Flashcards About Business law test 2

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One purpose of contract law is to make business matters more predictable.
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True
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The elements of a contract are agreement, consideration, legality, and capacity.
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True
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Robert offers to buy a car from Jane for $400. Jane must accept this offer in order to form an enforceable contract.
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True
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A valid contract can legally be voided by either party.
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False
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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.
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False
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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.
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False
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When promissory estoppel is used by the courts, it is because there is NOT an enforceable contract present.
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True
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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.
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True
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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.
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True
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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.
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False
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Revocation is the withdrawal of an offer by the offeror.
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True
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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.
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True
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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.
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False
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Society enforces all promises in the interests of simple morality.
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False
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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.
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True
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An illusory promise is not consideration.
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True
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An agreement may violate public policy even if the agreement does not require a party to commit a crime, tort, or violate a statute.
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True
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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.
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True
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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.
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True
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A gambling contract is legal unless it is specifically prohibited by state statute.
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False
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To be valid, an agreement not to compete must be ancillary to a legitimate bargain.
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True
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Spencer, an adult of sound mind, has the legal capacity to contract.
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True
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If a minor can cancel a contract, it can be done at any time during minority or within a reasonable time after reaching majority.
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True
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After her 18th birthday Lora may, by words or action, ratify a contract she made during the previous year.
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True
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A party injured by fraud generally has the choice of suing for damages or rescinding the contract
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True
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A party to a contract has a duty to investigate the other party’s factual statements.
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False
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Contract rescission can sometimes be based upon a unilateral mistake.
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True
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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
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False
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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.
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True
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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.
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True
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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.
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True
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A party may make either an assignment or a delegation, but cannot make both an assignment and a delegation simultaneously.
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False
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Most, but not all, contract rights are assignable.
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True
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Claims for personal injury are generally assignable.
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False
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Generally, the assignment of the obligation to perform personal services is invalid.
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True
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Contract prohibitions against assignments are invalid as a matter of public policy.
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True
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The legal right to sue for a breach of contract is subject to a statute of limitations.
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True
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Concurrent conditions arise when there is both a condition precedent and a condition subsequent.
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False
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Injunctions are commonly used by courts to force employees to complete their contractual obligations with their employers
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False
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Expectation interest can best be described as money spent in reliance upon the agreement.
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False
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Nominal damages are awarded in contract cases in which a damage amount was named in the contract.
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False
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The common law governs contracts for:
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Services, real estate, employment.
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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?
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Myrtle would not have to pay for the yard work.
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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:
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executory, bilateral, express contract.
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What is not required to establish promissory estoppel?
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A promise made by the plaintiff in response to the defendant’s promise.
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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?
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The law would not enforce Jane’s promise, as it does not have a lawful purpose.
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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.
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This contract was a voidable contract, Robert can disaffirm.
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The basic distinction between a bilateral contract and a unilateral contract is that:
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only one promise is involved in a unilateral contract.
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What type of example represents a unilateral offer?
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“I will pay you $50 if you mow my lawn.”
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Contracts that do not arise from mutual agreement but are created by courts to avoid unjust enrichment are:
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quasi-contracts.
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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:
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not made an offer because under the circumstances a reasonable person would not conclude that John had intent to make an offer.
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Which of the following are generally considered to be legal offers?
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None of the above are generally considered offers. (price lists, catalog advertisements, placing an item up for auction)
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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:
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will not be formed because the flyer was sent out as an invitation to negotiate
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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?
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Mary’s counteroffer terminates Carl’s offer of $1,500.
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Jaime offered to buy Kevin’s bike. Jamie is the:
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Offeror
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An agreement to pay a lesser amount to settle an unliquidated debt is:
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enforceable, as there is consideration.
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An unliquidated debt can be described as:
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a debt in which the existence or amount is in dispute.
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“I’ll sell you my car if I decide to sell it” is an example of:
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an illusory promise.
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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?
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Police Officer Paul is not entitled to the reward because he was under a pre-existing duty to make the arrest.
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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?
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The answer depends on the particular state law
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Which of the following exculpatory clauses will most likely be enforceable?
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An exculpatory clause that relieves a riding stable of negligence.
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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.
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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?
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The contract is illegal and void.
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A contract most likely will be declared unconscionable if:
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it is oppressive and the weaker party did not fully understand the consequences of the agreement.
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An insurance contract is not considered to be a legalized form of gambling because:
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one must have an insurable interest in the person being insured.
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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?
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The contract is voidable by Marty.
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When courts consider economic duress, they consider all the following factors EXCEPT:
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relative size of the contract.
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What is an example most likely to constitute fraud?
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Silence as to a toxic waste problem on real property that the buyer would not reasonably find.
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Angie, a minor, wants to avoid a contract she made with Cumberland Cycles. She may disaffirm the contract by:
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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)
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When a party to a contract makes a unilateral mistake, the contract:
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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.
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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:
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normally void the contract but will require Sasha to return the piano.
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If Jane persuades Linda to buy her horse by telling Linda that the horse runs “like the wind,” then Jane’s statement is:
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Puffery
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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:
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enforceable because of the leading object rule.
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In order to satisfy the statute of frauds, a writing must:
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be signed by the defendant and contain the name of each party, the subject matter of the agreement, and the essential terms and promises.
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What type of contracts cannot be either contradicted or supplemented by evidence of prior agreements or expressions?
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Totally integrated contracts.
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A third party beneficiary’s status occurs:
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when the contract is created.
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What is an example of a duty that can probably be delegated?
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An agreement to paint a house.
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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:
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Rescission
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Statutes of limitations:
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limit the time in which an injured party may sue.
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A condition:
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is an event that must occur before a party becomes obligated under a contract.
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Specific performance may be available for the breach of a contract to sell:
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An original painting.
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A contract clause which specifies the amount of damages to be paid in the event of a breach is called:
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A liquidated damages clause.
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In a promissory estoppel case, a court will generally award:
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Only reliance damages.
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The remedy of reformation:
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can be used to correct mistakes in the original contract.
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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
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Agreement
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One party makes a valid offer, and the other party must accept it
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consideration
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There has to be bargaining that leads to an exchange between the parties
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bilateral contract
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Both parties make a promise
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Unilateral Contract
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One party makes a promise that the other party can accept only be doing something
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express contract
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The two parties explicitly state all important terms of their agreement
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Implied Contract
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The words and conduct of the parties indicate that they intend an agreement
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Executory Contract
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a contract in which one or more parties has not fulfilled its obligations
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executed contract
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a contract in which all parties have fulfilled their obligations
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Two remedies created by Judicial activism:
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Promissory Estoppel and Quasi-Contracts
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Promissory Estoppel
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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
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Quasi-Contract
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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
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quantum meruit
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as much as he deserves
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Preexisting Duty
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A promise to do something the promisor is already obligated to due is not consideration
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Liquidated debt
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debt in which there is no dispute about the amount owed

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