Deck 12: Consideration

Question 1

The Restatement recognizes moral obligations as consideration.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

False

Question 4

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

Question 5

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 6

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

Question 7

Exclusive dealing contracts are binding because sufficient consideration is present.

Question 8

The UCC provides that a contract for the sale of goods cannot be effectively modified without new consideration.

Question 9

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 10

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 11

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

Question 12

Andrew agreed to exchange something clearly without value to enter a contract with Milt. The contract will likely fail for lack of consideration because many courts would consider this a sham.

Question 13

Obligations contingent upon a stated event are known as conditional promises.

Question 14

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 15

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

Question 16

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

Question 17

Exclusive dealing contracts are illegal and therefore always void.

Question 18

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

Question 19

An illusory promise is consideration for a return promise.

Question 20

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

Question 21

Consideration is the inducement to make a promise enforceable.

Question 22

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

Question 23

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 24

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

Question 25

The parties to a contract may modify the agreement with no additional consideration by simply substituting a new 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

Darren owes Carl a past-due undisputed debt of $600. Darren sees Carl in a restaurant and pays him $500. Carl then says to Darren , "Forget about the other $100 you owe me. I'm glad to get the $500." Carl 's promise to discharge the remainder of the debt is binding.

Question 28

A promisee's consideration is effective only if given directly to the promisor by the promisee.

Question 29

Nathan entered a contract while he was seventeen. If, upon reaching the age of majority, he has not avoided the contract and promises to perform those contractual obligations, new consideration is required for the contract to be enforceable.

Question 30

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 31

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

Question 32

James promises to pay Brooke $2,500 if she does not sue him for negligently injuring her in a bicycle accident. If Brooke does not sue, James's promise to pay is binding because it is supported by consideration.

Question 33

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 34

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

Question 35

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

Question 36

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

Question 37

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 38

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

Question 39

Promises to perform prior unenforceable obligations  are enforceable even though they are not supported by consideration.

Question 40

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

Question 41

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 42

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 for rendering emergency services to his injured son before the father had arrived at the accident scene.

Question 43

Which of the following statements best describes charitable subscription promises?

A) They are generally not enforceable.
B) They are equated by the law 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 44

Aron ordered an truck bed toolbox for $249.99. Before it was delivered, the same store from which he ordered the toolbox ran an ad in the paper for the same toolbox at $179.99. Aron called the store and demanded the advertised price. If the store says "okay":

A) Aron must pay $179.99.
B) Aron must pay $249.99.
C) there is no contract.
D) there is a contract for the reasonable value of the toolbox .

Question 45

A gratuitous promise is a promise made without consideration.

Question 46

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. If Edward agrees:

A) there 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) this is an option contract and Edward must wait at least a week for Darla's answer.

Question 47

Clint contests the amount of a bill he received from Car Care Specialists. Under the Restatement, settlement of the claim:

A) is not valid consideration.
B) is not a legal detriment to Clint if his contentions were not made in good faith.
C) is valid consideration if at the time of the settlement the claim was doubtful because of uncertainty as to the facts.
D) does not involve a disputed debt unless Clint contests both the existence of the obligation and the amount of the bill.

Question 48

Barbara, a wealthy widow, promises the pastor of her church that she will donate $30,000 to the church to help pay off its mortgage if the stewardship committee can obtain enough pledges for the balance of the $60,000 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. In this case:

A) Barbara's promise to pay $30,000 is enforceable because it was a promise made to satisfy a preexisting moral obligation.
B) the promise to pay $30,000 is a promise to give a gift and is therefore not enforceable.
C) under the Restatement of Contracts, Barbara's promise is enforceable.
D) Barbara's promise is enforceable only if she put it in writing.

Question 49

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. Jason's mother's promise is:

A) enforceable, because Jason returned to college.
B) enforceable, because Jason is giving up the right to do something else.
C) unenforceable, because it is a unilateral contract.
D) 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 50

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 51

Abbey helped Greyson study for an important exam for about 8 hours. After Greyson got an "A" on the exam, he told Abbey , "I will give you $25 for helping me get a good grade." Abbey said, "Thanks, I'll take it." There is:

A) no contract because there is no mutual assent.
B) no contract because there is no valid consideration.
C) no contract because $25 is not adequate consideration for 8 hours work.
D) a contract with sufficient consideration.

Question 52

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

Question 53

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

Question 54

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 these are eligible.

Question 55

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

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

Question 56

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 57

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 58

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 59

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 60

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 61

a. How does Article 2 of the UCC modify the common law of contracts with regard to consideration?
b. Explain how output and requirements contracts differ from illusory promises.

Question 62

Discuss the concept of adequacy of consideration.

Question 63

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 64

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 65

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 66

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 67

Define consideration.

Question 68

What transactions are enforceable even though they are not supported by consideration?

Question 69

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 70

Alice says to Brian, "If I decide to buy a digital camera 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 71

Ken, a research chemist, has been promised a fellowship with a stipend of $20,000 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 72

Breton owes Parkerson $750, which is due on June 1. Discuss the sufficiency of consideration if Breton offers Parkerson:
(a) $600 in full settlement on June 1 if the debt is undisputed;
(b) $600 in full settlement on April 10 if the debt is undisputed; and
(c) $500 on June 1 to settle the debt if the amount of the debt is validly disputed.

Question 73

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 74

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. What is the result?

A) The parties have agreed to a substitute contract which discharges the original contract. John is obligated to pay the additional $1,000.
B) The agreement for $4,000 is binding because of provisions of the UCC.
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 75

There are certain transactions that require consideration in order to be enforceable. 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) a unilateral contract.

Question 76

In a contract for the sale of lawn care services, an issue arises about whether the homeowner would receive disproportionately less in service than the lawn care company would receive in compensation. This disparity may be relevant to the:

A) requirement of legally sufficient consideration.
B) availability of certain defenses and remedies.
C) the voidability of the contract due to undue influence.
D) level of economic duress.

Question 77

Orwin, owner of a used furniture store, gives Maggie a signed offer to buy her living room furniture for $800. This offer:

A) is revocable at any time because no consideration was given.
B) would have been irrevocable if Orwin were a merchant, but he would not be considered a merchant under the UCC.
C) is irrevocable for a reasonable time, not to exceed three months, even if there was no consideration.
D) is revocable without consideration because it is an offer to buy rather than to sell.

Question 78

Which of the following is not correct with regard to consideration?

A) In a unilateral contract, a promise is exchanged for an act or forbearance to act.
B) In a bilateral contract, there is an exchange of promises.
C) Legal sufficiency is always related to adequacy of consideration.
D) Consideration can be a legal detriment.

Question 79

In DiLorenzo v. Valve & 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 80

Herb promises to give his nephew, Curt, his old TV when the new one he ordered arrives. Explain whether this promise is enforceable, and include in your discussion the concept of "bargained-for exchange."