Business law exam 3

Rusty, a soybean farmer, contracts with Organic Foods to sell it all the soybeans he can grow. This is an example of:

An output contract.

If the contract requires the seller to ship goods by carrier but does not require that the seller guarantee their delivery to a specific destination, when does risk pass from the seller to the buyer?

When the goods are delivered to the carrier.

Fran owns a retail store in Seattle, and Eli is a manufacturer in Boise. If Fran orders goods from Eli to be shipped "FOB Seattle," and nothing else in the contract references risk of low, when does risk of loss pass to Fran?

When the goods are delivered to their destination.

A guaranty contract is treated as an original contract outside the scope of the statute of frauds under which of the following circumstances?

When the leading object doctrine applies.

Judith is about to graduate from nursing school. The hospital has offered Judith a nursing position upon graduation. This contract contains:

a condition precedent.

When may a buyer and a seller have an insurable interest in goods?

A buyer has an insurable interest in goods at the moment the goods are identified to the contract, and sellers have an insurable interest in goods only so long as they have title.

Which of the following is true regarding how courts apply the UCC's treatment of the issue of unconscionability?

A consumer dealing with a merchant is more likely to prevail on a claim of unconscionability than is a merchant dealing with another merchant.

Which of the following would probably require specific performance?

A contract for Amy to sell Bill an antique necklace.

Spencer sold his sandwich shop to Irene and signed an agreement that he would not compete with her for one year within the same city. Which of the following is true regarding the agreement?

A court would likely uphold the agreement on the basis that it is no broader than reasonably necessary to protect the buyer's interests.

Life insurance contracts are a common form of which of the following?

A donee beneficiary contract.

Which of the following is true regarding the assignability of contract rights?

Any assignment that would materially alter the duties of the promisor is unenforceable.

When buying his new car, Ralph's bank required Ralph to list the bank on Ralph's car insurance policy as the beneficiary. What type of beneficiary is the bank?

Creditor beneficiary

Madeline, a car saleswoman, sold a leather couch to Daniel during a yard sale. Daniel asked Madeline if she would hold the couch until he could return with a truck to pick it up. Madeline agreed to leave the couch on the driveway until Daniel could return. An hour later, it began to rain and the couch was ruined. Who bears the risk of loss for the couch?

Daniel only

Deb's doctor has diagnosed her as medically insane because she suffers from periodic paranoid delusions.

Deb may have the capacity to contract if, despite her delusions, she has sufficient capacity to understand the nature and effect of the contract.

Sloan and Tracey enter into an oral contract that states Sloan will mow Tracey's grass every Friday for "as long as he is able" and Tracey will pay Sloan $50 each Friday. Which of the following statements is true?

The contract is enforceable.

Without a signed writing, merchant A accepted a partial shipment of goods ordered under an oral contract for the sale of goods totaling $1,000 in amount. Under the UCC, what is the effect of partial performance in regard to the requirement of a signed writing?

The contract will be enforced to the extent of the goods accepted.

Andrew, age 15, made a significant amount of money mowing lawns. He bought a vacant lot at age 16 and wanted to disaffirm the contract at age 17. Which of the following is the most likely result of his attempt to disaffirm

He would be required to wait until reaching the age of majority to disaffirm.

Which of the following is true regarding a sale or return as compared to a sale on approval?

In a sale or return, unless the parties agree to the contrary, title and risk of loss rest with the buyer on delivery.

Which of the following is true regarding the duty to mitigate damages?

It falls on the non-breaching party.

Lilly hired Sherri to sell her house and agreed to pay her a 6 percent commission rate. Sherri failed the real estate licensing test but was able to find a buyer for Lilly's house. Lilly was unaware of Sherri's licensing situation. Which of the following statements is true in regard to the situation of the parties?

It is generally held that agreements by unlicensed persons to perform regulated services or engage in regulated businesses are illegal and therefore unenforceable.

Trudy buys a used lawn mower from Jack and agrees to pay monthly over a six-month period. After one month, Trudy sells the mower to Ann, and Ann agrees to pay Jack. Which of the following is true regarding the status of Jack and from whom he may recover should Ann not make the payments on the mower?

Jack is a creditor beneficiary, and he may recover amounts owed from either Trudy or Ann.

Jack, a minor, purchased a video game at the Game Place, which has a sign posted above the cash register stating "NO RETURNS OR EXCHANGES." After opening the game and trying it out, Jack decided he wanted to return the game. Which of the following is a true statement?

Jack may return the game and receive a full refund.

Jess is 17 years old and bought a new computer from Wallie. Three days after he turned 18, Jess sold the computer to his sister. Which of the following is the most likely result regarding any attempt by Jess to disaffirm the contract with Wallie?

Jess has indicated his intent to be bound by the contract by selling the computer and can no longer disaffirm.

John, the promisor, contracted with Marla to paint Marla's house by October 15. John contacts Marla on October 10 to state that he would not paint the house because he got a great new job and decided to go to work out of state. Assuming he really did get an outstanding job that required an out-of-state move, which of the following statements is true?

John has committed an anticipatory breach. Marla may sue John immediately for breach of contract.

Kylie took her engagement ring to the jewelry shop to be cleaned. By mistake, the jeweler sold the ring to Bill, a customer. Bill was unaware that the ring belonged to Kylie.

Kylie cannot recover the ring from Bill.

Mary and Perry entered into a written, signed contract by which Mary agreed to buy Perry's home for $150,000. Mary and Perry orally agreed, but did not put into writing, that a condition precedent to the purchase was that Mary would be approved for financing. Unfortunately, although she put forth a good faith effort, Mary could not get a loan and refused to go through with the sale. Which of the following would be the most likely result if Perry sued Mary for breach of contract?

The court will likely rule in Mary's favor because oral testimony may be used to prove the existence of a condition precedent.

If the court grants $1.00 to Chris for Annette's purely technical breach of their contract, the award is:

Nominal.

In many states, intoxicated persons are treated like people who lack mental capacity:

Only if they were so intoxicated that they were unable to understand the nature of the business at hand when they entered into the agreement.

Which of the following is true regarding the effect of part performance of a contract in regard to the sale of land as far as the statute of frauds is concerned?

Part performance may take the sale of land out of the coverage of the statute of frauds if it clearly indicates the existence of a contract of sale and is not consistent with any other interpretation.

Rachel agrees to sell her boat worth $3,000 to Jake for $2,000, but she later refuses to complete the deal. Jake sues for damages. What is the likely outcome?

Rachel will be forced to sell the boat under the doctrine of specific performance but will receive the full value of $3,000 from Jake.

Which of the following generally happens when a minor lies about his or her age in order to convince an adult to enter into a contract?

The court will not allow the minor to defraud the adult.

Peter hired Alicia to burn his house down so that Peter could collect the insurance money. He paid Alicia, but Alicia never set the fire. If Peter sues Alicia for breach of contract, what is the likely outcome?

The court will not force Alicia to return Peter's money.

Big City contracts with a nursery to plant trees throughout the city. Kat lives in Big City. Which of the following best describes Kat's situation?

She is an incidental beneficiary to the contract between the city and the nursery and has no rights under the contract

When a minor reaches the age of majority:

She may disaffirm a contract for only a reasonable time after reaching majority.

Minors must pay the reasonable value of:

Shelter but not music lessons, cell phones, or driving classes.

Ted took out an insurance policy on his home when he purchased it. He continued paying premiums on the home even after he sold the home to Helen and received full payment. Ted knew Helen smoked late at night and thought that she might burn the house down. Sure enough, Helen's smoking resulted in a serious fire destroying the home although Helen escaped safely. Which of the following is true regarding Ted's entitlement to the insurance proceeds on the policy he purchased?

Ted is not entitled to recover because he had no insurable interest in the home.

Which of the following was the result in Wethington v. Swainson, the case in the text involving a minor injured during skydiving lessons and the attempted disaffirmance of a release of liability in favor of the provider signed by the minor and the minor's parents?

That parents of a minor may not release a minor's prospective claims for negligence, and that the minor could disaffirm.

Which of the following was the result in Alatriste v. Ceasar's Exterior Designs, Inc., the case in the text in which a landscaping company quit after the owner refused to continue to pay, and it was established that for four of the five months the landscaping company did work, the landscaping company lacked an appropriate license, although it obtained the license four months into the project?

That the company was not entitled to be paid for any of its work because it did not have the appropriate license for the whole term of the work.

Which of the following was the result in Hi-Tec Properties, LLC v. Murphy, the case in the text in which tenants sued for damages after being exposed to mold in an apartment, and the landlord defended on the basis of an exculpatory clause in the lease stating that the lessor had no injury for liability based on mold?

That the exculpatory clause was void as against public policy.

Connor contracted with Sean to rent the rooftop of Sean's two-story commercial building for a party. Connor told Sean that the building was along the route of the annual Thanksgiving Day Parade, and he wanted to have a party to watch the parade. Due to inclement weather, the parade was cancelled. Which of the following is Connor's best argument that he should not have to pay Sean?

That the theory of commercial frustration applies.

Mike orally hires Vonda to defame a local politician. Vonda does so and requests payment. Mike refuses to pay. Which of the following is true regarding the situation of the parties

The agreement is unenforceable because a contract that cannot be performed without committing a tort is illegal.

Todd is the executor of his grandfather's estate. Sam, who had loaned the grandfather $500, claimed that Todd orally agreed to pay out of Todd's own funds the amounts remaining due on the debt. Which of the following is the most likely result should Sam sue Todd personally for the amounts due?

The court, based on the statute of frauds, would refuse to allow oral evidence of any alleged oral agreement of Todd to pay.

Leroy ordered a DVD player for his son's birthday. While the manufacturer guaranteed that it would ship the player within ten business days, the player was not shipped until three months after Leroy placed his order. By the time the DVD player arrived, Leroy's son's birthday had long since passed. When the player arrived, Leroy refused to sign for it. Under these circumstances:

The manufacturer is automatically revested with title to the DVD player.

Which of the following is governed by Article 2 of the UCC?

The sale of apples to a grocery store.

Jamison, the owner of a shoe store, received a written confirmation from ABC Wholesaler in regard to his purchase of 100 pairs of shoes. Jamison threw the confirmation in the trash because he knew he had not ordered any shoes. He had encountered problems with sellers from ABC before and was tired of dealing with them. Which of the following is true should ABC sue alleging a valid contract between the parties for the sale of the shoes?

The statute of frauds does not bar the admission into evidence of the written confirmation, but ABC would still be required to convince the court that the parties had a contract.

Sue bought a car from Abe. After a few months, Sue decided to sell the car to Rick who agreed to make the monthly payments required to Abe. Sue would like to be rid of any obligation regarding the car. Which of the following sets forth the manner, if any, by which Sue may be released of legal obligations to Abe in regard to payment for the car?

Through a novation, she may be released from the obligation to make payments to Abe if he agrees to consent to the substitution of Rick as the party liable on the debt.

In satisfaction of a debt owed to Tina, Bill assigns to Tina his right to monthly payments owed on a debt from Joe. Neither Bill nor Tina take any steps to notify Joe of the assignment. Joe continues to pay Bill. Because he has run into trouble in regard to his finances, Bill accepts the funds and says nothing. What rights, if any, does Tina have against Bill and Joe in regard to the amounts Joe paid Bill after Bill assigned the debt to her?

Tina can collect the amounts at issue from Bill only.

Which of the following is true regarding the rule followed by a majority of states in regard to an assignor who wrongfully assigns a contract to a second assignee who pays for it without notice of the first assignment?

Under the American rule, the first assignee prevails.

In most states, oral contracts that are covered by the statute of frauds are:

Unenforceable

Which of the following is true regarding a claim of unconscionability in relation to contract law under common law?

Unequal bargaining power standing alone is insufficient to justify a refusal to enforce a contract on the basis of unconscionability.

When interpreting ambiguous language the court:

allows oral testimony to aid in interpretation.

Under the UCC, a "buyer in the ordinary course of business:"

does not know that a sale violates the ownership rights of any third party.

Which of the following was the result in Lopez v. Kmart, the case in the text involving whether the plaintiff, an employee who while a minor signed an arbitration clause in connection with employment, could disaffirm the clause once attaining the age of 18?

he court ruled that the plaintiff could disaffirm the contract because he did so within a reasonable time after turning 18.

If Tex contracts with Prudence to clean her house every week and Tex dies, the contract is governed by the doctrine of:

impossibility.

Equitable remedies include:

injunctions.

A revenue-raising statute:

is designed to protect the public; and, if violated by a party to a contract, results in the contract being unenforceable.

Substantial performance:

is performance that falls short of complete performance in minor respects but does not deprive the promisee of a material part of the consideration that was bargained for.

The duty to perform as a world-renowned concert pianist would be:

not delegable.

A donee beneficiary is a third party beneficiary:

to whom a gift of performance is given.