Business Law Exam II
Sam, a plumber, entered into a contract for $75,000 with Orr, Inc., to perform certain plumbing services in a building owned by Orr. After Sam had satisfactorily performed the work, Orr discovered that Sam had violated the state licensing statute by failing to obtain a plumbing license. As a result, Orr denied paying any money to Sam. The licensing statute was enacted merely to raise revenue for the state. An independent appraisal of Sam's work indicated that the building's fair market value increased by $70,000 as a result of Sam's work. The cost of the materials which Sam supplied was $35,000. If Sam sues Orr, Sam will be entitled to recover:
$75,000.
Which of the following is most likely to constitute undue influence?
A clergyman using a parishioner's emotional susceptibility to get the parishioner to contract with the clergyman.
An uncertain future event, the occurrence of which is necessary for the existence of a contractual obligation is called:
A condition precedent.
Which of the following contracts is void?
A contract made by a person who has been adjudicated insane and institutionalized.
King sent Foster, a real estate developer, a signed offer to sell a specified parcel of land to Foster for $200,000. King, an engineer, had inherited the land. Foster telephoned King the same day that he received his letter and accepted the offer. Which of the following statements concerning the contract is correct under the Statute of Frauds?
A contract was formed, although it would be enforceable only against King.
Which of the following is most likely to be considered a sale of goods to which the UCC applies?
A gas station sells and installs a new battery in a car.
Which of the following characterizes the traditional rule regarding a minor who misrepresents his/her age?
A minor's right to disaffirm is valid in such a case.
Which of the following is covered by the statute of frauds?
A real estate mortgage
Offers that fail to provide a specific time for acceptance
Are valid for a reasonable period for time.
The transfer of a right under a contract is called a(n):
Assignment.
Calvin tells Sara that he will sell her his car for $5,000. Sara agrees. The exchange is to take place in 10 days. The contract between Calvin and Sara is now:
Bilateral, executory, and express.
Calvin tells Sara that he will sell her his car for $5,000. Sara agrees. The exchange is to take place in 10 days. The contract between Calvin and Sara is now:
Bilateral, executory, and express.
An oral contract for the sale of land that has been completely performed by the vendor:
Can be enforced without any writing.
If the Uniform Commercial Code recognizes the fact that the parties to sales contract frequently omit terms from their agreements or state ambiguous terms, then the Code:
Can fill in the blanks with reference to common trade practices.
Which form of damages is intended to give the victim of the breach of contract the "benefit of the bargain"?
Compensatory
What type of transactions are governed by the Uniform Commercial Code?
Contracts for the sale of goods.
The appointment of another person to perform a duty under a contract is called a(n):
Delegation.
The right of minors to avoid a contract as a means of protecting themselves against their own improvidence and against overreaching by adults is called:
Disaffirmance
The right of minors to avoid a contract as a means of protecting themselves against their own improvidence and against overreaching by adults is called:
Disaffirmance.
With regard to an agreement for the sale of real estate, the Statute of Frauds:
Does not require that the agreement be signed by all parties.
In order for the consideration requirement in contracts to be met:
Each party must give consideration.
Melanie owes $250 to Jessica. Jessica gifts the right to receive the money from Melanie to her daughter Kelly in writing. This assignment is:
Enforceable despite the lack of consideration.
A(n) _____ clause is a provision in a contract that purports to relieve one of the parties from tort liability.
Exculpatory
A contract in which the parties have not yet fully performed their obligations is called a(n):
Executory contract.
If the delivery term of the contract is _____ the place at which the goods originate, the seller is obligated to deliver to the carrier goods that conform to the contract and are properly prepared for shipment to the buyer, and the seller must make a reasonable contract for transportation of the goods on behalf of the buyer.
FOB
Which of the following was NOT taken into account by classical law in assessing contracts?
Fairness
Antiassignment clauses in contracts are not enforceable.
False
Contracts must always be in writing to be enforceable.
False
Courts look at parties outward manifestations of intent as a requirement to enforce a contract. This is called the subjective standard of intent.
False
Generally, the age of majority for contracting purposes is 21 years.
False
In order for an assignment to be valid, the assignee must give some consideration to the assignor.
False
In order to satisfy the writing requirement of the statute of frauds, both parties must sign the writing.
False
Once a party properly delegates a duty to the delegatee, that party is relieved of any obligation to perform the duty.
False
Parol evidence can be used to contradict the terms of a partially integrated contract.
False
Where an offer stipulates a certain means of acceptance, the offeree's acceptance is effective upon dispatch even if it uses means other than those specified in the offer.
False
_____ is a wrongful coercion that induces a person to enter or modify a contract.
Fraud
Which of the following is a condition subsequent?
I promise to do X unless Al Gore is elected President in 2000.
When the surrounding facts and circumstances indicate that an agreement has in fact been reached, a(n) _____ has been created.
Implied contract
Daniel is a senior at State University. Brian, Daniel's father, is concerned about Daniel's study habits, given that Daniel spends most of his evenings at the campus pub instead of the library. Brian promises Daniel that he will send him on an expense-paid trip to Europe after his graduation if Daniel spends at least five evenings a week studying in the campus library for the remainder of his senior year. After returning home from his graduation, Daniel asks Brian about the European trip. Brian replies, "Your education was your reward. I don't owe you a trip to Europe." Brian is:
Incorrect; Brian owes Daniel a trip to Europe because Daniel's acts are consideration.
Daniel owes Casey a debt, the amount of which is subject to a good faith dispute. The parties agree to settle the debt, with Daniel promising to pay Casey $15,000 and Casey promising to release Daniel on a $25,000 debt. The settlement agreement:
Is supported by consideration.
Damages that are agreed upon at the time the contract is entered into are called
Liquidated damages
Damages that are agreed upon at the time the contract is entered into are called _____.
Liquidated damages
On May 2, Kurtz Co. assigned its entire interest in a $70,000 account receivable due in 60 days from Long to City Bank for $65,000. On May 4, City notified Long of the assignment. On May 7, Long informed City that Kurtz had committed fraud in the transaction out of which the account receivable arose and that payment would not be made to City. If City commences an action against Long, and Long is able to prove that Kurtz acted fraudulently:
Long will be able to successfully assert fraud as a defense.
On May 1, Dix and Wilk entered into an oral agreement by which Dix agreed to purchase a small parcel of land from Wilk for $450. Dix paid Wilk $100 as a deposit. The following day, Wilk received another offer to purchase the land for $650, the fair market value. Wilk immediately notified Dix that Wilk would not sell the land for $450. If Dix sues Wilk for specific performance, Dix will:
Lose, because the agreement was not in writing and signed by Wilk.
Which of the following would indicate a rejection under the mirror image rule?
Material changes to offer
Someone who attempts to recover for breach of contract:
Nan recover only for those losses that he can prove with reasonable certainty.
Milner Developers proposed an offer to Henry Wright, an independent contractor, to hire him for their next project. They offered him a certain rate and specified the contract details along with describing the stipulated mode of acceptance, but received no response. Wright responded to the offer after a delay of two months with a quote for a higher amount than that mentioned by Milner Developers. Do the two parties have a binding contract?
No, because Wright's letter was a counteroffer to the original offer.
An employer states that in exchange for an employee's decades of service, the employer will give her a $5000 bonus but then changes its mind the next day. Is there a contract for the bonus?
No, because the employee provided no consideration—the decades of work were all in the past and not bargained for.
Sue offers to buy a house from John and they were negotiating the price of the house. In the meantime, Sue confides in John's wife that she is willing to pay an amount of $50,000 for the house. Delighted to hear this, John's wife tells him the good news. John immediately calls up Sue and accepts her offer. Is there a binding contract?
No, because the offeror had not communicated the terms of the offer to the offeree.
Helga owns an insurance business in Idaho. Her clients are all Idaho residents. She later sells her business to Carlos. As part of the deal, the contract contains a non-compete clause that prevents Helga from operating an insurance business anywhere in Idaho, Washington or Oregon for a period of five years. Six months after this sale, Helga opens an insurance business in Oregon. If Carlos seeks to enforce the non- compete agreement against Helga, will he probably be successful?
No, because this agreement is not reasonable.
When can the offeror effectively revoke his/her offer?
Only before an effective acceptance.
Sue wanted to purchase a car. She went to "Honest Bob's" used car sales. She was interested in a classic 1956 Jaguar XK 140 Roadster. Bob told her "this is a great car-it runs like a dream, it is a sweet ride." Bob's statements are legally considered to be:
Opinion statements.
Sue wanted to purchase a car. She went to "Honest Bob's" used car sales. She was interested in a classic 1956 Jaguar XK 140 Roadster. Bob told her "this is a great car-it runs like a dream, it is a sweet ride." Bob's statements are legally considered to be:
Opinion statements.
A(n) _____ is a separate contract in which an offeror agrees not to revoke her offer for a stated time in exchange for some valuable consideration.
Option
A(n) _____ is a separate contract in which an offeror agrees not to revoke her offer for a stated time in exchange for some valuable consideration.
Option
In determining whether an offeree accepted an offer, the court is looking for the same _____ on the part of the offeree that it found on the part of the offeror.
Present intent to contract
Consideration can be a(n) _____ in the case of a bilateral contract.
Promise
A written agreement was signed by two parties and it was intended to be their entire agreement. The parol evidence rule will prevent the admission of evidence that is offered to:
Prove the existence of a contemporaneous oral agreement that modifies the contract.
Ted failed to disaffirm a contract during his minority. The contract was automatically:
Ratified.
If a statute is considered to be _____, the purpose of the legislation is to protect the public against dishonest or incompetent practitioners.
Regulatory
David entered into a contract to sell Ruth a parcel of land fully aware that Ruth's intention of purchase was to construct a high-rise commercial building. David was also aware that the subsurface soil condition of the property would prevent such construction. The soil condition was not readily discoverable in the course of normal inspections or soil evaluations. David did not disclose the existence of the condition to Ruth, nor did Ruth make any inquiry of David as to the suitability of the land for the intended development. David's silence as to the soil condition:
Renders the contract voidable at Ruth's discretion.
The statute of frauds requires that:
Some contracts be evidenced by a writing.
Which form of damages involves a court ordering a party to a contract to perform his/her obligations under the contract?
Specific performance
Rex Garner recently made an offer to Harry Barns for the sale of his shop using a registered letter. The offer says that Harry "may accept by registered letter" and this detail is an example of a _____.
Stipulation
What is emancipation?
Termination of parental rights to control a child.
It is important to promptly notify the obligor that an assignment has occurred. Why?
The obligor might perform to the assignor rather than the assignee.
In general, the mailbox rule is beneficial to:
The offeree
To distinguish an offer, courts first look at:
The present intent to contract.
Ian Kendler makes Brian Hyson an offer for a plot of land. In the offer, Kendler stipulates that the acceptance of the offer must be sent by registered mail but Hyson mails his acceptance through the regular postal service. Which of the following is true? Assume that the Restatement (Second) of Contracts does not apply.
There is no acceptance and no contract.
Abby promises to pay Brian $50 if he will mow Abby's lawn. Brian does not promise to mow Abby's lawn; however, later that day, Brian completely and satisfactorily does mow Abby's lawn. This is an example of a unilateral contract.
True
An exculpatory clause is a provision in a contract that purports to relieve one of the parties from tort liability.
True
In mixed goods-services situations, courts determine whether the contract is for the sale of goods by determining whether the good or the service is the dominant part of the transaction.
True
In order for a unilateral mistake to make a contract voidable, either the non-mistaken party must have caused or had reason to know of the mistake, or enforcement of the contract must be unconscionable.
True
John promises to pay Robert $100 per week, in exchange for Robert's promise not to beat John up. There is no consideration for John's promise.
True
Law of sale of goods codified in the Article-2 of the UCC is modified to accommodate current practices of the merchants.
True
Strictly speaking, a contract has nothing to do with the personal intent of the parties
True
The essence of a contract is that it is a legally enforceable promise or set of promises.
True
The intent to accept is objectively demonstrated by words or conduct or a combination of the two.
True
The traditional rule is that, where the consideration given a minor under a minor's contract has been lost, stolen, or dissipated, the minor can disaffirm without compensating the adult for the loss in any way.
True
When a promisor's performance is an express condition of the promisee's duty to perform, that performance must meet a strict performance standard.
True
Paul is hired by Soprano as a security guard. At the time of hiring, Paul signs an agreement that relieves Soprano from workers' compensation liability. This agreement is most likely:
Unenforceable as a violation of public policy.
When a court says that an agreement is illegal, it most likely means that the agreement:
Violates public policy.
When a court says that an agreement is illegal, it most likely means that the agreement:
Violates public policy.
Which of the following instances is sufficient reason to cause commercial impracticability?
War
When is revocation of an offer effective?
When received by the offeree
When is the revocation of an offer effective?
When received by the offeree
On Thursday, Trista Dylan receives a letter from Charlie Holmes offering to sell her a diamond ring and stating that: "if you choose to accept, you must do so prior to 2:00 p.m. tomorrow." Trista had a telegram of acceptance dispatched well before 2:00 p.m. on Friday but it is delivered to Charlie's home only at 2:15 p.m. Do Trista and Charlie have a binding contract?
Yes, because Trista dispatched the telegram prior to 2:00 p.m.
James has entered into a contract to sell his house to Mikhael. James knows that the house has a bad termite infestation that significantly reduces the value of the house. However, the topic of termites never came up and James did not volunteer any information about the termites. Mikhael is not aware of the termite problem. Under the law of most states, has legal misrepresentation occurred here?
Yes, because a seller must always inform a buyer about defects that are not obvious.
James has entered into a contract to sell his house to Mikhael. James knows that the house has a bad termite infestation that significantly reduces the value of the house. However, the topic of termites never came up and James did not volunteer any information about the termites. Mikhael is not aware of the termite problem. Under the law of most states, has legal misrepresentation occurred here?
Yes, because a seller must always inform a buyer about defects that are not obvious.
John promised the other co-owners of the ship Sea Fairy that he would insure the ship for an upcoming voyage. However, John fails to insure the ship. The ship is shipwrecked in a turbulent sea. The co-owners sue John for breach of contract. Will they succeed?
Yes, because there was a valid and binding contract between the co-owners.
Betty, age 16, buys a car and wrecks it one week later. She takes it back to the seller and demands all her money back. According to the traditional rule, is she entitled to get all her money back?
Yes, regardless of the condition of the car, because this was a voidable contract.