Deck 9: Consideration, Capacity, and Legality

Question 1

A release does not require consideration to be legally binding.​

Answer 1

False

Question 2

A promise made in return for an act or event that has not yet taken place can be fully enforceable.​

Answer 2

True

Question 3

Under the doctrine of promissory estoppel, a promise will not be enforced unless it is supported by consideration.​

Answer 3

False

Question 4

A minor has a reasonable time, after the minor reaches the age of majority, to disaffirm a contract.​

Question 5

A covenant not to sue does not always bar further recovery.​

Question 6

If a promise is made, it will be enforced.​

Question 7

Parties are usually free to bargain as they wish.​

Question 8

Legal sufficiency of consideration is the same as adequacy of consideration. ​

Question 9

A contract that one party retains the exclusive right to cancel at any time is fully enforceable.​

Question 10

An illusory promise is an unenforceable promise.​

Question 11

Rescission is the remaking of a contract so as to enrich one party at the expense of the other.​

Question 12

To be legally sufficient, consideration must be evidenced by something tangible.​

Question 13

Two parties can mutually agree to rescind a contract unless it is executory.​

Question 14

If a minor disaffirms a contract, he or she must disaffirm the entire contract.​

Question 15

An obligation is enforceable only if it is made in return for actions or events that have already taken place.​

Question 16

A release bars any further recovery beyond the terms stated in the release.​

Question 17

Contractual capacity includes the financial ability to pay for the benefits of a contract.​

Question 18

Essentially, adequacy of consideration concerns the fairness of the bargain.​

Question 19

Performance can constitute the consideration that creates a contractual obligation.​

Question 20

Risks ordinarily assumed in business constitute consideration for the modification of a contract.​

Question 21

Rose questions whether there is consideration for her contract to perform with Saxophone Symphony. To constitute consideration, there must be​

A) ​a payment.
B) ​a performance.
C) ​a bargained-for exchange.
D) ​serious thought underlying each party's intent to contract.

Question 22

Ross promises to pay Sara, his niece, $5,000 if she obtains her degree at Tech University, where she is in her third year. Sara graduates. Ross is​

A) ​not required to pay because Sara was already at Tech.
B) ​not required to pay because obtaining a degree benefits Sara.
C) ​required to pay because a job can be hard to find after college.
D) ​required to pay because Sara obtained a degree at Tech.

Question 23

A contract to commit a tortious act is unenforceable.​

Question 24

Even in states that permit certain types of gambling, courts find that gambling contracts are illegal.​

Question 25

A contract involving an unlicensed practitioner is generally illegal and unenforceable.​

Question 26

If a person has been determined by a court to be mentally incompetent, any contract entered into by that person is void.​

Question 27

A covenant not to compete included in the sale of an ongoing business is always unenforceable.​

Question 28

Fact Pattern 9-1
Sports Bar & Grill and Tea & Tarts Bakery are adjacent businesses with adjoining parking lots. Sports Bar offers Tea & Tarts a discount on purchases if the bakery will not tow the cars of Sports Bar's patrons who park in the bakery's lot.
​
Refer to Fact Pattern 9-1. Sports Bar's discount is legally sufficient consideration​

A) ​because it is a promise of something of value.
B) ​only if Sports Bar adds a cash rebate.
C) ​only if Tea & Tarts uses it.
D) ​under no circumstances.

Question 29

Contracts in restraint of trade are contrary to the public policy that favors competition in the economy.​

Question 30

A person who is intoxicated can avoid liability on any contract due to the intoxication.​

Question 31

A bargain is unconscionable if it is grossly unfair.​

Question 32

Executed contracts are presumed ratified.​

Question 33

The courts are usually not concerned if one of the wrongdoers in an illegal contract is unjustly enriched at the expense of the other.​

Question 34

A usurious contract involves the purchase and sale of usable goods.​

Question 35

If an illegal contract is executory, either party can always enforce it.​

Question 36

A covenant not to compete is enforceable only if it is necessary to restrain trade.​

Question 37

Kim promises to pay Leo $500 to install a sump pump in Kim's warehouse. Leo completes the installation. The act of installing the pump​

A) ​imposes a moral obligation on Kim to pay Leo.
B) ​imposes no obligation on Kim unless she is satisfied with the job.
C) ​is not sufficient consideration because it is not goods or money.
D) ​is the consideration that creates Kim's obligation to pay Leo.

Question 38

Ordinarily, minors can disaffirm contracts even when they have misrepresented their age.​

Question 39

Fact Pattern 9-1
Sports Bar & Grill and Tea & Tarts Bakery are adjacent businesses with adjoining parking lots. Sports Bar offers Tea & Tarts a discount on purchases if the bakery will not tow the cars of Sports Bar's patrons who park in the bakery's lot.
​
Refer to Fact Pattern 9-1. Tea & Tarts's forbearance from towing is legally sufficient consideration​

A) ​because it is a promise of something of value.
B) ​only if Sports Bar's patrons park in Tea & Tarts's lot.
C) ​only if Tea & Tarts's customers cannot park in its lot because it is full.
D) ​under no circumstances.

Question 40

Even in states that permit certain types of gambling, courts often find that gambling contracts are illegal.​

Question 41

Chet, a minor, signs a contract with Denise, an adult. The contract is voidable at the option of​

A) ​neither party.
B) ​Chet only.
C) ​either party.
D) ​Denise only.

Question 42

Stephen offers Theresa $1,000 for her collection of rare coins. She accepts. If a dispute arises, a court would likely​

A) ​enforce the deal after questioning the adequacy of consideration.
B) ​not question the adequacy of the consideration.
C) ​rewrite the deal after questioning the adequacy of consideration.
D) ​set aside the deal after questioning the adequacy of consideration.

Question 43

Fact Pattern 9-2
Sal contracts with Tasty Pizza to deliver its products. Both parties change their minds, however, and inform each other that they would like to cancel the contract.
Refer to Fact Pattern 9-2. The next day, Sal changes his mind and again offers to deliver Tasty's products. Tasty is willing to deal, but for a new price. Sal and Tasty​

A) ​may agree to a new contract, but it cannot include a new price.
B) ​may agree to a new contract that includes the new price.
C) ​must perform their original contract.
D) ​must perform the part of their original contract that is executory.

Question 44

​Intoxicated but capable of comprehending the consequences of her actions, Cricket signs a contract to sell her phone app design to Download, Ltd. This contract is

A) ​unenforceable because Cricket was intoxicated.
B) ​enforceable.
C) ​unenforceable if Cricket disaffirms it.
D) ​unenforceable if Download disaffirms it.

Question 45

Jenny promises to pay Kay $500 because "she does not have as much money as other people." Jenny's promise is​

A) ​enforceable because society wants people to keep their promises.
B) ​enforceable because the redistribution of wealth is a valid social goal.
C) ​not enforceable because Jenny could have paid Kyle more.
D) ​not enforceable because Kay has not given consideration in return.

Question 46

Desi's Uncle Eduardo tells Desi, "If I feel you deserve it at the time, I will give you a new car when you graduate from college." This promise​

A) ​is illusory.
B) ​is enforceable.
C) ​relies on forbearance.
D) ​consists of a preexisting duty.

Question 47

Rita, a minor, misrepresents her age as twenty-one and signs a contract with Sporty Motors to buy a sport utility vehicle (SUV. In most states, Rita may​

A) ​disaffirm the contract.
B) ​disaffirm the contract only if she makes full payment.
C) ​disaffirm the contract only if she returns the SUV in good condition.
D) ​not disaffirm the contract due to the misrepresentation.

Question 48

Baylor obtains a loan from City Bank at 24.5 percent interest. Their state's usury statute limits interest rates to a 22.0 percent maximum. Baylor's contract with the bank is enforceable only if​

A) ​Baylor does not attempt to disaffirm it.
B) ​the bank does not attempt to disaffirm it.
C) ​both Baylor and the bank knew of the state limit.
D) ​none of the choices.

Question 49

​Rosa, a seventeen-year-old, signs a contract to sell her car to Street Fleet Cars. Later, Rosa decides not to sell the car. Rosa is liable to Street Fleet for

A) ​the cost of a car of comparable value.
B) ​the value of her performance under the contract.
C) ​the amount of the buyer's profit on the deal.
D) ​nothing.

Question 50

Geri is a minor. Without her parents' knowledge, she signs a contract to buy an airline ticket to Hawaii for spring break. Geri's parents are liable for​

A) ​the entire price of the ticket.
B) ​no part of the price of the ticket.
C) ​up to half of the price of the ticket.
D) ​up to two-thirds of the price of the ticket.

Question 51

Under a contract with Valley Vineyard, Walsh begins grading a terraced hillside for the planting of grapes. Halfway through the project, Walsh asks for $5,000 over the contract price, claiming an increase in the "cost of doing business." Valley agrees but later refuses to pay. Valley's agreement to pay more is​

A) ​unenforceable because Walsh's performance was a preexisting duty.
B) ​unenforceable because Valley's promise was illusory.
C) ​enforceable.
D) ​unenforceable because Walsh's request modified the contract.

Question 52

A court adjudicates Henry mentally incompetent and appoints Inez to be his guardian. Later, without Inez's knowledge, Henry signs a contract to sell his farm to Jason for its real market value. The contract is​

A) ​enforceable if Henry comprehended the consequences.
B) ​enforceable if Henry knew the market value of the farm.
C) ​enforceable if Henry was the record owner of the farm.
D) ​void.

Question 53

Laurel enters into a contract to sell her bike to Melanie. Melanie takes possession of the bike as a minor and continues to use it well after reaching the age of majority. She has​

A) ​expressly ratified the contract.
B) ​impliedly ratified the contract.
C) ​expressly disaffirmed the contract.
D) ​impliedly disaffirmed the contract.

Question 54

Kent buys Lizzie's house for $100,000, which is the fair market value of the house. If the contract is later disputed in court, the court is likely to declare Kent's consideration​

A) ​inadequate.
B) ​past.
C) ​legally sufficient.
D) ​illusory.

Question 55

Fact Pattern 9-2
Sal contracts with Tasty Pizza to deliver its products. Both parties change their minds, however, and inform each other that they would like to cancel the contract.
Refer to Fact Pattern 9-2. Sal and Tasty​

A) ​may rescind their entire contract.
B) ​may rescind their contract to the extent that it is executory.
C) ​must perform their entire contract.
D) ​must perform the part of their contract that is executory.

Question 56

Maria is the sheriff of Narez, Texas. Oscar robs a Narez gas station and a $500 reward is offered for his capture. When, later, Maria finds and arrests him, with respect to the reward, she can​

A) ​collect it.
B) ​not collect it because she had a preexisting duty to capture Oscar.
C) ​not collect it because it is not legally sufficient consideration.
D) ​not collect it because it would be unconscionable.

Question 57

Rory questions whether there is consideration for his contract with Silver Spurs Club to exchange his performance of country music on certain dates for Silver's payment of a certain amount. To constitute consideration, the value of whatever is exchanged must be​

A) ​objectively worthy.
B) ​precisely adequate.
C) ​legally sufficient.
D) ​practically sound.

Question 58

Twyla's dock is damaged in a boating accident caused by Ulrich's negligence. Twyla agrees not to sue him if he will pay for the damage. If Ulrich fails to pay, Twyla can bring an action for breach of contract. This is​

A) ​a covenant not to sue.
B) ​an illusory promise.
C) ​an unforeseen difficulty.
D) ​a release.

Question 59

Pi in the Sky Aircraft Inc. files a suit against Quest Engineering Inc., claiming that the consideration for their contract is inadequate. The court will most likely not examine the adequacy of the consideration if​

A) ​there is a large disparity in the amount of consideration exchanged.
B) ​the consideration involves the performance of services.
C) ​something of value passed between the parties.
D) ​the consideration is worth less than $100.

Question 60

While biking, Jolene is injured when Kirby carelessly causes them to crash. Kirby's insurance company offers Jolene $50,000 to release Kirby from liability, and she accepts. Later, Jolene learns that her injuries are more serious than she realized. The release is​

A) ​enforceable.
B) ​unenforceable because Jolene's injuries are unforeseeably difficult.
C) ​unenforceable because Kirby has a preexisting duty to pay.
D) ​unenforceable because the release is an illusory promise.

Question 61

Centre City Properties, Inc., owns and manages a warehouse. DIY Home Improvement Stores agrees to lease the warehouse for six years. Under the lease, DIY is obligated to pay all of the utility costs. Two years into the term, DIY asks Centre City to modify the lease to provide that the utility costs will be split equally between them. The landlord agrees, but later decides it does not want to share the costs and refuses to pay. Is Centre City bound to its agreement to share the utility costs? Why or why not?​

Question 62

Countrywide Trucking Inc. contracts with Dewey to transport crated goods to a certain destination for $5,000. Countrywide delivers the crates, but Dewey does not pay. Countrywide learns that the crates contained stolen goods. Countrywide can recover from Dewey​

A) ​none of the choices.
B) ​$5,000, but not the goods.
C) ​the goods but not $5,000.
D) ​the goods and $5,000.

Question 63

A contract between Kim and Larry to lease residential property contains an exculpatory clause. This clause is​

A) enforceable as a matter of public policy.​
B) ​enforceable if either party is in a business important to the public.
C) ​enforceable if an event occurs to which the clause applies.
D) ​generally unenforceable.

Question 64

Games Galore Corporation hires Haley, a minor, to create new customized game software for certain clients. Haley signs a contract that requires her to work for Games Galore for eighteen months. Before beginning work, however, Haley tells Games Galore that she will not create new software for Games Galore and that she is going to work for Ideal Worldcraft, Inc., a Games Galore competitor. Is Games Galore's contract with Haley enforceable? Why or why not?​

Question 65

Service Corporation markets its service to less educated consumers. In considering the unconscionability of a Service contract, a court will likely consider all of the following except​

A) ​a buyer's level of education.
B) ​the parties' relative bargaining power.
C) ​the price of a service.
D) ​the seller's level of education.

Question 66

Research Data Corporation sells access to its database of scientific research to users for a certain price per month. Research Data files a suit against its user Tom when, in violation of their contract, he stops making payments. Tom claims that the deal is unconscionable. The court will most likely consider​

A) ​the geographic area of the relevant market.
B) ​the parties' relative bargaining power.
C) ​the quality of related services in the general market.
D) ​the relation of this deal to those of other users.

Question 67

Betty sells her Clothes Shop to Diane. In the sale agreement, there is a covenant not to compete that prohibits Betty from opening another clothing store within a certain distance. If a court concludes that this restriction is unreasonable, it will most likely​

A) ​award Betty damages equal to the speculative profit of a closer store.
B) ​order Diane to stop doing business.
C) ​reform the covenant.
D) ​prohibit both parties from opening clothing stores.

Question 68

Fagin and Gage agree to hijack a truck carrying a load of almonds. If Fagin later refuses to go through with the crime, Gage can​

A) ​enforce the agreement.
B) ​obtain damages in the amount of his partner's share of the illegal profits.
C) ​obtain damages in the amount of his own share of the illegal profits.
D) ​none of the choices.

Question 69

Omni Insurance Company violates a state licensing statute when selling a policy to Petra, in whose state Omni is not licensed to sell insurance. As a member of the class of persons protected by the statute, Petra can​

A) ​do nothing with respect to the policy.
B) ​enforce the policy or recover the amount of the premiums paid.
C) ​only enforce the policy.
D) ​only recover the amount of the premiums paid.

Question 70

Oscar owns Payroll Company, a bookkeeping service. Oscar pays Remy $5,000 to steal a list of a competitor's clients, to whom Oscar will aggressively market Payroll's services. This deal is​

A) ​enforceable.
B) ​void.
C) ​voidable at the option of either party.
D) ​voidable at the option of the party having less bargaining power.

Question 71

Reed agrees to sell his Sports Equipment store to Taylor. As part of the sale, Reed promises not to open a similar, competing store anywhere. This promise is most likely​

A) ​invalid because it is part of a sale of an ongoing business.
B) ​invalid because of the unreasonable terms of area and time.
C) ​valid because it is part of a sale of an ongoing business.
D) ​valid if Reed and Taylor are reasonably intelligent.

Question 72

Holly, a real estate broker licensed only in Iowa, concludes a sale of farmland in Illinois. Holly can​

A) ​collect the commission if it has not been paid.
B) ​keep the commission if it has already been paid.
C) ​foreclose on the property to obtain any unpaid amount.
D) ​none of the choices.