Deck 11: Requirements for a Contract

Question 1

When Randy, an electrician, 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." This type of broad non-compete agreement is always upheld by the courts.

Answer 1

False

Question 2

Judith is a CPA with an excellent reputation and client base. She sells her tax preparation business to Shawn, and the sales contract includes a non-compete clause restricting Judith from opening a similar business for one year within a 10-mile radius of her former office. If she opens a tax preparation office five miles away after one year, a court would probably

A)grant an injunction barring her from operating the new office.
B)order confiscation of all of her new client files and turn them over to Shawn.
C)refuse to become involved, as the non-compete clause was illegal.
D)refuse to enforce the non-compete clause, as it is unreasonable regarding time and geographic area.

Answer 2

A

Question 3

Agreeing not to open a competing business could be consideration.

Answer 3

True

Question 4

A forbearance is, in essence, the opposite of an act.

Question 5

Which of the following can be characterized as an exculpatory clause?

A)Contractor is not liable for damage caused by its employees.
B)Buyer agrees to pay $5,000 for a used cell phone.
C)Creditor charges 45% interest on a loan.
D)All of these are correct.

Question 6

In a non-compete agreement, the term "ancillary" means that

A)both parties must have a stake in the outcome.
B)the agreement is harmless to the general public.
C)the non-compete agreement must be part of a larger agreement.
D)the non-compete agreement is unfair to the employee, but not the employer.

Question 7

If Becky promises not to drink alcohol until she becomes a legal adult in exchange for Ben's promise of $1,000, the agreement is

A)enforceable because Becky is giving up the right to do something she would otherwise be entitled to do.
B)enforceable because the agreement accomplishes Ben's goal of keeping Becky from drinking.
C)not enforceable because Becky does not have a legal right to drink alcohol.
D)not enforceable because Becky is a minor and could disaffirm the contract.

Question 8

A promise to do (or not do)something in the future counts as consideration.

Question 9

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.

Question 10

The two basic elements of consideration are intention and agreement.

Question 11

A court is unlikely to enforce the non-compete agreement Kelly and Amber signed because of which of the following clauses?

A)Kelly agrees not to work for a competitor for two years.
B)Kelly agrees not to work for a competitor within a 10-mile radius of Amber's business.
C)Kelly agrees to go into a completely different line of work than Amber.
D)All of these are correct.

Question 12

What are the two most common settings for legitimate non-compete agreements?

A)real estate purchase and employment relationship
B)sale of a business and real estate purchase
C)real estate purchase and insurance purchase
D)sale of a business and employment relationship

Question 13

What is consideration and what are the two basic elements of consideration?

Question 14

Regarding consideration, an act occurs when a person

A)complies with the law.
B)fulfills an obligation under an existing contract.
C)does something not legally required.
D)All of these are correct.

Question 15

An exculpatory clause is generally unenforceable when

A)it attempts to release a party from liability for ordinarily negligent behavior.
B)it involves public transportation.
C)it is written clearly and in bold, large print.
D)the affected activity is a recreational activity.

Question 16

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

Question 17

If Rudy offers Oscar $200 for his laptop valued at $600 and Oscar agrees, a court will probably

A)set aside the agreement as being unfair.
B)set aside the agreement because the consideration is inadequate.
C)not set aside the agreement based on the adequacy of the consideration.
D)not set aside the agreement because of the UCC.

Question 18

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 five miles of Sallton for a period of nine months. After five months of the big city life, Barb is broke and moves back to Sallton. She opens a small day care business. Ken sues on the non-compete 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 19

Barbara, a skilled engineer, was hired at Mainco Enterprises. She was asked to sign a non-compete clause limiting future employment if she left Mainco. A court would be likely to enforce the non-compete clause if it was put into place to protect trade secrets or confidential information.

Question 20

Upon graduating from college, Kathy announced her plans to enter law school the following fall and to marry Rick in December. Kathy's father was afraid that marriage during her first year in law school might cause her to fall behind in her studies or cause her to drop out of school. He called Kathy and promised her $10,000 if she postponed her wedding until after completion of her first year of law school. Kathy agreed and postponed the wedding for a year. Kathy successfully completed her first year of law school, but soon thereafter, Kathy's father died. The administrator of her father's estate claimed she was not entitled to the $10,000 because there was no consideration for her father's promise. If Kathy sues the estate, she will probably be

A)unsuccessful because her father's death terminated the contract.
B)successful because there was consideration.
C)unsuccessful because her father received no benefit.
D)unsuccessful because it was merely fatherly advice not to get married during the first year of law school.

Question 21

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 can attempt to void the contract.

Question 22

Spencer, age 18 and of sound mind, has the legal capacity to contract.

Question 23

Discuss the meaning of "material fact" in fraud situations.

Question 24

In contract law, a minor is someone under the age of 21.

Question 25

Larson entered Forrester's Auto Mart to purchase a used car. Larson found a vehicle with a sales price of $11,000. After Forrester answered 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 he thought 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 26

Which of the following terms designates the legal ability of a party to enter into a contract?

A)Consent
B)Affirmation
C)Materiality
D)Capacity

Question 27

Roger, a minor, buys a stereo from Tuneland, Inc. Roger uses the stereo for a few months, returns it to Tuneland, and demands his money back. Roger may rescind the contract, return the stereo and get his money back.

Question 28

Courts will not allow the rescission of a contract due to a unilateral mistake.

Question 29

To formally cancel a contract is to _______ it.

A)affirm
B)rescind
C)disaffirm
D)ratify

Question 30

Discuss exculpatory clauses, and designate when an exculpatory clause is unenforceable.

Question 31

If a salesperson says, "This is a great car and it's really fun to drive," but the car turns out to be a lemon, the salesperson has committed fraud.

Question 32

If Jane persuades Linda to buy her horse by telling Linda that the horse runs "like the wind," then Jane's statement is

A)fraud.
B)reckless misrepresentation.
C)a unilateral mistake.
D)puffery.

Question 33

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 is paid in full. Which of the following is correct?

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

Question 34

A person who is mentally impaired generally can create only __________ contracts.

A)fraudulent
B)void
C)unconscionable
D)voidable

Question 35

Which of the following statements, if made by a seller who knows the statement to be untruthful, would NOT be misrepresentation of material fact resulting in a cause of action for fraud?

A)"This horse is only six years old."
B)"There is no better car in the world."
C)"The tires have less than 5,000 miles on them."
D)"This car gets 28 miles per gallon."

Question 36

Fraudulent but innocent misrepresentation permits the injured party to rescind a contract.

Question 37

The Tavern's secret recipe for its pizza sauce would be considered

A)a trade secret, and an employment non-compete clause would be enforceable to protect it.
B)a trade secret, but an employment non-compete clause would NOT be enforceable to protect it.
C)just a secret recipe and not something the Tavern could protect in a non-compete clause.
D)an exculpatory clause and not enforceable.

Question 38

To be valid, a non-compete 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 these are correct.

Question 39

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

Question 40

Alice offers to sell her car to Barry for $500, and Barry accepts. Alice's car has a market value of $1,000 but this fact is unknown to Alice. The contract is enforceable.

Question 41

The Uniform Electronic Transmission Act (UETA)

A)declares that a contract or signature may not be denied enforceability just because it is in electronic form.
B)declares that e-signatures are invalid.
C)creates a safe cyberspace environment in which business communications cannot be intercepted or fraudulently altered.
D)has only been adopted in a handful of states.

Question 42

When one person agrees to pay the debt of another as a favor to that debtor, it is called

A)promissory representation.
B)a mutual promise.
C)promissory estoppel.
D)a collateral promise.

Question 43

Hannah orally agrees to sell her house to Brett for $175,000. If she delivers the deed to Brett with the expectation of payment in two weeks and he fails to pay, most courts will not enforce the contract since it was not in writing.

Question 44

Ramona, age 42, 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 45

Under a contract for the sale of land, the Statute of Frauds

A)does not apply if the purchase price for the land is less than $500.
B)does not apply if the buyer must secure a loan for the purchase of the land.
C)requires the defendant to sign the agreement.
D)does not apply if the total price of the land is to be paid in less than one year.

Question 46

In order to satisfy the Statute of Frauds, a writing must

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

Question 47

Contracts that cannot be performed within __________ are unenforceable unless they are in writing.

A)one month
B)six months
C)one year
D)two years

Question 48

When a contract falls within the Statute of Frauds but is not in writing, the contract is

A)illegal.
B)unenforceable.
C)void.
D)voidable.

Question 49

Raymond agrees to transfer an easement right to Sandra for $1,000. This contract is within the Statute of Frauds and therefore needs to be in writing to be enforceable.

Question 50

Under the Statute of Frauds, the writing must: be signed by the defendant; and must state with reasonable certainty the name of each party, the subject matter of the agreement, and all of the essential terms and promises.

Question 51

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 105th Street, St. Joseph, Minnesota, U.S.A. for the price of $4,500 per acre. Transfer of title, payment, and possession to take place on May 1, 2011." Abyan signed the napkin. On May 1, 2011, 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 52

Describe legal capacity and discuss how it applies to minors entering into and cancelling contracts.

Question 53

What is the difference between a unilateral mistake and a mutual mistake? Under what circumstances will a court refuse to rescind a contract based on the defense of a "mistake"?

Question 54

Ethel's Exercise World plans to order three weight machines from Pete's Push, Pedal and Pull, Inc. for a total of $15,000. Pete's demands that Ethel's friend, Moneybags, a wealthy independent businesswoman (not connected with Ethel's business in any way)promise to pay Pete's for the three machines if Ethel's Exercise World does not. Which of the promises in this problem must be in writing to be enforceable?

A)The promise made by Ethel's Exercise World to buy the weight machines.
B)Moneybag's promise to pay if Ethel's Exercise World doesn't.
C)Both Moneybag's promise and Ethel's Exercise World's promise.
D)None of the promises in this problem need to be in writing.

Question 55

Which of the following would suffice for a signature on a writing under the Statute of Frauds?

A)a stamped signature
B)a handwritten signature
C)a name keyed at the bottom of an email
D)Any of these would suffice. Judges define "signature" very broadly.

Question 56

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 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? Explain why or why not.

Question 57

E-signatures are valid in all 50 states.

Question 58

Amanda, a recent university graduate, needed a car to get to her new job. To help Amanda secure a loan for the car, Ted, a friend, agreed to pay the loan should Amanda default. Ted's promise to pay the loan is a collateral promise. His promise must be in writing to be enforceable.

Question 59

Any contract involving a sale of goods of $100 or more must be in writing.

Question 60

Does the statement "The sale of goods will not be enforceable unless there is some writing, signed by the defendant, indicating that the parties reached an agreement" accurately reflect the UCC's basic rule?

A)No. It should also state that the contract must be signed by both parties, not just the defendant.
B)No. It should state that the contract must require all of the terms of the agreement to be in writing.
C)No. It should state that the contract must be for the sale of goods of $500 or more.
D)Yes. The wording accurately reflects the UCC's basic rule.

Question 61

List the types of agreements that must be in writing according to the Statute of Frauds.