Business Law Exam 1

The ACME Shoelace Company promises to sell to Coyote Shoes, Inc., all of the shoelaces that Coyote will need during the next nine months. This type of contract is known as a requirements contract.

This is a correct example of a "requirements" contract. An "outputs" contract would state that Coyote Shoes must purchase all showlaces produced by ACME. See page 330 (7th Edition).

List of elements of a contract

1. Consideration 2. Offer 3. Acceptance 4. Legality 5. Capacity 6. writing (sometimes)

the six situations in which a contract must be in writing to be enforceable

1. Contracts in which marriage is consideration 2.Contracts which cannot be completed in one year's time 3. Contracts which concern any interest in land 4. Promises made by an executor of an estate to pay a deceased's debt 5. Guaranty of performance of a promise (usually involving debt) 6. contracts for the sale of goods >=$500

Judith is a CPA with an excellent reputation and client base. She sells her tax preparation business to Shawn, and the sales contract includes a non-compete clause which prohibits Judith from competing against Shawn. For this non-compete clause to be enforceable, it must be reasonable as to three things:

1. Time 2. Feedback 3. scope of activity

instances when a party can complain of not giving its genuine consent to an agreement.

1. Undue Influence 2. Mistake 3. Fraudulent misrepresentation 4. Duress

Marty, a 16-year-old, contracts with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle. Marty agrees to make monthly payments until the purchase price plus interest are paid in full. Which of the following is correct?

Only the person lacking capacity -- in this case Marty, who is an "infant" or minor -- can cancel this voidable contract. Thus options C and D are incorrect. This is not a void (or illegal) contract, thus option B is incorrect.

ame facts as previous question. Suppose that Engel has told the court that he has a note from you in which you apologized to Engel for "the defective fork," and in which you admitted that "this accident is ABC's fault." You certainly do not remember ever writing such a note to Engel. Which of the following discovery devices can ABC's lawyer use to obtain a copy of this alleged note?

A request for production of documents is used to obtain for inspection items that are in the possession of another party. (page 54-57)

A contract is a ____________ that the law will enforce

Agreement

Which of the following exculpatory clauses will most likely be enforceable?

An exculpatory clause that relieves a riding stable of negligence.

An express contract:

An express contract is one in which the parties have clearly communicated to each other the terms and conditions of the agreement. The experession can be oral, in writing, or by their actions.

Brandon orally assigned his right to $100 from a lawn mowing contract to Will as a gift. This assignment is:

Assignment of contract rights are generally enforceable. An assignment of a right (such a a right to payment for services completed) does not need to be in writing and can be a gift (that is, made without consideration).

Same facts as in the previous question. Assuming a contract is formed, the contract between Colé and the Committee is an example of a/an:

Bilateral, express, executory, valid contract. Colé says he will "commit" to a future event -- a promise. The Committee says it promises to pay after the event. A promise for a promise is a bilateral contract. Options A and B are eliminated. Since neither party has performed, the contract is not "executed." Option E is eliminated. The contract is not "void" since it neither illegal and neither party is said to lack authority or capacity. Option C is eliminated. D is correct.

what best describes consideration

Consideration can be anything that a person may want to bargain for.

Colé En-gel, an aspiring clothing model, has been asked to perform for the FHSU Spring Fling Fashion Show in April. Having a very full teaching schedule and an equally full social calendar, Colé initially refuses the request. The Committee in charge of the show refuses to take "no" for an answer, and it offers to handsomely pay Colé $200 for his stylish swagger down the cat-walk. Sensing desperation on the Committee's part, Colé says he will commit to modeling at the show for no less than $500. The Committee agrees, promising it will pay the $500 after the show. Colé widely grins and says "Thank you!" Colé's demand to be paid $500 for his participation in the fashion show was a/an:

Counteroffer. Colé's first "no" may be a rejection. Colé's demand to be paid $500 is a counteroffer: a rejection of the Committee's offer to pay $200 and an offer to model for a promise of $500.

Which discovery method/device uses written questions?

Discovery devices include: interrogatories, depositions, requests for production of documents and things, and phyical/mental examinations. Interrogatories are written questions an opposing party must answer in writing under oath. (pages 54-59)

Sale of Goods >=$500

Exceptions: specially manufactured admitted under oath or in court that there is a contract Goods paid for or delivered

if there is no writing means

It can be unenforceable

Civil Law

Law which regulates rights and duties

Statutory law is to legislative bodies as common law is to:

Legislative bodies make laws; Judges decide cases that become the common law. That is why common law is also known as "judge-made" law.

MYLEGS

Marriage (when marriage is consideration for a promise made) Year or more to complete a promise Any interest in land - seller performs - part performance by buyer Executors promise to pay deceased's debt guaranty of performance/pay a debt of another Sale of goods >=$500

Suppose that you are a senior manager at ABC Company. ABC manufactures plastic forks, spoons and knives, paper plates, and other picnic supplies. ABC is being sued by Cole Engel, an energetic old man known for his compulsive behavior. Engel claims that one of ABC's plastic forks injured him during a picnic. You arrived at work this morning and found a large document on your desk—it is a set of interrogatories from Engel, asking you about the proprietary details of ABC's fork manufacturing process. What should you ask ABC's attorney to file with the court?

Motions for protective order limit discovery and are utilized to protect a party's information. (page 56)

Suppose that you are sitting at the window of a restaurant, overlooking the busy street outside. You see Mr. Crosswalk crossing the street when he did not have the right of way. Mr. Driver, who has the right-of-way, swerves onto the sidewalk to avoid hitting Mr. Crosswalk. Unfortunately, Mr. Driver strikes Ms. Smith, who was walking on the sidewalk. Mr. Driver panics and drives away. Mr. Crosswalk sees that Ms. Smith is injured, but does nothing to help, and he simply walks away. Suppose that Ms. Smith sues Mr. Crosswalk. The court must decide whether Mr. Crosswalk owed a duty to Ms. Smith. What is the court likely to find? (Assume that these parties had no prior connection with one another.)

Mr. Crosswalk did owe a duty to Ms. Smith because Mr. Crosswalk was responsible for creating the dangerous situation to begin with.

items to put into a contract

Names of people in contract what the contract is about terms and condition signature of the parties

Cynthia and Brian were friends. Brian was a dare devil and enjoyed taking unreseasonable risks. Because of his antics, Cynthia thought that Brian wasn't long for this life. Cynthia purchased a life insurance policy on Brian's life. Subsequently, Brian was mundanely killed in a car accident. Since Cynthia and Brian were friends, Cynthia had no insurable interest in his life and will not be entitled to the insurance proceeds.

Page 348 (7th Edition). Insurers require that a customer purchasing a life insurance policy on another person's life must have an "insurable interest" in the person to be insured. As a friend, Cynthia had no insurable interest in Brian's life. Otherwise, issuing life insurance policies without the "insurable interest" requirement would provide an incentive to kill the insured for profit.

Roger parked his car at a garage that has a large sign at the entrance saying, "This garage is not liable for items stolen from a car." This type of notice is referred to as an exculpatory clause.

Pages 355-58 (7th Edition). An exculpatory clause attempts to limit the liability of a party to a contract, when the counter-party is injured by the required performance.

Police Officer Paul apprehends a wanted criminal and then demands the $10,000 reward offered by Crime Stoppers. Which of the following statements is true?

Police Officer Paul is not entitled to the reward because he was under a pre-existing duty to make the arrest.

Suppose that Javier v. Jones, a tort case, has made its way to the Kansas Court of Appeals. No Kansas precedent is on point, but the Court adopts a legal rule from Simpson v. Flancrest Enterprises, an old decision from the Oregon Supreme Court. For the Kansas Court of Appeals, Simpson v. Flancrest Enterprises was a(n):

Precedent can be persuasive or binding. Lower courts must follow decisions of higher courts in the same jurisdiction. However, if no binding precedent exists in the jurisdiction, a court is free to look to other jurisdictions for guidance. (page 67)

Which of the following offers are considered to be irrevocable for a given period?

See pages 310-11 (7th Edition). A firm offer and a writing signed by a merchant offering to hold open an offer for a stated period are the same thing. An option contract is an offer that must be held open since the offeree gave consideration (paid for) to the offerer to not revoke the offer made to the offeree.

A contract most likely will be declared unconscionable if:

See pages 358-61 (7th Edition). Unconscionable contracts are those contracts involving fundamental unfairness to one party. An "unbalanced" contract means one where adequacy of consideration is in question (that is, "a bad deal"), and that will not be enough to set the contract aside. Minors will be bound to purchases of luxury items, as we'll see in a later chapter.

Same facts as in the previous question. Assuming a contract is formed, the contract between Colé and the Committee is governed by:

The contract is one for services (modeling), thus the common law would govern the contract. The UCC concerns sales of goods. The Restatement is a resource about contract law, but it has no binding authority. The other options are simply nonsense.

Elements of promissory estoppel

The defendant made a promise knowing that the plaintiff would likely rely on it; The plaintiff did rely on the promise; and The only way to avoid injustice is to enforce the promise.

Floyd offers to sell his 1967 Ford Mustang convertible to Tim. Before they conclude their negotiations, Floyd dies. Which of the following is true?

The offer terminates automatically upon Floyd's death. Offers are terminated in several ways. By operation of law (that is a party need do nothing to terminate an offer) an offer terminates on the death or mental incapcity of the offerer. In this case Floyd's offer dies with him. Without such a rule all sorts of fraudulent claims could be made against a deceased person's estate.

Under the Ucc, which of the following contracts may be enforceable, even without a written memoradum?

UCC 2-201(3) sets out circumstances in which a contract for the sale of goods equal to or granter than $500 is enforceable even without a writing. Under paragraph (3)(a), no writing is required in cases involving goods specially manufactured for the buyer when the seller has substantially changed its position in reliance on the contract. In such a case, the contract is enforceable in its entirety. Under paragraph (3)(b), a party that admits in court -- by pleading, stipulation, deposition, or otherwise -- that a contract was made may not rely on the statute of frauds as a defense. Both voluntary and involuntary admissions qualify. For this exception to apply, the party need not admit making an oral contract. Instead, it is sufficient that the party's words or admitted conduct reasonably lead to that conclusion. The contract is enforceable only to the extent of any quantity admitted. Under paragraph (3)(c), part performance makes a contract enforceable without regard to the statute of frauds. The contract is enforceable only to the extent goods have been received and accepted by the buyer or payment has been made to and accepted by the seller -- in other words, only to the extent of the part performance.

Johann, a well-known musician, agrees to give ten guitar lessons to Elton for $2,000. Nothing in the contract itself prohibits a delegation. If Johann delegates his obligation to Eugene, a second-year musical student and enthusiastic guitar player, then the delegation will probably be:

While many duties may be delegated (though the delegator is not relieved from liability unless a novation is executed), certain obligations cannot be delagated to another to perform. One of the three instances is that of performances requiring a personal skill the obligee/promisee bargained for.

protective order

a court order limiting discover

An unliquidated debt can be described as:

a debt in which the existence or amount is in dispute.

statute

a law created by a legislative body

criminal law

a law which prohibits certain behavior

A ________ contract is one which may be lawfully terminated by one of the parties because of fraud or duress

a voidable contract

The mirror image rule requires that {a} be on a precisely the same terms as the {b}

a. acceptance b. offer

precedent

an earlier case that helps decide a present issue

What would suffice for a signature on a writing under the statute of frauds?

any of the above would suffice. Judges define "signature" very broadly. A signature can be any mark which the signer intends to be his or her signature. Thus a handwritten or stamped signature will be sufficient. A keyed signature at the end of an email -- so long as the sender's intent was to "sign" the email in that manner -- can be deemed a sufficient signature.

A _______ contract is a promise in exchange for a promise

bilateral contracts

The courts will find an implied contract when

conduct of the parties indicates they intended an agreement.

Same facts as in previous question. Suppose that you want ABC's lawyer to ask Engel about the details of his claims, but you don't want Engel to have the luxury of thinking about the questions and writing out his responses. Which discovery device will be most helpful in this situation?

deposition. Interrogatories are written questions which allow a party time to compose their answers. Depositions are oral questions that require, in person response. Physical or mental exams are not relevant to this situation. A surprise visit, no matter how fun, is not permitted under the rules of discovery. (pages 54-57)

A gambling contract is legal unless it is specifically prohibited by state statute.

false

All oral contracts are quasi-contracts until they are completely executed.

false

Contracts generally do not require barganing that leads to an exchange between the parties

false

Rudolph overhears Macy's plans to go skydiving over spring break. Not really knowing Macy, but figuring it's worth a chance, Rudolph rushes out and buys an insurance policy for $100,000 on Macy's life. Macy does in fact meet her demise jumping out of the airplane. Rudolph can collect the $100,000.

false

courts normally require consideration to be approximately equal on both sides of the bargain

false

the age of majority to contract in all states is 21

false

the common law of a state never changes

false

courts enforce all promises in the interests of simple morality

false. Enforcing promises based upon "moral concerns" is the exception. Contract are promises which a court will enforce, and, generally, that means a promise must have been formed from a clear offer and acceptance (the "agreement" showing a "meeting of the minds"), the existence of consideration (a bargained-for exchange), concerning a legal subject matter.

Karen is a strong swimmer. One afternoon she is having a picnic at a lake and sees a man she does not know drowning. Generally, Karen:

has no legal duty to rescue the man. As noted by the series of cases illustrating the common law, when it comes to bystander liability, a person has no general duty to act to save a person from harm, as long as they did not cause the harm.

common law

judge-made law

stare decisis

let the decision stand

part performance by buyer

make partial payment enter property OR make improvement

If Becky promises not to drink alcohol until she becomes a legal adult in exchange for Ben's promise of $1,000, the agreement is:

not enforceable because Becky does not have a legal right to drink alcohol.

If Rudy offers Oscar $200 for his laptop valued at $600 and Oscar agrees, a court will probably:

not set aside the agreement based on the adequacy of the consideration.

The legal concepts of stare decisis and precedent work together to provide

predictability

jurisprudence

the philosophy of law

A contract voidable because of capacity may be canceled only by the party lacking capacity

true

A motion for summary judgment is granted when there are no material facts in dispute between parties and where the moving party is entitled to judgment as a matter of law.

true

Agreeing not to open a competing business could be consideration

true

An agreement may violate public policy even if the agreement does not require a party to commit a crime, tort, or violate a statute.

true

Consideration can be a promise or an act

true

In seeking to determine whether there is a meeting of the minds, the courts look to how a reasonable person would objectively view the language or actions of the parties.

true

Nella offers to sell her crop of strawberries, which have just been picked, to Morgan's Market. Since she does not specify a time limit for acceptance, Morgan's can accept the offer the following week, as long as Nella has not revoked it.

true

Parol evidence is permitted to explain true ambiguities or to provide evidence of fraud or duress

true

The remedy of "quasi-contract" is only available when a contract does not exist.

true

if a contract is made with a person required by law to hold a license, and the purpose of the license is protection of the public, the contract made by an unlicensed person will generally be unenforceable

true

When a contract is required to be in writing, bit it isnt, the contract is

unenforceable

When a contract falls within the statue of frauds but is not reduced to a writing, the contract is:

unenforceable.

A __________ agreement cannot be enforced by either party, because the bargain is illegal or one of the parties lacked authority to make it

void agreement