Question 1

An exclusive dealing contract is one type of contract which is illusory because it lacks consideration.

Accepted Answer

A) True 
 B)False  False

Question 2

Ken, a research chemist, has been promised a fellowship with a stipend of $10,000 to do research on synthetic fuel oil.Under the terms of the fellowship, Ken is free to use the money as he sees fit.Ken decides to build his own laboratory, so he will not have to rent one.He hires a carpenter who begins working on shelving and cabinets in the laboratory.Then Ken receives a telegram saying the fellowship has been canceled.No reason is given for the cancellation.If Ken sues, will he be able to collect the money from the foundation which promised the fellowship? Explain your answer using legal terminology.

Accepted Answer

It might be argued that since no work product is required, there was no consideration for the fellowship.Therefore it may be revoked.However, Ken has detrimentally relied on the promise of the fellowship, and under the doctrine of promissory estoppel, the courts would in all likelihood stop the grantors from rescinding the fellowship.

Question 3

Define a substituted contract and describe how it affects an agreement.

Accepted Answer

A substituted contract results when the parties to a contract mutually agree to rescind their original contract and enter into a new one.The rescission is binding in that each party, giving up his rights under the original contract, has provided consideration to the other, as long as each party still has rights under the original contract.Where the rescission and new agreement are simultaneous, the effect is the same as a contractual modification.

Question 4

A purchaser's agreement to buy from a particular seller all the materials of a particular kind he needs is a(n) contract.

Accepted Answer

A) illusory 
B) requirements 
C) output 
D) exclusive dealing 
A) illusory 
B) requirements 
C) output 
D) exclusive dealing

Question 5

Consideration can be present regardless of whether the parties intend an exchange.

Accepted Answer

A) True 
 B)False

Question 6

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 is most accurate?

Accepted Answer

A) McHenry is not liable to Nancy since there is no consideration. 
B) McHenry is not liable to Nancy since there is past consideration. 
C) McHenry is liable to Nancy since adequate consideration is given by both parties. 
D) McHenry is liable to Nancy based on the concept of promissory estoppel. 
A) McHenry is not liable to Nancy since there is no consideration. 
B) McHenry is not liable to Nancy since there is past consideration. 
C) McHenry is liable to Nancy since adequate consideration is given by both parties. 
D) McHenry is liable to Nancy based on the concept of promissory estoppel.

Question 7

Jerry received a bill for $300 from Johnson for a tune-up Johnson had performed on Jerry's car.Jerry called Johnson and told him, "The car runs no better now than before the tune-up.I am sending you $100 and no more." Johnson received the $100 check which was marked "paid in full" and cashed it.Jerry is still liable to Johnson for $200.

Accepted Answer

A) True 
 B)False

Question 8

In settling a liquidated debt, payment of a smaller amount before the due date would constitute consideration, but paying a lesser amount on the due date at an agreed-upon different place of payment would not be legally sufficient consideration.

Accepted Answer

A) True 
 B)False

Question 9

In some states a promise under seal is binding without consideration.

Accepted Answer

A) True 
 B)False

Question 10

Andrew agrees to paint Betty'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 Betty agrees to pay him $100 more.What law applies to this fact situation?

Accepted Answer

A) The acceptance of additional money to settle a disputed claim is supported by consideration. 
B) A past obligation is sufficient consideration for a new promise. 
C) Andrew gives no additional consideration in return for modification of a preexisting contract. 
D) Betty has made a promise in exchange for a forbearance. 
A) The acceptance of additional money to settle a disputed claim is supported by consideration. 
B) A past obligation is sufficient consideration for a new promise. 
C) Andrew gives no additional consideration in return for modification of a preexisting contract. 
D) Betty has made a promise in exchange for a forbearance.

Question 11

The requirement of legally sufficient consideration:

Accepted Answer

A) is that the parties have agreed to an exchange and it imposed a legal detriment upon the promisee or conferred a legal benefit upon the promisor. 
B) has nothing to do with the legal value of what is exchanged. 
C) means the subject matter that the parties agree to exchange has to have the same value. 
D) is the same as the requirement of adequacy of consideration. 
A) is that the parties have agreed to an exchange and it imposed a legal detriment upon the promisee or conferred a legal benefit upon the promisor. 
B) has nothing to do with the legal value of what is exchanged. 
C) means the subject matter that the parties agree to exchange has to have the same value. 
D) is the same as the requirement of adequacy of consideration.

Question 12

Sue owes $5,000 to the First National Bank for a student loan which will come due on January 1 next year.She has been offered a two-year graduate fellowship, but she will not be able to pay the loan back if she accepts the fellowship.The bank manager tells Sue that if she pays $3,000 now, they will forgive the loan.Should Sue accept the offer?

Accepted Answer

A) No, because the bank can still sue for the remaining $2,000 
B) No, because the manager's promise is not binding on the bank 
C) Yes, because the early payment of the loan is consideration that makes the bank's promise binding 
D) Yes, because the bank must do whatever the manager says 
A) No, because the bank can still sue for the remaining $2,000 
B) No, because the manager's promise is not binding on the bank 
C) Yes, because the early payment of the loan is consideration that makes the bank's promise binding 
D) Yes, because the bank must do whatever the manager says

Question 13

Rob repairs a door for Howard.In return, Howard is supposed to pay Rob $75 on November 1 at Howard's house. Which of the following would constitute legally sufficient consideration?

Accepted Answer

A) Howard pays Rob $60 on November 1 but, after checking with Rob, brings payment to Rob's house. 
B) Rob comes to Howard's house to collect the $75 on November 1, but Howard only has $50.Rob tells Howard to forget the other $25. 
C) Since this is an unliquidated debt, the only legally sufficient consideration is Howard's payment of $75 to Rob on November 1 at Howard's house. 
D) Since this is a liquidated debt, the only legally sufficient consideration is Howard's payment of $75 to Rob on November 1 at Howard's house. 
A) Howard pays Rob $60 on November 1 but, after checking with Rob, brings payment to Rob's house. 
B) Rob comes to Howard's house to collect the $75 on November 1, but Howard only has $50.Rob tells Howard to forget the other $25. 
C) Since this is an unliquidated debt, the only legally sufficient consideration is Howard's payment of $75 to Rob on November 1 at Howard's house. 
D) Since this is a liquidated debt, the only legally sufficient consideration is Howard's payment of $75 to Rob on November 1 at Howard's house.

Question 14

Stan 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.Stan refuses to pay the $800, and Isaac is threatening to sue.Which of the following is correct with regard to this transaction?

Accepted Answer

A) If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount, the substitute agreement is enforceable. 
B) If Isaac agrees to accept $600 to settle the dispute and Stan pays that amount, Isaac can still sue for the balance of $200 and will win the lawsuit. 
C) Stan is under a pre-existing legal obligation to pay the $800. 
D) Stan must return the defective gloves to Isaac, who must replace them.Then, Stan must pay the $800. 
A) If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount, the substitute agreement is enforceable. 
B) If Isaac agrees to accept $600 to settle the dispute and Stan pays that amount, Isaac can still sue for the balance of $200 and will win the lawsuit. 
C) Stan is under a pre-existing legal obligation to pay the $800. 
D) Stan must return the defective gloves to Isaac, who must replace them.Then, Stan must pay the $800.

Question 15

Charitable subscriptions are one of the most frequently occurring applications of the doctrine of promissory estoppel.

Accepted Answer

A) True 
 B)False

Question 16

According to the UCC, only a merchant can make a firm offer to a buyer.

Accepted Answer

A) True 
 B)False

Question 17

A few states provide by statute that the parties need to provide no new consideration when modifying any contract.

Accepted Answer

A) True 
 B)False

Question 18

"Consideration" does not require an actual benefit to both sides of an agreement.

Accepted Answer

A) True 
 B)False

Question 19

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?

Accepted Answer

A) Yes, there is no way for the dealer to get the extra money anyway. 
B) Yes, there is consideration for the modified amount. 
C) No, there is no consideration and the dealer can sue for the extra $300. 
D) No, there is an implied contract to pay the dealer whatever he billed Jack. 
A) Yes, there is no way for the dealer to get the extra money anyway. 
B) Yes, there is consideration for the modified amount. 
C) No, there is no consideration and the dealer can sue for the extra $300. 
D) No, there is an implied contract to pay the dealer whatever he billed Jack.

Question 20

In most, if not all, cases where there is a legal detriment to the promisee, there is also a legal benefit to the promisor.

Accepted Answer

A) True 
 B)False

Exam 12: Consideration

An exclusive dealing contract is one type of contract which is illusory because it lacks consideration.

Define a substituted contract and describe how it affects an agreement.

A purchaser's agreement to buy from a particular seller all the materials of a particular kind he needs is a(n) contract.

Consideration can be present regardless of whether the parties intend an exchange.

In settling a liquidated debt, payment of a smaller amount before the due date would constitute consideration, but paying a lesser amount on the due date at an agreed-upon different place of payment would not be legally sufficient consideration.

In some states a promise under seal is binding without consideration.

Andrew agrees to paint Betty'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 Betty agrees to pay him $100 more.What law applies to this fact situation?

The requirement of legally sufficient consideration:

Rob repairs a door for Howard.In return, Howard is supposed to pay Rob $75 on November 1 at Howard's house. Which of the following would constitute legally sufficient consideration?

Charitable subscriptions are one of the most frequently occurring applications of the doctrine of promissory estoppel.

According to the UCC, only a merchant can make a firm offer to a buyer.

A few states provide by statute that the parties need to provide no new consideration when modifying any contract.

"Consideration" does not require an actual benefit to both sides of an agreement.

In most, if not all, cases where there is a legal detriment to the promisee, there is also a legal benefit to the promisor.

Introduction to Law

Business Ethics and the Social Responsibility of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Relationship of Principal and Agent

Relationship With Third Parties

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Products Liability: Warranties and Strict Liability in Tort

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature, Formation, and Powers

Financial Structure

Management Structure

Fundamental Changes

Secured Transactions and Suretyship

Bankruptcy

Protection of Intellectual Property

Antitrust

Consumer Protection

Employment Law

Securities Regulation

Accountants Legal Liability

Environmental Law

International Business Law

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Decedents Estates

51: The Legal Environment Of Business

52: Contracts.

53: Agency.

54: Sales

55: Negotiable Instruments

56: Unincorporated Business Association

57: Corporations

58: Debtor and Creditor Relation

59: Regulation of Business

60: Property.

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