question

One purpose of contract law is to make business matters more predictable.

answer

True

question

The elements of a contract are agreement, consideration, legality, and capacity.

answer

True

question

Robert offers to buy a car from Jane for $400. Jane must accept this offer in order to form an enforceable contract.

answer

True

question

A valid contract can legally be voided by either party.

answer

False

question

Lucy and Rick sign a contract in which Lucy agrees to deliver 10 boxes of chocolates in exchange for Rick's promise to pay $5 per box. Lucy delivers the candy. Rick pays for the goods. This contract is fully executory.

answer

False

question

Upon the recommendation of a friend, Hope hires Joey to rewire her kitchen and he completes the work within the time agreed. Then Hope finds out that Joey is not a licensed electrician, and she refuses to pay him for the work. A court will enforce the agreement because otherwise Hope would be unjustly enriched.

answer

False

question

When promissory estoppel is used by the courts, it is because there is NOT an enforceable contract present.

answer

True

question

Under a contract, Danielle is required to make a set of draperies out of fabric chosen by the homeowners, the Flynns. After Danielle makes the draperies according to the contract requirements, her duties under the contract are discharged.

answer

True

question

Alex promises to pay $100 to anyone who finds his lost watch. Kate finds and returns the watch to Alex after hearing of the reward money. Alex and Kate have an enforceable unilateral contract.

answer

True

question

When Olga asks Sven if he wishes to sell his Harley motorcycle, he replies that he would not sell it "for less than $2,000. "Olga replies, "I accept," and hands him $2,000. A contract exists.

answer

False

question

Revocation is the withdrawal of an offer by the offeror.

answer

True

question

In seeking to ascertain whether there is a meeting of the minds, the courts look to how a reasonable person would objectively view the language or actions of the parties.

answer

True

question

Vern Valve Company makes valves for plumbing fixtures. At the beginning of the year, it sends out a price list addressing each one, "To our valued customers." Honest Hank Hardware orders a variety of valves at the prices quoted on the price list. Vern Valve must sell the valves to Honest Hank for the prices quoted on the list.

answer

False

question

Society enforces all promises in the interests of simple morality.

answer

False

question

Boris sky dives out of a plane and gets hung up 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.

answer

True

question

An illusory promise is not consideration.

answer

True

question

An agreement may violate public policy even if the agreement does not require a party to commit a crime, tort, or violate a statute.

answer

True

question

If a contract is made with a person required by law to hold a license, and the purpose of the license is protection of the public, the contract made by an unlicensed person will generally be unenforceable.

answer

True

question

Roger parked his car at a garage that has a large sign at the entrance saying, "This garage is not liable for items stolen from a car." This type of notice is referred to as an exculpatory clause.

answer

True

question

A gambling contract is legal unless it is specifically prohibited by state statute.

answer

False

question

To be valid, an agreement not to compete must be ancillary to a legitimate bargain.

answer

True

question

Spencer, an adult of sound mind, has the legal capacity to contract.

answer

True

question

If a minor can cancel a contract, it can be done at any time during minority or within a reasonable time after reaching majority.

answer

True

question

After her 18th birthday Lora may, by words or action, ratify a contract she made during the previous year.

answer

True

question

A party injured by fraud generally has the choice of suing for damages or rescinding the contract

answer

True

question

A party to a contract has a duty to investigate the other party's factual statements.

answer

False

question

Contract rescission can sometimes be based upon a unilateral mistake.

answer

True

question

Hannah orally agrees to sell her house to Brett for $175,000. If she delivers the deed to Brett with the expectation of payment in two weeks and he fails to pay, most courts will not enforce the contract since it was not in writing

answer

False

question

Parol evidence refers to anything (other than the written contract itself) that was said, done, or written before or as the parties signed the contract.

answer

True

question

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 to pay the loan is a collateral promise. His promise must be in writing to be enforceable.

answer

True

question

Under the statute of frauds, the writing must: be signed by the defendant; and must state with reasonable certainty the name of each party, the subject matter of the agreement, and all of the essential terms and promises.

answer

True

question

A party may make either an assignment or a delegation, but cannot make both an assignment and a delegation simultaneously.

answer

False

question

Most, but not all, contract rights are assignable.

answer

True

question

Claims for personal injury are generally assignable.

answer

False

question

Generally, the assignment of the obligation to perform personal services is invalid.

answer

True

question

Contract prohibitions against assignments are invalid as a matter of public policy.

answer

True

question

The legal right to sue for a breach of contract is subject to a statute of limitations.

answer

True

question

Concurrent conditions arise when there is both a condition precedent and a condition subsequent.

answer

False

question

Injunctions are commonly used by courts to force employees to complete their contractual obligations with their employers

answer

False

question

Expectation interest can best be described as money spent in reliance upon the agreement.

answer

False

question

Nominal damages are awarded in contract cases in which a damage amount was named in the contract.

answer

False

question

The common law governs contracts for:

answer

Services, real estate, employment.

question

When Myrtle comes home from work one evening, she finds that her yard has been mowed and trimmed. Later, a man comes to collect for the yard work done. Myrtle refuses to pay for the work since she has never seen the man before and did not hire him to do her yard work. Which of the following answers is most accurate?

answer

Myrtle would not have to pay for the yard work.

question

Mike made the following offer to Mick: "I will pay you $500 if you agree to paint my house." Mick replied that he would. At this point, the contract is an:

answer

executory, bilateral, express contract.

question

What is not required to establish promissory estoppel?

answer

A promise made by the plaintiff in response to the defendant's promise.

question

Shelly offers to sell Jane goods both parties know are stolen. Jane accepts the offer, and agrees to pay for the goods. Later, Jane refuses to accept or pay for the goods. If Shelly sues Jane for breach of contract, what is the probable result?

answer

The law would not enforce Jane's promise, as it does not have a lawful purpose.

question

Robert, a minor, buys a stereo from Jane for $200. State law allows a minor to disaffirm contracts within a reasonable time after turning 18. Robert disaffirms the contract the day after turning 18 and returns the stereo.

answer

This contract was a voidable contract, Robert can disaffirm.

question

The basic distinction between a bilateral contract and a unilateral contract is that:

answer

only one promise is involved in a unilateral contract.

question

What type of example represents a unilateral offer?

answer

"I will pay you $50 if you mow my lawn."

question

Contracts that do not arise from mutual agreement but are created by courts to avoid unjust enrichment are:

answer

quasi-contracts.

question

John owns a thoroughbred horse named Prince Charming that just ran in the Kentucky Derby. Prince Charming came in last, much to John's frustration and embarrassment. John exclaims in a loud voice, "I'm selling that horse to the first person who hands me $100 bucks!" John has:

answer

not made an offer because under the circumstances a reasonable person would not conclude that John had intent to make an offer.

question

Which of the following are generally considered to be legal offers?

answer

None of the above are generally considered offers. (price lists, catalog advertisements, placing an item up for auction)

question

The Johnsons decided to sell their summer cabin on Beech Lake. They sent flyers out to all who previously had expressed an interest in buying the cabin stating that they were planning on selling their cabin. The flyer described the location of the property, the size of the lot, and the price. If one of the recipients responds by sending a letter accepting, an agreement:

answer

will not be formed because the flyer was sent out as an invitation to negotiate

question

Collector Carl displays his beer can collection at the local swap meet. Mary sees the collection and is interested in buying it. Carl says he will sell the collection for $1,500. Mary says she really likes the collection but is only willing to pay $1,000. Which of the following is correct?

answer

Mary's counteroffer terminates Carl's offer of $1,500.

question

Jaime offered to buy Kevin's bike. Jamie is the:

answer

Offeror

question

An agreement to pay a lesser amount to settle an unliquidated debt is:

answer

enforceable, as there is consideration.

question

An unliquidated debt can be described as:

answer

a debt in which the existence or amount is in dispute.

question

"I'll sell you my car if I decide to sell it" is an example of:

answer

an illusory promise.

question

Police Officer Paul apprehends a wanted criminal and then demands the $10,000 reward offered by Crime Stoppers. Which of the following statements is true?

answer

Police Officer Paul is not entitled to the reward because he was under a pre-existing duty to make the arrest.

question

Virginia borrowed money from G & L Lending at 35% interest per year. The state maximum interest rate is 20% per year. Virginia defaulted on the loan. What amount can G& L collect from Virginia?

answer

The answer depends on the particular state law

question

Which of the following exculpatory clauses will most likely be enforceable?

answer

An exculpatory clause that relieves a riding stable of negligence.

question

Barb has been a children's day care provider for several years in the small town of Sallton. She has decided to give it all up and move to the big city for excitement and adventure. She sells her business to Ken, agreeing not to open a competing business within five miles of Sallton for a period of nine months. After five months of the big city life, Barb is broke and moves back to Sallton. She opens a small day care business. Ken sues on the noncompete clause. What is the most likely result?

answer

Ken wins. The agreement is enforceable.

question

Larry has the largest pizza business in the city. He learns that Henry is thinking of opening a competing pizza and pasta delivery business. Larry gives Henry $25,000 to not open his proposed business in the same city. Which statement is correct?

answer

The contract is illegal and void.

question

A contract most likely will be declared unconscionable if:

answer

it is oppressive and the weaker party did not fully understand the consequences of the agreement.

question

An insurance contract is not considered to be a legalized form of gambling because:

answer

one must have an insurable interest in the person being insured.

question

Marty, a 16-year-old, contracts with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle. Marty agrees to make monthly payments until the purchase price plus interest are paid in full. Which of the following is correct?

answer

The contract is voidable by Marty.

question

When courts consider economic duress, they consider all the following factors EXCEPT:

answer

relative size of the contract.

question

What is an example most likely to constitute fraud?

answer

Silence as to a toxic waste problem on real property that the buyer would not reasonably find.

question

Angie, a minor, wants to avoid a contract she made with Cumberland Cycles. She may disaffirm the contract by:

answer

notifying Cumberland orally that she will not honor the agreement, filing a lawsuit to have a court formally cancel the contract, just refusing to perform her obligations under the contract (ALL ABOVE ARE CORRECT)

question

When a party to a contract makes a unilateral mistake, the contract:

answer

generally cannot be rescinded by the mistaken party unless the contract is unconscionable or it is proven that the nonmistaken party knew of the error.

question

Mentally infirm Sasha contracts to purchase a piano for $2,500 in 60 monthly installment payments. Six months later she tries to void the contract on grounds of mental impairment. A court will:

answer

normally void the contract but will require Sasha to return the piano.

question

If Jane persuades Linda to buy her horse by telling Linda that the horse runs "like the wind," then Jane's statement is:

answer

Puffery

question

Tuan is president and sole shareholder of Entertainment, Inc. Entertainment, Inc. wishes to borrow money, but to do so, the bank requires Tuan to orally agree to pay the debt of the corporation if Entertainment, Inc. cannot. Tuan's guarantee to repay is:

answer

enforceable because of the leading object rule.

question

In order to satisfy the statute of frauds, a writing must:

answer

be signed by the defendant and contain the name of each party, the subject matter of the agreement, and the essential terms and promises.

question

What type of contracts cannot be either contradicted or supplemented by evidence of prior agreements or expressions?

answer

Totally integrated contracts.

question

A third party beneficiary's status occurs:

answer

when the contract is created.

question

What is an example of a duty that can probably be delegated?

answer

An agreement to paint a house.

question

Al contracted to sell his house to Bev. Subsequently, they both changed their minds and agreed to cancel the contract. The contract between Al and Bev is discharged by:

answer

Rescission

question

Statutes of limitations:

answer

limit the time in which an injured party may sue.

question

A condition:

answer

is an event that must occur before a party becomes obligated under a contract.

question

Specific performance may be available for the breach of a contract to sell:

answer

An original painting.

question

A contract clause which specifies the amount of damages to be paid in the event of a breach is called:

answer

A liquidated damages clause.

question

In a promissory estoppel case, a court will generally award:

answer

Only reliance damages.

question

The remedy of reformation:

answer

can be used to correct mistakes in the original contract.

question

Bob, a house builder, contracts with Ollie to build a house on Ollie's lot. The total price of the construction is $100,000, $20,000 of which will be Bob's profit. After Bob has put $10,000 worth of materials into the house, Ollie wrongfully refuses to let him finish the house. If Bob sues for damages, he will be able to collect:

answer

$30,000

question

Agreement

answer

One party makes a valid offer, and the other party must accept it

question

consideration

answer

There has to be bargaining that leads to an exchange between the parties

question

bilateral contract

answer

Both parties make a promise

question

Unilateral Contract

answer

One party makes a promise that the other party can accept only be doing something

question

express contract

answer

The two parties explicitly state all important terms of their agreement

question

Implied Contract

answer

The words and conduct of the parties indicate that they intend an agreement

question

Executory Contract

answer

a contract in which one or more parties has not fulfilled its obligations

question

executed contract

answer

a contract in which all parties have fulfilled their obligations

question

Two remedies created by Judicial activism:

answer

Promissory Estoppel and Quasi-Contracts

question

Promissory Estoppel

answer

Even when there is no contract, a plaintiff may use promissory estoppel to enforce the defendant's promise if he can show that: -The defendant made a promise knowing that the plaintiff would likely rely on it; -The plaintiff did rely on the promise; and -The only way to avoid injustices is to enforce the promise

question

Quasi-Contract

answer

Even when there is no contract, a court may use quasi-contract to compensate a plaintiff who can show that -The plaintiff gave some benefit to the defendant; -The plaintiff reasonably expected to be paid for the benefit and the defendant knew this; and -The defendant would be unjustly enriched if he did not pay

question

quantum meruit

answer

as much as he deserves

question

Preexisting Duty

answer

A promise to do something the promisor is already obligated to due is not consideration

question

Liquidated debt

answer

debt in which there is no dispute about the amount owed

Flashcards About Business law test 2

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards