BLAW Exam 1

Most common statute of frauds requiring certain contracts to be in writing

(1) a contract to pay a debt of another person (2) a contract to pay the debt of a deceased person out of personal funds (3) a contract for the sale of real property, or an interest in real property (4) a contract in consideration of marriage (5) a contract that cannot be performed within one year of the date of the agreement (6) a contract for the sale of goods or merchandise worth $500 or more.

What constitutes a valid contract?

(1) agreement, reached between at least two valid parties (2) consideration—something of value exchanged by each party (3) competent parties—individuals legally and mentally capable of understanding that they are making a contract (4) legality—not in violation of the law.

What are the seven methods of terminating an offer?

(1) lapse (2) rejection (3) counteroffer (4) revocation (5) death or insanity (6) illegality (7) impossibility

What are the types of classifications for contracts?

-bilateral or unilateral -valid, void, voidable, or unenforceable -formal or informal -express or implied -executory or executed

Moral Promise

A moral promise (e.g., based on love and affection) is no more enforceable than any other promise unsupported by consideration.

Promise to make a gift

A promise to make a gift is unenforceable because a transfer of property is made by one party without return consideration from the other party.

Agreements with the legally insane

Agreements made by persons declared legally insane by a court are void. Agreements made by persons who suffer from temporary periods of insanity, but who have not legally been declared insane, are voidable. Temporarily insane persons may, upon reaching a period of normalcy, disaffirm or ratify an agreement made while insane. Once ratified, the agreement may no longer be disaffirmed.

Agreements with those under the influence

Agreements made by persons under the influence of drugs or alcohol are voidable. Persons may, upon becoming sober, disaffirm or ratify an agreement made while intoxicated.

Can an agreement be partially legal and illegal?

An agreement may be partially legal and partially illegal. If it can be separated from the part that is illegal, the legal part of the agreement may be enforced.

Define contract

An agreement that a court will enforce; a social agreement is not enforceable because it does not create legally binding economic obligations for the parties or because the party suing has not suffered damage recognizable by a court.

Who are competent parties?

Competent parties are those persons legally and mentally capable of entering into agreements that are enforceable by law. In virtually all states a person is considered an adult at age eighteen for the purpose of making a contract.

What is consideration?

Consideration is a promise by the offeror in return for either money or property or a sacrifice by the offeree. Sacrifice (called legal detriment) consists of doing an act (or promising to do an act) or refraining (or promising to refrain) from an act. Parties to a contract, as a general rule, are not bound unless consideration is given by both of them.

Debtor and creditor disagreements

If a debtor and creditor disagree over the amount of a debt, they may compromise on an amount lower than the original debt. The consideration for the creditor's agreement to accept the compromise amount is the debtor's surrender of the right to go to court to determine the correct amount.

What makes an agreement illegal and void?

If they violate a state's civil and criminal statutes, licensing statutes, gambling statutes, usury statutes, or Sunday statutes. Because they are opposed to public policy if they disclaim liability for negligence, interfere with the administration of justice, interfere with the performance of a public duty, are harmful to marriage, unreasonably restrain competition and trade, create a monopoly or limit competition, or are unconscionable.

Bilateral contracts vs. Unilateral contracts

In bilateral contracts, communication of the acceptance is usually necessary, but this is not true for unilateral contracts. In unilateral contracts, the offeree accepts simply by completing the act requested in the offer, although as a practical matter, the offerer must actually know about the completed act.

What about minors?

Minors may usually disaffirm or avoid agreements they make any time before reaching majority or for a reasonable time thereafter. Adults, however, do not have this right and are found by the agreements they make with minors. Minors cannot disaffirm agreements for the sale of real property to adults until they reach their majority. Statutes in many states prevent minors at varying ages from disaffirming certain agreements—as, for example, those related to life or accident insurance, a sale of stock, or an educational loan of money. In most states, minors who deliberately lie and claim to have reached the age of majority may still disaffirm an agreement and recover only consideration paid. Minors may ratify agreements they make with adults only after reaching majority. Once ratified, these agreements become legally binding, and the privilege to disaffirm terminates. However, minors cannot ratify part of an agreement and disaffirm another part. The entire agreement must be either ratified or disaffirmed.

Oral changes to written agreement

Oral changes to a written agreement made subsequent to the writing are allowable. Oral changes are not allowable, however, if the written agreement was required by the statute of frauds to be in writing.

Past consideration

Past consideration is no consideration. The offeror, for example, is not bound by a promise to pay money for an act performed prior to the promise.

Performing or promising to perform existing obligation

Performing or promising to perform an existing obligation is not consideration unless the offeree does something in addition to what is required by the existing agreement

Pledges to charitable, religious, educational, or scientific organizations

Pledges to charitable, religious, educational, or scientific organizations are usually enforceable without consideration.

T or F Except as provided by statute, oral contracts are just as enforceable as written contracts.

True

T or F In a contract of guaranty, the guarantor's promise to pay is secondary to the debtor's promise.

True

T or F The statute of frauds applies only to executory contracts.

True

Aaron bet Davis that a certain candidate would win the presidential election. Aaron's candidate won the election, but Davis refused to pay the bet. In most states, Aaron could not enforce the agreement legally because a. a gambling agreement is illegal and void. b. the agreement involves usury. c. the bet was not in writing. d. Aaron and Davis are both professional gamblers.

a. a gambling agreement is illegal and void.

Altier orally promised his daughter a silver bracelet as a gift. Altier is not legally bound because a. a promise to make a gift is unenforceable. b. he never intended to give the gift. c. the consideration was inadequate. d. the gift was too expensive.

a. a promise to make a gift is unenforceable.

Lee owes Chaney $450. Both Lee and Chaney agree on the amount owed. The debt will be discharged if Chaney a. accepts $300 and a set of books worth $125 from Lee. b. accepts $375 in full payment. c. accepts $400 in full payment. d. orally agrees to cancel the debt.

a. accepts $300 and a set of books worth $125 from Lee.

Which of the following agreements ordinarily would be considered illegal? a. an agreement between two people that one would pay the other $20 depending on the outcome of a football game b. a contract made by a married woman who is a minor c. a lobbying agreement d. none of these

a. an agreement between two people that one would pay the other $20 depending on the outcome of a football game

Which of the following actions is opposed to public policy? a. an offer to pay money to a witness to testify falsely in court b. an offer to pay a contractor extra money to speed up a job he already is legally bound to do c. an offer to pay money to neighbors to attend your birthday party d. an offer to pay a lawyer to represent your civic group at a legislative session on a bill seeking tax reduction

a. an offer to pay money to a witness to testify falsely in court

Carlson fully performed her part of a contract to the complete satisfaction of Briggs, who has not yet paid Carlson. This is an example of a(n) a. executory contract. b. executed contract. c. formal contract. d. void contract.

a. executory contract.

Usury laws provide protection in a contract that is a. for the loan of money. b. for the sale of merchandise on credit. c. to be performed on a Sunday. d. for the restraint of trade.

a. for the loan of money.

Chang owed Scott $800 but was unable to pay Scott on the due date. Scott agreed to let Chang pay him the following month. This agreement a. is not binding legally. b. is binding legally. c. is enforceable by Chang. d. contains adequate consideration by Scott.

a. is not binding legally.

An example of a valid offer is a(n) a. notice of a reward for finding a lost dog. b. advertisement to sell a car. c. offer that is made in jest. d. offer to sell a stolen stereo.

a. notice of a reward for finding a lost dog.

A person whose main livelihood is gambling (gaming) is classified as a a. professional gambler. b. semiprofessional gambler. c. casual gambler. d. public gambler.

a. professional gambler.

Slater, believing that his daughter was about to marry and leave him, offered to pay her $10,000 if she would promise never to marry. The daughter promised and accepted the $10,000. One year later, she married. Slater sued for breach of contract. A court probably would rule that Slater is entitled to a. recover nothing. b. recover the $10,000. c. recover the $10,000 plus interest. d. annul the marriage on the basis of fraud.

a. recover nothing.

An example of a licensing statute is one that a. requires an attorney to have a permit to practice law. b. prevents usury. c. restricts business activity on Sundays. d. reasonably restricts trade.

a. requires an attorney to have a permit to practice law.

Preston offered to sell a camera to Bellino but then withdrew the offer before Bellino could accept. Preston's withdrawal of the offer is known as a. revocation. b. an option. c. a counteroffer. d. acceptance.

a. revocation.

When goods are sold at an ordinary auction, acceptance takes place when a. the auctioneer lets the gavel fall. b. the offeree pays for the goods. c. the auctioneer accepts a bid from the highest bidder. d. the auctioneer presents the goods for sale.

a. the auctioneer lets the gavel fall.

A police officer is not entitled to a reward offered for the arrest of a criminal because a. the officer has a legal duty to arrest criminals. b. a reward is not legal consideration. c. the reward is not an offer. d. the reward is too high.

a. the officer has a legal duty to arrest criminals.

Agreements of people who suffer from periods of temporary insanity but who have not been declared legally insane by a court can be disaffirmed by a. the temporarily insane person in a period of normalcy. b. the temporarily insane person at any time. c. the other party to the agreement. d. either party.

a. the temporarily insane person in a period of normalcy.

Peters promised to pay Carter $50 if he repaired a lawnmower. Carter repaired the lawnmower but has not been paid yet. At this point, this contract is a. valid, unilateral, and executory. b. valid, bilateral, and executory. c. valid, bilateral, and executed. d. valid, unilateral, and executed.

a. valid, unilateral, and executory.

Written evidence required by the statutes is

an informal memorandum that contains the essential terms of the agreement: names of the parties, subject matter of the agreement, consideration, and important terms. It need be signed only by the party who will be held responsible.

Which of the following statements most likely would not be considered a counteroffer? a. "I accept, but only if you also include a CD player." b. "I accept, but please ship the merchandise to my home rather than my place of business." c. "I accept, but only if you give me thirty days to pay." d. "I accept, but only if you give me a discount."

b. "I accept, but please ship the merchandise to my home rather than my place of business."

Which of the following agreements is unenforceable because of lack of valid consideration? a. Johnson agreed to donate $1,000 to the United Hospital Building Fund. On the basis of this and similar promises, construction was started. b. Davis promised to give his neighbor's son $50 if the boy would refrain from trespassing on his property. Because of Davis's promise, the boy complied. c. Boyd agreed to sell his used motorboat to Yates for $500. Yates offered the $500. d. Philips promised his nephew $200 if the boy would refrain from smoking until he reached age twenty-one. Because of this promise, his nephew did not smoke.

b. Davis promised to give his neighbor's son $50 if the boy would refrain from trespassing on his property. Because of Davis's promise, the boy complied.

Thomas said to Winton: "I'll sell you my computer for $2,000." Winton replied: "I'll take it if you will include a used printer." Winton's reply legally resulted in a. a binding contract. b. a counteroffer. c. revocation. d. substitution.

b. a counteroffer.

If either party fails to perform her or his duties under the terms of a contract, the contract has been a. performed. b. breached. c. enforced. d. executed.

b. breached.

If no fixed time is stated for an offer to remain open, the offer a. ends automatically after thirty days. b. ends after a reasonable time. c. ends when the offeree states that it has ended. d. remains open indefinitely.

b. ends after a reasonable time.

An emancipated minor's contracts are voidable unless they are a. for luxury items. b. for necessaries. c. made with other minors. d. made with adults.

b. for necessaries.

Allen repaired Hansen's house while Hansen was sick. When she found out about the repairs, Hansen promised to pay Allen $50. Hansen's promise is not enforceable in a court of law because it was a. not adequate. b. for past consideration. c. for future consideration. d. too indefinite.

b. for past consideration.

Exculpatory clauses are a. quasi in nature. b. generally considered to be contrary to public policy. c. valid in all cases. d. legal when they involve the lending of money.

b. generally considered to be contrary to public policy.

5. If an agreement is partially legal and partially illegal, the a. entire agreement is void in all cases. b. legal part of the agreement may be enforced if it can be separated from the illegal part. c. legal part of the agreement is never enforceable. d. parties to the agreement may choose to enforce the part of the agreement that is beneficial to both of them.

b. legal part of the agreement may be enforced if it can be separated from the illegal part.

Cigarette lighters, jewelry, and electronic games are classified legally as a. necessaries. b. luxury items. c. adult items. d. entertainment items.

b. luxury items.

Unless stated otherwise, acceptance of an offer made by mail takes place as soon as the letter of acceptance is a. written by the offeree. b. mailed by the offeree. c. received by the offerer. d. received by the offeree.

b. mailed by the offeree.

A person who enters into a written contract while intoxicated and does not understand the consequences of the agreement a. still is bound by the written contract. b. may avoid the contract under certain conditions on becoming sober. c. can do nothing. d. waives all rights in that agreement.

b. may avoid the contract under certain conditions on becoming sober.

10. If Stornelli pays Mooney $50 to keep an offer for the sale of a personal computer open for a definite length of time, their agreement is called a(n) a. counteroffer. b. option. c. breach. d. quasi contract.

b. option.

After Buckman found Conrad's wallet, Conrad orally promised to pay Buckman $15. Conrad is not legally bound to pay because the consideration for her promise was a. present. b. past. c. future. d. illegal.

b. past.

If both parties know that an agreement is illegal, a court probably will a. enforce the agreement. b. refuse to hear the case. c. allow the agreement to be ratified. d. permit each party to recover any consideration given.

b. refuse to hear the case.

An express contract is one in which a. no specific oral or written agreement is made. b. the agreement is stated specifically. c. neither party can enforce the contract against the other in court. d. no legal obligation is intended.

b. the agreement is stated specifically.

Revocation of an offer takes place when a. the offerer has been properly notified. b. the offeree has been properly notified. c. a proper counteroffer is made. d. the offeree properly refuses the offer.

b. the offeree has been properly notified.

An emancipated minor who purchases a prescription in a drugstore is required to pay a. any amount the druggist wants to charge. b. the reasonable value of the prescription. c. an amount decided on by the minor. d. the price set by the manufacturer.

b. the reasonable value of the prescription.

An agreement that is grossly unfair or harsh may be declared void by a court as being a. impossible. b. unconscionable. c. in violation of a state statute. d. in violation of the blue laws.

b. unconscionable.

Lewis, a minor, sold her indoor exerciser to Francis, an adult. Francis then resold the exerciser to Beacon, a good-faith purchaser. Beacon's title is a. voidable. b. valid. c. void. d. unenforceable.

b. valid.

An agreement that is in unreasonable restraint of trade is a. enforceable. b. void. c. voidable. d. valid.

b. void.

Kavik has been declared legally insane by a court. Her purchase of an electric corn popper for $43.95 is a. voidable by Kavik. b. void. c. valid if the price of the corn popper is reasonable. d. valid if the store declares it valid.

b. void.

A contract that can be enforced unless a party legally entitled to avoid the contract does so is called a a. void contract. b. voidable contract. c. quasi contract. d. contract implied in law.

b. voidable contract.

Bentley, a minor, bought a set of golf clubs for $250 from Mickey's Sporting Goods Shop. This is an example of a a. void contract. b. voidable contract. c. quasi contract. d. social agreement.

b. voidable contract.

Contracts that involve important or complicated matters should be a. implied in fact. b. written. c. breached. d. implied in law.

b. written.

The best illustration of a legally competent party is a. a person under the influence of alcohol. b. a 14-year-old. c. a 65-year-old. d. a person who is legally insane.

c. a 65-year-old.

A contract implied in fact a. does not exist in the eyes of the law. b. can be expressed orally or in writing. c. arises from the actions of the parties rather than from a specific agreement. d. generally is not enforced by the courts because competent parties are lacking.

c. arises from the actions of the parties rather than from a specific agreement.

Your uncle gave you a TV. He could not claim lack of consideration and demand its return because a. the promise of a gift is unenforceable. b. the TV is future consideration. c. consideration is unimportant once an agreement is executed. d. the consideration was inadequate.

c. consideration is unimportant once an agreement is executed.

Bart agreed to sell Sean his motorcycle for $1500. Sean paid Bart $1500, and Bart promised delivery the next day. This is an example of a(n) a. implied contract. b. executed contract. c. executory contract. d. void contract.

c. executory contract.

Billings and Durrick, competing distributors, made an agreement whereby Billings promised not to sell his goods in a specified area and Durrick promised not to sell his goods in another specified area. They made this agreement to keep prices high by eliminating competition. This arrangement is a. legal because it reasonably restrains trade in order to control prices. b. legal because a binding contract was made willingly by both parties. c. illegal because it unreasonably restrains trade by controlling prices and territories. d. illegal because agreements that allow manufacturers to set prices are void under the UCC.

c. illegal because it unreasonably restrains trade by controlling prices and territories.

An example of an agreement that ordinarily would be classified as illegal is one that a. is entered into on a weekday after regular business hours. b. is in reasonable restraint of trade. c. involves usury. d. is between an adult and a minor.

c. involves usury.

Two months before reaching the age of majority, Marcus bought a radar detector for $129.95. She paid cash. Nine months later, she sought to avoid the agreement. Marcus's delay in avoiding the agreement a. made her liable to the merchant for fraud. b. did not prevent her from avoiding the agreement. c. most likely constituted a ratification of the agreement. d. entitled her to only a partial refund of the purchase price.

c. most likely constituted a ratification of the agreement.

The Budget Office Furniture Company advertised a 60- x 30-inch executive desk for $220.99 in its office supplies catalog. Marlow went to the store and told the salesperson that she wanted to buy one of the advertised desks. Marlow's action was a(n) a. agreement. b. acceptance. c. offer. d. bilateral contract.

c. offer.

A person who makes a counteroffer becomes the a. acceptor. b. offeree. c. offerer. d. promisee.

c. offerer.

A bilateral contract involves a(n) a. act for an act. b. act for a promise. c. promise for a promise. d. promise for an act.

c. promise for a promise.

Another name for a contract implied in law is a(n) a. executed contract. b. written contract. c. quasi contract. d. express contract.

c. quasi contract.

When a debtor and a creditor disagree on the amount owed on a debt and agree to compromise, the debt is a. not paid legally. b. not binding legally. c. settled legally. d. partially settled.

c. settled legally.

Charging interest in excess of the legal rate is considered a. a restraint of trade. b. enforceable. c. usury. d. stare decisis.

c. usury.

An agreement to rob a bank is an example of a a. quasi contract. b. voidable contract. c. void contract. d. contract implied in law.

c. void contract.

Thompson, a minor, bought headphones for her stereo from The Stereo Store. This agreement is a. voidable by The Stereo Store only. b. voidable by either party. c. voidable by Thompson only. d. binding on both parties.

c. voidable by Thompson only.

Which of the following businesses would not be able to enforce an exculpatory clause under most circumstances? a. hospitals. b. common carriers. c. public utilities. d. all of these.

d. all of these.

An emancipated minor can avoid a contract to pay for a. having a tooth filled by a dentist. b. jeans and shirts that are part of a school wardrobe. c. room and board at a private roominghouse near the private school he is attending. d. archery equipment used in sports tournaments.

d. archery equipment used in sports tournaments.

Oral contracts a. are not legal. b. cannot be enforced in court. c. lack agreement. d. are harder to prove than written contracts.

d. are harder to prove than written contracts.

Fowler, an antiques dealer, wrote a letter to Gorcey on May 9 offering to sell Gorcey the grandfather clock that Gorcey had seen at Fowler's antiques show. The letter stated that the acceptance had to be received by May 15. Gorcey mailed a letter of acceptance on May 15 that reached Fowler on May 16. A valid contract was made a. on May 15. b. on May 9. c. on May 16. d. at no time.

d. at no time.

To create a legally binding contract, both parties to the agreement must be a. able to read and write. b. able to speak and understand English. c. financially responsible. d. competent.

d. competent.

McIntyre was struck by a car driven by Gaines, who orally promised McIntyre $1,500 if she would not bring suit for injuries. McIntyre agreed. McIntyre a. has made a void agreement. b. is entitled only to actual expenses. c. has no rights because she gave no consideration for Gaines's promise. d. has a right to $1,500 because she refrained from doing what she had a legal right to do.

d. has a right to $1,500 because she refrained from doing what she had a legal right to do.

A minor who disaffirms an executed agreement with an adult a. is bound for life. b. ends the agreement with no further obligation. c. must inform the adult orally. d. must return any consideration received from the adult.

d. must return any consideration received from the adult.

An agreement is unenforceable because of lack of consideration when a. consideration is inadequate. b. consideration is not in the form of money. c. a person gives up his or her legal rights. d. no promise is given or act completed for the offeror's promise.

d. no promise is given or act completed for the offeror's promise.

Your friend made the following statement: "I might sell my car next month if I can get a good price." This statement is a. an offer to a formal contract. b. an offer to a unilateral contract. c. an offer to a bilateral contract. d. not an offer.

d. not an offer.

Maile agrees to sell his retail men's shop in Cleveland to Lunger. Lunger wants a clause restricting competition by Maile included in the contract. Which of the following restrictive clauses would be enforceable? a. never to engage in a similar business in Cleveland b. not to engage in a similar business in Ohio for the next two years c. not to engage in any type of business anywhere in Cleveland for the next year d. not to engage in a men's shop business within a radius of one mile for the next year

d. not to engage in a men's shop business within a radius of one mile for the next year

Caldwell offered to sell his used car to Jones for $2,000. Jones refused. The offer has been terminated by a. performance. b. mutual agreement. c. revocation. d. rejection.

d. rejection.

A statute that requires a person to obtain a license to practice a certain trade or profession without having to show competence in that trade or profession is a a. criminal statute. b. usury statute. c. prohibiting statute. d. revenue-raising statute.

d. revenue-raising statute.

18. When a clause in a non-compete contract is too restrictive, most courts generally a. enforce it as it is written. b. enforce it as it is written but agree to evaluate the clause over a period of three years. c. enforce it as it is written but agree to evaluate the clause over a period of twenty years. d. throw it out but enforce the remainder of the agreement.

d. throw it out but enforce the remainder of the agreement.

Carelli bid $125 for an antique table at a flea market auction. Legally this bid is considered a(n) a. acceptance to an offer. b. bilateral contract. c. counteroffer. d. valid offer.

d. valid offer.

An illegal contract generally would be considered a. valid. b. voidable. c. implied. d. void.

d. void.

For a contract to be valid, four essential elements are required. All of the following are essential elements of a valid contract except a. offer and acceptance. b. competent parties. c. consideration. d. written form.

d. written form.

Oral evidence

not admissible in court to alter, add to, or vary the terms of a contract that represents the parties' final and complete statement of their agreement. admissible in court to explain vague or confusing terms in a written contract; to show that agreed-upon terms were accidentally omitted or are incorrect; or to prove illegality, fraud, or mental incompetence.

E-signatures

now just as legal and enforceable as printed and typed signatures according to the E-Sign Act.

What constitutes a genuine (legally effective) offer?

the offer must be seriously intended, be definite (clearly stated), and be communicated to the offeree. Under common law rules, the acceptance must be a "mirror image" of the offer—that is, it must match term by term what was requested in the offer.