Deck 11: Consideration

Question 1

An agreement to pay a lesser amount to settle an unliquidated debt is:

A)enforceable, as there is consideration.
B)unenforceable, as there is no consideration.
C)enforceable in only some states.
D)unenforceable as a violation of public policy.

Answer 1

A

Question 2

Contracts in which one party agrees to buy all his requirements of certain goods from the other party are generally unenforceable because there is no definite amount.

Answer 2

False

Question 3

Consideration can be a promise or an act.

Answer 3

True

Question 4

Courts normally require adequate consideration.

Question 5

Denton agreed to build a cedar deck for the Thrashers for $7,000.After he began the work,the Thrashers asked him to add cedar flower boxes at one side.Denton replied he would,but it would cost an additional $600.The Thrashers would not be obligated to pay the additional sum because the original agreement already obligated Denton to complete the deck for $7,000.

Question 6

In the historic case of Hamer v.Sidway,the nephew:

A)lost, as there was no consideration.
B)lost, as the uncle was dead.
C)won, as there was consideration.
D)won, as there was a completed gift.

Question 7

Output contracts in the sale of goods are expressly prohibited by Section 2-306 of the UCC.

Question 8

Ann owes a liquidated debt of $3000 to Platinum Body Shop for the work done on her car.She sends Platinum a check for $1000 on which she has marked,"Payment in Full." If Platinum cashes the check,they will not be able to successfully sue Ann for the remainder of the debt.

Question 9

An illusory promise is not consideration.

Question 10

The Utah Court of Appeals in the Dementas v.Estate of Tallas case found:

A)the trial court correctly determined that there was no consideration to support Tallas's promise.
B)Utah applies the "moral obligation" exception to the requirement of consideration, and therefore Tallas's promise was supported by consideration.
C)because Utah does not recognize the "moral obligation" exception to the requirement of consideration, Dementas prevails.
D)the trial court's finding that the services rendered by Dementas to Tallas were performed gratuitously was erroneous.

Question 11

In January,Alex promised to pay Y-K Inc.$5,000 if it would refrain from filing suit against him on a breach of contract action.Y-K agreed and accepted a $5,000 check from Alex.Which of the following statements is correct?

A)Y-K's promise to refrain from suing Alex was not supported by legal consideration.
B)Y-K's promise to refrain from suing Alex was supported by legal consideration and is enforceable.
C)This is an accord and satisfaction, and Y-K cannot sue.
D)The courts would apply promissory estoppel in this situation.

Question 12

The UCC requires consideration for agreements modifying contracts for the sale of goods.

Question 13

Which of the following statements describes a requirements contract?

A)The seller guarantees to sell 100% of its production to one buyer.
B)The buyer agrees to buy 100% of the seller's production.
C)The buyer agrees to purchase 100% of her goods from one seller.
D)It is usually not valid due to lack of consideration.

Question 14

Society enforces all promises in the interests of simple morality.

Question 15

Hilda owes Lex $3,000,which is an undisputed amount.If she offers him her car in full settlement of the debt and he accepts,the agreement is binding and he can no longer claim she owes him anything on the original debt.

Question 16

Raul agrees to paint Mike's house for $1,000.Before finishing,Raul states it is too hot to finish,and Mike offers to pay $1,200 if Raul finishes.Mike's statement that he will pay $1,200 is unenforceable.

Question 17

Agreeing not to open a competing business could be consideration.

Question 18

Consideration means that there is a bargaining that leads to an exchange between the parties.

Question 19

In Dementas v.Estate of Tallas,the Utah Court of Appeals ruled that Tallas's promise was not enforceable as past consideration is not valid.

Question 20

Reuben climbs up a tree in his front yard in order to retrieve his daughter's kite.All of a sudden,he realizes he is paralyzed with fear.Burt,his neighbor,passes by.He sees Reuben,runs in his garage,grabs a ladder and comes to his neighbor's rescue.Once Reuben is on the ground,he hugs Burt and promises to give him a case of wine next time he sees him.Reuben changes his mind.Burt will be successful in enforcing Reuben's promise as there was valid consideration.

Question 21

"I'll sell you my car if I decide to sell it" is an example of:

A)a conditional offer.
B)an unliquidated offer.
C)a unilateral contract.
D)an illusory promise.

Question 22

Lisa owes $800 to Bella Shoe Store.She sends the store a check for $200 with the notation "payment in full" on the check.If the store cashes the check:

A)Lisa's balance will automatically be paid in full if the $800 amount was a liquidated debt.
B)Lisa's balance will automatically be paid in full regardless of whether the amount of $800 was liquidated or unliquidated.
C)the check may be subject to a UCC exception to the general rules for accord and satisfaction cases involving checks.
D)Lisa's balance will automatically be paid in full if the $800 amount was an unliquidated debt.

Question 23

A promise by Derkin Restaurants to buy all of the produce it needs this next year at an established price from Elfredo's Produce would be an:

A)enforceable requirements contract.
B)enforceable output contract.
C)unenforceable, illusory contract.
D)unenforceable promise based on past consideration.

Question 24

The Kelsoe v.International Wood Products,Inc.case was an example of:

A)promissory estoppel.
B)partial performance.
C)illusory promises.
D)lack of consideration.

Question 25

An agreement in which a buyer agrees to buy all the goods produced by a manufacturer is known as:

A)a requirements contract.
B)an output contract.
C)an exclusive dealing contract.
D)an option contract.

Question 26

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, as 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 27

Jamie is building a new house on her lot.She invites Earnie of Earnie's Excavation to bid on the excavation job.Earnie observes that the lot next to Jamie's is also under excavation and the soil in that lot is normal and not excessively rocky.Based on the assumption that the soil in Jamie's lot will be similar,he and Jamie agree that the excavation will cost $3,000.When Earnie starts digging,he learns there is solid rock under Jamie's lot.Earnie says it will cost an extra $2,500 for the excavation work.Jamie agrees just to get the job done but later refuses to pay a dime more than $3,000.If Earnie sues,the most likely result would be:

A)Jamie wins, as Earnie was under a preexisting duty to dig the basement.
B)Earnie wins as this modification is governed by the UCC and consideration is not required to enforce a modification of the agreement.
C)Jamie wins as Earnie was not acting in good faith and just wanted to put Jamie in a situation where she didn't have a choice but to agree to more money.
D)Earnie wins, as the modification was due to unforeseen difficulties.

Question 28

Sanders Co.and Gaines,Inc.enter into a contract for the manufacture and sale of 200 patio wooden tables.If both parties agree that a modification is necessary:

A)the exception established by Citizens Trust Bank v.White will apply.
B)they may not do so as their original contract is not yet executed.
C)an agreement to rescind the contract will terminate the contractual rights of Sanders Co.and Gaines, Inc.if neither of them had completed their obligations.
D)courts will generally not enforce a cancellation and modification of a contract unless one party received inadequate consideration under the original contract.

Question 29

If Ellen and Daryl are in disagreement as to the exact amount of money that Ellen owes Daryl,then they may choose to form a new agreement at a set amount.If they both perform the new agreement,their conduct would be an example of:

A)a rescission.
B)a contract modification.
C)an accord and satisfaction.
D)past consideration.

Question 30

The Plaza Hotel contracts with EZ Lawn to have EZ mow the grass on the Plaza grounds for the next 10 years.However,there is a clause in the contract that states if the hotel chooses,the contract may be terminated provided Plaza pays EZ $2,000 on termination.Which of the following is correct?

A)The contract is unenforceable because the option to cancel clause makes the contract an illusory promise.
B)The contract is unenforceable because the $2,000 is past consideration.
C)The contract is unenforceable because only one party has the option to cancel.
D)The contract is enforceable because the option to cancel clause is supported by consideration.

Question 31

Northland,Inc.agreed to build Heather a cedar garden shed for $3,000.After beginning the project,Northland realized that it could not complete the job and make a profit.Northland demanded $3,800 to complete the building.Heather agreed to pay the $3,800.When the project was complete,Heather tendered $3,000 to Northland for the job.If Northland sues Heather for the remaining $800:

A)Northland will win because there was consideration for the additional $800.
B)Northland will win because Heather had agreed to the higher amount.
C)Northland will lose because there was no legal consideration to support the additional $800.
D)Northland will lose because consideration was not adequate.

Question 32

Under the Uniform Commercial Code,an agreement modifying a contract:

A)always requires consideration.
B)may not require consideration.
C)requires consideration only when it is not written.
D)requires consideration only when one of the parties is a minor.

Question 33

If Rudy offers Oscar $200 for his $600 stereo 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 34

Mid-American Oil had a contract with NSB Company to supply 1,000 gallons of oil by September 1.The contract contained a provision which required all modifications to be written and signed by the company presidents.In early August,an executive of Mid-American talked with the purchasing agent of NSB who orally agreed to two shipments of oil; one in September and the second one in December.By September 30,when only 500 gallons had been delivered,NSB sued.The likely outcome of this lawsuit is:

A)NSB wins because the modification was not supported by new consideration.
B)NSB wins because the modification has to be in writing.
C)Mid-American Oil wins because the UCC governs this case and no new consideration is required.
D)Mid-American Oil wins because new consideration was present.

Question 35

Police Officer Paul apprehends a wanted criminal and then demands the $10,000 reward offered by Crime Stoppers.Which of the following statements is true?

A)Police Officer Paul is not entitled to the reward because past consideration is never valid consideration.
B)Police Officer Paul is entitled to the reward because he puts his life on the line every day.
C)Police Officer Paul is not entitled to the reward because he was under a pre-existing duty to make the arrest.
D)Police Officer Paul is not entitled to the reward but may have an argument under promissory estoppel.

Question 36

Emily agrees to sell Clowns R Us some balloons.The contract states that Clowns may buy as many balloons as it wishes.This agreement is:

A)a requirements contract.
B)an output contract.
C)an option contract.
D)an illusory contract.

Question 37

An unliquidated debt can be described as:

A)a debt in which both its existence and amount is in dispute.
B)a debt in which the existence or amount is in dispute.
C)a debt disputed by the debtor but not the creditor.
D)a debt undisputed by either party.

Question 38

Frank owes an undisputed amount to Hanson Gutter Cleaners.Which of the following is true?

A)If Hanson agrees to accept less than the full amount as full payment, the agreement is not binding.
B)The undisputed amount is also known as an unliquidated amount.
C)Payment of less than the full amount will form an accord and satisfaction agreement.
D)If Hanson agrees to accept less than the full amount, the agreement is only binding if it is in writing and signed by Frank.

Question 39

If Annie promises not to drink alcohol until she is 21 years of age in exchange for her aunt's promise of $1,000,the agreement is:

A)enforceable because Annie is giving up the right to do something she would otherwise be entitled to do.
B)enforceable because both parties made a valid promise.
C)not enforceable because Annie does not have a legal right to drink alcohol.
D)not enforceable because Annie's aunt doesn't receive anything of value in exchange for her own promise.

Question 40

Walter worked nights as a clerk in a fast-food store.On his last work shift,Walter's boss told him,"I'm really grateful for the year that you have worked here.I am going to give you a bonus of $1,000 in your last paycheck." When Walter got his last paycheck,there was no bonus.If Walter sues,the likely result will be:

A)Walter will win, as the promise is enforceable.
B)Walter will lose, as he gave no consideration.
C)Walter will lose unless the promise was in writing.
D)Walter will win, as no consideration is required to modify an employment contract.

Question 41

Shirley Rhone suffered injuries when a truck struck the vehicle in which she was riding.State Auto Mutual Insurance Co.was the insurer involved and provided personal injury coverage.Shirley went to see Dr.Allen,a chiropractor who provided treatments 32 times over a 3-month period.Dr.Allen billed State Auto in three separate billings.After paying the first two billings in full,State Auto expressed concern about whether Dr.Allen's charges were excessive.State Auto hired Chiropractic Consultants,Inc.to evaluate Dr.Allen's billings.The consultants advised that Dr.Allen's billings were indeed excessive.State Auto then telephoned Dr.Allen and offered a partial payment to settle the account.After this conversation,State Auto issued and sent a check for $864 payable to Dr.Allen.On the face of the check,State Auto noted the total amount allocated to each claim and typed "settlement in full." On the reverse side it said,"The endorsement of this draft by the payee constitutes a clear release and full settlement of the claim or account shown on the other side." Upon receipt of the check,Dr.Allen cashed the check.He then sought payment of an additional $895.State Auto claims there was an accord and satisfaction with respect to the amount due for services rendered by Dr.Allen.What are the requirements of an accord and satisfaction? Were those requirements met in this case?

Question 42

Douros Realty & Construction Co.had a lead on a "prime" piece of real estate.Although Douros did not have a listing agreement with the seller of the property,he contacted Kelley Properties.Douros knew that Kelley was looking for a location for a commercial development.Douros contacted Kelley stating only that he had the "finest,most outstanding,viable location in the county and it just came on the market." Douros said he would reveal the location of the property and the owner's name if Kelley would sign an agreement which would require Kelley to pay a 10% commission if a sale of the property resulted.The agreement was signed.Four months later,Kelley bought the property after negotiating the deal himself.Kelley claims he does not owe a commission to Douros because there was insufficient consideration to support the payment of commission so large.Kelley claims that all Douros did in the entire transaction was to reveal the location of the property and the owner's name.Was there sufficient consideration to make this promise enforceable?

Question 43

What two exceptions did the UCC create for accord and satisfaction check cases?

Question 44

Discuss the concept of consideration.

Question 45

Zoe hired Shiny Pool Co.to install a swimming pool on her property for $13,000.They both thought the soil and subsoil were normal for the area,but after they started digging,Shiny found a layer of rock that required them to rent a special piece of equipment from a drilling company.Two extra days of work were going to be necessary.Shiny demanded an extra $4,000 to complete the job.Discuss whether Zoe is liable for the additional $4,000.

Question 46

Benny's Furniture Company promised in a written agreement to purchase all the oak wood it needs Forestry Products,Inc.If Benny's purchased oak wood from Milton Wood Co.and Forestry Products sued,what is the likely result?