BLAW Test 3

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?

Yes, because Robbie gave up a legal right

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

Janet's promise is legally sufficient unless Janet knew at the time she made the promise that she could not inherit the $1 million.

Stan purchased 400 pairs of gloves from Isaac at a contract price of $800. Fifty of the gloves were defective, and a dispute arose as to the amount due and owing under the contract. Stan refuses to pay the $800, and Isaac is threatening to sue. Which of the following is correct with regard to this transaction?

If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount, the substitute agreement is enforceable.

Which of the following would most likely be enforceable?

A substitute agreement to settle an undisputed debt

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?

This is a modification of a preexisting contract, which under common law must be supported by additional consideration on the part of Bravo Builders.

Carlos ordered an aluminum storm door for $249.99. Before it was delivered, the same store from which he ordered the door ran an ad in the paper for the same storm door at $179.99. Carlos calls the store and demands the advertised price. They say okay.

Carlos must pay $179.99.

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:

$60, since the modified agreement is supported by additional consideration.

Sue owes $5,000 to the First National Bank for a student loan which will come due on January 1 next year. She has been offered a two-year graduate fellowship, but she will not be able to pay the loan back if she accepts the fellowship. The bank manager tells Sue that if she pays $3,000 now, they will forgive the loan. Should Sue accept the offer?

Yes, because the early payment of the loan is consideration that makes the bank's promise binding

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?

Yes, there is consideration for the modified amount

Wayne helped Hank study all night for an important exam. After Hank got an A on the exam, he told Wayne, "I will give you $10 for helping me get a good grade." Wayne said, "Thanks, I'll take it."

There is no contract because there is no valid consideration.

Rob repairs a door for Howard. In return, Howard is supposed to pay Rob $75 on November 1 at Howard's house. Which of the following would constitute legally sufficient consideration?

Howard pays Rob $60 on November 1 but, after checking with Rob, brings payment to Rob's house.

Which of the following are the two basic elements to consideration?

Bargained-for exchange and legal sufficiency

Which of the following is enforceable without consideration?

A new promise to pay a debt barred by the statute of limitations.

Alice says to Brian, "If I decide to buy a word processor next year, I will buy it from you." This is an example of:

an illusory promise.

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 is most accurate?

McHenry is liable to Nancy based on the concept of promissory estoppel.

Which of the following statements is most accurate concerning charitable subscription promises?

They are generally enforceable if there is reliance by the charity.

Which of the following gratuitous promises are enforceable by statute?

All of the above are enforceable by statute.

Which of the following will support a contract?

Forbearance to do an act

A purchaser's agreement to buy from a particular seller all the materials of a particular kind he needs is a(n) \____ contract.

requirements

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.

-The consideration moving from Darla to Edward is the promise of $6,000 subject to a condition.
-Darla's conditional promise is sufficient consideration unless Darla knows she cannot receive at least $6,000 from her uncle's estate.

Jason's mother would like him to go to college, so in June he enrolls at State University. He also quits his job and tells his mother his plans to continue taking 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. Which of the following is true regarding his mother's promise?

It is unenforceable, because Jason had already enrolled in school and there is no consideration.

Which of the following requires consideration in order to be binding upon the parties?

Material alteration of a personal service contract

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?

An off-duty deputy sheriff from a county other than the one where the arrest occurred

In which of the following situations will a smaller sum be unable to discharge a larger debt?

If the smaller sum is paid when the larger sum would ordinarily be due, but the debtor is on the verge of insolvency

Andrew agrees to paint Betty'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 Betty agrees to pay him $100 more. What law applies to this fact situation?

Andrew gives no additional consideration in return for modification of a preexisting contract.

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.

The parties have agreed to a substitute contract which discharges the original contract. John is obligated to pay the additional $1,000.

Barbara, a wealthy widow, promises the pastor of her church that she will donate $20,000 to the church to help pay off its mortgage if the stewardship committee can obtain enough pledges for the balance of the $80,000 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.

-The doctrine of promissory estoppel can be applied to this case.
-Under the Restatement, Barbara's promise is enforceable.

Doug obtains an exclusive franchise to sell widgets for the Acme Widget Company. The exclusive franchise covers the entire State of Wisconsin for a period of three years.

-Acme is obligated to use its best efforts to supply the goods even if no such clause appears in the written franchise agreement.
-According to the UCC, unless otherwise agreed, Doug must use his best efforts to promote the sale of the widgets in his territory.

Tyler contracts to build a garage for Wilbur for a price of $6,000. Because of an increase in the cost of labor and materials, Tyler refuses to perform. Wilbur wants the garage, so he agrees to pay an additional $500.

Tyler has given no additional consideration, and under the common law must perform at the agreed upon original price.

The requirement of legally sufficient consideration:

is that the parties have agreed to an exchange and it imposed a legal detriment upon the promisee or conferred a legal benefit upon the promisor.

Nell gives Al $50 in return for Al's promise to defame Sara. Nell hopes to ruin Sara's chances at a promotion. Nell finds out that Al did not hold up his end of the agreement. Which of the following statements is true?

Legally, Nell can neither get the money back nor force Al to do as he promised.

Claudia sells her highly successful hair salon to Carl. In the sales contract, Claudia agrees never to open a hair salon in the state. Which of the following best describes this contract clause?

An unenforceable restraint of trade contrary to public policy

Don has an employment contract with Dunkirk Ice Cream. He sells ice cream and novelty ice cream products. He has nine children and doesn't make enough money, so he decides to see if another dairy will hire him, too. "After all," he reasons, "most stores carry four or five different brands." His employment contract prohibits him from competing. If Don sells for another dairy in addition to Dunkirk, will he be in trouble under his contract?

Yes, it is likely to be enforceable during employment.

William recently sold his successful business to Janice. The contract for the sale contained an unreasonable restriction that did not allow William to open a similar business for fifteen years. The courts would, in this instance,

-reform the contract to make it reasonable and enforceable.
-refuse to enforce the unreasonable restriction

Which of the following is true with regard to an exculpatory clause?

-An exculpatory clause excuses one party from liability for her own tortious conduct.
-Where one party has a superior bargaining position that has enabled him to impose an exculpatory clause upon the other, the courts are inclined to nullify the provision.
-An exculpatory clause may be unenforceable for unconscionability.
-All of the above are true.

If a restriction in an employment contract is found to be too harsh, a court may do any of the following EXCEPT:

refuse to void the restriction.

Divided Parcel (DP) includes the following on its mailing receipts: "We are not responsible for any damages to packages whether or not through the fault or negligence of our employees. Send packages at your own risk." Mary reads this clause but sends her watch back to its manufacturer to be repaired anyway. The watch is destroyed when the DP driver uses the package for a ball and tosses it to his buddy. Mary is:

likely to collect from DP because it is a common carrier.

A(n) \____ is a measure designed to protect the public from unqualified practitioners.

regulatory license

Before granting an injunction enjoining a former employee from competing in a described territory, the courts insist that the employer demonstrate that the restriction is:

necessary to protect the employer's legitimate interest.

John operates a small repair business and is in desperate need of a certain type of building material. He obtains the material from a large corporation, but is charged a grossly unreasonable price and is forced to buy other material he does not need. In view of the buyer's unequal bargaining power and unreasonable terms of the contract, this may be a case of:

substantive unconscionability.

Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere within the state for a period of three years.

-The agreement is unreasonable.
-The agreement unduly interferes with the interests of the public.

Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere in River City for a period of five years.

the geographic restraint is reasonable.

The UCC provides that if a court as a matter of law finds a contract for the sale of goods or a clause of such a contract to have been unconscionable at the time it was made, the court may:

-refuse to enforce the contract.
-enforce the part of the contract that is not unconscionable.
-limit the application of any unconscionable clause in order to avoid an unconscionable result.
-All of the above.

Sarah is working hard on the mayoral campaign of Timothy. She thinks that just a few more votes could win the election, so she promises to pay her friend Violet $50 to register and vote. Violet does so, but Timothy loses the election, and Sarah now refuses to pay.

This agreement is unenforceable and opposed to public policy.

Which of the following would generally be considered to be a revenue-raising licensing law?

A statute requiring that salespeople be licensed, but not establishing any educational or training requirements

Numerous states impose no limit on the rate of interest that may be charged on:

-loans to corporations.
-credit card transactions.
-loans made by certain designated types of lenders.
-All of the above.

Non-compete agreements drafted for employees of Internet companies:

are subject to larger geographic restrictions than for other types of companies.

Patrick agrees to sell two different goods to his friend Ron, a retailer. One item is legal, and one item is illegal. The contract price is $2,000.

-Patrick may not recover payment for either of the goods if delivered.
-Patrick may recover for the legal item, but he may not recover for the illegal item.
The court may view the contract in either way^

A contract prepared on a standard form and offering terms on a take-it-or-leave-it basis is called:

an adhesion contract.

Custom Sales and Rentals uses a four-page contract with important contract terms buried in the fine print. This is an example of:

procedural unconscionability.

R&R, Inc. entered into a contract with Scott, an agent, under the terms of which Scott would receive $20,000 if he stole trade secrets from the leading competitor of R&R. Scott performed his end of the agreement by delivering the trade secrets. R&R now refuses to pay Scott for his services.

Scott will be unable to recover, because this is an illegal contract.

Which of the following is correct with regard to an enforceable restraint of trade?

-The restraint should be no more extensive than is required to protect a specified property interest.
-Restraints typically arise in connection with the sale of a business.
-A typical restraint is a covenant not to compete.

Under which of the following circumstances would a court be likely to enforce an illegal contract?

Under certain circumstances in which the aggrieved party was unaware of the illegality

Which of the following would always be considered to be contrary to public policy?

An agreement to pay someone to make false, negative statements about a competitor's product

Which of the following would be considered a valid and legally enforceable agreement?

An agreement by a car salesman not to sell automobiles or automobile parts in Marin County for a period of one year after terminating his employment

Bill bets his friend $100 that the Patriots will win the next Super Bowl

This is an illegal wagering agreement.

Carl and Rob are both engaged in road construction work. They know that several jobs are going to be up for public bids, and agree between themselves that Carl will bid on one job and Rob will bid on the other, so that they both have work for the summer. When the bids are opened, Carl realizes that Rob has bid on both jobs. Rob is awarded both contracts. Carl now wants to sue Rob for breach of contract.

This is an agreement in violation of public policy that will not be enforced by the courts.

Al has a tax service and accounting business in Redwood City. He decides to move to Center City, which is 150 miles away and sells his accounting practice to Able and Baker, a CPA firm. In the sales contract, he agrees that he will refrain from practicing accounting anywhere within a 20-mile radius of Redwood City for a period of two years. However, on weekends he returns to his house in Redwood City, and when clients call him, he meets with them in his home.

Al is in violation of the sales agreement.

Theresa is a travel agent at the Fly Away Travel Agency. She has signed an agreement with her employer which prohibits her from working in any similar business in any town within a 100-mile radius of where she works. If she wants to quit her job and go to work for another travel agency, it is likely that:

if no trade secrets are involved, and she has no dominion over customers, a court would rule the restrictions to be invalid.

Anna is 88 years old and under the legal guardianship of her daughter. One day Anna receives a telephone call from a health insurance salesman and purchases a $400-a-month Medigap insurance policy.

This contract is void.

Fay, age 17, ordered a pair of skis on the installment plan. She paid $20 every month until she turned 18, the age of majority. The next day, she sold them to Sharon and disaffirmed the contract. What result?

Fay is still liable because selling the skis amounts to a ratification.

Ann, a minor, disaffirmed her agreement to buy $127 worth of cosmetics from Facial Glo Company. She had used up all the eye shadows, lipsticks, and powders. The general rule is that she may:

disaffirm, but she has to return the makeup that is not used up.

Mary, age 17, sold Mark, age 22, the briefcase she got for graduation. Mark's father liked it and bought it from him. If Mary decides to disaffirm the contract, will Mark's father have to return the briefcase to her?

No, if Mark's father bought it without knowing that Mary was a minor.

Ratification can occur in which of the following ways?

-Through express language
-As implied from conduct
-Through failure to make a timely disaffirmance
-All of the above.

Tim, who is a minor, enters into a contract with Violet, who is an adult. Which of the following is correct?

Violet may not disaffirm the contract.

Todd, a minor, rents an automobile from Rosa, an adult. Todd damages the vehicle when he negligently backs into a pole. Under the majority view, can Rosa recover damages from Todd?

No, his contractual immunity protects him from legal action by Rosa.

Steve purchases a four-wheel drive truck from Belk Auto Sales. Steve is only 17 years of age. He wrecks the vehicle and attempts to disaffirm the contract and have Belk repay him all that he has paid. In the majority of jurisdictions, what would happen?

Steve may simply return the vehicle and get his money.

Randy, a minor, buys a new four-wheel drive truck from the Jones Dealership. Randy sells this truck to his cousin, Steve, who is an adult. Steve conveys this vehicle to Arthur Smith. Arthur does not personally know Steve or Randy. Which of the following expresses the status of this situation?

Randy may not recover the vehicle from Mr. Smith.

Robert is 17 years old. He lies to Bouyers Auto in order to induce it to sell him a new pickup. Bouyers falls for this lie and sells him the pickup. In most jurisdictions, which of the following is correct?

Robert may disaffirm and get his money back.

Which of the following is not true regarding the contracts of incompetent persons?

Unlike a minor, an incompetent person can never ratify a contract.

Which of the following is not true regarding the contracts of intoxicated persons?

Slight intoxication will destroy one's contractual capacity.

The exercise of the power to avoid a contract is known as:

disaffirmance.

Sixteen-year-old Laura's disaffirmance of a contract:

for a sale of land by her is not effective until after she reaches the age of majority.

Which of the following is least likely to be classified as a necessary for which a minor will be held liable on a contract?

a camera

In which of the following situations would a minor be unable to disaffirm a contract which he had made?

Where the minor wishes to affirm part of a contract and disaffirm another part of the same contract

Which of the following would be a valid ratification?

-Two weeks after his eighteenth birthday, Jerry sells the motorcycle he contracted to buy when he was seventeen.
-Two weeks after attaining his eighteenth birthday, Jerry calls the bank to assure them that he will continue making payments on the loan agreement he signed a month before his eighteenth birthday.
-Two weeks after his eighteenth birthday, Jerry makes a payment on the installment contract he signed a month before.

Percy, age 17, purchased a used mobile home from a mobile home dealer for $20,000. This price, however, was twice the reasonable value of the mobile home. One month later, Percy wishes to disaffirm the contract. If the mobile home is considered a necessary, then:

Percy may keep the mobile home but is only liable for the reasonable value of the mobile home.

Cheryl, age 16, ordered a new dress to wear to the school prom. She has contracted to pay $500 when the dress arrives. Before the dress arrives, Cheryl decides that the dress is too expensive and now wishes to cancel the order.

Cheryl may disaffirm this executory contract.

Wanda at age 17 purchased an expensive stereo system from Stereo Sales. If Wanda wishes to ratify this contract, Wanda:

must reach the age of majority and ratify the contract as a whole.

Donald, a minor, makes a contract with Albert, an adult, to buy a computer. One week later, Donald has his eighteenth birthday and shortly thereafter tells Albert he will pick up the computer next week.

Donald has expressly ratified the contract.

A contract by which of the following is void?

A thirty-six-year-old man under a court-ordered guardianship for mental incompetency.

When a minor falsely advises the other party that he is of the age of majority and based upon that misrepresentation, the other party in good faith enters into a contract with the minor:

There is no uniform rule. States differ, and depending upon the state, any of the above could be correct.

Which of the following is correct regarding the contractual liability of incompetent persons?

For executed, fair contracts with a mentally incompetent person who understands but cannot control his behavior to act rationally, the incompetent must restore the competent party to the status quo before the transaction by a return of the consideration received or its equivalent in money.

In most states, whether the time within which a minor disaffirms a contract constitutes a reasonable time is determined by:

the facts and circumstances of the case.

Consideration:

the thing thapersuades someone to enter into a contract

Legal Sufficiency:

consists of either a detriment to the promisee or a benefit to the promisor.

Legal Detriment:
Legal Benefit:

-doing an act one is not legally obligated to do or not doing an act that one has a legal right to do.
-obtaining something to which one had no prior legal right

Adequacy:

deals with the fairness of the bargain
not required where the parties have freely agreed to the exchange.

Unilateral Contract:

Only one party makes a promise, but to make the promise binding, it must be supported by consideration - either a legal detriment to the promisee or legal benefit to the promisor

Bilateral Contracts:

Both parties make a promise, but to make the promises binding, they must be supported by consideration from both parties - either a legal detriment to the promisee or legal benefit to the promisor.

Illusory Promise:

promise that imposes no obligation on the promisor

Output Contract:

agreement to sell all of one's production to a single buyer.

Requirements Contract:

agreement to buy all of one's needs from a single producer.

Exclusive Dealing Contract:

grant to a franchisee or licensee by a manufacturer of the sole right to sell goods in a defined market

Conditional Promise:

a contract in which the obligations are contingent upon the occurrence of a stated event.

Preexisting Public Obligations:

public duties such as those imposed by tort or criminal law are neither a legal detriment nor a legal benefit.

Preexisting Contractual Obligation:
Modification of a Preexisting Contract -

performance of a preexisting contractual duty is not consideration
-Under the Code, a contract can be modified without new consideration.
-If someone has a preexisting obligation to do something and changes the date, it is not a binding contract to pay more money because there is no consideration

Substituted Contracts:

the parties agree to rescind their original contract and to enter into a new one; rescission and new contract are supported by consideration.

Settlement of a Undisputed Debt:

payment of a lesser sum of money to discharge a liquidated debt (one whose existence or amount is not contested) does not constitute legally sufficient consideration.

Settlement of an Disputed Debt:

payment of a lesser sum of money to discharge an unliquidated debt (one whose existence or amount is contested) is legally sufficient consideration