ACCT 363 EXAM 1

The four types of formal contracts are: _______.

contracts under seal, recognizance, letters of credit and negotiable instruments

An employment contract that restricts what an employee may do after leaving a company is known as a(n): _______.

covenant not to compete

_____ refers to the legal ability to enter into a binding agreement.

Contractual capacity

In determining whether parties intended to enter into a contract, the courts look at their ______.

objective behavior

Heavily one-sided agreements are known as ______.

unconscionable contracts

Which of the following statements are true of legal consideration? (Check all that apply.) As a general rule, a contract need not be supported by consideration in order for it to be binding. A court will not regulate the amount of consideration in the absence of fraud. The consideration of love and affection has been deemed insufficient to support a conveyance. Any consideration, however small, will support a promise.

A court will not regulate the amount of consideration in the absence of fraud. Any consideration, however small, will support a promise.

Which of the following is a commonly recognized way by which a party's contractual obligations can be terminated?

Agreement of the parties

what are situations in which a contract may be discharged by operation of law?

Alteration of the contract Bankruptcy impossibility of performance Tolling of the statute of limitations

What happens if a legal contract is formed and its subject later becomes illegal under a new statute?

Both parties are discharged from their obligations.

The most important sources of contract law are the: _______. (Check all that apply.) UCITA CISG case law UCC

CISG case law UCC

Identify the legal exception whereby loans may exceed the predetermined maximum in a state despite usury statute.

Corporate loans for facilitating business transactions

What should a judge do if a contract contains ambiguity?

Interpret the contract against the interests of the drafter.

Which of the following is not a means by which parties to a contract may agree to discharge each other from their obligations? Accord and satisfaction Substituted contract Novation Mutual remuneration

Mutual remuneration

______ is a failure to provide pertinent information about the contract.

Nondisclosure

what term means that it is, in fact, not possible to lawfully carry out one's contractual obligations? Multiple choice question. Objective impossibility

Objective impossibility

What is the standard that courts use to interpret contracts?

Objective standard

Which party to a contract is said to be the "master of their offer"?

Offeror

What is the common law rule that bars the admission of oral testimony to prove agreement to certain terms if there is a written contract between the parties after the oral testimony occurs?

Parol evidence rule

______ unconscionability describes conditions that impair one party's understanding of a contract, as well as the integration of terms into a contract

Procedural

what are the two exceptions to the common law rule requiring consideration.

Promissory estoppel and contracts under seal

According to the ______, discharge by reason of impracticability requires that the party claiming discharge prove that he or she did not expressly or impliedly agree to performance in spite of impracticability that would otherwise justify nonperformance.

Restatement (Second) of Contracts

Prominent legal scholars, recruited by the American Law Institute, organized the principles of the common law of contracts into the original: _______.

Restatement of the Law, Contracts

what are the common equitable remedies?

Restitution and Rescission Specific performance injunction reformation recovery based on quasi-contract

What does a minor need to do to disaffirm a contract?

Show an intention by words or action to rescind the contract

In the context of a breach of contract by the buyer, in which situation is the seller most likely to be entitled to the contract price as damages? The seller has invested in raw materials. The finished goods must be sold to another buyer at a lower price. The buyer breaches before the seller has invested in the order. The finished goods cannot be sold elsewhere.

The finished goods cannot be sold elsewhere.

Which of the following conditions need not be satisfied for substantial performance? No willful departure from the terms of the agreement Completion of nearly all of the terms of the agreement The formation of a contract between a merchant obligor and a non-merchant obligee An honest effort to complete all of the contract terms

The formation of a contract between a merchant obligor and a non-merchant obligee

Identify an exception to the need to have the secondary obligation in writing.

The main-purpose rule

In determining whether parties objectively intended to enter into a contract, at which of the following aspects of parties do the courts look? Their intuitive hunches Their behavior Their intentions Their objective words

Their behavior Their objective words

When can a minor be given full legal capacity to enter into contracts?

When the minor's parents or legal guardians give up their right to exercise legal control over the minor When the minor moves out of the parents' house and begins supporting himself or herself When the minor marries

A(n) ______ contract is an agreement presented on a take-it-or-leave-it basis.

adhesion

A(n) ______ is a statement made in court, under oath, in which one party against whom charges have been brought admits that an oral contract existed, even though the contract was required to be in writing.

admission

If a written agreement has missing parts, the court will: _______.

admit parol evidence to fill in missing parts

Consideration can be anything, as long as it is the product of a(n) _______.

bargained for exchange

The law of contracts is made up mainly from: _______.

common law

A _______ does not have to be an actual statement; it may also be an act of concealment or nondisclosure.

false assertion of fact

Negotiable instruments are an example of ______ contracts.

formal

Quasi-contracts are sometimes called: _______.

implied-in-law contracts

A(n) ______ is an order either forcing a person to do something or prohibiting a person from doing something.

injunction

An unconditional written promise to pay the holder a specific sum of money on demand or at a certain time is known as a(n) _______.

negotiable instrument

As a general rule, parents are ______ liable for contracts entered into by their minor children.

not

In an agreement for the sale of goods over $500, only the _____ needs to be stated.

quantity

In the context of the objective theory of contracts, the existence of a contract is based on ______.

the parties' outward manifestations of intent

Special relationships in which one person takes advantage of a dominant position in a relationship to unfairly persuade the other and interfere with that person's ability to make his or her own decision to enter into a contract is known as: _______.

undue influence

In an auction _______, the seller is treated as making an offer to accept the highest bid and therefore must accept it

without reserve

Which of the following is considered a false assertion of fact? (Check all that apply.) An incorrect assertion An innocent misrepresentation A nondisclosure An act of concealment

An incorrect assertion A nondisclosure An act of concealment

Which of the following terms refers to a situation when performance is still objectively possible, but would be extraordinarily injurious or expensive to one party?

Commercial impracticability

Which of the following occurs when all aspects of the parties' duties under the contract are carried out perfectly? Multiple choice question.

Complete performance

______ conditions occur when each party's performance is conditioned on the performance of the other.

Concurrent

Promissory estoppel requires what major element in order to exist?

Detrimental reliance by the injured party

If, due to factors beyond the control of the parties, an essential event does not occur, and neither party had assumed the risk of the event's non-occurrence, the contract may be discharged according to which doctrine?

Frustration of purpose

Which of the following is not a recognized purpose of licensing statutes? Government protection of the public's constitutional rights Government protection of the public's welfare Government protection of the public's safety Government protection of the public's health

Government protection of the public's constitutional rights

In which of the following situations is a contract be discharged under the frustration of purpose doctrine? If one of the parties materially alters the contract with the knowledge of the other party If unforeseen event occurs that makes it physically or legally impossible for a party to carry out the terms of the contract If one of the parties files bankruptcy If due to factors beyond the control of the parties, the event that is the purpose of the contract does not occur, and neither party has assumed the risk of the event's nonoccurrence

If due to factors beyond the control of the parties, the event that is the purpose of the contract does not occur, and neither party has assumed the risk of the event's nonoccurrence

In the context of misrepresentation, when can a consumer take legal action against a company? If the product benefits are misrepresented on labels If the product benefits are misrepresented on the packaging If the product benefits are exaggerated in customer reviews If the product benefits are exaggerated in advertisements

If the product benefits are misrepresented on labels If the product benefits are misrepresented on the packaging If the product benefits are exaggerated in advertisements

______ terms allow a court to determine damages if one of the parties breaches the contract.

Material

Under common law, what types of terms must be included in a valid contractual offer?

Material terms

In the context of contracts for necessaries, which of the following statements is true of the liability of minors?

Minors can disaffirm contracts for necessaries. Minors can be held liable for the reasonable value of necessaries.

In the context of justifiable reliance on a false assertion, which of the following is true of the modern contract law?

There is less emphasis on the duty to inspect.

What are the conditions for promissory estoppel to occur?

To avoid an injustice, the promise must be enforced. One party makes a promise and knows the other party will rely on it. A party reasonably relies on another's promise.

What are exceptions to the preexisting duty rule?

Unforeseen circumstances Additional work required to fulfill the promised obligation UCC Article 2 (sale of goods)

What occurs when a party gives a loan at an interest rate exceeding the legal maximum?

Usury

Under the parol evidence rule, oral testimony is inadmissible to prove certain terms or agreement if it comes: _______.

before or at the same time as the execution of the written contract.

The type of contract in which the offeror wants a promise from the offeree to form a binding contract is called a(n): _______.

bilateral contract

Public policy involves: _______.

both the government's concern for its citizens and the beliefs people hold regarding the proper subject of business transaction

Under common law, a valid contractual offer will be:_______.

certain and definite

The active hiding of the truth about a material fact is legally known as: _______.

concealment

Which of the following damages are foreseeable damages that result from special facts and circumstances arising outside the contract itself, and must be within the contemplation of the parties at the time the breach occurs?

consequential

Almost all business relationships are formed by a(n): _______.

contract

A(n) ______ clause releases one of the contracting parties from all liability, regardless of who is at fault or what injury is suffered.

exculpatory

A(n) ______ ratification occurs when, after reaching the age of majority, the person states she intends to be bound by the contract entered into as a minor.

express

When a person promises that they may do something if they want to, they have made an ______ promise. Such a promise is not sufficient consideration.

illusory

Basing the existence of a contract on the parties' outward manifestations of intent and basing the interpretation of that intent on how a reasonable person would interpret it is known as: ________.

objective theory of contracts

Most states will allow a merger clause to constitute the stated intent of the parties unless ______.

one party offers proof of a personal defense against the contract

Promissory estoppel is the contractual concept that: _______.

one party reasonably relied on another's promise and due to that reliance, the court won't allow the revocation of the offer now

In a case of an innocent mistake, a victim can: _______.

only request rescission of the contract

If multiple interpretations are possible, the court should adopt the interpretation that makes the contract: _______.

operative definite lawful reasonable

______ obligations do not require a written document, but _______ do. unless......

primary; secondary the main reason a person makes a secondary promise is to obtain personal benefit

A party seeking enforcement of an exculpatory clause must be a(n) ______ business or individual not important to the ______ interest.

private; public

Assume that an offer merely authorizes certain modes of acceptance, but does not condition acceptance on the use of those modes. In such a situation, if the offeree uses an unauthorized means of acceptance: _______.

the acceptance creates a valid contract upon receipt by the offeror

According to the Restatement (Second) of Contracts, discharge by reason of impracticability requires that the party claiming discharge prove all of the followingexcept that: _______.

the breaching party violated a duty of care to the party claiming discharge, and caused damages as a result

When a contract consists of both written and oral elements, judges tend to ______.

treat it as nonfinalized contract

In contracts for the lease of goods or the sale of securities, the UCC indicates that if the contract is over ______, it must be writing.

$5000

What are the reasons why a partial performance exception to the statute of frauds could be applied?

Buyer has taken possession of a land interest as part of a contract Partial payment for a contract involving an interest in land

types of contractual condition?

Condition subsequent Concurrent conditions Condition precedent

What occurs whenever a party fails to perform his or her obligations under the contract?

beach

promise + promise = promise + requested action =

bilateral contract unilateral contract

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 is known as a(n) _______.

contract

In order for a mutual mistake to interfere with legal consent, the following must be present.

An adverse effect on a party who did not agree to bear the risk of the mistake at the time of the agreement A basic assumption about the subject matter of the contract A material effect on the agreement

what're exceptions to the requirement of a written contract under UCC?

Contracts between merchants selling goods to one another customized goods

True or false: A judge should interpret a contract so as to give effect to the parties' intentions at the time they entered into the contract. True False

True

When calculating the length of time it will take for performance on a contract to determine if the contract falls within the scope of the statute of frauds, the start date for calculating time will be the day: _______.

after the contract is created

Under the equal dignity rule, if an agreement would have to be in writing if negotiated by a principal, then it would also have to be in writing if it were negotiated by a(n) _______

agent

In an option contract, the offeree gives consideration to the offeror: _______.

to have an offer that cannot be revoked by the offeror for a period of time

What are valid exceptions to the statute of frauds?

1. admission 2. partial performance 3. promissory estoppel

Today, how many states will still enforce contract under seal even if it is not supported by consideration?

10

As a general rule, when an agreement is deemed illegal, courts will usually label it void, meaning neither party can enforce the agreement, and neither is entitled to recovery. Which of the following is not a recognized exception to this rule? One of the parties withdraws from an illegal agreement after an illegality occurs. One of the parties withdraws from an illegal agreement before an illegality occurs. Justifiable ignorance of facts leaves one party unaware of a provision of an agreement that would make it illegal. A member of a protected class is a party to an agreement that contradicts a statute intended to protect the specific class.

One of the parties withdraws from an illegal agreement after an illegality occurs.

Identify a true statement about conditions in contracts. They can be implied by an oral agreement preceding the creation of the contract. They can be expressly inserted into the contract by the parties. They can be implied by an oral agreement at the time of the creation of the contract. They can be mandated by the court.

They can be expressly inserted into the contract by the parties.

Under the common law mirror-image rule, when is a counter offer formed?

When the offeree's acceptance does not include all of the terms of the offeror's offer

When is promissory estoppel in effect?

When the party's reliance is to her own detriment

Which of the following is not a factor a party should consider before filing suit for breach of contract? The likelihood of success The cost of litigation or ADR as compared to the value of the likely remedy Whether the potential defendant violated a duty of care and proximately caused damages to the party as a result The desire or need to maintain an ongoing relationship with the potential defendant

Whether the potential defendant violated a duty of care and proximately caused damages to the party as a result

A contract that has yet to be performed is known as a(n): _______.

executory contract

Whenever possible, courts award _______ damages rather than some form of _______ relief.

monetary, equitable

Compensatory damages are designed to put the ______ in the position she would have been in had the contract been fully performed.

plaintiff

An injured party has no justifiable claim of fraud after relying on assertions whose falsity: _______.

should have been obvious

A mistake of a material fact by one party is known as a(n): _______.

unilateral mistake

For a(n) ______ debt, if the debtor offers to pay less money than is owed as full payment and the creditor agrees, there is not a(n)______, and even if the debtor pays the money agreed to, the creditor may nevertheless sue for the balance it believes is owed.

unliquidated; accord

When a debt is _______, the parties may enter into a(n) _______.

unliquidated; accord and satisfaction

What are the types of contracts that fall within the scope of the statute of frauds?

1. Contracts related to an interest in real property 2. Promises made in consideration of marriage 3. contracts who's terms prevent possible performance in one year 4. contracts for one party to pay the debt of another if the initial party fails to pay

Identify the factors that would result in rescission of a contract based on duress.

1. One party threatens the other's economic interests, i.e., economic duress. 2. One party threatens to file a criminal lawsuit unless consent is given to the terms of the contract. 3. One party threatens physical harm or extortion to gain consent to a contract.

What are the elements of a written agreement under the statute of frauds?

1. Parties to a contract must be identified. 2. The subject matter of the agreement must be defined. 3. All pertinent terms must be listed.

Factors that are considered by a court in undue influence claims include all of the following: _______.

1. The dominant party rushes the other party to consent. 2. The non-dominant party was isolated from advisers at the time of the agreement. 3. The dominant party gained undue enrichment from the agreement. 4. the contract unreasonably benefits the dominant party

What conditions would permit a court to invalidate a contract on grounds of unilateral mistake?

1. The mistake was caused by an accidental clerical error 2. One party made a mistake about a material fact, and the other party knew about the mistake 3. the mistake was so serious the contract became unconscionable

To justify recovery under a theory of quasi-contract, what must a plaintiff prove?

1. The plaintiff conferred a benefit on the defendant. 2. The plaintiff had reasonably expected to be compensated for a benefit conferred on the defendant. 3. the defendant would be unjustly enriched from receiving the benefit w out compensating the plaintiff for it

what should a party should consider before filing suit for breach of contract.

1. The possibility of getting a better or faster resolution through some form of alternative 2. The cost of litigation or some form of ADR as compared to the value of the likely remedy 3. The desire or need to maintain an ongoing relationship with the potential defendant 4. The likelihood of success

In order for the courts to find a nondisclosure of a material fact to be equated with and have the same legal effect as a false assertion, the following elements must be present.

1. There is a statute that requires disclosure. 2. A relationship of trust exists between the parties to the contract. 3. There is a failure to correct assertions of fact that are no longer true. 4. the nondisclosure involves a serious defect

Purposes of the statue of fraud are:

1. To ease contractual negotiations by requiring sufficiently reliable evidence to prove the existence and specific terms of a contract 2. prevent unreliable oral evidence from interfering with a contractual relationship 3. To prevent parties from entering into contracts with which they do not agree

to have a valid offer under common law you need what 3 things?

1. intent to be bound by acceptance 2. definite and certain terms 3. communication to the offeree

If a business does inadvertently cash a "paid-in-full" check, it has _______ days to offer the debtor repayment in the same amount.

90

In which of the following situations is a contract enforceable? A contract that is against generally accepted public policy but does not violate a statute A contract that violates the state law but not the federal law A contract that can perform legally A contract with a legal subject matter

A contract that can perform legally A contract with a legal subject matter

Which of the following is a correct statement regarding a minor's obligations on disaffirmance?

A minor's obligations on disaffirmance vary from state to state

Which of the following terms refers to a situation when, before the actual time for performance, a contracting party decides not to complete the contract?

Anticipatory repudiation

Which of the following statements is correct regarding the legality and enforceability of contracts? Both a contract that requires an illegal act for performance and a contract for an illegal purpose are unenforceable. A contract that requires an illegal act for performance is enforceable, while a contract for an illegal purpose is unenforceable. A contract for an illegal purpose is enforceable, while a contract that requires an illegal act for performance is unenforceable. Both a contract that requires an illegal act for performance and a contract for an illegal purpose are enforceable.

Both a contract that requires an illegal act for performance and a contract for an illegal purpose are enforceable.

In general, what are the ways an offeree can manifest intent to enter into a contract? (Check all that apply.) By performance of the requested actions under the offer and contract By having a general conversation about a proposed offer By contacting the secretary of state's office to indicate that the requested offer is accepted By giving the offeror a return promise (e.g., promise to pay contract value)

By performance of the requested actions under the offer and contract By giving the offeror a return promise (e.g., promise to pay contract value)

What are some of the exceptions to the parol evidence rule?

Contracts with ambiguous terms Contracts that have been subsequently modified

Which of the following is not a type of monetary damages available in a successful breach of contract lawsuit? Existential Compensatory Nominal Punitive

Existential

Under what circumstances will an offeror not be able to rescind a unilateral contract offer?

In instances where the offeree has already started to perform under the contract

Which of the following statements best describes a negotiable instrument?

It is an acceptable medium for exchanging value from one person to another.

Which of the following statements is true of mistake of fact? It is an affirmative defense. It is caused by the neglect of a legal duty. It consists of unconscious ignorance of a past or present material event. It includes the guilty-mind element of the crime.

It is an affirmative defense. It consists of unconscious ignorance of a past or present material event.

Which of the following statements is true about past consideration? (Check all that apply.) It includes consideration from both sides. It is enforceable by the law. It is not a real consideration. It refers to a situation where one party provides value before the promise is made.

It is not a real consideration. It refers to a situation where one party provides value before the promise is made.

Identify a defense to the enforcement of a contract. Lack of witnesses Lack of oral reinforcement Lack of consideration of personal circumstances Lack of genuine assent

Lack of genuine assent

Which of the following is an order requiring that the breaching party fulfill the terms of the agreement?

Specific performance

What term refers to a situation in which it would be very difficult to carry out the contract?

Subjective impossibility

______ unconscionability occurs when an agreement is overly harsh or lopsided.

Substantive

Which of the following is true of severable contracts? They are not enforceable. They can be partially voided by the court. They can be voided by either party at any time. Their legal portion can be enforced by the court.

They can be partially voided by the court. Their legal portion can be enforced by the court.

Which of the following is true of marriage agreement based on mutual promises?

They do not need to be written. They do not fall within the statute of frauds.

Which of the following is true of prenuptial agreements? They do not require consideration legally. They do not necessarily indicate that both parties understand the terms of the agreement. They do not need to be written down to be enforceable. They do not state ownership rights.

They do not require consideration legally.

Which of the following are true of states where the purpose of licensing is to provide government control over the profession or generate revenue? They deem any contracts with unlicensed professionals to be illegal. They enforce contracts with unlicensed professionals. They require unlicensed professionals to pay fine. They allow contracts with unlicensed professionals but do not enforce them.

They enforce contracts with unlicensed professionals. They require unlicensed professionals to pay fine.

Which of the following is true of secondary obligations?

They fall within the statute of frauds. They involve a party outside a primary agreement.

Which of the following statements is true of equitable remedies? (Check all that apply.) They refer to the ratified laws in the English court. They were typically unique solutions specifically crafted to the demands of the situations. They grew out of the English court's authority to fashion remedies when the existing laws did not provide any adequate ones. They were based on legal precedent.

They were typically unique solutions specifically crafted to the demands of the situations. They grew out of the English court's authority to fashion remedies when the existing laws did not provide any adequate ones.

In the context of equitable remedies, reformation refers to a situation in which ______.

a contract is rewritten because it does not reflect the parties' actual agreement

Agreements that restrain trade, called ______ agreements, are viewed as being harmful to consumers and against public policy.

anticompetitive

According to Section 2-302 of the Uniform Commercial Code, if a court -- as a matter of law -- finds a contract or any clause of the contract to have been unconscionable at the time it was made, the court may do all of the following except: _______. limit application of any unconscionable clause in order to avoid an unconscionable result refuse to enforce the contract enforce the remainder of the contract without the unconscionable clause award the affected party treble damages

award the affected party treble damages

The two sources of law governing contracts are the: _______.

common law and the Uniform Commercial Code (UCC)

What are the most frequently awarded damages in a breach of contract lawsuit?

compensatory

Liza and Maryann were at a flea market. Liza had an antique vase that caught Maryann's eye. Maryann said to Liza that she would give Liza the antique necklace she had in exchange for the vase. Liza agreed. The antique vase and the antique necklace are called: _______.

consideration

The bargained-for exchange or what each party gets in exchange for his or her promise under a contract is known as: _______.

consideration

According to the Uniform Commercial Code, if the seller breaches the contract, the compensatory damages are calculated as ______.

difference between the contract price and the market price on the day the goods were supposed to be delivered

When a written agreement was conditioned on terms agreed to orally, the parol evidence rule allows parties to introduce evidence because such evidence ______.

does not substantially modify the written agreement

Discharge by performance refers to parties discharging their obligations by: _______.

doing what they agreed to do

In a case of fraudulent or negligent misrepresentation, a victim can _______.

either rescind the contract or keep the contract and sue for damages

In some states, under ______ contracts that would normally fall under the statute and need a writing if negotiated by the principal must be in writing even if negotiated by an agent.

equal dignity rule

The means by which the offeree can communicate a valid acceptance to the offeror may be: _______.

expressly stated in the offer implied from the facts and circumstances surrounding the communication of the offer to the offeree

An intentional and knowing false representation of a material act that is intended to mislead the other party is known as a(n): _______.

fraudulent misrepresentation

A condition subsequent is a(n) ______ event that terminates the obligations of the parties when it occurs.

future

The purpose of a merger clause is to: _______.

give direction to a judge that the written contract is intended to be the final and complete statement of the agreement

Article 2 of the Uniform Commercial Code (UCC) governs contracts for the sale of: _______.

goods

In a conflicting versions of a contract, a(n) ________ contract will prevail over a typed contract.

handwritten

The written requirement under the statute of frauds can be demonstrated by: _______.

having several written documents as part of a contractual agreement

In order to receive damages as a result of fraudulent misrepresentation, the plaintiff must demonstrate that: _______.

he or she was injured or harmed by the misrepresentation

If a unilateral mistake has been made about a material fact of the contract, the courts are: _______.

hesitant to void the contract

Intent to deceive occurs when the party making the false statement ______.

implies having personal knowledge of its accuracy.

According to the Restatement (Second) of Contracts, if a court -- as a matter of law -- finds a contract or any clause of the contract to have been unconscionable at the time it was made, the court may do all of the following except: _______. refuse to enforce the contract enforce the remainder of the contract without the unconscionable clause limit application of any unconscionable clause in order to avoid an unconscionable result impose statutory sanctions on the party who drafted the contract

impose statutory sanctions on the party who drafted the contract

Commercial ______ is used when performance is still _________ possible, but would be extraordinarily injurious or expensive to one party.

impracticability; objectively

According to the legal principle of ______ both contracting parties are equally responsible for an illegal agreement.

in pari delicto

Once a fully ______ agreement has been written, no oral evidence of any prior or contemporaneous agreement can be admitted in court to change the terms of the agreement.

integrated

In order to have promissory estoppel, the agreement: _______.

is not otherwise an enforceable contract

If there is a misrepresentation in a contract, the court allows the parties to rescind the contract because the contract lacks ______.

legal assent

A ______ is a binding document that a buyer obtains from his or her bank to guarantee that payment for goods will be made to the seller.

letter of credit

Damages specified as a term of a contract, before a breach of contract occurs, are called ______.

liquidated

If there is no dispute that money is owed, then the debt is ______.

liquidated

If a construction contract is breached by the landowner before the construction is begun, damages are simply the ______ of the contract.

lost profits

The ______ rule states that an acceptance is valid when mailed and a revocation is only effective when received.

mailbox

What type of breach occurs when a party unjustifiably fails to substantially perform his or her obligations under the contract, thereby discharging the non-breaching party from his or her obligations under the contract?

material

If contractual performance involves a _______ or utility standard, courts use a(n) ______ satisfaction standard.

mechanical; objective

If a mistake has occurred in the contract, then there is no: _______.

meeting of the minds

An untruthful assertion by one of the parties about a material fact of the contract is: _______.

misrepresentation

In order to be considered exempt from the statute of frauds, a contract: _______.

must be possibly performed in one year, even if the performance is highly unlikely

_______ refers to a situation in which parties agree that they simply wish to discharge each other from their mutual obligations and therefore cancel the contract.

mutual rescission

Courts find _______ only when the party making the false statement should have known the truth using the skills and competence required of a person in her position or profession.

negligent misrepresentation

The fourth element of a binding legal contract is that it should be a legal object. This means that to be enforceable the contract must ______.

not be against public policy

If intoxication causes a person to exercise poor judgment in making a contract, the contract is ______ unless the other party unfairly capitalized on the impaired judgment.

not voidable

Knowing the proper classification is important -- whether the contract is bilateral or unilateral -- because it determines when the: _______.

offeree is legally bound to perform

If a contract resulted from duress, the innocent party can: _______.

opt to void the contract

What type of contract allows the offeree a fixed amount of time to consider an offer without the offeror being able to revoke the contract during that fixed period of time?

option contract

Like the statute of frauds, the ______ evidence rule allows for eight ______ that would be admissible in court.

parol; exceptions

What rule allows for oral evidence to prove that a written contract was based on oral terms?

parole evidence rule

The test for compliance with the one-year rule considers the ______.

possibility of completing the contract within one year

A condition ______ is a particular event that must occur in order for a party's duty to arise.

precedent

When a contract is based on a future event occurring first, then that future event is called a condition ________.

precedent

Performance of a duty you are obligated to do under the law is not good consideration. This is known as the ______ duty rule.

preexisting

One defense against the enforcement of a contract is if there is a lack of a writing (if one is required). This defense is known as a lack of: ______.

proper form

An implied _______ occurs when a former minor takes some action after reaching the age of majority consistent with intent to ratify a contract.

ratification

The remedy that is most appropriate when a mutual mistake has occurred is: _____.

recission

A(n) ______ arises when a person acknowledges in court that he or she will perform some specified act or pay a price upon failure to do so.

recognizance

Which of the following terms refers to the situation where a court allows a contract to be rewritten because the document does not reflect the parties' actual agreement?

reformation

The courts insist on a "meeting of the minds" to have a valid contract and even if a misrepresentation was innocent and without intent, the court will: _______.

rescind the contract

what is the plain meaning rule?

rule of interpretation that states that words in a contract should be given their ordinary meaning

If a person had no knowledge of a claim's falsity, we say that he or she lacked: ________.

scienter

Concurrent conditions exist when the parties are to perform their obligations for each other: _______.

simultaneously

When the judgment involved is a matter of personal taste, courts apply a(n) ______ satisfaction standard.

subjective

Through ______, parties discharge their duty by making an offer to perform and being ready, willing, and able to perform.

tender

A rule of contract interpretation is that the judge should interpret an ambiguous contract against the interests of: _______.

the drafter of the contract

The injured party has two responsibilities in a case of false assertion. The first is that there is no claim of false assertion if the falsity is obvious, and the other is that there is no claim of false assertion if: _______.

the falsity could have been discovered by inspecting the item

In the context of discharge by mutual agreement, discharge by novation refers to the situation in which ______

the original parties and a third party all agree that the third party will replace one of the original parties and that the original party will then be discharged

In the context of general rules for illegal agreements, a party is allowed to sue for performance if ______.

the violated statute is intended to protect the specific class to which the party belongs

The title "statute of frauds" is misleading because: _______.

there is not one statute, but rather the statute of frauds is a general collection of concepts that has been incorporated at the state level

Under common law, a(n) ______ contract is unenforceable.

unconscionable

Generally, contracts made by intoxicated persons are ______.

voidable