ACCT 2700 Ostendorf - Test 4 (Q&A and HOMEWORK)

T/F: An otherwise valid contract is enforceable even if the parties have not genuinely agreed to its terms.

F

T/F: Voluntary consent to a contract is not lacking if one of the parties is mistaken about a material fact concerning the subject matter of the bargain.

T

T/F: When both parties to a contract are mistaken about the same material fact, a unilateral mistake has occurred.

F

T/F: If a contractor's bid was significantly low because he made a mistake in adding up the total estimated costs, any contract resulting from the bid is still normally enforceable.

F

T/F: Because value is variable, mistakes of value affect the enforceability of contracts.

F

T/F: For purposes of fraudulent misrepresentation, scienter clearly exists if a party asserting a fact knows it is not as stated.

T

T/F: Undue influence can arise from a confidential relationship or a relationship based on trust.

T

T/F: Forcing a party to enter into a contract under the fear of threats constitutes duress.

T

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

A.Bilateral.

B.Unilateral.

C.Lateral.

D.Any of the choices.

A

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:

A.Still liable on the bid.

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

C.Not liable because the auctioneer misrepresented the value.

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

A

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 lw. Any contract with Quality Built that includes the mistake may be rescinded: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 Plumbing knew of should have known of the mistake.

D.Under no circumstances.

A

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

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 the choices.

A

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:

A.Fraudulent misrepresentation.

B.Undue influence.

C.Mistake.

D.Duress.

B

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

T/F: An agreement subject to the writing requirement must be written on paper.

F

T/F: 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.

T

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

F

T/F: 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.

T

T/F: A contract must be in writing to be enforceable if its performance is not likely within a year of its formation, even if that performance is possible.

F

T/F: A promise to pay a primary obligation normally must be in writing to be enforceable.

F

T/F: A promise to pay another's debt only if that party fails to pay does not need to be in writing to be enforceable.

F

T/F: An oral sales contract for goods priced at less than $500 is enforceable.

T

T/F: To satisfy the UCC's Statute of Frauds, a writing evidencing a sale of goods need only state the price term.

F

T/F: A written contract must consist of a single document to constitute an enforceable contract.

F

T/F: To clarify the terms of a written contract, a court will admit any parol evidence.

F

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 the choices.

D

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

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

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:

A.Natalie promises to pay only if Polly does not pay.

B.Natalie assumes primary responsibility for the cost.

C.Oliver's services will be provided in installments with separate payments.

D.Polly also promises to pay.

A

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:

A.Any third party, such as a Guitars Inc. customer.

B.Farah.

C.Guitars Inc.

D.Home Bank.

B

Elena offers to invest a certain amount in Fred's business if Fred marries Elena's daughter, Gloria. This 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

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

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

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

Randy, who is Stephanie's guardian, convinces her to buy a certain parcel of land from Tyrone at a greatly inflated price. Randy may be liable for:

A. Duress

B. Fraudulent Misrepresentation

C. Mistake

D. Undue influence

D

T/F: Under the Statute of Frauds, a contract involving the sale of an interest in land must be in writing to be enforceable

T

T/F: A promise to pay secondary obligation must be in writing to be enforceable, unless the main purpose exception applies.

T

Grain Co-op LLC and Hearty Cereals Inc. discuss the terms of a contract for deliveries of corn over a two-year period. This transaction falls within the provision of the Statute of Frauds involving

A. Surety

B. Transfers of land

C. The one-year rule

D. All of the choices

C

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

F

T/F: A bank's sale of its right to receive payment on a loan to a third party is an assignment.

T

T/F: 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.

T

T/F: 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.

F

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

F

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

T

T/F: Personal services are unique to the person rendering them, but the right to receive those services is not and can therefore be assigned.

F

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

T

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

F

T/F: Once the obligor receives proper notice of an assignment, only performance to the assignee can discharge the obligor's obligation.

T

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

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

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

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:

A.The assignment is prohibited by statute.

B.The contract is personal.

C.The assignment will materially change the risk.

D.The contract prohibits assignment.

D

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.

B

T/F: 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.

T

T/F: When the performance of a contract depends on the personal skill of the obligor, a delegation of the duty is prohibited.

T

T/F: An oblige can legally refuse performance from a delegate only if the duty delegated is one that cannot be delegated.

T

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

F

T/F: Under an assignment of "all rights" on a contract, the assignor is absolved from any liability for performance under the contract.

F

T/F: When the original parties to a contract agree that its performance should directly benefit a third party, that third party can sue the promisor directly for breach.

T

T/F: A third party's right to control the details of performance of a contract indicates that the third party is an intended beneficiary.

T

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

T

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

For a price, Recycle LLC agrees the 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

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

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 delegate's performance will match the obligee's expectations.

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

D.Under any circumstances.

A

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:

A.No one.

B.Jay or Ike.

C.Leo only.

D.Jay or Leo.

D

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:

A.Kevin's Food Truck.

B.Lenders Bank.

C.Jim.

D.Any customer, client or employee of Kevin or Lenders Bank.

B

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

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

F

T/F: If a contract condition is not satisfied, the obligations of the parties are not discharged.

F

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

T

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

T

T/F: A buyer who offers to pay for goods has tendered payment but cannot yet demand delivery.

F

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

T

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

T

T/F: Any breach of contract effectively excuses both parties from performing.

F

T/F: 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.

T

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

F

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

The most common way to terminate contractual duties is by:

A.Agreement.

B.Repudiation.

C.Failure of a condition.

D.Performance.

D

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

A.Discharged.

B.Breached.

C.Altered.

D.Performed.

A

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 contract.

D.Suspends the parties' contractual obligations.

B

Restoration Inc. enters into a contract to refurbish an old bus depot for Quality Diners LLC. If Restoration completes most of the work promised in the contract, its performance will be:

A.Conditional.

B.Complete.

C.Material.

D.Substantial.

D

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 as promised. 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

A novation requires:

A.The existence of a previous, valid obligation.

B.Consideration greater than $5,000.

C.Performance of the original contract by all of the parties.

D.An accord and satisfaction.

A

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:

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 Jeremy that Keri decided to sue.

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

B

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

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

T

T/F: In contract law, damages compensate for harm suffered as a result of another's wrongful act, not for the loss of the bargain.

F

T/F: 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.

T

T/F: Special damages that compensate for foreseeable damages resulting from the breach are consequential damages.

T

T/F: In most states, a person whose employment is wrongfully terminated has no duty to take a similar job of one is available.

F

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

T

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

T

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:

A.Establish, as a matter of principle, that Repair acted wrongfully.

B.Provide Soapy with funds for a loss beyond the contract.

C.Provide Soapy with funds for its loss of the bargain.

D.Punish Repair and deter others from similar acts.

C

Helen contracts to work exclusively for Island Tours LLC during July $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:

A.$5,000.

B.$3,000.

C.$2,000.

D.$0.

C

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:

A.The amount Emma invested in the project to the date of the closing.

B.Nothing—Forest Acres still owns the land.

C.The difference between the contract and market prices of the land.

D.Specific performance.

D

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:

A.Continue to store the fruit until Produce pays.

B.Do whatever is reasonable to minimize the damages.

C.Dispose of the fruit immediately.

D.Set an example to deter similar misconduct in the future.

B

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.Impose a penalty on the seller.

B.Force the seller to accept a more reasonable price.

C.Rescind the contract.

D.None of the choices.

C