ACCT 2700* Business Law (unit 4)

An otherwise valid contract is enforceable if the parties have not genuinely agreed to its terms.

False (we want both parties to agree to its terms)

If there is a unilateral mistake about a material fact, there is still voluntary consent and the contract will generally be enforceable.

True

When both parties to a contract are mistaken about the same material fact, a bilateral mistake has occurred.

True; and for a bilateral mistake either party can rescind the deal

If a contractor’s bid was significantly low because he made an inadvertent mistake in adding up the total estimated costs, any contract resulting from the bid is still normally enforceable.

False

Because value is variable, mistakes of value always affect the enforceability of contracts.

False; the fact that value can change is part of the risk of signing a contract Ex: stock

For purposes of fraudulent misrepresentation, scienter clearly exists if a party asserting a fact knows it is not true.

True

Undue influence can arise from a confidential relationship or a relationship based on trust.

True

Forcing a party to enter into a contract under the fear of threats constitutes duress.

True

A misunderstanding concerning a basic assumption on which a contract is made
will support the rescission of the deal if the mistake is:

bilateral; unilateral mistakes generally won’t get you out of contract unless other party of contract should have known mistake of inadvertent math error

At an auction, Ben bids on a classic car, believing that it is worth more than the price asked. When the car proves to need more repairs than Ben estimated, and
thus is worth less as is, Ben is:

still liable on the bid (mistakes of value don’t get you out of contract)

Owen, an employee of Plumbing LLC, makes a substantial math mistake in totaling the estimated costs for a project for which Quality Built Inc. is seeking bids. Consequently, Plumbing’s bid is significantly low. Any contract with Quality Built that includes the mistake may be rescinded:

if Quality Built knew or should have known of the mistake

In selling a 300-acre tract to Organic Farm, Peyton tells the buyer that the land “will be worth twice as much by next year.” This statement is not likely to support rescission of the contract because it is:

an opinion

Alvin induces Beth to enter into a contract for the purchase of a Chef’s Burger restaurant. Alvin knowingly misrepresents a number of material features about the restaurant and the business. When Beth discovers the truth, she can rescind
the contract on the basis of:

Fraudulent misrepresentation

Eugene, an accountant, convinces his client Faye to enter into contract to invest her savings in Gathering, a non-existent social media site.There is clear and convincing evidence that Faye did not act out of her free will. This is:

Undue influence (relationship of accountant & client)

Don threatens physical harm to force Earl to sell his flower shop to Don for a
below-market price. This is:

Duress

An agreement subject to the writing requirement must be written on paper.

False. it can be electronic (docusign, series of emails, etc)

The purpose of the Statute of Frauds is to ensure that, for certain types of contracts, there is reliable evidence of the contracts and their terms.

True

A mortgage taken on a piece of land need not be in writing to be enforced.

False (this is under the land rule) also leases need to be in writing to be enforceable

A contract must be in writing to be enforceable if it cannot by its terms be performed within one year from the day after the contract’s
formation.

True (the year starts the day after the contract is formed)

A contract need not be in writing to be enforceable if its performance is possible within one year of its formation, even if that
performance is not likely.

True

A promise to pay a primary obligation generally does not need to be in writing to be enforceable.

A promise to pay another’s debt only if that party fails to pay (a secondary obligation) needs to be in writing to be enforceable.

True; True

An oral sales contract for goods priced at less than $500 is enforceable.

True

To satisfy the UCC’s Statute of Frauds, a writing evidencing a sale of goods need only state the
price term.

False; you need only to have the quantity term

A written contract must consist of a single document to constitute an enforceable
contract.

False

To clarify the terms of a written contract, a court will admit any parol (outside) evidence.

not tested on; we didn’t do in class

Dave and Evan orally agree to the sale of 40 acres of farmland. Evan asks Finance Bank to lend him the funds to buy the land. Under the
Statute of Frauds, the agreement between
Dave and Evan is enforceable by:

none of the choices; you cannot have a VERBAL contract for the sale of land

To cater a holiday banquet, Food Service LLC agrees to buy 100 pre-made pumpkin pies from Great Desserts Inc. To be enforceable, the agreement must be in writing if the pies cost at least:

$500

Air Flo Inc. and Banyan Grove Apartments enter into an oral contract in which Air Flo agrees to provide air-conditioning and heating
maintenance for Banyan Grove’s facilities for two years. This contract is enforceable by:

none of the choices; you cannot have a VERBAL contract that lasts longer than a year

Natalie promises to pay for medical services provided by Oliver to Polly. Natalie receives no personal benefit for the promise. To be enforceable, the promise must be in writing if:

not tested on; we didn’t do in class

Farah agrees to assume a debt owed by Guitars Inc. to Home Bank. The agreement is not in writing. To be enforceable under the “main purpose” rule, the promise must be for the
benefit of:

not tested on; we didn’t do in class

Elena offers to invest a certain amount in Fred’s business if Fred marries Elena’s daughter, Gloria. This promise is enforceable:

only if it is in writing (the marriage section doesn’t matter how much is being paid or if the daughter agrees)

Hardware Store Company and Indestructible Tools Inc. sign a written contract for a sale of goods. To be enforceable, this written contract
must include:

a quantity term, such as “50 hammers.”

To be enforceable, a contract that is required to be in writing must include:

the signature of the party against whom enforcement is sought

Randy agrees to sell his Taco Hut restaurant to Sally.The parties intend their written contract to be a complete and final statement of the terms of their agreement. Later, the parties dispute some of the provisions. In litigation, Sally offers evidence to contradict the written terms. Most likely, the court will:

Exclude the evidence

Privity of contract establishes the basic principle that contracting parties have a right to privacy in the information expressed in their contracts.

False; not a right to privacy but simply stating who are the parties to the contract

A bank’s sale of its right to receive payment on a loan to a third party is an assignment.

True; like a bank transferring a payment of a mortgage to another bank

On an assignment to a loan broker by an auto dealer of the payments due on an auto loan, the loan broker obtains only those rights that the auto dealer originally had.

True, a direct pass through

Following an assignment by a lender of a right to receive payments on a mortgage, the homebuyer must continue to make those payments to the original lender, even after notified of the assignment.

False; if you continue paying the original lender after being notified to pay a new lender then that is a breach of contract

The unconditional assignment of rights under a contract extinguishes any defenses that the obligor had against the assignor.

SKIP; not tested on it

An insurance policy cannot be assigned if the assignment will significantly alter the risks to, or
the duties of, the insurer.

False; if you continue paying the original lender after being notified to pay a new lender then that is a breach of contract

The right to receive personal services is unique and therefore cannot be assigned.

True

If a statute expressly prohibits assignment, the particular right in question cannot be assigned.

True

The assignment of the same contract right to two different parties creates parallel and equal
rights and obligations.

False; only ONE assignment will be an effective assignee

Once the obligor receives proper notice of an assignment, only performance to the assignee can discharge the obligor’s obligation.

True; once notified she can only make payments to the assignee in order to not breach her contract

Frank makes and sells camping gear. Frank and Greg enter into a contract for a delivery of the gear to Greg’s Outfitters retail locations for an invoiced price. Frank transfers the right to payment under the contract to Haulers Distribution Inc. This transfer is:

an assignment

Jan is obligated under a contract to pay Katie $500. Katie assigns the right to receive the funds to Lauren. If Jan does not pay the debt,
the obligee (Lauren) can:

enforce the payment in court

Lori enters into a contract to mow Macy’s yard every week for the summer. Macy sells her house and yard to Nancy, and assigns the right to receive Lori’s services to Nancy. Macy is:

the assignor

Retail LLC contracts with Paving Inc. to pave a parking lot. The contract provides that it cannot be assigned without Retail’s consent. Later, Paving assigns the contract to Roadwork Company without obtaining Retail’s consent. Retail could most successfully argue that the contract cannot be assigned because:

the contract prohibits assignment

In a state in which a statute prohibits an employee from assigning the right to receive workers’ compensation benefits, the employee can assign the right:

under no circumstances

Ellen owes Floyd $10,000. Floyd assigns the claim to Garry. Garry does not notify Ellen of the assignment. Later, Floyd assigns the same claim to Holly. Holly immediately notifies Ellen of the assignment. Holly has priority to payment in:

states that follow the English rule

No special form is required to make a delegation of duties – as long as the delegator expresses an intention to make the delegation, it is effective.

When the performance of a contractual duty depends on the personal skill of the obligor, a delegation of the duty is prohibited.

An obligee can legally refuse performance from a delegatee only if the duty delegated is one
that cannot be delegated.

On a delegation of contract duties, the delegator is absolved from any liability for
performance under the contract.

Under an assignment of “all rights” on a contract, the assignor is absolved from any liability for performance under the contract.

When the original parties to a contract agree that its performance should directly benefit a third party, that third party can sue for
breach of contract.

A third party’s right to control the details of performance of a contract indicates that the third
party is an intended beneficiary.

An incidental third party beneficiary cannot sue to enforce the contract because the benefit is unintentional.

For a price, Rose agrees to unload the catch from fishing boats that dock at Seafood Shipping. Rose delegates this duty to Tina, who then owes performance of the duty to the
warehouse. Tina is:

For a price, Recycle LLC agrees to empty the dumpster behind Sushi Café. Recycle delegates this duty to Trash Inc. Sushi Café is:

If performance under a contract will vary materially on a delegation of its duties to a third party from that expected by the obligee, the delegation is:

Beth contracts to design and deliver marketing materials to Charlie. Beth cannot delegate this duty to Devon:

Leo contracts to install watering troughs in Ken’s dairy barn. When Leo becomes seriously ill, he contracts with Jay to do the work. Jay is
unreliable and never shows up. Ken hires Ike to
do the installation. To recover for any loss on
the deal, Ken can sue:

Jim and Kevin agree that Jim will fix the refrigeration unit in Kevin’s Food Truck in exchange for payment of a debt that Jim owes to Lenders Bank. Under this contract, the intended third party beneficiary is:

Molly is a third party beneficiary under a contract between Ned and Oliver. Ned and Oliver can modify or rescind their contract to take away Molly’s rights under the contract without her consent:

There is only one way to discharge a contract—all parties must fulfill their contractual duties.

If a contract condition is not satisfied, the obligations of the parties are discharged.

A contract promise that is absolute must be performed, or the party who made the promise
will be in breach.

Tender is an unconditional offer to perform by a person who is ready, willing, and able to do so.

A buyer who offers to pay for goods has tendered payment and can therefore demand
delivery.

Whether performance under a contract is substantial is decided on a case-by-case basis, examining all of the facts of the particular
situation.

A breach of contract occurs when a party fails to perform part or all of the required duties under a contract.

Any breach of contract effectively excuses both parties from performing.

Anticipatory repudiation of a contract is treated as a present, material breach in order to give the non-breaching party an opportunity to seek a similar deal elsewhere.

A statute of limitations limits the amount of damages that the nonbreaching party can obtain
for breach.

Range Free Farms enters into a contract to deliver to Sara’s Market a truckload of eggs for a certain payment. Range Free fails to deliver. Sara’s Market:

The most common way to terminate contractual duties is by:

Daniel enters into a contract to buy Everett’s office building for a certain price, subject to an appraiser’s evaluation of the structure. If the appraiser deems the structure to be substandard, the parties’ obligations will be:

Sage enters into a contract to sell her condo to Tara for a certain price on a specific day. On that day, Sage unconditionally offers to perform by turning over ownership of her condo. Sage’s offer to perform:

Restoration Inc. enters into a contract to refurbish an old bus depot for Quality Diners LLC. If Restoration acts in good faith and completes nearly all (but not all) of the work promised in the contract, its performance will
be:

Dairy Farm enters into a contract with EZ Ice Cream Inc. to supply milk. Later, Dairy decides that it is no longer advantageous to fulfill the contract and subsequently fails to perform on the agreed upon delivery date. EZ files a suit against Dairy. A breach occurred when Dairy:

Jeremy and Keri enter into a contract for Jeremy to renovate Keri’s house by a certain date. Jeremy never performs. After the applicable limitations period has passed, Keri decides to bring suit against Jeremy for breach. This suit:

City Delivery, Inc. enters into a contract to deliver furniture to David’s house with payment due on July 4. On July 4, David’s bank is closed,
and for this reason, he claims that he cannot pay on time. In this situation:

Normally, a court will not award equitable remedies unless the remedy at law (damages) is
inadequate.

In contract law, damages compensate for harm suffered as a result of another’s wrongful act,
not for the loss of the bargain.

The standard measure of compensatory damages is the difference between the value of the breaching party’s promised performance and the value of actual performance (reduced by any loss the injured party has avoided).

Special damages that compensate for foreseeable damages resulting from the breach are consequential damages.

In most states, a person whose employment is wrongfully terminated has no duty to look for or take a similar job if one is available.

Under the doctrine of restitution, when a contract is rescinded, both parties must return goods, property, or money previously conveyed.

The equitable remedy of specific performance gives the nonbreaching party the exact
bargain promised in the contract.

Repair Service enters into a contract to fix washing machines in Soapy Suds Company’s coin-operated laundries. Repair breaches the contract. Soapy is awarded compensatory
damages. The purpose is to:

Helen contracts to work exclusively for Island Tours LLC during July for $5,000. On June 30,
Island cancels the contract. Helen finds a similar
job for the month of July but earns only $3,000. Helen files a suit against Island. As compensatory damages, Helen can recover:

Emma enters into a contract to buy a unique tract of lakefront property from Forest Acres to
build and sell a residential development. Forest
Acres fails to close the sale. Emma’s remedy is
most likely:

Oliver holds one ton of perishable fruit in storage for Produce Corporation. If Produce does not pay for the storage, under the doctrine of mitigation of damages, Oliver is held to a duty of:

To induce the sale of an auto parts business, Carter fraudulently represents the worth of the inventory to Drew, who offers an inflated price. They enter into a contract to close the deal. On closer inspection, the buyer learns the true value of the goods. Drew can

A contract for a sale of land from Beachfront Properties Inc. to City Development Corporation contains an erroneous legal description. The
appropriate remedy for these parties is most
likely: