Business Law Test 2

Building Restoration, Inc. (BRI), enters into a contract to refurbish an old train depot for Casual Dining, Inc., to open as Eat Up Restaurant. If BRI completes most of the work promised in the contract, its performance will be a. complete. ​b. material. c. substantial.

c. substantial.

Retail Outlets, Inc., contracts with Smooth Paving Inc. to grade and pave a parking lot. Smooth assigns the contract to Tough Road Company, which has a poor record of completing projects. Retail could most successfully argue that the contract cannot be assigned because a. ​Retail did not consent to the assignment. ​b. Retail did not receive adequate consideration for the assignment. c. the assignment will materially increase the risk of nonperformance.

c. the assignment will materially increase the risk of nonperformance.

What are the elements necessary to create a contract?

1) Agreement-generally includes an offer and an acceptance 2) Consideration-legal value given in bargain for a promise 3) Contractual capacity -all parties must have contractual capacity-Generally assumed to be present 4) Legality-contract must not accomplish an illegal goal or purpose. Must have legal subject matter.

What are elements of promissory estoppel?

1. A promise must be made 2. upon reliance of that promise, 3. a significant loss is suffered. For example: The promisor will be estopped or prevented from asserting a lack of consideration as a defense.

What are the elements of an offer?

1. Serious Intent -The offeror must have intent to become bound 2. The terms of the offer are reasonably certainso that the parties can determine the terms:- ID the parties -the subject of the contract- Consideration paid -time of performance 3. The offer must be communicatedto the offeree

What are elements of acceptance?

1. Unequivocal agreement (by deeds or conduct) to be mutually bound to the terms of the contract 2. Communicated to the offeror 3. Timely -made before offer is terminated 4. Proper means -any reasonable means or the contract can specify how acceptance is to be made

What are elements of capacity?

A legal ability to enter a contractual relationship -the law limits what a person can agree to if there is a question of capacity. Minors -voidable at option of minor -must disaffirm -becomes enforceable after turning 18 unless disaffirmed within a reasonable period Intoxicated/under influence -severe to cause incapacitation and other party was aware (objective indications) -voidable at option of intoxicated person Incompetency -depends upon the facts but look at whether party lacked ability to understand the purpose/consequence -voidable at option of incompetent person Court determined incompetency -contract is never valid

What does MYLEGG mean when it comes to statute of frauds?

Contract must be in writing and signed by the party against whom the contract is to be enforced Marriage -contracts made in consideration of marriage Year -contracts which cannot be performed within one year of contract formation Land -contracts involving the transfer of an interest in land -legal description Executor promises -promises made by the executor of an estate to pay for liabilities of the estate Guarantees -promises made to pay for the debt of another when no economic benefit is derived Goods -under the UCC the sale of goods priced $500 or more

What is the intentional use of force/threats -can be mental (threatened action must be wrongful or illegal)l?

Duress

What is the difference between expressed vs. implied?

Express -terms are set forth in writing or orally. Implied in fact -based on conduct• Example -order a steak at restaurant; you ask attorney to prepare contract• Example -two parties have the same deal over and over, for example a supplier continually sells to same customer 1. Plaintiff furnished a service or good 2. Defendant knew or should have known Plaintiff wanted to contract 3. Defendant had a chance to say "no" to the services Implied in law -there isn't an enforceable contract, but court treats the agreement as if it is an enforceable contract• To prevent unjust enrichment• Example, unconscious person is brought to hospital in an ambulance

T/F: A contract that can be completed within one year by the terms of its agreement must be evinced by a writing under the Statute of Frauds.

False

T/F: All promises are legally enforceable.

False

T/F: Courts do not accept duress as a valid defense against contract enforcement.

False

T/F: The Statute of Frauds requires the signature of both parties.

False

T/F: The four requirements of a contract are: agreement, consideration, capacity, and a written document

False

What is it called if the language is clear, the contract will be enforced as written or as agreed?

Plain meaning rule

What is like a mistake but with intent to deceive and innocent party justifiably relied on the misrepresentation, causing harm?

Fraud

What is it called when the acceptance must match the offer exactly or it's likely a counteroffer?

Mirror image rule

What is it called when an offer is taken back prior to acceptance and the offeree knows about it. Exception - options contract.

Revocation

What are the elements of consideration?

Something of value --> promise to do something, performance of an action, refraining from an action Promise or performance of an act with no pre-existing duty• Refraining from an action that one has a legal right to do• Promises for actions that have already taken place (past) = no consideration• If no definiteness to the promise or unconditional option to cancel = illusory promise Which is bargained for -the basis of the bargain• Both parties gain a reward and receive a detriment Which is adequate• Need not be of equal value -assumption the parties believe it's fair• A bad negotiation is of no consequence• If shockingly unequal, it's still consideration but this may be a read flag that fraud, duress, undue influence exists

What are ways in which an offer can be terminated?

Termination can occur by the action of the parties:• Performance Revocation - offer is taken back prior to acceptance and the offeree knows about it. Exception - options contract. Rejection - once rejected, the offer terminates. Counteroffer - seen as rejection of offer and making new offer•"mirror image rule" - the acceptance must match the offer exactly or it's likely a counteroffer. Offer terminates after a reasonable amount of time.

T/F: A party can generally not use a mistake of value as a defense against contract enforcement.

True

T/F: A valid offer must be: communicated to the offeree, made with serious objective intent, and contain definite-enough or material terms of the agreement.

True

T/F: An implied in fact contract requires: the offeror to provide a good or service, the expectation that they would be paid and an opportunity for the offeree to say no to the good or service.

True

T/F: An offer terminates once its subject matter has become illegal.

True

T/F: The contract for the sale of land must be in writing to be enforceable under the Statute of Frauds.

True

Nate promises to pay for dental services provided by Otto to Polly. Nate receives no personal benefit for the promise. To be enforceable, the promise must be in writing if a. Nate promises to pay only if Polly does not pay. ​b. Nate assumes primary financial responsibility for the cost. ​c. Otto's services will be provided in installments with separate payments.

a. Nate promises to pay only if Polly does not pay.

John enters into a contract with Katie's Coin-op Laundry to move a suite of dryers from one of Katie's locations to another. John subsequently transfers this duty to Loren. Loren is a. a delegatee. b. an obligee. c. an obligor.

a. a delegatee.

A contract between Laser Equipment, Inc., and Medical Center contains a clause stating that any assignment is "void." This ordinarily prohibits a. ​any assignment. ​b. no assignment. ​c. only an assignment of contract rights to personal services.

a. any assignment

In an exchange of e-mails, Rob, a landlord, and Sam agree to a lease of a certain apartment for one year. Under the Statute of Frauds, this lease is enforceable provided a. the e-mail is signed by the party against whom enforcement is sought. ​b. the parties print and sign a hard copy of a document titled "Lease." ​c. there is outside evidence, such as a security deposit, of the lease

a. the e-mail is signed by the party against whom enforcement is sought.

Even-Bilt Construction contracts to build a warehouse for Discount E-Sales Company. Even-Bilt substantially performs. Even-Bilt is entitled to a. the full contract price less any damages they caused by their failure to comply with the contract. b. the full contract price. c. to be excused from performance

a. the full contract price less any damages they caused by their failure to comply with the contract.

Faye makes and sells furniture. Faye and Glen enter into a contract for the delivery of Faye's products to Glen's Gear retail locations for which he agrees to pay the invoiced price. Faye transfers her right to payment under the contract to Haulers Trucking Company. This transfer is a. ​a delegation. b. an assignment. c. a third party beneficiary contract

b. an assignment.

Kali contracts to sell Leony her car for $3,000. This contract will be fully discharged when Kali and Leony a. ​agree to sign a bill of sale. b. exchange the car for the $3,000. ​c. sign a receipt.

b. exchange the car for the $3,000.

Ed's Electric substantially performs its contract with Forest Hills Apartments, Inc., to deliver and install an alarm system and parking lot lighting. Forest Hills is entitled to a. damages to compensate for the failure to comply with the contract. b. nothing more. c. to be excused from performance

b. nothing more.

Lestor and MaryElise enter into a contract. Lestor agrees to mow MaryElise's yard every week for the summer. MaryElise is a. the obligor. b. ​the obligee. ​c. the assignee

b. ​the obligee.

ActioNOW and Becca enter into an oral contract in which Becca agrees to work on a project for ActioNOW for eighteen months. This contract is enforceable by a. ActioNOW b. Becca c. none of the choices

c. none of the choices

Lewis tells a representative of Musical Instruments, Inc., that he will pay for Nora's trumpet if she does not. Lewis does not secure any personal benefit for this promise. This promise is enforceable as a contract a. ​only if Nora agrees to it. b. only if the value of the trumpet is more than $500. c. only if it is in writing.​

c. only if it is in writing.​

Dharma enters into a contract to manage the operations of Esther's dental office for one year, renewable for subsequent one-year terms. If this contract is discharged like most contracts, it will be a. ​breached. ​b. altered. c. performed.

c. performed.

Stephanie enters into a contract to work as a lifeguard at Tim's Water Park for the summer in exchange for a weekly paycheck and free admission to the park's attractions. If Stephanie works the entire summer and Tim's provides her paychecks and free admission, the duties have been: a. avoided. b. breached. c. performed.

c. performed.

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

c.​in writing or evidenced by a written memorandum

What is the exchange of one thing of value for another called?

consideration

Colin and Delta Water Company enter into an oral contract under which Delta agrees to provide Colin with lifetime employment. This contract may be enforceable by a. Colin only. ​b. Delta only. ​c. any interested third party, such as a Delta supplier. d. either Colin or Delta.

d. either Colin or Delta.

Air Flo, Inc., and Banyan Grove Apartments enter into an oral contract in which Air Flo agrees to provide air-conditioning and heating maintenance for Banyan Grove's facilities for two years. This contract is enforceable by a. ​Air Flo. b. Banyan Grove. ​c. any third party, such as a HVAC supplies provider. d. ​none of the choices.

d. ​none of the choices.

What is also known as detrimental reliance -a court may enforce an otherwise unenforceable promise to avoid the injustice that would otherwise result?

promissory estoppel

What lways involves a relationship with one party in a special relationship in a superior position? (there is a presumption that must be disproved)

undue influence

What are elements of legality?

•Contracting for something illegal -never valid Contracts that reduce competition are against public policy• Exception: covenants not to compete and sale of ongoing business restrictions -must be reasonable in scope and length Unconscionable -terms are so oppressive that the court will relieve the innocent party

What are types of remedies and damages?

•Substantial Performance -the contract can still be enforced, if not intentional failure, and innocent party substantially received the promised benefits -usually fixed by paying money Material breach -party fails a significant duty causing contract to fail Anticipatory Repudiation -prior to performance a party refuses to carry out obligations -material breach Duty to mitigate -innocent party has to duty to reduce damages as much as possible