Business Law - Chapter 9

Pumps, Inc., agrees to assume a debt of Quality Parts Company to Reliable Finance LP. The agreement is not in writing. To be enforceable, the promise must be for the benefit of a. Pumps. b. Pumps and Quality. c. Quality. d. Reliable.

a. Pumps

Gusher Irrigation, Inc., and Heartland Farm enter into a contract for a sale of irrigation equipment for $50,000. To be enforceable, the contract should be in writing and identify a. the source of payment. b. the quantity. c.the terms of payment. d. the price.

b. the quantity

Insurance Company violates a state licensing statute when selling a policy to Jay, in whose state it is not licensed to sell insurance. As a member of the class of persons protected by the statute, Jay can a. collect benefits under the policy immediately. b. Sue the Insurance Company. c. enforce the policy and recover from the insurer. d. obtain a license to sell insurance, and a list of the insurer's customers.

c. enforce the policy and recover from the insurer

Dex sells a motorcycle to Elton without disclosing that the odometer, which reads 10,000 miles, was disconnected 100,000 miles ago. Dex is most likely liable for a. puffery. b. undue influence. c. negligence d. fraudulent misrepresentation.

d. fraudulent misrepresentation

A covenant contract provision that deprives one party of the benefits of the agreement may seem unfair, but a court is not likely to consider it unconscionable or void. True or False

False

A memorandum evidencing an oral contract must contain every term of the deal to be enforceable. True or False

False

If a mistake concerns the quality of the object of the contract, the mistake is one of fact, and the contract normally is enforceable. True or False

False

Generally neither party to an illegal contract can sue for breach. True or False

True

In the context of fraudulent misrepresentation, an opinion is objective and a basis for fraud. True or False

True

Reed agrees to sell his Sports Equipment store to Taylor. As part of the sale, Reed promises not to open a similar, competing store anywhere. This promise is most likely a. invalid because of the unreasonable terms of area and time. b. valid if both parties are justifiably ignorant of the facts. c. valid because it is part of a sale of an ongoing business. d. invalid because it is part of a sale of an ongoing business.

a. invalid because of the unreasonable terms of area and time

With respect to different types of transactions, including ordinary loans, the purpose of a usury statute is to a. set a maximum rate of interest. b. prohibit certain contracts based on their subject matter. c. specify clauses that must be included in certain contracts. d. regulate certain forms of gambling.

a. set a maximum rate of interest

Big Dig LLC makes an offer to perform an excavation and related tasks for Commercial Development Corporation, but due to a substantial mathematical mistake, significantly underprices the work. Commercial accepts the offer. Data Big's best defense against enforcement of the contract is that Commercial knew a. the price was below the prices of comparable services. b. a unilateral mistake supports the cancellation of a contract. c. a bilateral mistake supports the cancellation of a contract. d. a mistake of value supports the cancellation of a contract.

a. the price was below the prices of comparable services

A lease between Mia and Niles for residential property contains an exculpatory clause. This clause is most likely a. unenforceable. b. enforceable if either party is in a business important to the public. c. enforceable if an event occurs to which the clause applies. d. enforceable as a matter of public policy.

a. unenforceable

Duane and Evan orally agree to a transfer of forty acres of farmland. Evan asks Finance Bank to lend him the funds to buy the land. Under the Statute of Frauds, the agreement between Duane and Evan is enforceable by a. Finance Bank. b. no one because it is oral c. Duane or Evan. d. Duane, Evan, or Finance Bank.

b. no one because it is oral

Ben makes an appointment for a $50 haircut, buys a bike for $250, and agrees to work for Coding Associates for one year for $5,000 per month, starting at the beginning of next month. To be enforceable, a writing is required for a. the appointment. b. the purchase. c. the employment agreement. d. the haircut and the bike.

b. the purchase

Alice and Bart enter into a contract for the sale of Canyon Ranch. To be enforceable, this contract must be a. signed in a sufficient manner by both parties b. substantiated by reliable, external evidence. c. in writing or evidenced by a written memorandum. d. dated before the property is taken.

c. in writing or evidenced by a written memorandum

At Mattress Store, Nate signs a contract to buy bedroom furniture. The contract sets a schedule of $500 monthly payments, subject to a late fee of 15 percent. Nate finds the language of the contract difficult to understand. This is most likely a. an exculpatory contract. b. substantive unconscionability. c. procedural unconscionability. d. an enforceable contract.

c. procedural unconscionability

Donald is a minor. He can enter into any contract an adult can, provided a. Donald is willing to disaffirm the contract. b. an adult is willing to ratify the contract. c. the adult is willing to enter into contracts with minors. d. the contract is not one prohibited by law for minors.

d. the contract is not one prohibited by law for minors

In entering into a contract with Marc for the sale of a cold storage warehouse, Nan fails to reveal the fact that the freezers do not consistently maintain a proper temperature. Most likely, this is fraudulent misrepresentation if a. Nan finds out about it. b. the fact concerns the value or quality of the freezers. c. Nan is not aware of the fact. d. the fact is a serious defect known to Nan, but not to Marc.

d. the fact is a serious defect known to Nan, but not to Marc

Nina is induced by her guardian Ollie to sign a contract to invest funds in Penny Stocks, Inc., through Ollie's investment firm. Unknown to Nina, Ollie realizes a commission from the investment. Most likely, Nina may rescind the contract on the basis of a. fraud. b. duress. c. resentment d. undue influence.

d. undue influence

A contract clause that releases an employer from liability for any injury to an employee, no matter who is at fault, is generally enforceable. True or False

False

A contract entered into by a mentally ill person during a lucid interval is nevertheless void. True or False

False

A contract involving property of any kind must be in writing to be enforceable. True or False

False

A contract must be in writing to be enforceable if its performance is not likely within a year of its formation, even if that performance is possible. True or False

False

Generally, a unilateral mistake does not give the mistaken party any right to relief from the contract. True or False

False

If a person was sufficiently intoxicated to lack mental capacity, his or her contracts are void. True or False

False

If contracting parties attach materially different meanings to a contract word or term subject to more than one reasonable interpretation, the contract is void. True or False

False

Ordinarily, every party to a contract has a duty to come forward and disclose facts. True or False

False

The first element of proving fraud in contracting is to show that the innocent party is not easily fooled. True or False

False

To disaffirm a contract is to deny its existence. True or False

False

When a covenant not to compete is unreasonable in its essential terms, a court will refuse to reform the covenant. True or False

False

A contract in which a party assumes a secondary obligation must be in writing to be enforceable. True or False

True

A party who can show that he or she did not genuinely agree to the terms of a contract can still choose to carry out the deal. True or False

True

Any confirmation, invoice, sales slip, check, or e-mail may constitute a writing that satisfies the Statute of Frauds True or False

True

A landlord can avoid liability for injuries that occur on rental property by including an exculpatory clause in the lease True or False

False

A minor can enter into any contract an adult can, without exception. True or False

False

A written contract must consist of a single document to constitute an enforceable contract. True or False

False

Forcing a party to enter into a contract under the fear of threats constitutes undue influence. True or False

False

Sal is mentally incompetent but has not been adjudged by a court to be incompetent. Sal enters into a contract with Tony for the cleaning and maintenance of Uptown Office building. Most likely, the contract is a. void. b. voidable if Sal did not comprehend the consequences. c. enforceable if Tony did not know that Sam was mentally incompetent. d. enforceable if Sam is the owner of the building.

b. voidable if Sal did not comprehend the consequences

A party who has justifiably relied on an oral contract may use _______ if the courts will not enforce it, because of the failure of a writing a. promissory estoppel b. undue influence c. breach of contract d. duress

c. breach of contract

Daredevil Rides, Inc., owes debts to Equipment Company and Food Supplies, Inc. Equipment orally agrees to assume Daredevil's debt to Food to prevent the concessionaire from filing a suit against Daredevil. This agreement is enforceable by a. Daredevil, Equipment, or Food. b. Equipment only. c. none of the choices. d. Daredevil only.

a. Daredevil, Equipment, or Food

Intoxicated, Efron enters a contract for the sale of his business, Freight Dispatch, to Gretel for less than its market value. This contract is enforceable if, at the time, a. Efron understood the legal consequences. b. Efron's intoxication was purely voluntary. c. Gretel fraudulently induced Efron to become intoxicated. d. Gretel was also intoxicated.

a. Efron understood the legal consequences

The lack of a license in certain occupations bars the enforcement of work-related contracts. True or False

True

The Statute of Frauds operates as a defense to the enforcement of an oral contract for the sale of land. True or False

true

An innocent party who does not suffer harm as a result of a misrepresentation can nevertheless collect damages. True or False

False

Even if the defects on a piece of property are obvious, the buyer can justifiably rely on the seller's misrepresentations concerning those defects. True or False

False

Under the Statute of Frauds, a contract involving an interest in land must be in writing to be enforceable. True or False

True

An intent to deceive or guilty knowledge, can also be referred to as a. unfaithfulness. b. bad faith. c. scienter. d. compulsion.

c. scienter

With respect to different types of transactions, including ordinary loans, the purpose of a usury statute is to a. prohibit certain contracts based on their subject matter. b. regulate certain forms of gambling. c. set a maximum rate of interest. d. specify clauses that must be included in certain contracts.

c. set a maximum rate of interest

Ken, a real estate agent, assures Lily that a certain parcel of commercial property fronts on the most highly trafficked street in Metro City. Lily buys the property and then discovers that the street has no more traffic than any other in its vicinity. Lily may recover damages for a. negligence b. the city's undue influence. c. the agent's fraudulent misrepresentation. d. the buyer's mistake.

c. the agent's fraudulent misrepresentation

Gary owns two all-terrain vehicles (ATVs), worth $1,000 and $500, respectively. Helen enters into a contract to buy "Gary's ATV" for $750. Gary believes, in good faith, that he is selling the $500 ATV. Helen believes, in good faith, that she is buying the $1,000 ATV. In this situation a. Gary is entitled to $750 for the $500 ATV. b. Helen is entitled to the $1,000 ATV for $750. c. the contract is not enforceable d. Helen must buy both ATVs for $1,500.

c. the contract is not enforceable

Physicians Clinic orders by phone seven cases of single-use latex gloves from Quality Medical Supplies, Inc. After three cases are delivered and accepted, Physicians Clinic repudiates the contract. Quality Medical can enforce the contract to a. the extent of the four undelivered cases. b. no extent. c. the extent of the three accepted cases. d. the full extent.

c. the extent of the three accepted cases

Ray agrees to buy one hundred pounds of almonds from Sol. To be enforceable, the agreement must be in writing if the almonds cost at least a. $250. b. $499. c. $50. d. $500.

d. $500

Because of the potential for punitive damages, plaintiffs often include a claim for fraudulent misrepresentation in their contract disputes. True or False

True

For purposes of fraudulent misrepresentation, scienter clearly exists if a party asserting a fact knows it is not as stated. True or False

True

If a contract is not enforceable under the Statute of Frauds, promissory estoppel may be another remedy. True or False

True

Persuasion that induces a person to act according to the will of a dominant party is undue influence. True or False

True

Oscar owns Payroll Company, a bookkeeping service. Oscar pays Ripley $5,000 to steal a list of a competitor's clients. This deal is a. void. b. voidable at the option of the party having less bargaining power. c. voidable at the option of either party. d. enforceable.

a. voide

A party may have the capacity to enter into a valid contract, and the right to avoid liability under it. True or False

True

A party to a contract who has no reason to know that the contract is illegal, can often obtain restitution on a partially executed contract. True or False

True

In selling a warehouse, Riley, a real estate broker, tells Sam that the property has a certain capacity, making it suitable for a nightclub. Riley knows nothing about the capacity of the building, but it is not as he specifies. Sam buys the building. Sam's best course of action is most likely to a. recover damages or rescind the contract to buy the building. b. scam Riley. c. induce Riley to give him the commission on her next sale. d. sabotage Riley's career with bad publicity.

a. recover damages or rescind the contract to buy the building

Cathy agrees to sell her Daily Donut shop to Ernie. In the agreement, there is a covenant not to compete that prohibits Cathy from operating a donut shop within a certain distance. If the restriction is unreasonable, a court will most likely a. reform the covenant. b. prohibit both parties from operating donut shops. c. award Cathy damages. d. order Ernie to stop doing business.

a. reform the convenant

Car Lot's salesperson Dick offers to sell Ernie, who is twenty years old, a car. Dick intentionally misrepresents the vehicle's use and repairs. In reliance, Ernie buys the car. To prove fraud, Ernie does not have to show that a. Dick misrepresented material facts. b. Ernie is under twenty-one. c. Dick intentionally deceived Ernie. d. Ernie justifiably relied on Dick's misrepresentations.

b. Ernie is under twenty-one

Lumber LLC files a suit against Mill Company to enforce an oral contract that would otherwise be unenforceable under the Statute of Frauds. The court could enforce such a contract if a. neither party has begun to perform. b. Lumber foreseeably and justifiably relied on Mill's promise. c. Mill denies the existence of any contract. d. the deal does not involve customized goods.

b. Lumber foreseeably and justifiably relied on Mill's promise

Renee, a minor, enters into a contract to buy two all-season passes from Ski Mountain Resort. The contract will be made enforceable if Renee a. voids it. b. ratifies it. c. disaffirms it. d. nullifies it.

b. ratifies it

At an auction, Ben bids on a 1957 Chevy coupe, believing that it is worth more than the price asked. When the car proves to need more repairs than Ben estimated, and thus is worth less as is, Ben is a. not liable on the bid, because the auctioneer misrepresented the value. b. still liable on the bid. c. not liable on the bid, because he underestimated the cost of repairs. d. not liable on the bid, because the need for repair is not a material fact.

b. still liable on the bid

Maya and Nick enter into a contract. To be enforceable, the contract must include a. the signatures of both Maya and Nick. b. the signature of the party who is seeking enforcement. c. the signature of the party against whom enforcement is sought. d. no particular signatures.

c. the signature of the party against whom enforcement is sought

Bob and Jim enter into a contract where Jim will custom make curtains for Bob's living room. Bob picks out the fabric and Jim makes the curtains. He delivers them to Bob and Bob refuses to pay, and says he does not like them. On what basis can Jim enforce? a. Custom made goods exception b. Duress c. Fair dealings act d. Good faith

d. Good Faith

Main St. Market, Inc., and Natural Food Corporation discuss the terms of a contract. They exchange "signed" e-mails that summarize the terms on which they agree. Between these parties, the e-mails are a. no contract. b. an oral contract. c. a pre-contract. d. a written contract.

d. a written contract

Beryl enters into a contract with Clay for a guided tour of Deep Canyon. Clay represents that he is an experienced, knowledgeable guide, when in reality he has never been in the canyon. Most likely, Beryl ​ a. must comply with the contract because the representation is an opinion. b. could exert duress to obtain a new guide. c. might recover damages for the mistake. d. can rescind the deal based on fraudulent misrepresentation.

d. can rescind the deal based on fraudulent misrepresentation

County Title Company processes information furnished by others to transfer title to real estate from a seller to a buyer. In performing this task for a sale of land from Dale to Ezra, the furnished information is mistaken. The contract between Dale and Ezra that includes the mistake may be rescinded because the mistake a. involves a detail on which the parties had a true "meeting of the minds." b. affects County Title, a third party. c. concerns a term in the contract subject to only one interpretation. d. is about a material fact.

d. is about a material fact