Deck 10: Legality, consent, and Writing

Question 1

Whittle sent an order over the Internet for a $1,200 garage door.His name keyed onto the order will only be effective as a signature sufficient to create a "writing" "signed by the party against whom enforcement is sought" if he follows up with a signature on paper.

Answer 1

False

Question 2

E-mation hired Jose to bribe a foreign government official.E-mation gave Jose $10,000 in cash to make the bribe payment and $2000 for Jose's efforts.Instead of paying the bribe,Jose pocketed all of the money.If E-mation sues Jose,E-mation will:

A) be able to recover the $12,000.
B) be able to recover the $10,000, but not the $2,000.
C) be able to recover the $2,000 but not the $10,000.
D) not be able to recover the $12,000.

Answer 2

D

Question 3

Roger parked his car at a garage that has a large sign at the entrance saying,"This garage is not liable for items stolen from a car." This type of notice is referred to as an exculpatory clause.

Answer 3

True

Question 4

Travis had too many beers at the baseball game.Ed realized Travis was so intoxicated he wouldn't know what he was doing,so he got Travis to sign a promise to sell his motorcycle to Ed for $50.When Travis gets sober,he may void the contract.

Question 5

To be valid,an agreement not to compete must be ancillary to a legitimate bargain.

Question 6

A minor,someone under age 18,lacks legal capacity to contract and normally can create only a voidable contract.

Question 7

A party injured by fraud generally has the choice of suing for damages or rescinding the contract.

Question 8

Contract rescission cannot be based upon a unilateral mistake.

Question 9

An exculpatory clause is generally enforceable if the affected activity involves medical care or an essential service.

Question 10

When Randy accepted a job with Buren Construction,Randy signed the following agreement,"Upon termination of my employment with Buren Construction,I agree never to work for another employer as an electrician." If Randy resigns from Buren Construction,this agreement would be upheld under the theory of freedom of contract.

Question 11

Roger,a minor,buys some electronic equipment from Tuneland,Inc.Roger uses the equipment for a few months and destroys it.In a majority of states,Roger is not entitled to his money back since the merchandise cannot be returned.

Question 12

The original statute of frauds is the English law that began the practice of requiring written evidence of certain kinds of contracts.

Question 13

Suppose that Lenny,a lawyer,enters into an agreement with Cindy,his client,that his fees will be a percentage of the recovery Lenny obtains for Cindy in her pending divorce.State law makes such a contingency fee arrangement illegal in divorce actions.What will be the probable outcome if Lenny attempts to enforce the agreement?

A) The contract will be valid. Cindy would not have been able to afford an attorney otherwise and therefore Lenny was doing a public service.
B) The contract will be voidable at Cindy's option.
C) The contract will be void as violating a statute. Lenny will not be able to recover anything.
D) The contract will be unenforceable if Lenny did not get the agreement in writing.

Question 14

To be valid,a noncompete clause must be:

A) ancillary to a legitimate bargain.
B) reasonable in time, geographical area, and scope of activity when ancillary to the sale of a business.
C) necessary to protect trade secrets, confidential information, or customer lists developed over an extended time when ancillary to an employment contract.
D) All of the above.

Question 15

When Mohammed was hired by Pomico,Inc.,he signed the following agreement,"Upon termination of my employment with Pomico,I agree not to work for a competing company within 30 miles of Pomico's headquarters for one year." This agreement,important to protecting secret information developed in the employer's business,is an:

A) unenforceable exculpatory agreement.
B) unenforceable usurious agreement.
C) enforceable bailment agreement.
D) enforceable agreement not to compete.

Question 16

Sweet Plantation,Inc.made a written contract with Candy,Inc.whereby Sweet Plantation agreed to supply all of Candy's sugar requirements for the next year at $.35 per pound.A dispute arose as to how much sugar Sweet is to supply.The parol evidence rule will bar Sweet's introduction of evidence concerning the intent of the parties regarding the requirements of Candy.

Question 17

Mark sues Paula to enforce an alleged oral contract to sell a one-acre lot.She defends based on the statute of frauds.Even if Mark proves he paid 15 percent of the purchase price and that Paula was aware that he had begun construction of a house on the lot,Mark will not be allowed to enforce the contract since a contract for the sale of any interest in land must be in writing to be enforceable.

Question 18

If a salesperson says,"This is a great car," but the car turns out to be a lemon,the salesperson has committed fraud.

Question 19

Barb has been a children's day-care provider for several years in the small town of Sallton.She has decided to give it all up and move to the big city for excitement and adventure.She sells her business to Ken,agreeing not to open a competing business within two miles of Sallton for a period of six months.After four months of the big city life,Barb is broke and moves back to Sallton.She opens a new day-care business.Ken sues on the noncompete clause.What is the most likely result?

A) Ken wins. The agreement is enforceable.
B) Barb wins. The agreement is denying her the right to do the only thing she knows how to do.
C) Barb wins. The agreement is not enforceable because it is not ancillary to a legitimate bargain.
D) Barb wins. The agreement is not reasonable as to time.

Question 20

Ramona orally agreed to work for Brahma,Inc.for the rest of her life for $50,000 per year.This agreement would not be enforceable since it violates the one-year rule of the statute of frauds.

Question 21

Marty,a 16-year-old,contracts with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle.Marty agrees to make monthly payments until the purchase price plus interest are paid in full.The contract is:

A) voidable by Marty.
B) void as soon as it is made.
C) voidable by Cream-of-the-Crop Cycles.
D) voidable by either Marty or Cream-of-the-Crop Cycles.

Question 22

For statute of frauds purposes,an interest in land includes:

A) a house.
B) a real estate mortgage.
C) an easement.
D) All of the above.

Question 23

In order to satisfy the statute of frauds,a writing must be:

A) a formal written document drafted by an attorney.
B) signed by the defendant and contain the name of each party, the subject matter of the agreement, and the essential terms and promises.
C) notarized.
D) All of the above.

Question 24

Derek and Abyan were discussing business over lunch when they agreed on the sale of a five-acre parcel of land.Since neither of them had any paper with them,Derek wrote the following on a napkin: "Abyan agrees to purchase from Derek a 5-acre parcel located at the local address of 123 Forrest Street,St.Joseph,Minnesota,U.S.A.for the price of $3500 per acre.Transfer of title,payment,and possession to take place on May 1,2010." Abyan signed the napkin.On May 1,2010,Derek was ready to close the deal and transfer title but Abyan refused to pay the purchase price.If Derek sues Abyan for the price of the land,the most likely result will be:

A) Abyan will win because the writing is not sufficient under the statute of frauds.
B) Derek will win because the writing is sufficient under the statute of frauds.
C) Abyan will win because Derek did not sign the writing.
D) Derek will win because the statute of frauds does not apply to this situation.

Question 25

Which of the following would not be a sufficient signature on a writing to satisfy the statute of frauds?

A) An "X. "
B) A stamped signature of the plaintiff.
C) A name automatically included at the bottom of an e-mail message.
D) A retinal scan.
E) None of the above would be a sufficient signature.

Question 26

Willis and Leslie orally agree to the sale of a parcel of land for $50,000: one-half payable now as a down payment;one-half payable in 30 days at the time of closing when the title will be transferred.The buyer,Willis,is to have possession immediately.Willis pays Leslie $25,000,takes possession of the land,and starts building a house.At the time of closing,the house is nearly completed.However,Leslie refuses to transfer the title,claiming the oral contract is not enforceable.This contract is:

A) enforceable, because the statute of frauds does not apply to this interest in land.
B) unenforceable, because there is no writing signed by Leslie.
C) enforceable, because Willis has partially performed the oral contract and made improvements on the land.
D) unenforceable, because the parol evidence rule applies.

Question 27

AAA and XXX companies are both major international conglomerates.They are negotiating a contract whereby AAA will install a computer system for XXX.One clause in the contract states that AAA will not be liable for damages caused by the negligent installation of the computer system,except that AAA warrants the system and will fix any problem for a period of two years following installation.AAA completes the installation of the computer system.XXX loads extensive amounts of information on the system,but all of it is destroyed because AAA negligently installed the memory chips.AAA fixes the memory,but XXX incurred significant expenses in recreating the lost information.XXX sues for these expenses and AAA defends with the noted clause in the contract.Who wins?

A) XXX wins; these types of clauses are never enforceable.
B) XXX wins; exculpatory clauses are usually valid, but this one would not be valid since it attempts to relieve AAA of liability for negligent behavior.
C) XXX wins; this exculpatory clause is not valid because it is unconscionable.
D) AAA wins; this exculpatory clause is most likely enforceable.

Question 28

Dallas unearths what he thinks may be a gem while he is working up a garden spot.He takes it to the local jeweler,who says he isn't sure until it is cleaned and polished,but he thinks it may be a semiprecious gem worth about $150.The jeweler offers to buy it,and Dallas is thrilled to sell for that price.If the jeweler later finds that the gem was really a precious gem worth ten times what he paid for it:

A) Dallas may rescind the contract of sale because of a mutual mistake.
B) Dallas may rescind the contract of sale because of a unilateral mistake.
C) the jeweler must contact Dallas to rescind the contract of sale or face fraud charges.
D) Dallas may not rescind the contract of sale. He knew there was uncertainty about the value of the exchange and accepted the risk.

Question 29

E-mation entered into a contract with a consumer,Ezra.Ezra was a recent immigrant to the United States,spoke very little English,and had no formal education.The contract provided for Ezra to pay $2500 for a computer system.The system was worth $400.If E-mation sued Ezra under the contract,what is the most likely result?

A) The contract is enforceable because of the statute of frauds.
B) The contract is enforceable because of the parol evidence rule.
C) The contract is enforceable because of the underlying reference rule.
D) The contract is unenforceable because it is unconscionable.

Question 30

Which of the following is an example of an exculpatory clause?

A) Seller reserves the right to cancel the contract at any time.
B) Seller is not responsible for property damage regardless of the cause of the injury.
C) Buyer agrees to pay any costs of litigation.
D) Buyer agrees to notify seller of any change in address.

Question 31

Vicki entered into a written contract to buy a car from Valley Motors.During the negotiations,the sales representative said that the car had a two-year full warranty.The written contract included a provision that stated,"This writing is the full and final expression of the parties' agreement,and anything said before signing or while signing is irrelevant." The written contract did not include a warranty.Two months after Vicki took delivery of the car,she discovered that the transmission needed to be replaced.Vicki claimed that it was covered by the full warranty.Will Vicki be able to present evidence as to the sale representative's statements concerning the warranty?

A) No. The parol evidence rule will most likely exclude any evidence of the discussion of the warranty.
B) Yes. The UCC will allow evidence as to the discussion of the warranty.
C) Yes. The evidence is needed because the contract is ambiguous.
D) Yes. The contract was fully executed.

Question 32

Richard and Danita are negotiating the sale of Richard's car.Danita had been present a few months earlier when Richard bragged to a group of friends that his car got 33 miles to a gallon in city driving,which was an exaggeration.Before they agree on a price for the car,Richard:

A) is under no obligation to disclose the actual mileage per gallon unless Danita specifically asks him.
B) is under an obligation to disclose the actual mileage per gallon regardless of whether Danita specifically asks him because he knows she is relying on his earlier erroneous statement.
C) need not say anything about the mileage per gallon because nondisclosure of a fact cannot amount to misrepresentation.
D) must, under any circumstances, reveal the actual mileage per gallon because failure to disclose a material fact always constitutes fraud.

Question 33

Betty wants to sell her car.If she tells a prospective buyer that the car is mechanically sound,when it is not,she:

A) has made an innocent misrepresentation if she actually believes the car is mechanically sound and has good reason for this belief. However, this misrepresentation would make a contract of sale void.
B) has made an innocent misrepresentation if she actually believes the car is mechanically sound and has good reason for this belief. This misrepresentation would make a contract of sale voidable by the buyer.
C) is guilty of fraud, which would make a contract of sale void.
D) has merely expressed an opinion, which cannot be the basis of either fraud or innocent misrepresentation.

Question 34

The Uniform Electronic Transaction Act (UETA):

A) is a federal statute which declares that a contract or signature may not be denied enforceability simply because it is in electronic form.
B) is the law in at least 48 states and territories, and it validates contracts or signatures made in electronic form.
C) applies to any state that has not adopted E-Sign to validate electronic transactions which are uniform from one company to another.
D) provides a format or model for electronic contracts for the sale of goods so that such contracts will be uniform throughout the United States.

Question 35

Which of the following contracts is enforceable without a writing?

A) A contract for the sale of a camera for $479.
B) A family's lease of a house and lot for a two-year period.
C) An employment contract for one year starting the following month.
D) A mother's promise to pay her son's car loan if he defaults.
E) All of the above.

Question 36

Mike owns a house in a poor area of a large city.Mike is on disability and his total monthly income is $700.A sales representative visits his home,selling a water purification system.Mike buys and signs a contract that calls for monthly payments of $500 for the next 10 years.The water system is worth no more than $1000.Mike did not understand what he was signing and thought it was a permission slip allowing the salesman to conduct a free water test to determine the number of toxins in the water.A court would most likely find this contract:

A) fully enforceable as written.
B) unenforceable because it is unconscionable.
C) unenforceable because it is illusory.
D) unenforceable because it is exculpatory.

Question 37

Abby dies,and her good friend,Claire is appointed to administer Abby's estate.Abby's house was in poor condition,so Claire orally hired a contractor to make repairs.Claire also orally promised that if the estate could not pay the repair bill,he would pay it even though he does not live in the house and has no entitlement under Abby's estate.The estate does not pay the repair bill.The contractor:

A) can collect from either the estate or Claire.
B) can collect from the estate only.
C) can collect from Claire only.
D) must collect from the estate first, and then collect any deficiency from Claire.

Question 38

When a party to a contract makes a unilateral mistake,the contract:

A) generally can be rescinded by the mistaken party.
B) is void.
C) can be rescinded by either party.
D) generally cannot be rescinded by the mistaken party unless the contract is unconscionable or it is proven that the nonmistaken party knew of the error.

Question 39

Larson entered Forrester's Auto Mart to purchase a used car.Larson found a vehicle with a sales price of $11,000.After Forrester ansed all of Larson's questions,Forrester and Larson agreed to a sale.As Larson was leaving to get the money to pay for the car,Forrester told Larson that Robert Redford formerly owned the car.Larson later learned that Robert Redford had never owned the car.If Larson seeks to rescind the deal based on Forrester's statement,Larson will:

A) win because he relied on the misrepresentation.
B) win because there was a misrepresentation of a material fact.
C) lose because he will not be able to prove reliance on the misrepresentation.
D) lose because Forrester made a unilateral mistake.

Question 40

Jeff was a subcontractor,bidding on a contract for ACE Corp.,the general contractor.When adding up the total of materials and labor,Jeff's secretary mistakenly moved the decimal point one place,ending up with a bid of $3500 rather than $35,000.ACE Corp.accepted Jeff's bid,mostly because all the other bids were over $30,000.When Jeff learned of the mistake,he tells ACE Corp.that he cannot do the job for $3500.If ACE Corp.sues to enforce this contract,what is the most likely result?

A) The contract is enforceable, since there was an offer, acceptance, and consideration.
B) This is a bilateral mistake, so the contract can be rescinded by either party.
C) This is a unilateral mistake, so the contract cannot be rescinded by Jeff.
D) This is a unilateral mistake, but one where ACE Corp. knew that a mistake had been made. Jeff should be able to rescind the contract.

Question 41

Discuss the pros and cons of gambling and whether there might be any reason for a court or legislature to treat gambling on credit any differently from gambling itself.

Question 42

Discuss the concept of a "material fact" in fraud situations.

Question 43

In 1970,Continental Airlines agreed to buy a number of DC-10 airplanes from McDonnell Douglas Corporation (MDC).Their contract included a limited warranty in which MDC undertook certain servicing obligations and an exculpatory clause in which Continental waived "all other remedies" against MDC.On March 1,1978,one of these DC-10s was nearing takeoff at Los Angeles International Airport when the two front tires of its left-side landing gear blew out.The pilot aborted the takeoff,but the uncushioned landing gear tore through the tarmac and broke away from the plane.This ruptured the left wing fuel tank,which burst into flames.The emergency escape slides failed,apparently due to the heat of the fire.Some passengers evacuated through the copilot's window,others jumped from the exits.Four passengers died,and over 70 suffered injuries.The plane was destroyed.It should be noted that the exculpatory clause did not prevent the passengers from suing Continental and/or MDC.Continental sued MDC and MDC defended based on the exculpatory clause.Is this type of clause enforceable? Discuss exculpatory clauses,particularly the one involved here.

Question 44

Larson is the owner of a home in Eagle City,Iowa.He put the home on the market for sale.His good friend Bill,an attorney,came to look at the home for the purpose of possible purchase or rental.Bill noticed a crack in the ceiling and inquired about it to Larson.Larson informed Bill that there had been a water leakage problem in the area but it had been fixed two years ago and had not leaked since.Bill proceeded to make a written offer on the house which was accepted in writing by Larson the next day.On the day prior to closing the transaction,Bill went to the residence to make a final inspection.During the inspection,Bill observed water leaking through another crack in a ceiling of the house and in the garage.On the next day,Bill informed the real estate agent that he was rescinding the contract because of the leaks.Larson subsequently rented the property to another party.A couple of months later,Larson filed a suit seeking a court order to make Bill purchase the house or in the alternative for money damages.Bill defended by claiming that Larson either defrauded him or there was a mutual mistake and asked for the return of his earnest money and/or damages for fraud.The trial court found there was no evidence to find fraud on the part of Larson because the roof had been previously fixed and the two parties had been good friends.However,the trial court held that there was a mutual mistake of fact.What is the law with regard to mistakes? Was Bill under a duty to hire his own inspector to inspect the roof? What is the appropriate remedy when a court concludes that there has been a mutual or bilateral mistake of material fact?

Question 45

Herb was interviewed for a job on Wednesday.The employer orally offered Herb a job right on the spot.Herb orally agreed to start working the following Monday,to be employed from that day,Monday,for one year thereafter.Three weeks after starting the job Herb was fired without cause and replaced by the employer's friend.Will Herb be successful in an action brought against the employer for breach of contract?