Barry announced that the auction was being held without reserve. Helen, Mary, and Chris were all in attendance. Helen saw an old cash register with a stuck drawer that she thought would look great in her den. The auctioneer put the cash register up for sale noting that the drawer was stuck but that it could probably be fixed with little effort. Helen bought it for $20. When she got it home, she discovered that it actually contained $5,000. Unfortunately, Helen had a teenage son named Tad who started bragging to his friends about the family's good fortune. Barry heard about what had happened and sued Helen for return of the $5,000. At the same auction, Mary saw a great deal on a used table. She bid $20 on it. No one else bid anything. Barry announced that $20 was clearly insufficient for the table, that it was worth much more than that, and that he was taking it out of the auction. Chris started bidding on a diamond ring for his girlfriend. He bid $2,000. Just as Barry was getting ready to say "Sold," Chris looked over at his girlfriend, decided that he was not sure about marriage, and leaped up yelling "I revoke." Barry, however, immediately after, yelled "Sold." Barry sues Chris attempting to obtain the money for the engagement ring. Barry also sues Helen seeking to recover the $5,000 contained in the stuck drawer. Mary sues Barry attempting to obtain possession of the table. What is the likely result in the lawsuit Barry brought against Chris?
Chris will win because he properly revoked his bid before it was accepted.
A policy of fidelity insurance is an example of which of the following types of insurance?
Commercial
A policy of title insurance is an example of which of the following types of insurance?
Commercial
If insurance covers some type of business risk, the insurance is called ______ insurance.
Commercial
Which of the following is used as a basis for discharge by operation of law when performance is still objectively possible but would be extraordinarily injurious or expensive to one party?
Commercial impracticability
"Powder Room Mess." For $300,000, Willis agrees to build a new home for Robert, who is very picky. Willis builds the home to Robert's specifications with one exception. The faucets and linoleum flooring in an upstairs powder room are not exactly what Robert specified. That was a mistake on Willis' part, but he had not intentionally failed to follow specifications. When Robert sees the powder room, he goes ballistic and tells Willis that he will not pay Willis anything for the house. It will take $300 to put in correct faucets and linoleum. Willis says that he is willing to pay $300 to put Robert in the position he would have been in had the correct faucets and linoleum been used, but that is all he is willing to pay. Willis' offer to put Robert in the position he would have been in had the proper faucets and linoleum been used is based on the measure used for what type of damages?
Compensatory
Which of the following damages are designed to put the plaintiff in the position he or she would have been in had the contract been fully performed?
Compensatory
Which of the following are the two primary kinds of performance?
Complete and substantial
Which of the following occurs when all aspects of the parties' duties under the contract are carried out perfectly?
Complete performance
Which of the following involves the active hiding of the truth about a material fact?
Concealment
"Scheming Friends." Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. (The information regarding the arrests is true.) Weaver reluctantly agrees to rent the apartment to Willy for $100 per month. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Weaver offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake. Which of the following is the proper legal term, if any, for Weaver's action in regard to running back the odometer?
Concealment.
"Book Sale." Beverly offered to sell Rick a used business law book for $50. She told him that he could use it in his upcoming business law class the next semester. In fact, there was a problem with the book; it was several editions old. Rick was not aware of that fact, and neither was Beverly. When Rick took the book to class and realized the problem, he went back to Beverly requesting a refund. Beverly refused to return his money. She claimed that subjectively she thought that the book was correct, that she did not commit fraud, and that a binding contract existed. The book, however, is outdated and cannot be appropriately used in the class. Which of the following is the term representing the $50 to be provided by Rick and the book to be provided by Beverly?
Consideration
Which of the following is what a person will receive in return for performing a contract obligation?
Consideration
Sam promises his uncle, Bob, that he will lose 10 pounds and exercise every day during the spring semester in exchange for having his tuition paid for the fall semester. The uncle agrees; but after Sam has lost 10 pounds and exercised all semester, Bob refuses to pay saying that no contract existed. Which of the following is true?
Consideration was present, there was an enforceable contract, and Bob has wrongfully refused to pay.
Which of the following types of insurance protects contractors against liability for injuries that might occur while completing a job, excluding injuries to employees?
Contractors' liability
Which of the following contracts are usually voidable?
Contracts entered into as a result of fraud, duress, or undue influence.
"Useless Friend." Charles, who is very gullible, is friends with Bobby. Bobby, who cannot be trusted, decides to try to bind Charles to a contract in Bobby's favor. Bobby has Charles sign a contract promising to wash Bobby's car once a week for a month for $80 per month in payment. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Charles for one year to cook dinner for Bobby, do his laundry, and clean his apartment. Bobby is also very angry with his former girlfriend, Tessa, and decides to start rumors, that would constitute the tort of defamation, such as that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to enlist the help of Charles in smearing Tessa but knows that Charles would be hesitant to assist in his endeavors. One evening, however, Charles drank too much beer and was clearly intoxicated - a fact apparent to Bobby. Bobby had him sign a contract agreeing to defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and that he has no intention of defaming Tessa, who also happens to be Charles' new girlfriend. He also finally takes a look at the contract involving work for Bobby and tells Bobby that the contract is outrageous. Which of the following is true under the Restatement of Contracts, Section 16, regarding the claim of Charles that he should be able to avoid the contract involving Tessa because he was intoxicated?
Contracts of an intoxicated person are voidable if the other party had reason to know that because of the intoxicated person's condition, that person was unable to understand the nature and consequences of the transaction or was unable to act in a reasonable manner in relation to the transaction.
Which of the following is a type of contract that does not fall within the scope of the statute of frauds?
Contracts related to any lease of land or equipment
The reference to __________________ comes from the days when the contract was literally sealed by a piece of soft wax into which an impression was made.
Contracts under seal
Which of the following is an example of a formal contract?
Contracts under seal letters of credit, but not executory contracts.
Which of the following is a type of contract that falls within the scope of the statute of frauds?
Contracts whose terms prevent possible performance within one year
Which of the following are permitted to file under Chapter 11 reorganization?
Corporate debtors
In determining whether a mistake of fact occurred, what of the following is true?
Courts look to determine whether a mistake of fact occurred at the time the contract was concluded.
Which of the following is true regarding the adequacy of consideration?
Courts seldom consider the adequacy of consideration but will do so if fraud is involved.
Bob is hired to do computer sales for an electronics store. He agrees that if he leaves his employment, he will not work for another computer store within 25 miles for a period of two years. That type of agreement is called a[n] ______.
Covenant not to compete
A[n] ______ beneficiary is a third party who benefits from a contract in which the promisor agrees to pay the promisee's debt.
Creditor
Even if they would normally have to be in writing, if applicable criteria are met, oral contracts for _____ goods are enforceable.
Customized
Which of the following represents the legal ability to enter into a binding agreement?
D. Contractual capacity
Which of the following was the result on appeal in Reisenfeld & Co. v. The Network Group Inc.; Builders Square Inc.; Kmart Corp., the case in the text involving whether the plaintiff could recover from BSI in the situation in which BSI contracted with Network Group to lease property, and Network Group contracted with the plaintiff agreeing to pay a certain commission for his work but then defaulted on the contract? A. The court ruled that because it was a third-party beneficiary, BSI was required to pay the plaintiff the full amount of the commissions claimed. B. The court ruled that because it was a third-party beneficiary, BSI was required to pay the plaintiff the reasonable value of the services rendered, not necessarily the contractual amount promised for commissions. C. The court ruled that because a quasi-contract was involved, BSI was required to pay the plaintiff the full amount of the commissions claimed. D. The court ruled that because a quasi-contract was involved, BSI was required to pay the plaintiff the reasonable value of the services rendered, not necessarily the contractual amount promised for commissions. E. The court ruled that because the plaintiff did not have a contract with BSI, the plaintiff was entitled to no recovery from BSI.
D. The court ruled that because a quasi-contract was involved, BSI was required to pay the plaintiff the reasonable value of the services rendered, not necessarily the contractual amount promised for commissions.
Which of the following was the result in the Case Opener in which Hallmark claimed that an arbitration ruling against a former employee should be upheld? A. The former employee was barred from proceeding in court because of the binding arbitration clause. B. The former employee was barred from proceeding in court based on the statute of limitations which expired while she was pursuing her remedies in arbitration. C. The former employee was allowed to proceed in court because she had exhausted her remedies in the arbitration arena. D. The former employee could proceed with an action in court because there was no consideration for the arbitration agreement and, therefore, no valid agreement. E. The former employee could proceed with an action in court because, as a matter of law, arbitration agreements are barred in the arbitration context.
D. The former employee could proceed with an action in court because there was no consideration for the arbitration agreement and, therefore, no valid agreement.
A[n] ______ is a written federal court order signed by a bankruptcy judge stating that the debtor is immune from creditor actions to collect debts.
Discharge
"Garage Sale." Richard, who is cleaning out his garage, offers to sell Dawn a used computer for $200. Dawn replies that "I'll think about it and buy it if I decide to do so." Richard also calls Denise and offers to sell Denise a used business law book for $50. She asks if she can clean his apartment in return for the book instead of pay cash, and he agrees. Richard also agrees to sell a communications book for $5 to Jill who promises to pick it up the next day. Meanwhile, Sam comes to visit and offers Richard $45 for the business law book. Richard sells it to him because he decides his apartment is clean enough. Sam also offers Richard $50 for the used computer. Richard sells it to Sam because he does not expect to hear from Dawn. Sam sees the communications book and offers Richard $45 for it. Richard decides to forget about Jill and proceeds to sell the book to Sam for $45. The next day Denise shows up to clean Richard's apartment and is very angry because Richard did not save the book for her. Denise claims that Richard breached their contract because they had a deal. Richard says that they never had a deal because no consideration was present. He also said that even if cleaning house would be considered consideration, any housekeeping done would have been wholly inadequate to support receipt of the book because his house was already clean. Jill is also angry because Richard sold the communications book and informs him that he breached the contract he had with her. Richard tells her that he had no obligation to hold the book for her because they had a unilateral contract. Two days after they first talked, Dawn tells Richard that she would like the computer. She tells him that her response bound him and that he should have awaited her action. Richard tells Sam that he needs to return everything for a full refund. Sam refuses. Which of the following is true regarding whether Richard breached a contract with Dawn?
Dawn's statement created an illusory promise which cannot be enforced.
A third party, who is not part of an original contract, but to whom duty to perform contained in the original contract is transferred is called a[n] _____.
Delegatee
A[n] ______ occurs when a party to a contract transfers his or her duty to perform to a third party who is not part of the original contract.
Delegation
A party to a contract who transfers his or her duty to perform to a third party who is not part of the original contract is called a[n] _____.
Delegator
Which of the following is the reason the Uniform Commercial Code was drafted?
Different states had different laws governing contracts which did not result in a smooth flow of interstate commerce.
The parties' discharge of their obligations by doing what they respectively agreed to do under the terms of the contract is called ____.
Discharge by performance
Which of the following is true regarding ways by which a party's contractual obligations may be discharged?
Discharge may occur through material breach by one or both parties.
If a legal contract is formed and the subject of the contract then becomes illegal under a new statute, the contract is ____.
Discharged
When a party's obligations under a contract are terminated, the party is said to be ____.
Discharged
A[n] ______ beneficiary is a third party who benefits from a contract in which the promisor agrees to give a gift to the third party.
Donee
Which of the following is a type of intended beneficiary?
Donee and creditor, but not incidental
"Leaky Tub and Flaming Watercraft." Charles finished college, got a good job, and decided to sell some used toys and buy newer ones. A used hot tub with a leak in it and a personal watercraft were at the top of the list. Charles offered to sell to Constance the hot tub for $500. Constance was interested but not willing to pay $500. She said "I'll give you $400." Charles said that he would think about it. Later, the same day, Charles offered to sell Donna the hot tub for $500. Donna said "Would you consider $450?" Charles said he would think on it. A few minutes later, Everett who had heard that Charles wanted to sell the hot tub accepted Charles' offer to sell for $500, and they agreed that the transfer would be made the next day. A few minutes later, Constance called saying that she accepted Charles' offer to sell the hot tub for $500. A few minutes after that, Donna called and told Charles that she accepted his offer to sell the hot tub for $500. Charles told Constance and Donna that he had already sold it, and they are angry, threatening to sue. Charles offered to sell the personal watercraft to Joan for $800. She said that she would think it over and let him know the next day. Unfortunately, through no fault of anyone, there was a fire at Charles' home that night and the personal watercraft burned. Joan called the next day and accepted before Charles could tell her the watercraft burned. When she found out about the fire, Joan told Charles that he had better come up with another watercraft, or she was going to sue. Which of the following is correct regarding the final status of the negotiations between Donna and Charles?
Donna did not reject Charles' offer because she merely made an inquiry.
"Scheming Friends." Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. (The information regarding the arrests is true.) Weaver reluctantly agrees to rent the apartment to Willy for $100 per month. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Weaver offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake. Of which of the following is Willy guilty in threatening to tell friends about the arrest unless Weaver rents the apartment?
Duress
Which of the following is found when one party was forced into an agreement by the wrongful act of another?
Duress
Which of the following occurs in Australia whenever an illegitimate threat is made to hold on to goods unless a payment is made or an agreement is entered into?
Duress of goods
If the subject matter of an offer is destroyed, the offer terminates after 10 days or notice of the death to the offeree, whichever comes first.
FALSE
In a bilateral contract, the consideration for a promise is a completed act.
FALSE
In all states parents are responsible for the torts of their minor children.
FALSE
Today's law of contracts originated from judicial decisions in ______.
ENGLAND
Which of the following is true if a contract is disaffirmed on the basis of intoxication?
Each party to the contract must return the other to the condition he or she was in at the time the contract was entered into.
For a court to enforce a promise, ______ must offer consideration.
Each side to the contract
Which of the following is involved in a situation in which a person refuses to perform according to a contract unless the other person either signs another contract with the one making the threat or pays that person a higher price than was specified in the original agreement?
Economic duress
The ______ is the term used for the date an insurance policy begins coverage of an insured.
Effective date
In most cases, when a minor marries, she or he is considered ____.
Emancipated
In most states a person is given full legal capacity to enter into contracts when he or she becomes ______ before reaching the age of majority.
Emancipated
Which of the following occurs when a minor's parents or legal guardians give up their right to exercise legal control over the minor, typically when the minor moves out of the parents' house and begins supporting himself or herself?
Emancipation
In an insurance contract, the beneficiary is another name for the insured.
FALSE
Which of the following is false regarding international treatment of evidentiary matters?
England has significantly increased the number of contracts falling within the statute of frauds since the original act was passed.
Which of the following is true regarding European courts?
European courts permit rescission of the contract for a mistake of value when the mistake involves more than 50 percent of the value at the time of the contract.
"Irresponsible Teen." At age 17, in a state in which the age of majority is 18, Sally purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted to return it to the store claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Sally claimed was from grape juice. Additionally, a few days before she turned 18, Sally purchased a used car from Dings and Dents used cars. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for six months after she turned 18. Sally then returned the car to Dings and Dents, informed the owner that she was under 18 when she entered into the contract to purchase the car, and told the owner that she was returning the car for a full refund. Dings and Dents claimed the car was a necessity. Sally and her parents disagreed claiming that the parents were ready and willing to provide a car to Sally, and that she only purchased the car from Dings and Dents because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Sally was under the age of 18. In the dispute between Sally and the owner of Dings and Dents, which of the following is true regarding the claim of Sally and her parents that the car was a necessary?
Even if a minor disaffirms a contract for a necessary, the minor will still be held liable for the reasonable value of the necessary.
"Beauty Shop Woes." When Janice went to work as a hair stylist in Rick's beauty shop, she entered into an agreement with Rick whereby if she left she would not work for another beauty shop within 50 miles for 2 years. Rick trained Janice in a number of new techniques. After nine months, Janice was offered a great job down the street at a new beauty shop, she quit Rick, and had a number of customers follow her down the street to her new job. Rick claimed that she had signed a contract and had no right to go to work at the new shop. Janice disagreed and told Rick that no judge in the country would enforce such an agreement. Janice told Rick that she was more worried about a customer who was threatening to sue her because her hair turned green after Janice worked on it. Janice said that she knew that the customer's hair was damaged; but that she told the customer that odd results could result from a dye attempt, and had her sign a contract that she released Janice from all liability and would not sue. The customer, however, sued anyway. What type of agreement did Janice have the customer with green hair sign?
Exculpatory
A statement releasing one of the parties to an agreement from all liability, regardless of who is at fault or what the injury suffered is, would be referred to as a[n] ______ agreement.
Exculpatory
Once all the terms of the contract have been fully performed, the contract is said to be ___________.
Executed
As long as some of the duties under a contract have not yet been performed, the contract is considered ________________.
Executory
A contractual condition of satisfaction is considered a[n] ______ condition that must be met before the other party's obligation to pay for the performance arises.
Express
Which of the following describes conditions explicitly stated in the contract?
Express
Which of the following occurs when a person reaches the age of majority and states, either orally or in writing, that he or she intends to be bound by the contract entered in to as a minor?
Express ratification
A commercial general liability policy provides protection against intentional wrongful acts committed by an insured.
FALSE
A debtor must be insolvent to file a voluntary petition for bankruptcy under Chapter 7.
FALSE
A liquidated debt may be the subject of an accord and satisfaction.
FALSE
A promise to do something that you are already obligated to do is generally a valid consideration.
FALSE
An "instructed authorization" occurs if the means by which an acceptance can be communicated to the offeror is expressly stated in the offer.
FALSE
An offer by a retailer to purchase seasonal goods from a wholesaler would not lapse sooner than an offer to purchase goods that could easily be sold all year long.
FALSE
As a general rule, past consideration qualifies as consideration.
FALSE
As a matter of federal law, arbitration clauses are illegal in policies of insurance.
FALSE
Both a minor and the adult with whom the minor contracted may disaffirm a contract based upon the minor's lack of majority.
FALSE
Chapter 11 reorganization may be involuntary but not voluntary.
FALSE
Federal law is the primary law addressing when an insurance company can cancel a policy of insurance.
FALSE
If an acceptance is received after a rejection is received, the acceptance is still valid.
FALSE
If an offeree makes a mistake and sends an acceptance to the wrong address, there is an acceptance upon dispatch.
FALSE
The state of New York does not grant a donee beneficiary the right to enforce a contract unless the promisee is connected to the donee through a ______ relationship.
Familial
Which of the following is true regarding the number of creditors who must vote to accept a reorganization plan under a Chapter 11 proceeding?
For the plan to be accepted, two-thirds of the creditors of each class of creditors must vote to approve it.
A[n] ______ is a false representation of a material fact that is consciously false and intended to mislead the other party.
Fraudulent misrepresentation
"Portraits." Belinda, a famous portrait painter, agreed to paint Harry's portrait for $4,000. She also agreed to paint the portraits of Michelle's two Corgi dogs, Baby and Bree. Michelle agreed to pay Belinda $10,000 for the two Corgi portraits. Belinda charged Michelle more because dogs annoyed her. Belinda met the spoiled dogs, and they really got on her nerves. Plus, she was behind on finishing Harry's portrait. Belinda, therefore, assigned the right to receive the money for the dog portraits and delegated the duty to paint the dog portraits to her assistant, Fred. He eagerly accepted and painted the portraits. She also assigned to Fred, as payment for amounts she owed him for various duties, the right to receive payment from Harry. The contract Belinda had with Michelle did not address assignment in any way. The contract Belinda had with Harry, however, prohibited the right to assign payment for services received. Harry fancied himself as an experienced business person and insisted on that provision because he had read somewhere that such a clause was a good idea. Belinda finished the portrait of Harry and called him to come and pick it up. Meanwhile, a disgruntled secretary who disliked Belinda told both Michelle and Harry about the assignments to Fred. Michelle was furious and refused to pick up the portrait or pay anyone. Harry likewise refused to pay for his portrait. What would be the most likely result if Fred sues Harry for the $4,000 payment?
Fred will win because the right to receive payment could be validly assigned.
When duress is at issue, the _____ needed for legal consent has been removed by the specifics of the threat.
Free will
Which of the following doctrines arose from cases in England in which parties who had contracted for rooms along a parade route for a king's coronation, received their money back when the coronation was canceled because the king became ill?
Frustration of purpose
Which of the following types of insurance protects a garage owner from liability to persons who are injured by the operation of the garage?
Garage liability
Gretchen offers $100 to anyone who can return her lost dog, Sparky. Haley returns the dog and requests the money. Gretchen says that there is no binding contract. Which of the following is true regarding Gretchen's statement?
Gretchen is incorrect because there is a binding unilateral contract which Haley accepted by performing.
"Lake House." Harry has two houses, a house on the lake and a house in town. Rebecca wants to buy the house on the lake. Harry and Rebecca orally agree that Rebecca will buy the house on the lake for $300,000. Harry hurriedly writes out a contract providing that he would sell "his house" to Rebecca for $300,000. Harry signs the top of the document. Rebecca does not sign at all. No merger clause is included in the contract. Harry backs out of the contract, and Rebecca sues him. He tells the judge that the statute of frauds is left unsatisfied because he did not sign the document at the end and also because Rebecca did not sign at all. He also tells the judge that, at any rate, the agreement referred to the house in town, not the house on the lake; and that under the parol evidence rule, he had the right to identify the correct house. Which of the following is true regarding Harry's assertion that the statute of frauds is not satisfied because Rebecca did not sign the document?
Harry is incorrect because he is the one being sued, and he signed the document.
"Lake House." Harry has two houses, a house on the lake and a house in town. Rebecca wants to buy the house on the lake. Harry and Rebecca orally agree that Rebecca will buy the house on the lake for $300,000. Harry hurriedly writes out a contract providing that he would sell "his house" to Rebecca for $300,000. Harry signs the top of the document. Rebecca does not sign at all. No merger clause is included in the contract. Harry backs out of the contract, and Rebecca sues him. He tells the judge that the statute of frauds is left unsatisfied because he did not sign the document at the end and also because Rebecca did not sign at all. He also tells the judge that, at any rate, the agreement referred to the house in town, not the house on the lake; and that under the parol evidence rule, he had the right to identify the correct house. Which of the following is true regarding Harry's assertion that under the parol evidence rule he had the right to identify the house referenced in the contract?
Harry is incorrect because under the parol evidence rule, the judge would likely allow oral evidence regarding the house at issue in order to clarify an ambiguity.
"Lake House." Harry has two houses, a house on the lake and a house in town. Rebecca wants to buy the house on the lake. Harry and Rebecca orally agree that Rebecca will buy the house on the lake for $300,000. Harry hurriedly writes out a contract providing that he would sell "his house" to Rebecca for $300,000. Harry signs the top of the document. Rebecca does not sign at all. No merger clause is included in the contract. Harry backs out of the contract, and Rebecca sues him. He tells the judge that the statute of frauds is left unsatisfied because he did not sign the document at the end and also because Rebecca did not sign at all. He also tells the judge that, at any rate, the agreement referred to the house in town, not the house on the lake; and that under the parol evidence rule, he had the right to identify the correct house. Which of the following is true regarding Harry's assertion that the statute of frauds is left unsatisfied because he did not sign the document at the end?
Harry is incorrect because while the statute of frauds would require his signature on the document, there is no requirement that the signature be at the end.
Which of the following are written documents signed by a party that makes an unconditional promise to pay a specific sum of money on demand or at a certain time to the holder of the instrument?
Negotiable instruments
"Hawaiian Adventure." Beverly decides to go on a great trip to Hawaii. She needs someone, however, to take care of her two dogs, Creaky and Toady, while she is gone. She hires Frank three months in advance and they reach a contractual arrangement whereby he will be paid $200 for keeping the dogs for two weeks. Frank comes over two months before Beverly is set to leave, takes one look at Creaky and Toady, and declares that they are too creepy to be around. Beverly hires Alice who agrees to care for Creaky and Toady. Two weeks before Beverly is set to leave, however, Alice calls and tells her that she just broke both her legs in an automobile accident and has been put on bed rest for two months. Finally, Beverly hires Betty to care for the dogs and heads off to Hawaii where she has a great time. Unfortunately, when Beverly returns home, she finds that Betty has absconded with Creaky and Toady. They were later found in good health in an exclusive resort visited by Betty. Betty refuses to return Creaky and Toady to Beverly claiming that they were all enjoying the resort and that she had become quite attached to them. Which of the following is true regarding Frank's refusal to keep Creaky and Toady?
He committed an anticipatory repudiation.
"Refusal to Pay." Business law teacher Debby needed some yard work done. She told her class that she would give $50 to the first person who mowed her yard. She also entered into an agreement with Betty who agreed to trim some shrubbery for $40. Max went to mow Debby's yard. Unfortunately, just as he finished mowing, a neighborhood dog bit him, and he had to go to the emergency room for a couple of stitches. Debby refused to pay Max because she said that he had angered the neighbors and their dog, and that he was more trouble than he was worth. Secretly, Debby was glad about the dog bite because she felt it gave her an excuse not to pay. Max refused to pay the emergency room because he said that they did not have a binding, bilateral contract. Betty refused to trim the shrubbery because she got a better offer and claimed that she was not bound on the contract until she started to perform Which of the following is true regarding Max's statement that he did not have to pay the emergency room charges?
He is incorrect because there was a binding implied contract.
"Wrong Deck." Penny hires Jackson to paint her back deck. She agrees to pay him $200 for the job, and he accepts sight unseen. They enter into the agreement on Tuesday, and he is to paint the deck on Saturday. When Jackson arrives, neither Penny nor her neighbor is at home. He mistakenly paints the neighbor's deck. Penny calls him the next day and asks him why he did not paint her deck. He informs her that he did paint the deck. It is then discovered that he mistakenly painted the neighbor's deck. Penny tells him not to worry because the neighbor will be required to pay him. Jackson says that if the neighbor does not pay, then he expects all of his funds from Penny, because the contract is executed. Which of the following is true regarding Jackson's assertion that Penny must pay him at this point if the neighbor fails to do so?
He is incorrect unless he can somehow establish that Penny gave him poor directions or was otherwise at fault in informing him which deck to paint, and the contract remains executory.
"Teenage Driver." Sally bought a new car, a yellow convertible. She also had a teenage son at home, Bobby, but she did not plan to let him drive the car. She was annoyed because Bobby had run her last car into the lake. Sally decided to change insurers because she thought her previous insurance agent was annoyed over Bobby's antics. She went to ABC Insurance to apply. She got an application from Mark. Sally was a little nervous because the application asked about other drivers in the home. It also asked if there were any teenagers in the home. Sally answered "no" on both counts because she had no plans to let Bobby drive. Sally got full coverage on the car, and the policy was issued shortly after she completed the application. She renewed the policy without revising any of the information she provided. Thirteen months later, Sally really needed some gas in the car for the next day. Under the belief that he had sufficiently matured, Sally sent Bobby to get some gas at the station just down the street. Unfortunately, a drunk driver who had no insurance hit the car and totaled it. Sally immediately called Mark. When Mark reviewed the police report, however, he told Sally that there would be no coverage on the car because Bobby was driving. Sally said that was completely unfair and that she would appeal to the jury. Sally told Mark that ABC issued the policy and that she was relying on the incontestability clause. Mark told Sally that she was wrong and that based on how disputes were handled under the policy, she would not even see a jury. Which of the following is true regarding Mark's statement that Sally would never see a jury?
He is likely referencing a provision requiring arbitration contained in some policies.
"Book Sale." Beverly offered to sell Rick a used business law book for $50. She told him that he could use it in his upcoming business law class the next semester. In fact, there was a problem with the book; it was several editions old. Rick was not aware of that fact, and neither was Beverly. When Rick took the book to class and realized the problem, he went back to Beverly requesting a refund. Beverly refused to return his money. She claimed that subjectively she thought that the book was correct, that she did not commit fraud, and that a binding contract existed. The book, however, is outdated and cannot be appropriately used in the class. Which of the following describes Rick's role in the transaction?
He was the offeree.
"Scheming Friends." Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. (The information regarding the arrests is true.) Weaver reluctantly agrees to rent the apartment to Willy for $100 per month. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Weaver offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake.' Which of the following would be the most likely result if Weaver attempts to rescind the agreement to rent the apartment?
He will be able to rescind the agreement based upon Willy's threat of extortion.
"Scheming Friends." Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. (The information regarding the arrests is true.) Weaver reluctantly agrees to rent the apartment to Willy for $100 per month. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Weaver offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake. Which of the following is true regarding Willy's rights in regards to the ring purchase?
He will be able to rescind the agreement because Weaver was guilty of fraudulent misrepresentation.
"Scheming Friends." Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. (The information regarding the arrests is true.) Weaver reluctantly agrees to rent the apartment to Willy for $100 per month. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Weaver offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake. Which of the following is true regarding Willy's rights in regards to the car purchase?
He will be able to rescind the contract because of the fraudulent misrepresentation on the part of Weaver.
"Saturday Auction." Barry, an auctioneer, held an auction on a Saturday morning. At the beginning of the auction, Barry announced that the auction was being held without reserve. Helen, Mary, and Chris were all in attendance. Helen saw an old cash register with a stuck drawer that she thought would look great in her den. The auctioneer put the cash register up for sale noting that the drawer was stuck but that it could probably be fixed with little effort. Helen bought it for $20. When she got it home, she discovered that it actually contained $5,000. Unfortunately, Helen had a teenage son named Tad who started bragging to his friends about the family's good fortune. Barry heard about what had happened and sued Helen for return of the $5,000. At the same auction, Mary saw a great deal on a used table. She bid $20 on it. No one else bid anything. Barry announced that $20 was clearly insufficient for the table, that it was worth much more than that, and that he was taking it out of the auction. Chris started bidding on a diamond ring for his girlfriend. He bid $2,000. Just as Barry was getting ready to say "Sold," Chris looked over at his girlfriend, decided that he was not sure about marriage, and leaped up yelling "I revoke." Barry, however, immediately after, yelled "Sold." Barry sues Chris attempting to obtain the money for the engagement ring. Barry also sues Helen seeking to recover the $5,000 contained in the stuck drawer. Mary sues Barry attempting to obtain possession of the table. In the lawsuit in which Barry sues Helen for return of the $5,000, which of the following is the most likely result?
Helen will win because the auction was without reserve, and she properly bid on and bought the cash register with everyone knowing that the cash drawer was stuck.
"Courtroom Surprises." Wilma agrees to sell Wally her house for $200,000. Wilma, Wally, and the house are all located in Tennessee. She also orally agrees to sell her used car to Wally for $1,000. Wilma and Wally discuss the fact that the house needs some repairs. Wilma gives Wally a key and tells him to do whatever he wants with the house. In reliance on her promise to sell the house, Wally sells his home, gets a loan, and has a new roof put on Wilma's house because of leaks that needed to be repaired to prevent further damage. When presented with the written agreements of sale for the home and the car, however, Wilma refuses to sign either. Wally sues, and the case proceeds to trial. Wilma tells the judge in court under oath that she orally agreed to sell the house but that she changed her mind before signing and that she believes she has protection under the statute of frauds. She tells the judge that no agreement was ever made regarding the car and that she also has protection under the statute of frauds regarding that matter. Which of the following is true regarding Wally getting a loan and putting a new roof on the house?
His actions would likely amount to promissory estoppel, which establishes an exception to the statute of frauds.
Which of the following is true under the UCC regarding checks marked "paid-in-full"?
If a business inadvertently cashes such a check, the business has 90 days from the date it cashed that check to offer repayment in the same amount to the debtor and avoid an accord and satisfaction.
Which of the following is true once a guardian has been appointed for a person who has been adjudicated insane?
If a person has been adjudicated insane and has a guardian appointed, that person has no capacity to enter into contracts and any contract he does attempt to enter into is void.
Which of the following is true regarding acceptable means of acceptance if no means of communicating an acceptance is specified in an offer?
If no means of communicating the acceptance is specified, any reasonable means is generally acceptable.
If a licensing statute is intended to protect the public's health, safety, and welfare, an agreement with an unlicensed professional is typically deemed _____.
Illegal and unenforceable
Which of the following is true regarding illusory promises?
Illusory promises are not consideration.
If the subject matter of an offer is destroyed, the offer _______.
Immediately terminates
Which of the following describes conditions that are not explicitly stated but are inferred from the nature and language of the contract?
Implied
In which of the following does a contract arise not from words but from the conduct of the parties?
Implied contracts
A[n] ______ occurs when a former minor does not specifically state that he affirms a contract entered into as a minor but takes some action that is consistent with intent to ratify the contract.
Implied ratification
In the law, when both parties are equally responsible for an illegal agreement, it is known as ____.
In pari delicto
Which of the following is true regarding oral assignments?
In some cases, assignments may be made orally.
"Irresponsible Teen." At age 17, in a state in which the age of majority is 18, Sally purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted to return it to the store claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Sally claimed was from grape juice. Additionally, a few days before she turned 18, Sally purchased a used car from Dings and Dents used cars. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for six months after she turned 18. Sally then returned the car to Dings and Dents, informed the owner that she was under 18 when she entered into the contract to purchase the car, and told the owner that she was returning the car for a full refund. Dings and Dents claimed the car was a necessity. Sally and her parents disagreed claiming that the parents were ready and willing to provide a car to Sally, and that she only purchased the car from Dings and Dents because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Sally was under the age of 18. Which of the following is true regarding Sally's attempt to return the damaged dress?
In some states Sally would have an obligation of restitution to the store.
Which of the following is some sort of mental or physical defect that prevents a person from being able to enter into a legally binding contract?
Incapacity
A[n] ______ beneficiary is one who unintentionally gains a benefit from a contract between other parties.
Incidental
A[n] ______ clause states that after an insurance policy has existed for a specified period of time, the insurance company cannot contest any statements made in the insurance application.
Incontestability
Which of the following is true regarding who may receive a discharge of debt under Chapter 7 of the bankruptcy code?
Individuals, partnerships, and corporations may all receive a discharge.
Which of the following is false regarding Chapter 13 of the bankruptcy code?
Individuals, partnerships, and corporations may file for a Chapter 13 repayment plan.
A[n] ______ contract is one requiring complete performance by both parties, even if it appears as if the contract contains multiple parts.
Indivisible
Which of the following is an order either forcing a person to do something or prohibiting a person from doing something?
Injunction
A[n] ______ misrepresentation results from a false statement about a fact material to an agreement that the person making the statement believed to be true.
Innocent
Which of the following is false regarding bankruptcy proceedings in Spain?
Insolvency means that the business has failed to meet at least some financial obligations for at least six months.
Which of the following is a term used in bankruptcy for debtors who cannot pay their debts in a timely fashion?
Insolvent debtors
Which of the following occurs when the parties to the agreement wish to replace one of the parties with a third party?
Novation
"Wild Things." Image Company, a company specializing in photography of exotic and wild animals, took out a life insurance policy through ABC Insurance on its president Bruno and also on a company-owned jeep that he drove. Bruno got a better offer from Wild Things Company, another company specializing in the photography of exotic animals, and went to work for them. He parted on good terms with Image Company and taking the jeep with him under the mistaken idea that the jeep was part of his severance benefits. Neither of the insurance policies was cancelled by Image. Unfortunately, while photographing a lion for Wild Things Company, Bruno was attacked and eaten. His jeep was then stolen by an unknown bystander who apparently saw the attack and took the opportunity to take the jeep. Image Company had been in the process of contacting Bruno in an attempt to obtain possession of the jeep but had not reacquired it at the time of his death. Image Company had renewed the policy on the jeep reaffirming to the insurer that its purpose was for use by Image employees because Image planned to have possession of the vehicle shortly. Image Company filed a claim to collect on the life insurance policy and also on the vehicle policy. ABC Insurance denied both claims. Which of the following is a term referencing the concept that a sufficient interest must exist on the part of an insured in order to take out a policy of insurance?
Insurable interest
To have a[n] ______ in property or life, a person must be subject to economic loss if there is damage or harm to the person or property.
Insurable interest
Which of the following is true regarding the reduction of the impact of moral hazard by insurers?
Insurance companies lessen the impact of moral hazard by requiring that individuals with insurance make co-payments or pay a deductible.
Which of the following are written contracts intended to be the complete and final representation of the parties' agreement?
Integrated contracts
A[n] ______ beneficiary is a third party to a contract who is intended to be benefited directly from the contract made by the contracting parties.
Intended
"Third-Party Woes." Trudy owed Sam $40 for a book she purchased from him. Trudy mowed Betty's yard for $40 and agreed with Betty that Betty would pay Sam for the book. Sam is not aware of the assignment. Betty pays no one. Trudy also mowed Bob's yard for $40. She agreed with Bob that Bob would give the payment to Sally representing Trudy's birthday present to Sally. Bob later refuses to do so saying that promises to give gifts are not enforceable. He then moves out of town. Trudy tells both Sam and Sally that she is broke and that they will have to get any amounts due from Betty and Bob respectively. Sally is very unhappy because she wanted to buy a new pair of sandals with the money. What type of third-party beneficiary is Sam?
Intended and creditor
"Third-Party Woes." Trudy owed Sam $40 for a book she purchased from him. Trudy mowed Betty's yard for $40 and agreed with Betty that Betty would pay Sam for the book. Sam is not aware of the assignment. Betty pays no one. Trudy also mowed Bob's yard for $40. She agreed with Bob that Bob would give the payment to Sally representing Trudy's birthday present to Sally. Bob later refuses to do so saying that promises to give gifts are not enforceable. He then moves out of town. Trudy tells both Sam and Sally that she is broke and that they will have to get any amounts due from Betty and Bob respectively. Sally is very unhappy because she wanted to buy a new pair of sandals with the money. What type of third-party beneficiary is Sally?
Intended and donee
Which of the following is true regarding what is considered an interest in land within the statute of frauds?
Interests in land within the statute of frauds include promises to sell crops annually, agreements between parties for profit sharing from the sale of real property, and boundary disputes that have been settled through the use of land.
By filing a[n] ______ petition under Chapter 7, creditors can attempt to force a debtor into bankruptcy.
Involuntary
Which of the following is false regarding insurance and the international sale of goods?
Manufacturers typically have insurance only in their home country because, under international law, the home country's law would be applied in the event of disputes.
Which of the following is true regarding the type of marriage contract discussed in the text called the muta'a? A. It is a type of premarital contract typical to the U.S. in which the parties agree ahead of time how property and assets should be divided in the event of divorce. B. It is a contract by which the female agrees to a divorce if there are no children from the marriage within five years. C. It is a contract by which the female agrees to a divorce if there are no children from the marriage within three years. D. It is a temporary type of arrangement called a "responsibility marriage" in which the female is paid to care for the male's elderly parents. E.It is a temporary type of arrangement called a "pleasure marriage" in which the female is paid for sexual intimacy.
It is a temporary type of arrangement called a "pleasure marriage" in which the female is paid for sexual intimacy
Which of the following is true regarding the effect of an innocent misrepresentation on a contract?
It permits the party that was misled by the false statement to rescind the contract, but damages are not available.
"Bank Robbery." Safe Bank was robbed of a significant sum of cash by a robber later identified as Victor Victory. Safe Bank offered a reward of $10,000 to anyone who captured or provided information leading to the capture of Victor. Ted, a police officer in town, promised Safe Bank officials that he would apprehend Victor. While on duty, Ted arrested Victor at a hamburger joint in town. He found Victor based upon a hunch he had after Ursula, who dated Victor, told him about various places Victor enjoyed eating. The bank refuses to pay either Ursula or Ted any of the reward money. Which of the following is true regarding the offer of the reward?
It pertained to a unilateral contract that could be accepted with consideration consisting of performance.
Which of the following is false regarding the statute of frauds?
It relates to fraudulent contracts.
Which of the following is true regarding the Uniform Electronic Transactions Act?
It seems to create an electronic version of the mailbox rule.
Which of the following is the maximum interest rate?
It varies depending on the state involved.
"Exemptions." Sidney is injured in an automobile accident and cannot work. She cannot pay her bills and files for bankruptcy relief under Chapter 7. Federal exemptions apply, and she lists as exempt $25,000 in equity in her residence; interest in a vehicle of $2,000; interest in jewelry of $400; and retirement funds in her individual retirement account. Her creditors filed an objection to all claimed exemptions except for the home equity claim. What is the status of the exemption she claimed on the residence?
It will likely be allowed because although it is more than the federal exemption, no creditor filed an objection to it.
"Painted House." Billy had a contract to paint Jan's house for $800 including the duty to clean up any debris. The contract between Billy and Jan did not address assignment in any way. Billy, who was very busy, assigned the contract, specifying that it included the right to receive the money and the duty to paint the house, to Richard who was interested in making some extra money and had experience painting. Billy did not tell Jan about the assignment because he did not want any trouble nor did Richard mention the assignment to her. In fact, Richard never met Jan because he painted while she was at work. After Richard did a good job painting the house, Jan sent a check to Billy for $800. Billy needed the money to pay some bills, so he spent it. He thought he would have money coming in with which to pay Richard, but that did not happen. Richard asked Jan for $800 when it was not forthcoming from Billy. Jan refused. Richard said that he was going to sue her. Jan called Billy and told him that he had no right to assign the contract. Another problem involved disposal of debris. Although Richard was a good, competent painter, he forgot and left some old paint cans at Jan's house. Jan demanded that Billy come and properly dispose of the paint cans because they could not simply be put in the trash. Billy refused and told her that she would have to get Richard to dispose of the paint cans because that was his responsibility. Jan called Richard who told her that he was busy and that clearing out the paint cans was Billy's responsibility. Which of the following is true regarding Jan's statement to Billy that he had no right to assign the contract?
Jan is incorrect because the contract was not a personal service, and there was no requirement that the contract specifically reference the right to assign rights and duties.
"Painted House." Billy had a contract to paint Jan's house for $800 including the duty to clean up any debris. The contract between Billy and Jan did not address assignment in any way. Billy, who was very busy, assigned the contract, specifying that it included the right to receive the money and the duty to paint the house, to Richard who was interested in making some extra money and had experience painting. Billy did not tell Jan about the assignment because he did not want any trouble nor did Richard mention the assignment to her. In fact, Richard never met Jan because he painted while she was at work. After Richard did a good job painting the house, Jan sent a check to Billy for $800. Billy needed the money to pay some bills, so he spent it. He thought he would have money coming in with which to pay Richard, but that did not happen. Richard asked Jan for $800 when it was not forthcoming from Billy. Jan refused. Richard said that he was going to sue her. Jan called Billy and told him that he had no right to assign the contract. Another problem involved disposal of debris. Although Richard was a good, competent painter, he forgot and left some old paint cans at Jan's house. Jan demanded that Billy come and properly dispose of the paint cans because they could not simply be put in the trash. Billy refused and told her that she would have to get Richard to dispose of the paint cans because that was his responsibility. Jan called Richard who told her that he was busy and that clearing out the paint cans was Billy's responsibility. What would be the likely result of a lawsuit brought by Richard against Jan to recover the $800?
Jan will win because she had no notice that the contract had been assigned and could, therefore, legally pay Billy.
"Garage Sale." Richard, who is cleaning out his garage, offers to sell Dawn a used computer for $200. Dawn replies that "I'll think about it and buy it if I decide to do so." Richard also calls Denise and offers to sell Denise a used business law book for $50. She asks if she can clean his apartment in return for the book instead of pay cash, and he agrees. Richard also agrees to sell a communications book for $5 to Jill who promises to pick it up the next day. Meanwhile, Sam comes to visit and offers Richard $45 for the business law book. Richard sells it to him because he decides his apartment is clean enough. Sam also offers Richard $50 for the used computer. Richard sells it to Sam because he does not expect to hear from Dawn. Sam sees the communications book and offers Richard $45 for it. Richard decides to forget about Jill and proceeds to sell the book to Sam for $45. The next day Denise shows up to clean Richard's apartment and is very angry because Richard did not save the book for her. Denise claims that Richard breached their contract because they had a deal. Richard says that they never had a deal because no consideration was present. He also said that even if cleaning house would be considered consideration, any housekeeping done would have been wholly inadequate to support receipt of the book because his house was already clean. Jill is also angry because Richard sold the communications book and informs him that he breached the contract he had with her. Richard tells her that he had no obligation to hold the book for her because they had a unilateral contract. Two days after they first talked, Dawn tells Richard that she would like the computer. She tells him that her response bound him and that he should have awaited her action. Richard tells Sam that he needs to return everything for a full refund. Sam refuses. Which of the following is true regarding Jill's claim that by selling the communications book for a higher price, Richard breached the contract he had with her?
Jill is correct.
If a person wishes to ensure that an offer will in fact be held open for a set period of time, the person may do so by entering into a[n] ______________ contract with the offeror.
Option
"Consumer Debt." Mona had not been keeping up with her spending and bought several expensive items. She had numerous credit cards and some unsecured loans. She had a total of 14 creditors. All her debt was consumer debt, and Mona really wished that she had not put all those new clothes on her credit card. Although Mona was struggling, she did not want to file for bankruptcy because she did not want a bad credit score. Three of her credit card companies, however, who had unsecured claims against her totaling $14,500, signed and filed an involuntary bankruptcy petition against her under Chapter 7. Mona is unsure about how to proceed. While she is several months behind on a number of payments, including alimony payments she believes were unfairly awarded to her ex-husband, she does not particularly want to go bankrupt. She believe that the creditors have been unfair in not allowing her additional time in which to pay. On the other hand, she would really like to be rid of her excessive debt and stop collection efforts on the part of her ex-husband. Which of the following is true regarding the claims of Mona's ex-husband for alimony?
Legal action to collect alimony is not subject to the stay, and alimony payments are nondischargeable.
Which of the following is false regarding actions that may be taken while an automatic stay is in effect in a Chapter 7 proceeding?
Legal actions to collect child support payments are subject to the stay.
Which of the following involves a promise to buy or sell that the courts will require the parties to obey?
Legal assent
An individual would purchase ______ insurance to protect his or her business from tort liability to third parties.
Liability
Which of the following types of insurance provides a specific sum of money on the death of the insured?
Life
As a general rule, most states will not allow a minor to disaffirm contracts for which of the following?
Life insurance, health insurance, and psychological counseling
In a[n] ______ debt, there is no dispute about the fact that money is owed and the amount of money owed.
Liquidated
Under which of the following type of damages do the parties specify in advance the damages if there is a particular kind of breach?
Liquidated
If a[n] __________ contract exists, the administrator of an offeror's estate must hold the offer open until it expires in accordance with the contract.
Option
Which of the following is called straight bankruptcy?
Liquidation
Which of the following occurs when a debtor turns over all assets to a trustee?
Liquidation
All states except ______ adhere to the admission exception to the statute of frauds.
Louisiana and California
"Pet Pig Farm." Marcy wanted to buy Lucy's land and use it to breed small pigs to be kept as pets. Marcy told Lucy that having water on the property was very important although she did not mention to Lucy her plan to breed small pigs. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, Marcy had a land survey done, and it was discovered that actually the spring did not run through the corner of Lucy's property. The area in which the spring ran actually belonged to a neighbor. Additionally, when Lucy brought Marcy the used truck, Marcy said, "That's not the truck!" It was discovered that Lucy, who had two trucks, thought that Marcy had bought the older truck although Marcy thought she had purchased the newer truck. Marcy was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Marcy for nuisance. It will cost Marcy more than she had agreed to pay Lucy in order for Marcy to obtain a similar farm which actually has a spring on it. Which of the following would be the result if Marcy attempts to rescind the contract and recover damages only on the basis of the neighbor's objection to a pig farm?
Marcy may not rescind the contract nor may she recover damages because she, Marcy, made a unilateral mistake.
"Pet Pig Farm." Marcy wanted to buy Lucy's land and use it to breed small pigs to be kept as pets. Marcy told Lucy that having water on the property was very important although she did not mention to Lucy her plan to breed small pigs. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, Marcy had a land survey done, and it was discovered that actually the spring did not run through the corner of Lucy's property. The area in which the spring ran actually belonged to a neighbor. Additionally, when Lucy brought Marcy the used truck, Marcy said, "That's not the truck!" It was discovered that Lucy, who had two trucks, thought that Marcy had bought the older truck although Marcy thought she had purchased the newer truck. Marcy was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Marcy for nuisance. It will cost Marcy more than she had agreed to pay Lucy in order for Marcy to obtain a similar farm which actually has a spring on it. Assuming that Lucy innocently made a misrepresentation regarding the spring running through the corner of the farm with no reason to believe that was incorrect, which of the following is true, considering only the lack of a spring issue, if Marcy does not want to go through with the sale?
Marcy may rescind the contract, but she may not recover damages.
"Pet Pig Farm." Marcy wanted to buy Lucy's land and use it to breed small pigs to be kept as pets. Marcy told Lucy that having water on the property was very important although she did not mention to Lucy her plan to breed small pigs. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, Marcy had a land survey done, and it was discovered that actually the spring did not run through the corner of Lucy's property. The area in which the spring ran actually belonged to a neighbor. Additionally, when Lucy brought Marcy the used truck, Marcy said, "That's not the truck!" It was discovered that Lucy, who had two trucks, thought that Marcy had bought the older truck although Marcy thought she had purchased the newer truck. Marcy was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Marcy for nuisance. It will cost Marcy more than she had agreed to pay Lucy in order for Marcy to obtain a similar farm which actually has a spring on it. Assuming that Lucy fraudulently made a misrepresentation regarding the spring running through the corner of the farm knowing the statement was not correct, which of the following is true, considering only the lack of a spring issue, if Marcy does not want to go through with the sale?
Marcy may rescind the contract, or she may keep the contract and sue for damages.
Which of the following is false regarding marine insurance in Scotland?
Marine insurance policies are among the most simple and easy to understand insurance policies.
Property of Mary is damaged in a fire. She claims the property damage amounted to $10,000, and the insurer claims it only amounted to $5,000. Which of the following is true in this situation?
Mary should demand an appraisal under her policy's appraisal clause.
"Saturday Auction." Barry, an auctioneer, held an auction on a Saturday morning. At the beginning of the auction, Barry announced that the auction was being held without reserve. Helen, Mary, and Chris were all in attendance. Helen saw an old cash register with a stuck drawer that she thought would look great in her den. The auctioneer put the cash register up for sale noting that the drawer was stuck but that it could probably be fixed with little effort. Helen bought it for $20. When she got it home, she discovered that it actually contained $5,000. Unfortunately, Helen had a teenage son named Tad who started bragging to his friends about the family's good fortune. Barry heard about what had happened and sued Helen for return of the $5,000. At the same auction, Mary saw a great deal on a used table. She bid $20 on it. No one else bid anything. Barry announced that $20 was clearly insufficient for the table, that it was worth much more than that, and that he was taking it out of the auction. Chris started bidding on a diamond ring for his girlfriend. He bid $2,000. Just as Barry was getting ready to say "Sold," Chris looked over at his girlfriend, decided that he was not sure about marriage, and leaped up yelling "I revoke." Barry, however, immediately after, yelled "Sold." Barry sues Chris attempting to obtain the money for the engagement ring. Barry also sues Helen seeking to recover the $5,000 contained in the stuck drawer. Mary sues Barry attempting to obtain possession of the table. What is the likely result in the lawsuit brought by Mary against Barry for the table?
Mary will win because the auction was without reserve, and Barry had agreed to accept the highest bid.
The __________ terms of a contract are those terms that would allow a court to determine what the damages would be in the event that one of the parties breaches the contract.
Material
A[n] _____ discharges the nonbreaching party from his or her obligations under the contract.
Material breach
Which of the following occurs when a party unjustifiably fails to substantially perform his or her obligations under the contract?
Material breach
A[n] ______ agreement is a clause parties include in a written agreement that states that the written agreement accurately reflects the final, complete version of the agreement.
Merger
One way parties can indicate their desire to create an integrated contract is through the use of a[n] ______ clause.
Merger
"Portraits." Belinda, a famous portrait painter, agreed to paint Harry's portrait for $4,000. She also agreed to paint the portraits of Michelle's two Corgi dogs, Baby and Bree. Michelle agreed to pay Belinda $10,000 for the two Corgi portraits. Belinda charged Michelle more because dogs annoyed her. Belinda met the spoiled dogs, and they really got on her nerves. Plus, she was behind on finishing Harry's portrait. Belinda, therefore, assigned the right to receive the money for the dog portraits and delegated the duty to paint the dog portraits to her assistant, Fred. He eagerly accepted and painted the portraits. She also assigned to Fred, as payment for amounts she owed him for various duties, the right to receive payment from Harry. The contract Belinda had with Michelle did not address assignment in any way. The contract Belinda had with Harry, however, prohibited the right to assign payment for services received. Harry fancied himself as an experienced business person and insisted on that provision because he had read somewhere that such a clause was a good idea. Belinda finished the portrait of Harry and called him to come and pick it up. Meanwhile, a disgruntled secretary who disliked Belinda told both Michelle and Harry about the assignments to Fred. Michelle was furious and refused to pick up the portrait or pay anyone. Harry likewise refused to pay for his portrait. What would be the most likely result if Belinda sues Michelle for the $10,000 payment?
Michelle will win because the portrait was personal in nature and could not be assigned.
"Portraits." Belinda, a famous portrait painter, agreed to paint Harry's portrait for $4,000. She also agreed to paint the portraits of Michelle's two Corgi dogs, Baby and Bree. Michelle agreed to pay Belinda $10,000 for the two Corgi portraits. Belinda charged Michelle more because dogs annoyed her. Belinda met the spoiled dogs, and they really got on her nerves. Plus, she was behind on finishing Harry's portrait. Belinda, therefore, assigned the right to receive the money for the dog portraits and delegated the duty to paint the dog portraits to her assistant, Fred. He eagerly accepted and painted the portraits. She also assigned to Fred, as payment for amounts she owed him for various duties, the right to receive payment from Harry. The contract Belinda had with Michelle did not address assignment in any way. The contract Belinda had with Harry, however, prohibited the right to assign payment for services received. Harry fancied himself as an experienced business person and insisted on that provision because he had read somewhere that such a clause was a good idea. Belinda finished the portrait of Harry and called him to come and pick it up. Meanwhile, a disgruntled secretary who disliked Belinda told both Michelle and Harry about the assignments to Fred. Michelle was furious and refused to pick up the portrait or pay anyone. Harry likewise refused to pay for his portrait. What would be the most likely result if Fred sues Michelle for the $10,000 payment?
Michelle will win because the portrait was personal in nature and could not be assigned.
The obligation to use reasonable efforts to minimize damage resulting from a breach is referred as the duty to ______ one's damages.
Mitigate
Penny, a bit of a hypochondriac, decides that she should have MRIs covering her whole body and insists that her doctor order them. Penny tells her doctor that she is not concerned about cost because she has great insurance. Which of the following is the appropriate and recognized term for the problem associated with her behavior as far as an insurer is concerned?
Moral hazard
Which of the following suggests that people who are insulated from risk sometimes behave differently?
Moral hazard
What have most states done with regard to unsolicited merchandise received from a seller?
Most states have passed laws providing that unsolicited merchandise does not have to be returned and the recipient may keep it as a gift, with no contract being formed.
A[n] ______ mistake is a mistake that is shared by both parties to an agreement.
Mutual
Ia[n] _____________ misunderstanding between the parties exists, and as a result of that misunderstanding the parties do not really come to a meeting of the minds, there is no contract.
Mutual
The reasoning in innocent misrepresentation cases resembles the reasoning in a[n] ______ case.
Mutual mistake
Which of the following is false regarding the statute of frauds and promises made in consideration of marriage?
Mutual promises to marry fall within the statute of frauds.
Which of the following occurs when parties agree that they simply wish to discharge each other from their mutual obligations and therefore rescind or cancel the contract?
Mutual rescission
Which of the following, if any, is needed in order for an assignment to be valid?
No form is required.
Which of the following is false regarding the statute of frauds provision relating to an interest in land?
No leases are within the statute of frauds.
Constance asks Kathy if Kathy would consider selling her car for $2,000. What is the status of the negotiation?
No offer has been made.
When no actual damages result from the breach of a contract, the court may award the plaintiff ______ damages.
Nominal
Which of the following is false regarding nondischargeable debts under a Chapter 7 bankruptcy filing?
Nondischargeable debts include claims for back taxes or government fines within four years of filing for bankruptcy.
Which of the following refers to an intentional failure to provide pertinent information about a projected contract?
Nondisclosure
A promise to do something that you are already obligated to do is ____.
Not valid consideration
Contract law is said to be based on a[n] ___________ theory, meaning that the existence and interpretation of the contract is based on the outward manifestations of intent by the parties.
Objective
If a contract does not clearly specify that the satisfaction is to be personal, the ______ standard applies.
Objective
A contractual condition of satisfaction may be judged by either a[n] ______ or ______ standard.
Objective; subjective
Which of the following is a contractual party who agrees to receive something from the other party?
Obligee
Which of the following is a contractual party who agrees to do something for the other party?
Obligor
The person who agrees to the terms of an offer made by the other party is called the _________.
Offeree
The person who makes an offer is called a[n] ___________.
Offeror
As discussed in the text, a main purpose of the statute of frauds is to prevent unreliable _____ evidence from interfering with a contractual relationship.
Oral
In China which of the following is true regarding the treatment of fraudulent misrepresentations by outsiders?
Outsiders have been fined heavily and refused permission to enter into more agreements with Chinese firms.
Which of the following is true regarding whether an accepted offer to pay part of a debt is consideration?
Partial payment is consideration if an unliquidated debt is involved.
Under ____, if the buyer in an alleged contract for the sale of land has paid any portion of the sale price, has begun to permanently improve the land, or has taken possession of the land, the courts will consider the contract partially performed, and this partial performance will amount to proof of the contract.
Partial performance
Which of the following is considered a debtor eligible for Chapter 7 relief in bankruptcy?
Partnerships
In return for his oral promise to pay her $100, Penny promises her uncle that she will not violate laws against speeding for one year. Penny abides by her promise, but her uncle refuses to pay. Which of the following is true regarding whether Penny is entitled to the money?
Penny is not entitled to recover because she had a preexisting duty to obey laws against speeding.
If an insurance policy covers an individual's life or health, the insurance is ______ insurance.
Personal
Which of the following is true regarding the ability of persons suffering from a mental illness to enter into a binding contract?
Persons suffering from a mental illness may have full, limited, or no legal capacity to enter into a binding contract depending on the nature and extent of their mental deficiency.
"Cheap Motorcycle." Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has a nice motorcycle that is for sale. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass and, in the next sentence, says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here! Take it or leave it!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 which Peter signs. Peter does some research and finds that Tony has had several arrests for driving under the influence in a nearby town. As an act of revenge, Peter tells Tony that unless Tony sells Peter his new Mustang convertible for $50, he is publishing the facts about the arrests in the school newspaper. Tony reluctantly agreed to the deal. Which of the following is true if Peter seeks to rescind the contract for the sale of the motorcycle?
Peter may rescind the contract on grounds of duress or on grounds of unconscionability.
The parties express their agreement for insurance in a document called a[n] _____.
Policy
A condition ______ is a particular event that must occur in order for a party's duty to arise.
Precedent
Which of the following is a term used to define the payment made by an insured party in exchange for a later payment by an insurer in the event of damage or injury to insured property or person?
Premium
"Not So Rich Uncle." Bruce is attempting to convince Sally to marry him. He promises her that if she will marry him, he will buy a new Mercedes automobile for her within six months of the marriage and take her on a world tour within a year of the marriage date. Sally reluctantly agrees, and they sign an agreement by which Bruce agrees to provide the Mercedes and world tour. Bruce and Sally marry on January 1. Unexpectedly, on March 1, Bruce's supposedly rich uncle, Frank, dies. Frank has no living relatives other than Bruce and has a will leaving everything to Bruce who is also appointed executor. In attempting to settle the estate, Bruce agrees orally to pay out of his own pocket debts of Frank totaling $10,000. Sally is concerned about Bruce's doing so. Bruce tells her not to worry because he will get all the money back when the estate settles. Bruce admits to a number of friends that he agreed to settle the debts out of his own pocket because he needed to obtain assets from the estate in a hurry and did not want anything to slow down probate. The assets were needed in large part to satisfy his obligations to Sally. Surprisingly, it later came to light that prior to his death Frank had signed away all his assets to his girlfriend in Argentina. There was nothing left in the estate for Bruce to inherit. Bruce disavowed his agreement to pay the $10,000 to various creditors of Frank. Which of the following is the appropriate term for the marriage agreement entered into between Bruce and Sally?
Prenuptial agreement
Which of the following are debts incurred in an initial contract?
Primary obligations
Parties not in ______ usually do not have rights to a contract.
Privity of contract
"Useless Friend." Charles, who is very gullible, is friends with Bobby. Bobby, who cannot be trusted, decides to try to bind Charles to a contract in Bobby's favor. Bobby has Charles sign a contract promising to wash Bobby's car once a week for a month for $80 per month in payment. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Charles for one year to cook dinner for Bobby, do his laundry, and clean his apartment. Bobby is also very angry with his former girlfriend, Tessa, and decides to start rumors, that would constitute the tort of defamation, such as that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to enlist the help of Charles in smearing Tessa but knows that Charles would be hesitant to assist in his endeavors. One evening, however, Charles drank too much beer and was clearly intoxicated - a fact apparent to Bobby. Bobby had him sign a contract agreeing to defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and that he has no intention of defaming Tessa, who also happens to be Charles' new girlfriend. He also finally takes a look at the contract involving work for Bobby and tells Bobby that the contract is outrageous. Which of the following would be a possible defense to Bobby's contract involving chores based upon the size of the print on the back of the contract?
Procedural unconscionability
A party who claims that he or she could not understand contractual terms because of tiny, hard-to-read print on the back of an agreement and the excessive use of legalese is referring to which of the following?
Procedural unconscionability.
Which of the following types of insurance protects the producer or manufacturer of a good from loss incurred by people who are injured using the good?
Product liability
Which of the following types of insurance protects members of specific professions from liability associated with their professional acts?
Professional liability
The ______ in a third-party beneficiary contract is the party to the contract who owes something to the promisor in exchange for the promise made to the third-party beneficiary.
Promisee
The ______ in a third-party beneficiary contract is the party to the contract who made the promise that benefits the third party.
Promisor
When a donee beneficiary may enforce rights under a contract, it may be done so only against the ____.
Promisor
As discussed in the case of Double AA Builders Ltd., v. Grand State Construction L.L.C., which of the following may be used to necessitate that a subcontractor perform according to the terms of its bid because the contractor has relied on the subcontractor's bid?
Promissory estoppel
Which doctrine may courts use to estop, or prevent, an offeror from revoking an offer based on a party's taking steps in reasonable reliance on an offer?
Promissory estoppel
Which of the following involves the legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract?
Promissory estoppel
Which of the following is an exception to the rule requiring consideration?
Promissory estoppel
Which of the following occurs when three conditions are met: one party makes a promise knowing the other party will rely on it; the other party does rely on it; the only way to avoid injustice is to enforce the promise?
Promissory estoppel
If the purpose of an insurance policy is to protect property from loss or damage, the insurance is ______ insurance.
Property
"Prudence's Imprudence." Unfortunately, Prudence failed to act prudently. She had a bad day after failing a business law test and breaking up with her boyfriend. While drinking a mocha and talking on the cell phone with her best friend, she slammed into the back of George's car. Shortly thereafter she received notice of a lawsuit setting forth George's claims for personal injury and property damage. Prudence was very busy studying for her next business law test and hanging out with her boyfriend with whom she had reconciled. Also, she just did not feel like dealing with a pesky lawsuit. Several months later, Alice, a new agent with the insurer called Prudence and told Prudence that she had just heard something about a lawsuit from the plaintiff's lawyer. Alice told Prudence that although investigation would be difficult after so many months, she would like to talk with Prudence because the trial was scheduled for the next week. Prudence told Alice that she had no time to meet at the moment and that just before court, she would meet with the lawyer the company appointed to represent her. Alice told Prudence that the insurance company was going to deny coverage. Alice also told Prudence that vehicle insurance did not typically provide for legal representation and that, in any event, no lawyer would be provided. Finally, Alice told Prudence that her insurance was cancelled immediately because she was a real jerk and failed to help, that insurance would not pay for accidents that were the fault of Prudence anyway, and that the insurer wanted nothing more to do with her. Which of the following is true regarding Alice's complaint that Prudence failed to help?
Prudence had a duty to cooperate with the insurer.
Because ______ does not favor intoxication, the courts tend to be unsympathetic to intoxicated parties and will fairly liberally interpret behavior that seems like ratification as ratifying the contract.
Public policy
Which of the following types of damages are designed to punish the defendant and deter him and others from engaging in similar behavior in the future?
Punitive
Which of the following is sometimes referred to as an implied-in-law contract?
Quasi-contracts
A[n] _______________ arises when a person acknowledges in court that he or she will perform some specified act or will pay a price upon failure to do so.
Recognizance
Which of the following is true regarding the termination of an offer based on a rejection?
Regardless of how long an offeror states that an offer will be held open, once the offeree rejects it, the offer is terminated.
Which of the following was the result in the case in the text Adone v. Paletto involving the rejection of a purported acceptance of an offer of compromise because it was not made within the time limit of 10 days specified in the offer?
Rejection of the acceptance was enforceable because the 10 days in which the other party had to accept had expired.
Christen graduates from college, receives a job offer across the country, and moves there giving up her apartment and cancelling all the other job interviews. After she gets there, she is told that there is no job. What may she recover in most states?
Reliance damages
In cases where both parties to a contract are mistaken about either a current or a past material fact, either can choose to ______ the contract.
Rescind
______ is the termination of the contract, and ______ is the return of any property given up under the contract.
Rescission; restitution
"Garage Sale." Richard, who is cleaning out his garage, offers to sell Dawn a used computer for $200. Dawn replies that "I'll think about it and buy it if I decide to do so." Richard also calls Denise and offers to sell Denise a used business law book for $50. She asks if she can clean his apartment in return for the book instead of pay cash, and he agrees. Richard also agrees to sell a communications book for $5 to Jill who promises to pick it up the next day. Meanwhile, Sam comes to visit and offers Richard $45 for the business law book. Richard sells it to him because he decides his apartment is clean enough. Sam also offers Richard $50 for the used computer. Richard sells it to Sam because he does not expect to hear from Dawn. Sam sees the communications book and offers Richard $45 for it. Richard decides to forget about Jill and proceeds to sell the book to Sam for $45. The next day Denise shows up to clean Richard's apartment and is very angry because Richard did not save the book for her. Denise claims that Richard breached their contract because they had a deal. Richard says that they never had a deal because no consideration was present. He also said that even if cleaning house would be considered consideration, any housekeeping done would have been wholly inadequate to support receipt of the book because his house was already clean. Jill is also angry because Richard sold the communications book and informs him that he breached the contract he had with her. Richard tells her that he had no obligation to hold the book for her because they had a unilateral contract. Two days after they first talked, Dawn tells Richard that she would like the computer. She tells him that her response bound him and that he should have awaited her action. Richard tells Sam that he needs to return everything for a full refund. Sam refuses. Which of the following is true regarding Richard's claim regarding the inadequacy of house cleaning as consideration?
Richard is incorrect because house cleaning would constitute consideration that would support a contract, and the court would not likely be concerned with the fact that the cleaning duties would be light.
Which of the following refers to the potential for loss in an insurance agreement?
Risk
The transfer and distribution of risk done by an insurer is known as _____.
Risk management
Prudence, a mean business law teacher, offers $50 to any student who will mow her lawn. Sam goes right over and begins mowing. Just before he finishes, Prudence goes over and tells him that she revokes her offer. Which of the following is true regarding Sam's entitlement to payment?
Sam is entitled to recover because a unilateral contract was involved, and he was entitled to a reasonable amount of time to complete the job.
"Used Car Sales." Walter sells used cars. He is seeking a way to increase sales and profits because he would like to take his girlfriend on a nice diving trip to the Grand Cayman Islands. The first thing that Walter does is say that during the first week of December, he will give a $500 rebate on used cars that are under two years old. To spice things up, he also offers to sell any car on the lot that is over five years old for $1,000 to the first three customers who can hula hoop ten hours straight on December 7th. (Hula hooping was a practice popular some years ago in which a large hoop would be swung around by a person, usually around the waist.) Walter was not very concerned about the hula hooping issue because he thought that no one would be able to hula hoop for ten hours straight. Walter put an advertisement pertaining to the rebate and the hula hoop opportunity in the local newspaper. The promotion went over very well. Although Walter had several cars available, he ran out of cars under two years old within one day. During the rest of the week shoppers were told that no cars of that description were available. Sam was very angry at Walter for not having a car available that was under two years old so that he could get a good deal and a $500 rebate. On December 7th, while Walter was watching the hula hoopers, Sally was shopping for a car. She was in college and did not have much money. She saw one, an older car, a real clunker, that she liked; but she really did not know if it could be repaired sufficiently to be dependable. Walter had not even put a price on it because he planned to have it crushed. Sally was going to talk to her parents about it. Walter eventually approached her, and Sally asked him if he would take $450 for the car. Walter said, "Yes, sold." Sally tried to explain that she needed to talk to her parents first, but Walter would not hear of it. While Walter was still fuming from his encounter with Sally, Zack walked up and started to criticize the nature of Walter's inventory. Walter told him that he had great cars. Zack pointed at an old jalopy that was banged up, had 200,000 miles on it, and a cracked windshield. Zack said, "Sure, I'll pay $100,000 for that car!" Walter said, "Sold." Zack said, "Wait a minute. I was only kidding." Walter said, "No way." Meanwhile all the hula hoopers dropped out well prior to ten hours of hula hooping except for Barbara. She completed the hula hooping and asked for her car for $1,000. Walter refused saying that the offer was revoked. Sam and Barbara sued Walter, and Walter sued Zack and Sally. Under the applicable law in Walter's state, common law will be applied, and there are no state statutes impacting the situation. Which of the following is the most likely result in the lawsuit brought by Sam complaining that Walter ran out of cars available for a rebate?
Sam will lose because a court would interpret the intent of Walter as being to invite readers to make an offer that Walter was free to reject.
"Teenage Driver." Sally bought a new car, a yellow convertible. She also had a teenage son at home, Bobby, but she did not plan to let him drive the car. She was annoyed because Bobby had run her last car into the lake. Sally decided to change insurers because she thought her previous insurance agent was annoyed over Bobby's antics. She went to ABC Insurance to apply. She got an application from Mark. Sally was a little nervous because the application asked about other drivers in the home. It also asked if there were any teenagers in the home. Sally answered "no" on both counts because she had no plans to let Bobby drive. Sally got full coverage on the car, and the policy was issued shortly after she completed the application. She renewed the policy without revising any of the information she provided. Thirteen months later, Sally really needed some gas in the car for the next day. Under the belief that he had sufficiently matured, Sally sent Bobby to get some gas at the station just down the street. Unfortunately, a drunk driver who had no insurance hit the car and totaled it. Sally immediately called Mark. When Mark reviewed the police report, however, he told Sally that there would be no coverage on the car because Bobby was driving. Sally said that was completely unfair and that she would appeal to the jury. Sally told Mark that ABC issued the policy and that she was relying on the incontestability clause. Mark told Sally that she was wrong and that based on how disputes were handled under the policy, she would not even see a jury. Which of the following is most likely true regarding Sally's reliance on an incontestability clause if typical state laws are in effect?
Sally is incorrect because the incontestability clause does not generally apply until coverage has been in effect for at least two years.
"Third-Party Woes." Trudy owed Sam $40 for a book she purchased from him. Trudy mowed Betty's yard for $40 and agreed with Betty that Betty would pay Sam for the book. Sam is not aware of the assignment. Betty pays no one. Trudy also mowed Bob's yard for $40. She agreed with Bob that Bob would give the payment to Sally representing Trudy's birthday present to Sally. Bob later refuses to do so saying that promises to give gifts are not enforceable. He then moves out of town. Trudy tells both Sam and Sally that she is broke and that they will have to get any amounts due from Betty and Bob respectively. Sally is very unhappy because she wanted to buy a new pair of sandals with the money. Which of the following would be the likely result if Sally sues Trudy and Bob for the $40 promised to her for her birthday?
Sally will lose as to Trudy because Trudy had no obligation to go through with the gift, but she will win as to Bob.
Sally agrees to mow Paul's yard for $300 for the summer. Paul wishes to assign the contract to his grandmother. Sally objects because Paul's yard is very small while his grandmother's yard is over an acre. Which of the following is the correct legal outcome for the dispute between Sally and Paul?
Sally will win because Paul's attempted assignment would increase the duties to which she agreed.
"Used Car Sales." Walter sells used cars. He is seeking a way to increase sales and profits because he would like to take his girlfriend on a nice diving trip to the Grand Cayman Islands. The first thing that Walter does is say that during the first week of December, he will give a $500 rebate on used cars that are under two years old. To spice things up, he also offers to sell any car on the lot that is over five years old for $1,000 to the first three customers who can hula hoop ten hours straight on December 7th. (Hula hooping was a practice popular some years ago in which a large hoop would be swung around by a person, usually around the waist.) Walter was not very concerned about the hula hooping issue because he thought that no one would be able to hula hoop for ten hours straight. Walter put an advertisement pertaining to the rebate and the hula hoop opportunity in the local newspaper. The promotion went over very well. Although Walter had several cars available, he ran out of cars under two years old within one day. During the rest of the week shoppers were told that no cars of that description were available. Sam was very angry at Walter for not having a car available that was under two years old so that he could get a good deal and a $500 rebate. On December 7th, while Walter was watching the hula hoopers, Sally was shopping for a car. She was in college and did not have much money. She saw one, an older car, a real clunker, that she liked; but she really did not know if it could be repaired sufficiently to be dependable. Walter had not even put a price on it because he planned to have it crushed. Sally was going to talk to her parents about it. Walter eventually approached her, and Sally asked him if he would take $450 for the car. Walter said, "Yes, sold." Sally tried to explain that she needed to talk to her parents first, but Walter would not hear of it. While Walter was still fuming from his encounter with Sally, Zack walked up and started to criticize the nature of Walter's inventory. Walter told him that he had great cars. Zack pointed at an old jalopy that was banged up, had 200,000 miles on it, and a cracked windshield. Zack said, "Sure, I'll pay $100,000 for that car!" Walter said, "Sold." Zack said, "Wait a minute. I was only kidding." Walter said, "No way." Meanwhile all the hula hoopers dropped out well prior to ten hours of hula hooping except for Barbara. She completed the hula hooping and asked for her car for $1,000. Walter refused saying that the offer was revoked. Sam and Barbara sued Walter, and Walter sued Zack and Sally. Under the applicable law in Walter's state, common law will be applied, and there are no state statutes impacting the situation. What is the most likely result in Walter's lawsuit against Sally in which he claims that she must pay $3,000 for the car at issue?
Sally will win because she merely expressed interest and did not make an offer.
"Garage Sale." Richard, who is cleaning out his garage, offers to sell Dawn a used computer for $200. Dawn replies that "I'll think about it and buy it if I decide to do so." Richard also calls Denise and offers to sell Denise a used business law book for $50. She asks if she can clean his apartment in return for the book instead of pay cash, and he agrees. Richard also agrees to sell a communications book for $5 to Jill who promises to pick it up the next day. Meanwhile, Sam comes to visit and offers Richard $45 for the business law book. Richard sells it to him because he decides his apartment is clean enough. Sam also offers Richard $50 for the used computer. Richard sells it to Sam because he does not expect to hear from Dawn. Sam sees the communications book and offers Richard $45 for it. Richard decides to forget about Jill and proceeds to sell the book to Sam for $45. The next day Denise shows up to clean Richard's apartment and is very angry because Richard did not save the book for her. Denise claims that Richard breached their contract because they had a deal. Richard says that they never had a deal because no consideration was present. He also said that even if cleaning house would be considered consideration, any housekeeping done would have been wholly inadequate to support receipt of the book because his house was already clean. Jill is also angry because Richard sold the communications book and informs him that he breached the contract he had with her. Richard tells her that he had no obligation to hold the book for her because they had a unilateral contract. Two days after they first talked, Dawn tells Richard that she would like the computer. She tells him that her response bound him and that he should have awaited her action. Richard tells Sam that he needs to return everything for a full refund. Sam refuses. Which of the following is true regarding the dispute between Richard and Sam regarding whether Sam must return anything?
Sam does not legally have to return anything.
"Third-Party Woes." Trudy owed Sam $40 for a book she purchased from him. Trudy mowed Betty's yard for $40 and agreed with Betty that Betty would pay Sam for the book. Sam is not aware of the assignment. Betty pays no one. Trudy also mowed Bob's yard for $40. She agreed with Bob that Bob would give the payment to Sally representing Trudy's birthday present to Sally. Bob later refuses to do so saying that promises to give gifts are not enforceable. He then moves out of town. Trudy tells both Sam and Sally that she is broke and that they will have to get any amounts due from Betty and Bob respectively. Sally is very unhappy because she wanted to buy a new pair of sandals with the money. Which of the following would be the likely result if Sam sues Trudy for the $40 she owes him for the book?
Sam will win because Trudy cannot avoid her obligations through a delegation.
"Third-Party Woes." Trudy owed Sam $40 for a book she purchased from him. Trudy mowed Betty's yard for $40 and agreed with Betty that Betty would pay Sam for the book. Sam is not aware of the assignment. Betty pays no one. Trudy also mowed Bob's yard for $40. She agreed with Bob that Bob would give the payment to Sally representing Trudy's birthday present to Sally. Bob later refuses to do so saying that promises to give gifts are not enforceable. He then moves out of town. Trudy tells both Sam and Sally that she is broke and that they will have to get any amounts due from Betty and Bob respectively. Sally is very unhappy because she wanted to buy a new pair of sandals with the money. Which of the following is the likely result if Sam sues Betty for the $40 that Trudy owes him for the book?
Sam will win.
When an accord and satisfaction is at issue, the ______ is the payment, by the debtor, of the reduced amount.
Satisfaction
When a person who makes a misrepresentation has no knowledge about the falsity of the claim, it is said that the person lacked ____.
Scienter
Which of the following is a term for contracts within the statute of frauds involving promises to pay a debt of another if the initial party fails to pay?
Secondary obligations
Which of the following are contracts that contain multiple parts which can each be performed separately and for which separate consideration is offered?
Severable contracts
"Hawaiian Adventure." Beverly decides to go on a great trip to Hawaii. She needs someone, however, to take care of her two dogs, Creaky and Toady, while she is gone. She hires Frank three months in advance and they reach a contractual arrangement whereby he will be paid $200 for keeping the dogs for two weeks. Frank comes over two months before Beverly is set to leave, takes one look at Creaky and Toady, and declares that they are too creepy to be around. Beverly hires Alice who agrees to care for Creaky and Toady. Two weeks before Beverly is set to leave, however, Alice calls and tells her that she just broke both her legs in an automobile accident and has been put on bed rest for two months. Finally, Beverly hires Betty to care for the dogs and heads off to Hawaii where she has a great time. Unfortunately, when Beverly returns home, she finds that Betty has absconded with Creaky and Toady. They were later found in good health in an exclusive resort visited by Betty. Betty refuses to return Creaky and Toady to Beverly claiming that they were all enjoying the resort and that she had become quite attached to them. Which of the following is true regarding Alice's refusal to keep Creaky and Toady?
She is discharged from performance because of impossibility of performance.
"Beauty Shop Woes." When Janice went to work as a hair stylist in Rick's beauty shop, she entered into an agreement with Rick whereby if she left she would not work for another beauty shop within 50 miles for 2 years. Rick trained Janice in a number of new techniques. After nine months, Janice was offered a great job down the street at a new beauty shop, she quit Rick, and had a number of customers follow her down the street to her new job. Rick claimed that she had signed a contract and had no right to go to work at the new shop. Janice disagreed and told Rick that no judge in the country would enforce such an agreement. Janice told Rick that she was more worried about a customer who was threatening to sue her because her hair turned green after Janice worked on it. Janice said that she knew that the customer's hair was damaged; but that she told the customer that odd results could result from a dye attempt, and had her sign a contract that she released Janice from all liability and would not sue. The customer, however, sued anyway. Which of the following is true regarding Janice's claim that no judge in the country would enforce such an agreement?
She is incorrect because courts across the country vary in regards to the enforceability of such agreements.
"Book Sale." Beverly offered to sell Rick a used business law book for $50. She told him that he could use it in his upcoming business law class the next semester. In fact, there was a problem with the book; it was several editions old. Rick was not aware of that fact, and neither was Beverly. When Rick took the book to class and realized the problem, he went back to Beverly requesting a refund. Beverly refused to return his money. She claimed that subjectively she thought that the book was correct, that she did not commit fraud, and that a binding contract existed. The book, however, is outdated and cannot be appropriately used in the class. Which of the following is true regarding Beverly's claim that she subjectively believed the book was an appropriate edition and that an enforceable contract, therefore, existed?
She is incorrect because her subjective belief would not be the basis for a determination of whether the contract would be enforced in this case and also because fraud is not necessary in order to find a breach of contract.
Undue influence refers to those special relationships in which one person has taken advantage of his or her dominant position in a relationship to unduly persuade the other person and interfere with that person's ability to make his or her own decision.
TRUE
Whenever a written agreement under the statute of frauds contains a serious, and obvious, typographical error, parol evidence is admissible to demonstrate that the error was indeed an error, as well as to set forth the proper term.
TRUE
"Prudence's Imprudence." Unfortunately, Prudence failed to act prudently. She had a bad day after failing a business law test and breaking up with her boyfriend. While drinking a mocha and talking on the cell phone with her best friend, she slammed into the back of George's car. Shortly thereafter she received notice of a lawsuit setting forth George's claims for personal injury and property damage. Prudence was very busy studying for her next business law test and hanging out with her boyfriend with whom she had reconciled. Also, she just did not feel like dealing with a pesky lawsuit. Several months later, Alice, a new agent with the insurer called Prudence and told Prudence that she had just heard something about a lawsuit from the plaintiff's lawyer. Alice told Prudence that although investigation would be difficult after so many months, she would like to talk with Prudence because the trial was scheduled for the next week. Prudence told Alice that she had no time to meet at the moment and that just before court, she would meet with the lawyer the company appointed to represent her. Alice told Prudence that the insurance company was going to deny coverage. Alice also told Prudence that vehicle insurance did not typically provide for legal representation and that, in any event, no lawyer would be provided. Finally, Alice told Prudence that her insurance was cancelled immediately because she was a real jerk and failed to help, that insurance would not pay for accidents that were the fault of Prudence anyway, and that the insurer wanted nothing more to do with her. Which of the following is true regarding the assertion of Alice that vehicle insurance policies do not generally provide coverage for legal representation?
She is incorrect.
"Wrong Deck." Penny hires Jackson to paint her back deck. She agrees to pay him $200 for the job, and he accepts sight unseen. They enter into the agreement on Tuesday, and he is to paint the deck on Saturday. When Jackson arrives, neither Penny nor her neighbor is at home. He mistakenly paints the neighbor's deck. Penny calls him the next day and asks him why he did not paint her deck. He informs her that he did paint the deck. It is then discovered that he mistakenly painted the neighbor's deck. Penny tells him not to worry because the neighbor will be required to pay him. Jackson says that if the neighbor does not pay, then he expects all of his funds from Penny, because the contract is executed. Which of the following is correct regarding Penny's assertion that the neighbor will be required to pay Jackson?
She is incorrect. The neighbor will not be required to pay Jackson.
"Courtroom Surprises." Wilma agrees to sell Wally her house for $200,000. Wilma, Wally, and the house are all located in Tennessee. She also orally agrees to sell her used car to Wally for $1,000. Wilma and Wally discuss the fact that the house needs some repairs. Wilma gives Wally a key and tells him to do whatever he wants with the house. In reliance on her promise to sell the house, Wally sells his home, gets a loan, and has a new roof put on Wilma's house because of leaks that needed to be repaired to prevent further damage. When presented with the written agreements of sale for the home and the car, however, Wilma refuses to sign either. Wally sues, and the case proceeds to trial. Wilma tells the judge in court under oath that she orally agreed to sell the house but that she changed her mind before signing and that she believes she has protection under the statute of frauds. She tells the judge that no agreement was ever made regarding the car and that she also has protection under the statute of frauds regarding that matter. Which of the following is true regarding Wilma's statement to the judge that the agreement to sell the car was covered by the statute of frauds?
She was incorrect because while the UCC has a provision regarding writings for the sale of certain goods, that provision is not a part of the statute of frauds.
"Book Sale." Beverly offered to sell Rick a used business law book for $50. She told him that he could use it in his upcoming business law class the next semester. In fact, there was a problem with the book; it was several editions old. Rick was not aware of that fact, and neither was Beverly. When Rick took the book to class and realized the problem, he went back to Beverly requesting a refund. Beverly refused to return his money. She claimed that subjectively she thought that the book was correct, that she did not commit fraud, and that a binding contract existed. The book, however, is outdated and cannot be appropriately used in the class. Which of the following would describe Beverly's role in the transaction?
She was the offeror.
"Exemptions." Sidney is injured in an automobile accident and cannot work. She cannot pay her bills and files for bankruptcy relief under Chapter 7. Federal exemptions apply, and she lists as exempt $25,000 in equity in her residence; interest in a vehicle of $2,000; interest in jewelry of $400; and retirement funds in her individual retirement account. Her creditors filed an objection to all claimed exemptions except for the home equity claim. What is the status of the exemption she claimed for individual retirement account funds?
She will be able to claim that exemption.
Which of the following is true regarding a signature on a document falling within the statute of frauds?
So long as it is meant as a signature, a party required to sign may sign at any place on the document.
"Irresponsible Teen." At age 17, in a state in which the age of majority is 18, Sally purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted to return it to the store claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Sally claimed was from grape juice. Additionally, a few days before she turned 18, Sally purchased a used car from Dings and Dents used cars. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for six months after she turned 18. Sally then returned the car to Dings and Dents, informed the owner that she was under 18 when she entered into the contract to purchase the car, and told the owner that she was returning the car for a full refund. Dings and Dents claimed the car was a necessity. Sally and her parents disagreed claiming that the parents were ready and willing to provide a car to Sally, and that she only purchased the car from Dings and Dents because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Sally was under the age of 18. In the dispute between Sally and the owner of Dings and Dents, which of the following is true regarding the effect of Sally turning 18 before she attempts to disaffirm the contract?
So long as, after reaching the age of majority, Sally did not state orally or in writing that she intended to be bound by the contract, then she did not commit an express ratification.
Which of the following is true regarding the Uniform Commercial Code?
Some elements of a contract under the common law have been modified under the UCC for contracts for the sale of goods.
Which of the following requires that the breaching party fulfill the terms of the agreement?
Specific performance
What does the term "parol" in the "parol evidence rule" mean?
Speech or words, specifically words outside the original writing
Which of the following terms would be considered material terms?
Subject matter, price, parties, quality, and quantity
As a general rule, the ________ intent of the parties is not relevant when determining whether a contract exists; rather, what is relevant is how they represented their intent through their actions and words.
Subjective
A condition ______ is a future event that terminates the obligations of the parties when it occurs.
Subsequent
"Useless Friend." Charles, who is very gullible, is friends with Bobby. Bobby, who cannot be trusted, decides to try to bind Charles to a contract in Bobby's favor. Bobby has Charles sign a contract promising to wash Bobby's car once a week for a month for $80 per month in payment. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Charles for one year to cook dinner for Bobby, do his laundry, and clean his apartment. Bobby is also very angry with his former girlfriend, Tessa, and decides to start rumors, that would constitute the tort of defamation, such as that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to enlist the help of Charles in smearing Tessa but knows that Charles would be hesitant to assist in his endeavors. One evening, however, Charles drank too much beer and was clearly intoxicated - a fact apparent to Bobby. Bobby had him sign a contract agreeing to defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and that he has no intention of defaming Tessa, who also happens to be Charles' new girlfriend. He also finally takes a look at the contract involving work for Bobby and tells Bobby that the contract is outrageous. Which of the following would be a possible defense to Bobby's contract involving the harsh and lopsided terms in the contract involving chores?
Substantive unconscionability
Which of the following involves overly harsh or lopsided substance in an agreement?
Substantive unconscionability.
Which of the following occurs when, instead of canceling a contract, the parties substitute a new agreement in place of the original?
Substituted contract
Whether a contract is bilateral or unilateral depends upon what response the offeror expects from the offeree.
TRUE
A contract of an intoxicated person for necessaries will be enforced for the reasonable value of the necessaries.
TRUE
A factor that courts consider in determining whether a party is an incidental or intended beneficiary is whether the contract directly states that the third party is the benefiting party.
TRUE
A negligent misrepresentation results when the party making the statement would have known the truth about the fact had he used reasonable care to discover or reveal it.
TRUE
An exception to the rule requiring consideration is promissory estoppel
TRUE
An illusory promise is not a consideration.
TRUE
Assets that a debtor gains after filing a voluntary Chapter 7 bankruptcy petition are generally not part of the bankruptcy estate unless they fall under an exemption.
TRUE
Before a debtor files for one specific type of relief, the clerk of courts must give the debtor written notice of the other types of relief available.
TRUE
Contracts related to an interest in land fall within the statute of frauds.
TRUE
Creditor beneficiaries can enforce their rights under a contract whenever the contract is valid.
TRUE
If a contract's terms require that modification be in writing, oral modifications are inadmissible and unenforceable.
TRUE
If a debtor fails to appear at the Chapter 7 creditors' meeting, the court may refuse to grant the bankruptcy.
TRUE
In Australia a third party can sue for breach of contract.
TRUE
In a Chapter 7 proceeding, a bankruptcy trustee may at times take over a debtor's business.
TRUE
In some cases, if past consideration was given with expectation of future payment, the court may enforce the promise.
TRUE
In some states a promise to pay a debt that has already been discharged in bankruptcy must be in writing in order to be enforceable
TRUE
In the employer/employee context, the purpose of a covenant not to compete is to restrict what an employee may do after leaving a company.
TRUE
One of the requirements before a collective bargaining agreement can be rejected under Chapter 11 is that the debtor has first presented to the employee's representative the proposed changes to the collective bargaining agreement, and the employees reject the changes without good cause.
TRUE
Scienter is present when the party accused of making the fraudulent assertion believed that the assertion was false or made the claim without any regard for whether it was true or false.
TRUE
Some debts that are dischargeable under Chapter 13 are not dischargeable under Chapter 7.
TRUE
Specific performance is an order requiring that the breaching party fulfill the terms of the agreement.
TRUE
The concept of performance has no effect on the statute of frauds
TRUE
The government spends large amounts on social insurance.
TRUE
The insured party in insurance law is the party who makes a payment to an insurance company, called a premium, in return for insurance coverage.
TRUE
Through the insurance agreement, the insured party transfers his or her risk of loss of property or life to the insurance company.
TRUE
Today, courts hold that once an offeree begins performance on a unilateral contract, the offeror must hold the offer open for a reasonable time to allow the offeree to complete the performance.
TRUE
Under Chapter 7, liquidation may be voluntary but not involuntary.
TRUE
Under the Mailbox Rule, a valid contract has been formed if a rejection is dispatched, but before it is received, the acceptance is communicated to the offeror.
TRUE
How many states still allow a contract without consideration to be enforced if it is under seal?
Ten
An offer of performance by being ready, willing, and able to perform is known as ____.
Tender
Which of the following types of life insurance provides coverage for a specified term?
Term-life
Mary and Jason discuss the fact that a new teacher is being hired for business law at their school. Jason mentions that he does not yet have a book, and Mary agreed to sell Jason a used business law book for $30 for the upcoming semester. When the new semester begins, the new business law teacher announces that a new custom business law text will be used that is only available in the campus bookstore. Jason wants a refund. Which of the following is Mary's best defense?
That Jason knew of the change of change of teacher and bore the risk of mistake.
Alice owned a condominium directly above Sam. Alice failed to take proper care of some plumbing problems, and on several occasions Alice's plumbing problems caused leaking into Sam's apartment resulting in property damage. Both Alice and Sam had signed a condominium association agreement providing that each tenant would pay for any damage caused; that the agreement could be enforced by the management of the association or, in a proper case, by an aggrieved owner; and that adherence to the agreement was required "for the benefit of the Association and any person acquiring or owning an interest in the property." The association itself refused to sue Alice in order to recover damages with which to reimburse Sam. Therefore, Sam sued Alice himself. She claimed that he had no standing to sue. Which of the following is the most likely result of the dispute if the court follows Allan v. Nersesova, the case in the text involving a similar issue?
That Sam was an intended beneficiary of the agreement between Alice and the association; that he had standing to sue; and that under the terms of the agreement, the association's failure to act gave him the right to proceed.
Which of the following was the result on appeal in the case in the text, Gary W. Cruse and Venita R. Cruse v. Coldwell Banker/Graben Real Estate Inc., in which the court considered whether the plaintiffs could prevail based on alleged misrepresentations by a salesman that a house was new when it was actually not new leading the plaintiffs to forego a home inspection?
That a jury question was presented on whether the plaintiffs could have justifiably relied on the defendants' misrepresentation.
Which of the following was the result in Hartford Underwriters Insurance Company v. The Cincinnati Insurance Company, the case in the text involving whether insurance coverage was available to a party injured when a vehicle hit her while she was loading a van and the policy at issue provided coverage for a person "occupying" a vehicle defined as "in, upon, getting in, on, out or off"?
That any ambiguity in the language was resolved against the insurer writing the policy, that a reasonable reading of the policy included the claim, and that coverage was therefore available.
"Trick or Treat?" Penny has significant credit card debt following her diving trip with her boyfriend, Sam, to the Grand Cayman islands. Some of the diving trips cost more than she expected, and these extra expenses were unforeseen. Penny recently took a business law class and thought that she might be able to find a way out of her troubles. She owed $2,000 to Credit Card Company A and $3,000 to Credit Card Company B. She also owed $2,000 to the local dive shop for diving equipment she purchased for the trip. Penny is in negotiations with the dive shop over that amount because she had a problem with a mask fogging on the trip and had to replace it while on the trip at a charge of $100. While the mask issue did not significantly interfere with the trip, Penny thought that she should get at least some deduction on the overall bill. Penny called Credit Card Company A and told them that she was a poor student and could not afford to pay the entire $3,000 she owed. The representative of Credit Card Company A, who was working her last day, told Penny just to pay $50, and that would be considered payment in full. The representative sent Penny an e-mail to that effect. Penny was very pleased and went right out and quit her job at the campus bookstore because she did not really like dealing with student problems and thought that with the reduction from Credit Card Company A, she would have no problem in regard to having extra money. Although her parents supplied her with a large monthly allowance, Penny had the job at the bookstore so that she would have more money for clothes shopping and fun activities. In relation to Credit Card Company B, Penny called up and once again pled her case as a poor student. She talked Credit Card Company B into taking a used car with a blown-up engine worth around $1,000 in exchange for the debt. Penny did not lie about the value of the car, but she made it sound as good as possible. Transfer details regarding the car were worked out through e-mail. Finally, Penny sent the dive shop a check for $1,000 marked "paid in full." Much to her surprise and pleasure, the dive shop did indeed cash the check. Penny, however, was distraught to find that within 30 days, Credit Card Company A sent her a bill for $1,950; Credit Card Company B sent her a bill for $3,000; and from the dive shop she received a check for $1,000 along with a bill for $2,000. Faced with all these claims, Penny decided to look for work. She ended up two weeks later with a job selling beauty products that she liked much better than the bookstore job. It did not require dealing with pesky students. Assume all credit card company representatives had authority to make the agreements at issue. Which of the following should be the result in regard to Penny's obligation to Credit Card Company B?
That because Penny offered and the company accepted a different performance in discharge of the obligation, the company is bound.
"Trick or Treat?" Penny has significant credit card debt following her diving trip with her boyfriend, Sam, to the Grand Cayman islands. Some of the diving trips cost more than she expected, and these extra expenses were unforeseen. Penny recently took a business law class and thought that she might be able to find a way out of her troubles. She owed $2,000 to Credit Card Company A and $3,000 to Credit Card Company B. She also owed $2,000 to the local dive shop for diving equipment she purchased for the trip. Penny is in negotiations with the dive shop over that amount because she had a problem with a mask fogging on the trip and had to replace it while on the trip at a charge of $100. While the mask issue did not significantly interfere with the trip, Penny thought that she should get at least some deduction on the overall bill. Penny called Credit Card Company A and told them that she was a poor student and could not afford to pay the entire $3,000 she owed. The representative of Credit Card Company A, who was working her last day, told Penny just to pay $50, and that would be considered payment in full. The representative sent Penny an e-mail to that effect. Penny was very pleased and went right out and quit her job at the campus bookstore because she did not really like dealing with student problems and thought that with the reduction from Credit Card Company A, she would have no problem in regard to having extra money. Although her parents supplied her with a large monthly allowance, Penny had the job at the bookstore so that she would have more money for clothes shopping and fun activities. In relation to Credit Card Company B, Penny called up and once again pled her case as a poor student. She talked Credit Card Company B into taking a used car with a blown-up engine worth around $1,000 in exchange for the debt. Penny did not lie about the value of the car, but she made it sound as good as possible. Transfer details regarding the car were worked out through e-mail. Finally, Penny sent the dive shop a check for $1,000 marked "paid in full." Much to her surprise and pleasure, the dive shop did indeed cash the check. Penny, however, was distraught to find that within 30 days, Credit Card Company A sent her a bill for $1,950; Credit Card Company B sent her a bill for $3,000; and from the dive shop she received a check for $1,000 along with a bill for $2,000. Faced with all these claims, Penny decided to look for work. She ended up two weeks later with a job selling beauty products that she liked much better than the bookstore job. It did not require dealing with pesky students. Assume all credit card company representatives had authority to make the agreements at issue. Which of the following would be the result in a majority of states in regard to Penny's obligation to the dive shop?
That because the dive shop offered, through issuance of the check, full repayment, no accord and satisfaction existed; Penny owes the full $2,000.
Which of the following was the result in Alexander v. Lafayette Crime Stoppers Inc., the case in the text in which the plaintiffs sued for collection of reward money offered to catch a serial killer by the defending publications, and the publications defended on the basis that the plaintiffs failed to provide notice as required by the reward offers because the plaintiffs provided relevant information to law enforcement, not the defendants?
That defendants did not receive acceptance of the reward offer and that, therefore, no contract was formed.
Which of the following did the court determine in In re Holsinger, the case in the text in which the debtor requested a waiver of debt-counseling under the Bankruptcy Abuse Prevention and Consumer Protection Act?
That even imminent foreclosure of real property does not entitle a debtor to waiver when other requirements in relation to debt counseling remain unsatisfied.
What was the result in Stewart Lamle v. Mattel Inc., the case in the text in which the plaintiff claimed that in discussions Mattel agreed to a three-year license agreement to distribute a board game the plaintiff created, and that the agreement was confirmed by Mattel through an email, but that Mattel later wrongfully refused to enter into a written contract and follow through with the deal?
That it was up to a jury to decide matters including whether the parties intended to be bound by the oral agreement and whether an email contained the material terms of the oral contract.
Which of the following is the majority rule regarding a minor's misrepresentation of his or her age?
That misrepresentation does not affect the minor's right to disaffirm the contract.
"Trick or Treat?" Penny has significant credit card debt following her diving trip with her boyfriend, Sam, to the Grand Cayman islands. Some of the diving trips cost more than she expected, and these extra expenses were unforeseen. Penny recently took a business law class and thought that she might be able to find a way out of her troubles. She owed $2,000 to Credit Card Company A and $3,000 to Credit Card Company B. She also owed $2,000 to the local dive shop for diving equipment she purchased for the trip. Penny is in negotiations with the dive shop over that amount because she had a problem with a mask fogging on the trip and had to replace it while on the trip at a charge of $100. While the mask issue did not significantly interfere with the trip, Penny thought that she should get at least some deduction on the overall bill. Penny called Credit Card Company A and told them that she was a poor student and could not afford to pay the entire $3,000 she owed. The representative of Credit Card Company A, who was working her last day, told Penny just to pay $50, and that would be considered payment in full. The representative sent Penny an e-mail to that effect. Penny was very pleased and went right out and quit her job at the campus bookstore because she did not really like dealing with student problems and thought that with the reduction from Credit Card Company A, she would have no problem in regard to having extra money. Although her parents supplied her with a large monthly allowance, Penny had the job at the bookstore so that she would have more money for clothes shopping and fun activities. In relation to Credit Card Company B, Penny called up and once again pled her case as a poor student. She talked Credit Card Company B into taking a used car with a blown-up engine worth around $1,000 in exchange for the debt. Penny did not lie about the value of the car, but she made it sound as good as possible. Transfer details regarding the car were worked out through e-mail. Finally, Penny sent the dive shop a check for $1,000 marked "paid in full." Much to her surprise and pleasure, the dive shop did indeed cash the check. Penny, however, was distraught to find that within 30 days, Credit Card Company A sent her a bill for $1,950; Credit Card Company B sent her a bill for $3,000; and from the dive shop she received a check for $1,000 along with a bill for $2,000. Faced with all these claims, Penny decided to look for work. She ended up two weeks later with a job selling beauty products that she liked much better than the bookstore job. It did not require dealing with pesky students. Assume all credit card company representatives had authority to make the agreements at issue. What is Credit Card Company A's best argument in relation to enforcing Penny's obligations?
That no consideration existed for its promise, and that based on Penny's circumstances and behavior, enforcing the debt would not result in injustice to Penny.
"Trick or Treat?" Penny has significant credit card debt following her diving trip with her boyfriend, Sam, to the Grand Cayman islands. Some of the diving trips cost more than she expected, and these extra expenses were unforeseen. Penny recently took a business law class and thought that she might be able to find a way out of her troubles. She owed $2,000 to Credit Card Company A and $3,000 to Credit Card Company B. She also owed $2,000 to the local dive shop for diving equipment she purchased for the trip. Penny is in negotiations with the dive shop over that amount because she had a problem with a mask fogging on the trip and had to replace it while on the trip at a charge of $100. While the mask issue did not significantly interfere with the trip, Penny thought that she should get at least some deduction on the overall bill. Penny called Credit Card Company A and told them that she was a poor student and could not afford to pay the entire $3,000 she owed. The representative of Credit Card Company A, who was working her last day, told Penny just to pay $50, and that would be considered payment in full. The representative sent Penny an e-mail to that effect. Penny was very pleased and went right out and quit her job at the campus bookstore because she did not really like dealing with student problems and thought that with the reduction from Credit Card Company A, she would have no problem in regard to having extra money. Although her parents supplied her with a large monthly allowance, Penny had the job at the bookstore so that she would have more money for clothes shopping and fun activities. In relation to Credit Card Company B, Penny called up and once again pled her case as a poor student. She talked Credit Card Company B into taking a used car with a blown-up engine worth around $1,000 in exchange for the debt. Penny did not lie about the value of the car, but she made it sound as good as possible. Transfer details regarding the car were worked out through e-mail. Finally, Penny sent the dive shop a check for $1,000 marked "paid in full." Much to her surprise and pleasure, the dive shop did indeed cash the check. Penny, however, was distraught to find that within 30 days, Credit Card Company A sent her a bill for $1,950; Credit Card Company B sent her a bill for $3,000; and from the dive shop she received a check for $1,000 along with a bill for $2,000. Faced with all these claims, Penny decided to look for work. She ended up two weeks later with a job selling beauty products that she liked much better than the bookstore job. It did not require dealing with pesky students. Assume all credit card company representatives had authority to make the agreements at issue. What is Penny's best argument in attempting to avoid obligations to Credit Card Company A?
That she reasonably relied to her detriment and that she should be able to enforce the company's promise under a theory of promissory estoppel.
Which of the following was the result on appeal in the Case Opener involving the claim that Michael Jordan owed $5 million based on his agreement to pay the plaintiff's mother on the premise that he was the father although it was later determined that the child was not his?
That the agreement to pay $5 million could be rescinded based on either a mutual mistake of fact or based on the mother's fraud.
Which of the following was the result in the Case Nugget in the text involving the dispute between Dr. Ralph M. Aurigemma and New Castle Care, LLC, involving whether an oral agreement entered into on September 4 involving Dr. Aurigemma serving as medical director from October 1 of that year until October 1 of the next year was enforceable?
That the contract was not in writing and, therefore, could not be enforced.
Which of the following was the result in the case in the text William Cavanaugh v. Margaret McKenna, the case in which the plaintiff was sued for opening a funeral home after she agreed to refrain from doing so in her divorce as part of a covenant not to compete with her ex-husband?
That the covenant was reasonable and valid and construed liberally because it was most analogous to the sale of a business.
Which of the following was the result in Margaret Kawaauhau v. Paul W. Geiger, the case in the text in which the plaintiff claimed that the defending doctor, who had no malpractice insurance, could not discharge in bankruptcy a judgment for malpractice on the basis that he deliberately chose less effective treatment to cut costs while knowing that he was providing substandard care.
That the defendant could discharge the judgment because he did not intend to cause injury.
Which of the following was the judge's ruling in Jamil Blackmon v. Allen Iverson, the case in the text in which the plaintiff alleged that the defendant, a professional athlete, wrongfully failed to pay him a percentage of proceeds received from using the nickname "The Answer" in merchandising although the defendant agreed to do so after the plaintiff suggested the use of the nickname?
That the defendant's promise to pay was past consideration insufficient to create a binding contract.
Which of the following was the result in Life Partners Inc., v. Miller, the case in the text involving the validity of a state law in Virginia requiring that viatical insurance companies pay certain amounts to terminally-ill policyholders who sell their policies?
That the law constituted a valid exercise of the state's police powers and was therefore constitutional.
Selma agreed to buy a used car from Hillary for $2,000. Hillary drew up the contract providing that the exchange would occur the next week. Unfortunately, Hillary was not very good with the keyboard and typed in $1,200 as the price of the car. Selma noticed that the contract said $1,200, not $2,000, and was very pleased. She signed it without saying anything. When it was time to make the exchange, Selma gave Hillary $1,200. In response to Hillary's inquiry regarding an additional $800, Selma pulled out the contract and showed her that it said $1,200. Hillary immediately responded that she had made a typographical error. Selma said that there was no mistake on her part because she knew exactly what she was doing and that she thought that Hillary had decided to give her a deal on the car. Which of the following is Hillary's best argument for a rescission of the contract?
That the mistake resulted from an accidental clerical error and that it would be unconscionable to enforce the contract.
Which of the following was the result in the case in the text Hamer v. Sidway, in which, after performance by his nephew, an uncle reneged on a promise to the nephew to pay him $5,000 if the nephew refrained from drinking liquor, using tobacco, swearing, and playing cards or billiards for money until he was 21 years of age?
That the nephew could recover because he supplied consideration.
What did the appellate court rule in the case in the text, Power Entertainment Inc., v. Football League Properties Inc., involving the enforceability of an alleged oral agreement by which the plaintiff assumed a third party's debt owed to the defendant in return for the defendant transferring a licensing agreement to the plaintiff?
That the oral agreement fell outside the statute of frauds if the plaintiff satisfied the main purpose doctrine.
Which of the following was the result on appeal in the Case Opener involving the alleged breach of an oral contract based on the plaintiff lawyer loaning a corporate client funds and the client later reneging on a promise, made in gratitude, to give the lawyer 3 percent of the company's stock?
That the promise was not enforceable because it was a gift.
Which of the following was the result in Royal Capital Development LLC v. Maryland Casualty Company, the case in the text involving whether on a policy of insurance covering "direct physical loss of or damage to" a building that allows the insurer the option of paying either "the cost of repairing the building" or "the loss of value," the insurer must also compensate the insured for the diminution in value of the building if the insured elects to repair the building?
That when a policy promised to pay the insured's loss, the insured had a claim for diminution in value even if repairs were made.
What did the U.S. Supreme Court rule in Buckeye Check Cashing Inc., v. Cardegnaet, the case in the text involving whether the court or the arbitrator should determine decide the issues of a case when illegality in relation to a contract is claimed?
That when an arbitration provision in a contract is not specifically challenged, an arbitrator should address a charge of illegality to a contract as a whole.q
In which of the following did Congress make comprehensive changes to bankruptcy law?
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
Sue is three months behind on her mortgage, and her lender filed negative information affecting her credit rating. Sue mailed one monthly payment to the lender along with a letter providing that she was making the payment on condition that the lender removes negative material sent to credit reporting agencies affecting her credit rating. The lender cashed the check but did not remove the negative information. Sue sues the bank for breach of contract. Which of the following is the most likely result?
The bank will win because under the preexisting duty rule, Sue was already legally obligated to make the payment, and there was no consideration to support the contract.
When acceptance is examined under the common law, how do the basic requirements for a valid acceptance compare with those for a valid offer?
The basic requirements for a valid acceptance parallel those for a valid offer.
Which of the following states that in the case of multiple assignments of the same right, the first assignee to give notice of assignment to the obligor is the party with rights to the contract?
The English rule
Which of the following is false regarding how the Japanese tend to view contracts?
The Japanese do not desire that any terms be left to be decided later.
Which of the following provides that a revocation is effective only when received by the offeree?
The Mailbox Rule
Which of the following provides that an acceptance is valid when it is placed in the mailbox?
The Mailbox Rule
Which of the following sets forth the common law rule that the terms of an acceptance must mirror the terms of an offer?
The Mirror Image Rule
Which of the following states that if a writing, or term in question, appears to be plain and unambiguous on its face, its meaning must be determined from the four corners of the instrument without resort to outside evidence, with the words being given their ordinary meaning?
The Plain Meaning Rule
Which of the following was propounded by prominent legal scholars, recruited by the American Law Institute?
The Restatement of the Law Second, Contracts.
Tina tells Barry that she will mow his yard for the summer for $800. Barry thinks about it and drops a note in the mail to Tina telling her that he rejects her offer. He thinks about it, however, and calls her to tell her that he accepts the offer before she receives his rejection. Which of the following is true under the mailbox rule?
The acceptance is valid, and the rejection has no effect.
"Bank Robbery." Safe Bank was robbed of a significant sum of cash by a robber later identified as Victor Victory. Safe Bank offered a reward of $10,000 to anyone who captured or provided information leading to the capture of Victor. Ted, a police officer in town, promised Safe Bank officials that he would apprehend Victor. While on duty, Ted arrested Victor at a hamburger joint in town. He found Victor based upon a hunch he had after Ursula, who dated Victor, told him about various places Victor enjoyed eating. The bank refuses to pay either Ursula or Ted any of the reward money. In a lawsuit between the bank and Ted regarding the reward funds, who is likely to prevail and why?
The bank is likely to prevail because Ted had a preexisting duty to catch Victor.
Which of the following was the result in the case in the text Wesley Locke v. Ozark City Board of Education, in which an umpire was injured by an angry parent and sued claiming that he was an intended third-party beneficiary under a contract the defending board of education had with the Alabama High School Athletic Association requiring police protection which was not provided?
The case was remanded for trial on the issue of whether adequate police protection was provided in view of the fact that the plaintiff was an intended third-party beneficiary to the contract between the school board and the athletic association.
Trudy signs a contract with ABC Book Club without reading it. The contract provides that new books will be sent to her eBook reader every month unless she sends notification rejecting the receipt of new books. Which of the following is true regarding whether the contract is binding?
The contract is binding.
Which of the following is true when an offer authorizes a certain mode of acceptance but does not require it, and an offeree attempts to accept the offer through a method other than the authorized means?
The contract is not formed until the acceptance is received by the offeror.
An attorney who says that a contract lacks "the proper form" is typically referencing which of the following?
The contract lacked a writing.
Which of the following is needed in order to satisfy the UCC's requirement for a written document?
The contract or memorandum needs only to state the quantity to be sold.
Which of the following was the result on appeal in Thelma Agnes Smith v. David Phillip Riley, the case in the text in which the plaintiff who had lived with the defendant out of wedlock for several years sought after they broke up to enforce two agreements regarding the sale and assignment of property to her?
The court ruled in favor of the plaintiff on the basis that a recitation of nominal consideration of $1 along with consideration of love and affection was adequate consideration to support the agreements.
"Wrong Deck." Penny hires Jackson to paint her back deck. She agrees to pay him $200 for the job, and he accepts sight unseen. They enter into the agreement on Tuesday, and he is to paint the deck on Saturday. When Jackson arrives, neither Penny nor her neighbor is at home. He mistakenly paints the neighbor's deck. Penny calls him the next day and asks him why he did not paint her deck. He informs her that he did paint the deck. It is then discovered that he mistakenly painted the neighbor's deck. Penny tells him not to worry because the neighbor will be required to pay him. Jackson says that if the neighbor does not pay, then he expects all of his funds from Penny, because the contract is executed. What was the status of the agreement between Jackson and Penny as of Tuesday when they agreed upon the price for the job?
The contract was executory.
"Pet Pig Farm." Marcy wanted to buy Lucy's land and use it to breed small pigs to be kept as pets. Marcy told Lucy that having water on the property was very important although she did not mention to Lucy her plan to breed small pigs. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, Marcy had a land survey done, and it was discovered that actually the spring did not run through the corner of Lucy's property. The area in which the spring ran actually belonged to a neighbor. Additionally, when Lucy brought Marcy the used truck, Marcy said, "That's not the truck!" It was discovered that Lucy, who had two trucks, thought that Marcy had bought the older truck although Marcy thought she had purchased the newer truck. Marcy was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Marcy for nuisance. It will cost Marcy more than she had agreed to pay Lucy in order for Marcy to obtain a similar farm which actually has a spring on it. Which of the following is the most likely result in the dispute between Marcy and Lucy regarding which used truck was sold assuming that both Marcy and Lucy were innocently mistaken and did not intend to defraud the other?
The contract will be rescinded.
Which of the following was the result in Orville Arnold and Maxine Arnold v. United Companies and Michael T. Searls, involving the issue of whether an arbitration agreement entered into as part of a consumer loan transaction containing a substantial waiver of the consumer's rights, including access to the courts, while preserving for all practical purposes the lender's right to a judicial forum, is void as a matter of law?
The court found that the waiver of the plaintiffs' rights to a judicial forum considered along with the defendants' retention of such rights and other unfair aspects of the agreement required a finding that the arbitration agreement was void.
"Consumer Debt." Mona had not been keeping up with her spending and bought several expensive items. She had numerous credit cards and some unsecured loans. She had a total of 14 creditors. All her debt was consumer debt, and Mona really wished that she had not put all those new clothes on her credit card. Although Mona was struggling, she did not want to file for bankruptcy because she did not want a bad credit score. Three of her credit card companies, however, who had unsecured claims against her totaling $14,500, signed and filed an involuntary bankruptcy petition against her under Chapter 7. Mona is unsure about how to proceed. While she is several months behind on a number of payments, including alimony payments she believes were unfairly awarded to her ex-husband, she does not particularly want to go bankrupt. She believe that the creditors have been unfair in not allowing her additional time in which to pay. On the other hand, she would really like to be rid of her excessive debt and stop collection efforts on the part of her ex-husband. If Mona convinces the judge that the creditors have filed the involuntary bankruptcy frivolously, which of the following is true regarding what amounts, if any, the court may force the creditors to pay?
The court may award attorney costs, fees of the debtor, and punitive damages.
Which of the following is true regarding the effect of an automatic stay on claims of secured creditors in a Chapter 7 proceeding?
The court may exclude secured creditors from the stay if they petition the court to show that they do not have adequate protection under the stay.
What was the result in the Case Opener in which customers of Apple attempted to disaffirm purchases of game currency by their children?
The court refused to dismiss the lawsuit because no case law was provided to prove that Apple's Terms of Service served as a contract for all subsequent transactions.
Which of the following is true on appeal regarding the case of Mary W. Scott v. Mid-Carolina Homes Inc., discussed in the "Case Nugget" in which the plaintiff sued to recover damages after a salesperson allegedly mistakenly agreed to sell a mobile home to her for a price that was too low, later told her the mobile home could not be sold because of a bent frame, and then proceeded to sell it for a higher price to other buyers?
The court refused to find that the defendant had the right to rescind the contract based on the alleged unilateral mistake.
What was the result in the Peerless case discussed in the text in which there were two ships named Peerless and the parties disagreed over which ship was the subject of the contract?
The court rescinded the contract.
Which of the following was the result in In Re Zappos.com Inc., v. Customer Data Security Breach Litigation, the case in the text in which customers of Zappos claimed that they were not bound to an arbitration agreement contained in a contract with Zappos?
The court ruled for the plaintiffs for the following two reasons: (1) there was no contract because plaintiffs did not assent to it, and (2) even if a contract existed, the contract was illusory and unenforceable because Zappos could avoid promises at any time.
Which of the following was the result on appeal in King v. Riedl, the case in the text in which the plaintiffs claimed that the defendant lacked the right to proceed against them for sums allegedly owed because the contractor was not licensed as a residential home builder as required by state law?
The court ruled in favor of the plaintiffs on the basis that the contractor was statutorily barred from bringing an action to enforce payment because he lacked a residential home builder license and the amount of the contract satisfied statutory requirements.
Which of the following was the result on appeal in Eric Lucier and Karen Haley v. Angela and James Williams, Cambridge Associates LTD., and Al Vasys, the case in the text in which, after finding significant problems with their roof, the plaintiffs claimed that provisions in a home inspection contract illegally limited the liability of the defendants?
The court ruled in favor of the plaintiffs on the basis that the limitation of liability provision in the contract was unconscionable and violated the public policy of the state.
Which of the following was the result on appeal in Forest Commodity Corp. ("FCC") v. Lone Star Industries Inc., the case in the text in which the Forest Commodity Corp. denied that it violated a contractual nonassignability clause and claimed that it was entitled to recover on a breach of contract claim because the defendant did not fully perform?
The court ruled that FCC violated a nonassignability clause and was therefore unable to recover on its claim.
Which of the following was the result on appeal in the case of Evan Rothberg v. Walt Disney Pictures, the case in the text in which the defendant allegedly used undue influence to obtain a release of employee benefits from a person in the hospital dying of AIDS?
The court ruled that a jury question was presented as to whether undue influence was present.
What was the result in the case nugget, Lefkowitz v. Great Minneapolis Surplus Store Inc., involving an advertisement for the sale of fur coats?
The court ruled that the ad was an offer and that the plaintiff properly accepted it.
Which of the following was the result in the case in the text Shelby's Inc., v. Sierra Bravo Inc., involving the issue of whether an agreement to deposit debris and soil on land and an alleged agreement to build a building pad and waterway came within the statute of frauds?
The court ruled that the agreement did not involve an interest in land and did not come within the statute of frauds.
What was the result in the case in the text Lucy v. Zehmer involving whether allegations of joking prevented the formation of the contract involved?
The court ruled that the agreement would be enforced because under the applicable standard, it was not apparent that joking was involved.
Which of the following is true regarding whether the insureds in the "Case Opener" were entitled to insurance coverage for imported toxic Chinese drywall used in their home?
The court ruled that the insureds were not entitled to coverage.
Which of the following was the result on appeal in Equity Fire & Casualty Company v. Laurence Traver, the case in the text in which an insured on a policy of automobile insurance mailed a premium to the insurer, but it did not reach the insurer prior to the expiration date of the policy; and the insurer refused to provide coverage for a motor vehicle accident that occurred after the expiration date of the policy and before the premium was received?
The court ruled that under the unique facts of the case, there was acceptance of the renewal offer preventing a lapse of the policy.
"Consumer Debt." Mona had not been keeping up with her spending and bought several expensive items. She had numerous credit cards and some unsecured loans. She had a total of 14 creditors. All her debt was consumer debt, and Mona really wished that she had not put all those new clothes on her credit card. Although Mona was struggling, she did not want to file for bankruptcy because she did not want a bad credit score. Three of her credit card companies, however, who had unsecured claims against her totaling $14,500, signed and filed an involuntary bankruptcy petition against her under Chapter 7. Mona is unsure about how to proceed. While she is several months behind on a number of payments, including alimony payments she believes were unfairly awarded to her ex-husband, she does not particularly want to go bankrupt. She believe that the creditors have been unfair in not allowing her additional time in which to pay. On the other hand, she would really like to be rid of her excessive debt and stop collection efforts on the part of her ex-husband. Assuming that Mona does not object to the bankruptcy proceeding, what is the next step that should occur?
The court should enter an order of relief.
Which of the following is a consideration of courts in determining whether a person is an incidental or intended beneficiary?
The courts ask if a reasonable person in the position of the party in question would believe the contracting parties intended to benefit the party in question.
Which of the following states that in the case of multiple assignments of the same right, the first party granted the assignment is the party correctly entitled to the contractual right?
The first-assignment-in-time rule
Bob's house was damaged by fire. He got three independent appraisals regarding the damage and submitted those to his insurer informing the insurer that he was willing to use the lowest appraisal as a basis for his insurance reimbursement. The adjuster for the insurance company asked Bob to submit to an oral examination under oath regarding the fire, but Bob refused. The insurance company denied reimbursement based on Bob's refusal to provide the examination under oath. Which of the following is true regarding whether Bob should be allowed to recover under the policy if the court follows the case in the text Hamilton v. State Farm Fire & Casualty Insurance Company?
The insurer will prevail if it can establish actual prejudice based on Bob's refusal to provide an examination under oath.
Who calls the creditors' meeting in a Chapter 7 proceeding?
The interim trustee
Which of the following is an exception as to when a secondary obligation needs to be in writing?
The main-purpose rule
Blaine and Amanda orally agreed with Medical Center X for an in vitro fertilization procedure that would not result in the birth of an autistic child. They later signed a written contract stating that the medical center could not promise an absence of physical or mental defects and assumed no responsibility for such defects. The child conceived had autism. Which of the following is the most likely result of the parents' suit for breach of the oral agreement if the court follows the decision Scalisi et al. v. New York University Medical Centerdiscussed in the text?
The medical center will prevail based upon the written contract.
Which of the following is true regarding the obligation of a minor on disaffirmance?
The obligations of a minor upon disaffirmance vary from state to state.
If the subject matter of an offer becomes illegal, what is the result?
The offer immediately terminates.
Which of the following refers to the right of an offeror to revoke an offer?
The offeror is the "master of his offer."
Susie and Sam have significant funds invested with a stock broker named Will and also with other brokers. Susie and Sam decided to divorce. Susie was really interested in investments, so the divorce decree provided that Susie would retain "all investment accounts," and Sam would receive a "cash settlement" from funds the parties had in the bank. Six months after the divorce was final, it was discovered that Will had absconded to parts unknown with all the money invested with him. Susie could have withdrawn the funds at the time of the divorce, before Will left town, but she had no reason for concern and left the funds there for investment purposes. After discovering Will's wrongdoing, Susie asked Sam to renegotiate the divorce agreement, but he refused. Which of the following is the most likely result of their dispute if the court follows the decision of the court in Simkin v. Blank, discussed in the text?
The original divorce agreement will be enforced only in part because based on their mutual mistake in regard to investing with Will, the parties will be required to renegotiate the part of the contract involving the investments with Will.
Which of the following parties must sign a document coming within the statute of frauds?
The party against whom action is sought
"Friends and Family." Mindy was very close to her family and friends. She also liked to spend and had a large amount of consumer debt for items such as jewelry, clothing, a personal watercraft, and a new car. Mindy was having problems making her credit card payments as they became due. She, however, wanted to make every effort to pay her debts. She had borrowed money from her mother for some jewelry and repaid that loan on January 1st. She repaid a loan to her business partner on May 15th of the same year. On September 1stof that year, she also repaid a loan to Friendly Jewelry Store because she wanted to remain on good terms with the manager. Unfortunately, Mindy was simply unable to continue making payments and on November 1st of that year, she filed a voluntary petition for bankruptcy relief under Chapter 7. Which of the following is the most likely result of a claim of preferential payment based on the payment to the jewelry store?
The payment is presumed preferential on the basis that it was made within 90 days of the filing of the bankruptcy petition only if the trustee is able to establish that the jewelry store received more through the transfer than the jewelry store would have received through bankruptcy proceedings.
"Friends and Family." Mindy was very close to her family and friends. She also liked to spend and had a large amount of consumer debt for items such as jewelry, clothing, a personal watercraft, and a new car. Mindy was having problems making her credit card payments as they became due. She, however, wanted to make every effort to pay her debts. She had borrowed money from her mother for some jewelry and repaid that loan on January 1st. She repaid a loan to her business partner on May 15th of the same year. On September 1stof that year, she also repaid a loan to Friendly Jewelry Store because she wanted to remain on good terms with the manager. Unfortunately, Mindy was simply unable to continue making payments and on November 1st of that year, she filed a voluntary petition for bankruptcy relief under Chapter 7. Assuming the business partner received more than would have been received through bankruptcy proceedings, which of the following is the most likely result of a claim of preferential payment based on the payment to the business partner?
The payment was preferential on the basis that it was made to a business partner within two years of the filing of the bankruptcy petition only if the trustee is able to demonstrate that Mindy was insolvent when she made the payment.
"Friends and Family." Mindy was very close to her family and friends. She also liked to spend and had a large amount of consumer debt for items such as jewelry, clothing, a personal watercraft, and a new car. Mindy was having problems making her credit card payments as they became due. She, however, wanted to make every effort to pay her debts. She had borrowed money from her mother for some jewelry and repaid that loan on January 1st. She repaid a loan to her business partner on May 15th of the same year. On September 1stof that year, she also repaid a loan to Friendly Jewelry Store because she wanted to remain on good terms with the manager. Unfortunately, Mindy was simply unable to continue making payments and on November 1st of that year, she filed a voluntary petition for bankruptcy relief under Chapter 7. Assuming Mindy's mother received more than would have been received through bankruptcy proceedings, which of the following is the most likely result of a claim of preferential payment based upon the payment to the mother?
The payment was preferential on the basis that it was made to a family member within two years of the filing of the bankruptcy petition only if the trustee is able to demonstrate that Mindy was insolvent when she made the payment.
"Consumer Debt." Mona had not been keeping up with her spending and bought several expensive items. She had numerous credit cards and some unsecured loans. She had a total of 14 creditors. All her debt was consumer debt, and Mona really wished that she had not put all those new clothes on her credit card. Although Mona was struggling, she did not want to file for bankruptcy because she did not want a bad credit score. Three of her credit card companies, however, who had unsecured claims against her totaling $14,500, signed and filed an involuntary bankruptcy petition against her under Chapter 7. Mona is unsure about how to proceed. While she is several months behind on a number of payments, including alimony payments she believes were unfairly awarded to her ex-husband, she does not particularly want to go bankrupt. She believe that the creditors have been unfair in not allowing her additional time in which to pay. On the other hand, she would really like to be rid of her excessive debt and stop collection efforts on the part of her ex-husband. Which of the following is true regarding the involuntary petition for bankruptcy filed by some of Mona's creditors?
The petition was properly filed because 3 or more creditors with unsecured claims totaling $14,425 or more signed the petition for involuntary bankruptcy.
What was the result in the Opening Case in which the plaintiff attempted to buy a jet from Pepsi for Pepsi points and some additional funds?
The plaintiff did not prevail because Pepsi reserved the details of the offer to a separate writing, and Pepsi had the authority to reject the plaintiff's offer to purchase.
Which of the following is true regarding the result in the case in the text Thrifty Rent-A-Car System v. South Florida Transport, in which the plaintiffs sued the defendant, the operator of a Thrifty franchise, for amounts owed, but the defendant resisted payment on the basis that several hurricanes rendered the business operations commercially impractical?
The plaintiffs were entitled to recover for reasons including that the nonoccurrence of hurricanes was not a basic assumption of the agreement.
"Not So Rich Uncle." Bruce is attempting to convince Sally to marry him. He promises her that if she will marry him, he will buy a new Mercedes automobile for her within six months of the marriage and take her on a world tour within a year of the marriage date. Sally reluctantly agrees, and they sign an agreement by which Bruce agrees to provide the Mercedes and world tour. Bruce and Sally marry on January 1. Unexpectedly, on March 1, Bruce's supposedly rich uncle, Frank, dies. Frank has no living relatives other than Bruce and has a will leaving everything to Bruce who is also appointed executor. In attempting to settle the estate, Bruce agrees orally to pay out of his own pocket debts of Frank totaling $10,000. Sally is concerned about Bruce's doing so. Bruce tells her not to worry because he will get all the money back when the estate settles. Bruce admits to a number of friends that he agreed to settle the debts out of his own pocket because he needed to obtain assets from the estate in a hurry and did not want anything to slow down probate. The assets were needed in large part to satisfy his obligations to Sally. Surprisingly, it later came to light that prior to his death Frank had signed away all his assets to his girlfriend in Argentina. There was nothing left in the estate for Bruce to inherit. Bruce disavowed his agreement to pay the $10,000 to various creditors of Frank. Which of the following is true regarding Bruce's promises to Sally of a Mercedes and a trip?
The promises fall within the statute of frauds.
Which of the following is true regarding the elements that must be satisfied in order for a mutual mistake to interfere with legal consent?
The required elements are: (1) a basic assumption about the subject matter of the contract, (2) an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, and (3) a material effect on the agreement.
George offers to sell Penelope a ring that George found in his yard. He and Penelope look at the ring and decide that they are not sure what it is, probably just a shiny stone. Penelope pays George $10 for the ring. The ring turns out to be a diamond worth much more than $10. George wants the ring back, and Penelope refuses. What is the most likely result?
The ring will remain with Penelope because the parties contracted on the assumption that they did not know the value of the ring.
Which of the following is false regarding the parol evidence rule?
The rule is a rule of evidence.
"Courtroom Surprises." Wilma agrees to sell Wally her house for $200,000. Wilma, Wally, and the house are all located in Tennessee. She also orally agrees to sell her used car to Wally for $1,000. Wilma and Wally discuss the fact that the house needs some repairs. Wilma gives Wally a key and tells him to do whatever he wants with the house. In reliance on her promise to sell the house, Wally sells his home, gets a loan, and has a new roof put on Wilma's house because of leaks that needed to be repaired to prevent further damage. When presented with the written agreements of sale for the home and the car, however, Wilma refuses to sign either. Wally sues, and the case proceeds to trial. Wilma tells the judge in court under oath that she orally agreed to sell the house but that she changed her mind before signing and that she believes she has protection under the statute of frauds. She tells the judge that no agreement was ever made regarding the car and that she also has protection under the statute of frauds regarding that matter. Which of the following is true regarding Wilma's statement to the judge under oath that she orally agreed to sell the house?
The statement would be classified as an admission and would establish an exception to the statute of frauds involving the agreement on the house.
Sally goes to have her hair trimmed and agrees to pay $40 to the stylist. While there, Sally decides that she would also like highlights. The stylist informs her that highlights will cost an additional $30. Sally agrees to the price, gets the highlights, but refuses to pay the extra amount. What is the likely result in a dispute between Sally and the stylist and why?
The stylist will win because she did additional work in exchange for the extra payment; and, therefore, Sally's promise was supported by valid consideration.
Which of the following is false regarding rights of a trustee in a Chapter 7 bankruptcy?
The trustee examines the debtor's records but may not even temporarily take over the debtor's business.
Harry and Frank are in agreement that Harry will pay Frank $2,000 for a used car. At what point is there a binding contract?
When the agreement is made.
Which of the following is true regarding types of conditions?
There are three types of conditions: precedent, subsequent, and concurrent.
Inez, wishing to sell a used business law book, calls Janice and tells her that if she does not hear from her within twenty-four hours, she will assume that Janice wishes to purchase the book for $50. Which of the following is correct regarding the status of the proposed book sale?
There is no contract because in this situation silence cannot be used to form a contract.
Which of the following is presumed to be a reasonable amount of time when considering whether an offer has expired?
There is no set amount of time, and what constitutes a reasonable amount of time varies depending upon the subject matter of the offer.
Which of the following is the age of majority in regard to the right to contract in Great Britain?
There is not a set age of majority
"Refusal to Pay." Business law teacher Debby needed some yard work done. She told her class that she would give $50 to the first person who mowed her yard. She also entered into an agreement with Betty who agreed to trim some shrubbery for $40. Max went to mow Debby's yard. Unfortunately, just as he finished mowing, a neighborhood dog bit him, and he had to go to the emergency room for a couple of stitches. Debby refused to pay Max because she said that he had angered the neighbors and their dog, and that he was more trouble than he was worth. Secretly, Debby was glad about the dog bite because she felt it gave her an excuse not to pay. Max refused to pay the emergency room because he said that they did not have a binding, bilateral contract. Betty refused to trim the shrubbery because she got a better offer and claimed that she was not bound on the contract until she started to perform. Which of the following is an appropriate characterization of the agreement between Debby and Max?
They had a unilateral, express agreement.
Which of the following is false regarding Internet liability protection policies?
They typically cover claims involving related to patents or trade secrets.
A[n] ______ is created when two parties enter into a contract with the intended end purpose of benefiting a third party.
Third-party beneficiary
Which of the following titles of the United States Code contains the Bankruptcy Code?
Title 11
Why did equitable remedies come into being?
To fashion remedies when the existing laws did not provide any adequate ones.
What is a purpose of the parol evidence rule?
To restrict evidence from being admitted that substantially contradicts an agreement in its written form.
"Cheap Motorcycle." Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has a nice motorcycle that is for sale. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass and, in the next sentence, says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here! Take it or leave it!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 which Peter signs. Peter does some research and finds that Tony has had several arrests for driving under the influence in a nearby town. As an act of revenge, Peter tells Tony that unless Tony sells Peter his new Mustang convertible for $50, he is publishing the facts about the arrests in the school newspaper. Tony reluctantly agreed to the deal. Which of the following is true if Tony seeks to rescind the contract for the sale of the Mustang?
Tony may rescind the contract on grounds of duress.
Which of the following is an individual who takes over administration of the debtor's estate?
Trustee
Which of the following occurs when one of the parties to a contract has so much more bargaining power than the other that he or she dictates the terms of the agreement?
Unconscionability
The term ______ refers to the fact that an agreement is so unfair that it is void of conscience.
Unconscionable
Which of the following is false regarding provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005?
Under the act if a party has at least $10,000 in assets, the party may not file for any type of bankruptcy protection.
An insurer may also be called a[n] _____.
Underwriter
Which of the following refers to special relationships in which one person has taken advantage of his or her dominant position in a relationship to unduly persuade the other person?
Undue influence
A valid contract may be valid but _____________ when there is some law that prohibits the courts from enforcing it.
Unenforceable
Which of the following is true regarding the preexisting duty rule?
Unforeseen circumstances and additional work are exceptions, but past consideration is not an exception.
A[n] ______ mistake is the result of an error by one party about a material fact.
Unilateral
Although there are some exceptions, a[n] ______ mistake does not generally void a contract.
Unilateral
In a[n] _____________ contract, the offeror wants a performance to form the contract
Unilateral
All contracts can be categorized as either ___________ or __________.
Unilateral; bilateral
In a[n] ______ debt, the parties either dispute the fact that any money is owed or agree that some money is owed but dispute the amount.
Unliquidated
"Bank Robbery." Safe Bank was robbed of a significant sum of cash by a robber later identified as Victor Victory. Safe Bank offered a reward of $10,000 to anyone who captured or provided information leading to the capture of Victor. Ted, a police officer in town, promised Safe Bank officials that he would apprehend Victor. While on duty, Ted arrested Victor at a hamburger joint in town. He found Victor based upon a hunch he had after Ursula, who dated Victor, told him about various places Victor enjoyed eating. The bank refuses to pay either Ursula or Ted any of the reward money. In a lawsuit between the bank and Ursula, regarding the reward funds, who is likely to prevail and why?
Ursula is likely to prevail because an enforceable unilateral contract exists based on her provision of information leading to the capture of Victor.
Which of the following occurs when a party gives a loan at an interest rate exceeding the legal maximum?
Usury
A[n] _____________ contract is one that contains all the legal elements of a contract.
Valid
Creditor beneficiaries can enforce their rights under a contract whenever the contract is _____.
Valid
Which of the following references the maturing of rights such that a party can legally act on the rights?
Vesting
A contract is ______________ if one or both of the parties, without breaching the contract, have the ability to either withdraw from the contract or enforce it.
Voidable
Because their contracts are ____, minors have the right, until a reasonable time after reaching the age of majority, to _____ or void their contracts.
Voidable; disaffirm
When may a court rule find parol evidence admissible to further the court's understanding of an agreement?
When a court determines that a written agreement does not represent a complete and final version of the agreement.
Which of the following is true regarding assignment of rights in China?
When a private party is involved, the assignor must first get the obligor's approval before an assignment is made.
Which of the following is true regarding an accord and satisfaction?
When amounts agreed upon are paid, the debt is fully discharged.
As a general rule, when is revocation effective?
When it is received by the offeree.
Which of the following is an exception to the general rule that rights to a contract cannot be assigned when a contract is personal in nature?
When the only part of a contract left to be fulfilled is the payment.
Which of the following is true regarding distinguishing an offer from an invitation to negotiate?
Whether an offer in fact existed is a question of fact.
Which of the following is true regarding factors considered by a court in determining whether a party is an intended or incidental beneficiary?
Whether performance of the contract is done directly to the third party, the third party's ability to control the specifics of performance of the contract, and whether the contract directly states that the third party is the benefiting party.
If nothing is stated to the contrary in the terms of an auction, an auction is presumed to be ______.
With reserve
In an auction _________, the seller is treated as making an offer to accept the highest bid.
Without reserve
"Used Car Sales." Walter sells used cars. He is seeking a way to increase sales and profits because he would like to take his girlfriend on a nice diving trip to the Grand Cayman Islands. The first thing that Walter does is say that during the first week of December, he will give a $500 rebate on used cars that are under two years old. To spice things up, he also offers to sell any car on the lot that is over five years old for $1,000 to the first three customers who can hula hoop ten hours straight on December 7th. (Hula hooping was a practice popular some years ago in which a large hoop would be swung around by a person, usually around the waist.) Walter was not very concerned about the hula hooping issue because he thought that no one would be able to hula hoop for ten hours straight. Walter put an advertisement pertaining to the rebate and the hula hoop opportunity in the local newspaper. The promotion went over very well. Although Walter had several cars available, he ran out of cars under two years old within one day. During the rest of the week shoppers were told that no cars of that description were available. Sam was very angry at Walter for not having a car available that was under two years old so that he could get a good deal and a $500 rebate. On December 7th, while Walter was watching the hula hoopers, Sally was shopping for a car. She was in college and did not have much money. She saw one, an older car, a real clunker, that she liked; but she really did not know if it could be repaired sufficiently to be dependable. Walter had not even put a price on it because he planned to have it crushed. Sally was going to talk to her parents about it. Walter eventually approached her, and Sally asked him if he would take $450 for the car. Walter said, "Yes, sold." Sally tried to explain that she needed to talk to her parents first, but Walter would not hear of it. While Walter was still fuming from his encounter with Sally, Zack walked up and started to criticize the nature of Walter's inventory. Walter told him that he had great cars. Zack pointed at an old jalopy that was banged up, had 200,000 miles on it, and a cracked windshield. Zack said, "Sure, I'll pay $100,000 for that car!" Walter said, "Sold." Zack said, "Wait a minute. I was only kidding." Walter said, "No way." Meanwhile all the hula hoopers dropped out well prior to ten hours of hula hooping except for Barbara. She completed the hula hooping and asked for her car for $1,000. Walter refused saying that the offer was revoked. Sam and Barbara sued Walter, and Walter sued Zack and Sally. Under the applicable law in Walter's state, common law will be applied, and there are no state statutes impacting the situation. What is the most likely result in the lawsuit brought by Walter against Zack?
Zack will win because under an objective standard, it appears he was joking.
A[n] ___________ is a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty.
contract
Which of the following occurs when a party threatens to file a criminal lawsuit unless consent is given to the terms of a contract?
duress
A contract overturned due to having illegal subject matter or for being illegal to perform is generally declared voidable.
false
A contract stating "I assign all of my rights under the contract" will generally be construed to be an assignment of rights but not duties.
false
A donee beneficiary is a third party that benefits from a contract in which the promisor agrees to pay the promisee's debt in return for compensation plus interest.
false
A donee beneficiary is a type of incidental beneficiary.
false
A person who is intoxicated when signing a contract may not avoid the contract based on being intoxicated because being intoxicated is a voluntary condition.
false
Liquidated damages will be enforced based upon the free-will concept of contracts even if the liquidated damages amount is unreasonable.
false
Russia has modified the Russian Civil Code to reflect the freedom of assignments found in the American Uniform Commercial Code.
false
Substitution of a party to a contract is called guaranteeing.
false
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 included only minor changes to bankruptcy law.
false
when a fraudulent misrepresentation is at issue, intent to deceive may not be inferred
false
Monetary damages are also referred to as ______ damages.
legal
When a mistake of fact occurs, ______ is absent.
legal assent
A mistake of fact is an erroneous belief about the facts of the contract at the time the contract is concluded.
true
Without legal assent a contract may be ____.
voidable
Which of the following types of life insurance provides protection for the entire life of the insured and has a cash-surrender value?
whole-life