Deck 13: Consideration

Question 1

Agreeing not to open a competing business could be consideration.

Answer 1

True

Question 2

Section 2-306 of the UCC expressly disallows output contracts in the sale of goods.

Answer 2

False

Question 3

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

Answer 3

False

Question 4

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

Question 5

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 6

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

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

Question 7

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

Question 8

Pastor Tom was employed by the First Church for 40 years.On Pastor Tom's retirement,there was no adequate pension plan.Two months after the retirement,a wealthy parishioner,in consideration for Pastor Tom's 40 years of faithful service and for being such a "sweet" man,promised to pay him $500 per month for the rest of his life.This promise probably is not enforceable.

Question 9

Billy owes a liquidated debt of $3,000 to Rayna,his personal weight trainer.Billy sends Rayna a check for $300 on which he has marked,"Payment in Full." If Rayna cashes the check she will NOT be able to successfully sue Billy for the remainder of the debt.

Question 10

An illusory promise is valid consideration.

Question 11

A completed act can be the basis for consideration.

Question 12

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

Question 13

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 14

Juan agrees to paint Michelle's house for $1,000.Halfway through the job,Juan tells Michelle that he will need an extra $250 to finish the job.Which of the following is a correct evaluation of the situation?

A)Michelle will have to pay because she and Juan did not have a bargained-for exchange.
B)Michelle will have to pay the extra $250 because Juan has promised not to finish the job unless she does.
C)Michelle will not have to pay the extra $250 because Juan made an illusory promise about only charging $1,000.
D)Michelle will not have to pay the extra $250 because Juan has a preexisting duty to paint the house for $1,000.

Question 15

Courts distinguish between mere gifts between parties and legally binding commitments by the element of consideration.

Question 16

An agreement between two parties 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.

Question 17

What phrase explains how a requirements contract can be valid?

A)"will buy 100 percent of output"
B)"willing to accept the entire quantity"
C)"no consideration needed"
D)"in good faith"

Question 18

The two basic elements of consideration are intention and agreement.

Question 19

A debt that is disputed because the parties disagree over its existence or amount is an unliquidated debt.

Question 20

As it pertains to consideration,which of the following constitutes value?

A)an illusory promise
B)a preexisting duty
C)a forbearance
D)All of these are correct.

Question 21

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 22

Jamie is building a 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 23

Yolanda was shoveling snow from her sidewalk,and just to be nice,she also shoveled snow from her neighbor Melody's walk.The next day,Melody promises that she will pay Yolanda $25 for shoveling snow from her walk.Has a contract been created?

A)No,Yolanda had a preexisting duty to shovel Melody's walk.
B)No,past consideration is not valid consideration.
C)Yes,Melody made a promise and that created the contract.
D)Yes,Melody has a moral obligation to pay for the work,even if she didn't request it.

Question 24

Bernie owes an undisputed amount to Wilde's Heating & Air Conditioning.Which of the following is true?

A)If Wilde's 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)If the parties agree to settle for less than the full amount,their agreement is governed by the ruling in Henches v.Taylor.
D)If Wilde's agrees to accept less than the full amount,the agreement is only binding if it is in writing and signed by Bernie.

Question 25

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 26

Zero,Inc.agreed to build Millie a storage building for $8,000.After beginning the project,Zero realized that it could not complete the job and make a profit.Zero demanded $9,500 to complete the building.Millie agreed to pay the $9,500.When the project was complete,Millie tendered $8,000 to Zero for the job.If Zero sues Millie for the remaining $1,500,

A)Zero will win because there was consideration for the additional $1,500.
B)Zero will win because Millie had a preexisting duty to pay any additional amounts.
C)Zero will lose because there was no legal consideration to support the additional $1,500.
D)Zero will lose because the UCC does not require consideration to modify an existing contract.

Question 27

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 28

If someone provides a service that he or she is already obligated to do,it is an example of

A)a promissory estoppel.
B)a past consideration.
C)an illusory promise.
D)a preexisting duty.

Question 29

An agreement to settle a debt for less than the sum claimed is referred to as

A)a promissory estoppel.
B)an accord.
C)a satisfaction.
D)rescission.

Question 30

Mid-American Oil had a contract with NSB Company to supply 1,000 gallons of oil by September 1.The contract contained a provision that 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 31

What is an output contract?

A)A contract in which a buyer agrees to purchase all of his or her goods from one seller.
B)A contract between a manufacturer and a distributor where the distributor only buys from the manufacturer and is contractually prevented from trading with the manufacturer's competitors
C)A contract in which the seller guarantees to sell all of its output to one buyer,and the buyer agrees to accept the entire quantity.
D)A contract in which a seller agrees to sell a product or service to the buyer only on the condition that the buyer also purchases an additional product from the seller.

Question 32

Mary owes $3,800 on her credit card.She sends the credit card company a check for $800 with the notation "payment in full" on the check.If the credit card issuer cashes the check,

A)Mary's balance will automatically be paid in full if the $3,800 amount was a liquidated debt.
B)Mary's balance will automatically be paid in full regardless of whether the amount of $3,800 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)Mary's balance will automatically be paid in full if the $3,800 amount was an unliquidated debt.

Question 33

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 34

Bailey Co.and Spryt Bros.enter into a contract for the manufacture and sale of 400 lawn chairs.If both parties agree that a modification is necessary,

A)the surest way to modify the contract is to liquidate it.
B)they may not do so without court supervision.
C)an agreement to rescind the contract will terminate the contractual rights of Bailey Co.and Spryt Bros.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 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 preexisting 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

A liquidated debt is one in which

A)the debtor is unable to pay.
B)there is no dispute about the amount owed.
C)the parties dispute whether any money is owed.
D)there is disagreement about the amount owed.

Question 37

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 38

Marco 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 illusory contract.
D)an enforceable contract.

Question 39

If Crosby and Dash are in disagreement as to the exact amount of money that Crosby owes Dash,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)a preexisting duty.
D)an accord and satisfaction.

Question 40

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 creditor but not the debtor.
D)a debt undisputed by either party.

Question 41

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

Question 42

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

Question 43

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 44

Shelby hired Evan to drill a well on her property for $3,000.They both thought the soil and subsoil were normal for the area,but after he started drilling,Evan found a layer of rock that required him to purchase a special drill and required an extra ten hours of work.Evan demanded an extra $1,000 to complete the job.Discuss whether Shelby is liable for the additional $1,000.

Question 45

Frank's Furniture Company promised in a written agreement to purchase as much walnut wood "as it desires" from Forestry Products,Inc.If Frank's purchased walnut wood from another source and Forestry Products sued,what is the likely result?