BUL review questions test 1

Which of the following is correct with regard to a contract?

A. All contracts must be in writing.

B. A person who deposits money in a bank account has entered into a contract with the bank.

C. A contract may be for a tortious purpose.

D. To be valid, a contract must be bilateral and cannot be unilateral.

B. A person who deposits money in a bank account has entered into a contract with the bank.

In contract law, intent is determined by the personal or subjective intent, or belief, of a party.

A.True.

B.False.

B.False.

A contract that has been fully performed by the parties is called an executory contract.

A.True.

B.False.

B.False.

Sal assures Tom that she will deliver a truckload of hay to his cattle ranch. A person's declaration to do a certain act is part of the definition of:

A.An expectation.

B.A moral obligation.

C.A prediction.

D.A promise.

D.A promise.

Which of the following is not an element of a valid contract?

A.Agreement.

B.Consideration.

C.Legal capacity of the parties to the contract.

D.A written document with notarized signatures.

E.All of the above are elements of a contract.

D.A written document with notarized signatures.

John bought a dishwasher from Local Appliance Store. The law that governs the contract between John and Local is _____.

A.State common law.

B.Federal common law.

C.The Uniform Commercial Code.

D.The Sarbanes - Oxley Act.

C.The Uniform Commercial Code.

On the first day of the month, Thomas and Moore verbally agreed that Thomas was to deliver to Moore's place of business a case of fruit on each Monday of the current month. Moore was to pay the $100 price on the first of the following month. On the 15th of the month, the agreement should be classified as:

A.Executed.

B.Executory.

C.Unexecuted because the agreement was verbal.

D.Cancelable at any time.

B.Executory.

Spring agreed to buy Summer's car. Because the actual purchase was not to occur for several months, they drafted a lengthy agreement that specified all of the rights and obligations of each of the parties. They hired an attorney to review this two-page, single-spaced document. After the attorney suggested a few changes, the document was retyped and signed. The contract is:

A.A formal contract.

B.An executed contract.

C.A simple contract.

D.An implied contract.

C.A simple contract.

For an offer to confer the power to form a contract by acceptance, it must have all of the following elements except:

A.Be communicated to the offeree in a communication made or authorized by the offeror.

B.Be sufficiently definite and certain.

C.Be communicated by words to the offeree by the offeror.

D.Manifest an intent to enter into a contract.

C.Be communicated by words to the offeree by the offeror

Carol dictated an offer she intended to make to Deanna. Irvin, her secretary, drafted an email based on Carol's dictation. During lunch and before the offer had been sent, Irvin saw Deanna and told her about it. Deanna promptly sent an acceptance to Carol. What was the effect of this attempted acceptance?

A.No contract was formed because the offer was not communicated to the offeree.

B.No contract was formed because the offer was not communicated to the offeree by the means chosen by the offeror.

C.A contract was formed because Irvin was Carol's agent.

D.A contract was formed because Carol intended to make an offer and Deanna learned of the offer in time to make a valid acceptance.

B.No contract was formed because the offer was not communicated to the offeree by the means chosen by the offeror.

In determining whether the consideration requirement to form a contract has been satisfied, the consideration exchanged by the parties to the contract must be:

A.Of approximately equal value.

B.Legally sufficient.

C.Exchanged simultaneously by the parties.

D.Fair and reasonable under the circumstances.

B.Legally sufficient.

Culler Construction Company agreed with the City of Orange Key to build a road. The project was to begin on December 1. One week after work began, a hurricane struck the site, washing away so much land that the construction would be twice as expensive. As a result, Culler refused to continue the job unless Orange Key paid a large sum in addition to the initial contract price. A promise by Orange Key to pay more than the original price is:

A.Unenforceable because Orange Key received no additional legal benefit.

B.Unenforceable because Culler incurred no additional legal detriment.

C.Unenforceable because of the pre-existing contractual obligation.

D.Enforceable because Culler encountered unforeseen difficulties.

D.Enforceable because Culler encountered unforeseen difficulties.

On September 10, Harrin, Inc., a new car dealer, placed a newspaper advertisement stating that Harrin would sell 10 cars at its showroom for a special discount only on September 12, 13, and 14. On September 12, King called Harrin and expressed an interest in buying one of the advertised cars. King was told that five of the cars had been sold and that King should come to the showroom as soon as possible. On September 13, Harrin made a televised announcement that the sale would end at 10:00 p.m. that night. King went to Harrin's showroom on September 14 and demanded the right to buy a car at the special discount. Harrin had sold the 10 cars and refused King's demand. King sued Harrin for breach of contract. Harrin's best defense to King's suit would be that Harrin's:

A.Offer was unenforceable.

B.Advertisement was not an offer.

C.Television announcement revoked the offer.

D.Offer had not been accepted.

B.Advertisement was not an offer.

Ann Mayer wrote Tom Jackson and offered to sell Jackson a building for $200,000. The offer stated it would expire 30 days from July 1. Mayer changed her mind and does not wish to be bound by the offer. If a legal dispute arises between the parties regarding whether there has been a valid acceptance of the offer, which of the following is true?

A.The offer cannot be legally withdrawn for the stated period of time.

B.The offer will not expire prior to the 30 days even if Mayer sells the property to a third person and notifies Jackson.

C.If Jackson phoned Mayer on August 1 and unequivocally accepted the offer, a contract would be formed, provided Jackson had no notice of withdrawal of the offer.

D.If Jackson categorically rejects the offer on July 10, Jackson cannot validly accept it within the remaining stated period of time.

D.If Jackson categorically rejects the offer on July 10, Jackson cannot validly accept it within the remaining stated period of time.

For there to be consideration for a contract, there must be:

A.A bargained-for-detriment to the promisor(ee) or a benefit to the promisee(or).

B.A manifestation of mutual assent.

C.Genuineness of assent.

D.Substantially equal economic benefits to both parties.

A.A bargained-for-detriment to the promisor(ee) or a benefit to the promisee(or).

The following conversation took place between Mary and Ed. Mary: "Ed, if you wanted to sell your table, what would you ask for it?" Ed: "I suppose $400 would be a fair price." Mary: "I'll take it, if you will have it refinished." Ed: "Sold." Thus,

A.Ed's statement, "I suppose $400 would be a fair price," constituted an offer.

B.Mary's reply, "I'll take it, if you will have it refinished," was a conditional acceptance, terminating Ed's offer.

C.No contract resulted because Ed never stated he would actually sell the table for $400.

D.A contract was formed when Ed said, "Sold."

D.A contract was formed when Ed said, "Sold."

Mildred saw a vase in a store. A tag on the vase said, "Genuine Chrystal, $125." Mildred said to the owner of the shop, "I'll buy this vase for $125." Milford, the owner of the shop, refused to sell the vase. In a lawsuit brought by Mildred against Milford,

A.Mildred will win because a contract was formed when she said she would buy the vase.

B.Mildred will win because the vase was a unique chattel.

C.Milford will win because he rejected Mildred's offer.

D.Milford will win because the contract was not written.

C.Milford will win because he rejected Mildred's offer.

Carson Corp., a retail chain, asked Alto Construction to fix a broken window at one of Carson's stores. Alto offered to make the repairs within 3 days at a price to be agreed on after the work was completed. A contract based on Alto's offer will fail because of indefiniteness as to the:

A.Price involved.

B.Nature of the subject matter.

C.Parties to the contract.

D.Time for performance.

A.Price involved.

Jackson offered to sell his painting, Blue Opus #2, to Pollock for $10,000. Pollock was to send his acceptance by mail to Jackson by the 30th of the month. Before Pollock could accept the offer, Jackson died. Which statement best describes the legal status of the transaction?

A.The offer is still valid because all the required elements are present.

B.Pollock can accept the offer if he mails the acceptance before the 30th of the month.

C.Jackson's estate is bound by the exact terms of the offer and cannot raise the price.

D.Pollock cannot accept the offer because it terminated by operation of law when Jackson died.

E.Statements a, b and c are all true statements about the offer.

E.Statements a, b and c are all true statements about the offer.

Which of the following is not a legal detriment?

A.A 20 year old who lives in a state where the drinking age is 21 promises not to drink alcohol.

B.A 22 year old who lives in a state where the drinking age is 21 promises not to drink alcohol.

C.An 85 year old with a valid driver's license promises that she will not drive on superhighways anymore.

D.The victim of libel promises not to sue.

A.A 20 year old who lives in a state where the drinking age is 21 promises not to drink alcohol.

Egan, a minor, purchased Baker's used computer for Egan's personal use. Egan paid $200 down on delivery and was to pay $200 30 days later. Twenty days later, the computer was damaged seriously as a result of Egan's negligence. Five days after the damage occurred and 1 day after Egan reached the age of majority, Egan attempted to disaffirm the contract with Baker. Egan will:

A.Be able to disaffirm despite the fact that Egan was not a minor at the time of disaffirmation.

B.Be able to disaffirm only if Egan does so in writing.

C.Not be able to disaffirm because Egan had failed to pay the balance of the purchase price.

D.Not be able to disaffirm because the computer was damaged as a result of Egan's negligence.

A.Be able to disaffirm despite the fact that Egan was not a minor at the time of disaffirmation.

Joe Minorca purchased a motorcycle from Big Rig Company on May 1. Joe's birthday is June 17, at which time he will have attained his majority. Which of the following actions is ineffective as a ratification of the contract of purchase?

A.On June 21, Joe gave property to his sister.

B.On June 20, Joe made a verbal promise to honor the contract.

C.On June 16, Joe remitted an installment payment.

D.As of November 17, Joe was still using the vehicle.

C.On June 16, Joe remitted an installment payment.

Green was adjudicated incompetent by a court having proper jurisdiction. Which of the following statements is true regarding contracts subsequently entered into by Green?

A.All contracts are voidable.

B.All contracts are valid.

C.All contracts are void.

D.All contracts are enforceable.

C.All contracts are void.

Payne entered into a written agreement to sell a parcel of land to Stevens. At the time the agreement was executed, Payne had consumed alcoholic beverages. Payne's ability to understand the nature and terms of the contract was not impaired. Stevens did not believe that Payne was intoxicated. The contract is:

A.Void as a matter of law.

B.Legally binding on both parties.

C.Voidable at Payne's option.

D.Voidable at Steven's option.

B.Legally binding on both parties.

What type of conduct generally will make a contract voidable?

A.Fraud in the execution.

B.Fraud in the inducement.

C.Physical coercion.

D.Contracting with a person under guardianship.

B.Fraud in the inducement.

Ed entered into a contract with Cindy, who owns a liquor store, to bring in from Canada two shipments of Cuban rum, packaged in a way to disguise the country of origin. It is illegal to import Cuban goods into the United States because of a trade embargo. Cindy took delivery of the first shipment and paid Ed the contract price. After receiving the second shipment, however, she refused to pay for it. What remedies, if any, are available to Ed if he sues Cindy for breach of contract?

A.This is an illegal contract so Ed has no judicial remedies.

B.This is a voidable contract so the court will order Cindy to pay for the second shipment.

C.This is a voidable contract so the court will order Cindy to return the second shipment.

D.This is an illegal contract so a court will order Cindy to return both shipments to Ed and will order Ed to return the money to Cindy.

A.This is an illegal contract so Ed has no judicial remedies.

West, an Indiana real estate broker, misrepresented to Zimmer that West was licensed in Kansas under the Kansas statute that regulates real estate brokers and requires all brokers to be licensed. Zimmer signed a contract agreeing to pay West a 5% commission for selling Zimmer's home in Kansas. West did not sign the contract. West sold Zimmer's home. If West sued Zimmer for nonpayment of commission, Zimmer would be:

A.Liable to West only for the value of services rendered.

B.Liable to West for the full commission.

C.Not liable to West for any amount because West did not sign the contract.

D.Not liable to West for any amount because West violated the Kansas licensing requirements.

D.Not liable to West for any amount because West violated the Kansas licensing requirements.

Phil Fairbanks was approached by Nickle Corporation to write the history of Nickle for $15,000. The president of Nickle told Fairbanks the job was his if he would agree to cleverly defame Nickle's leading competitor, Mogul Corporation, using sly innuendo and clever distortion of the facts. Fairbanks wrote the history. It turned out that the Mogul passages were neither sly nor clever, although they were defamatory, and Mogul obtained a judgment against Nickle. Fairbanks is seeking to collect the final $5,000 installment of the contract. Nickle refuses to pay and seeks to recover the $10,000 it has paid. In the event of a lawsuit,

A.Fairbanks will recover $5,000.

B.The court will deny relief to either Fairbanks or Nickle.

C.Nickle will recover $10,000.

D.Fairbanks will recover in quantum meruit for the value of his services.

B.The court will deny relief to either

Which of the following types of conduct renders a contract void?

A.Mutual mistake as to the facts forming the basis of the contract.

B.Undue influence by a dominant party in a confidential relationship.

C.Duress through physical compulsion.

D.Duress through improper threats.

C.Duress through physical compulsion.

Dora, an accountant, uses undue influence to induce her client Emily to invest in Fine Gems, Ltd., a business with little potential. When Emily learns the truth, she can:

A.Do nothing.

B.Enforce the contract but not rescind it.

C.Enforce the contract or rescind it.

D.Rescind the contract but not enforce it.

C.Enforce the contract or rescind it.

To which of the following transactions does the common law statute of frauds not apply?

A.Contracts for the sale of real estate.

B.Agreements made in consideration of marriage.

C.Promises to pay the debt of another.

D.Contracts that can be performed within 1 year.

D.Contracts that can be performed within 1 year.

True or False: A contract for a sale of goods priced at $501 must be in writing to be enforceable.

A.True.

B.False.

A.True.

Which of the following statements is true with regard to the statute of frauds?

A.All contracts involving consideration of $500 or more must be in writing.

B.The written contract must be signed by all parties.

C.The statute of frauds applies to contracts that can be fully performed within 1 year from the date they are made.

D.The contract terms may be stated in more than one document.

D.The contract terms may be stated in more than one document.

The distinction between contracts that are covered by the UCC and those that are not is:

A.Basically dependent upon whether the subject matter of the contract involves the purchase or sale of goods.

B.Based upon the dollar amount of the contract.

C.Dependent upon whether the statute of frauds is involved.

D.Of relatively little importance because the laws are invariably the same.

A.Basically dependent upon whether the subject matter of the contract involves the purchase or sale of goods.

Patch, a frequent shopper at Soon-Shop Stores, received a rain check for an advertised sale item after Soon-Shop's supply of the product ran out. The rain check was in writing and stated that the item would be offered to the customer at the advertised sale price for an unspecified period of time. A Soon-Shop employee signed the rain check. When Patch returned to the store one month later to purchase the item, the store refused to honor the rain check. Under UCC Article 2, will Patch win a suit to enforce the rain check?

A.No, because one month is too long a period of time for a rain check to be effective.

B.No, because the rain check did not state the effective time period necessary to keep the offer open.

C.Yes, because Soon-Shop is required to have sufficient supplies of the sale item to satisfy all customers.

D.Yes, because the rain check met the requirements of the merchant's firm offer even though no effective time period was stated.

D.Yes, because the rain check met the requirements of the merchant's firm offer even though no effective time period was stated.

Which of the following is excluded from the UCC's definition of goods?

A.Minerals (including oil and gas) to be extracted by the seller.

B.Investment securities.

C.Growing crops and timber.

D.The young of animals.

B.Investment securities.

A sheep rancher agreed, in writing, to sell all the wool shorn during the shearing season to a weaver. The contract failed to establish the price and a minimum quantity of wool. After the shearing season, the rancher refused to deliver the wool. The weaver sued the rancher for breach of contract. Under UCC Article 2, will the weaver win?

A.Yes, because this was an output contract.

B.Yes, even though both price and quantity terms were omitted.

C.No, because quantity cannot be omitted for a contract to be enforceable.

D.No, because the omission of price and quantity terms prevents the formation of the contract.

A.Yes, because this was an output contract.

Taylor signed and mailed a letter to Peel that stated: "Ship promptly 600 dozen grade A eggs." Taylor's offer:

A.May be accepted only by a prompt shipment.

B.May be accepted by either a prompt promise to ship or prompt shipment.

C.Is invalid because the price term was omitted.

D.Is invalid because the shipping term was omitted.

B.May be accepted by either a prompt promise to ship or prompt shipment.

Which of the following is TRUE regarding an open price term?

A.The open term is not fatal to a common-law contract, as long as the parties intended to be bound and there is a reasonably certain basis for a remedy.

B.The open term is not fatal to a UCC contract, as long as the parties intended to be bound and there is a reasonably certain basis for a remedy.

C.The open term is fatal to both common-law and UCC contracts.

D.Price cannot be an open term.

D.Price cannot be an open term.

Sandy bought a large air conditioner from Big Box Home Store for $525. For an additional $100, the store delivered, installed and programmed the unit. Does this sale come under Article 2 of the Code?

A.Yes, because at least one element of the transaction was a sale of goods.

B.Yes, because the sale of goods predominates.

C.No, because this is an employment contract.

D.No, because this is a contract for the sale of services.

B.Yes, because the sale of goods predominates.

On Monday, Gullible George is induced to sell a computer to Fraudulent Freddy on the basis of Freddy's misrepresentation that he is Wealthy Walter. That same day, Freddy resells the computer to Innocent Ivan, a good faith purchaser for value. On Tuesday, Gullible George sells an electronic typewriter to Dishonest David who pays for the goods with a check that is later dishonored by the payor (drawee) bank. Before the check is dishonored, David sells the typewriter to Innocent Irene, a good faith purchaser for value. On the basis of these facts:

A.George's best remedy is to recover the value of the goods from Freddy and David in a tort action for deceit.

B.George is entitled to recover the computer from Ivan, but he is not entitled to recover the typewriter from Irene.

C.George is entitled to recover the typewriter from Irene, but he is not entitled to recover the computer from Ivan.

D.George is entitled to recover the computer from Ivan and the typewriter from Irene.

A.George's best remedy is to recover the value of the goods from Freddy and David in a tort action for deceit.

Which of the following factors is most important in deciding who bears the risk of loss between merchants when goods are destroyed during shipment?

A.The agreement of the parties.

B.The perishable or nonperishable nature of the goods.

C.The holder of title at the time of the loss.

D.The terms of applicable insurance policies.

A.The agreement of the parties.

On Monday, Wolfe paid Aston Co., a retailer, $300 for a table. On Thursday, Aston notified Wolfe that the table was ready to be picked up. On Saturday, while Aston was still in possession of the table, it was destroyed in a fire. Who bears the loss of the table?

A.Wolfe, because Wolfe had title to the table at the time of loss.

B.Aston, unless Wolfe is a merchant.

C.Wolfe, unless Aston breached the contract.

D.Aston, because Wolfe had not yet taken possession of the table.

D.Aston, because Wolfe had not yet taken possession of the table.

A seller with voidable title has the power to transfer good title to a good faith purchaser for value.

A.True.

B.False.

A.True.

When an agreement is ambiguous as to whether it is a shipment or a destination contract, courts will normally presume that it is a destination contract.

A.True.

B.False.

B.False.

Sue bought a painting from Neda, who had inherited it and was not in the business of selling art. Sue gave Neda a check and Neda tendered delivery simultaneously. Sue asked if she could pick up the painting later in the day. Through no fault of Neda's, the painting was stolen before Sue returned. The risk of loss in these circumstances:

A.Passed to Sue on Neda's tender of delivery.

B.Would not pass to Sue until her check cleared.

C.Remained with Neda because she was the seller.

D.Remained with Neda because Sue had not yet taken possession of the painting.

A.Passed to Sue on Neda's tender of delivery.

To whom can a thief pass good title to stolen goods?

A.Any purchaser or done that does not have reason to know that the goods are stolen.

B.Any good faith purchaser for value.

C.Any buyer in the ordinary course of business.

D.A thief can pass good title to no one.

D.A thief can pass good title to no one.

Which of the following is a true statement about the general obligations of the parties to a sale of goods?

A.Tender of delivery is a condition of the buyer's duty to accept the goods.

B.Tender does not entitle the seller to payment.

C.Tender does not entitle the seller to acceptance of the goods.

D.The UCC requires tender as a prerequisite to the buyer's performance, and the parties may not agree otherwise.

A.Tender of delivery is a condition of the buyer's duty to accept the goods.

A proper tender of delivery requires that the seller:

A.Put and hold conforming goods, or nonconforming goods that the seller reasonably believes will be acceptable, at the buyer's disposition.

B.Furnish facilities reasonably suited to the receipt of the goods.

C.Deliver the goods at the buyer's place of business and keep them available for the time reasonably necessary for the buyer to take possession.

D.Put and hold conforming goods at the buyer's disposition and give any necessary notice.

D.Put and hold conforming goods at the buyer's disposition and give any necessary notice.

In September, Cobb Company contracted with Thrifty Oil Company for the delivery of 100,000 gallons of heating oil at the price of $.75 per gallon at regular specified intervals during the forthcoming winter. Because of an unseasonably warm winter Cobb took delivery of only 70,000 gallons. In a suit against Cobb for breach of contract, Thrifty will:

A.Lose, because Cobb acted in good faith.

B.Lose, because both parties are merchants and the UCC recognizes commercial impracticability.

C.Win, because this is a requirements contract.

D.Win, because the change in circumstances could have been contemplated by the parties.

D.Win, because the change in circumstances could have been contemplated by the parties.

Under UCC Article 2, which of the following legal remedies would a buyer not have when a seller fails to transfer and deliver goods identified to the contract?

A.Suit for specific performance.

B.Suit for punitive damages.

C.Purchase substitute goods (cover).

D.Recover the identified goods (capture).

B.Suit for punitive damages.

A buyer must notify a seller of his intention to reject a non-conforming tender:

A.Within 10 days of the tender.

B.Within 30 days of the tender.

C.Within a seasonable time.

D.In a certified letter.

E.Both b and d.

E.Both b and d.

Which of the following would be reasonable grounds for a seller feeling insecure?

A.Buyer's last two payments to the seller were 30 days late.

B.Buyer is making late payments to other suppliers in the business.

C.Buyer's check to the seller was returned for insufficient funds.

D.All of the above are reasonable grounds for feeling insecure.

D.All of the above are reasonable grounds for feeling insecure.

A cure occurs when:

A.The buyer obtains goods from another source after the seller sends non-conforming goods.

B.The seller ships conforming goods to the buyer to replace an earlier non-conforming tender.

C.Adequate assurances are given by the buyer to the seller.

D.Adequate assurances are given by the seller to the buyer.

B.The seller ships conforming goods to the buyer to replace an earlier non-conforming tender.