Deck 11: Contracts and Sales: Performance, Remedies, and Rights

Question 1

Incidental and consequential damages are the same types of damages.

Answer 1

False

Question 2

Covenants not to compete are generally considered void as against public policy.

Answer 2

False

Question 3

Duress requires proof of physical force.

Answer 3

False

Question 4

Contracts with illegal subject matter are voidable.

Question 5

Conditions precedent are events that must happen before contract performance is required.

Question 6

A contract with a minor is voidable at the minor's option.

Question 7

Scienter is required for misrepresentation.

Question 8

Fraud is misrepresentation with intent to mislead or deceive.

Question 9

Liquidated damages are void as penalties.

Question 10

A force majeure clause is a clause that prevents additional terms in acceptances from becoming part of the contract.

Question 11

Unconscionability is an illegality defense.

Question 12

A contract with a party who has been declared incompetent is voidable.

Question 13

Competency licensing statutes do not prevent enforcement of contracts by unlicensed parties.

Question 14

Undue influence requires proof of a confidential relationship.

Question 15

Minors are liable for the reasonable value of necessaries.

Question 16

Puffing is sufficient grounds for setting aside a contract on the basis of misrepresentation.

Question 17

Incidental damages are the costs of being compensated and are nonrecoverable.

Question 18

Substantial performance is available for all types of contracts.

Question 19

A force majeure clause is one that provides excuses for nonperformance.

Question 20

Exculpatory clauses are generally considered void as against public policy.

Question 21

The doctrine of substantial performance applies in construction contracts.

Question 22

Rescission is another term for consideration.

Question 23

An exculpatory clause seeking to hold a party completely blameless in a contract is acceptable in all states except Louisiana, California, and Florida.

Question 24

There is no difference between assignments and delegation.

Question 25

In a relationship of dependence, the failure to deal fairly can result in liability for the party controlling the contract term.

Question 26

A bill of lading is a receipt for shipment issued by the seller.

Question 27

Silence, or the failure to disclose information, is not misrepresentation.

Question 28

The difference between fraud and misrepresentation is knowledge.

Question 29

The failure to deal fairly with a party to a contract can result in damages for breach.

Question 30

A letter of credit is issued by the buyer's bank.

Question 31

Goods can be transferred physically or by transfer of the bill of lading.

Question 32

A television rent-to-own contract that requires 24 payments of $30 each before the renter owns the $199 television set is unconscionable.

Question 33

Commercial impracticability and impossibility of performance are essentially the same standard.

Question 34

Conditions are promise modifiers.

Question 35

All contracts have conditions for performance.

Question 36

Covenants not to compete are void only in sale-of-business contracts.

Question 37

An accord and satisfaction is a void contract.

Question 38

The seller's cost of running another ad in order to sell the car that a buyer breached a contract on is an example of consequential damages.

Question 39

Compensatory damage formulas are provided under the UCC.

Question 40

Misrepresentation does not require proof of the buyer's reliance.

Question 41

An assignment is the transfer of benefits under a contract.

Question 42

A minor who has received medical care can never be responsible for payment for those services.

Question 43

When employees earn commissions as well as a salary, the employees face more of a temptation to engage in misrepresentation.

Question 44

A lawyer/client relationship is an example of a confidential relationship.

Question 45

For a contract to be void, scienter is required.

Question 46

Bob, age 17, has entered into a contract to buy a car. The contract is:

A)voidable.
B)void.
C)voidable only if Bob can return the car.
D)enforceable since it is for a necessary.
E)None of the above

Question 47

Parents of minors can be held liable for the reasonable value of necessaries that their minor children contracted for.

Question 48

A seller recovering the difference between his resale price and the buyer's original contract price is an example of:

A)compensatory damages.
B)incidental damages.
C)liquidated damages.
D)None of the above

Question 49

Telling your broker to sell a particular stock when it reaches $50 a share is a condition precedent.

Question 50

Contracts with illegal subject matter are:

A)void.
B)voidable.
C)Neither a nor b
D)Both a and b

Question 51

Using a threatening tone of voice when negotiating a contract may lead to a valid charge of duress.

Question 52

Courts rarely apply the excuse of commercial impracticability, even when the cost of the contract has increased dramatically for one party.

Question 53

A provision in a contract requiring that a buyer obtain financing before a deal can go through is an example of:

A)a contract with no consideration.
B)economic duress.
C)a condition precedent.
D)None of the above

Question 54

An example of a condition precedent in a home purchase contract is that the buyer must qualify for financing first.

Question 55

A multi-million dollar contract between a manufacturer and a parts supplier provides for damages of $300 per day for late delivery is void as a penalty contract.

Question 56

Force majeure clauses:

A)are liquidated damages clauses.
B)are void.
C)serve to shift the risk of unforeseen events.
D)None of the above

Question 57

Which of these is not a contract defense?

A)Capacity
B)Duress
C)Fraud
D)Rejection

Question 58

James Krieg has finished law school but has unsuccessfully taken the bar exam twice. Krieg is running low on patience and cash. He has begun writing wills to see him through this time of crisis and is charging $200 per will. Some of his will clients have refused to pay Krieg and he wishes to take them to a small claims court. Which of the following statements is true?

A)Krieg could recover the fees on a quasi-contract theory.
B)Krieg could recover the fees since the licensing after the bar exam is simply to raise funds.
C)Krieg agreements are voidable.
D)Krieg agreements are void.

Question 59

A valid defense makes a contract automatically void.

Question 60

A defense of age capacity applies to all contracts made by parties under the age of 18.

Question 61

Monique and Seth agree, due to increased fuel charges, that Monique will pay Seth twenty cents more per mile of transportation than in their original contract. This new agreement is called a(n):

A)novation.
B)accord and satisfaction.
C)force majuere clause.
D)alteration.

Question 62

Andy Seagroves purchased a computer from Best Buy. Best Buy did not disclose to him that the computer was a return item. There was no indication of any price difference between the computer Andy bought and the unopened computers. Andy experiences significant difficulties with the computer and returns it to Best Buy. Andy indicates that he would like to have a new computer and that the price is now $150 more. Best Buy indicates that it is happy to take the return on the computer and credit Andy's account, but that it has no further liability.

A)Best Buy's position is correct.
B)Andy has no damages since Best Buy took back the computer.
C)Andy is entitled to recover the price difference so that he can replace the computer.
D)Andy is entitled to the return, but no additional damages.
E)None of the above

Question 63

Lisa and Mandy have a contract. Mandy wants out of the contract; Carla Sue is willing to take Mandy's place, which is satisfactory with Lisa. When the Carla Sue for Mandy exchange is made, this is known as:

A)third party beneficiaries.
B)novation.
C)accord and satisfaction.
D)illegal activity.

Question 64

Which of the following contracts would be void?

A)A contract with a person declared mentally incompetent
B)A contract with a minor
C)A contract with a force majeure clause
D)All of the above are void.

Question 65

The Hoffmans were having their home remodeled by All-Right Contractors. The roof had to be removed in order to build the second story the Hoffmans had contracted and designed to build. After All-Right had removed the roof, but before a covering was placed over the exposed half of the home, All-Right's foreman said the job would cost an additional $12,500. The Hoffmans refused to agree to the additional fees and All-Right's foreman said, "Suit yourselves. Looks like rain for the next day or two," and left. The Hoffmans called All-Right and agreed to pay the $12,500 extra and went in to sign the paperwork. Which of the following statements is true?

A)The contract for the additional $12,500 is valid and binding.
B)The contract for the additional $12,500 is invalid because of duress.
C)The contract was not valid because of duress, but the Hoffmans signed anyway - so there is a valid and enforceable agreement.
D)None of the above

Question 66

Paddock Pools constructed a swimming pool and deck for the Jensens' home. Paddock installed the wrong trim on the pool. It would cost $2800 to change the trim - one-fifth the total cost of the pool. The Jensens refuse to pay anything for the pool. Paddock's best defense is:

A)duress.
B)substantial performance.
C)mistake.
D)failure of conditions.

Question 67

A minor's purchase of a necessity is voidable, but the minor must pay _____ value.

A)full
B)no
C)reasonable
D)partial

Question 68

The seller of a dry cleaning business has agreed not to open another dry cleaning business for two years within a one-mile radius of the sold business. Such an agreement:

A)is void as against public policy.
B)is void as unconscionable.
C)is void as usurious.
D)is valid and enforceable.

Question 69

Which contractual defense requires a confidential relationship?

A)Fraud
B)Undue influence
C)Misrepresentation
D)Duress

Question 70

Contracts with a clause that violates a public policy provision generally are held to be:

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

Question 71

Angela, age 17, is injured in a car accident and receives $5,200 in medical treatment at the emergency room. The hospital sends a bill to Angela, who signed the admitting form in which she agreed to pay for the treatment. Angela:

A)is a minor and need not pay the bills.
B)is liable for the bill as a necessity.
C)can rescind the agreement.
D)None of the above

Question 72

A life insurance policy beneficiary is a good example of a:

A)third party beneficiary.
B)delegation.
C)liquidated damages clause.
D)confidential beneficiary.

Question 73

Ralph Deuschle owned an ice sculpture company. Ralph provides ice sculptures for private weddings, parties, and receptions. The Canasta Resort was a large hotel located near Ralph that was not satisfied with its current catering company's ice sculptures and its events manager liked Ralph's work. The events manager approached Ralph and indicated the Canasta would like to have an ongoing supply contract but that its needs would require Ralph to expand his business, both with additional space and 3 new employees. Ralph entered into a supply contract with the Canasta and the events manager told a lending officer at the bank where Ralph got his construction mortgage for the business expansion that the Canasta would be sending all of its business to Ralph. The Canasta then began to rethink its events focus and marketing and decided to cut back on ice sculptures. Ralph could not use the additional space and the three employees had to be laid off. The Canasta:

A)has no liability to Ralph for the downturn in amount of ice sculptures ordered if it did not guarantee a minimum amount to be purchased.
B)may be liable to Ralph under a theory of a lack of good faith.
C)is entitled to refocus its business and has not breached its contract.
D)None of the above

Question 74

Costco, Inc. had a contract to purchase 300,000 electric mini-Mercedes from HUMBENZ Toy Co. The toy cars were to be delivered by November 1. On October 23, the Consumer Product Safety Commission announced a recall of the toy cars as well as a ban on their sales because of electrical shorts and a high risk of fire in the cars. HUMBENZ has not delivered the cars to Costco. HUMBENZ:

A)has breached its contract with Costco.
B)has a void contract with Costco because the subject matter is now illegal.
C)must still deliver the cars because its contract predated the recall and ban.
D)None of the above

Question 75

Sue and Kevin Kellman signed a contract for the construction of a cabin near Pinetop. In building the $562,000 cabin, the builder discovered that it had to put the vent for the heating system in the area where the hall closet is located. The result was that the Kellman's had a half-closet there instead of a full-length closet that was open to the floor. The Kellmans:

A)need not pay for the cabin because of this material breach.
B)can be compensated under the doctrine of force majeure .
C)can be compensated under the doctrine of commercial impracticability.
D)can be compensated under the doctrine of substantial performance.

Question 76

In most states the legal age capacity for contracts is ___ years old.

A)21
B)16
C)18
D)17

Question 77

Dana Riley purchased a home in the Brentwood area of Los Angeles. After she purchased the home, she learned that the home had been the residence of a long-time drug dealer. She experienced many late-night visitors and often noticed cars parked outside near the street curb with the drivers and passengers studying the home. The former owner has been convicted of drug charges. Dana has become uncomfortable with the visitors and the surveillance. She just wants out of the house. Suppose that the listing agent was aware of the home's history and the drug dealer's arrest and conviction. The agent told the neighbors to cooperate by not disclosing any information to Dana. "Look," the agent told them, "you can get the house sold and keep your values up or let it sit there and have the old druggies come by and destroy it." Which of the following statements is true?

A)The real estate agent has committed fraud.
B)The real estate agent is under no obligation to disclose the information.
C)The most the real estate agent has committed is misrepresentation.
D)None of the above

Question 78

Dana Riley purchased a home in the Brentwood area of Los Angeles. After she purchased the home, she learned that the home had been the residence of a long-time drug dealer. She experienced many late-night visitors and often noticed cars parked outside near the street curb with the drivers and passengers studying the home. The former owner has been convicted of drug charges. Dana has become uncomfortable with the visitors and the surveillance. She just wants out of the house. Which of the following statements is true?

A)Dana has no grounds for rescinding her agreement.
B)The information about the drug dealer was material and should have been disclosed to her.
C)Withholding information about the former drug-dealer owner is not misrepresentation.
D)None of the above

Question 79

Which of the following statements (if later established as untrue)would constitute a misrepresentation defense to contract formation?

A)"You are going to love this house as we have."
B)"This farm's well is adequate for household, ranch, and crop needs."
C)"The school system here is very fine."
D)"Our buyers are the happiest customers around."

Question 80

Teshawn and Amber have a contract with a clause that states that in the event of a breach, the breaching party will pay the non-breaching party $5,000.00. The type of clause is referred to as a _____ clause.

A)compensatory damages
B)liquidated damages
C)incidental damages
D)punitive damages