Deck 7: Contracts

Question 1

An illegal contract is generally considered a voidable contract.

Answer 1

False

Question 2

An offeror may not revoke an offer before the offeree has had a reasonable time in which to consider it.

Answer 2

False

Question 3

Mutuality of obligation applies only to bilateral contracts.

Answer 3

True

Question 4

Generally,prior to upholding a contract,a court will carefully scrutinize the value of consideration to be sure that the contract is a fair one.

Question 5

A counteroffer does not terminate the original offer.

Question 6

Courts enforce liquidated damages as a form of a penalty.

Question 7

To develop rules for behavior,civil law countries rely primarily on civil codes,or statutes,rather than on case-by-case common law.

Question 8

An objective standard is used in determining whether an offer has been made.

Question 9

Void means the same thing as voidable in contract law.

Question 10

In certain cases a court may order specific performance rather than monetary damages.

Question 11

Consideration can be either a promise to do a certain act or the performance of the act itself.

Question 12

Only an attorney can hold a power of attorney.

Question 13

Reliance damages are awarded in addition to expectation damages.

Question 14

A merger agreement is an agreement between two companies to combine into a single entity.

Question 15

In a unilateral contract,a promise is given in exchange for another promise.

Question 16

.Whether a contract is a bilateral or unilateral contract depends upon whether the sale of goods is involved.

Question 17

A minor may ratify a contract after reaching the age of majority.

Question 18

A promise that neither confers any benefit on the promisee nor subjects the promisor to any detriment is an illusory promise

Question 19

Most advertisements are treated as invitations to negotiate,not offers.

Question 20

The statute of frauds requires certain types of contracts to be evidenced by some form of written communication.

Question 21

Which of the following is true regarding the effect of death and incapacity on an offer?

A) Death or incapacitation of either party terminates an offer.
B) Death of either party terminates an offer, and incapacity on the part of the offeror terminates an offer, but incapacity on the part of an offeree does not terminate an offer.
C) Death of either party terminates an offer, and incapacity on the part of an offeree terminates an offer, but incapacity on the part of the offeror does not terminate an offer.
D) Neither death nor incapacity on either the part of the offeror or offeree terminates an offer.

Question 22

A third party beneficiary is someone who is not

A) a legal and recognized type of beneficiary.
B) intended to benefit from the contract.
C) a party to the original contract.
D) intended to enforce the contract.

Question 23

Which of the following is not one of the basic elements for formation of a valid contract?

A) Consideration
B) Promissory estoppel
C) An offer and acceptance
D) A legal purpose

Question 24

An agreement between two parties that provides that the seller will sell all of a product that he produces to the buyer is called a(n)

A) illusory promise
B) requirements contract
C) output contract
D) fulfillment contract

Question 25

A(n)________ is any agreement to accept performance that is different from what is called for in the contract.

A) accord and satisfaction
B) anticipatory repudiation
C) frustration of purpose
D) mutual rescission

Question 26

Which of the following is a type of conditional promise?

A) Condition concurrent
B) Condition subsequent
C) Condition illusory
D) Both a condition concurrent and a condition subsequent

Question 27

An agreement between two parties that provides that the buyer will buy all of a particular product from a particular seller is called a[n] ______.

A) illusory promise
B) requirements contract
C) output contract
D) fulfillment contract

Question 28

Which of the following is true regarding acceptance?

A) In the absence of a provision in an offer regarding how acceptance is to be made, acceptance is effective upon dispatch into a mailbox.
B) Acceptance is never effective until it is received.
C) An offeror may not by law specify that an offer can be accepted only by facsimile to a stated fax number and that the acceptance is not effective until actually received.
D) An offeror may revoke an offer so long as the revocation is made before an acceptance is received.

Question 29

Which of the following was the result in Copeland v.Baskin Robbins,the case in the text involving the issue of whether a party may be held liable on the theory that the party wrongfully failed to engage in contract negotiations?

A) That a party may not recover damages based upon breach of an agreement to engage in negotiations because reliance damages are impossible to compute in such situations.
B) That a party may not recover damages based upon breach of an agreement to engage in negotiations because no actual contract was ever agreed upon.
C) That a party may be held liable for breaching an agreement to engage in negotiations regardless of whether the plaintiff establish damages based on reliance on any such agreement.
D) That a party may be held liable for breaching an agreement to engage in negotiations but that the plaintiff must establish damages based on reliance on any such agreement.

Question 30

Under the doctrine of ________,a court may invalidate an agreement if one party had sufficient influence and power over the other as to make genuine assent impossible.

A) fraud
B) mistake
C) undue influence
D) detrimental reliance

Question 31

Under traditional common law,the acceptance must be the ________ of the offer.

A) essential terms
B) consideration
C) understanding
D) mirror image

Question 32

Which of the following does not generally make a contract voidable?

A) Fraud
B) Duress
C) Unilateral mistake of fact
D) Misrepresentation

Question 33

Ann promises to give Carlos $50 if he promises to sell her a business law book. This is an example of a[n] ______ contract.

A) Unilateral
B) Bilateral
C) Void
D) Conditional

Question 34

Which of the following are damages that give the plaintiff the benefit of its bargain,putting the plaintiff in the case position it would have been in if the contract had been fulfilled?

A) Expectation damages
B) Reliance damages
C) Restitution damages
D) In kind damages

Question 35

Which of the following are damages that compensate the plaintiff for any expenditures it made in reliance on a contract that was subsequently breached?

A) Expectation damages
B) Reliance damages
C) Restitution damages
D) In kind damages

Question 36

________ damages compensate a party for losses that occur as a foreseeable result of the breach.

A) Quantum meruit
B) Reliance
C) Restitution
D) Consequential

Question 37

Commercial transactions involving the sale of goods,movable personal property,are governed by which of the following?

A) Article 2 of the Uniform Commercial Code
B) Articles 1-3 of the Uniform Sale of Goods Code
C) Article 1 of the Federal Sales Code
D) Article 1 of the Uniform Credit Code

Question 38

Liquidated damages are damages that

A) punish the breaching party
B) fluctuate with the market conditions
C) are agreed upon
D) none of the above

Question 39

Contract law is based on which of the following?

A) Case law
B) Statutes
C) Tradition
D) All the responses are correct

Question 40

A contract entered into by a minor is

A) void
B) voidable
C) binding
D) illusory

Question 41

Fact Pattern 7-1
Prudence offered to sell her car to Danny for $3,000. Danny was not sure what to do, so he asked Prudence if she would hold the offer open for him for one week for $50. Prudence said sure, and the parties signed a contract to the effect that Prudence would hold the car. A few hours, Bobby unexpectedly offered Prudence $3,500 for the car, and Prudence sold it to him on the spot. Danny decided to buy the car, but when he came by to pick it up the next day, it was gone. Prudence gave Danny his $50 back telling him that was her only obligation and that if he had any complaints, he could take it up with Bobby. Danny found a similar car the next week for $3,500 and purchased it.
Refer to fact pattern 7-1. What damages,if any,could Danny likely collect against Prudence in litigation over the car?

A) None
B) Reliance damages consisting of $500
C) Incidental damages consisting of $50
D) Compensatory damages consisting of $500

Question 42

Helen tells her nephew,Bernard,that she will pay him $100 if he will stop smoking for six months. Helen was hopeful that if Bernard stopped smoking for six months,he would stop altogether. Bernard stops smoking for six months but then resumed his smoking. Helen will not pay him. She says that the type of promise she made cannot constitute a binding contract and that,furthermore,it was at least implied that he would stop smoking for good. Can Bernard legally collect $100 from Helen?

A) No, because under the law his stopping smoking was not adequate consideration.
B) No, because it was implied that he would stop smoking for good, and he only quit for six months.
C) Yes, because his stopping smoking for six months, as agreed, was adequate consideration for the contract.
D) Yes, because stopping smoking was good for his health even if he only did it for six months.

Question 43

List the elements necessary for the doctrine of promissory estoppel to be applied.

Question 44

To which of the following does the statute of frauds apply?

A) A promise to pay the debt of another person.
B) A contract that cannot be performed within the space of six months.
C) Any contract of employment.
D) Any contract involving commerce.

Question 45

If a new law of general application indirectly affects a government contract,making the government's performance impossible,the ________ will protect the government in a subsequent suit for breach of contract.

A) sovereign acts doctrine
B) discretionary acts doctrine
C) ministerial acts theory
D) legislatively enacted principle

Question 46

Define the term "consideration" as it is used in contract law.

Question 47

Which of the following is a technique by which a new party is substituted for one of the old parties,and a new contract is written (with the consent of all old and new parties)to effect the desired change?

A) Novation
B) Substitution
C) Formal change
D) Verified change

Question 48

Fact Pattern 7-2
Hester offers to sell her house to Frank for $250,000. Frank says that he would like to think about it, and Hester says that is fine. The next day, Martha, Hester's friend, says that she will give Hester $240,000 for the house. Hester really likes Martha more than Frank and signs a contract to sell the house to Martha. Later that day Hester sees Frank walking up her driveway. She immediately opens the window and yells "I revoke the offer on the house" before Frank says anything. Frank replies that he accepts the offer and expects to purchase the home. Frank tells Hester that while he has not yet taken steps to sell his own home or get a loan, he feels confident that there will be no problem with those matters and he is a ready, willing, and able buyer.
Refer to fact pattern 7-2. Which of the following is true regarding the offer to Frank assuming Hester's revocation was ineffective?

A) The offer was probably still open the next day because a reasonable length of time would not have expired.
B) The offer would have terminated because Frank did not provide any consideration to leave it open.
C) By operation of law, it would have terminated at midnight on the day it was made.
D) By operation of law, it would still have been open because it would not have terminated until midnight on the day after it was made.

Question 49

Conditions ________ occur when the mutual duties of performance are to take place simultaneously.

A) precedent
B) concurrent
C) subsequent
D) consequential

Question 50

Alice typically mows her own lawn whereas her neighbor pays to have her yard mown by ABC Law Service. Alice notices one day that an apparently new employee of ABC is mowing Alice's yard by mistake. She says nothing. When the employee asks for payment,Alice refuses on the basis that the yard mowing was a mistake and that she has no contract with ABC. Which of the following is true regarding whether ABC could recover against Alice?

A) ABC likely has no rights against Alice.
B) ABC could recover against Alice based on breach of contract.
C) ABC could likely recover on a theory of quantum meruit.
D) ABC could likely recover against Alice based on a negligence theory.

Question 51

S calls B and says,"I will sell my 1966 Mustang convertible to you for $3,000." B knows that the car is worth $4,000.B replies,"Would that include the trunk-mounted spare tire?" S hangs up without a word.B calls back in three days and says,"I'll buy the car for $3,000." Is there a contract? Discuss fully.

Question 52

If the promisee entered into the contract in order to discharge a duty he or she owed the third party,then the third party is a(n)________ beneficiary.

A) express
B) implied
C) creditor
D) donee

Question 53

Fact Pattern 7-1
Prudence offered to sell her car to Danny for $3,000. Danny was not sure what to do, so he asked Prudence if she would hold the offer open for him for one week for $50. Prudence said sure, and the parties signed a contract to the effect that Prudence would hold the car. A few hours, Bobby unexpectedly offered Prudence $3,500 for the car, and Prudence sold it to him on the spot. Danny decided to buy the car, but when he came by to pick it up the next day, it was gone. Prudence gave Danny his $50 back telling him that was her only obligation and that if he had any complaints, he could take it up with Bobby. Danny found a similar car the next week for $3,500 and purchased it.
Refer to fact pattern 7-1. What damages,if any,could Danny likely collect against Bobby in litigation over the car?

A) None
B) Reliance damages consisting of $500
C) Incidental damages consisting of $50
D) Compensatory damages consisting of $500

Question 54

As a birthday gift,Ben's uncle promised Ben that he would pay Ben's business school tuition for the next semester. In reliance on that promise,Ben quit his part time job at a fast food restaurant. When the tuition bill became due,Ben's uncle told Ben that he was sorry but that he would not be able to pay the tuition because he just built a new swimming pool at his house,and funds were running short. Ben asks you if there is any basis upon which he could win in litigation against his uncle. Which of the following would be the best advice?

A) That Ben should sue for breach of contract because an offer, acceptance, and consideration are all present.
B) That Ben should sue for breach of contract because an offer and acceptance are present, and his reliance would substitute for consideration.
C) That Ben should sue based on promissory estoppel.
D) That Ben should hurry and try to get his job back because there is no basis upon which he would have a viable case.

Question 55

Which of the following is true regarding a mistake of judgment?

A) It is a valid defense to enforcement of a contract.
B) It is not a valid defense to enforcement of a contract.
C) Whether it is a valid defense to enforcement of a contract depends upon the substantiality of the mistake.
D) Whether it is a defense to enforcement of a contract depends upon: (1) the substantiality of the mistake, (2) whether the risks were allocated, and (3) timing.

Question 56

Describe the three standard measures as listed in the text that courts have developed to measure monetary damages in contract cases.Explain how each would be measured.

Question 57

Fact Pattern 7-1
Prudence offered to sell her car to Danny for $3,000. Danny was not sure what to do, so he asked Prudence if she would hold the offer open for him for one week for $50. Prudence said sure, and the parties signed a contract to the effect that Prudence would hold the car. A few hours, Bobby unexpectedly offered Prudence $3,500 for the car, and Prudence sold it to him on the spot. Danny decided to buy the car, but when he came by to pick it up the next day, it was gone. Prudence gave Danny his $50 back telling him that was her only obligation and that if he had any complaints, he could take it up with Bobby. Danny found a similar car the next week for $3,500 and purchased it.
Refer to fact pattern 7-1. Did Danny have any type of contract with Prudence,and if so what type?

A) Danny did not have any type of contract with Prudence.
B) Danny had an option contract with Prudence.
C) Danny had a hold contract with Prudence.
D) Danny had a conditional contract with Prudence.

Question 58

What are the four basic elements necessary for a valid contract?

Question 59

Fact Pattern 7-2
Hester offers to sell her house to Frank for $250,000. Frank says that he would like to think about it, and Hester says that is fine. The next day, Martha, Hester's friend, says that she will give Hester $240,000 for the house. Hester really likes Martha more than Frank and signs a contract to sell the house to Martha. Later that day Hester sees Frank walking up her driveway. She immediately opens the window and yells "I revoke the offer on the house" before Frank says anything. Frank replies that he accepts the offer and expects to purchase the home. Frank tells Hester that while he has not yet taken steps to sell his own home or get a loan, he feels confident that there will be no problem with those matters and he is a ready, willing, and able buyer.
Refer to fact pattern 7-2. Which of the following is true regarding whether Hester's attempted revocation was effective?

A) It was effective because Hester had left the offer open the amount of time required by law regardless of whether she revoked before Frank could accept.
B) It was effective because Hester issued the revocation before Frank could accept.
C) It was ineffective because the amount paid by Martha was less than the offer to Frank.
D) It was ineffective because Hester attempted the revocation at too early a point in time.

Question 60

Fraud in the ________ occurs when a party is persuaded to sign one document thinking that it is another.

A) acceptance
B) obligation
C) factum
D) inducement

Question 61

Jack is an accountant who works for the firm of Readum & Weep.Jack was approached by Ima Phool,who represents one of Readum's competitors,Numbers R Us.Jack was offered a substantial raise to leave his company and work for Numbers.When Jack's boss heard this he called him in and said,"If you agree to stay with us for at least five years,I promise that next year you will receive a promotion with a 50% raise,and a 5-year contract." Jack turned down the offer and stayed with Readum.Nine months later Jack was dismissed due to corporate downsizing.Can Jack legally enforce his boss's promise? What theory or theories would Jack use? Discuss fully.

Question 62

Penny found a billfold on a city street; looked inside to determine its owner and returned it to its true owner,Richard. A few days later she found out that Richard had offered a reward in the amount of $100 for the return of the billfold. She asks Richard for the reward money,but he refuses. Is Penny entitled to the reward,and why or why not?

Question 63

Identify and discuss the two elements focused on in relation to procedural unconscionability.