Deck 12: Consideration

Question 1

Gross inadequacy of consideration is,by itself,a sufficient reason to set aside a contract.

Answer 1

False
Explanation: Inadequacy of consideration,standing alone,is never sufficient to prove lack of true consent or contractual capacity.Although gross inadequacy of consideration is not,by itself,ordinarily a sufficient reason to set aside a contract,the courts may refuse to grant specific performance or other equitable remedies to persons seeking to enforce unfair bargains.

Question 2

Mr.Green agrees to an offer to drive Ms.White to the airport for $20,but "only if I feel like it".Mr.Green has failed to give sufficient consideration to create a contract with Ms.White.

Answer 2

True
Explanation: If the promisee's promise is illusory because it really does not bind the promisee to do or refrain from doing anything,such a promise cannot serve as valid consideration.

Question 3

Unlike the UCC,the CISG requires new consideration to modify a contract.

Answer 3

False
Explanation: Like the UCC,the CISG also states that a contract can be modified by "mere agreement" only.

Question 4

Michael and William contracted for Michael to mow William's lawn once a week for 20 weeks,at a price of $20 per week.Later,without terminating the first contract,the parties modify the contract as follows: Michael will mow William's lawn in exactly the same way for exactly the same time period,in exchange for William's promise to pay Michael $22 per week.There is no consideration for William's promise.

Question 5

Mr.Green agrees to purchase a lawn mower from Ms.White for $300.The act of payment of $300 by Mr.Green is consideration for the act of passing ownership of the lawn mower from Ms.White to Mr.Green.

Question 6

Promissory estoppel cannot be applied in the case of the absence of a binding consideration.

Question 7

An accord and satisfaction prevents a creditor from maintaining an action to recover the remainder of the debt that he alleges is due.

Question 8

The rule on adequacy of consideration reflects the laissez-faire assumption of freedom of contract.

Question 9

A promise not to sue another party is not consideration because the promise does not convey any legal value to the other party.

Question 10

According to the provisions of UCC,an exclusive dealing contract imposes a duty only on the distributor to use its best efforts to sell the goods.

Question 11

In determining whether consideration exists,the law is not concerned with any disproportion in value between the things exchanged in a contract.

Question 12

Consideration is what distinguishes enforceable agreements from gratuitous promises.

Question 13

A promise to refrain from smoking can be legal consideration because refraining from a legal right,the right to smoke,can be consideration.

Question 14

Mr.Blue gave his favorite nephew Jim Jr. ,who is a mechanic,$1,000 in January.Later that year,he needed his car repaired.In the sales contract,Mr.Blue indicated that the amount owed should be deducted from the money already paid.A court will find that Mr.Blue failed to give proper consideration for the contract.

Question 15

Consideration can be a promise for another promise.

Question 16

A contract in which one party to the agreement agrees to buy all of the other party's production of a particular commodity is called a requirements contract.

Question 17

David,a debtor,owes debts to creditors Paul,Mark,and Gary.Paul,Mark,and Gary agree with each other and with David to release him from his debts,in exchange for his promise to pay Paul,Mark,and Gary 75 percent of the amount he owes each of them.This is called a composition agreement,and such agreements generally are binding contracts.

Question 18

In return for services Charles performed for Richard in the past,Richard promises to pay Charles $1,000.There is no consideration for Richard's promise.

Question 19

A creditor who fails to file suit to collect a debt within the time prescribed by the appropriate statute of limitations loses the right to collect it.

Question 20

John promises to pay Robert $100 per week,in exchange for Robert's promise not to beat John up.There is no consideration for John's promise.

Question 21

Contracts in which one party to the agreement agrees to buy all of the other party's production of a particular commodity is called a(n):

A)requirements contract.
B)composition agreement.
C)output contract.
D)nominal consideration.

Question 22

Consideration can be a(n)________ in the case of a bilateral contract.

A)act
B)promise
C)exchange
D)gift

Question 23

Daniel is a senior at State University.Brian,Daniel's father,is concerned about Daniel's study habits,given that Daniel spends most of his evenings at the campus pub instead of the library.Brian promises Daniel that he will send him on an expense-paid trip to Europe after his graduation if Daniel spends at least five evenings a week studying in the campus library for the remainder of his senior year.After returning home from his graduation,Daniel asks Brian about the European trip.Brian replies,"Your education was your reward.I don't owe you a trip to Europe." Brian is:

A)correct;Daniel has already gained the benefit of the bargain.
B)correct;Daniel did not give anything of legal value.
C)incorrect;Brian owes Daniel a trip to Europe because Daniel's acts are consideration.
D)incorrect,but only if Daniel's acts are adequate consideration for such an expensive trip.

Question 24

Which of the following is true of consideration?

A)A promise cannot be deemed a consideration in a bilateral contract.
B)The legal value of a consideration must be equal to the actual value in a consideration.
C)Gross inadequacy of consideration can give rise to an inference of fraud for setting aside a contract.
D)A preexisting moral obligation is deemed a consideration.

Question 25

Historically,free promises were not enforced unless they had which of the following supporting them?

A)Witnesses of good character
B)A signed statement of the Secretary of State
C)Consideration
D)Affidavits of profit attached to the promise

Question 26

James owns Great Expectations,a trendy restaurant in Manhattan.He enters into a contract with Mary,who makes and sells pastries.The contract states that Mary will "supply all of Great Expectation's needs" for pastries for the next year.Is this contract enforceable?

A)Yes,because this is a requirements contract.
B)Yes,but only if James buys all of the pastries produced by Mary in the next year.
C)No,because the promise fails to specify the quantity of goods to be purchased.
D)No,because James might not need any pastries in the next year.

Question 27

Mr.White contracts with his wife Ms.White to watch their kids,Joe and Jimmy,one night for $50.What is the status of the contract between Mr.White and Ms.White?

A)There is no contract because there is inadequate consideration.
B)There is a contract as long as Mr.White registers the contract with the Secretary of State.
C)There is a contract as long as $50 is a reasonable profit for watching the kids.
D)There is a contract as long as a court reviews the terms within 30 days.

Question 28

Sigmund enters into a contract with Carl.The terms are that Sigmund will purchase all the gasoline that he wants to purchase in 2011 at a price of $2.50 per gallon,and Carl agrees to sell on those terms.This is an example of a(n):

A)valid contract.
B)illusory contract.
C)voidable contract.
D)implied contract.

Question 29

For the consideration requirement in contracts to be met:

A)the consideration given by each party must be of roughly equal value.
B)each party must give consideration.
C)the consideration must have monetary value.
D)the consideration must consist of some form of property.

Question 30

John promised the other co-owners of the ship Sea Fairy that he would insure the ship for an upcoming voyage.However,John fails to insure the ship.The ship is shipwrecked in a turbulent sea.The co-owners sue John for breach of contract.Will they succeed?

A)Yes,because there was a valid and binding contract between the co-owners.
B)No,because it was a purely gratuitous promise.
C)No,because an intervening cause absolved John's liability.
D)Yes,because of promissory estoppel.

Question 31

Jack went to the ABC Casino to gamble.ABC offers its customers one free spin of the Million Dollar Wheel if they fill out an application form.Jack filled out the form,spun the Million Dollar Wheel,and won.However,now ABC refuses to pay,claiming that because Jack did not purchase his chance at the Million Dollar Wheel,Jack gave no consideration and therefore,no contract was formed.Identify the accurate statement.

A)No contract was formed because Jack paid no money for his chance at the Million Dollar Wheel.
B)No contract was formed because ABC did not sign any written contract as an obligation to do so.
C)A contract was formed because filling out an application can constitute legal consideration.
D)A contract was formed because no consideration is needed when a customer takes advantage of a "free" offer.

Question 32

To satisfy the consideration requirement to form a contract,the consideration exchanged by the parties must:

A)have a monetary value.
B)conform to the parties' subjective intent.
C)have legal value.
D)have approximately the same value.

Question 33

As mentioned in the case in the text,Steinberg v.U.S. ,in deciding whether consideration to form a contract exists,a court must determine whether:

A)the consideration given by each party is of roughly equal value.
B)the consideration conforms to the subjective intent of the parties.
C)the consideration has sufficient monetary value.
D)the benefit was bargained for.

Question 34

Chica,a women's clothing store,held a "prize drawing" for a $500 shopping spree on Saturday that it advertised throughout the week.Participation in the drawing required being at the store by noon and completing an application form that included personal information.The information would then be put into a database for marketing purposes.Fashion consultants offering merchandise for sale greeted customers arriving at the store on Saturday morning.Joy was the winner of the drawing.Has she given consideration for the prize?

A)No,she gave no legal value to Chica.
B)No,unless she purchased an item from one of the fashion consultants.
C)Yes,she came to the store and gave information that was for the store's use.
D)Yes,unless the store was conveniently located.

Question 35

Daniel owes Casey a debt,the amount of which is subject to a good faith dispute.The parties agree to settle the debt,with Daniel promising to pay Casey $15,000 and Casey promising to release Daniel on a $25,000 debt.The settlement agreement:

A)is supported by consideration.
B)lacks consideration because Casey is not giving Daniel any legal value.
C)lacks consideration because Daniel is promising to perform a preexisting legal obligation.
D)is binding under UCC section 2-209 even though there is no consideration.

Question 36

Consideration can be a(n)________ in the case of a unilateral contract.

A)security
B)guarantee
C)act
D)promise

Question 37

Which of the following meets the requirements of consideration?

A)A promise not to engage in a crime or tort
B)A promise without a binding obligation
C)A promise that involves the exchange of a legal value
D)A promise to do a preexisting duty

Question 38

Dan,President of BAZ Co. ,is happy with the extraordinary performance of Naomi,a BAZ Co.senior accountant.Dan informs Naomi that because of her superlative work in the past fiscal year,he is going to give her a 5 percent raise effective next month.Naomi,who has never heard of anyone at BAZ Co.getting a raise,is thrilled and thanks Dan.Later that day,Dan realizes that giving Naomi this raise might cause all senior accountants to demand salary increases.Dan decides not to give Naomi a raise after all.He believes that his promise to give her a raise is not legally binding.Dan is correct because:

A)there was no bargained-for exchange for the raise.
B)of the "preexisting duty" rule.
C)past consideration is not an act or promise.
D)past consideration is not liquidated.

Question 39

Which of the following is often used by agreements that try to make gratuitous promises look like true bargains?

A)Nominal consideration
B)Past consideration
C)Composition agreement
D)Requirements contract

Question 40

Bill is 25 years old.His uncle promised in writing to pay him $2,000 if Bill would refrain from drinking alcohol for one year.Bill refrained from drinking alcohol for one year.However,his uncle now refuses to pay Bill as they agreed.The uncle claims that because Bill suffered no detriment by refraining from alcohol,his non-drinking does not constitute legal consideration,and,therefore,no contract was formed.If Bill sues his uncle,Bill will:

A)win because Bill had a legal right to drink alcohol.
B)lose because consideration must have monetary value.
C)win because no consideration is needed in this contract.
D)lose because refraining from an action can never be considered legal consideration.

Question 41

Joe and Jack have a written contract whereby Joe agrees to sell Jack a plot of land for $100,000.Later,without terminating the first contract,the parties modify the deal so that Joe sells Jack the same plot of land for $125,000.The second agreement is not a contract because:

A)the first contract was not terminated.
B)there is no consideration for Jack's promise.
C)Joe's promise is illusory.
D)written contracts for the sale of land cannot be modified.

Question 42

Why is past consideration not adequate consideration in a present promise?

A)It falls under exceptions to consideration.
B)It does not pertain to the present exchange.
C)It is not covered under the UCC codes for consideration.
D)It involves an issue of moral obligation.

Question 43

An agreement in which a party promises to supply all the other party's needs for a particular commodity is called a(n):

A)requirements contract.
B)composition agreement.
C)output contract.
D)nominal consideration.

Question 44

A reaffirmation promise has to be made prior to the date of the discharge and gives the debtor the right to revoke his promise within 30 days after it becomes enforceable.This is the requirement of:

A)charitable subscriptions.
B)promises to pay debts barred by statutes of limitations.
C)promises to pay debts barred by bankruptcy discharge.
D)promissory estoppels.

Question 45

Mr.Green is a local mobster who makes Mr.Blue pay $100 not to have his business burned to the ground.What is the status of the contract between Mr.Green and Mr.Blue?

A)There is no contract because Mr.Green gave inadequate consideration
B)There is a contract as long as Mr.Green registers the contract with the Secretary of State
C)There is a contract as long as $100 is a reasonable profit for not burning down the business
D)There is a contract as long as a court reviews the terms within 30 days

Question 46

Which of the following is an element of promissory estoppel?

A)The promisee should reasonably expect to induce reliance
B)Reliance on the promise by the promisor
C)A promise to pay liquidated debts
D)Injustice to the promisee as a result of reliance

Question 47

The general common law rule on contract modifications holds that an agreement to modify an existing contract requires a(n):

A)necessary increase in the value of the exchange.
B)inclusion of a new party to the contract.
C)new and independent consideration.
D)economic exchange of substantial value.

Question 48

Patricia is a general contractor performing construction work for ABC Corp.Patricia requested extra payment because abnormal subsurface rock formations made excavation on the construction site far more costly and time-consuming than could have been reasonably expected.The court will:

A)enforce such modifications in contract.
B)allow the party to rescind such a contract.
C)consider the contract voidable.
D)consider the contract unenforceable.

Question 49

X and Y have a contract,which obligated X to sell Y 100 boxes of screws for $100.The parties orally modify the contract so that X will sell Y the same 100 boxes of screws for $125.The second agreement is:

A)binding because it is due to unforeseeable situation.
B)binding by virtue of being mutually agreed on.
C)not binding because it is an outputs contract.
D)not binding due to the promise of performing a preexisting legal obligation.

Question 50

In which of the following circumstances is a debt settlement a binding contract?

A)Where the amount of the debt is uncertain or subject to dispute.
B)Where the amount of the debt is certain and undisputed.
C)Where the only consideration the creditor gives the debtor is his promise not to sue the debtor on the original debt.
D)Where the settlement is part of a composition agreement.

Question 51

Which of the following is true of preexisting contractual duties and their modification under the UCC?

A)There is no provision of modifications due to unforeseen circumstances.
B)No modifications can be made to an existing contract that is binding.
C)Modification requires "mere agreement" on the part of those involved.
D)Rules for contractual modifications are different for the UCC and the CISG.

Question 52

Which of the following is adequate consideration?

A)A preexisting duty
B)Agreement to settle an unliquidated debt
C)A preexisting moral obligation
D)Nominal consideration

Question 53

Able borrowed $10,000 from Baker,promising to return it with $1,000 interest on January 1,2006.There is no dispute that Able owes Baker $11,000 due on January 1,2006.On that day,Able gave Baker a valid check in the amount of $10,500 marked "payment in full for loan due January 1,2006." Baker accepted that check and deposited it into his account.If Baker then sues Able for the unpaid $500,what would the result be?

A)Able wins,because Baker accepted the lesser payment.
B)Able wins,because Baker made an implied promise to accept $10,500 as full payment,thereby forgiving $500 of the loan.
C)Baker wins,because Able gave no consideration in exchange for Baker's promise to forgive $500 of the loan.
D)Baker wins,because marking "payment in full" can never relieve a party of its original obligations under a contract.

Question 54

A contract that involves obligations on the part of manufacturers and distributors is called a(n):

A)requirements contract.
B)composition agreement.
C)output contract.
D)exclusive dealing contract.

Question 55

Helen worked for ABC Motors for 25 years.The president of ABC said to her: "In consideration of your past service for 25 years,I promise to give you a new car next week." However,he did not give the car.Is this promise legally enforceable?

A)Yes,a contract was formed.
B)Yes,promissory estoppel requires enforcement of the promise.
C)No,legal consideration is absent.
D)No,legal capacity is absent.

Question 56

Which of the following is an exception to a consideration requirement?

A)Bargained-for exchange
B)Charitable subscription
C)Nominal consideration
D)Adequacy of consideration

Question 57

The settlement of an unliquidated debt is called a(n):

A)forbearance to sue.
B)accord and satisfaction.
C)past consideration.
D)moral obligation.

Question 58

Ron was employed by Mass Co.in 1970.At that time,he was given an employee handbook that described the particular steps that had to be taken before an employee could be fired.Later,in 2000,Mass published a new handbook by which all workers' statuses were changed to at-will employees.Mass then fired Ron.Ron claimed he was terminated without cause and was not afforded procedures described in the 1970 handbook,such as an appeal or review of the decision.He sued Mass under breach of contract based upon the 1970 employee handbook.Will he succeed?

A)Yes,because the modifications in 2000 were not by mutual consent and for consideration.
B)No,because the employee handbook contains terms and conditions of the employment contract.
C)Yes,because Mass Co.has arbitrarily terminated Ron.
D)No,because Ron had acquiesced to the modification by not raising any objection.

Question 59

Gift promises are not generally enforceable because they lack:

A)legality.
B)capacity.
C)consideration.
D)agreement.

Question 60

Can a local businessman pay a police officer $50 a week to watch his business more closely?

A)Yes,as long as the contract is registered with the Secretary of State.
B)No,public officials cannot give consideration on duties they are already supposed to perform.
C)Yes,as long as $50 is reasonable amount to watch the business.
D)Yes,as long as a court reviews the contract within 30 days.

Question 61

A promise to perform a preexisting duty is not consideration because the promise is essentially:

A)void.
B)voidable.
C)implied.
D)gratuitous.

Question 62

A promisee's promise not to commit a crime can never be consideration because:

A)the promise is not bargained for and given in exchange.
B)every member of society has a duty to obey the law.
C)the promise is illusory.
D)it lacks future intent.

Question 63

In a(n)________ contract,the distributor must use her best efforts to sell the goods and the manufacturer must use his best efforts to supply the goods.

A)requirements
B)output
C)implied
D)exclusive dealing

Question 64

Prior to the enactment of the UCC,common law courts often refused to enforce both output contracts and requirements contracts because they:

A)failed to specify the quantity of goods to be produced or purchased.
B)lacked legal value to satisfy the consideration requirement.
C)failed to specify the amount of money to be exchanged.
D)included only nominal consideration.

Question 65

In Welsh v.Lithia Vaudm,Inc. ,the case in the text,the court held that:

A)written agreements,such as an invoice,are presumed to be supported by consideration.
B)there was adequate consideration,making the arbitration clause enforceable.
C)no additional consideration existed where Lithia had a preexisting duty under the oral contract.
D)Lithia's modification was a pre-performance,bilateral demand.

Question 66

Which of the following is an agreement by a promisee to refrain from pursuing a legal claim against a promisor?

A)Statute of limitations
B)Forbearance to sue
C)Past consideration
D)Moral obligation

Question 67

An accident on a state highway rendered Jill in a comatose state for nearly a month.There was an old nurse who used to take care of her then.After her recovery,Jill felt so indebted to the nurse that she contracted to transfer all her assets to her to fulfill her (Jill's)moral obligation.Although this contract lacks ________,it can be enforced.

A)value
B)consideration
C)acceptance
D)capacity

Question 68

Which of the following statements about output contracts is false?

A)Output contracts are generally illusory because they fail to specify a quantity of goods to be produced or purchased.
B)A party's quantity needs must be made in good faith.
C)A party's quantity needs cannot be unreasonably disproportionate to any normal prior output.
D)A party may not use an output contract to exploit the other party.

Question 69

When a promise does not bind the promisee to do or refrain from doing anything,the promise is:

A)enforceable.
B)voidable.
C)terminated.
D)illusory.

Question 70

Mel promises to buy all the video games he wants from Bart.This promise is:

A)illusory.
B)voidable.
C)a moral obligation.
D)binding.

Question 71

Henry agrees to give Beth $100 in exchange for her $50.Which of the following statements is true?

A)The agreement violates the parties' freedom of contract.
B)The agreement is supported by nominal consideration.
C)The inadequacy of consideration is apparent on the face of the agreement.
D)The consideration is insufficient because it is based on past performance.

Question 72

In the case in the text,Franchise Holding II,LLC v.Huntington Restaurants Group,Inc. ,the court held all of the following,except:

A)the plaintiff provided adequate consideration.
B)the defendant provided adequate consideration.
C)the defendant materially breached the Stay Agreement.
D)the Stay Agreement was legally enforceable.

Question 73

Nancy's car collides with Randy's truck at an intersection.Randy believes the accident is his fault and asks Nancy if she will agree to a settlement of $5,000 for the damage to her vehicle and her promise not to sue him.Nancy believes the accident is her fault,but agrees to Randy's proposal anyway.Which of the following statements is true?

A)Nancy's forbearance does not amount to consideration because Randy's promise is illusory.
B)Nancy's forbearance does not amount to consideration because she does not have a good faith belief in the validity of her claim against Randy.
C)Nancy's forbearance amounts to consideration because she has a good faith belief in the validity of her claim against Randy.
D)Nancy's forbearance amounts to consideration because Randy has a moral obligation.

Question 74

Joe promises to give his brother Bill a $30,000 new car for $50.Which of the following best describes the $50?

A)Nominal consideration
B)Past consideration
C)Adequate consideration
D)Requirements contract

Question 75

Mr.Blue gave Mr.Green $1,000 to help his family out.Later,Mr.Blue entered into a sales contract with Mr.Green and wanted the consideration to be,in part,the $1,000.Which of the following describes the $1,000?

A)Past consideration
B)Future consideration
C)Equitable exchange
D)Present intent

Question 76

Which of the following will be legally binding on all parties despite lack of consideration?

A)An irrevocable oral promise by a merchant to keep an offer open for 60 days.
B)A promise to donate money to a charity,which the charity relied upon in incurring large expenditures.
C)A promise to pay for the college education of the child of a person who saved the promisor's life.
D)A signed modification to a contract to purchase a parcel of land.

Question 77

Which of the following terms in an agreement would not render it illusory?

A)A right to cancel a contract after the first 30 days.
B)A party to an agreement has a right to cancel or terminate at any time,for any reason,and without any notice.
C)A promisee promises to buy "all the tools I want."
D)A promise to perform under the contract "if I feel like it."

Question 78

To reduce creditor attempts to pressure debtors to reaffirm,which of the following acts requires that a reaffirmation promise be made prior to the date of the discharge and gives the debtor the right to revoke his promise within 30 days after it becomes enforceable?

A)The National Labor Relations Act
B)The Bankruptcy Abuse Prevention and Consumer Protection Act
C)The Uniform Debt-Management Services Act
D)The Bankruptcy Reform Act

Question 79

When Oliver Wendell Holmes said,"It is the essence of a consideration that,by the terms of the agreement,it is given and accepted as the motive or inducement of the promise," he was referring to:

A)Moral obligations
B)Bargained-for exchange
C)Nominal consideration
D)Past consideration

Question 80

In Day v.Fortune Hi-Tech Marketing,Inc. ,the case in the text,the court held that:

A)the agreement had adequate consideration because there was no modification of the arbitration clause at any point during the relevant time period.
B)the agreement had adequate consideration because both parties were bound by the agreement.
C)the promise was illusory because it did not have legal value.
D)the promise was illusory because the defendant had the option to modify the contract at its discretion.