BusiLaw Ch 16-21

Which of the following statements accurately brings out the difference between creditor and donee beneficiaries? a) A creditor beneficiary can enforce rights against the promisor or the promisee, whereas a donee beneficiary can enforce rights only against the promisor. b) A donee beneficiary is created when the contract is intended to release a party from an obligation to a third party, whereas a creditor beneficiary is created if the contract intends to grant a gift. c) A creditor beneficiary who wins a judgment against one party to a contract may not seek judgment against the other party, whereas a donee beneficiary can seek judgment against both the parties. d) A creditor beneficiary has limited ability to enforce a contract when compared to a donee beneficiary's ability to enforce rights to a contract.

a) A creditor beneficiary can enforce rights against the promisor or the promisee, whereas a donee beneficiary can enforce rights only against the promisor.

For contracts involving a sale of automobiles, which of the following individuals will be held to a higher standard of behavior under the Uniform Commercial Code (UCC)? a) A dealer of pre-owned cars b) A college student who buys a new car for personal use c) A baker who sells his old van d) A publishing firm that buys a new car for office use

a) A dealer of pre-owned cars

The _____ states that the first assignee to give notice of assignment to the obligor is the party with rights to the contract. a) English rule b) preexisting duty rule c) parol evidence rule d) first-assignment-in-time rule

a) English rule

Which of the following statements best defines a concurrent condition? a) It occurs when the parties to a contract are required to perform their obligations for each other simultaneously. b) It is a particular event that must occur in order for a party's contractual duty to arise. c) It is a future event that terminates the obligations of the parties to a contract when it occurs. d) It refers to a condition an assignee to a contract must fulfill in order to claim his or her rights to the contract.

a) It occurs when the parties to a contract are required to perform their obligations for each other simultaneously.

_____ are best described as damages parties to a contract specify in advance in order to prevent a difficult court battle if there is a particular kind of breach. a) Liquidated damages b) Punitive damages c) Nominal damages d) Special damages

a) Liquidated damages

Which of the following is true of the parol evidence rule? a) The purpose of the rule is to prevent evidence that substantially contradicts an agreement in its written form. b) The rule takes into account evidence of prior agreements and negotiations, as well as contemporaneous agreements and negotiations. c) The rule is a unitary concept, which can be considered as a rule of evidence. d) The rule effectively applies to evidence of condition precedents.

a) The purpose of the rule is to prevent evidence that substantially contradicts an agreement in its written form.

In which of the following cases is the assignment of rights prohibited? a) When the assignment increases the risk or duties the obligor would face in fulfilling the original contract b) When either party to a contract, which has an antiassignment clause, wants to assign his or her right to receive payment c) When the law necessitates an assignment in bankruptcy cases, but the contract has an antiassignment clause d) When a party to the contract wants to assign the right to receive damages for a breach of contract to sell goods or services

a) When the assignment increases the risk or duties the obligor would face in fulfilling the original contract

Before a contract can be voided for a mutual mistake, it must be proved that: a) a basic assumption about the subject matter of the contract is present. b) party to the contract made erroneous judgment about the value of an item. c) there is no material effect on the agreement. d) both the parties to the contract consciously made false statements about a fact material to the agreement.

a) a basic assumption about the subject matter of the contract is present.

Which of the following areas does Article 2(A) of the Uniform Commercial Code (UCC) govern? a) Contracts for the lease of goods b) Bank deposits and collections c) Service and land contracts d) Transaction related to letters of credit

a) contracts for the lease of goods

When the contracting parties do not intend to benefit someone but unintentionally do so, that third party is referred to as a(n): a) incidental beneficiary. b) contingent beneficiary. c) donee beneficiary. d) creditor beneficiary.

a) incidental beneficiary

In a contract made by a minor, the: a) minor has the right to disaffirm the contract before or within a reasonable time of reaching the age of majority. b) minor can choose to disaffirm only a portion of the contract. c) other party will have no recourse against the minor in any state if the consideration has been damaged or destroyed. d) adult parties to the contract can disaffirm the contract.

a) minor has the right to disaffirm the contract before or within a reasonable time of reaching the age of majority.

In contract law, _____ refers to having an erroneous belief about the facts of a contract at the time the contract is concluded. a) mistake of fact b) defalcation c) false light d) implied-in-fact

a) mistake of fact

When determining whether a contract falls under Article 2 of the Uniform Commercial Code (UCC), first determine if the: a) sale is for goods and then determine if the contract is predominantly for the sale of goods. b) parties involved in the transaction are merchants and then evaluate the value of the transaction. c) sale is for real estate and then determine if trade fixtures are a part of the contract. d) contract is for a mixed sale and then determine if the transaction is predominantly for the sale of services.

a) sale is for goods and then determine if the contract is predominantly for the sale of goods.

Restitution, as a primary equitable remedy for a breach of contract, is best described as: a) the return of any property given up under the contract. b) an order requiring the breaching party to pay some predetermined amount of money to the injured party. c) the replacement of one of the parties to a contract. d) an order for the breaching party to perform a new duty as a substitution to an old duty.

a) the return of any property given up under the contract.

Which of the following contracts falls within the statute of frauds? a) Contracts for lifetime employment b) Contracts related to an interest in land c) Contracts for the sale of goods totaling not more than $100 d) Contracts whose terms could be performed within six months

b) Contracts related to an interest in land

Which of the following statements is true of mistakes in contract law? a) Mistaken beliefs about the subjective value of an item affect the validity of a contract. b) Mistakes in contract law do not result from untrue statements. c) A unilateral mistake generally voids a contract. d) In a mutual mistake, neither party can choose to rescind the contract.

b) Mistakes in contract law do not result from untrue statements.

Which of the following can be in the form of an oral contract to be enforceable? a) A prenuptial agreement b) Mutual promises to marry c) A contract of suretyship d) Contract for a sale of land

b) Mutual promises to marry

A(n) _____ occurs when a party to a contract transfers his or her rights to receive something under the contract to a third party. a) aleatory contract b) assignment c) third-party beneficiary contract d) delegation

b) assignment

A(n) _____ occurs when a party outside a primary agreement promises to fulfill one of the original party's obligations if the original party fails to fulfill it. a) recognizance b) collateral promise c) primary obligation d) illusory promise

b) collateral promise

Under the Uniform Commercial Code (UCC), which of the following will be treated as goods? a) Copyrights b) Crops grown on a field c) Corporate stocks d) Real estate

b) crops grown on a field

Which of the following refers to agreements in which parties pay consideration for the chance, or opportunity, to obtain an amount of money or property? a) predatory lending b) gambling c) defalcation d) usury

b) gambling

The _____ makes oral evidence of an agreement inadmissible if it is made before or at the same time as a writing that the parties intend to be the complete and final version of their agreement. a) equal dignity rule b) parol evidence rule c) collateral agreement rule d) mirror image rule

b) parol evidence rule

Article 2 of the Uniform Commercial Code (UCC) applies to: a) transactions involving letters of credit. b) sale of goods. c) transfer of money between banks. d) investment securities.

b) sale of goods

A contract is referred to as a(n) _____ when a court can void the illegal part of the contract and enforce the rest as long as they represent the main purpose of the original agreement. a) adhesion contract b) severable contract c) constructive contract d) executory contract

b) severable contract

An agreement can be rescinded on grounds of _____, when one of the parties to the contract has so much more bargaining power than the other that he or she dictates the terms of the agreement. a) libel b) unconscionability c) false light d) defalcation

b) unconscionability

If a person has been adjudicated insane and has a guardian appointed, any contract the person attempts to enter into is: a) voidable. b) void. c) valid. d) unilateral.

b) void

In a contract between Sophia and Carl, Sophia had agreed to pay Carl $30,000 to paint her house and redo her garden. Carl agreed to the terms. After painting the house, Carl decided and convinced Sophia that it would be a better deal for her if he could redo her swimming pool rather than the garden for the original price. Carl's duty under the original contract was discharged only after he performed the new duty. Which of the following methods to discharge a contract does this scenario best illustrate? a) Discharge by anticipatory repudiation b) Discharge by material breach c) Discharge by accord and satisfaction d) Discharge by novation

c) Discharge by accord and satisfaction

In employment contracts, what is the purpose of covenants not to compete? a) It restricts an employee from quitting her current job for a designated period of time. b) It restricts an employee from competing against his or her coworkers in the workplace. c) It restrains an employee from competing with her boss for a designated period of time after she quits her current job. d) It makes it legal for competitors of a business to involve in corporate espionage.

c) It restrains an employee from competing with her boss for a designated period of time after she quits her current job.

Which of the following occurs when a party to a contract unjustifiably fails to substantially perform his obligations under the contract? a) Anticipatory repudiation b) Substantial performance c) Material breach d) Objective impossibility

c) Material Breach

Which of the following statements accurately brings out the difference between the common law and the Uniform Commercial Code (UCC)? a) While the common law focuses on contracts for the sale of goods, the UCC focuses on land and service contracts. b) Under the UCC, if a buyer has ordered for specifically manufactured goods, the buyer has to assert the statute of frauds, which is not required under the common law. c) The mirror image rule that applies under common law does not apply under the UCC. d) Under the common law, a contract may be formed even though some terms of the contract are left open, whereas under the UCC, such contracts will be deemed as void.

c) The mirror image rule that applies under common law does not apply under the UCC.

Which of the following statements is true of merger clauses? a) They are used by parties to a contract to signal that the written contract is not the final statement of their agreement. b) They are universally considered to be conclusive proof of a contract by all courts. c) They seek to blend other agreements either into the final agreement or into something explicitly identified as being outside the final agreement. d) They increase the amount of guesswork courts must do in determining what is the final statement of the agreement

c) They seek to blend other agreements either into the final agreement or into something explicitly identified as being outside the final agreement.

Under the statute of frauds, which of the following statements is true of the one-year rule for contracts? a) The possibility that a contract's terms could be performed within one year does not remove the contract from the statute's written requirements. b) If a contract can possibly be performed within a year, but such performance is highly unlikely, then the contract needs to be in writing to be enforceable. c) Under the statute, the one-year period begins the day after the contract is created, not when it is scheduled to begin. d) The test for compliance with the one-year rule considers the likelihood of completing the contract in one year rather than the possibility.

c) Under the statute, the one-year period begins the day after the contract is created, not when it is scheduled to begin.

In which of the following cases is parol evidence inadmissible? a) When a contract contains ambiguous terms that significantly affect its interpretation b) When certain conditions make an otherwise valid contract void c) When a contract is deemed integrated by the courts d) When a contract contains obvious typographical errors

c) When a contract is deemed integrated by the courts

Uniform Commercial Code (UCC) Section 2A-103(j) defines a lease as: a) the practice of purchasing an item, using it, and then returning it to the store for a refund. b) an agreement where parties exchange with each other a good, service, or property of almost equal value. c) a transfer of the right to possession and use of goods for a term in return for consideration. d) the practice of discharging a duty by making an offer to perform and being ready, willing, and able to perform.

c) a transfer of the right to possession and use of goods for a term in return for consideration.

A(n) _____ is best described as a statement made in court, under oath, or at some stage during a legal proceeding in which a party against whom charges have been brought admits that an oral contract existed, even though the contract was required to be in writing. a) recognizance b) illusory promise c) admission d) assignment

c) admission

A person who transfers his or her rights to receive something under a contract to a third party is referred to as a(n) _____. a) creditor b) beneficiary c) assignor d) delegator

c) assignor

Removing 10,000 miles from the odometer on a pre-owned car before selling it is an example of: a) negligent misrepresentation. b) mistake of fact. c) concealment. d) trade libel.

c) concealment

Contracts that are required to be in writing by the statute of frauds include: a) promises to sell crops annually. b) contracts between parties for profit sharing from the sale of real property. c) contracts of suretyship promises. d) mutual promises to marry.

c) contracts of suretyship promises

A party transferring her or his duties under a contract to a third party is referred to as the _____. a) assignor b) creditor c) delegator d) beneficiary

c) delegator

A(n) _____ occurs when, after reaching the age of majority, a person states orally or in writing that he or she intends to be bound by the contract entered into as a minor. a) emancipation b) juvenile adjudication c) express ratification d) recognizance

c) express ratification

A third-party beneficiary: a) is created when three different parties enter into a contract with the purpose of mutual benefit. b) occurs when a party to a contract transfers his duties under the contract to a third party, who is not part of the original contract. c) is created when two parties enter into a contract with the purpose of benefiting a third party. d) occurs when a party to a contract transfers her rights to receive something under the contract to a third party.

c) is created when two parties enter into a contract with the purpose of benefiting a third party.

In a contract, _____ refers to a promise the courts will require the parties to obey. a) legal capacity b) legal consideration c) legal assent d) legal object

c) legal assent

Which of the following elements of a contract refers to the mental ability of a person to understand his or her rights and obligations under a contract and comply with the terms? a) fair consideration b) recognizance c) legal capacity d) agreement

c) legal capacity

Without legal assent, a contract: a) is still valid. b) is deemed void. c) may be voidable. d) may be valid but unenforceable.

c) may be voidable

If a buyer decides to terminate a contract because the seller changes the price of the contract without the knowledge of the buyer, then the contract is discharged by: a) novation. b) mutual rescission. c) operation of law. d) condition precedent.

c) operation of law

According to Article 2(A) of the Uniform Commercial Code (UCC), a lessee is a(n): a) third-party beneficiary who gains from a lease contract. b) incidental beneficiary in a full-service lease agreement. c) person who acquires the right to possession and use of goods under a lease. d) person who transfers his or her obligations under a lease contract to a third party.

c) person who acquires the right to possession and use of goods under a lease.

_____ is best described as those 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. a) Duress b) Unconscionability c) Undue influence d) Defalcation

c) undue influence

A contract entered into by a person suffering from mental problems yet who still understands the nature of the contract and the obligations it imposes is considered _____. a) illegal b) void c) valid d) voidable

c) valid

Which of the following statements is true of a consumer lease? a) It is a lease in which the lessor does not select, manufacture, or supply the goods, but simply acquires the right to their use in connection with the terms of the lease. b) It is a lease that has a value of $50,000 or more, and primarily exists between a lessor and lessee who are both merchants. c) It is a lease that is complicated by the addition of a third person, a supplier or vendor, who plays a separate role from that of the lessor. d) It is a lease that exists between a lessor regularly engaged in the business of leasing or selling and a lessee who leases the goods primarily for personal purpose.

d) It is a lease that exists between a lessor regularly engaged in the business of leasing or selling and a lessee who leases the goods primarily for personal purpose.

Which of the following statements is true of Sabbath laws? a) These laws limit the types of business activities in which parties can legally engage on Saturdays. b) These laws limit the performance of charity work to Sundays. c) These laws do not apply to contracts for obtaining necessities and anything related to health or survival. d) These laws require parties to enter into contracts only on Sundays for certain business activities.

d) These laws do not apply to contracts only on Sundays for certain business activities

A(n) _____ is best described as an agreement presented on a take-it-or-leave-it basis or as the only chance the presented party will have to enter into it. a) aleatory contract b) unilateral contract c) executory contract d) adhesion contract

d) adhesion contract

Bob agrees to sell his farm to Joseph for $80,000. He then transfers his right to receive Joseph's payment to Kiara. In this scenario, the transfer of Bob's rights to Kiara is an example of a(n) _____. a) collateral promise b) adhesion contract c) delegation d) assignment

d) assignment

Maya, a wedding planner, had agreed to use purple orchids for Janet's wedding. However, due to an embargo against the country from where the flowers were to be imported, Maya could not fulfill her promise. In this scenario, the contract between Maya and Janet may be discharged on the basis of _____. a) novation b) condition subsequent c) objective impossibility d) commercial impracticability

d) commercial impracticability

_____ are best described as foreseeable damages that result from special facts and circumstances arising outside a contract itself. a) Compensatory damages b) Nominal damages c) Equitable damages d) Consequential damages

d) consequential damages

Ronald contracts with Saba to have her deliver some machinery to his factory. Saba then transfers her duty to Liam, a third party, who delivers the machinery to Ronald. In this scenario, the transfer of Saba's duties to Liam is an example of a(n): a) third-party beneficiary contract. b) adhesion contract. c) assignment. d) delegation.

d) delegation

Naomi sold her five-year-old car to the buyer claiming that she had bought the car three years ago. This is an example of: a) duress. b) mistake of fact. c) mistake of law. d) fraudulent misrepresentation.

d) fraudulent misrepresentation

To justify recovery based on a quasi-contract, a plaintiff must prove that: a) the defendant lacks legal capacity. b) the contract lacks legal assent. c) he or she suffered consequential damages. d) he or she conferred a benefit on the defendant.

d) he or she conferred a benefit on the defendant

A(n) _____ is best described as an order either forcing a person to do something or prohibiting a person from doing something. a) delegation b) assignment c) novation d) injunction

d) injunction

A(n) _____ occurs only when the party making a false statement, without the intentions to deceive, should have known the truth using the skills and competence required of a person in his position or profession. a) fraudulent misrepresentation b) intentional misrepresentation c) innocent misrepresentation d) negligent misrepresentation

d) negligent misrepresentation

Under Article 2 of the Uniform Commercial Code (UCC), a mixed sale is best described as a contract: a) that combines a service with realty. b) created when more than one type of a company's stocks are sold. c) formed through a combination of implied and unilateral contracts. d) that combines a good with a service.

d) that combines a good with a service