Business Law Exam 4 - Ostendorf

True or False: A contract that has all four required elements (A-C-C-L) is not enforceable if the parties have not genuinely agreed to its terms.

True

True or False: If there is a unilateral mistake about a material fact, there is still voluntary consent by the parties, and the contract will generally be enforceable.

True

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

True

True or False: 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

True or False: Mistakes of value or quality will entitle the mistaken party to rescind the contract.

False

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

True

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

True

True or False: Forcing a party to enter into a contract under the fear of threats constitutes duress.

True

Restaurant Food Inc. intends to sell a certain quantity of beef for $1,100. In an email, however, the firm's sales representative mistakenly offers to sell the beef to Steak House for $1,000. Steak's manager immediately accepts. The seller:

A. Is bound to the deal at the offered price.

B. Can rescind the deal.

C. Is bound to the deal, but can change the intended price.

D. Can rescind the deal and recover damages for the mistake.

A. Is bound to the deal at the offered price.

Ben enters a contract to buy 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:

A. Still liable on the contract.

B. Not liable because he underestimated the cost of repairs.

C. Not liable because he made a mistake of value.

D. Not liable because the need for repair is not a material fact.

A. Still liable on the 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 Any contract with Quality Built that includes the mistake may be rescinded:

A. If Quality Built knew or should have known of the mistake.

B. If Owen's supervisor did not know of the mistake.

C. If Owen's calculator did not work properly.

D. Under no circumstances.

A. 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:

A. A material fact.

B. A misrepresentation.

C. A mistake.

D. An opinion.

D. 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:

A. Fraudulent misrepresentation.

B. Undue influence.

C. Mistake.

D. None of these choices.

A. Fraudulent misrepresentation.

Eugene, an accountant, convinces his client, Faye, to enter into a 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:

A. Fraudulent misrepresentation.

B. Undue influence.

C. Mistake.

D. Duress.

B. Undue influence.

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

A. Fraudulent misrepresentation.

B. Undue influence.

C. Mistake.

D. Duress.

D. Duress.

True or False: When both parties are mistaken about the same material fact, a bilateral mistake has occurred.

True

True or False: Each party to a contract assumes the risk that the value of the object of the deal will change in the future.

True

True or False: If consent to the terms of a contract is voluntary even if one or the parties is forced into the agreement through fear or threats.

False

Huey, a financial advisor, convinces Ethel, his elderly client, to invest in a risky start-up business run by Huey's friend. This is most likely:

A. Fraudulent misrepresentation.

B. Mistake.

C. Undue influence.

D. None of these choices.

C. Undue influence

Dennis sells a motorcycle to Elton without disclosing that the odometer, which reads 10,000 miles, was disconnected 100,000 miles ago. Dennis is most likely liable for:

A. Mistake.

B. Fruadulent misrepresentation.

C. Puffery.

D. None of these choices.

B. Fraudulent misrepresentation.

True or False: An agreement subject to the writing requirement must be written on paper.

False

True or False: 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

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

False

True or False: 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

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

True

True or False: 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 or False: An oral sale contract for goods priced at less than $500 is enforceable.

True

True or False: To satisfy the UCC's Statute of Frauds, a writing evidencing a sale of goods need only state the price term.

False

True or False: A written contract need not consist of a single document to constitute an enforceable contract.

True

True or False: To clarify the terms of a written contract, a court will always admit parol (outside) evidence.

False

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:

A. Dave and Evan.

B. Dave, Evan, or Finance Bank.

C. Finance Bank.

D. None of these choices.

D. None of these choices.

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:

A. $100.

B. $499.

C. $500.

D. Price does not matter.

C. $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:

A. Air Flo.

B. Banyan Grove.

C. Any third party, such as an HVAC supplies provider.

D. None of the choices.

D. None of the choices.

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

A. Only if it is in writing.

B. Only if the amount of the investment is more than $500.

C. Only if Gloria agrees to marry Fred.

D. Under no circumstances.

A. Only if it is in writing.

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. A correct title, such as "Purchase Order."

B. A date, such as "October 2023."

C. A quantity term, such as "50 hammers."

D. The parties' contact information.

C. A quantity term, such as "50 hammers."

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

A. No particular signatures.

B. The signatures of all of the parties to the agreement.

C. The signature of the party against whom enforcement is sought.

D. The signature of the party who is seeking enforcement.

C. 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 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:

A. Exclude the evidence.

B. Reform the written terms to match the evidence.

C. Strike a balance between the evidence and the written terms.

D. Dismiss the case.

A. Exclude the evidence.

True or False: Any contract involving consumer goods must be in writing to be enforceable.

False

True or False: A promise to pay the debt of another only if that party fails to pay must be in writing to be enforceable.

True

True or False: A party's signature must be at the end of a writing for the writing to constitute an enforceable contract.

False

Kevin and Lee enter into a contract for the sale of Mountain Valley Ranch. To be enforceable, this contract must be:

A. In writing.

B. Signed in a sufficient manner by both parties.

C. Substantiated by reliable, external evidence.

D. All of the above.

A. In writing.

Acme Corp and Becca enter into an oral contract in which Becca agrees to work on a project to Acme Corp for 18 months. This contract is enforceable by:

A. Acme Corp.

B. Becca.

C. Any third party, such as Acme Corp.'s clients.

D. None of the parties.

D. None of the parties.

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

False

True or False: A bank's transfer of its right to receive payment on a loan to a thrid party is an assignment.

True

True or False: 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

True or False: After a transfer to a creditor by an investor of a right to receive payments on a business loan, the creditor can demand those payments from the borrower.

True

True or False: An assignment of rights under a contract extinguishes any defenses that the obligor had against the assignor.

False

True or False: An insurance policy can be assigned freely, even if the assignment will significantly alter the risks to, or the duties of, the insurer.

False

True or False: If a statute expressly prohibits assignment, that particular right in question cannot be assigned.

True

True or False: The same contract right can properly be assigned to two different parties, thereby creating parallel and equal rights and obligations.

False

True or False: Once the obligor receives proper notice of an assignment, only performance to the assignee can discharge the obligor's obligation.

True

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:

A. A delegation.

B. An assignment.

C. A third-party beneficiary contract.

D. Prohibited.

B. 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:

A. Extinguish the contract rights of the obligor.

B. Demand performance of the deal from any of the original parties.

C. Enforce the payment in court.

D. None of the choices.

C. 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:

A. The obligor.

B. A third-party beneficiary.

C. The assignee.

D. The assignor.

D. The assignor.

Retail LLC contracts with Paving Inc. to grade and 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:

A. The assignment is prohibited by statute.

B. The contract is personal.

C. The assignment will materially change a risk.

D. The contract prohibits assignment.

D. 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:

A. If all interested parties consent.

B. If the employee is fully advised of his rights.

C. If there is no significant change to the obligor's risk or duties.

D. Under no circumstances.

D. 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:

A. All states.

B. States that follow the English rule.

C. No state.

D. Most states.

B. States that follow the English rule.

True or False: A contracting party's transfer of the contract rights or duties to another person is an exception to the rule of privity of contract.

True

True or False: Once the obligor receives proper notice of an assignment, only performance to the assignee can discharge the obligor's obligation.

True

True or False: Following a transfer 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 being notified of the assignment.

False

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

A. Extinguish the contract rights of the obligor.

B. Demand performance of the deal from any of the original parties.

C. Sue Emily to enforce the payment in court.

D. None of the choices.

C. Sue Emily to enforce the payment in court.

Mary and Nita enter into a contract for the sale of Mary's apartment, for which Nita agrees to pay $350,000. Nita assigns her right to buy the apartment to Owen. Owen is:

A. The assignee.

B. A third-party beneficiary.

C. The assignor.

D. The delegatee.

A. The assignee.

True or False: 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.

True

True or False: As a general rule, any duty can be delegated (subject to certain exceptions).

True

True or False: An obligee can legally refuse performance from a delegatee for any reason.

False

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

True

True or False: A third party's right to control the details of performance of a contract indicates that the third party is an intended beneficiary.

True

True or False: An incidental third-party beneficiary cannot sue to enforce the contract because the benefit is unintentional.

True

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:

A. The obligor.

B. A third-party beneficiary.

C. The obligee.

D. The delegatee.

D. The delegatee.

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

A. The obligor.

B. A third-party beneficiary.

C. The obligee.

D. The delegatee.

C. The obligee.

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:

A. Prohibited.

B. Permitted on sufficient notice by the obligor.

C. Permitted if the performance does not require the obligor's personal skill.

D. Permitted if special trust has been placed in the obligor.

A. Prohibited.

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

A. If performance depends on Beth's personal skill.

B. If the delegatee's performance will match the obligee's expectations.

C. If special trust has not been placed in the obligor.

D. Under any circumstances.

A. If performance depends on Beth's personal skill.

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:

A. At any time.

B. At no time.

C. After Molly's rights have vested.

D. Before Molly's rights have vested.

D. Before Molly's rights have vested.

True or False: A famous artist cannot delegate his or her contractual duty to paint someone's portrait because that type of service requires special skill.

True

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

True

True or False: Expressly designating a third-party beneficiary within a contract indicates that the third party is an intended third-party beneficiary.

True

For a price, Randy agrees to load up trash for Packaging Warehouse. Randy delegates this duty to Tom, who then owes performance of the duty to Warehouse. Tom is:

A. The obligee.

B. The assignor.

C. The delegatee.

D. A third-party beneficiary.

C. The delegatee.

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

A. prohibited.

B. permitted if the performance does not require the obligor's personal skill.

C. permitted if special trust has been placed in the obligor.

D. permitted on sufficient notice by the obligor.

A. Prohibited.

True or False: There is only one way to discharge obligations under a contract - all parties must fulfill their contractual duties.

False

True or False: If a contract condition is not satisfied, the obligations of the parties are discharged.

True

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

True

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

True

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

True

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

True

True or False: Any breach of contract effectively excuses both parties from performing.

False

True or False: 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.

True

True or False: A statute of limitations limits the amount of damages that the non-breaching party can obtain for breach.

False

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:

A. Must pay in anticipation of the delivery to avoid a breach of contract.

B. Does not have to pay because Range Free did not perform.

C. Must pay under the contract, but can sue Range Free for breach.

D. None of the choices.

B. Does not have to pay because Range Free did not perform.

The most common way to terminate contractual duties is by:

A. Agreement.

B. Repudiation.

C. Failure of a condition.

D. Performance.

D. Performance.

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:

A. Conditions Tara's promise to pay for the property.

B. Constitutes tender of performance.

C. Excuses the parties' performance under the contracts.

D. Suspends the parties' contractual obligations.

B. Constitutes tender of performance.

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:

A. Conditional.

B. Complete.

C. Material.

D. Substantial.

D. Substantial.

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:

A. Entered into the contract.

B. Decided that it was not advantageous to fulfill the contract.

C. Failed to perform as promised.

D. Was sued by EZ.

C. Failed to perform as promised.

Alison and Jonathan enter into a contract for Alison to refurbish Jonathan's living room by a certain date. Alison never performs. After the applicable limitations period has passed, Jonathan decides to bring suit against Alison for breach. This suit:

A. Must be filed within 10-20 years, depending on state law.

B. Can no longer be brought.

C. Can be filed within 4 years of notice to Alison that Jonathan decided to sue.

D. Must be filed between 4 and 5 years after Jonathan decides to sue.

B. Can no longer be brought.

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:

A. The bank is liable for breach.

B. David is in breach.

C. The contract is discharged.

D. The contract is suspended.

B. Davis is in breach.

True or False: The most common way to terminate contractual duties is by performance.

True

True or False: There is no difference between complete and substantial performance.

False

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

True

State University provides on-campus and in some adjacent off-campus neighborhoods. To lease a university house or apartment, a person must be a student at State. This requirement is:

A. A novation.

B. A breach of contract.

C. A condition.

D. An operation of law.

C. A condition.

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

A. Must be filed between 4 and 5 years after Keri decides to sue.

B. Can be filed within 4 years of notice to Jerry that Keri decided to sue.

C. Can no longer be brought.

D. Must be filed within 10 to 20 years, depending on state law.

C. Can no longer be brought.

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

True