Ch 9-13 Study Guide QUIZ
Slick owes Gullible $50. Slick offers to let Gullible have Slick's pocket knife if he will accept $25 and forgive the rest of the debt. Later Gullible sues for the balance of the debt.
Slick will win because the knife constituted legally sufficient consideration
A contract under which the parties' obligation to perform arises only on the happening of a stated event lacks the requisite mutuality of obligation if the specified event may never occur
False
A rejection is effective at the moment of its dispatch by the offeree
False
A revenue licensing statute is one designed to protect the public against unqualified persons
False
A voidable contract is an agreement that does not meet all of the requirements of a binding contract; thus, it is no contract at all and has no legal effect
False
Actionable fraud can usually be based on a statement of opinion as well as a statement of fact.
False
William, who just purchased a new computer which won't work properly, screams, "I'll sell this thing for $10," and thereby makes an offer
False
Which of the following would be an offer?
I'll sell you this computer for $1000.
Knowledge of falsity and intention to deceive under fraud in the inducement may be shown by:
actual knowledge lack of belief of the statement's truthfulness reckless indifference as to its truthfulness ALL of the above
The courts will presume that the parties intended to form a bilateral contract when it is unclear whether a unilateral or a bilateral contract has been formed
True
An offer can be effectively communicated to an offeree by:
a writing, by spoken words, or by conduct from which a reasonable person could infer a promise
In order for a purchaser of land to avoid a contract with the seller based on duress, it must be shown that the seller's improper threats:
actually induced the purchaser to assent to the contract
An executed contract is one in which:
all duties under it have been performed by all parties to the contract
An agreement in a contract that attempts to excuse one party from liability for her own negligence is called:
an exculpatory clause
Colleen agrees to pay $10 for David's computer which is worth $300. Colleen's consideration:
appears to be inadequate but is probably legally sufficient
A rejection of an offer by the offeree is effective:
at the moment that the offeree receives the notice of rejection
Opal offered, in writing, to sell Larkin a parcel of land for $300,000. If Opal dies, the offer will:
automatically terminate prior to Larkin's acceptance
In order for a offer to have legal effect, it must:
be communicated to the offeree manifest an intent to enter into a contract be sufficiently definite and certain in its terms ALL of the above
In order to satisfy the consideration requirement to form a contract, the consideration exchanged by the parties must:
be legally sufficient
A contract in which both parties exchange promises is a(n):
bilateral contract
The remedies provided for breach of contract include:
compensatory damages reliance damages (a) and (c), but not (b)
In order for an act or threat to constitute duress, it needs to be at least:
contrary to public policy
An agreement is illegal and unenforceable if its formation or performance is:
criminal tortious contrary to public policy ALL of the above
A fiduciary owes which of the following duties?
trust loyalty confidence ALL of the above
A contract which fails to satisfy the requirements of the statute of frauds is:
unenforceable
A contract in which one party seeks an act in exchange for a promise is a(n):
unilateral contract
Kay, an art collector, promised Hammer, an art student, that if Hammer could obtain certain rare artifacts within 2 weeks, Kay would pay for Hammer's postgraduate education. At considerable effort and expense, Hammer obtained the specified artifacts within the 2-week period. When Hammer requested payment, Kay refused. Kay claimed that there was no consideration for the promise. Hammer would prevail against Kay based on:
unilateral contract
A contract assented to by a party acting under improper physical coercion is:
void
A package is delivered to your door and the delivery person asks you to sign a receipt for the package. You actually sign a promissory note promising to pay the delivery person $5,000! The note is:
void due to fraud in the execution
A contract entered into or induced by undue influence on the part of the dominant party is:
voidable
All of the following situations represent exceptions to the strict rule of unenforceability of illegal agreements except:
where the parties are in pari delicto
Which of the following will be legally binding on all the parties despite the lack of consideration?
A promise to donate money to a charity which was relied upon by the charity in incurring large expenditures
Which of the following promises must be supported by consideration to be enforceable?
A modification of an existing contract under common law
In which of the following situations would silence constitute a misrepresentation?
A person fails to disclose a fact which she knows would correct a mistake upon which the other party is relying, and the nondisclosure is a failure to act in good faith
The courts will not enforce an agreement declared illegal by statute
True
Each of the following is an essential element of a binding promise EXCEPT:
a writing signed by the partied
Which of the following would be an illusory promise?
Bill agrees to buy all the widgets he wants from Sara
Usury statutes establish the minimum rate of permissible interest that may be contracted for between a lender and a borrower of money
False
When parties are dealing at arm's length, silence or nondisclosure usually constitutes fraud.
False
A bilateral contract results from the exchange of a promise for an act, whereas a unilateral contract results from the exchange of a promise for a return promise
False
A contract exists if either party party's actions manifest recognition of a contract's existence
False
A contract may be formed orally or by a writing, but it may not be inferred merely from the conduct of the parties
False
A contract to provide legal services for a fee is governed by Article 2 of the UCC
False
An exculpatory clause is a contractual clause that exempts a party from liability for his own poor business judgment in entering into a contract
False
An offeror's manifestation of intent to enter into a contract is judged by a subjective standard
False
As defined by the UCC, goods are movable, tangible and intangible property
False
At an auction announced to be "without reserve," the auctioneer is free to withdraw the goods from sale at any time prior to a bid's acceptance
False
Big Bucks, Inc. pays Andrew Attorney to lobby for a law that would increase its annual income. This is an illegal contract.
False
Bill Businessman has a bad day one Monday morning and signs a contract to buy a piece of real property for $250,000. Later he realizes he has been had, because the property is only worth $100,000. Bill can avoid the contract based on inadequacy of consideration.
False
Bill Businessman has decided to buy a copy machine on an installment contract from the Business Supply Store. After looking at machines, Bill is in a hurry, so he signs the agreement without reading it. Later, he discovers that the interest rate is 22% and that there are no guarantees on the machine. Bill can avoid the contract based on mistake.
False
Duress in the form of improper threats must be explicit in order to render the resulting contract voidable.
False
Duress in the form of physical force renders the resulting agreement voidable.
False
First Bank issues a consumer loan to Happy Homemaker at an annual rate of interest of 16%. In most states, this would be an illegal contract, because First Bank is in violation of a usury law.
False
Harold Homeowner went to Al's Auto Dealership to look at cars. Harold found a 1980 Plymouth Horizon that he thought would be a good car for his teenagers to drive to school. Al said, "This is the best car in town." Harold buys it for $1,000. Two weeks later, the car breaks down. Al is guilty of fraud in the inducement.
False
If a court finds that a part of a contract is unconscionable, it must deny enforcement of the entire contract
False
In a unilateral contract, each promise is the consideration for the other, a relationship that has been referred to as mutuality of obligation
False
In deciding whether a threat is sufficient to constitute duress, the fact that the act or threat would not affect a person of average strength and intelligence is determinative.
False
In order for an offeror's revocation of the offer to be effective, notice of the revocation must be directly communicated to the offeree before acceptance
False
In the absence of a specific statutory provision, an unlicensed person engaged in a business or profession for which a license is required cannot recover for services rendered if the licensing statute was enacted in order to raise revenue
False
Sara bets Bill that Hilltop High will win the big game. This is an enforceable agreement.
False
The adequacy of consideration is the same as the legal sufficiency of consideration
False
The agreement of a seller to sell her entire production to a particular purchaser is an illusory agreement because the purchaser doesn't know the quantity being purchased
False
The doctrine of consideration requires only that the promise or performance of one party be legally sufficient
False
Thomas says to Steve, "If you will paint my garage, I will pay you $75." Steve replies, "Would you make it $85?" Under these facts, Thomas and Steve are both promisors and promisees
False
Under the Code, the modification of a contract for the sale of goods requires the furnishing of additional consideration, just as required under the common law
False
Carl Contractor submits a bid that contains a substantial error in addition.
If the error is an obvious one that the other party knew of when it accepted the contract, Carl can avoid the contract
Pat mails Trish an offer to buy Blackacre. Trish receives the offer on May 1. On May 2, Trish delivers a letter of acceptance to National Express, but due to their error the letter is not sent by the company until May 3. Pat receives the acceptance on May 4. A contract is formed on:
May 2
On April 1, Fine Corp. faxed Moss an offer to purchase Moss' warehouse for $500,000. The offer stated that it would remain open only until April 4 and that acceptance must be received to be effective. Moss sent an acceptance on April 4 by overnight mail and Fine received it on April 5. Which of the following statements is correct?
No contract was formed because Fine received Moss' acceptance after April 4.
Which of the following would be subject to Article 2 of the UCC?
None of the above is subject to the UCC
Wert, an employee of Salam Corp., signed an agreement not to compete with Salam. Wert is the director of research and has knowledge of many of Salam's trade secrets. If Wert's employment with Salam is terminated and Wert wished to compete with Salam, which of the following statements is not correct?
The agreement is only enforceable is Wert voluntarily terminates his employment with Salam
Lucky Larson runs an illegal gambling business. Every month he pays a local judge $500 for protection. If Lucky is arrested and convicted in a trial before the same judge, and then sues the judge for breach of contract, what will be the likely result?
The contract will be unenforceable because it is a violation of public policy
Which of the following is legally sufficient consideration?
The settlement of a debt subject to honest dispute as to its amount
Carl Contractor pledges to contribute $500 to the local United Fund for charity.
There is the probability of reliance by the United Fund and the promise will be enforced under the doctrine of promissory estoppel
Which of the following would be a statement of fact?
This furniture was refurnished last year
A contract for the sale of goods need not specify the price in order to have an effective contract
True
A contract induced by an innocent misrepresentation is actionable provided all of the remaining elements of fraud are present and the misrepresentation is material.
True
A quasi contract is not a contract, but rather is an obligation imposed regardless of the intention of the parties in order to assure a just and equitable result
True
Active concealment, or action intended or known to be likely to keep another from learning a fact he otherwise would have learned, can form the basis for fraud.
True
Although an offeree is generally under no duty to reply to an offer, by custom, usage, or course of dealing, silence or inaction by the offeree may operate as an acceptance
True
An executory contract is one in which there are one or more unperformed promises by any party to the contract
True
An offer is a proposal, expressed either in words or by conduct, by one person to another indicating a willingness to enter into a contract
True
As defined by the UCC, a sale is the transfer of title to goods from seller to buyer for a price
True
At common law, a modification of an existing contract must be supported by new consideration in order for the reformed agreement to be enforceable
True
Before one can avoid a contractual obligation based upon undue influence, there must exist a confidential relationship between the parties involved.
True
Bill Businessman agrees to buy 2,000 widgets from the Widget Corporation of America next year for $60 a widget if he wants to for his business. This is an illusory contract.
True
Bill purchased 500 pairs of shoes from Sam at a contract price of $1,000. Fifty pairs were defective and a dispute arose as to the amount owing under the contract. Finally, Bill sent a check for $800, marked it "paid in full," and sent a letter to Sam explaining his reasons for thinking $800 was fair. Sam didn't respond, but he cashed the check. The debt is discharged.
True
Carol Customer signs a consumer purchase agreement for a VCR in which she agrees to make monthly payments. In fine print on the back, the contract also provides that if she misses a payment, she will confess judgment and pay all costs necessary in enforcing the contract without raising any defenses against the lender. This is an unconscionable contract.
True
Donna is in her last semester of dental school. On weekends she cleans her friends' teeth and then sends them a bill for $25. These are illegal contracts, because Donna is not yet licensed.
True
Fraud in the execution consists of a misrepresentation that deceives the defrauded person as to the very nature of the contract being entered.
True
Fraud in the inducement will result in the contract being voidable.
True
If an offer does not state the time within which the offeree may accept, the offer will terminate upon the expiration of a reasonable time
True
In a legally challenged contract between a guardian and his ward, the law presumes that the guardian took advantage of the ward.
True
In a quasi contract situation, the remedy granted will be similar to a breach of contract remedy
True
In cases involving the enforceability of covenants not to compete in employment contracts, courts must carefully balance the public policy favoring the employer's right to protect his business interests against the public policy favoring full opportunity for individuals to gain employment
True
In certain circumstances, noncontractual promises are enforced under the doctrine of promissory estoppel in order to avoid injustice
True
In order to have the mutual assent requisite to the formation of a contract, the offeror must have communicated the offer and the offeree must have knowledge of the offer
True
In the absence of legal consideration, a promise may nevertheless be enforceable under the doctrine of promissory estoppel if the promisee has relied on the promise to his detriment
True
It has generally been held that contracts induced by threats of criminal prosecution are voidable, regardless of whether the coerced party had committed an unlawful act.
True
Justifiable reliance requires that the misinterpretation contribute substantially to the misled party's decision to enter into the contract.
True
Most contracts are primarily governed by state law
True
Nearly every business transaction is based on contract, and even the most common transactions may involve multiple contracts
True
Procedural unconscionability involves scrutiny for the presence of "bargaining naughtiness."
True
Subject to a few exceptions, neither party to an illegal contract can sue the other for breach nor recover for any performance rendered
True
The UCC imposes an obligation of good faith in the performance or enforcement of every contract within its scope
True
The performance of a preexisiting contractual obligation is that neither doubtful nor the subject of honest dispute is not legally sufficient consideration, because the doing of what one is legally bound to do is neither a detriment to the promisee nor a benefit to the promisor
True
The president of Big Bucks, Inc. pays a state official $500 to give the corporation's application for a government contract special consideration. This is an illegal contract.
True
To be legally sufficient, the consideration for the promise must be either a legal detriment to the promisee or a legal benefit to the promisor
True
Under the Code, a merchant's offer to buy or sell goods is not revocable for lack of consideration during the time stated that it is open or if no time is stated, for a reasonable time, but in either event for a period not to exceed three months
True
Under the Restatements of Contracts and the Code, unless language in the offer, or the circumstances under which it is made indicate otherwise, an offer shall be construed as inviting acceptance in any reasonable manner
True
Under the UCC, if both parties are merchants, additional terms contained in the offeree's unconditional acceptance will become part of the contract provided they do not materially alter the agreement and are not objected to either in the offer itself or within a reasonable period of time
True
Under the common law mirror image rule, a offeree's acceptance will not be effective if it deviates from the exact terms of the offer
True
Where general contract law has not been specifically modified by the UCC, the common law of contracts continues to apply
True
Words of promise that make the performance of the purported promisor entirely optional result in an illusory contract
True
Bill Businessman places an ad in the local newspaper saying, "Reward: $50 for return of my golden retriever named Fido." The ad lists his address and telephone number. If Tim Teenager finds Fido and returns him to Bill, there will be:
a unilateral contract, because Bill has promised to pay $50 but Tim hasn't promised anything
A promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty, is best described as:
a contract
The requisite elements of fraud in the inducement include:
a false representation of material fact a representation made with knowledge of its falsity and the intention to deceive a false representation justifiably relied upon ALL of the elements above are required to be shown
To be legally sufficient, the consideration for a promise must be:
a legal detriment to the promisee a legal benefit to the promisor either (a) or (b)
The law grants relief in a situation involving mistake only where there has been:
a mutual mistake of material fact
A manifestation of the intention to act or refrain from acting in a specified way is best described as:
a promise
The requirement of consideration is satisfied by:
a promise exchanged for a promise a promise exchanged for an act both (a) and (b)
Which of the following would most likely be considered a regulatory licensing law?
a state statute requiring a license to practice medicine a state statute requiring that beauticians pass an examination and pay a yearly licensing fee a state statute requiring that public school teachers complete a required course of study and pay a yearly licensing fee ALL of the above
Debbie promises to pay Bill $2,000 if Bill paints Debbie's house. Bill doesn't say a word but paints Debbie's house. This is an example of:
a unilateral contract
A contract in which the parties indicate their assent in words is a(n):
express contract
All of the following are relevant to defining the principles of contract law EXCEPT:
federal common law
A leading manufacturer of electronic equipment writes a letter to its wholesale distributors offering to sell its most popular VCR for $100 and stating that it will accept orders at that price for 30 days. This is a(n):
firm offer
Contract law:
has more relaxed requirements today than in the nineteenth century
Which of the following is not required in order to have a usurious transaction?
interest within allowable legal limits
An offeree generally may cancel or revoke an offer at any time prior to its acceptance unless the offer:
is an option contract is a merchant's firm offer under the Code contemplates a unilateral contract and the offeree had begun the invited performance ALL of the above
Which of the following is necessary in order to satisfy the consideration requirement?
legal sufficiency bargained-for-exchange both (a) and (b)
Carol Customer sees an ad in a newspaper for a clock radio for $8. She goes to the store and wants to buy the item advertised in the newspaper at the price quoted. Carol is:
making an offer to buy
The courts would not carefully scrutinize a contract between the parties in which of the following relationships?
manufacturer and wholesaler
In general, if a promise is illegal:
neither the promisor nor the promisee can sue the other for breach and recover any performance rendered
Todd is a licensed real estate broker in Ohio. One of Todd's largest clients, Sun Corp., contracted in writing with Todd to find a purchaser for its plant in New York and agreed to pay him a 6% commission if he were successful. Todd located a buyer who purchased the plant. Unknown to Todd, New York has a real estate broker's licensing statute which is regulatory in nature, intended to protect the public against unqualified persons. Todd violated the licensing statute by failing to obtain a New York license. If Sun refuses to pay Todd any commission and Todd brings an action against Sun, he will be entitled to recover:
nothing
Crime Stoppers offers a reward of $500 for information leading to the arrest and conviction of a criminal who has committed several recent burglaries. Paul Police Officer has been working on the case and applies for the reward based upon information he has gathered while on duty. Paul cannot collect the reward under the:
preexisting duty role
Under the Code, if two parties, at least one of them is not a merchant, intend to enter into a contract, those terms are construed as:
proposals for addition to the contract
A regulatory licensing statute is one intended to:
protect the public against unqualified persons
Where one party to an illegal contract is less at fault than the other, she may:
recover payments made or property transferred
Widget Manufacturing Corporation of America contracts with the Poly Plastic Company of Wisconsin to buy from Poly all of the plastic it will need next year in its manufacturing process. This is an example of a(n):
requirements contract
A misrepresentation is material in which of the following cases:
seller represents a fact knowing it would be likely to induce a reasonable buyer to manifest his assent seller knows the misrepresentation would be likely to induce the buyer to act (b) or (c), but not (a)
A promise by Andrew to pay Barry $1,000 if he refrains from suing Andrew, which is accepted by Barry not suing is:
supported by consideration enforceable because Barry has incurred a legal detriment by refraining from bringing suit enforceable because Andrew has received a legal benefit ALL of the above
The Uniform Commercial Code defines goods as:
tangible personal property
Whether a person's words or conduct constitutes an offer is determined according to:
the objective, reasonable person standard
With respect to agreements for the sale of goods, the Code provides standards by which omitted terms may be ascertained, provided:
the partied intended to enter into a binding contract regardless of whether they actually discussed the open term or not
In considering whether a covenant not to compete included in the sale of a business is reasonable, courts will consider all of the following factors except:
the price that the promisee paid for the business
An agreement to refrain from a particular trade, profession, or business is enforceable if:
the purpose of the restraint is to protect a property interest of the promisee the restraint is no more extensive than is reasonable necessary to protect the interest (a) and (b), but not (c)
In general, an agreement not to compete with an employer while employed is enforceable if:
the purpose of the restraint is to protect the employer's business the restraint is no greater than is reasonably needed to protect the employer's business both (a) and (b)
UCC Article 2 applies to contracts involving which of the following?
the sale of a television set
In determining whether an improper threat constitutes duress, it must be shown that:
the threat actually coerced assent on the part of the person claiming to be the victim of duress
Advertisements, circulars, quotation sheets, and other similar business communications usually do not constitute offers because:
they do not contain a promise they leave unexpressed many terms which would be necessary to the making of a contract both (a) and (b)
A man and a woman make mutual promises to marry. Unknown to the woman, the man is already married.
this is an agreement to commit a crime, which renders the agreement void if the woman is unaware of the man's other marriage, she could pursue an action for money damages against him two of the above are correct, (a) and (c)