BLAW 420 - ULL - First Test 1

Under common law, an acceptance of an offer for a bilateral contract is effective A. Even though it adds to, or subtracts from, the terms of the offer. B. Only if it is the mirror image of the offer. C. Only if it is expressed in words. D. Even though it alters or qualifies a term of the offer.

B. Only if it is the mirror image of the offer. Under common law, the acceptance of a bilateral offer may not add to, subtract from, alter, or qualify any term in the acceptance. The terms of the acceptance must reflect the exact terms of the offer.

On the first day of the month, Thomas and Moore orally agreed that Thomas was to deliver to Moore's place of business a case of fruit on each Monday of the current month. Moore was to pay the $100 price on the first of the following month. On the 15th of the month, the agreement should be classified as A. Executed. B. Executory. C. Unexecuted because the agreement was oral. D. Cancelable at any time.

B. Executory. As of the 15th, Thomas had partially performed, but Moore had not performed at all. The contract was therefore executory

What type of conduct generally will make a contract voidable? A. Fraud in the execution. B. Fraud in the inducement. C. Physical coercion. D. Contracting with a person under a guardianship.

B. Fraud in the inducement. Answer (B) is correct. Fraud in the inducement occurs even when the defrauded party is aware of entering into a contract and intends to do so. However, (s)he is deceived about a fact material to the contract (e.g., the nature of the goods or services). Thus, the contract is voidable.

Which of the following represents the basic distinction between a bilateral contract and a unilateral contract? A. Specific performance is available if the contract is unilateral but not if it is bilateral. B. Only one promise is involved if the contract is unilateral, but two are involved if it is bilateral. C. The statute of frauds applies to a bilateral contract but not to a unilateral contract. D. Rights under a bilateral contract are assignable, whereas rights under a unilateral contract are not assignable.

B. Only one promise is involved if the contract is unilateral, but two are involved if it is bilateral.

Mildred saw a vase in a store. A tag on the vase said, "Genuine Crystal, $125." Mildred said to the owner of the shop, "I'll buy this vase for $125." Milford, the owner of the shop, refused to sell the vase. In a lawsuit brought by Mildred against Milford, A.Mildred will win because a contract was formed when she said she would buy the vase. B.Mildred will win because the vase was a unique chattel. C.Milford will win because he rejected Mildred's offer. D.Milford will win because the contract was not written.

C.Milford will win because he rejected Mildred's offer.

A _____________________ is based on either a lack of knowledge of the law or an incorrect interpretation of the law.

mistake of law

Objective

not based on emotion

Adele borrowed $1,000 from Beatrice and signed a promissory note due on January 1. On December 1, Beatrice agreed to accept immediate payment of $800 in full satisfaction of the debt. In January, Beatrice sought to receive the $200 unpaid balance. What will be the result? A. Adele will win because she provided consideration for Beatrice's new promise. B. Adele will win because the debt was unliquidated. C. Beatrice will win because of the pre-existing contractual obligation rule. D. Beatrice will win because the debt was liquidated.

A. Adele will win because she provided consideration for Beatrice's new promise. The debt was liquidated (undisputed in amount). Because a debtor has a pre-existing contractual obligation to pay the full amount, a creditor's promise to accept partial payment in full satisfaction is unenforceable for lack of consideration unless the debtor furnishes new or different consideration, such as payment before the due date. Beatrice had no right to early payment, so she received a new legal benefit. Adele had no obligation to make early payment, so she incurred a new legal detriment. Adele therefore can enforce Beatrice's promise to accept a lesser amount in full satisfaction of the debt.

When a client accepts the services of an accountant without an agreement concerning payment, the result is A. An implied-in-fact contract. B. An implied-in-law contract. C. An express contract. D. No contract.

A. An implied-in-fact contract. A client's acceptance of the services of an accountant implies an agreement to pay for them. Because the facts indicate a contract was formed, it is an implied-in-fact contract.

Egan, a minor, purchased Baker's used computer for Egan's personal use. Egan paid $200 down on delivery and was to pay $200 thirty days later. Twenty days later, the computer was damaged seriously as a result of Egan's negligence. Five days after the damage occurred and 1 day after Egan reached the age of majority, Egan attempted to disaffirm the contract with Baker. Egan will A. Be able to disaffirm even though Egan was not a minor at the time of disaffirmance. B. Be able to disaffirm only if Egan does so in writing. C. Not be able to disaffirm because Egan had failed to pay the balance of the purchase price. D. Not be able to disaffirm because the computer was damaged as a result of Egan's negligence.

A. Be able to disaffirm even though Egan was not a minor at the time of disaffirmance. Most contracts entered into by a minor may be disaffirmed if (s)he acts during minority or a short time thereafter. Tender of goods is usually required. However, a minor may disaffirm even though (s)he cannot return the property or can return it only in damaged condition.

Blume owns three motorcycles: a 1996 Kawasaki, a 1999 Honda, and a 1995 Honda. Rich is interested in purchasing a motorcycle. If Blume makes a written offer to sell and Rich accepts, in which case is the agreement enforceable? A. Blume, meaning to offer the 1995 Honda, inadvertently wrote Kawasaki instead. Rich accepted in good faith. B. Blume, meaning the 1995 model, offered to sell the Honda. Rich, meaning the 1999 model, accepted in good faith. C. Blume, meaning to offer the Kawasaki, inadvertently wrote Honda instead. Rich, realizing from the price offered that an error had been made, accepted in hopes of getting a bargain. D. Blume, meaning the 1995 Honda, offered to sell "the motorcycle." Rich, knowing only that Blume owned a 1996 Kawasaki, accepted in good faith.

A. Blume, meaning to offer the 1995 Honda, inadvertently wrote Kawasaki instead. Rich accepted in good faith. If Blume offered to sell the Kawasaki and neither the price nor anything else in the transaction alerted Rich to the error, the acceptance was binding despite the unilateral mistake in the description of the subject matter.

Dye sent Hill a written offer to sell a tract of land for $60,000. They were engaged in a separate dispute. The offer stated that it would be irrevocable for 60 days if Hill would promise to refrain from suing Dye during this time. Hill promptly delivered a promise not to sue during the term of the offer. Dye subsequently decided that the possible suit by Hill was groundless. Dye then phoned Hill and revoked the offer. Hill mailed an acceptance. Dye did not reply. Under the circumstances, A. Dye's offer was supported by consideration and was not revocable when accepted. B. Dye's written offer would be irrevocable even without consideration. C. Dye's silence was an acceptance of Hill's promise. D. Dye's revocation, not being in writing, was invalid.

A. Dye's offer was supported by consideration and was not revocable when accepted. Hill's promise not to sue during the term of the offer formed an option contract. That is, Hill's promise to forgo a legal right was consideration for Dye's promise not to revoke the offer for 60 days. Consequently, Dye's attempted revocation was ineffective, and Hill's acceptance within the 60-day period resulted in a contract.

Gudrun owned a 2,000-acre country estate. She signed a written agreement with Johann, selling the house on the property and "a sufficient amount of land surrounding the house to create a park." The price was stated to be $200,000. When Gudrun refused to honor the agreement, Johann sued. Who will prevail and why? A. Gudrun will win because the agreement is not reasonably definite. B. Johann will win because the quantity of land is implied. C. Johann will win because the parties intended to make a contract. D. Gudrun will win because no financing term was included in the agreement.

A. Gudrun will win because the agreement is not reasonably definite. The writing is not reasonably clear as to what amount of land Gudrun agreed to sell.

Which of the following requires consideration to be binding on the parties? A. Material modification of a contract involving the sale of real estate. B. Ratification of a contract by a person after reaching the age of majority. C. A written promise signed by a merchant to keep an offer to sell goods open for 10 days. D. Material modification of a sale of goods contract under the UCC.

A. Material modification of a contract involving the sale of real estate. Common law requires that a material modification to a contract be supported by new bargained-for consideration.

Gala leases her B-25 to pilots for recreational flying. One Saturday morning, Hanna called and offered to rent the B-25 for the day. Gala agreed. Unknown to her, Hanna had been hired by Lana to use the aircraft to fly at an extremely low altitude over a crowded stadium that afternoon. The flight would violate state and federal law. Who may enforce the agreement? A. Only Gala. B. Only Hanna. C. Only Lana. D. None of the answers are correct.

A. Only Gala. When one party to an agreement has no knowledge that what (s)he is to supply is intended for an illegal use, (s)he may enforce the agreement. The party intending the illegal use may not. The latter restriction is based on the argument that the bargain would facilitate accomplishment of an illegal objective. Rental of an aircraft, for example, is in itself lawful. In the circumstances, however, it would facilitate achievement of an illegal objective.

Carson Corp., a retail chain, asked Alto Construction to fix a broken window at one of Carson's stores. Alto offered to make the repairs within 3 days at a price to be agreed on after the work was completed. A contract based on Alto's offer would fail because of indefiniteness as to the A. Price involved. B. Nature of the subject matter. C. Parties to the contract. D. Time for performance.

A. Price involved. No basis for objectively computing the price was agreed to by the parties.

Quick Corp. mailed a letter to Blue Co. on May 1, offering a 3-year franchise dealership. The offer stated the terms in detail and, at the bottom, stated that the offer would not be withdrawn prior to June 5. Which of the following is true? A. The offer cannot be assigned to another party by Blue. B. A letter of acceptance sent on June 5 and received by Quick on June 6 does not form a valid contract. C. The offer is an irrevocable option that cannot be withdrawn prior to June 5. D. The statute of frauds does not apply to the proposed contract.

A. The offer cannot be assigned to another party by Blue.

Which of the following does not require consideration to be effective and binding? A. Waiver of a breach. B. Mutual rescission. C. Modification of a contract. D. Composition with creditors.

A. Waiver of a breach. Most contractual actions require consideration because they involve either the formation or the modification of a contract. Waiver of remedies prior to breach is a modification of a contract and needs consideration unless the agreement is within the UCC. However, once a breach has been committed, remedies may be waived without any consideration.

Bill Cratchett leased an apartment from Grendel. Cratchett was a person of limited means in a locality where low-income housing was scarce. Shortly after signing the agreement, he fell in an unlit stairwell when a step unexpectedly gave way. In a suit for damages, Grendel relied on a clause in the lease stating, "Tenant agrees to hold Owner harmless from any claims for damages no matter how caused." Cratchett should A. Win because the exculpatory clause (relieves the responsible party from liability) was unenforceable as a violation of public policy. B. Win because the lease was a contract of adhesion. C. Lose because nothing indicates that the lease was unconscionable as a whole. D. Lose because exculpatory clauses are usually upheld in the interest of freedom of contract.

A. Win because the exculpatory clause (relieves the responsible party from liability) was unenforceable as a violation of public policy. A bargain may fail to meet the legality requirement for enforceability if it is a violation of public policy even though no crime, tort, or violation of a statute is contemplated.

Which of the following will be legally binding despite lack of consideration? A. An employer's promise to make a cash payment to a deceased employee's family in recognition of the employee's many years of service. B. A promise to donate money to a charity on which the charity relied in incurring large expenditures. C. A modification of a signed contract to purchase a parcel of land. D. A merchant's oral promise to keep an offer open for 60 days.

B. A promise to donate money to a charity on which the charity relied in incurring large expenditures. A requirement for enforceability of an agreement is legally sufficient consideration, or a substitute for it.

Which promise is enforceable in most states? A. A creditor's promise to accept a lesser sum than due. B. A written promise to pay a debt barred by the statute of limitations. C. A promise to perform an illegal act. D. A promise to pay a debt after the discharge of the debt in bankruptcy was granted.

B. A written promise to pay a debt barred by the statute of limitations. Answer (B) is correct. A new promise to pay a debt barred by the statute of limitations requires no consideration to be enforceable because it is only the waiver of a defense. Some courts, however, take the view that consideration is supplied by the old debt. Nevertheless, most states require the new promise to be in writing.

Jackson paid Brady $100 for a 90-day option to purchase Brady's 160-acre farm for $32,000. The option agreement was in writing and signed by both parties. The agreement referred only to the option, its period, a legal description of the farm, and the purchase price. Jackson wrote Brady 30 days later: "I hereby exercise my option to purchase your farm for $32,000 subject to closing details to be worked out by you and my attorney." Jackson's letter A. Rejects Brady's offer and terminates the option agreement. B. Accepts Brady's offer, leaving customary details to be worked out during formalization of the contract. C. Accepts Brady's offer, leaving a matter to be negotiated during formalization of the contract. D. Does not affect the option agreement.

B. Accepts Brady's offer, leaving customary details to be worked out during formalization of the contract. Jackson's letter exercising the option effectively accepts the offer. The letter does not state additional or different terms from those contemplated by the offer, so it is not a counteroffer. The details of closing can be left to be worked out later without affecting the validity of the contract.

Bea Barnes held an annual auction at her farm to sell tools, animals, and leftover crops. Ana Adam bid $50 for a plow, and no one bid against her. The auctioneer did not accept Adam's bid and stated that the plow would not be sold for such a low price. What is the legal effect of the bid and its rejection? A.Adam's bid constituted an acceptance, which formed a valid contract. B.Adam's bid was only an offer. C.The plow could not be withdrawn from the auction. D.Two bids must be made before an auction is deemed to be without reserve.

B. Adam's bid was only an offer, so no contract was formed.

Card communicated an offer to sell Card's stereo to Bend for $250. Which of the following statements is correct regarding the effect of the communication of the offer? A. Bend should immediately accept or reject the offer to avoid liability to Card. B. Card is not obligated to sell the stereo to Bend until Bend accepts the offer. C. Card is required to mitigate any loss Card would sustain in the event Bend rejects the offer. D. Bend may not reject the offer for a reasonable period of time.

B. Card is not obligated to sell the stereo to Bend until Bend accepts the offer. Because Bend has not yet accepted the offer, a contract has not been formed, and Card is not obligated to sell the stereo to Bend until Bend accepts the offer.

The Acme Corporation is having a "Happy Holiday Giveaway." To win, a person must guess the number of marbles in a large jar. No purchase is necessary. This contest is probably not illegal because what element is lacking? A. A prize. B. Consideration. C. Chance. D. The illegality of the lottery in most states.

B. Consideration. Answer (B) is correct. To be illegal, this promotion would need to have the three characteristics of a wager: a prize, consideration, and determination of the outcome by chance. If all three are present, the contest is illegal and the contract is unenforceable. Because the participants in the promotion were not required to give up anything of value to participate, the element of consideration is lacking.

To prevail in an action for fraud in the inducement, a plaintiff must prove that the A. Defendant was an expert with regard to the misrepresentations. B. Defendant made the misrepresentations with knowledge of their falsity and with an intention to deceive. C. Misrepresentations were in writing. D. Plaintiff was in a fiduciary relationship with the defendant.

B. Defendant made the misrepresentations with knowledge of their falsity and with an intention to deceive. Elements of fraud are a false representation of a material fact, scienter (knowledge of the falsehood or reckless disregard for its truth), intent to deceive, and reliance on the false representation that is both justifiable and detrimental. Fraud in the inducement occurs when the underlying consideration is misrepresented, i.e., the nature or quality of the goods or services. Such an agreement is voidable.

In which of the following instances may silence by the offeree constitute acceptance? A. The offeror stated that silence would constitute an acceptance, and the offeree intended to reject the offer but forgot. B. During the course of prior business dealing, the offeree has always sent a rejection if the items were not wanted. The offeror always shipped the items if such a rejection was not received. C. An offeree receives unordered goods in the mail along with a letter from the sender stating that the offeree must return them if they are not wanted. D. The offeree tells the offeror that (s)he will accept or reject on the next morning. (S)he intends to reject but fails to respond to the offeror.

B. During the course of prior business dealing, the offeree has always sent a rejection if the items were not wanted. The offeror always shipped the items if such a rejection was not received.

On February 12, Harris sent Fresno a written offer to purchase Fresno's land. The offer included the following provision: "Acceptance of this offer must be by registered or certified mail, received by Harris no later than February 18 by 5:00 p.m. CST." On February 18, Fresno sent Harris a letter accepting the offer by private overnight delivery service. Harris received the letter on February 19. Which of the following statements is true? A. A contract was formed on February 19. B. Fresno's letter constituted a counteroffer. C. Fresno's use of the overnight delivery service was an effective form of acceptance. D. A contract was formed on February 18 regardless of when Harris actually received Fresno's letter.

B. Fresno's letter constituted a counteroffer. The offeror is the master of the offer. To the extent (s)he expressly limits what constitutes effective acceptance, it is limited under both common law and the UCC. Thus, Fresno's failure to respond in a timely manner by the stipulated method nullified the attempted acceptance. The letter therefore constituted a counteroffer.

Payne entered into a written agreement to sell a parcel of land to Stevens. At the time the agreement was executed, Payne had consumed alcoholic beverages. Payne's ability to understand the nature and terms of the contract was not impaired. Stevens did not believe that Payne was intoxicated. The contract is A. Void as a matter of law. B. Legally binding on both parties. C. Voidable at Payne's option. D. Voidable at Steven's option.

B. Legally binding on both parties. Answer (B) is correct. A contract entered into by an intoxicated person is not void. It is voidable by that person only if his or her reason and judgment were impaired to the extent that (s)he did not understand the legal consequences of his or her actions. If so, (s)he may disaffirm the contract even if the intoxication was voluntary and unknown to the other party.

In determining whether the consideration requirement to form a contract has been satisfied, the consideration exchanged by the parties to the contract must be A. Of approximately equal value. B. Legally sufficient. C. Exchanged simultaneously by the parties. D. Fair and reasonable under the circumstances.

B. Legally sufficient. Consideration must be legally sufficient and intended as a bargained-for exchange. A promisee has provided legally sufficient consideration if (s)he incurs a legal detriment or if the promisor receives a legal benefit.

The president of Deal Corp. wrote to Boyd, offering to sell the Deal factory for $300,000. The offer was sent by Deal on June 5 and was received by Boyd on June 9. The offer stated that it would remain open until December 20. The offer A. Constitutes an enforceable option. B. May be revoked by Deal any time prior to Boyd's acceptance. C. Is a firm offer under the UCC but will be irrevocable for only 3 months. D. Is a firm offer under the UCC because it is in writing.

B. May be revoked by Deal any time prior to Boyd's acceptance The statement that the offer would be held open was not binding because it was not supported by consideration.

Carol dictated an offer she intended to make to Deanna. Irvin, her secretary, drafted an email based on Carol's dictation. During lunch and before the offer had been sent, Irvin saw Deanna and told her about it. Deanna promptly sent an acceptance to Carol. What was the effect of this attempted acceptance? A. No contract was formed because the offer was not communicated to the offeree. B. No contract was formed because the offer was not communicated to the offeree by the means chosen by the offeror. C. A contract was formed because Irvin was Carol's agent. D. A contract was formed because Carol intended to make an offer and Deanna learned of the offer in time to make a valid acceptance.

B. No contract was formed because the offer was not communicated to the offeree by the means chosen by the offeror. Carol evidently intended to communicate the offer by email. When the offeree learned of the offer in an unauthorized manner, she could only make an offer, not a valid acceptance.

Phil Fairbanks was approached by Nickle Corporation to write the history of Nickle for $15,000. The president of Nickle told Fairbanks the job was his if he would agree to cleverly defame Nickle's leading competitor, Mogul Corporation, using sly innuendo and clever distortion of the facts. Fairbanks wrote the history. It turned out that the Mogul passages were neither sly nor clever, although they were defamatory, and Mogul obtained a judgment against Nickle. Fairbanks is seeking to collect the final $5,000 installment of the contract. Nickle refuses to pay and seeks to recover the $10,000 it has paid. In the event of a lawsuit, A. Fairbanks will recover $5,000. B. The court will deny relief to either Fairbanks or Nickle. C. Nickle will recover $10,000. D. Fairbanks will recover in quantum meruit for the value of his services.

B. The court will deny relief to either Fairbanks or Nickle. A promise to commit a tort or to induce a tort is unenforceable on public policy grounds. The general principle is that neither party to an illegal bargain can use the judicial process to compel performance, obtain damages, or recover performance or its value.

In deciding whether consideration necessary to form a contract exists, a court must determine whether A. The consideration given by each party is of roughly equal value. B. There is mutuality of consideration. C. The consideration has sufficient monetary value. D. The consideration conforms to the subjective intent of the parties.

B. There is mutuality of consideration. An essential aspect of consideration is that it be bargained for, and given in exchange for, the consideration provided by the other party. That is, consideration is mutual.

Tim Carlton was swimming at the beach when he happened to see Fay Hudson struggling in the water. Carlton saved Hudson's life. Hudson was so grateful that she promised Carlton a job for the rest of his life. Carlton went to work for Hudson, but a few months later Hudson found that she did not get along with Carlton and demanded Carlton's resignation. The contract is A. Unenforceable because it was not definite enough. B. Unenforceable because Carlton did not give consideration. C. Enforceable because Hudson gave consideration in the form of job security. D. Enforceable because there was mutuality of assent.

B. Unenforceable because Carlton did not give consideration. A contract for life employment is ordinarily terminable at the option of the employee. But the employer can be bound not to terminate the contract without good cause if the employee has given consideration. Saving Hudson was "past consideration." Past consideration, that is, an act performed before the making of the agreement, does not satisfy the consideration requirement for the formation of a contract.

Certain contracts have absolutely no effect and are not recognized under law. If two or more parties enter into such an agreement, it is A. Valid. B. Void. C. Voidable. D. Unenforceable.

B. Void.

Gus Parker owned a race horse that had not made a good showing in the last 10 races. Disgusted with the horse, Parker stated that he would sell the horse for $25. Sam Hood immediately said that he would accept the horse for $25. Parker agreed to accept $25 after the afternoon's race in which Parker was obligated to participate. The horse won the race, and Parker decided that he did not really want to sell the horse. Which of the following is true? A. The contract is unenforceable because the consideration is not adequate. B. The courts will review whether the consideration is good consideration. C. $25 constitutes sufficient consideration. D. The sufficiency of the consideration depends on whether Parker was serious

C. $25 constitutes sufficient consideration. Courts will usually not review the value or the adequacy of consideration. The $25 is adequate consideration if that is the amount bargained for, whether or not it is a fair value. The sufficiency or adequacy of consideration does not depend on the seriousness of the offer. Whether the offer was in jest would bear on whether a meeting of the minds had occurred.

Spring agreed to buy Summer's car. Because the actual purchase was not to occur for several months, they drafted a lengthy agreement that specified all of the rights and obligations of each of the parties. They hired an attorney to review this two-page, single-spaced document. After the attorney suggested a few changes, the document was retyped and signed. The contract is A. A formal contract. B. An executed contract. C. A simple contract. D. An implied contract.

C. A simple contract.

Green was adjudicated incompetent by a court having proper jurisdiction. Which of the following statements is true regarding contracts subsequently entered into by Green? A. All contracts are voidable. B. All contracts are valid. C. All contracts are void D. All contracts are enforceable.

C. All contracts are void An incompetent person is one whose mental capacity is such that (s)he is unable to understand the nature and consequences of his or her acts. If a person is adjudicated insane or otherwise incompetent before a contract is entered into, the contract is void and cannot be ratified (even after the person is later adjudged competent).

For an offer to confer the power to form a contract by acceptance, it must have all of the following elements except A. Communication to the offeree in a communication made or authorized by the offeror. B. Be sufficiently definite and certain. C. Be communicated by words to the offeree by the offeror. D. Manifestation of an intent to enter into a contract.

C. Be communicated by words to the offeree by the offeror.

Nix sent Castor a letter offering to employ Castor as controller of Nix's automobile dealership. Castor received the letter on February 19. The letter provided that Castor would have until February 23 to consider the offer and, in the meantime, Nix would not withdraw it. On February 20, Nix, after reconsidering the offer to Castor, decided to offer the job to Vick, who accepted immediately. That same day, Nix called Castor and revoked the offer. Castor told Nix that an acceptance of Nix's offer was mailed on February 19. Under the circumstances, A. Nix's offer was irrevocable until February 23. B. No contract was formed between Nix and Castor because Nix revoked the offer before Nix received Castor's acceptance. C. Castor's acceptance was effective when mailed. D. Any revocation of the offer would have to be in writing because Nix's offer was in writing.

C. Castor's acceptance was effective when mailed. An acceptance is effective when dispatched by the same mode used to transmit the offer, unless the offer stipulated otherwise. Revocation of an offer received after effective acceptance does not cancel the contract formed on acceptance.

Which of the following types of conduct renders a contract void? A. Mutual mistake as to facts forming the basis of the contract. B. Undue influence by a dominant party in a confidential relationship. C. Duress through physical compulsion. D. Duress through improper threats.

C. Duress through physical compulsion. Duress occurs when one party, by means of threats or actions, instills fear or apprehension in the other party so as to deny that party's exercise of free will. Duress through improper threats renders the contract voidable, not void. Duress through physical compulsion that includes threats of physical violence renders a contract void, not just voidable.

Fact Pattern: On April 2, Jet Co. wrote to Ard, offering to buy Ard's building for $350,000. The offer contained all of the essential terms to form a binding contract and was duly signed by Jet's president. It further provided that the offer would remain open until May 30 and an acceptance would not be effective until received by Jet. On April 10, Ard accepted Jet's offer by mail. The acceptance was received by Jet on April 14. For this item only, assume that on April 11 Jet sent a letter to Ard revoking its offer and that Ard received the letter on April 12. Under the circumstances, A. A contract was formed on April 10. B. A contract was formed on April 14. C. Jet's revocation effectively terminated its offer on April 12. D. Jet's revocation effectively terminated its offer on April 11. For this item only, assume that on April 13 Ard sent a letter to Jet withdrawing the acceptance and rejecting Jet's offer and that Jet received the letter on April 15. Under the circumstances, A. A contract was formed on April 14. B. A contract was formed on April 10. C. Ard's rejection effectively terminated Jet's offer on April 13. D. Ard's rejection effectively terminated Jet's offer on April 15.

C. Jet's revocation effectively terminated its offer on April 12. The offer expressly stated that an acceptance would be effective only upon receipt. The acceptance was received on April 14. However, Jet's revocation was effective when received by the offeree on April 12. Thus, the offer had been terminated before the acceptance could have formed a contract. A. A contract was formed on April 14. The offer stipulated that acceptance would be effective only upon receipt, an event that occurred on April 14. A rejection is effective only upon receipt. But, because the acceptance formed a contract on April 14, the receipt of the rejection on April 15 had no effect.

Which of the following types of mistakes ordinarily will not allow a contract to be rescinded? A. Mutual mistake of fact. B. Unilateral mistake of fact known to the other party. C. Mistake of law. D. Mistake as to the existence of the object of the contract.

C. Mistake of law. Ordinarily, a contract may not be rescinded on such a basis because everyone is deemed to know the law.

On November 1, Yost sent a telegram to Zen offering to sell a rare vase. The offer required that Zen's acceptance telegram be sent on or before 5:00 p.m. on November 2. On November 2, at 3:00 p.m., Zen sent an acceptance by overnight mail. It did not reach Yost until November 5. Yost refused to complete the sale to Zen. Is there an enforceable contract? A. Yes, because the acceptance was made within the time specified. B. Yes, because the acceptance was effective when sent. C. No, because Zen did not accept by telegram. D. No, because the offer required receipt of the acceptance within the time specified

C. No, because Zen did not accept by telegram. Unless otherwise indicated, an offer involving a sale of goods invites acceptance in any manner and by any medium reasonable in the circumstances. However, the offer required acceptance to be by a stated mode. The purported acceptance by a different mode was therefore not effective.

Joe Minorca purchased a motorcycle from Big Rig Company on May 1. Joe's birthday is June 17, at which time he will have attained his majority. Which of the following actions is ineffective as a ratification of the contract of purchase? A. On June 21, Joe gave the property to his sister. B. On June 20, Joe made an oral promise to honor the contract. C. On June 16, Joe remitted an installment payment. D. As of November 17, Joe was still using the vehicle.

C. On June 16, Joe remitted an installment payment. Upon attainment of the age of majority, however, the minor can ratify the contract. After ratification, (s)he will be bound from the inception of the contract. An attempt to ratify while still a minor is not effective. One who lacks contractual capacity clearly lacks the capacity to ratify. Performance of the contract by making installment payments may be a ratification but only if done after the minor comes of age.

Denise Smolen hired David Vause to construct an exercise center in her home. After completing the job, Vause sent her a bill for $3,000. Based on the cost of similar work done for several of her neighbors, Smolen stated that $2,000 was a fair price. Vause said that the market rate for quality work was $3,000 but that he would accept $2,500. Smolen agreed and remitted a $2,500 check in full payment of the debt. The parties have A. Compromised a liquidated debt. B. Concluded a composition with a creditor. C. Reached an accord and satisfaction. D. Reached an accord without satisfaction.

C. Reached an accord and satisfaction. The parties had an honest dispute as to the amount of the debt. The agreement to compromise was an accord. The payment of the agreed amount was a satisfaction. The accord and satisfaction is enforceable because of mutuality of consideration: Vause's acceptance of a lesser amount is consideration for Smolen's payment of a greater amount and vice versa.

Adhesion contracts are sometimes held to be unconscionable, but their use is often justified. An adhesion contract is most appropriate if a seller A. Has few transactions. B. Drafts a standard contract containing extremely favorable terms and refuses to negotiate with buyers who wish to alter its terms. C. Realizes efficiencies that reduce transaction costs. D. Has substantially greater bargaining power than the buyer.

C. Realizes efficiencies that reduce transaction costs. Answer (C) is correct. Many businesses could function only on a small scale if all adhesion contracts were prohibited. Their use permits large businesses to avoid the costs associated with negotiating the terms of individual transactions. Consequently, the transaction costs of inexpensive goods and services are reduced.

An agreement is an essential element of a contract. Ordinarily, the required mutual assent is achieved by means of an offer and an acceptance. Acceptance A. Requires a subjective intent to accept. B. Is never accomplished by silence. C. Requires an indication of an intent to accept. D. May ordinarily be made by anyone with knowledge of the offer.

C. Requires an indication of an intent to accept.

Steele, Inc., wanted to purchase Kalp's distribution business. On March 15, Year 2, Kalp provided Steele with copies of audited financial statements for the period ended December 31, Year 1. The financial statements reflected inventory in the amount of $1.2 million. On March 29, Year 2, Kalp discovered that the December 31 inventory was overstated by at least $400,000. On April 3, Year 2, Steele, relying on the financial statements, purchased all of Kalp's business. On April 29, Year 2, Steele discovered the inventory overstatement. Steele sued Kalp for fraud. Which of the following statements is true? A. Steele will lose because it should not have relied on the inventory valuation in the financial statements. B. Steele will lose because Kalp was unaware that the inventory valuation was incorrect at the time the financial statements were provided to Steele. C. Steele will prevail because Kalp had a duty to disclose that the inventory value was overstated. D. Steele will prevail but will not be able to sue for damages.

C. Steele will prevail because Kalp had a duty to disclose that the inventory value was overstated. Kalp had an affirmative duty to disclose the overstated inventory to Steele.

To prevail in an action for innocent misrepresentation, the plaintiff must prove A. The defendant made the false statements with a reckless disregard for the truth. B. The misrepresentations were in writing. C. The misrepresentations concerned material facts. D. Reliance on the misrepresentations was the only factor inducing the plaintiff to enter into the contract.

C. The misrepresentations concerned material facts. Answer (C) is correct. Innocent misrepresentation is a false statement of a material fact (part of the basis of the bargain) intended to induce reliance. Moreover, the defendant must have reasonably but detrimentally relied on the misrepresentation.

The mailbox rule ordinarily makes acceptance of an offer effective at the time the acceptance is dispatched. The mailbox rule does not apply if A. Both the offeror and offeree are merchants. B. The offer proposes a sale of real estate. C. The offer provides that an acceptance shall not be effective until actually received. D. The duration of the offer is not in excess of 3 months.

C. The offer provides that an acceptance shall not be effective until actually received. Acceptance is effective upon dispatch by the same mode used to transmit the offer. The UCC provides that acceptance may be by any means reasonable under the circumstances and is effective upon dispatch. But an offeror may stipulate the moment when acceptance will be effective.

If a person is induced to enter into a contract by another person because of the close relationship between the parties, the contract may be voidable under which of the following defenses? A. Fraud in the inducement. B. Unconscionability. C. Undue influence. D. Duress.

C. Undue influence. A valid contract requires mutual assent, that is, a true or genuine meeting of the minds of the contracting parties. No serious misconduct must have occurred, and no party must have taken unfair advantage of another, during the formation of the contract. A valid contract is an exercise of free will of the parties and not the result of threats, other forms of coercion, wrongful persuasion, innocent misrepresentation, mistake, or fraud. Thus, a fiduciary or other close personal relationship between the contracting parties may give rise to a claim of undue influence. When one party dominates the other party so as to deprive him or her of free will, the contract is voidable as a result of undue influence, the essence of which is wrongful persuasion rather than coercion.

Able Sofa, Inc., sent Noll a letter offering to sell Noll a custom-made sofa for $5,000. Noll immediately sent a letter to Able purporting to accept the offer. However, the post office erroneously delivered the letter to Abel Soda, Inc. Three days later, Able mailed a letter of revocation to Noll that was received by Noll. Able refused to sell Noll the sofa. Noll sued Able for breach of contract. Able A. Would have been liable under the deposited acceptance rule only if Noll had accepted by mail. B. Will avoid liability because it revoked its offer prior to receiving Noll's acceptance. C. Will be liable for breach of contract. D. Will avoid liability because of the telegraph company's error.

C. Will be liable for breach of contract. Assuming the offer did not specify a means of acceptance, the contract was formed when Noll sent the acceptance by letter. If the contract is for the sale of goods (a sofa), acceptance may be by any means reasonable under the circumstances and will be effective upon dispatch. A properly dispatched acceptance is effective upon dispatch, and the risk of its loss or delay is on the offeror. Thus, the negligence of the post office does not excuse the offeror's failure to perform.

The following conversation took place between Mary and Ed. Mary: "Ed, if you wanted to sell your table, what would you ask for it?" Ed: "I suppose $400 would be a fair price." Mary: "I'll take it, if you will have it refinished." Ed: "Sold." Thus, A. Ed's statement, "I suppose $400 would be a fair price," constituted an offer. B. Mary's reply, "I'll take it, if you will have it refinished," was a conditional acceptance, terminating Ed's offer. C. No contract resulted because Ed never stated he would actually sell the table for $400. D. A contract was formed when Ed said, "Sold."

D. A contract was formed when Ed said, "Sold." Mary's first question was merely a request for information. It contained no promissory language and evidenced no intention to be bound, so it could not have been construed as an offer. Ed's first reply was at best a negotiatory statement and likewise contained no language construable as an offer. Mary's second statement effectively contained a promise to pay $400 for the table if Ed had it refinished. Mary thereby manifested an intention to be bound if Ed made a return promise or performed a certain act. Ed's response of "sold" was an acceptance and formed a contract.

In which of the following situations does the first promise serve as valid consideration for the second promise? A. A police officer's promise to catch a thief for a victim's promise to pay a reward. B. A builder's promise to complete a contract for a purchaser's promise to extend the time for completion. C. A debtor's promise to pay $500 for a creditor's promise to forgive the balance of a $600 liquidated debt. D. A debtor's promise to pay $500 for a creditor's promise to forgive the balance of a $600 disputed debt.

D. A debtor's promise to pay $500 for a creditor's promise to forgive the balance of a $600 disputed debt. The debtor's promise to pay part of a disputed liability incorporates legally sufficient consideration: the legal detriment of forgoing the dispute.

Which of the following is not a required element of a contract? A. Legality. B. Consideration. C. Legal capacity. D. A writing.

D. A writing. A writing is not required to enter into a contract. A writing is not required to enter into a contract. However, some contracts are not enforceable unless a writing evidences the contract.

Culler Construction Company agreed with the City of Orange Key to build a road. The project was to begin on December 1. One week after work began, a hurricane struck the site, washing away so much land that the construction would be twice as expensive. As a result, Culler refused to continue the job unless Orange Key paid a large sum in addition to the initial contract price. A promise by Orange Key to pay more than the original price is A. Unenforceable because Orange Key received no additional legal benefit. B. Unenforceable because Culler incurred no additional legal detriment. C. Unenforceable because of the pre-existing contractual obligation. D. Enforceable because Culler encountered unforeseeable difficulties.

D. Enforceable because Culler encountered unforeseeable difficulties. If Culler had simply made a bad bargain or had met foreseeable difficulties, such as labor problems, equipment malfunctions, or materials price increases, Orange Key's additional promise would have been unenforceable for lack of consideration. Culler was already contractually obligated to perform the promised act. Unforeseen difficulties, however, are an exception to this principle. Because Culler could not reasonably have anticipated a hurricane in December, the promise to pay additional compensation would probably be enforceable.

Ann Mayer wrote Tom Jackson and offered to sell Jackson a building for $200,000. The offer stated it would expire 30 days from July 1. Mayer changed her mind and does not wish to be bound by the offer. If a legal dispute arises between the parties regarding whether there has been a valid acceptance of the offer, which of the following is true? A. The offer cannot be legally withdrawn for the stated period of time. B. The offer will not expire prior to the 30 days even if Mayer sells the property to a third person and notifies Jackson. C. If Jackson phoned Mayer on August 1 and unequivocally accepted the offer, a contract would be formed, provided Jackson had no notice of withdrawal of the offer. D. If Jackson categorically rejects the offer on July 10, Jackson cannot validly accept within the remaining stated period of time.

D. If Jackson categorically rejects the offer on July 10, Jackson cannot validly accept within the remaining stated period of time.

Parr is the vice president of research of Lynx, Inc. When hired, Parr signed an employment contract prohibiting Parr from competing with Lynx during and after employment. While employed, Parr acquired knowledge of many of Lynx's trade secrets. If Parr wishes to compete with Lynx and Lynx refuses to give Parr permission, which of the following statements is true? A. Parr has the right to compete with Lynx upon resigning from Lynx. B. Parr has the right to compete with Lynx only if fired from Lynx. C. In determining whether Parr may compete with Lynx, the court should not consider Parr's ability to obtain other employment. D. In determining whether Parr may compete with Lynx, the court should consider, among other factors, whether the agreement is necessary to protect Lynx's legitimate business interests.

D. In determining whether Parr may compete with Lynx, the court should consider, among other factors, whether the agreement is necessary to protect Lynx's legitimate business interests.

Lydia promised to pay Lavinia $10,000 if she stopped smoking for 1 year. Lavinia stopped and brought suit when Lydia failed to pay. Who will win? A. Lydia will win because she received no actual benefit. B. Lydia will win because Lavinia incurred no actual detriment. C. Lydia will win because Lavinia incurred no legal detriment. D. Lavinia will win because Lydia received a legal benefit.

D. Lavinia will win because Lydia received a legal benefit. A unilateral contract was formed when the promisee stopped performing an act that she had a legal right to perform, i.e., smoking for 1 year. The promise to pay is enforceable because it was supported by consideration that was a legal detriment to the promisee (not smoking). The consideration was also a legal benefit to the promisor because she obtained a forbearance to which she had no previous legal right.

Tom Payne had a toothache, so he visited Dennis Dentist, DDS, during his lunch hour. Although the visit was Payne's first, Dentist accepted him as a patient without discussion of the cost of dental services. Dentist extracted a tooth and sent Payne a bill for $600. Payne was outraged and asserted that a contract was never formed. Payne was A. Not liable because he never made an offer for Dentist to accept. B. Not liable because he never accepted any offer. C. Liable for the $600 because he accepted Dentist's services. D. Liable only for a reasonable amount.

D. Liable only for a reasonable amount. A person who accepts the services of another known to be in the business of providing services for a fee is liable for the reasonable value of the services. This contract is implied. The intent of the parties is inferred from the circumstances. The reasonable value is measured by what others in the locality charge, i.e., the market price.

Sam Student was hit by a car while he was crossing the street and was knocked unconscious. Fast Ambulance Service and Towing (FAST) took him to the hospital while he was still unconscious. What is Sam's liability for FAST's fee? A. Not liable because no contract was formed. B. Liable under an implied-in-fact contract theory. C. Liable under the UCC. D. Liable under quasi-contract (implied-in-law contract) theory.

D. Liable under quasi-contract (implied-in-law contract) theory. FAST should recover the reasonable value of its services (not the potential contract price) under the theory of quasi-contract.

On January 1, Lemon wrote Gina Martin offering to sell Martin a ranch for $80,000 cash. Lemon's letter indicated that the offer would remain open until February 15 if Martin mailed $100 by January 10. On January 5, Martin mailed $100 to Lemon. On January 30, Martin telephoned Lemon stating that she would be willing to pay $60,000 for the ranch. Lemon refused to sell at that price and immediately placed the ranch on the open market. On February 6, Martin mailed Lemon a letter accepting the original offer to buy the ranch at $80,000. The following day, Lemon received Martin's acceptance. At that time, the ranch was on the market for $100,000. Which of the following is true? A. Martin's mailing of $100 to Lemon on January 5 failed to grant an option. B. Martin's call on January 30 automatically terminated the January 1 offer. C. Placing the ranch on the market constituted an effective revocation of the offer of January 1. D. Martin's letter of February 6 formed a binding contract based on the original terms of Lemon's January 1 letter.

D. Martin's letter of February 6 formed a binding contract based on the original terms of Lemon's January 1 letter. Martin's telephone call was a counteroffer because it varied the price term of the offer. Although a counteroffer normally is a rejection of the offer, the option contract was not affected. Martin could still accept under the terms of the option. Furthermore, even an outright rejection will not terminate the option unless the principle of estoppel applies.

Neither party to a contract has a duty to disclose facts. Each is responsible to exercise ordinary business sense in his or her dealings. True or False?

True

On April 6, Apple entered into a signed contract with Bean, by which Apple was to sell Bean an antique automobile, having a fair market value of $150,000, for $75,000. Apple believed the auto was worth only $75,000. Unknown to either party, the auto had been destroyed by fire on April 4. If Bean sues Apple for breach of contract, Apple's best defense is A. Unconscionability. B. Risk of loss borne by Bean. C. Lack of adequate consideration. D. Mutual mistake.

D. Mutual mistake. A mistake of material fact made by both parties is grounds for rescission or is a sufficient defense in an action on the contract. Existence of the subject matter of the contract is a material fact. The parties generally are assumed to accept the risks concerning future events.

Baker Corporation sent a letter to Sampson Company in which Baker offered to purchase 10 acres of certain real estate from Sampson for $4,000. Sampson responded that it would sell eight of these acres for that price. Baker and Sampson have created A. A contract for sale of eight acres for $4,000. B. A contract for sale of 10 acres for $4,000. C. A contract to sell eight acres for $3,200. D. No contract via these communications.

D. No contract via these communications. The response to the offer contained a different term. The effect is a rejection and a counteroffer, not an acceptance. No contract exists unless Baker accepts Sampson's counteroffer.

West, an Indiana real estate broker, misrepresented to Zimmer that West was licensed in Kansas under the Kansas statute that regulates real estate brokers and requires all brokers to be licensed. Zimmer signed a contract agreeing to pay West a 5% commission for selling Zimmer's home in Kansas. West did not sign the contract. West sold Zimmer's home. If West sued Zimmer for nonpayment of commission, Zimmer would be A. Liable to West only for the value of services rendered. B. Liable to West for the full commission. C. Not liable to West for any amount because West did not sign the contract. D. Not liable to West for any amount because West violated the Kansas licensing requirements.

D. Not liable to West for any amount because West violated the Kansas licensing requirements.

An offer may be accepted A. By an assignee of the designated offeree. B. Only by a specific individual named in the offer. C. By anyone who learns of its existence prior to acceptance by the designated offeree. D. Only by the designated offeree.

D. Only by the designated offeree. The offeror has the right to specify who may accept the offer. When an offer designates a specific offeree, only that person may accept.

An Offeree's Rejection Is Effective When.... A. Received by offeror B. Sent by offeree C. Sent by offeree D. Received by offeror An Offeror's Revocation Is Effective When.... A. Sent by offeror B. Received by offeree C. Sent by offeror D. Received by offeree

D. Received by offeror D. Received by offeree The general rule is that a revocation of an offer is effective when received by the offeree.

An offer is not terminated by operation of law solely because the A. Offeror dies. B. Offeree is adjudicated insane. C. Subject matter is destroyed. D. Subject matter is sold to a third party.

D. Subject matter is sold to a third party.

Contract law has undergone considerable change in response to social, economic, and political shifts since the 19th century. Which of the following is a characteristic of modern contract law? A. Contract formation has become more difficult. B. Greater freedom of contract is permitted. C. Once a contract is formed, the parties are less likely to be excused from performance. D. The principles of caveat emptor and laissez faire are less enfluential.

D. The principles of caveat emptor and laissez faire are less enfluential. In the 19th century, contract theory was dominated by the notions of caveat emptor ("let the buyer beware") and laissez-faire (the idea that economic activity should be unregulated or "left alone" by government). In today's complex society, contract law has changed in response to disparity of bargaining power between buyers and sellers, government influence in commercial matters, and social reality.

Which of the following agreements is unenforceable because of indefiniteness? A. The seller agrees to supply all of the buyer's requirements for tents for the next year. B. The buyer agrees to purchase all of the seller's output of cotton in the next season. C. The buyer agrees to purchase all of the seller's output of ice cream and to deal exclusively in the seller's goods. D. The seller agrees to supply a quantity of pears dependent upon the buyer's will.

D. The seller agrees to supply a quantity of pears dependent upon the buyer's will. Requirement and output contracts are valid and enforceable. Both parties are required to act in good faith and not vary substantially from the estimated or normal quantity. The definiteness criterion is met because the output or requirements term is defined by the reasonable needs of the seller's or buyer's business, not by the whim or will of any party.

Alex Anderssen performed accounting services for Carla Hansen and sent her a bill for $500. She responded in good faith that the value of the services was $300 but that she was willing to pay $375 to avoid litigation. Accordingly, she sent Anderssen a check for that amount marked "payment in full." Anderssen received the check, crossed out the notation "payment in full," cashed it, and filed suit in small claims court for $125 and costs. If he desired to recover the full $500, Anderssen's best course of action was A. To keep the check instead of cashing it. B. To cash the check without crossing out the satisfaction recital. C. To follow the course of action he actually chose. D. To return the check.

D. To return the check. Tender of the check by Hansen was an offer of settlement that Anderssen effectively accepted by cashing it. Returning the check would have been an unequivocal rejection of the offer. If the debt had not been disputed, cashing a check for a lesser sum (even if marked "payment in full") would not have been an acceptance of an offer to settle for the lesser amount.

The age of majority in the State of Gibraldi is 21. At the age of 20, Carol decided to leave school to seek employment sufficient to support herself. She therefore concluded an agreement with The Employment Agency (TEA) to pay a fee if it located a job for her. TEA did find a job, but Carol refused to pay. At the time of her refusal, Carol was still 20. In an action against Carol, TEA will most likely A. Lose, because Carol was a minor when she contracted. B. Lose, because Carol disaffirmed while still a minor. C. Win, because Carol is liable as an emancipated minor. D. Win, because Carol is liable for necessaries.

D. Win, because Carol is liable for necessaries. Minors are liable for necessaries such as food, clothing, shelter, medicine, and tools of a trade. Other items may be considered necessaries depending upon the circumstances. This rule protects the minor: A person may be unwilling to contract to supply necessaries to a minor who is not liable on the agreement. Nevertheless, a minor may still disaffirm a contract for necessaries. In that event, the minor will be liable in quasi-contract for the reasonable value of the necessaries, not for the contract price.

Mutual assent requires that a valid offer be accepted by the intended offeree in a manner stipulated by the offeror. The overt indication of the offeree's assent should signify an intent to accept. ----->

For example, performance of an act requested by an offer does not result in a contract if the offeree had not yet learned of the offer.

Harry promised to sell his guitar to Harriet, who promised to pay him $1,000. After Harriet tendered payment, Harry reneged on his promise, so Harriet filed suit. Which of the following is true? A. The consideration for Harry's promise is both a legal detriment to Harriet and a legal benefit to Harry. B. This contract is unilateral, so only Harry is bound. C. Harriet cannot enforce Harry's promise because she neither incurred a legal detriment nor received a legal benefit. D. In a bilateral contract, each party is bound only if each receives a legal benefit and incurs a legal detriment.

The consideration for Harry's promise is both a legal detriment to Harriet and a legal benefit to Harry. Harriet's promise to pay is a legal detriment to her because she had no prior obligation to pay $1,000. It is also a legal benefit to Harry because he had no prior legal right to the money.

Subjective

based on emotion

unilateral mistake of fact

effects on contract: generally none

An________________ ________________ is disfavored by the courts because it may enable a person to escape paying damages for wrongful conduct. The clause is most likely invalid when the parties have unequal bargaining power and the terms have been imposed upon one party by the other.

exculpatory clause

Duress -- physical force

void

fraud in the execution

void

Contracts of minors are usually ____________________ at the option of the minor.

voidable

Duress -- improper threat

voidable

Fraud in the inducement occurs when the underlying consideration is misrepresented, i.e., the nature or quality of the goods or services. Such an agreement is void, voidable, unenforceable.

voidable

Negligent misrepresentation

voidable

fraud in the inducement

voidable

innocent misrepresentation

voidable

mutual mistake of fact

voidable

undue influence

voidable

A contract is _________________ (1) when it is based upon a mutual mistake regarding a material fact that induced the making of the contract; (2) when it arises from different, good faith interpretations of a material ambiguity in the contractual language; or (3) when one party makes a material mistake about which the other knew or should have known.

voidable In these cases, the requisite meeting of the minds is deemed not to have occurred.