Deck 12: Consideration

Question 1

The Uniform Commercial Code follows the common law rule that requires a modification of an existing contract to be supported by consideration in order to be valid.

Answer 1

False

Question 2

The requirement of legally sufficient consideration is concerned with whether the bargain was good.

Answer 2

False

Question 3

An output contract is a special form of an illusory contract.

Answer 3

False

Question 4

Past actions unbargained for by the parties in an agreement can become valid consideration for a contract.

Question 5

Sandy's private secretary promises not to disclose the contents of a letter she typed if Sandy will give her the next day off with pay.If the secretary takes the day off, Sandy does not have to pay her for the day.

Question 6

Legal detriment means the obtaining by the promisor of that which he had no prior legal right to obtain.

Question 7

In a unilateral contract a promise is exchanged for an act or forbearance to act.

Question 8

An exclusive dealing contract is one type of contract which is illusory, because it lacks consideration.

Question 9

An agreement to sell the entire production of a particular plant is a requirements contract.

Question 10

Dana gives care to Marnie's dog when Dana finds Marnie's dog ill on the side of the road.After Marnie locates her dog, Marnie promises to reimburse Dana for the cost of treating the dog.Marnie's promise is binding, because there is a bargained-for-exchange.

Question 11

In a unilateral contract, a promise is exchanged from one party to another for a promise to forbear to act.

Question 12

If Marguarite promises to pay Neal $300 not to defame her, the promise is unenforceable because tort law imposes a preexisting obligation on Neal to refrain from such an act.

Question 13

An illusory promise is consideration for a return promise.

Question 14

Gratuitous promises are generally legally enforceable.

Question 15

The UCC provides that a contract for the sale of goods can be effectively modified without new consideration, provided the modification is made in good faith and both parties intend to modify the contract.

Question 16

"Consideration" requires an actual benefit to both sides of an agreement.

Question 17

In the case of Denney v.Reppert the court allowed the employees of a bank to collect a reward, because they supplied information that led to the arrest and conviction of a bank robber.

Question 18

The Abbot Corporation contracts with the Baker Corporation to sell to Baker its entire production.After signing the agreement, Abbot can increase its production from one shift to two shifts and Baker will have to buy all of the doubled production.

Question 19

Andrew agreed to exchange something clearly without value to enter a contract with Milt.The contract will not fail for lack of consideration because, if the parties agree to the exchange, the courts will not be concerned about whether the consideration is "adequate."

Question 20

In most, if not all, cases where there is a legal detriment to the promisee, there is also a legal benefit to the promisor.

Question 21

Obligations contingent upon the happening or nonhappening of an event not certain to occur are known as conditional promises.

Question 22

Exclusive dealing contracts are illegal and void.

Question 23

Although such a gratuitous promise would be otherwise unenforceable, under the UCC, any claim arising out of an alleged breach of contract can be discharged by a written renunciation signed and delivered by the aggrieved party.

Question 24

Charitable subscriptions are one of the most frequently occurring applications of the doctrine of promissory estoppel.

Question 25

In the Pearsall v.Alexander case, the court found that by exchanging mutual promises to share in proceeds of lottery tickets, the parties entered into a valid, enforceable contract.

Question 26

Under the common law, in order to be enforceable, a modification of an existing contract must be supported by mutual consideration.

Question 27

D owes C a past-due undisputed debt of $500.D sees C in a bar and pays him $400.C then says to D, "Forget about the other $100 you owe me.I'm glad to get the $400." C's promise to discharge the remainder of the debt is binding.

Question 28

Contracts binding without consideration include promises to pay debts barred by a statute of limitations and debts discharged in bankruptcy.

Question 29

Jerry received a bill for $300 from Johnson for a tune-up Johnson had performed on Jerry's car.Jerry called Johnson and told him, "The car runs no better now than before the tune-up.I am sending you $100 and no more." Johnson received the $100 check which was marked "paid in full" and cashed it.Jerry is still liable to Johnson for $200.

Question 30

An illusory promise has the form of a promise but imposes no real obligation.

Question 31

Under the common law, payment of a lesser sum of money than is owed in consideration of a promise to discharge a fully matured, undisputed debt is legally sufficient to support the promise of discharge.

Question 32

In some states, a contract under seal is binding without consideration.

Question 33

Legal sufficiency of consideration and adequacy of consideration are virtually synonymous terms.

Question 34

The performance of a pre-existing contractual duty which is neither doubtful nor the subject of an honest dispute is legally sufficient consideration to support a second contract.

Question 35

In a bilateral contract, if one party is not bound, neither party is bound.

Question 36

The term "past consideration" is not really consideration at all because the law will not find a contract where there is no bargained-for-exchange.

Question 37

The two basic elements to consideration are legal adequacy and a bargained-for exchange.

Question 38

Under the common law, a modification of a preexisting contract must be supported by mutual consideration; under the Code, a contract can be modified without new consideration.

Question 39

The Restatement recognizes moral obligations as consideration.

Question 40

Exclusive dealing contracts are binding because the implied obligations are sufficient consideration.

Question 41

Sam owes $5,000 to the First National Bank for a student loan which will come due on January 1 next year.He has been offered a two-year graduate fellowship, but he will not be able to pay the loan back if he accepts the fellowship.The bank manager tells Sam that if he pays $3,000 now, they will forgive the loan.Should Sam accept the offer?

A)No, because the bank can still sue for the remaining $2,000.
B)No, because the manager's promise is not binding on the bank.
C)Yes, because the early payment of the loan is consideration that makes the bank's promise binding.
D)Yes, because the bank must do whatever the manager says.

Question 42

Aunt Ellie promises her 21-year-old nephew, Robbie, that she will pay him $100 if he quits smoking for a month.If Robbie does, is there a binding contract?

A)No, because Robbie gave no benefit to Aunt Ellie.
B)No, because Robbie did not suffer any detriment.
C)Yes, because stopping smoking will benefit Robbie's health.
D)Yes, because Robbie gave up a legal right.

Question 43

A debt is disputed only if both the existence and amount are contested.

Question 44

Nancy, who lives in Birdville, wants to open a McHenry Roast Chicken franchise.Mark, a representative of McHenry, told Nancy, "If you will buy a lot and build a building in River City, we will give you a franchise." Nancy bought the lot and built the building as instructed only to discover that McHenry had awarded the franchise to a large corporation.McHenry claims no liability to Nancy since there was no consideration.Which statement best describes the situation?

A)McHenry is not liable to Nancy since there was no consideration.
B)McHenry is not liable to Nancy since there was past consideration.
C)McHenry is liable to Nancy since adequate consideration was given by both parties.
D)McHenry is liable to Nancy based on the concept of promissory estoppel.

Question 45

Howard ordered an aluminum storm door for $249.99.Before it was delivered, the same store from which he ordered the door ran an ad in the paper for the same storm door for $179.99.Howard called the store and demanded the advertised price.They say okay.

A)Howard must pay $179.99.
B)Howard must pay $249.99.
C)There is no contract.
D)There is a contract for the reasonable value of the door.

Question 46

Jan promises Eli $4,000 for one of his original paintings on the condition that she receives $1 million from her mother's will.In this case:

A)Jan has made an illusory promise.
B)Jan's promise is legally sufficient unless Jan knows she cannot inherit the $1 million.
C)Jan has made a conditional promise which is not sufficient to form consideration.
D)Jan's promise is legally inadequate and the courts will therefore not enforce it.

Question 47

Alice says to Brian, "If I decide to buy a word processor next year, I will buy it from you." This is an example of:

A)an illusory promise.
B)past consideration.
C)the pre-existing duty rule.
D)good consideration.

Question 48

Wayne helped Hank study all night for an important exam.After Hank got an "A" on the exam, he told Wayne, "I will give you $10 for helping me get a good grade." Wayne said, "Thanks, I'll take it."

A)There is no contract because there is no mutual assent.
B)There is no contract because there is no valid consideration.
C)There is no contract because $10 is reasonably inadequate consideration.
D)There is a contract with sufficient consideration.

Question 49

Nathan's father promises to give him a car for his twenty-first birthday.Nathan can legally enforce this promise because it created a moral obligation.

Question 50

Which of the following would most likely be enforceable?

A)An agreement supported by past consideration.
B)A substitute agreement to settle an undisputed debt.
C)A debt agreed to seven years ago in a state where the statute of limitations is six years.
D)A promise following the rendering of emergency services that is not supported by new consideration.

Question 51

Which of the following would not be a promise statutorily made enforceable without consideration?

A)Hawkins, in good faith, changes the quantity of square yards of carpet ordered from Grant Mills.
B)Jones promises to pay his cousin's past-due cell phone bill.
C)Dodds signs and delivers a waiver of a claim arising out of a breach of contract by Keys.
D)A signed, written offer by Marcum Jewelers to sell four dozen 18" gold chains to the Alpha Sorority for $480 within the next 30 days.

Question 52

A modification of a preexisting contract occurs when the parties agree to change one or more of its terms.

Question 53

Which of the following is enforceable without new consideration?

A)Beth, after reaching the age of majority, promises to pay off a debt she incurred while a minor.
B)Cheyenne entered a contract to buy a car based on a fraudulent misrepresentation.A new promise to pay is made without knowledge of the original fraud.
C)Val entered a contract voidable because of mistake.A new promise to fulfill the contractual obligations that had not previously been avoided and without knowledge of the mistake is enforceable without new consideration.
D)None of the above.New promises to perform voidable obligations that have not previously been avoided must always have new consideration.

Question 54

Bob promises to sell to Candy an automobile for $20,000, for which Candy promises $20,000.A unilateral contract exists.

Question 55

Which of the following is enforceable without consideration?

A)A new promise to pay a debt barred by the statute of limitations.
B)An illusory promise.
C)A promise to supply all of the materials a manufacturer will need for the production of a certain item for a specified period of time.
D)In the majority of states, a promise by a father to pay someone who rendered emergency services to his injured son before the father had arrived at the accident scene.

Question 56

Mary agrees to sew Georgia's prom dress for $50 plus costs.Georgia decides that she wants ruffles around the neck and calls Mary who says it will now cost $60.When Mary finishes the dress (with ruffles), Georgia must pay:

A)$50, since that is the original agreement.
B)$50, since a modification must be in writing.
C)$60, since the modified agreement is supported by additional consideration.
D)$60, since any subsequent agreement is enforceable.

Question 57

Marilyn contracted with Bravo Builders to build an addition to her house for $15,000.After digging the foundation, Bravo decides that it will take more work and more concrete than it had originally thought and that it will need to charge an additional $5,000 for the job.Assuming Marilyn agrees, which of the following is correct?

A)Marilyn will have to pay $20,000.
B)This is a contract under seal which is enforceable.
C)This is a modification of a preexisting contract, which under common law must be supported by additional consideration on the part of Bravo Builders.
D)This is the settlement of a disputed debt that requires no additional consideration on the part of Bravo Builders.

Question 58

Jack moved from New Hampshire to Florida and decided to have an air conditioner installed in his car.After it was installed, Jack received a bill for $1,200.Jack called the dealer and told him he'd never heard of this service costing more than $500.They argued, but the dealer finally agreed to take $900.Is the agreement enforceable?

A)Yes, there is no way for the dealer to get the extra money anyway.
B)Yes, there is consideration for the modified amount.
C)No, there is no consideration and the dealer can sue for the extra $300.
D)No, there is an implied contract to pay the dealer whatever he billed Jack.

Question 59

Consideration the inducement to make a promise enforceable.

Question 60

Harold purchased 400 pairs of gloves from Isaac at a contract price of $800.Fifty of the gloves were defective and a dispute arose as to the amount due and owing under the contract.Harold refuses to pay the $800 and Isaac is threatening to sue.Which of the following is correct with regard to this transaction?

A)If Isaac agrees to accept $600 to settle the dispute and Harold agrees to pay that amount, the agreement is enforceable.
B)If Isaac agrees to accept $600 to settle the dispute and Harold pays that amount, Isaac can still sue for the balance of $200 and will win the lawsuit.
C)Harold is under a pre-existing legal obligation to pay the $800.
D)Two of the above, (b) and (c).

Question 61

An undisputed debt is:

A)a contested amount of debt.
B)an obligation that is not contested as to existence but is contested as to the exact amount of the debt.
C)an obligation that is not contested as to its existence or amount.
D)a debt action that the court will not hear because it is not definite and certain.

Question 62

Ken, a research chemist, has been promised a fellowship with a stipend of $10,000 to do research on synthetic fuel oil.Under the terms of the fellowship, Ken is free to use the money as he sees fit.Ken decides to build his own laboratory, so he will not have to rent one.He hires a carpenter who begins working on shelving and cabinets in the laboratory.Then Ken receives a telegram saying the fellowship has been canceled.No reason is given for the cancellation.If Ken sues, will he be able to collect the money from the foundation which promised the fellowship? Explain your answer using legal terminology.

Question 63

A bank robbery has occurred, and the banker's association has offered a $1,000 reward for information leading to the arrest and conviction of the robber.Several people are claiming to be entitled to the money.Which of them is eligible?

A)The employees of the bank.
B)An on-duty sheriff's deputy in the county where the arrest occurred.
C)An off-duty deputy sheriff from a county other than the one where the arrest occurred.
D)None of the above are eligible.

Question 64

There are certain transactions that are enforceable without consideration.These include:

A)promises to pay a debt barred by the statute of limitations.
B)a promise to pay a debt that has been discharged in bankruptcy if certain requirements are met.
C)a new promise to perform a voidable obligation that has not previously been avoided.
D)All of the above.

Question 65

Andrew agrees to paint Rosalene's house for $500.Two days after he starts the job, he decides that $500 isn't enough money.He refuses to finish the job, unless Rosalene agrees to pay him $100 more.What principle applies to this fact situation?

A)The acceptance of additional money to settle a disputed claim is supported by consideration.
B)A past obligation is sufficient consideration for a new promise.
C)Andrew was already obligated to paint the house.He gives no additional consideration in return for Rosalene's promise to pay more money.
D)Rosalene has made a promise in exchange for a forbearance.

Question 66

Define a substituted contract and explain how it affects an agreement.

Question 67

Shane contracts to build a garage for Bob for a price of $6,000.Because of an increase in the cost of labor and materials, Shane refuses to perform.Bob wants the garage, so he agrees to pay an additional $500.In this case:

A)Bob must pay the additional $500.
B)Shane has given no additional consideration, and under the common law he must perform at the agreed-upon original price.
C)the substitute agreement is an illusory contract.
D)the debt is a disputed one, and therefore Bob is obligated to pay the additional money.

Question 68

Define legal detriment.

Question 69

Which of the following are the two basic elements to consideration?

A)Bargained-for exchange and legal sufficiency.
B)Legal detriment and legal benefit.
C)Legal sufficiency and legal adequacy.
D)Promise and forbearance.

Question 70

Ron owes Matt an unsecured deposit of $3,000.Ron has a discharge of all his unsecured debts by a bankruptcy court.Can the contract between Matt and Ron be reinstated?

Question 71

Which of the following statements best describes charitable subscription promises?

A)They are generally not enforceable.
B)They are equated with gifts.
C)They are generally enforceable if there is reliance or a probability of reliance by the charity.
D)Courts generally find that it would be unjust to enforce them because persons who promise charitable subscriptions do not expect to be held accountable for them.

Question 72

Roberto obtains an exclusive franchise to sell widgets for the Acme Widget Company.The exclusive franchise covers the entire State of Wisconsin for a period of three years.

A)The manufacturer is obligated to use his best efforts to supply the goods even if no such clause appears in the written franchise agreement.
B)Roberto has an implied obligation to use his best efforts to promote the sale of the widgets.
C)Under the UCC, such an agreement lacks consideration.
D)Two of the above, (a) and (b).

Question 73

Which of the following would not be enforceable without additional consideration?

A)A promise to pay a debt barred by the statute of limitations.
B)A promise to pay a debt discharged in bankruptcy where the promise meets the requirements of the Bankruptcy Code.
C)A promise which falls within the doctrine of promissory estoppel.
D)The settlement of an undisputed debt.

Question 74

Is a promise to pay a pre-existing moral obligation enforceable? Explain.

Question 75

Darla offers to pay Edward $6,000 for Edward's car, provided that Darla receives that much from her uncle's estate, which is currently being probated.She expects to know for sure how much she will receive within a week or so.Edward agrees.

A)This is an illusory contract, because Darla is not certain she will receive the money.
B)There is no consideration present in this example.
C)The consideration from Darla to Edward is the promise of $6,000 subject to a condition.
D)Two of the above.

Question 76

Barbara, a wealthy widow, promises the pastor of her church that she will donate $10,000 to the church to help pay off its mortgage if the stewardship committee can obtain enough pledges for the balance of the $30,000 mortgage.Other pledges are obtained to pay off the mortgage, but now Barbara has changed her mind and plans to take an around-the-world cruise instead.Barbara's promise to pay $10,000:

A)is enforceable because it is a new promise to perform a voidable obligation.
B)is a promise to give a gift and is therefore not enforceable.
C)is enforceable under the Restatement of Contracts.
D)was made to satisfy a preexisting moral obligation and is therefore enforceable.

Question 77

In DiLorenzo v.Valve and Primer Corporation, the court held:

A)DiLorenzo gave consideration for the stock option.
B)Valve & Primer conditioned the alleged stock option on DiLorenzo's promise to remain in its employment.
C)promissory estoppel applied because there was detrimental reliance on DiLorenzo's part.
D)there was no consideration for the stock option, and promissory estoppel did not apply because detrimental reliance was not proven.

Question 78

Jason's mother would like him to go to college, so in June he enrolls at the local university.He also quits his job and tells his mother his plans to take classes.His mother says, "I'm so happy that you are going to college that I want to pay for your books." Jason then sends her a bill for $485.Which of the following is true regarding his mother's promise?

A)It is enforceable, because Jason returned to college.
B)It is enforceable, because Jason is giving up the right to do something else.
C)It is unenforceable, because it is a unilateral contract.
D)It is unenforceable, because Jason had already enrolled in school when she made the statement that she wanted to pay for his books, and there is no consideration.

Question 79

William agrees to drill a well up to 200-feet deep for John's rural cabin.The contract price is $3,000.After drilling 100 feet, William strikes solid granite rock.He talks to John and explains that this is highly unusual for the area and could not have been anticipated at the time of entering into the contract.He offers to get a special drill, but says it will cost him more money, so that he will be unable to complete the project for the agreed price.Because John is anxious to have the well, he agrees to pay William an additional $1,000 to complete the job.However, once the well is finished, he changes his mind and now says he will pay only the originally agreed-upon amount.

A)The parties have agreed to a substitute contract which discharges the original contract.John is obligated to pay the additional $1,000.
B)Under the UCC, the substitute contract is binding, because there is the payment of additional money.
C)William is in breach of contract.John need not pay any additional money.
D)William is under a pre-existing moral duty to perform at the originally agreed-upon price.

Question 80

Which of the following will often not constitute valid consideration?

A)Forbearance to do an act.
B)Performance of services.
C)A promise to perform.
D)An illusory promise.