Question 1

Which of the following is NOT an example of the exception to the rule regarding liquidated debt?

Accepted Answer

A)  A car owner offers her car to the bank as full settlement of the remaining balance owed on the loan and the bank accepts. 
B)  A student offers the use of his picture in a school brochure in full settlement of the $100 debt he owes to the university bookstore and the school accepts. 
C)  A debtor disputes the amount of money that is owed, so the debtor pays half of the debt and the creditor cashes the check. 
D)  A debtor offers a credit card company a rare book in full settlement of a $3,000 debt and the credit card company accepts. 
E)  None of the above choices are correct, since there are no exceptions to the rule regarding liquidated debt. 
A)  A car owner offers her car to the bank as full settlement of the remaining balance owed on the loan and the bank accepts. 
B)  A student offers the use of his picture in a school brochure in full settlement of the $100 debt he owes to the university bookstore and the school accepts. 
C)  A debtor disputes the amount of money that is owed, so the debtor pays half of the debt and the creditor cashes the check. 
D)  A debtor offers a credit card company a rare book in full settlement of a $3,000 debt and the credit card company accepts. 
E)  None of the above choices are correct, since there are no exceptions to the rule regarding liquidated debt. C

Question 2

[Car Trouble] Jennifer wants to sell her car and Timmy agrees to purchase it. Jennifer and Timmy become involved in an over-the-phone negotiation and settle on a price of $1,000. Jennifer lives three hours from Timmy but agrees to deliver the car to him in his home state and take the bus back, provided Timmy promises to purchase the vehicle. She drives three hours. Upon arrival, Timmy says he will not purchase the vehicle unless Jennifer agrees to go to the dealer, get a second set of $500 SmartKeys, and mail the keys to Timmy within three weeks. Having driven all that way, Jennifer agrees. Timmy gives Jennifer the $1,000, using money he borrowed from Joe and promised to repay. Jennifer accepts the money and leaves. Jennifer never sends Timmy the second set of keys. Timmy later decides the car is worth only $500. He decides not to pay Joe and instead gives the vehicle to Joe, explaining his plan. Joe accepts the car and drives away, secretly planning to sue Timmy for the rest of the money. When Timmy is sued by Joe, he makes a claim against Jennifer and claims she should have to compensate him for losses because they never had a valid contract since the car was not worth the $1,000 Jennifer claimed it was.
-If the car is really worth only $500, what is the effect of this lower vehicle value on the contract between Jennifer and Timmy?

Accepted Answer

A)  There is no effect, because the court does not determine if a good or bad deal was made. 
B)  Promissory estoppel results in the contract being voided because Timmy's promise was based on inaccurate information. 
C)  The contract is voided because an illusory promise was made by Jennifer based on the illusion that the car was worth more. 
D)  The effect of the lower vehicle value will depend upon whether the court determines if Timmy entered into a bad or good deal. 
E)  The court may award Timmy damages because Jennifer entered into a contract under false pretenses and cost him money. 
A)  There is no effect, because the court does not determine if a good or bad deal was made. 
B)  Promissory estoppel results in the contract being voided because Timmy's promise was based on inaccurate information. 
C)  The contract is voided because an illusory promise was made by Jennifer based on the illusion that the car was worth more. 
D)  The effect of the lower vehicle value will depend upon whether the court determines if Timmy entered into a bad or good deal. 
E)  The court may award Timmy damages because Jennifer entered into a contract under false pretenses and cost him money. A

Question 3

A detriment to a promisor is a type of consideration.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following is true of consideration?

Accepted Answer

A)  Consideration is not required in bilateral contracts 
B)  Consideration is not required in unilateral contracts 
C)  Consideration is required in all contracts 
D)  Consideration is never required 
E)  Consideration is valid only if it is part of an equal exchange 
A)  Consideration is not required in bilateral contracts 
B)  Consideration is not required in unilateral contracts 
C)  Consideration is required in all contracts 
D)  Consideration is never required 
E)  Consideration is valid only if it is part of an equal exchange

Question 5

In an unliquidated debt, the parties agree on whether money is owed and agree upon the amount but disagree on the repayment schedule.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following was the result on appeal in the Case Opener involving the alleged breach of an oral contract based on the plaintiff lawyer loaning a corporate client funds and the client later reneging on a promise, made in gratitude, to give the lawyer three percent of the company's stock?

Accepted Answer

A)  That the promise to transfer the stock flowed from the loan transaction and was enforceable by the plaintiff. 
B)  That the promise was unenforceable because lawyers may not loan clients money. 
C)  That the promise was enforceable only if the total the plaintiff received in funds did not violate state usury laws involving maximum interest rates. 
D)  That the promise was not enforceable because it was a gift. 
E)  That the promise was enforceable as a gift. 
A)  That the promise to transfer the stock flowed from the loan transaction and was enforceable by the plaintiff. 
B)  That the promise was unenforceable because lawyers may not loan clients money. 
C)  That the promise was enforceable only if the total the plaintiff received in funds did not violate state usury laws involving maximum interest rates. 
D)  That the promise was not enforceable because it was a gift. 
E)  That the promise was enforceable as a gift.

Question 7

Gabrielle is three months behind on her mortgage, and her lender filed negative information affecting her credit rating. Gabrielle mailed one monthly payment to the lender along with a letter stating that she was making the payment on the condition that the lender remove negative material sent to credit reporting agencies affecting her credit rating. The lender cashed the check but did not remove the negative information. Gabrielle sues the bank for breach of contract. Which of the following is the most likely result?

Accepted Answer

A)  The bank will win because under the preexisting duty rule, Gabrielle was already legally obligated to make the payment, and there was no consideration to support the contract. 
B)  The bank will win because under federal law, once correct negative information is reported regarding a customer, it can be removed only if it is found to be untruthful. 
C)  The bank will win because under state law, once correct negative information is reported regarding a customer, it can be removed only if it is found to be untruthful. 
D)  Gabrielle will win because the bank's cashing the check constituted acceptance of her offer, and a valid contract existed. 
E)  Gabrielle will win because the bank had an obligation to notify her that it was not accepting her offer before cashing the check. 
A)  The bank will win because under the preexisting duty rule, Gabrielle was already legally obligated to make the payment, and there was no consideration to support the contract. 
B)  The bank will win because under federal law, once correct negative information is reported regarding a customer, it can be removed only if it is found to be untruthful. 
C)  The bank will win because under state law, once correct negative information is reported regarding a customer, it can be removed only if it is found to be untruthful. 
D)  Gabrielle will win because the bank's cashing the check constituted acceptance of her offer, and a valid contract existed. 
E)  Gabrielle will win because the bank had an obligation to notify her that it was not accepting her offer before cashing the check.

Question 8

Assuming no exception applies, which of the following is true regarding the effect of a debtor offering to pay less money than is owed as full payment on a debt for which there is a dispute over the amount of the debt, and the creditor agrees?

Accepted Answer

A)  A liquidated debt is involved, and there is an accord and satisfaction. 
B)  A liquidated debt is involved, and there is an accord but no satisfaction. 
C)  A liquidated debt is involved, and there is neither a satisfaction nor an accord. 
D)  An unliquidated debt is involved, and there is an accord and satisfaction. 
E)  An unliquidated debt is involved, and there is an accord but not satisfaction. 
A)  A liquidated debt is involved, and there is an accord and satisfaction. 
B)  A liquidated debt is involved, and there is an accord but no satisfaction. 
C)  A liquidated debt is involved, and there is neither a satisfaction nor an accord. 
D)  An unliquidated debt is involved, and there is an accord and satisfaction. 
E)  An unliquidated debt is involved, and there is an accord but not satisfaction.

Question 9

Raphael, who owes $10,000 to his credit card company, sends a check to the credit card company for $50 and marks the check "paid in full." The credit card company inadvertently cashes the check, but the mistake is caught two weeks later and they offer to repay Raphael his $50. Raphael does not respond. Does accord and satisfaction exist?

Accepted Answer

A)  Yes, because the bank cashed the check and this is sufficient for accord and satisfaction. 
B)  Yes, because Raphael did not accept the bank's offer for repayment. 
C)  Yes, because the bank has to offer a refund to Raphael within one week to avoid accord and satisfaction. 
D)  No, because the $50 payment accounted for less than 10 percent of the balance due. 
E)  No, because the bank offered to repay the money in a timely manner. 
A)  Yes, because the bank cashed the check and this is sufficient for accord and satisfaction. 
B)  Yes, because Raphael did not accept the bank's offer for repayment. 
C)  Yes, because the bank has to offer a refund to Raphael within one week to avoid accord and satisfaction. 
D)  No, because the $50 payment accounted for less than 10 percent of the balance due. 
E)  No, because the bank offered to repay the money in a timely manner.

Question 10

Sameer promises his uncle, Farouk, that he will study every day and earn straight A's during the spring semester in exchange for having his tuition paid for the fall semester. Farouk agrees, but after Sameer studies all semester and receives straight A's, Farouk refuses to pay, saying that no such contract ever existed. Which of the following is true?

Accepted Answer

A)  Consideration was present, there was an enforceable contract, and Farouk has wrongfully refused to pay. 
B)  There was no consideration present, and Farouk has no obligation to pay. 
C)  There was no consideration present, but Farouk must pay under principles of promissory estoppel. 
D)  There was consideration present, but Farouk is not required to pay because the contract was illusory. 
E)  There was consideration present, but Farouk is not required to pay because he did not receive a benefit personally. 
A)  Consideration was present, there was an enforceable contract, and Farouk has wrongfully refused to pay. 
B)  There was no consideration present, and Farouk has no obligation to pay. 
C)  There was no consideration present, but Farouk must pay under principles of promissory estoppel. 
D)  There was consideration present, but Farouk is not required to pay because the contract was illusory. 
E)  There was consideration present, but Farouk is not required to pay because he did not receive a benefit personally.

Question 11

Every year, the World Bank gives over 181 countries a rating on the ease of doing business within the country. This is based on aggregate distance to frontier scores on 10 topics. Where does China generally fall in the "Enforcing Contracts" topic ranking?

Accepted Answer

A)  The bottom 10. 
B)  Near the middle. 
C)  In the top 25. 
D)  The top 10. 
E)  China is ranked last. 
A)  The bottom 10. 
B)  Near the middle. 
C)  In the top 25. 
D)  The top 10. 
E)  China is ranked last.

Question 12

[Bank Robbery] Safe Bank was robbed of a significant sum of cash by a robber later identified as Victor Victory. Safe Bank offered a reward of $10,000 to anyone who captured or provided information leading to the capture of Victor. Kareem, a police officer in town, promised Safe Bank officials that he would apprehend Victor. While on duty, Kareem arrested Victor at a restaurant in town. He found Victor after Ursula, Victor's girlfriend, told Kareem about various places Victor enjoyed eating. The bank refuses to pay either Ursula or Kareem any of the reward money.
-In a lawsuit between the bank and Kareem regarding the reward funds, who is likely to prevail and why?

Accepted Answer

A)  The bank is likely to prevail because Kareem only provided past consideration. 
B)  The bank is likely to prevail because Kareem had a preexisting duty to catch Victor. 
C)  The bank is likely to prevail because Kareem's promise to catch Victor was illusory. 
D)  Kareem is likely to prevail because his promise to catch Victor resulted in a binding bilateral contract. 
E)  Kareem is likely to prevail because an enforceable unilateral contract exists based on his performance. 
A)  The bank is likely to prevail because Kareem only provided past consideration. 
B)  The bank is likely to prevail because Kareem had a preexisting duty to catch Victor. 
C)  The bank is likely to prevail because Kareem's promise to catch Victor was illusory. 
D)  Kareem is likely to prevail because his promise to catch Victor resulted in a binding bilateral contract. 
E)  Kareem is likely to prevail because an enforceable unilateral contract exists based on his performance.

Question 13

What must you prove in a successful promissory estoppel case?

Accepted Answer

A)  Reasonable reliance on a promise to your detriment. 
B)  The exchange of adequate consideration. 
C)  The existence of consideration. 
D)  Intent of both parties to enter into a legally binding agreement. 
E)  The mutual exchange of promises. 
A)  Reasonable reliance on a promise to your detriment. 
B)  The exchange of adequate consideration. 
C)  The existence of consideration. 
D)  Intent of both parties to enter into a legally binding agreement. 
E)  The mutual exchange of promises.

Question 14

[Car Trouble] Jennifer wants to sell her car and Timmy agrees to purchase it. Jennifer and Timmy become involved in an over-the-phone negotiation and settle on a price of $1,000. Jennifer lives three hours from Timmy but agrees to deliver the car to him in his home state and take the bus back, provided Timmy promises to purchase the vehicle. She drives three hours. Upon arrival, Timmy says he will not purchase the vehicle unless Jennifer agrees to go to the dealer, get a second set of $500 SmartKeys, and mail the keys to Timmy within three weeks. Having driven all that way, Jennifer agrees. Timmy gives Jennifer the $1,000, using money he borrowed from Joe and promised to repay. Jennifer accepts the money and leaves. Jennifer never sends Timmy the second set of keys. Timmy later decides the car is worth only $500. He decides not to pay Joe and instead gives the vehicle to Joe, explaining his plan. Joe accepts the car and drives away, secretly planning to sue Timmy for the rest of the money. When Timmy is sued by Joe, he makes a claim against Jennifer and claims she should have to compensate him for losses because they never had a valid contract since the car was not worth the $1,000 Jennifer claimed it was.
-Was Timmy's debt to Joe liquidated or unliquidated debt after Timmy bought the car and subsequently decided it was worth less than what he had borrowed to pay for it?

Accepted Answer

A)  Liquidated debt, because there was no dispute that he owed money or how much. 
B)  Liquidated debt, because the debt was not supported by consideration. 
C)  Unliquidated debt, because there was a dispute over how much was owed. 
D)  Unliquidated debt, because there was disagreement about the car's value. 
E)  Unliquidated debt, because the debtor offered different performance. 
A)  Liquidated debt, because there was no dispute that he owed money or how much. 
B)  Liquidated debt, because the debt was not supported by consideration. 
C)  Unliquidated debt, because there was a dispute over how much was owed. 
D)  Unliquidated debt, because there was disagreement about the car's value. 
E)  Unliquidated debt, because the debtor offered different performance.

Question 15

The court will never look at adequacy of consideration as long as at least one party has given some detriment.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true regarding an accord and satisfaction?

Accepted Answer

A)  When amounts agreed upon are paid, the debt is fully discharged. 
B)  When amounts agreed upon are paid, the debt is fully discharged except for any late charges due on the initial indebtedness. 
C)  When amounts agreed upon are paid, the debt is fully discharged except for any interest due on the initial indebtedness. 
D)  When amounts agreed upon are paid, the debt is fully discharged except for any late charges and for any interest due on the initial indebtedness. 
E)  When amounts agreed upon are paid, the debt is fully discharged except for any late charges or interest due on the initial indebtedness, or attorney fees of the creditor that are due. 
A)  When amounts agreed upon are paid, the debt is fully discharged. 
B)  When amounts agreed upon are paid, the debt is fully discharged except for any late charges due on the initial indebtedness. 
C)  When amounts agreed upon are paid, the debt is fully discharged except for any interest due on the initial indebtedness. 
D)  When amounts agreed upon are paid, the debt is fully discharged except for any late charges and for any interest due on the initial indebtedness. 
E)  When amounts agreed upon are paid, the debt is fully discharged except for any late charges or interest due on the initial indebtedness, or attorney fees of the creditor that are due.

Question 17

Which of the following was the result in the case in the text Hamer v. Sidway, in which, after performance by his nephew, an uncle reneged on a promise to the nephew to pay him $5,000 if the nephew refrained from drinking liquor, using tobacco, swearing, and playing cards or billiards for money until he was 21 years of age?

Accepted Answer

A)  That because refraining from the conduct at issue benefited his character and health, the nephew could not recover. 
B)  That no consideration was involved, and the nephew could not recover because the consideration from him did not consist of money or goods. 
C)  That no consideration was involved, and the nephew could not recover because the proof established that the nephew had no interest in engaging in the items at issue, and avoiding them was no detriment to him. 
D)  That the nephew could recover because he supplied consideration. 
E)  That the nephew could recover, but only under promissory estoppel could he recover an amount compensating him for his reliance on the promise. 
A)  That because refraining from the conduct at issue benefited his character and health, the nephew could not recover. 
B)  That no consideration was involved, and the nephew could not recover because the consideration from him did not consist of money or goods. 
C)  That no consideration was involved, and the nephew could not recover because the proof established that the nephew had no interest in engaging in the items at issue, and avoiding them was no detriment to him. 
D)  That the nephew could recover because he supplied consideration. 
E)  That the nephew could recover, but only under promissory estoppel could he recover an amount compensating him for his reliance on the promise.

Question 18

Jun is building a home for Tessa that is to be completed by December 31st. Jun tells Tessa that he needs to hire additional workers in order to have the home done by that time and that she needs to pay him an extra $10,000. Tessa agrees to pay. Jun finishes the home and asks for his $10,000. Tessa refuses to pay. If Jun sues, what is the likely result? Discuss whether you believe the result is ethical and equitable.

Accepted Answer

Tessa will likely win. Assuming the unfo

Question 19

To be valid, consideration must ________

Accepted Answer

A)  be the product of a bargained-for exchange. 
B)  be part of an equal exchange. 
C)  involve performance in exchange for a promise. 
D)  involve a mutual exchange of promises. 
E)  be money or a good. 
A)  be the product of a bargained-for exchange. 
B)  be part of an equal exchange. 
C)  involve performance in exchange for a promise. 
D)  involve a mutual exchange of promises. 
E)  be money or a good.

Question 20

Sonia goes to have her hair trimmed and agrees to pay $40 to the stylist. While there, Sonia decides that she would also like highlights. The stylist informs her that highlights will cost an additional $30. Sonia agrees to the price, gets the highlights, but refuses to pay the extra amount. What is the likely result in a dispute between Sonia and the stylist and why?

Accepted Answer

A)  The stylist will win because she did additional work in exchange for the extra payment; and, therefore, Sonia's promise was supported by valid consideration. 
B)  The stylist will win because she did additional work in exchange for the extra payment; and, therefore, a valid unilateral contract existed. 
C)  The stylist will win unless Sonia can show that she had previously received both a trim and highlights for $40. If she can prove that she previously received both for $40, then the past expectations rule applies. 
D)  Sonia will win because the stylist had a preexisting duty to have Sonia's hair look as good as possible. 
E)  Sonia will win because there was no valid consideration in exchange for the highlighting. 
A)  The stylist will win because she did additional work in exchange for the extra payment; and, therefore, Sonia's promise was supported by valid consideration. 
B)  The stylist will win because she did additional work in exchange for the extra payment; and, therefore, a valid unilateral contract existed. 
C)  The stylist will win unless Sonia can show that she had previously received both a trim and highlights for $40. If she can prove that she previously received both for $40, then the past expectations rule applies. 
D)  Sonia will win because the stylist had a preexisting duty to have Sonia's hair look as good as possible. 
E)  Sonia will win because there was no valid consideration in exchange for the highlighting.

Exam 15: Consideration

Which of the following is NOT an example of the exception to the rule regarding liquidated debt?

A detriment to a promisor is a type of consideration.

Which of the following is true of consideration?

In an unliquidated debt, the parties agree on whether money is owed and agree upon the amount but disagree on the repayment schedule.

Which of the following was the result on appeal in the Case Opener involving the alleged breach of an oral contract based on the plaintiff lawyer loaning a corporate client funds and the client later reneging on a promise, made in gratitude, to give the lawyer three percent of the company's stock?

Assuming no exception applies, which of the following is true regarding the effect of a debtor offering to pay less money than is owed as full payment on a debt for which there is a dispute over the amount of the debt, and the creditor agrees?

Every year, the World Bank gives over 181 countries a rating on the ease of doing business within the country. This is based on aggregate distance to frontier scores on 10 topics. Where does China generally fall in the "Enforcing Contracts" topic ranking?

What must you prove in a successful promissory estoppel case?

The court will never look at adequacy of consideration as long as at least one party has given some detriment.

Which of the following is true regarding an accord and satisfaction?

To be valid, consideration must ________

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