Deck 7: Contract Formation

Question 1

According to the mailbox rule, a revocation is valid the moment that it is mailed.

Answer 1

False
Explanation: Acceptances are effective when mailed. Revocations are effective when received.

Question 2

For a contract to be enforceable, it must meet the requirement of __________; that is, both the subject matter and the performance of the contract must be legal.

Answer 2

legality

Question 3

For the formation of a valid contract, the broad underlying requirement that the parties must reach an agreement using a combination of offer and acceptance and that the assent must be genuine is known as ___________ assent.

Answer 3

mutual

Question 4

If a 17-year-old enters into a contract to purchase a car, that contract is ________ at the minor's option until he or she reaches the age of 18.

Question 5

The mailbox rule provides that the acceptance of an offer is generally effective upon receipt of the acceptance when sent in a commercially reasonable manner.

Question 6

A basic fact or assumption in a contract is said to be ________ to the contract.

Question 7

Under most circumstances, acceptance cannot be imposed or inferred from an offeree's silence after receiving an offer.

Question 8

An option contract is a contract that gives one of the parties a choice of consideration to accept.

Question 9

Boris skydives from a plane and gets tangled in a tree, hopelessly suspended and swinging precariously in his parachute from the branches of the tree. Natasha sees that he is in trouble and comes to his rescue. Once Boris is safely on the ground, he gratefully promises to give Natasha half of his life savings account. When he changes his mind, Natasha will probably be unsuccessful in enforcing his promise.

Question 10

If Bill Gates goes into a car dealership and buys every car on the lot at the sticker price, the dealer has suffered no contractual detriment because he's in the business of selling cars and got full price.

Question 11

Consideration in a small or minimal amount that is written into a contract but never actually paid is called ________ consideration.

Question 12

In many states, if a person has been declared incompetent, contracts that person enters into are classified as void ________ or not valid from the onset.

Question 13

For a binding contract to exist, not only must there be agreement but the agreement must be supported by ___________.

Question 14

The mailbox rule determines when a contract is considered to be deemed accepted by the offeree, thus depriving the offeror of the right to revoke the offer.

Question 15

If an offer does not specify a required type or form of acceptance, the offeree is required to provide a written acceptance for valid mutual assent to be proved.

Question 16

The legal term for guilty knowledge that is an element of fraudulent misrepresentation is _______.

Question 17

Use of unfair coercion to force a party into a contract constitutes _______.

Question 18

A contract that is so blatantly unfair that it shocks the objective conscience would be rendered unenforceable and subject to the defense of _______.

Question 19

Jeff goes to a car dealership and the salesperson tells him that the car he's looking at is a great car and an excellent value. The statements made by the salesperson, if untrue, will not be adequate to create either an innocent misrepresentation or a fraudulent misrepresentation.

Question 20

Uncle Buck has lent you $10,000 for tuition and living expenses. The agreement was oral. This contract violates the statute of frauds, so it is unenforceable and you need not repay the loan.

Question 21

Ronald is 17 years old and contracts to purchase a car and make monthly payments for three years. He may disaffirm the contract at any time prior to his 18th birthday.

Question 22

A minor's contract for actual necessities does not require that the minor be mentally competent for the contract to be valid.

Question 23

Amanda, a recent university graduate, needed a car to get to her new job. To help Amanda secure a loan for the car, Ted, a friend, agreed to pay the loan should Amanda default. Ted's promise is enforceable as long as he goes to the bank, declares his promise to guarantee Amanda's loan in front of witnesses, and shakes hands on the deal, giving his word.

Question 24

If you give a truthful answer to a question during contract negotiations, but something then happens that makes that answer now false, you are not obligated to notify the other party unless he or she asks the question again.

Question 25

Ike has orally agreed to paint Tina's portrait. The oral agreement is for the portrait to be completed in nine months. Even if the portrait actually takes 13 months to complete, the agreement will be enforceable.

Question 26

Should an adult find out that he or she has entered into a contract with a minor, the adult may disaffirm the contract if the adult does so before the minor reaches the legal age.

Question 27

Contractual consideration is defined as the thought process a party uses to decide whether or not to accept the offer and enter into a contract.

Question 28

If Peter owns two different cars and says to Amy, "I'll sell you my car for $5,000," this offer is unclear.

Question 29

After an offer is made, the offeror may revoke that offer at any time, even if the offeree has not been given a reasonable period of time to decide whether or not to accept.

Question 30

An agreement to purchase $499 worth of land does not have to be in writing to be enforceable.

Question 31

The term option contract refers to the choices that one has when entering into a contract.

Question 32

It is not possible for a total stranger with no ties to the alleged victim to commit undue influence over another.

Question 33

Jon owns two cars. He says to Rachel, "I'll sell you either car for $8,000." This is a valid offer.

Question 34

Reasonableness of an offer requires that the offeror have an objective intent to contract when making the offer.

Question 35

In Harley-Davidson Motor Co. v. PowerSports Inc., the court permitted PowerSports to retain its Harley-Davidson franchise because PowerSports' decision to become a publicly owned corporation had nothing to do with its commitment to sales and service and thus was deemed not material to the negotiations, so no fraud occurred.

Question 36

Larry has had a few beers and is starting to get a bit drunk. He isn't acting strange, and in conducting conversations with others he's slurring only an occasional word or two. Larry, should he enter into a contract in this condition, would be considered mentally incompetent and his contract would be void.

Question 37

Generally, for an acceptance to create a noncommercial contract, the acceptance must be without qualifications or conditions.

Question 38

Duress must be based on a physical threat and not an economic one.

Question 39

The legal detriments exchanged by the parties must be equal, or reasonably close to equal, for consideration to be valid.

Question 40

Generally, mutual mistakes will often lead to the court allowing an avoidance of a contract; however, a unilateral mistake is not usually grounds to cancel a contract.

Question 41

If the offer specifies no time limit in which to accept:

A) the offeree has 10 days to accept.
B) the offeree has 30 days to accept.
C) the offeree has an unlimited time to accept as long as a revocation has not been made.
D) the offeree has a reasonable time to accept.

Question 42

Bill has voluntarily organized office birthday parties for the past 10 years because he enjoys making people happy. One day, Brenda, his boss, tells him that he's been doing such a great job that she's going to pay him an extra $200 next month. However, when Bill gets his check, it's the same amount that it has always been. Which of the following is correct?

A) Brenda's promise is enforceable because it is based on a bargained-for exchange.
B) Brenda's promise is unenforceable because it is based on past consideration.
C) Brenda's promise is enforceable because Bill performed a service for the company and should be paid even if it's not part of the job description.
D) Brenda's promise is unenforceable because the situation is governed under the preexisting duty rule.

Question 43

Bruno owns a French poodle that he advertises for sale. The dog has a history of viciously biting three neighborhood kids without provocation, as well as one of Bruno's kids. Marge is looking for a dog to be a playmate for her children. When she comes to Bruno's house to see the dog, she sees it playing with Bruno's kids and doesn't ask about the dog's past behavior. She tells Bruno that she's looking for a dog for her kids, and Bruno says nothing. Five minutes after the dog enters her house, it bites one of Marge's kids.

A) Bruno has not committed a fraudulent misrepresentation because silence cannot be considered a fraudulent misrepresentation.
B) Bruno has not committed a fraudulent misrepresentation because Marge didn't specifically ask if the dog bites.
C) Bruno has committed a fraudulent misrepresentation because he withheld a material fact.
D) Bruno has committed an innocent misrepresentation because he didn't state a lie but only withheld all of the truth.

Question 44

Most advertisements in the mass media are not offers because they:

A) do not contain a specific commitment to sell.
B) are specific enough to constitute a unilateral contract.
C) require that the consumer accept the offer in a specific manner.
D) contain a specific commitment to sell.

Question 45

Aiden says to Bob, "I'll sell you this rare book for $1,000." Aiden is the:

A) assentor.
B) assentee.
C) offeror.
D) offeree.

Question 46

An offer may be terminated in all but which of the following ways?

A) acceptance
B) revocation
C) rejection
D) counteroffer

Question 47

Which of the following promises ordinarily need not be in writing to be enforceable?

A) promises made as a part of a prenuptial agreement
B) an agreement to sell a car for $1,500
C) a lease of a warehouse for 24 months
D) a $1,000 agreement with a personal trainer for 10 sessions

Question 48

Applying the parole evidence rule:

A) Written contracts with ambiguous terms are automatically void and cannot be corrected.
B) Oral agreements may be used to change a final written contract if the final written contract isn't exactly conforming to the precontract agreements.
C) Written agreements may be used to change a final written contract if the final written contract isn't exactly conforming to the precontract agreements.
D) A written contract is the final expression of the party's agreement and may not be contradicted by oral or written agreements made prior to the writing.

Question 49

Bud calls Lou and says, "I'll sell you my car for a thousand bucks, interested?" Lou says, "I'll look it up on the Internet. If the Blue Book price is close, I'll pay you $1,000 in the morning." At sunrise Lou shows up with $1000.

A) Bud must sell him the car because Lou accepted the evening before when he promised to look up the car's value.
B) Bud must sell him the car because he cannot revoke his offer after Lou accepted.
C) Bud does not have to sell the car because his promise was unclear.
D) Bud does not have to sell the car because the payment is based on past consideration.

Question 50

Big Time Appliance advertised 46-inch plasma TVs for $10 to the first 50 buyers on Friday. This ad is:

A) not a valid offer because it is not a specific commitment to sell.
B) not a valid offer but, rather, invites the buyer to make an offer.
C) a valid offer because it is specific enough to constitute a unilateral contract.
D) a valid offer because it requires a certain manner of acceptance.

Question 51

Franz asks Josef if he will paint his office building for $1,000. Josef says he will do the job for $2,000. Josef's response is:

A) a counteroffer.
B) an acceptance.
C) a rejection.
D) a mirror image offer.

Question 52

Jon works for a major bank. The revised employee handbook that he received 5 years ago says that all employees with 25 years of service will receive a retirement party. He is about to hit 25 years of service and has announced his retirement. His manager tells him that the company, on the basis of his years of service, will throw him a party and present him with a gold watch. Jon retires on his 25th anniversary, and his manager announces that the company will not throw the party or give him the watch.

A) Because of past consideration, no party or watch is owed.
B) The company is required to throw the party, but no watch is owed.
C) The company is required to present him with the watch, but no party is owed.
D) The company is required to present him with the watch and throw him the party.

Question 53

Burns offers Realtor a commission of 10 percent of the sales price if Realtor can find a buyer for the Burns Building for $500,000. Realtor spends funds to research and obtain potential-buyer contact information and locates Walters, who is willing to accept the $500,000 offer to sell from Burns. Before any transaction takes place, Burns revokes his offer to Realtor and refuses to sell the property to Walters. Burns's revocation is:

A) valid.
B) not effective.
C) enforceable.
D) effective.

Question 54

Robert is about to graduate college, and his parents tell him that because he is the first member of the family to graduate college, they want to buy him a new, but inexpensive, car. They have the money to buy the car, and Robert is excited about getting his gift. Robert owns a used car but has never owned a new car, so this will be his first. He decides to keep his used car because he had been promised a new car by his parents for his high school graduation and never got it. On graduation day, his parents tell him that they have decided to use the car money for a vacation and there will be no new car.

A) Robert can successfully sue based on promissory estoppel.
B) Robert can successfully sue based on the promise of a gift.
C) Robert cannot successfully sue because he did not rely to his detriment on the promise.
D) Robert cannot successfully sue because the promise was not reasonable and would not support promissory estoppel.

Question 55

Aimee is a 21-year-old college student. Her parents are worried about her being away from home, so they tell her that if she goes through both the fall and spring semesters without drinking alcohol, they will buy her a new car. Aimee does in fact complete both semesters without drinking.

A) Aimee gets the car because she performed exactly as required under her parents offer.
B) Aimee gets the car because a quasi-contract is formed due to her parent's unjust enrichment.
C) Aimee is not entitled to the car because her benefit far outweighed her detriment.
D) Aimee is not entitled to the car because she's healthier, so she suffered no detriment.

Question 56

Hillary is a nerdy bookworm couch potato who rarely goes out of her home except to go to her job as a deskbound CPA. She wears a sweater almost every day, including during the summer, and is always complaining about being cold. Edmund, a co-worker, tells Hillary that he will give her $1 million if she climbs Mt. Everest. Edmund doesn't believe that she'd even give the offer a second thought. Hillary, without saying anything to anyone, starts an intensive training program to whip herself into shape, and six months later, during her vacation, she climbs Mt. Everest. Upon returning to work, she presents Edmund a picture of herself on the summit of Mt. Everest and demands her $1 million. Edmund tells her that they never had a contract so he owes her nothing, and Hillary claims that the money is owed based on promissory estoppel.

A) Promissory estoppel applies only if Edmund is very rich, because $1 million is a lot of money.
B) Promissory estoppel applies whether Edmund is rich or not.
C) Promissory estoppel does not apply because Edmond had no reason to believe that Hillary would rely on his promise.
D) Promissory estoppel does not apply because Hillary must announce that she accepts his offer for it to create an obligation to pay.

Question 57

To be valid, offers must meet all of the following criteria except:

A) clear.
B) reasonable.
C) serious.
D) communicated.

Question 58

Offers that the offeree partly performed or detrimentally relied on are:

A) irrevocable offers.
B) revocable offers.
C) firm offers.
D) option offers.

Question 59

Josh is negotiating the sale of his car with Jonathan. Jonathan asks if the car has ever been in an accident, and Josh replies, "No, it has never been in an accident." In fact, the car was nearly totaled the year before when Sheila, Josh's girlfriend, was driving Josh's car, hit a wet spot, and skidded into a pole. She had the car repaired without telling him about the accident. Josh has committed:

A) fraudulent misrepresentation.
B) innocent misrepresentation.
C) an unconscionable act.
D) no misrepresentation because he thought he was being truthful and didn't intend to deceive Jonathan.

Question 60

Jonathan's Soccer Mart (JSM) advertises a pair of boots on sale. The normal price is $150 and the sale price should have been $135, but the advertisement says $15. Josh walks into the store, picks up a pair of the boots, and puts $15 on the counter, demanding to purchase the boots at the advertised price. Which of the following is correct?

A) JSM must sell the boots at the advertised price.
B) Josh has accepted JSM's offer to sell.
C) JSM has made an ambiguous offer.
D) Josh has made an offer.

Question 61

With regard to the court, adequacy of consideration means:

A) the consideration exchanged must be exactly equal in value.
B) the consideration exchanged must be reasonably close in value.
C) the court will adjust the consideration if the value exchanged is unfair.
D) the court doesn't care about value as long as the mutual assent is valid.

Question 62

In 1975, Denise purchased a used Volkswagen Beetle from Don. At the sale, Don produced a title to the car that said it was a 1972 car. In 1976, Denise sold the car to Ed, delivering a title stating that the car was a 1972 Volkswagen Beetle. Both titles were genuine and issued by the proper state office. In the 1970s, Volkswagen Beetles underwent essentially no body changes and, quite frankly, the cars were indistinguishable from year to year except to experts. When Ed takes the car to his mechanic for some routine maintenance, he is told that the car is actually a 1970, not a 1972, model. Ed immediately calls Denise and accuses her of fraud. Denise calls Don and is told that the car was indeed a 1970 car but he had replaced the motor with a new 1972 motor and had the car reregistered for the year of the new engine, an act which at the time was legal in their state. Has Don committed an actionable wrong? Has Denise committed any form of an actionable wrong?

Question 63

In Stevens v. Publicis, S.A., the courts addressed the statute of frauds issue of what constitutes a writing in today's cyber world and determined that:

A) technology aside, a writing must contain an original signature to create a true contract.
B) since e-mail could be written by anyone, an e-mail must be followed by a document with an original signature.
C) an e-mail with the sender's typed signature shows an intent to authenticate the contents and satisfies statute of frauds requirements.
D) the statute of frauds requires that certain contracts be in writing to be enforceable but does not address or concern itself with signatures.

Question 64

In Raffles v. Wichelhaus, the court refused to enforce the contract for a boatload of cotton, shipped to but refused by Wichelhaus, because:

A) the parties made a mutual mistake with regard to which ship named Peerless the cotton was to be shipped on and the two ships sailed in different months.
B) the parties made a mutual mistake with regard to the quality of the cotton as each ship carried different grades of cotton.
C) despite there being two ships named Peerless sailing on different dates, the contract was oral and violated the statute of frauds.
D) Raffles knew that there were two ships named Peerless but failed to notify Wichelhaus, thus committing a fraudulent misrepresentation due to the withholding of a material fact.

Question 65

What does the parole evidence rule say, and how does it affect contracts?

Question 66

In Leonard v. PepsiCo Inc., the court ruled against Leonard and refused to enforce the purchase of a Harrier jet because:

A) the advertisement specifically referred to the accumulation of points to purchase items in the catalog and the Harrier was not listed in the catalog.
B) the sale of a Harrier jet, still used by the military, would jeopardize national security, so Pepsi's ad could not be taken seriously.
C) Leonard did not accumulate points but instead purchased them, which violated the rules of the offer.
D) Leonard did not accept the offer in the manner specified and required in the offer, so his acceptance was defective and void.

Question 67

Courts enforce contracts only if each party had the legal capacity to enter into a contract. Which classes of persons have limited power to contract?

Question 68

In the case Lucy v. Zehmer, the parties were two farmers who had been drinking whiskey in a bar and handwrote an agreement to sell Zehmer's farm for $50,000. Zehmer claimed that he was drunk and joking and never intended to sell the farm. What did the court decide, and what does this famous case establish about mutual assent?

Question 69

Your school is negotiating with another school to run a joint program. The other school is not sure that your college can handle the increase in students and tells your administration that it will join the joint-program initiative if your college increases its faculty. Based on this offer, two full-time tenure track faculty members are hired. Soon afterward the other college decides that it will not participate in the program and ends negotiations. What rights does your school have?

Question 70

Dick has made a statement that the average person would realize is puffery. Dick is guilty of:

A) fraudulent misrepresentation.
B) innocent misrepresentation.
C) undue influence.
D) nothing.

Question 71

Tina's dog has run away. She places reward posters throughout the neighborhood and places an ad in the local newspaper. Ted, her good friend, sees Tina's dog wandering and takes the dog back to Tina's house without ever seeing a poster or the newspaper advertisement. After he leaves her home, he then sees a reward poster. If he returns and demands the reward, is Tina obligated to pay?

Question 72

You arrive at your final exam for your law class, and as you approach the door, your professor is standing at the door with a sign saying, "THE COST FOR TAKING THIS TEST IS $10 PAYABLE TO ME" (the professor). Your professor is also holding a tin cup for students to place their cash and checks into. Speaking entirely from a contract perspective, can your professor enforce such a fee? Explain fully.

Question 73

Which of the following is not required for promissory estoppel to apply?

A) The promise made must be reasonable.
B) The promise made must be relied on by the promisee to the promisee's detriment.
C) The promisor must suffer an injustice if the promise isn't enforced.
D) The promisor must know that the promisee is likely to rely on the promise.

Question 74

Maria has just sat down and is ready to take her last final exam before graduating. Just before the tests are distributed, she discovers that all three pens that she brought are out of ink. She turns to Mike, a classmate, and asks to borrow a pen. Recognizing her predicament, he says, "No, I won't lend you a pen, but I'll sell you this Bic ballpoint pen for $100." Recognizing that she has no alternative, she gives him the money. A Bic pen is worth about 10 cents. Afterward she demands a return of her cash and offers to return the pen. Mike laughs and says, "No, a deal's a deal." How would the courts look at this "deal"?

Question 75

Which of the following statements may be grounds for a misrepresentation, innocent or fraudulent, to occur?

A) "This car is the best-looking car in its price class."
B) "This is the best car that money can buy."
C) "This car gets 32 miles per gallon in highway driving."
D) "This car has the most comfortable ride you can buy."

Question 76

Wilma has a valid driver's license but has a tendency to get speeding tickets. Fred tells her that he will pay her $1,000 if she does not get a ticket for one year. Wilma drives very cautiously and goes through one year without a ticket. Is Fred obligated to pay?

A) yes, because Wilma gave up a legal right based on the agreement
B) no, because $1,000 is not an adequate amount based on Wilma's detriment
C) no, because Wilma suffered no detriment in this agreement
D) yes, because a promise is a promise and consideration has nothing to do with this agreement

Question 77

When a store places an advertisement in a newspaper or runs an ad for broadcast on the radio, what are the store's obligations if a customer arrives at the store and demands to purchase the item at the advertised price? Be complete.

Question 78

What is the mailbox rule, and how does it apply in the following situation? Explain whether acceptance is effective and a contract is formed.
Day 1: An antique dealer e-mails an offer to sell a highly collectible Art Nouveau glass vase to a collector for $1,500.
Day 2: Collector receives the offer, prints out the e-mail, writes "ACCEPTED, 1 Art Nouveau glass vase for $1,500. Collector," and faxes Dealer the acceptance.
Day 3 (9 a.m.): Dealer's assistant receives Collector's fax, but Dealer is out of the store all morning.
Day 3 (12 p.m.): Realizing he can get much more for the vase at auction, Dealer calls Collector to revoke his offer.
Day 3 (1:30 p.m.): Collector's acceptance fax is delivered to Dealer.

Question 79

In which of the following situations will the court enforce a contract?

A) Tinker offers to sell his car to Evers. Evers asks for some time to decide, and Tinker gives him until 6 p.m. At 4 p.m. Evers sees Chance driving the car and is told that Tinker sold it to him. Evers calls Tinker at 4:30 p.m. and says "I accept."
B) Jan offers to sell his boat to Dean. Dean asks for 24 hours to decide, and Jan agrees. At midnight, the boat sinks, although neither Jan nor Dean knows it has sunk. Dean calls Jan before the 24 hours elapse and says "I accept."
C) Martin offers to sell his horse to Lewis for $1,000. Lewis replies that $1,000 is too much and says, "I'll give you $850 for her." Martin says no, and Lewis replies, "Okay, I'll give you $1,000."
D) Fred offers to sell his car to Wilma. Wilma asks for more time, and Fred says she can have until 10 o'clock the next morning. For Fred to keep the offer open to her, Wilma gives him $50, which is nonrefundable. Fred dies during the night, and after hearing that Fred died, Wilma calls Fred's heirs at 9 o'clock the next morning and accepts Fred's offer.

Question 80

In Lucy v. Zehmer, the two parties were drinking in a bar when Lucy offers to buy Zehmer's farm. After some negotiation a written contract was executed. Zehmer claimed that the whole episode was only a joke and he never intended to sell the farm. The court determined that:

A) since Zehmer claimed to be "high as a Georgia pine" and it was only the liquor talking, there was no contract.
B) since the contract was written without lawyers present, it was likely not really serious, so no contract was actually formed.
C) because the terms were fair, the parties are bound by the contract regardless of their intent or capacity.
D) because negotiations and modifications to the written agreement lasted between 30 and 40 minutes, it appeared that both parties were serious, so even if Zehmer had no objective intent to sell the farm, he is still bound by his actions and the contract is enforceable.