Business Law Exam 2

Mary agrees to sew Georgia's prom dress for $50 plus costs. Georgia decides that she wants ruffles around the neck and calls Mary who says it will now cost $60. When Mary finishes the dress (with ruffles), Georgia must pa

$60, since the modified agreement is supported by additional consideration.

Carlos ordered an aluminum storm door from Sears for $249.99. Before it was delivered, Sears ran an ad in the paper for the same storm door at $179.99. Carlos calls Sears and demands the advertised price. They say okay.

Carlos must pay $179.99.

Stan purchased 400 pairs of gloves from Isaac at a contract price of $800. Fifty of the gloves were defective, and a dispute arose as to the amount due and owing under the contract. Stan refuses to pay the $800, and Isaac is threatening to sue. Which of the following is correct with regard to this transaction?

If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount, the substitute agreement is enforceable.

Jason's mother would like him to go to college, so in June he enrolls at State University. He also quits his job and tells his mother his plans to continue taking classes. His mother says, "I'm so happy that you are going to college that I want to pay for your books." Jason then sends her a bill for $485. Which of the following is true regarding his mother's promise?

It is unenforceable, because Jason had already enrolled in school and there is no consideration.

A collection agency threatened to sue Martha for the unpaid hospital bills from her heart operation. She signed a promissory note at a high but not illegal rate of interest. What result?

It is valid because the threat to bring a civil suit to collect money owed is permissible.

James threatens to hit Kenneth on the head with a baseball bat unless Kenneth signs a contract agreeing to pay James $300 for his latest painting. Because of the threat, Kenneth signs the contract.

James has committed physical duress against Kenneth.

Janet promises Eli $4,000 for one of his original paintings on the condition that she receive $5 million from her mother's will.

Jan's promise is legally sufficient.

A contract was made for 125 bales of cotton to arrive on a ship named "Peerless" from Bombay. Unbeknownst to either party to the contract, there were two ships named "Peerless," both of which were sailing from Bombay. One sailed in October and the other in December. The buyer had in mind the ship sailing in October, but the seller had in mind the ship sailing in December. Each party held his belief in good faith. When the goods failed to arrive on time, the buyer sued for breach of contract.

No contract exists due to mutual mistake of fact as to the existence or identity of the subject matter of the contract.

Eliza was an antique expert. She went to a tea party at Grandma Jones' house and saw a magnificent Queen Anne table out on the back porch. She asked Grandma about it and was told it was in the way so they were going to store it in the barn. Eliza offered to buy it from her for $200. The next week, Grandma saw it in Eliza's store on sale for $3,000. Which of the following is true?

She cannot rescind the contract because Eliza did not have a duty to tell her the value of the table.

The State of Florida enters into a contract with Treasure Salvors governing the salvage of a Spanish galleon that sunk in the 1600's. Under the terms of the contract, the salvagers agree to relinquish 25% of the items recovered to the State of Florida in return for the right to salvage on state lands. At the time the parties enter into the contract, they both believe that the seabed where the ship lies is state land. Subsequently, the United States Supreme Court holds that the continental shelf on which the ship rests has never been owned by Florida. The salvagers sue to rescind the contract.

The parties made a mutual mistake for which the contract should be avoided.

Jason agrees to sell to Barbara a vacant lot adjoining a house which he owns. The vacant lot is "Lot 2, block 1," and the house is located on "Lot 1, block 1." When the typist types the contract, she mistakenly types "Lot 1, block 1" on the contract. Neither Jason nor Barbara notices the error when they read the contract.

The property description in the written contract is a clerical error that will have no effect on the intent of the parties

Fred is a concert violinist who is scheduled to perform at Carnegie Hall for the first time. He buys what he is told is a Stradivarius violin from a well-known, reputable dealer in quality violins, and he pays the going rate for a Stradivarius. He later learns the violin is an imitation, although it is such a good imitation that even the dealer thought it was authentic

The sale is voidable by the purchaser for mutual mistake.

Wayne helped Hank study all night for an important exam. After Hank got an A on the exam, he told Wayne, "I will give you $10 for helping me get a good grade." Wayne said, "Thanks, I'll take it."

There is no contract because there is no valid consideration.

Darla offers to pay Edward $6,000 for Edward's car, provided that Darla receives that much from her uncle's estate, which is currently being probated. She expects to know for sure how much she will receive within a week or so

Both (b) and (c

Alex wants to submit a bid on a city sewer project. He computes the cost, but mistakenly omits the cost of one item. Accordingly, he submits a bid of $430,000 to the city. The next highest bid is $675,000, and the rest of the bids are even higher. The city is happy to have such a low bid, so it accepts Alex's bid and awards him the contract for the job, even though the city engineer is of the opinion the job cannot be done for less than $650,000.

Both (b) and (c)

Ralph sold a motel to Steve by stating that he had paid $250,000 for it and that his net average annual profit from the business has been $40,000. In reality he paid $100,000 for the motel and has earned a net average annual profit of only $30,000. Steve made no attempt to verify the statements until after the transaction was completed.

Both b & c

Jack moved from New Hampshire to Florida and decided to have an air conditioner installed in his car. After it was installed, Jack received a bill for $1,200. Jack called the dealer and told him he'd never heard of this service costing more than $500. They argued, but the dealer finally agreed to take $900. Is the agreement enforceable?

Yes, there is consideration for the modified amount.

Albert found a stone in his yard and took it to Bob, a jeweler, for evaluation. Although Bob knew what the stone was, he told Albert that he wasn't sure as to the nature of the stone, but that he thought it was a topaz. Bob then offered to buy the stone for $25 and Albert agreed. Later Albert found out the stone was an uncut diamond worth about $700.

This contract can be voided based upon fraud in the inducement.

Stewart entered into a contract with Will to have Will build a 10-unit apartment complex on Elm Street in Randolph County. Unknown to both parties, this land had recently been rezoned and only single-unit dwellings can be constructed

This is a mistake of law

Marilyn contracted with Bravo Builders to build an addition to her house for $15,000. After digging the foundation, Bravo decides that it will take more work and more concrete than it had originally thought and that it will need to charge an additional $5,000 for the job. Assuming Marilyn agrees, which of the following is correct?

This is a modification of a preexisting contract, which under common law must be supported by additional consideration on the part of Bravo Builders.

David offers to sell Elmer a house located in another state. Elmer accepts the offer and agrees to buy the house. Unknown to either party, the house has been destroyed by a tornado.

This is an example of mutual mistake as to the existence or identity of the subject matter

Tom tries to sell his Aston-Martin to Victoria for $12,000. Tom tells Victoria, "I paid $12,000 for the car in 1978 and it's worth twice that today." Tom really paid $8,000 for the car in 1978. If Victoria buys the car, basing her decision on Tom's statement, which of the following correctly states the situation?

Tom's statements provide grounds to set the contract aside.

Sam wants to sell his Golden Retriever dog to Jordan. Sam tells Jordan that the dog is three years old and that he will point, back, and retrieve. Although the dog is three years old and will point at birds, he will not back (honor another dog's point). Al relies on these statements and purchases the bird dog. The buyer has most probably been a victim of

fraud in the inducement.

During a visit to Joe's Jewelry, Patrick looked at a watch that appeared in every way to be a Rolex. Having no reason to believe that this watch was not a Rolex, Patrick paid $2,000 for the watch. Later, Patrick discovered that the watch was a fake Rolex. Patrick can:

give back the watch and get back the $2,000.

Larry and Fred had been negotiating for a landscaping contract for Fred's business. Larry began by offering to do the work for $6,000 and they had been talking about doing a little less work for around $5,000 in their most recent discussions. Finally, Fred called Larry and said that he was going to be off in the foreign office for the next month and that he wanted the work to be done while he was gone; he'd send over a contract the next day on his way to the airport. The contract arrived, stipulating payment of $15,000 for the work that had been discussed. Larry decides to go ahead and do the work. When Fred gets the bill for $15,000 a month later, he

must pay the reasonable value of the services.

Tommy's parents died in a plane crash and he went to live with his guardian, Aunt Rose. Rose had a very small house and did not have a separate bedroom and bath for 12-year-old Tommy. She and Tommy decided to use some of his inheritance to pay for an addition to the house. He had some shares of stock transferred into Rose's name so that she could sell them when the money was due to be paid. The stock transfers are:

presumed voidable unless Rose can show no unfair advantage was taken

A bank robbery has occurred, and the banker's association has offered a $1,000 reward for information leading to the arrest and conviction of the robber. Several people are claiming to be entitled to the money. Which of them is eligible?

An off-duty deputy sheriff from a county other than the one where the arrest occurred.

Jill contracts to purchase Kevin's automobile under the belief that she can sell it at a profit to Linda, but after Jill has bought the car, she finds out that Linda isn't interested in buying it.

Jill cannot void the contract

Kyle wants to buy a six-passenger car. The salesperson tells him that the two-seat sports car Kyle sees on the car lot would be just perfect for six people. Kyle test drives the car and then buys it.

Kyle was not justified in relying upon the salesperson's representation that the car would seat six people

Mark paid off his brother Steve's debt to the loan shark on condition that Steve wouldn't be contacted by the loan shark for payment. The loan shark says that he doesn't have to honor that promise because Steve didn't pay. Mark would help his cause by accurately pointing out which of the following to the loan shark

Mark's payment to the shark was a legal detriment to Mark.

Nancy, who lives in Birdville, wants to open a McHenry Roast Chicken franchise. Mark, a representative of McHenry, told Nancy, "If you will buy a lot and build a building in River City, we will give you a franchise." Nancy bought the lot and built the building as instructed, only to discover that McHenry had awarded the franchise to a large corporation. McHenry claims no liability to Nancy since there was no consideration. Which statement is most accurate?

McHenry is liable to Nancy based on the concept of promissory estoppel.

Aunt Ellie promises her 21-year-old nephew, Robbie, that she will pay him $100 if he quits smoking for a month. If Robbie does, is there a binding contract?

Yes, because Robbie gave up a legal right.

Steven has a typed copy of a contract, which he would like to have Thomas sign. Thomas, who needs glasses to read typing, doesn't want to sign until he has read the document, but Steven convinces Thomas to sign it anyway, because it is a "standard" contract for this type of situation. Is the contract which Thomas signed binding upon him?

Yes, because he was negligent in not ascertaining its contents

Sue owes $5,000 to the First National Bank for a student loan which will come due on January 1 next year. She has been offered a two-year graduate fellowship, but she will not be able to pay the loan back if she accepts the fellowship. The bank manager tells Sue that if she pays $3,000 now, they will forgive the loan. Should Sue accept the offer?

Yes, because the early payment of the loan is consideration that makes the bank's promise binding.

Alice says to Brian, "If I decide to buy a word processor next year, I will buy it from you." This is an example of:

an illusory promise.