Business Law Test 2
Refusal of a tender of performance by one party to a bilateral contract will:
A) be treated as a repudiation, excusing the tendering party from further duty of performance under the contract.
Adam wants to buy a six-passenger car. The salesman tells him that the two-seat sports car Adam sees on the car lot would be just perfect for six people. Adam test drives the car and then buys it.
Adam is not entitled to relief based on fraud because he was not justified in relying upon the salesman's representation that the car would seat six people.
For an offer to be valid:
the offeree must have knowledge of the offer.
Which of the following is enforceable without consideration?
A new promise to pay a debt barred by the statute of limitations.
Albert read ElectroCorp's ad in the local newspaper advertising a music system for $89. Albert rushed to the store to buy the system only to be told by the salesperson that the ad was a misprint and the price should have been $289. Albert gave the salesperson $89 plus sales tax and demanded the music system.
Albert is merely making an offer to ElectroCorp to buy the music system for $89 plus sales tax.
Which of the following is NOT true concerning the requirements for an effective assignment?
Consideration is required.
Donald, a minor, makes a contract with Albert, an adult, to buy a motorcycle. One week later, Donald has his eighteenth birthday and shortly thereafter tells Albert he will pick up the motorcycle next week. In this case:
Donald has expressly ratified the contract.
Samuel Tate enters into a contract with Bill Smith under the terms of which Smith is to pay Tate $7,000 and Tate is to build a garage, repair a boat, and build a doghouse. If the doghouse has not yet been built, which term describes the type of contract in existence?
Executory contract.
Which of the following is not generally required in order to have a valid contract?
Fairness of the bargain.
All contractual promises are absolute promises to perform.
False
Objective impossibility occurs if a particular contracting party is unable to perform because of financial inability or lack of competence.
False
Specific performance is the usual judicially granted remedy for breach of contract.
False
The Restatement and the Code have made the traditional test of objective impossibility more stringent by requiring that the performance must be actually or literally impossible in order to excuse a party from contractual duties.
False
The UCC prohibits assignments of $5,000 or more.
False
The costs or losses an injured party avoids by not having to perform are not figured in the computation of damages.
False
The majority of courts hold that the running of the statute of limitations operates to discharge a contract.
False
Fourteen-year-old Marsha bought $120 worth of video games at a local store, using her own money. Her parents insisted that she return the items and get her money back. Which of the following is true?
In a majority of jurisdictions, Marsha may get her money back even if she cannot return the merchandise.
Which of the following promises does not have to be evidenced by a writing or electronic record in order to be enforceable?
Mindy's agreement with Susan to buy her bike for $400.
To accomplish the basic purposes of contract remedies, which of the following limitations have not been imposed upon monetary damages?
Restitution.
Which of the following is a contract with a condition subsequent?
Roger bought a VCR but he may return the VCR within ten days and get all of his money back.
Brian makes a material misrepresentation of fact regarding his horse to Rosalind while out riding one day. Later that day, Rosalind makes an offer to buy the horse which Brian accepts, without correcting his earlier misrepresentation of fact. In this case:
Rosalind may avoid the contract.
Russell and Joe make a contract for Russell to manufacture five leather chairs of a specified design. Prior to their manufacture, the factory is destroyed in an accidental fire that is no one's fault. If the chairs are available from other sources:
Russell's duty to deliver the chairs is discharged by the destruction of the factory.
Marcella pays $12,000 down on a houseboat which Hugh had agreed to sell to her for $64,000. Marcella then repudiates the contract. Hugh sells the houseboat to Lloyd in good faith for $60,000. Marcella may recover from Hugh:
$8,000 in restitution, which represents Marcella's $12,000 down payment less the $4,000 in damages Hugh sustained because of Marcella's breach.
The concept of consideration in contract law includes:
an inducement to each party to make a return exchange.
On November 1, Paula and Roberta enter into a contract where both parties are obligated to perform on December 31. On December 1, Paula tells Roberta, "I can, in no way, perform my duties in our contract." This statement is:
anticipatory repudiation.
Which of the following is untrue regarding the contracts of intoxicated persons?
Slight intoxication will destroy one's contractual capacity.
Busby contracts to build a house for Connell. Busby finishes approximately half of the house and quits. Connell files suit against Busby. Which remedy is not available?
Specific performance.
In the Osprey L.L.C. v. Kelly-Moore Paint Co.,Inc. case, the Supreme Court of Oklahoma held that:
a faxed delivery of the written notice to renew the commercial lease was sufficient to exercise the renewal option of the lease.
A change in contract law between the nineteenth and twentieth centuries was:
a relaxation of requirements of contract formation.
An agreement of a seller to supply a buyer with all of the buyer's requirements for certain goods is known as:
a requirements contract.
The parol evidence rule is:
a rule of substantive law.
Sarah offers to pay Allison $150 if Allison will paint her apartment while she is out of town on vacation for two weeks. Allison makes no promise but tells Sarah that she will think about it. While Sarah is out of town, Allison paints the apartment. This is best described as:
a unilateral contract.
A breach of contract always gives rise to a cause of action for damages by the injured party.
True
By agreement, parties to a contract may discharge each other from performance under a contract.
True
If a contract explicitly provides that it may be assigned, then rights under it are assignable even if the assignment would change the duty, risk, or burden of performance on the obligor.
True
If the performance of a contract that was legal when formed becomes illegal because of a subsequently enacted law, the duty of performance is discharged.
True
Implied-in-fact conditions must fully and literally occur, and they are understood by the parties to be part of the agreement.
True
In the case of Hochster v. De La Tour the plaintiff was allowed to treat the repudiation by De La Tour as breach of contract and immediately bring suit.
True
Restitution can be obtained where a voidable contract is avoided.
True
Substituted contracts immediately discharge the original contracts.
True
The purpose of reliance damages is to place the injured party in a position as good as he would have held if the contract had not been made.
True
Under the rule in Hadley v. Baxendale, only damages foreseeable at the time of entering into the contract can be recovered.
True
Which of the following is correct with regard to consideration?
Two of these are correct.
Roberto obtains an exclusive franchise to sell widgets for the Acme Widget Company. The exclusive franchise covers the entire State of Wisconsin for a period of three years. In this case:
Two of these but not all three.
Alice says to Brian, "If I decide to buy a word processor next year, I will buy it from you." This is an example of:
an illusory promise.
Aunt Ellie promises her 21-year-old nephew, Robbie, that she will pay him $100 if he quits smoking for a month. If Robbie does, is there a binding contract?
Yes, because Robbie gave up a legal right.
Sam owes $5,000 to the First National Bank for a student loan which will come due on January 1 next year. He has been offered a two-year graduate fellowship, but he will not be able to pay the loan back if he accepts the fellowship. The bank manager tells Sam that if he pays $3,000 now, they will forgive the loan. Should Sam accept the offer?
Yes, because the early payment of the loan is consideration that makes the bank's promise binding.
On March 1, Tammy, a student, received a telephone call from Watterson, Inc. offering her a job for one year beginning on June 15, after completion of the school year. According to the personnel manager, she will have to move to California and be ready to start work at 8:00 a.m. on June 15. Should Tammy ask for a letter confirming the telephone conversation if she accepts the offer immediately?
Yes, because the job offer is for longer than one year from March 1.
If a court finds a contract unconscionable:
the court may refuse to enforce only the unconscionable part.
Anita owes Brad $75,000. Brad signs a written statement granting Carl a gratuitous assignment of his rights from Anita. If Brad delivers the signed statement to Carl before he dies:
the delivery of the statement makes the assignment irrevocable.
In Berg v. Traylor, the court found that:
the disaffirmance of an agreement by a minor does not operate to terminate the contractual obligations of the parent who signed the agreement.
A(n) __________ contract is one in which the terms have been definitely and specifically stated and agreed upon.
express
A conditional acceptance:
is a common type of counteroffer.
Kellie owes a duty to Grant and Kellie delegates the duty to Hank. Hank:
is not obligated to either Kellie or Grant to perform the duty unless Hank agrees to do so.
Lynne agrees to buy Harriette's farm for $200,000 and puts $20,000 down. Then Lynne learns she is allergic to hay and repudiates the contract. If Harriette can sell the farm in a good faith transaction for $190,000 a month later, she may:
keep $10,000 of Lynne's down payment.
In the case of Hadley v. Baxendale, the plaintiff was seeking damages for:
lost profits.
Melody, age 17, makes a contract with Seung, who is an adult. Melody:
may exercise the power of avoidance, called disaffirmance, while still a minor, and thereby be released from any liability on the contract.
Joanne, a minor, sold her laptop computer to Bruce, an adult. Bruce then sold the laptop to Anna, also an adult, who had no knowledge of the fact that the original owner was a minor. Under the Uniform Commercial Code, Joanne may:
not avoid her contract with Bruce and may not recover her laptop.
A(n) __________ is a method of discharging a contract in which a third party becomes bound upon a promise to the obligee.
novation
The Code greatly alters the common law doctrine of material breach by adopting what is known as the:
perfect tender rule.
A __________ is the refusal to accept an offer.
rejection
According to the UCC, an enforceable agreement involving the transfer of title of goods from a seller to a buyer for a price is called a(n):
sale
Caroline signs a contract to work as a sales rep for Incellmed Corporation for a period of two years. This contract is governed by:
state common law.
To be effective, an offer must:
be communicated to the offeree.
Quasi contracts are used to provide a remedy when the parties enter into a(n):
void contract.
Contract damages that put the injured party in as good a position as if the other party had performed are:
compensatory damages.
The definition of commercial reasonableness as used in contract law includes:
that the practices customary in the type of transaction involved be used as a standard.
Express contracts and implied in fact contracts:
Two of these are true.
Equitable remedies are available any time the plaintiff chooses them over money damages.
False
Tender is an offer by a party, who is ready, willing, and able, to perform his obligations under the contract.
True
According to the "American Rule," when contracting parties litigate over a breach:
each party pays its own attorney fees, regardless of who wins.
The usual remedy for breach of contract is:
money damages.
Which of the following is NOT true regarding specific performance?
It will be granted frequently in contracts involving the sale of goods.
Which of the following contracts is covered by Article 2 of the Uniform Commercial Code?
The sale of a new car.
Which of the following would not be enforceable without additional consideration?
The settlement of an undisputed debt.
Which of the following would be considered to be a misrepresentation of a material fact for purposes of establishing fraud in the inducement?
"This car has a new radiator."
Which of the following is a collateral promise?
A mother tells a merchant to extend $1,000 worth of credit to her son and says, "If he doesn't pay, I will."
Which of the following would NOT be a merchant under Article 2 of the UCC?
A person who inherits three speedboats and wants to sell them to buy a car.
Which of the following is correct with respect to election of remedies?
A person who seeks an injunction may also seek incidental damages for the breach.
Which of the following would generally be considered to be a revenue-raising licensing law?
A statute requiring that salespeople be licensed, but not establishing any educational or training requirements.
Which of the following is NOT always necessary in order for a valid contract to be formed?
A writing.
Al, an accountant, has a tax service and accounting business in Redwood City. He decides to move to Center City, which is 150 miles away and sells his accounting practice to Able and Baker, a CPA firm. In the sale contract, he agrees that he will refrain from practicing accounting anywhere within a 60-mile radius of Redwood City for a period of two years. However, on weekends he returns to his house in Redwood City, and when clients call him, he meets with them in his home. In this case:
Al is in violation of the sale agreement, which contained restrictions that would probably be held to be valid.
Which of the following is true with regard to an exculpatory clause?
All of these are true. An exculpatory clause excuses one party from liability for her own tortious conduct, Where one party has a superior bargaining position that has enabled him to impose an exculpatory clause upon the other, the courts are inclined to nullify the provision, and An exculpatory clause may be unenforceable for unconscionability.
The Uniform Commercial Code does not apply to:
All of these. Employment contracts, service contracts, insurance contracts, and contracts involving real property.
Contract law is significant in that it is basic to other fields of law such as:
All of these. Sales of personal property, commercial paper, and secured transactions.
The remedies of damages and rescission are available for:
All of these. material fraudulent misrepresentation, negligent misrepresentation, and innocent misrepresentation.
Which of the following are the two basic elements to consideration?
Bargained-for exchange and legal sufficiency.
Arnold has offered to take Bob into his accounting firm as a partner upon payment of $5,000 cash. In response, Bob says, "I'll give you $3,000 cash now and I will pay you the remainder in two months after I see whether things are working out as a partnership."
Bob has made a counteroffer and hence there is no contract.
If Anna by mistake delivers to Bob a plain, unaddressed envelope containing $50 intended for Cora:
Bob's obligation to return the money is quasi-contractual.
A valid contract may be unenforceable for which reason(s)?
Both failure to satisfy the statute of frauds and running of the statute of limitations.
The UCC provides missing contract terms in which of the following instances?
Both failure to specify the price and failure to specify the place of deliver.
In which of the following situations will a court grant specific performance?
Both in cases involving breach of contract for the sale of real property and where goods are unique or rare.
If West and Burton designated in their contract an amount to be paid in the event of a breach and the amount is found to be so high it is considered a penalty, the injured party will be left without a remedy.
False
If the parties to a contract stipulate an amount that will be paid in the event of a breach, the courts will always enforce it.
False
In all substituted contracts there must be an agreement among three parties where a new promise is substituted for an existing promise or a new promisor is substituted for an existing promisor.
False
The remedy for misrepresentation is specific performance of the contract.
False
The test of foreseeable damages is subjective.
False
Where a party has been induced by fraud to enter a contract, the Restatement of Torts permits the injured party to recover out-of-pocket damages but expressly excludes recovery of benefit-of-the-bargain damages.
False
Howard ordered an aluminum storm door for $249.99. Before it was delivered, the same store from which he ordered the door ran an ad in the paper for the same storm door at $179.99. Howard called the store and demanded the advertised price. If the store says "okay":
Howard must pay $179.99.
James threatens to hit Kenneth in the head with a baseball bat unless Kenneth signs a contract agreeing to pay James $400 for his saw. Because of the threat, Kenneth signs the contract.
James has committed physical duress against Kenneth.
Which of the following would not be a promise statutorily made enforceable without consideration?
Jones promises to pay his cousin's past-due cell phone bill.
Maxine offered to sell her video camera to Tom for $200 and also stated to Tom, "I will give you two weeks to accept my offer." One week later Tom learned that Maxine had sold the video camera to Cindy. In this case:
Maxine has revoked her offer to Tom.
In which of the following cases would an oral contract be enforceable without a written memorandum?
Michelle calls an employment agency in Paris to arrange for maid service for her three-month Parisian vacation.
Barry's Sport Shop calls Champion Tee Shirt Company to order 200 designer tee shirts at $2 per shirt. The next day, Barry decides he can easily sell 100 more. Before the order is filled, he calls to change the order to 300 tee shirts. Champion sends 200. Can Barry force Champion to send the additional 100?
No, because Barry does not have a writing signed by Champion Tee Shirts.
Which is not a revocable offer?
None of these are revocable offers.
Which of the following is untrue with regard to the interpretation of contracts?
Technical terms will always be given technical meaning and language that has a commonly accepted meaning is always interpreted in accordance with that meaning.
Michelle's Boutique places an ad in the Sunday paper for beautiful, top-of-the-line designer suits for $3.00. Alice sees the ad in the paper and goes to the store to stock up on business suits for her new job. Michelle apologizes for the misprint. Alice has just finished a class in contract law and insists that the store sell her five suits for $15. Alice threatens to sue Michelle for breach of contract.
The ad in the newspaper is a solicitation seeking offers, but is not an offer to sell; therefore, Alice will not be able to successfully sue for breach of contract.
In which of the following cases will an oral contract for the sale of goods of $750 be enforceable without a writing?
The goods are to be specially manufactured for the buyer and the seller has made a substantial beginning of their manufacture. B) A party admits in an answer to a complaint in a lawsuit that the contract was made. C) Delivery and acceptance of the goods has been made. D) All of the above. (correct)
In which of the following situations does the parol evidence rule not apply?
The parol evidence rule does not apply in either (a) or (b).
In addition to the four basic requirements of a contract, which of the following must also occur in order to have a valid contract?
There must be an absence of invalidating conduct.
Assume an offeree mails a rejection to the offeror on November 1. This rejection arrives at the offeror's place of business on November 5. In the meantime, on November 4, the offeree sends the offeror an acceptance that arrives November 6. Which of the following statements correctly describes the situation?
There was no contract.
Which of the following statements best describes charitable subscription promises?
They are generally enforceable if there is reliance or a probability of reliance by the charity.
Marilyn contracted with Bravo Builders to build an addition to her house for $15,000. After digging the foundation, Bravo decides that it will take more work and more concrete than it had originally thought and that it will need to charge an additional $5,000 for the job. Assuming Marilyn agrees, which of the following is correct?
This is a modification of a preexisting contract, which under common law must be supported by additional consideration on the part of Bravo Builders.
A gratuitous assignment is revocable by the assignor.
True
A liquidated damage clause that represents a reasonable approximation of the damages where the actual amount would be very difficult to determine will usually be upheld.
True
A party delegating his duty to a third party is known as a delegator.
True
An accord and satisfaction discharges the original debt.
True
An implied-in-law condition and constructive condition are the same.
True
An implied-in-law condition need only be substantially performed.
True
Assignments of future wages are subject to statutes that sometimes prohibit them altogether.
True
Punitive damages are not always awarded as a deterrent in breach of contract cases.
True
in a third-party beneficiary contract, the third party's rights arise at the time the contract is formed.
True
Carlos owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Virginia and, as part of the transaction, agrees not to engage in the same business anywhere within the state for a period of four years. The agreement:
Two of these.
Which of the following is untrue regarding the contracts of incompetent persons?
Unlike a minor, an incompetent person can never ratify a contract.
Tim, who is a minor, enters into a contract with Violet, who is an adult. Which of the following is correct?
Violet may not disaffirm the contract.
Al owes Tracy $500, due June 1. Al, Tracy, and Ted mutually agree that Ted will pay Tracy instead of paying Al the money Ted owes Al. Such an agreement is an example of:
a novation.
Steven owes Theresa $100 for a used computer which he bought last year at Theresa's garage sale. The two agree that the debt can be paid by Steven's shoveling Theresa's driveway from January through March. The new contract is a(n):
accord.
The sole nursing home in the county offers a long-term care agreement. The contract is prepared on a standard form and offers terms on a take-it-or-leave-it basis. Such a contract is called:
an adhesion contract.
David enters into a contract giving Edward the right of first refusal on a tract of land owned by David. David subsequently offers the land to Fred without first offering it to Edward. An appropriate remedy for Edward to seek would be:
an injunction.
An ad in a newspaper or a circular describing goods and stating prices would generally be considered:
an invitation to buyers to make an offer to buy goods.
A contract that binds the offeror to keep an offer open for a specified period of time is known as:
an option.
A contract in which both parties exchange promises is a:
bilateral contract.
Possible remedies for a breach of contract include:
compensatory damages.
The requirement that each party to a contract must intentionally exchange something of value as an inducement to the other party to make a return exchange is known as:
consideration
A contract of adhesion:
consists largely of boilerplate provisions, such as a standard-form insurance policy.
Under the UCC, __________ refers to the manner and extent to which the respective parties to a contract have accepted successive tenders of performance by the other party without objection.
course of performance
A(n) __________ is an intended beneficiary of a contract who receives the benefits of the contract as a gift.
donee beneficiary
Unless one of the parties contractually assumes the risk, the __________ discharges a contract if supervening circumstances make fulfillment of the purpose which both parties had in mind impossible.
frustration of purpose doctrine
Bob, the tax accountant, promises to do Marge's individual federal, state, local, and gift taxes for the year. He completes all but the gift taxes. Under the substantial performance doctrine, Marge will:
have to pay Bob for all but the gift taxes.
In order to form a contract, the parties must:
manifest their agreement objectively.
The Rogers family has always wanted to buy the beautiful house at the top of the hill. The owners of the house, the Thompsons, decided to sell and called Mr. Rogers. Before he could get back in touch with Mr. Thompson, Mr. Rogers suffered a heart attack and died. Mr. Rogers' adult daughter, to whom the Thompsons had not spoken, still wants the house. She may:
not accept, since the offer is terminated.
Harry said to Marge, "I have a ring once owned by Marilyn Monroe. Would you like to buy it for $500?" Marge pays for the ring, but the next day a friend tells her that Harry had recently purchased the ring at a local store. Marge enjoys wearing the ring and wears it constantly for twelve months. Finally, she goes to Harry and says, "Here is the ring you lied about. Give me my $500." Most likely Marge will:
not get her money back since she has affirmed the contract by taking an unduly long time to disaffirm.
Randy, a minor, buys a new four-wheel drive truck from the Jones Dealership. Randy sells this truck to his cousin, Steve, who is an adult. Steve conveys this vehicle to Arthur Smith. Arthur does not personally know Steve or Randy. Randy may:
not recover the vehicle from Mr. Smith.
Jeb submits a bid to construct a student union building for the local community college. He realizes after submitting the final bid that he forgot to include the cost of the window casings for the entire building. He may:
not revoke his bid due to the statutory irrevocability of the bid.
By holding a knife to his back, Ed compelled Sean to sign a contract advantageous to Ed. This contract was entered under:
physical duress.
Nanette wanted to purchase a new car and found one she liked at Minson Motors. Several important contractual terms were buried in the written agreement and some of the meaning of the contract was obscured by legal jargon. The contract involved:
procedural unconscionability.
The court in the Weichert Co. Realtors v. Ryan case held that the performing party was entitled to recoup the reasonable value of the services rendered under:
quantum meruit.
A(n) __________ is a measure designed to protect the public from unqualified practitioners.
regulatory license
If the contract does not state otherwise, standard goods under a contract for sale to meet the satisfaction of the buyer must:
satisfy a reasonable person.
Fay, age 17, ordered a pair of skis on the installment plan. She paid $20 every month until she turned 18, the age of majority. The next day, she sold the skis to Sharon and disaffirmed the contract. Fay is:
still liable because selling the skis amounted to a ratification.
The court in National Business Services, Inc. v. Wright found a noncompete agreement drafted for an employee of an Internet company was:
subject to larger geographic restrictions than for other types of companies.
The principle illustrated in the Christy v. Pilkinton case is:
subjective impossibility does not discharge the contractual duty of the party.
Clint contests the amount of a bill he received from Car Care Specialists. Under the Restatement, settlement of the claim:
is valid consideration if at the time of the settlement the claim was doubtful because of uncertainty as to the facts.
In considering a covenant not to compete in an employment contract, the court in the case of Payroll Advance, Inc. v. Yates said in its opinion:
the question of reasonableness of a restraint requires consideration of such circumstances as the subject matter of the contract, the purpose to be served, the situation of the parties, the extent of the restraint, and the specialization of the business.
Rorzex, Inc. entered into a contract with Denzil under the terms of which Denzil would receive $20,000 if he stole trade secrets from the leading competitor of Rorzex. Denzil performed his end of the agreement by delivering the trade secrets. Rorzex now refuses to pay Denzil for his services. Denzil:
will be unable to recover, because this is an illegal contract.
Barbara, an antique dealer, intentionally misrepresents the value of an antique chest of drawers, as $6,000 when she has reason to know the value is considerably less. Margaret agrees to buy it for $5,500. It is worth $2,500. In a state that uses the "out-of-pocket" rule, Margaret's damage award would be:
$3,000.
The UCC Article 2 statute of frauds provision applies to the sale of goods for the price of __________ or more.
$500
Nancy, who lives in Birdville, wants to open a McHenry Roast Chicken franchise. Mark, a representative of McHenry, told Nancy, "If you will buy a lot and build a building in River City, we will give you a franchise." Nancy bought the lot and built the building as instructed only to discover that McHenry had awarded the franchise to a large corporation. McHenry claims no liability to Nancy since there was no consideration. Which statement best describes the situation?
$60, since the modified agreement is supported by additional consideration.
Hal promises not to foreclose on a mortgage that he holds on an office complex that Christopher owns. In reliance on this promise, Christopher spends $200,000 to remodel the complex. Which of the following is correct with regard to Hal's promise?
All of these. Hal's promise not to foreclose is unsupported by consideration, Hal's promise is non-contractual, and Hal's promise may be enforced against him based upon the doctrine of promissory estoppel.
Under the Restatement, if the parties to a contract attach materially different meanings to their manifestations and neither party knows or has reason to know the meaning attached by the other:
All of these. and neither party is to blame, there is no contract at all, and both parties are to blame, there is no contract at all, and one party is to blame, that party will be held responsible, but the contract is not void.
Which of the following involves an invalid assignment that a court would not enforce?
An assignment of an automobile liability insurance policy accompanied by the delivery of the policy.
If Nioma cannot prove a particular element of her loss with reasonable certainty, she is barred from recovering any of the loss arising from breach of contract by the other party.
False
In the Arrowhead School District No. 75, Park County, Montana, v. James A. Klyap, Jr. case, the court found the liquidated damages clause was void as a penalty because it was unreasonable and unduly oppressive.
False
Cheryl, age 16, ordered a new dress to wear to the school prom. She has contracted to pay $500 when the dress arrives. Before the dress arrives, Cheryl decides that the dress is too expensive, and she now wishes to cancel the order. Cheryl:
May disaffirm this executory contract because, while clothing, in general is classified as a necessary, a new prom formal would probably not be as classified as a necessary
Which of the following would be considered a material breach of a contract?
Partial performance that omits some essential part of the contract. B) Delivery of 50 chairs in a contract that calls for 100 chairs. C) An intentional breach of the contract. D) All of these would be material breaches. (correct)
Percy, age 17, purchased a used mobile home from a mobile home dealer for $20,000. This price, however, is twice the reasonable value of that mobile home. Several months later, Percy wants to disaffirm the contract. If the mobile home is considered a necessary item:
Percy is only liable for the reasonable value of the mobile home.
Belinda has a household insurance policy, which requires that she notify the insurance company within 30 days of any loss before she is eligible to receive payment for her loss. The notification requirement is a condition precedent to the insurance company's obligation to perform, even though the notification must occur subsequent to the loss.
True
Concurrent conditions occur when mutual duties of performance are to take place simultaneously.
True
Contract rights are generally assignable.
True
Discharge by performance is the most frequent method of discharging a contractual duty.
True
Even if a party has the power to avoid a contract for lack of capacity, duress, or undue influence, the party will lose that power by affirming the contract.
True
What principle did the court apply in the case of Madison Square Garden Corp., Ill. v. Carnera?
When damages are not adequate, an injunction may be used to enforce a negative covenant regarding exclusive services that are unique and extraordinary.
Jack moved from New Hampshire to Florida and decided to have an air conditioner installed in his car. After it was installed, Jack received a bill for $1,200. Jack called the dealer and told him he'd never heard of this service costing more than $500. They argued, but the dealer finally agreed to take $900. Is the agreement enforceable?
Yes, there is consideration for the modified amount.
George has been declared incompetent by the court and is under the care of his sister. Unknown to his sister, George rents the 10,000-seat civic center for his birthday party. George's contract to rent the civic center is best described as:
a void contract.
The doctrine of promissory estoppel:
All of these. Is a doctrine enforcing non contractual promises, includes as a requirement within the doctrine that there has been justifiable reliance on the promise, and a doctrine relying on justice and not contractual rights.
Contracts that are implied in law:
All of these. are obligations imposed by law on grounds of justice and equity, and are intended to prevent unjust enrichment, do not rest upon the assent of the contracting parties.
There are certain transactions that are enforceable without consideration. These include:
All of these. promises to pay a debt barred by the statute of limitations, a promise to pay a debt that has been discharged in bankruptcy if certain requirements are met, and a new promise to perform a voidable obligation that has not previously been avoided.
A bank robbery has occurred, and the banker's association has offered a $1,000 reward for information leading to the arrest and conviction of the robber. Several people are claiming to be entitled to the money. Which of them is eligible?
An off-duty deputy sheriff from a county other than the one where the arrest occurred.
Andrew agrees to paint Rosalene's house for $500. Two days after he starts the job, he decides that $500 isn't enough money. He refuses to finish the job, unless Rosalene agrees to pay him $100 more. What principle applies to this fact situation?
Andrew was already obligated to paint the house. He gives no additional consideration in return for Rosalene's promise to pay more money.
In which of the following situations is restitution available as a remedy?
As an alternative remedy for a party injured by breach. B) For a party in default. C) For a party who may not enforce the contract because of the statute of frauds. D) All of these are situations in which restitution is available. (correct)
Bart sends Carla an offer by express mail. Carla receives it at 10 a.m. on Tuesday. At 11 a.m. on Tuesday, Carla delivers an acceptance to Speedy Mail-to-You Express, Inc., but due to their error, the letter is not sent out by the company until Wednesday at 8 a.m. At what time does the law consider the acceptance to be effective?
At 11 a.m. on Tuesday.
Which one of the following assignments would probably be prohibited by a court?
Mary is in debt. A credit card company calls and threatens to sue. Mary orally assigns her next bimonthly paycheck to her creditor.
At its discretion, a court of equity may grant an injunction against breach of a contractual duty when damages for a breach would be inadequate.
True
Divided Parcel (DP) includes the following on its mailing receipts: "We are not responsible for any damages to packages whether or not through the intentional or reckless fault or negligence of our employees. Send packages at your own risk." Mary reads this clause but sends her watch back to the manufacturer to be repaired anyway. The watch is destroyed when the DP driver uses the package for a ball and tosses it to his buddy. Mary is:
likely to collect from DP because it attempted to excuse intentional and reckless behavior.
Howard needs a truck to pull a 2,000-pound trailer. Gordon tells Howard, "My truck will pull a 2,000 pound trailer with ease." Relying on Gordon's statement, Howard buys the truck, but it will not pull a 2,000-pound trailer. If Gordon did not intend to deceive and Howard sues for nonfraudulent misrepresentation, he can ask for:
out-of-pocket damages, plus consequential damages.
An obligation imposed by law where there has been no agreement or expression of assent by word or act on the part of either party involved is a(n):
quasi contract.
The case of In re The Score Board, Inc. involved the issue of:
ratification of a contract upon attaining majority.
Bartow signed a contract to coach baseball for Washington High for a period of three years. After two years he is offered and accepts an assistant coaching position at State University. Contract law will not allow Washington High to ask for: A)
specific performance of his contract.
Carolyn agrees to sell Marianne an antique handmade lace tablecloth for $1,500. When Carolyn discovers that her cousin wants it too, she breaks the contract with Marianne. Marianne can ask the court to order:
specific performance.
Miller made a contract to sell his condominium to Jefferson for $80,000. Two days later Miller changed his mind after discovering that he could have sold the property to another buyer for an additional $20,000. Jefferson sues and asks the court to have the property conveyed to him at the price of $80,000. Jefferson is seeking:
specific performance.
General contract law states that contracts that have to be in writing must:
specify the parties to the contract. B) specify the subject matter and essential terms. C) be signed by the party to be charged or by his/her agent. D) All of these. (correct)
John operates a small repair business and is in desperate need of a certain type of building material. He obtains the material from a large corporation, but is charged a grossly unreasonable price and is forced to buy other material he does not need. In view of the buyer's unequal bargaining power and unreasonable terms of the contract, this may be a case of:
substantive unconscionability.
In the Pacific Custom Pools, Inc. v. Turner Construction Company case, the court found:
that the purpose of the relevant licensing law was to protect the public from incompetence and dishonesty in those who provide building and construction services.
A condition subsequent is a much more frequent occurrence than a condition precedent.
False
A gratuitous assignment is revocable even after the assignor has made an effective delivery of the assignment to the assignee.
False
A novation is an agreement between two parties to have one substitute for the other in a contract.
False
A person who has made a financially unsound contract may be relieved from performance under the doctrine of commercial impracticability.
False
Article 9 of the UCC makes waiver-of-defense clauses effective against assignees in consumer transactions.
False
Carl, a contractor, has a contract with Ron, a realtor, to construct a new condominium complex. The contract provides that Carl must furnish a certificate of occupancy and conformity with the local fire code before Ron has an obligation to pay. The furnishing of the certificate is an implied-in-fact condition subsequent to the construction of the building.
False
Deanne contracts with Leonard to paint her barn in two weeks. If Leonard breaches the contract, Deanne can elect the remedy of damages or the remedy of injunctive relief to prevent Leonard from providing his painting services for anyone else until he paints her barn.
False
Donee beneficiaries and incidental beneficiaries are called intended beneficiaries
False
Barbara, a wealthy widow, promises the pastor of her church that she will donate $30,000 to the church to help pay off its mortgage if the stewardship committee can obtain enough pledges for the balance of the $60,000 mortgage. Other pledges are obtained to pay off the mortgage, but now Barbara has changed her mind and plans to take an around-the-world cruise instead. In this case:
under the Restatement of Contracts, Barbara's promise is enforceable.
Byron and Merv enter a contract for the sale of a computer. If Merv breaches the contract and Byron waits until the time specified in the statute of limitations has passed, the contract is now:
unenforceable
Under the UCC, a(n) __________ is a practice or method of dealing regularly observed and followed in a place or vocation or trade.
usage of trade
Which of the following is correct with regard to conditions subsequent?
A "sale or return" contract is an example of a contract with a condition subsequent.
In a majority of jurisdictions, Marsha may get her money back even if she cannot return the merchandise.
A camera.
Which of the following involves a creditor beneficiary relationship?
A contract where the insured names a bank with which he has a loan as the beneficiary of a life insurance policy.
Carl, a contractor, and Lyle, a landowner, have a contract whereby Carl is to perform routine construction services according to the blueprints that Lyle has provided. Carl assigns the contract to David, a developer. As a result of this assignment:
Carl no longer has any rights under the contract, but he remains responsible for the duties he agreed to perform.
Although not covered by the original statute of frauds, most states have statutes requiring a writing to make all but which of the following contracts enforceable?
Contracts for the sale of securities.
Which of the following is correct with regard to duress?
Duress by improper threats or acts is the more common form of duress.
William agrees to drill a well up to 200-feet deep for John's rural cabin. The contract price is $3,000. After drilling 100 feet, William strikes solid granite rock. He talks to John and explains that this is highly unusual for the area and could not have been anticipated at the time of entering into the contract. He offers to get a special drill, but says it will cost him more money, so that he will be unable to complete the project for the agreed price. Because John is anxious to have the well, he agrees to pay William an additional $1,000 to complete the job. However, once the well is finished, he changes his mind and now says he will pay only the originally agreed-upon amount. What is the result?
The parties have agreed to a substitute contract which discharges the original contract. John is obligated to pay the additional $1,000.
Jack has been in the business of selling carpeting for 20 years. He calls Bob, who is opening another branch of his furniture stores, and offers to sell him 100 square yards of carpet at $20 per square yard. Bob agrees and sends back the following letter confirming the deal:Dear Jack:As we discussed on the phone January 3, we accept your offer of 100 square yards of Saxony "heather blue" carpeting at the rate of $20 per square yard. We also reserve the right to purchase any additional yardage we need to carpet our other showroom facilities at the same rate for one year from that date.Very truly yours,BobWhich of the following is true?
There is a contract for only 100 square yards of carpeting.
Under which of the following circumstances would a court be unlikely to enforce the illegal contract?
Where the agreement is with an unlicensed attorney.
In which of the following situations would a minor be unable to disaffirm a contract which he had made?
Where the minor wishes to perform part of a contract and disaffirm another part of the same contract.
Rebecca sees a pair of beautiful silver shoes in a store window. She goes in and tells the shopkeeper, "If I am asked to the prom, I will buy those shoes. Please hold them for me." If the shopkeeper signs a note that says, "Will hold for Rebecca silver shoes, style 1028, size 8," will he have to honor that promise?
Yes, and there is a condition precedent to the contract of sale.
Don has an employment contract with Dunkirk Ice Cream. He sells ice cream and novelty ice cream products. He has nine children and doesn't make enough money, so he decides to see if another dairy will hire him, too. "After all," he reasons, "most stores carry four or five different brands." His employment contract prohibits him from competing. If Don sells for another dairy in addition to Dunkirk, will he be in trouble under his contract?
Yes, it is likely to be enforceable during employment.
Tim mails an offer to Brian on June 15. Brian receives the offer on June 16. Tim mails a revocation of the offer on June 17. Brian mails a letter of acceptance on June 18. Brian receives the revocation on June 19. Tim receives the letter of acceptance on June 20. Was a contract formed?
Yes, on June 18.
If Anna Laura, in return for the payment of $200 to her by Catherine, gives Catherine an option to buy Jesse, a prime Arabian mare, at any time within the next 14 days at a price of $50,000, Anna Laura's offer to Catherine is:
irrevocable for the 14 days covered by the option.
Under E-Sign, an electronic agent:
is a computer program or other automated means used independently to initiate an action or respond to electronic records or performances.
Orwin, owner of a used furniture store, gives Maggie a signed offer to buy her living room furniture for $800. This offer:
is irrevocable for a reasonable time, not to exceed three months, even if there was no consideration.
Jan promises Eli $4,000 for one of his original paintings on the condition that she receives $1 million from her mother's will. Jan's promise:
is legally sufficient unless Jan knows she cannot inherit the $1 million.
Rose is working hard on Arlin's mayoral campaign. She thinks that just a few more votes could win the election, so she promises to pay her friend Violet $50 if she will register and vote for Arlin. Violet does so, but Arlin loses the election, and Rose now refuses to pay. Rose's agreement to pay Violet:
is unenforceable and opposed to public policy.
Robert Briscoe is 17 years old. He lies to Bouyers Auto about his age in order to induce them to sell him a new pickup truck. Bouyers falls for this lie and sells him the pickup. Under the prevailing view, Robert:
may disaffirm and get his money back.
Sean has a right against Tanner and assigns it for value to Megan. Later, Sean gives Tanner a release. Megan:
may recover damages from Sean for breach of an implied warranty.
Darla offers to pay Edward $6,000 for Edward's car, provided that Darla receives that much from her uncle's estate, which is currently being probated. She expects to know for sure how much she will receive within a week or so. If Edward agrees:
the consideration from Darla to Edward is the promise of $6,000 subject to a condition.
Under the Uniform Commercial Code, when the minor has sold goods and the buyer has resold them to a good faith purchaser for value:
the good faith purchaser for value acquires legal title.
Charlene hears about a reward being offered by the local television station for information leading to the arrest and conviction of a local rapist. She supplies the requested information and the suspect is then arrested and convicted. In this case:
the offer by the television station was an offer made to the general public to enter into a unilateral contract, which offer Charlene has accepted.
Kelley borrows $3,000 from Paul and orally agrees to repay him in three annual installments. Most courts would hold:
the oral contract is enforceable because Paul fully performed his obligation under the contract.
An arm's length transaction is one in which:
the parties are acting in their own self-interest.
Fred contracts to sell a certain tract of land to Mary for $20,000, but the contract is silent as to the time of delivery of the deed and payment of the price. In this case:
the payment of the $20,000 and the delivery of the deed are mutually dependent and, in the absence of an agreement to the contrary, are concurrent conditions.
Fred is a concert violinist who is scheduled to perform at Carnegie Hall for the first time. He buys what he is told is a Stradivarius violin from a well-known, reputable dealer in quality violins, and he pays the going rate for a Stradivarius. He later learns the violin is an imitation, although it is a good imitation, which fooled even the dealer. In this case:
the sale may be rescinded, because the dealer has made a nonfraudulent misrepresentation.
A written, integrated contract contains a provision that states it will be effective for a "year." The plaintiff in a lawsuit claims that a "year" is obviously 12 months. The defendant claims that the contract meant a 10-month school year. In this case:
the term "year" is ambiguous, and the parties can bring in parol evidence to clarify their intent.
Stewart entered into a contract with Will to have Will build a 10-unit apartment complex on Elm Street in Randolph County. Unknown to both parties, this land had recently been rezoned and only single-unit dwellings can be constructed. In this case:
there is a mistake of law, which in some states is treated no differently than a mistake of fact. In such states, since this mistake relates to a basic assumption on which the parties made their contract and it has a material effect on their agreement, the contract is voidable.
Able is involved in an automobile accident and is injured. While he is unconscious, the police call an ambulance which takes him to a hospital. Able is treated at the hospital and released a day later. The hospital sends him a bill for $4,500, which Able refuses to pay, claiming it is too high and he never consented to the treatment because he was unconscious. Able:
will have to pay the hospital, because this is a quasi-contractual agreement.
The definition of "discharge by breach" is:
wrongful failure to perform the terms of a contract that gives rise to a right to damages by the injured party.
James offers to sell his fishing boat to Brenda for $3,000. Brenda says she will apply for a loan and will buy the boat within a week. A contract is formed:
when Brenda tells James she will buy the boat.
Which of the following would NOT require a writing under the statute of frauds?
A landscaper agrees to landscape the lot surrounding an office building.
Which of the following is true regarding noncompliance with the statute of frauds?
A party to a contract which was unenforceable because of the statute of frauds but who relied upon the contract may recover in restitution the benefits he conferred on the other party.
Which of the following is an exception to the suretyship provision requirement under the statute of frauds?
A promise, the leading object of which is to obtain an economic benefit for oneself.
Harold purchased 400 pairs of gloves from Isaac at a contract price of $800. Fifty of the gloves were defective and a dispute arose as to the amount due and owing under the contract. Harold refuses to pay the $800, and Isaac is threatening to sue. Which of the following is correct with regard to this transaction?
If Isaac agrees to accept $600 to settle the dispute and Harold agrees to pay that amount, the agreement is enforceable.
Action Play Equipment ordered 200 feet of chain, 400 clasps, and 50 swing seats from Brace Company for $1,600 to be delivered within three weeks of the order. Brace sent back an acceptance form which stated payment was due within 30 days of delivery or a finance charge of 2% per month would be added to the balance. What is the status of the interaction between Action and Brace?
There is a valid contract under the UCC, and the additional payment terms become part of the contract unless Action objects within a reasonable period of time.
When a minor falsely advises the other party that he is of the age of majority and based upon that misrepresentation, the other party enters into a contract with the minor:
There is no uniform rule. States differ, and depending upon the state, any of the above could be correct.
Elvis makes an offer to Fred, but before Fred can accept, the state supreme court decides a case that makes Elvis's offer illegal. The court's decision:
automatically terminates the offer.
Will makes an offer to Ike, but before Ike can accept, the state legislature passes a law that makes Will's offer illegal. The new statute:
automatically terminates the offer.
In a contract for the sale of lawn care services, an issue arises about whether the homeowner would receive disproportionately less in service than the lawn care company would receive in compensation. This disparity may be relevant to the:
availability of certain defenses and remedies.
Steven makes a material misrepresentation of fact regarding his motorcycle to Thelma who agrees to buy the motorcycle based upon the misrepresentation. This contract is:
voidable
Morris interviewed for a job as plant manager at Northland Bearings and was offered a two-year contract if she could relocate and start the new job within three weeks. Morris agreed. Northland promised to follow up the oral agreement with a written contract setting forth all the agreed terms, but the contract had not arrived within several days. Morris wanted to give two-weeks' notice to her present employer, so she called Northland to check on the written contract and was told it was ready to be sent to her and assured her the job was hers. She gave notice of her intention to quit her present job and moved two states away to the Northland location. When Morris arrived for her first day of work, she was told someone else with better qualifications had been found and hired for the position. Morris:
may be entitled to good-faith reliance damages under the doctrine of promissory estoppel to avoid injustice.
Steve purchases a four-wheel drive truck from Belk Auto Sales. Steve is only 17 years of age. He wrecks the vehicle and attempts to disaffirm the contract and have Belk repay him all that he has paid. In the majority of jurisdictions, Steve:
may simply return the vehicle and get his money.
Marilyn read an ad in the school newspaper offering a $1,000 swimming scholarship to anyone who could swim 500 laps in the school pool. Marilyn called the advertiser and began swimming. She has reached lap number 460; she feels great and is sure she can make it all the way. The advertiser:
must permit Marilyn the opportunity to finish her attempt to swim the 500 laps, or pay damages if he interferes with the completion of the laps.
Arlene signs an employment contract to work for a local business, Davis Restoration, for one year but is wrongfully discharged after three months. In order to recover from Davis full pay for the remaining nine months of her contract, Arlene:
must use reasonable efforts to mitigate her damages by seeking other employment, even if she does not find another job.
Wayne helped Hank study all night for an important exam. After Hank got an "A" on the exam, he told Wayne, "I will give you $10 for helping me get a good grade." Wayne said, "Thanks, I'll take it." There is:
no contract because there is no valid consideration.
Stan sends for a law school catalog from Ivory Towers University. According to the catalog, the law school applications are evaluated on the basis of undergraduate grades, standardized test scores, and references. Stan, who is a straight-A student, has high test scores and excellent references, applies and pays the $100 application fee. His application is rejected. Later he finds out that others with low grades and test scores were accepted based on their family connections and donations made to the University. If Stan followed all of the guidelines in the college catalog and paid the required application fee, then according to the court in Steinberg v. Chicago Medical School:
there is a valid contract; the school bound itself to honor the obligations set forth in the college catalog.
In DiLorenzo v. Valve & Primer Corporation, the court held:
there was no consideration for the stock option, and promissory estoppel did not apply because detrimental reliance was not proven.
A and B enter into a contract on January 1 of this year. A's friend C tells A, "The law generally restricts the time within which an action can be brought by either party to a contract." C's statement is:
true because of statutes of limitations.
The Uniform Commercial Code provides that a court may scrutinize every contract for the sale of goods to determine whether, in its commercial setting, purpose, and effect, the contract is:
unconscionable.
Jason's mother would like him to go to college, so in June he enrolls at the local university. He also quits his job and tells his mother his plans to take classes. His mother says, "I'm so happy that you are going to college that I want to pay for your books." Jason then sends her a bill for $485. Jason's mother's promise is:
unenforceable, because Jason had already enrolled in school when she made the statement that she wanted to pay for his books, and there is no consideration.
A __________ is a law establishing a maximum rate of permissible interest for which a lender and borrower of money may contract.
usury statute
Anna is 88 years old and under the legal guardianship of her daughter. One day Anna receives a telephone call from a health insurance salesman and purchases a $400-a-month Medigap insurance policy. This contract is:
void.
