Chapter 20 Multiple Choice Question Bank- Exam 2

Ambiguities in contracts are always interpreted in favor of the side that wrote the contract, since they are the ones who know what the provision is supposed to mean. Select one: True False

false

Contracts must use formal terminology such as "whereas" and "heretofore" in order to be legal. Select one: True False

false

Ricardo has agreed to sell his family farm to Walter for a price of $450,000. Even though both sides agree on the terms, it is still worth the money for Ricardo to hire a lawyer to write the contract. Select one: True False

true

Some contracting parties are intentionally vague in contract terms. Select one: True False

true

Which of the following guidelines applies to writing the title of a contract? a. It should be written in general terms, like "Memorandum of Agreement." b. It should be written like a sentence, with only the first letter capitalized. c. It should be brief with no more than five words. d. It should be descriptive of the agreement, and typed in all capital letters.

d. It should be descriptive of the agreement, and typed in all capital letters.

An honest effort to meet both the spirit and letter of the contract is termed a. reasonable circumstances. b. sole discretion. c. honest representation. d. good faith.

d. good faith

"Scrivener's error" is another (fancier) name for a typo. Select one: True False

true

A contract should have a descriptive title, which is generally in all capital letters, underlined and centered at the top of the page. Select one: True False

true

Any ambiguity in a contract is interpreted against the party who drafted the contract. Select one: True False

true

In the case of a typo, a court will reform a contract if there is clear and convincing evidence that the alleged mistake does not actually reflect the true intent of the parties. Select one: True False

true

Farmer's Fortune Insurance has a contract with Farmer Fran to insure her crops against insect damage. The contract does not specify which insects are covered or how much damage is necessary to make a claim. The contract will probably be enforced in favor of a. Farmer Fran. b. Farmer's Fortune Insurance. c. Neither side, as it is ridiculous to try to insure against insects. d. Cannot determine... would have to go through litigation to decide.

a. Farmer Fran

Which of the following is one of the four steps in reading a contract? a. What-ifs b. Scan for typos c. Re-write with a lawyer d. Final approval

a. What-ifs

Which of the following is a standard provision frequently found in contracts? a. choice of forum b. understanding c. choice of compensation d. mediation

a. choice of forum

Rich and Archie sign an agreement in which Archie agrees to deliver ten cases of champagne in 5 days. The parties negotiated and meant to say in the written agreement, delivery in 50 days. If the evidence is clear that the two parties intended to agree to 50 days, the courts will probably a. reform the contract. b. rescind the contract. c. issue a warranty. d. issue a covenant.

a. reform the contract

In the case of scrivener's errors, a court will usually a. reform the contract if it is clear that the mistake is not what the parties intended. b. instruct the parties to rewrite the contract without the errors. c. enforce the contract as written. d. throw out the contract completely.

a. reform the contract if it is clear that the mistake is not what the parties intended.

When a party to a contract intentionally makes the terms of a contract unclear, it is called. a. vagueness. b. duress. c. ambiguity. d. a mistake.

a. vagueness

Which of the following is generally NOT in the introductory paragraph of a contract? a. The date of the contract b. The covenants of the contract c. The parties to the contract d. The nature of the contract

b. The covenants of the contract

Standard provisions in a contract that are often listed under the heading "Miscellaneous" are called a. boilerroom. b. boilerplate. c. boilerpot. d. boilertape.

b. boilerplate

When one party to a contract fails to perform as promised, it is called a. litigation. b. breach. c. liquidated damages. d. bad faith.

b. breach

Which of the following is NOT one of the three ways to amend a written contract? a. by writing and signing an amendment (or rider) b. by verbally agreeing to the changes and shaking hands on the deal c. by crossing out the mistakes and writing in the corrections d. by writing a totally new contract with the correct provisions

b. by verbally agreeing to the changes and shaking hands on the deal

If the subject of the contract includes issues that may be controversial or "touchy," it is best to a. keep lawyers out of the negotiation, so relationships are not strained. b. deal with them up front before the relationship becomes strained. c. deal with them one at a time, as the problems arise. d. state your position up front and stand firm when the other party objects.

b. deal with them up front before the relationship becomes strained.

A+ Modeling Agency signs a contract with Sandi to do a photo shoot for the local used car dealer's advertising. The contract was most likely written by a. the owner of A+ Modeling Agency. b. Sandi. c. A+ Modeling Agency's lawyer. d. Sandi's lawyer.

c. A+ Modeling Agency's lawyer.

Ralph is a professional football player. He signs a valid contract with the Miami Dolphins. Later, he claims that he was also promised free use of the Dolphins' private jet, but this was not in the contract. What type of clause in his contract would prevent him from flying away with this claim? a. A complete agreement clause b. A "no additional terms" clause c. An integration clause d. A severability clause

c. An integration clause

Bob, a house painter, contracts with Ollie to paint a rental house which Ollie owns. Bob hires Rob to take his place as the painter on this contract. What has Bob done? a. Made a scrivener's error b. Severed the contract c. Delegated his duties d. Assigned his rights

c. Delegated his duties

In which of the following situations is it likely that you may NOT need a written contract? a. You are dealing with a party you do not know well, so you need to remain flexible. b. You are buying land from a member of your family. c. The terms of the agreement are simple and the value of the transaction is small. d. You have negotiated with the other party enough that you both know what the other person intends.

c. The terms of the agreement are simple and the value of the transaction is small.

What is a force majeure event? a. any action that makes the contract unprofitable for either party b. any finding in a contract that shows a provision was deliberately left unclear. c. a disruptive, unexpected occurrence for which neither party is to blame that prevents one or both parties from complying with a contract. d. any happening that fulfills one of the conditions in the contract, making it enforceable.

c. a disruptive, unexpected occurrence for which neither party is to blame that prevents one or both parties from complying with a contract.

Nate works as a sales representative. His employment contract specifies that he cannot work for a competitor for a period of two years from employment. This is an example of a. vagueness. b. extortion. c. ambiguity. d. duress.

c. ambiguity

When a provision in a contract is unclear by accident, it is a case of a.vagueness. b.mistake. c.ambiguity. d.condition.

c. ambiguity

Contract provisions that are enforceable independently are referred to as a. covenantal promises. b. conditional promises. c. reciprocal promises. d. material promises.

c. reciprocal promises

Statements of fact about the past and present are called a. provisions and terms. b. promises and covenants. c. representations and warranties. d. damages and remedies.

c. representations and warranties

Two parties are debating whether or not to put their contract into writing. In making their determination, which of the following factors would normally NOT be considered? a. whether or not the agreement falls within the Statute of Frauds b. the complexity of the agreement c. the length of time covered by the agreement d. the relationship between the two parties

c. the length of time covered by the agreement

In a contract modification, the phrase "charged with such amendment" refers to a. the party who suggested the change. b. the party who will benefit from the change. c. the party who will be adversely affected by the change. d. the party who did NOT suggest the change.

c. the party who will be adversely affected by the change.

Emily runs a children's clothing boutique which takes in local homemade items on a consignment basis. Her standard form contract indicates that Emily has the right to put items on sale without prior approval, but does not specify what effect the sale has on the consignor's payment percentage. Her intent is to keep the same profit she would have had without the sale. She is using ambiguity in her contract to increase her sales and profit. Select one: True False

false

If you have an established relationship with a buyer, you can sell small tracts of land without a written contract. Select one: True False

false

In business law, a lawyer's primary job is to represent the client in contract litigation. Select one: True False

false

It is unethical to use your lawyer as an excuse for a provision of a contract, such as, "My lawyer insists that I have a liquidated damages clause..." Select one: True False

false

Lawyers prefer to negotiate touchy subjects as they arise rather than address them at the beginning of a relationship. Select one: True False

false

The legal term for a promise in a contract is "provision." Select one: True False

false

You should hire a lawyer to review any legal papers you have to sign, especially such papers as lease agreements or car purchases. Select one: True False

false