REG unit 5

On June 15, Peters orally offered to sell a used lawn mower to Mason for $125. Peters specified that Mason had until June 20 to accept the offer. On June 16, Peters received an offer to purchase the lawn mower for $150 from Bronson, Mason’s neighbor. Peters accepted Bronson’s offer. On June 17, Mason saw Bronson using the lawn mower and was told the mower had been sold to Bronson. Mason immediately wrote to Peters to accept the June 15 offer. Which of the following statements is correct?

a. peter’s offer had been revoked and Mason’s acceptance was ineffective

b. peters was obligated to keep the June 15 offer open until June 20

c. mason’s acceptance would be effective when mailed

d. mason’s acceptance would be effective when received by peters

a. peter’s offer had been revoked and Mason’s acceptance was ineffective

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. exchange simultaneously by the parties

b. of approximately equal value

c. fair and reasonable under the circumstances

d. legally sufficient

d. legally sufficient

Which of the following statements is correct regarding the formation of a unilateral contract?

a. only one party to a unilateral contract makes a promise

b. only one party to a unilateral contract receives a benefit or suffers a detriment

c. a unilateral contract does not require performance

d. a unilateral contract may be formed without consideration

a. only one party to a unilateral contract makes a promise

Kay, an art collector, promised Hammer, an art student, that if Hammer could obtain certain rare artifacts within two weeks, Kay would pay for Hammer’s postgraduate education. At considerable effort and expense, Hammer obtained the specified artifacts within the two-week period. When Hammer requested payment, Kay refused. Kay claimed that there was no consideration for the promise. Hammer would prevail against Kay based on:

a. unilateral contract

b. unjust enrichment

c. public policy

d. quasi contract

a. unilateral contract

Karen tells her friend Judi that she plans to shave her dog’s long hair so short Judi will be able to see the freckles on his skin. Judi feels so bad for the dog that she offers to pay Karen $50 to have a professional dog groomer cut the dog’s hair to a more attractive length and style. Karen immediately leaves for the groomer and has the dog’s hair professionally groomed. Judi’s promise to pay is:

a. unenforceable because Karen should not have considered shaving the dog’s hair in the first place

b. unenforceable even though Karen had a professional groomer cut the dog’s hair in anticipation of receiving $50 from Judi

c. enforceable because Karen had a professional groomer cut the dog’s hair

d. enforceable because Karen was only saying she was shaving the dog to get Judi to offer her some money

c. enforceable because Karen had a professional groomer cut the dog’s hair

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 three days at a price to be agreed on after the work was completed. A contract based on Alto's offer would fail because of indefiniteness as to the:

a. time for performance

b. nature of the subject matter

c. price involved

d. parties to the contract

c. price involved

Jen is at a client preparing to begin her audit of their financial statements. Her new laptop computer is not booting up when she presses the start button. She bangs the lid down and vows, loud enough for Paul to hear, that she would sell the computer to anyone for a dollar. Paul reaches into his wallet, places one dollar down on Jen's desk, and declares to her, "Sold!" Paul's act:

a. is not valid acceptance, because Jen does not seriously intend to sell the computer

b. is a valid acceptance, because Paul’s statement of “sold” is universally known to commit a seller of goods to sell those to the buyer

c. is a valid acceptance

d. is not a valid acceptance, because Jen’s offer did not sufficiently identify the offeree

a. is not valid acceptance, because Jen does not seriously intend to sell the computer

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

a. offer had not been accepted

b. television announcement revoked the offer

c. advertisement was not an offer

d. offer was unenforceable

c. advertisement was not an offer

Jen offers to sell Bob her laptop computer for $500. Bob is not sure he can afford it and asks Jen if she will keep the offer open until noon the next day. Jen tells Bob that she will keep her offer open if he gives her his promise that he won't buy another computer before that time. Bob gives Jen his promise not to buy another computer. Is Jen obligated to keep the offer open until noon the next day?

a. yes, because there is a valid option contract in place

b. no, because bob did not buy the computer

c. yes, because jen gave bob her word to keep the offer open

d. no, because bob did not give valid consideration to create an option contract

a. yes, because there is a valid option contract in place

Opal offered, in writing, to sell Larkin a parcel of land for $300,000. If Opal dies, the offer will:

a. automatically terminate despite Larkin’s prior acceptance

b. automatically terminate prior to Larkin’s acceptance

c. terminate prior to Larkin’s acceptance only if Larkin received notice of Opal’s death

d. remain open for a reasonable period of time after Opal’s death

b. automatically terminate prior to Larkin’s acceptance

Under common law, when a written offer has been made without specifying a means of acceptance but providing that the offer will only remain open for ten days, which of the following statements represent(s) a valid acceptance of the offer?

I. an acceptance sent by regular mail the day before the ten-day period expires that reaches the offeror on the eleventh day

II. an acceptance e-mailed the day before the ten-day period expires that reached the offeror on the eleventh day, due to a server malfunction

a. II only

b. neither I nor II

c. I only

d. both I and II

d. both I and II

On February 12, Harris sent Fresno a written offer to purchase Fresno's land. The offer included the following provision: "Acceptance of this offer must be by registered or certified mail, received by Harris no later than February 18 by 5:00 p.m. CST." On February 18, Fresno sent Harris a letter accepting the offer by private overnight delivery service. Harris received the letter on February 19. Which of the following statements is correct?

a. a contract was formed on February 19

b. fresno’s use of the overnight delivery service was an effective form of acceptance

c. a contract was formed on February 18 regardless of when harris actually received fresno’s letter

d. fresno’s letter constituted a counteroffer

d. fresno’s letter constituted a counteroffer

On April 1, Fine Corp. e-mailed Moss an offer to purchase Moss' warehouse for $500,000. The offer stated that it would remain open only until April 4 and that acceptance must be received to be effective. Moss sent an acceptance on April 4 by overnight mail and Fine received it on April 5. Which of the following statements is correct?

a. a contract was formed when Fine received Moss’ acceptance

b. no contract was formed because Moss sent the acceptance by an unauthorized method

c. a contract was formed when Moss sent the acceptance

d. no contract was formed because Fine received Moss’ acceptance after April 4

d. no contract was formed because Fine received Moss’ acceptance after April 4

On September 27, Summers sent Fox a letter offering to sell Fox a vacation home for $150,000. On October 2, Fox replied by mail agreeing to buy the home for $145,000. Summers did not reply to Fox. Do Fox and Summers have a binding contract?

a. no, because fox failed to sign and return Summers’ letter

b. yes, because Summers’ silence is an implied acceptance of Fox’s letter

c. yes, because Summers’ offer was validly accepted

d. no, because Fox’s letter was a counteroffer

d. no, because Fox’s letter was a counteroffer

On November 1, Yost sent an e-mail to Zen offering to sell a rare vase. The offer required that Zen's acceptance e-mail be sent on or before 5:00 P.M. on November 2. On November 1, at 3:00 P.M., Zen sent an acceptance by overnight mail. It did not reach Yost until November 5. Yost refused to complete the sale to Zen. Is there an enforceable contract?

a. no, because the offer required receipt of the acceptance within the time specified

b. no, because Zen did not accept by e-mail

c. yes, because the acceptance was effective when sent

d. yes, because the acceptance was made within the time specified

b. no, because Zen did not accept by e-mail

To satisfy the consideration requirement for a valid contract, the consideration exchanged by the parties must be:

a. legally sufficient

b. payable in legal tender

c. of the same economic value

d. simultaneously paid and received

a. legally sufficient

Card communicated an offer to sell Card's stereo to Bend for $250. Which of the following statements is correct regarding the effect of the communication of the offer?

a. bend may not reject the offer for a reasonable period of time

b. bend should immediately accept or reject the offer to avoid liability to card

c. card is required to mitigate any loss card would sustain in the even bend rejects the offer

d. card is not obligated to sell the stereo to bend until bend accepts the offer

d. card is not obligated to sell the stereo to bend until bend accepts the offer

In which of the following situations does the first promise serve as valid consideration for the second promise?

a. a debtor’s promise to pay $500 for a creditor’s promise to forgive the balance of a $600 liquidated debt

b. a police officer’s promise to catch a thief for a victim’s promise to pay a reward

c. a builder’s promise to complete a contract for a purchaser’s promise to extend the time for completion

d. a debtor’s promise to pay $500 for a creditor’s promise to forgive the balance of the $600 disputed debt

d. a debtor’s promise to pay $500 for a creditor’s promise to forgive the balance of the $600 disputed debt

To prevail on the defense of fraud in the inducement, a victim must prove that the:

a. defrauder made the misrepresentation with knowledge of their falsity and with an intention to deceive

b. defrauder was an expert with regard to the misrepresentations

c. misrepresentations were in writing

d. defrauder was in a fiduciary relationship with the victim

a. defrauder made the misrepresentation with knowledge of their falsity and with an intention to deceive

Which of the following offers of proof are inadmissible under the parol evidence rule when a written contract is intended as the complete agreement of the parties:

I. proof of the existence of a subsequent oral modification of the contract

II. proof of the existence of a prior oral agreement that contradicts the written contract

a. I only

b. II only

c. both I and II

d. neither I nor II

b. II only

Which of the following, if intentionally misstated by a seller to a buyer, would be considered a fraudulent inducement to make a contract?

a. prediction

b. immaterial fact

c. appraised value

d. nonexpert opinion

c. appraised value

Miller negotiated the sale of Miller's liquor store to Jackson. Jackson asked to see the prior year's financial statements. Using the store's checkbook, Miller prepared a balance sheet and profit and loss statement as well as he could. Miller told Jackson to have an accountant examine Miller's records because Miller was not an accountant. Jackson failed to do so and purchased the store in reliance on Miller's financial statements. Jackson later learned that the financial statements included several errors that resulted in a material overstatement of assets and net income. Miller was not aware that the errors existed. Jackson sued Miller, claiming Miller misrepresented the store's financial condition and that Jackson relied on the financial statements in making the decision to acquire the store. Which of the following statements is correct?

a. jackson will not prevail because jackson’s reliance on the financial statements was not reasonable

b. jackson will prevail if the errors in the financial statements were material

c. money damages is the only remedy available to jackson if, in fact, miller has committed a misrepresentation

d. jackson would be entitled to rescind the purchase even if the errors in the financial statements were not material

a. jackson will not prevail because jackson’s reliance on the financial statements was not reasonable

If a person is induced to enter into a contract by another person because of the close relationship between the parties, the contract may be voidable under which of the following defenses?

a. duress

b. unconscionability

c. fraud in the inducement

d. undue influence

d. undue influence

Maco, Inc. and Kent contracted for Kent to provide Maco certain consulting services at an hourly rate of $20. Kent's normal hourly rate was $90 per hour, the fair market value of the services. Kent agreed to the $20 rate because Kent was having serious financial problems. At the time the agreement was negotiated, Maco was aware of Kent's financial condition and refused to pay more than $20 per hour for Kent's services. Kent has now sued to rescind the contract with Maco, claiming duress by Maco during the negotiations. Under the circumstances, Kent will:

a. win, because maco refused to pay their fair market value of kent’s services

b. lose, because maco cannot prove that kent, at the time, had no other offers to provide consulting services

c. lose, because maco’s actions did not constitute duress

d. win, because maco was aware of kent’s serious financial problems

c. lose, because maco’s actions did not constitute duress

A building subcontractor submitted a bid for construction of a portion of a high-rise office building. The bid contained material computational errors. The general contractor accepted the bid with knowledge of the errors. Which of the following statements best represents the subcontractor's liability?

a. not liable because the errors were a result of gross negligence

b. liable because the errors were unilateral

c. liable because the errors were material

d. not laible because the contractor knew of the errors

d. not laible because the contractor knew of the errors

If a buyer accepts an offer containing an immaterial unilateral mistake, the resulting contract will be:

a. void as a matter of law

b. voidable at the election of the seller

c. void at the election of the buyer

d. valid as to both parties

d. valid as to both parties

Which of the following types of mistake will generally make a contract unenforceable and allow it to be rescinded?

a. a mutual mistake of fact

b. a unilateral mistake of fact

c. a unilateral mistake of value

d. a mutual mistake of value

a. a mutual mistake of fact

Which of the following types of mistakes made when entering into a contract generally allows for rescission of the contract?

a. mutual mistakes of value of consideration

b. mutual mistakes of material fact

c unilateral mistakes of material fact

d. unilateral mistakes of value of consideration

b. mutual mistakes of material fact

Paco Corp., a building contractor, offered to sell Preston several pieces of used construction equipment. Preston was engaged in the business of buying and selling equipment. Paco's written offer had been prepared by a secretary who typed the total price as $10,900, rather than $109,000, which was the approximate fair market value of the equipment. Preston, on receipt of the offer, immediately accepted it. Paco learned of the error in the offer and refused to deliver the equipment to Preston unless Preston agreed to pay $109,000. Preston has sued Paco for breach of contract. Which of the following statements is correct?

a. paco will be able to rescind the contract because preston should have known that the price was erroneous

b. the contract between paco and preston is void because the price set forth in the offer is substantially less than the equipment’s fair market value

c. preston will prevail because paco is a merchant

d. paco will not be liable because there has been a mutual mistake of fact

a. paco will be able to rescind the contract because preston should have known that the price was erroneous

Under a personal services contract, which of the following circumstances arising after a contract is made will cause the discharge of a party's duties?

a. cost of performing the services has doubled

b. death of the party who is to receive the services

c. bankruptcy of the party who is to receive the services

d. illegality of the services to be performed

d. illegality of the services to be performed

All of the following are effective methods of ratifying a contract entered into by a minor, except:

a. ratifying the contract before reaching the age of majority

b. impliedly ratifying the contract after reaching the age of majority

c. failing to disaffirm the contract within a reasonable time after reaching the age of majority

d. expressly ratifying the contract after reaching the age of majority

a. ratifying the contract before reaching the age of majority

On reaching majority, a minor may ratify a contract in any of the following ways, except by:

a. orally ratifying the entire contract

b. acting in a manner that amounts to ratification

c. failing to disaffirm within a reasonable time after reaching majority

d. affirming, in writing, some of the terms of the contract

d. affirming, in writing, some of the terms of the contract

Maureen is 15 years old. She buys a $2,000 bicycle that she continues to use and keep in repair after reaching the age of majority. Maureen has:

a. rescinded the contract

b. ratified the contract

c. rejected the contract

d. disaffirmed the contract

b. ratified the contract

Egan, a minor, contracted with Baker to purchase Baker's used computer for $400. The computer was purchased for Egan's personal use. The agreement provided that Egan would pay $200 down on delivery and $200 thirty days later. Egan took delivery and paid the $200 down payment. Twenty days later, the computer was damaged seriously as a result of Egan's negligence. Five days after the damage occurred and one day after Egan reached the age of majority, Egan attempted to disaffirm the contract with Baker. Egan will:

a. be able to disaffirm only if Egan does so in writing

b. be able to disaffirm despite the fact that Egan was not a minor at the time of disaffirmance

c. not be able to disaffirm because the computer was damaged as a result of Egan’s negligence

d. not be able to disaffirm because Egan had failed to pay the balance of the purchase price

b. be able to disaffirm despite the fact that Egan was not a minor at the time of disaffirmance

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

Rail, who was 16 years old, purchased an $800 computer from Elco Electronics. Rail and Elco are located in a state where the age of majority is 18. On several occasions Rail returned the computer to Elco for repairs. Rail was very unhappy with the computer. Two days after reaching the age of 18, Rail was still frustrated with the computer's reliability, and returned it to Elco, demanding an $800 refund. Elco refused, claiming that Rail no longer had a right to disaffirm the contract. Elco's refusal is:

a. incorrect, because Rail disaffirmed the contract within a reasonable period of time after reaching the age of 18

b. incorrect, because Rail could disaffirm the contract at any time

c. correct, because Rail’s multiple requests for service acted as a ratification of the contract

d. correct, because Rail could have transferred good title to a good faith purchaser for value

a. incorrect, because Rail disaffirmed the contract within a reasonable period of time after reaching the age of 18

On May 25, Fresno sold Bronson, a minor, a used computer. On June 1, Bronson reached the age of majority. On June 10, Fresno wanted to rescind the sale. Fresno offered to return Bronson's money and demanded that Bronson return the computer. Bronson refused, claiming that a binding contract existed. Bronson's refusal is:

a. justified, because Bronson and Fresno are bound by the contract as of the date Bronson reached the age of majority

b. not justified, because Fresno does not have to perform under the contract if Bronson has a right to disaffirm the contract

c. justified, because Fresno must perform under the contract regardless of Bronson’s minority

d. no justified, because Fresno is not bound by the contract unless Bronson specifically ratifies the contract after reaching the age of majority

c. justified, because Fresno must perform under the contract regardless of Bronson’s minority

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

a. all contracts are enforceable

b. all contracts are void

c. all contracts are valid

d. all contracts are voidable

b. all contracts are void

Which of the following actions if taken by one party to a contract generally will discharge the performance required of the other party to the contract?

a. delay in performance

b. material breach of the contract

c. assignment of rights

d. tender

b. material breach of the contract

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. voidable at Steven’s option

b. voidable at Payne’s option

c. legally binding on both parties

d. void as a matter of law

c. legally binding on both parties

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

a. mutual mistake as to facts forming the basis of the contract

b. duress through physical compulsion

c. duress through improper threats

d. undue influence by a dominant party in a confidential relationship

b. duress through physical compulsion

What type of conduct generally will make a contract voidable?

a. physical coercion

b. fraud in the execution

c. fraud in the inducement

d. contracting with a person under guardianship

c. fraud in the inducement

Ordinarily, in an action for breach of a construction contract, the statute of limitations time period would be computed from the date the:

a. contract is signed

b. contract is negotiated

c. construction is begun

d. contract is breached

d. contract is breached

Which of the following statements correctly applies to a typical statute of limitations?

a. the statute requires that a legal action for breach of contract be commenced within a certain period of time after the breach occurs

b. the statute limits the right of a party to recover damages for misrepresentation unless the false statements were intentionally made

c. the statute prohibits the admission into evidence of proof of oral statements about the meaning of a written contract

d. the statute provides that only the party against whom enforcement of a contract is sought must have signed the contract

a. the statute requires that a legal action for breach of contract be commenced within a certain period of time after the breach occurs

In an action for breach of contract, the statute of limitations time period would be computed from the date of the:

a. commencement of the action

b. negotiation of the contract

c. signing of the contract

d. breach of the contract

d. breach of the contract

With regard to an agreement for the sale of real estate, the Statute of Frauds:

a. does not require that the agreement be signed by all parties

b. requires that the entire agreement be in a single writing

c. does not apply if the value of the real estate is less than $500

d. requires that the purchase price be fair and adequate in relation to the value of the real estate

a. does not require that the agreement be signed by all parties

Which of the following statements is correct regarding the effect of the expiration of the period of the statute of limitations on a contract?

a. once the period of the statute of limitations has expired, the contract is void

b. the expiration of the period of the statute of limitations extinguishes the contract’s underlying obligations

c. a cause of action barred by the statute of limitations may not be revived

d. the running of the statute of limitations bars access to judicial remedies

d. the running of the statute of limitations bars access to judicial remedies

The date used for the start of the statute of limitation for breach of contract is the date that the contract is:

a. amended

b. signed

c. breached

d. negotiated

c. breached

Teller brought a lawsuit against Kerr ten years after an oral contract was made and eight years after it was breached. Kerr raised the statute of limitations as a defense. Which of the following allegations would be most important to Kerr's defense?

a. the action was not timely brought because the contract was entered into ten years prior to the commencement of the lawsuit

b. the action was not timely brought because the contract was allegedly breached eight years prior to the commencement of the lawsuit

c. the contract could not be performed within one year from the date made

d. the contract was oral

b. the action was not timely brought because the contract was allegedly breached eight years prior to the commencement of the lawsuit

Carson agreed orally to repair Ives' rare book for $450. Before the work was started, Ives asked Carson to perform additional repairs to the book and agreed to increase the contract price to $650. After Carson completed the work, Ives refused to pay and Carson sued. Ives' defense was based on the Statute of Frauds. What total amount will Carson recover?

a. $650

b. $450

c. $200

d. $0

a. $650

In 1959, Dart bought an office building from Graco under a written contract signed only by Dart. In 1991, Dart discovered that Graco made certain false representations during their negotiations concerning the building's foundation. Dart could have reasonably discovered the foundation problems by 1965. Dart sued Graco claiming fraud in the formation of the contract. Which of the following statements is correct?

a. the parol evidence rule will prevent the admission into evidence of proof concerning Dart’s allegations

b. dart will be able to rescind the contract because both parties did not sign it

c. the statute of limitations would likely prevent dart from prevailing because of the length of time that has passed

d. dart must prove that the alleged misrepresentations were part of the written contract because of the contract involved real estate

c. the statute of limitations would likely prevent dart from prevailing because of the length of time that has passed

Kram sent Fargo, a real estate broker, a signed offer to sell a specified parcel of land to Fargo for $250,000. Kram, an engineer, had inherited the land. On the same day that Kram's letter was received, Fargo telephoned Kram and accepted the offer. Which of the following statements is correct under the common law statute of frauds?

a. a contract was formed but would be enforceable only against Kram

b. no contract could be formed because Fargo’s acceptance was oral

c. a contract was formed and would be enforceable against both Kram and Fargo

d. no contract could be formed because Karm’s letter was signed only by Kram

a. a contract was formed but would be enforceable only against Kram

Camp orally guaranteed payment of a loan Camp's cousin Wilcox had obtained from Camp's friend Main. The loan was to be repaid in 10 monthly payments. After making six payments, Wilcox defaulted on the loan and Main demanded that Camp honor the guaranty. Regarding Camp's liability to Main, Camp is:

a. not liable under the oral guaranty because of failure of consideration

b. not liable under the oral guaranty because Camp’s guaranty must be in writing to be enforceable

c. liable under the oral guaranty because Cap benefitted by maintaining a personal relationship with Main

d. liable under the oral guaranty because the loan would be paid within one year

b. not liable under the oral guaranty because Camp’s guaranty must be in writing to be enforceable

On December 1, Gem orally contracted with Mason for Mason to manage Gem's restaurant for one year starting the following January 1. They agreed that Gem would pay Mason $40,000 and that Mason would be allowed to continue to work for Gem if "everything worked out." On June 1, Mason quit to take a better paying job, alleging that the contract violated the statute of frauds. What will be the outcome of a suit by Gem for breach of contract?

a. gem will lose because the contract could not be performed within one year

b. gem will win because the contract was for services not goods

c. gem will lose because the contract required payment of more than $500

d. gem will win because the contract was executory

a. gem will lose because the contract could not be performed within one year

A CPA sued a former client for nonpayment of the final bill. Although happy with the CPA's performance of services, the client claimed that the CPA is not entitled to the final bill payment because the contract between the client and the CPA failed to meet the Statute of Frauds. The client argues that the contract allowed up to 15 months for the CPA to complete the work, the contract price was well over $5,000, and although the client sent signed checks to the CPA, the client did not sign the contract. Which of the following statements about this situation is correct?

a. the Statute of Frauds does not apply, allowing enforcement of the contract terms

b. the Statute of Frauds does not apply, preventing enforcement of the contract terms

c. the Statute of Frauds does apply, and the requirements are not satisfied, thereby preventing enforcement of the contract terms

d. the Statute of Frauds does apply, but the requirements are satisfied by the client’s signing of the checks, allowing enforcement of the contract terms

a. the Statute of Frauds does not apply, allowing enforcement of the contract terms

Which of the following statements is true with regard to the Statute of Frauds?

a. the contract terms may be stated in more than one document

b. the Statute of Frauds applies to contracts that can be fully performed within one year from the date they are made

c. the written contract must signed by all parties

d. all contracts involving consideration of more than $500 must be in writing

a. the contract terms may be stated in more than one document

Bond and Spear orally agreed that Bond would buy a car from Spear for $475. Bond paid Spear a $100 deposit. The next day, Spear received an offer of $575, the car's fair market value. Spear immediately notified Bond that Spear would not sell the car to Bond and returned Bond's $100. If Bond sues Spear and Spear defends on the basis of statute of frauds, Bond will probably:

a. lose, because the agreement was not in writing and signed by Spear

b. win, because Bond paid a deposit

c. win, because the agreement was for less than $500

d. lose, because the agreement was for less than the fair market value of the car

c. win, because the agreement was for less than $500

Which of the following circumstances generally will cause a discharge of contractual duties by operation of law?

a. accord and satisfaction

b. novation

c. impossibility of performance

d. anticipatory repudiation

c. impossibility of performance

Maco Corp. contracted to sell 1,500 bushels of potatoes to LBC Chips. The contract did not refer to any specific supply source for the potatoes. Maco intended to deliver potatoes grown on its farms. An insect infestation ruined Maco's crop but not the crops of other growers in the area. Maco failed to deliver the potatoes to LBC. LBC sued Maco for breach of contract. Under the circumstances, Maco will:

a. lose, because it could have purchased potatoes from other growers to deliver to LBC

b. lose, unless it can show that the purchase of substitute potatoes for delivery to LBC would make the contract unprofitable

c. win, because the infestation was an act of nature that could not have been anticipated by Maco

d. win, because both Maco and LBC are assumed to accept the risk of a crop failure

a. lose, because it could have purchased potatoes from other growers to deliver to LBC

On May 25, 1991, Smith contracted with Jackson to repair Smith's cabin cruiser. The work was to begin on May 31, 1991. On May 26, 1991, the boat, while docked at Smith's pier, was destroyed by arson. Which of the following statements is correct with regard to the contract?

a. smith would not be liable to Jackson because of mutual mistake

b. jackson would not be liable to Smith because performance by the parties would be impossible

c. jackson would be liable to repair another boat owned by Smith

d. smith would be liable to Jackson for the profit Jackson would have made under the contract

b. jackson would not be liable to Smith because performance by the parties would be impossible

Which of the following will release all original parties to a contract but will maintain a contractual relationship between the original parties?

		Novation	Substituted contract
	A.	Yes	No
	B.	Yes	Yes
	C.	No	Yes
	D.	No	No

c. No, Yes

Which of the following types of conditions affecting performance may validly be present in contracts?

		Conditions precedent	Conditions subsequent	Concurrent conditions
	A.	No	Yes	Yes
	B.	Yes	Yes	No
	C.	Yes	No	Yes
	D.	Yes	Yes	Yes

d. Yes, Yes, Yes

Which of the following actions will result in the discharge of a party to a contract?

		Prevention of performance	Accord and satisfaction
	A.	No	Yes
	B.	Yes	No
	C.	No	No
	D.	Yes	Yes

d. Yes, Yes

Kelly owed Connor $500. Connor agreed to accept Kelly's microwave oven instead of the money. Kelly immediately delivered the oven to Connor. Which of the following terms correctly describes this agreement?

a. novation

b. material alteration

c. accord and satisfaction

d. mutual rescission

c. accord and satisfaction

Wren purchased a factory from First Federal Realty. Wren paid 20% at the closing and gave a note for the balance secured by a 20-year mortgage. Five years later, Wren found it increasingly difficult to make payments on the note and defaulted. First Federal threatened to accelerate the loan and foreclose if Wren continued in default. First Federal told Wren to make payment or obtain an acceptable third party to assume the obligation. Wren offered the land to Moss, Inc. for $10,000 less than the equity Wren had in the property. This was acceptable to First Federal and at the closing Moss paid the arrearage, assumed the mortgage and note, and had title transferred to its name. First Federal released Wren. The transaction in question is a (an):

a. assignment and delegation

b. novation

c. third party beneficiary contract

d. purchase of land subject to a mortgage

b. novation

Where the parties have entered into a written contract intended as the final expression of their agreement, which of the following agreements will be admitted into evidence because they are not prohibited by the parol evidence rule?

		Subsequent oral agreements	Prior written agreements
	A.	No	Yes
	B.	Yes	No
	C.	Yes	Yes
	D.	No	No

b. Yes, No

Under the parol evidence rule, oral evidence will be excluded if it relates to:

a. a modification made several days after the contract was executed

b. failure of a condition precedent

c. lack of contractual capacity

d. a contemporaneous oral agreement relating to a term in the contract

d. a contemporaneous oral agreement relating to a term in the contract

Which of the following statements is correct regarding the parol evidence rule?

a. it applies only in cases involving an oral contract

b. it applies to subsequent oral agreements that contradict the terms of a final written agreement

c. it applies only to subsequent written modifications to a written contract

d. it applies to prior or contemporaneous oral agreements that contradict the terms of final written agreements

d. it applies to prior or contemporaneous oral agreements that contradict the terms of final written agreements

Rogers and Lennon entered into a written computer consulting agreement that required Lennon to provide certain weekly reports to Rogers. The agreement also stated that Lennon would provide the computer equipment necessary to perform the services, and that Rogers' computer would not be used. As the parties were executing the agreement, they orally agreed that Lennon could use Rogers' computer. After executing the agreement, Rogers and Lennon orally agreed that Lennon would report on a monthly, rather than weekly, basis. The parties now disagree on Lennon's right to use Rogers' computer and how often Lennon must report to Rogers. In the event of a lawsuit between the parties, the parol evidence rule will:

a. not apply to any of the parties’ agreements because the consulting agreement did not have to be in writing

b. not prevent Lennon from proving the parties’ oral agreement that Lennon could use Rogers’ computer

c. not prevent the admission into evidence of testimony regarding Lennon’s right to report on a monthly basis

d. not apply to the parties’ agreement to allow Lennon to use Roger's; computer because ti was contemporaneous with the written agreeemnt

c. not prevent the admission into evidence of testimony regarding Lennon’s right to report on a monthly basis

Parc hired Glaze to remodel and furnish an office suite. Glaze submitted plans that Parc approved. After completing all the necessary construction and painting, Glaze purchased minor accessories that Parc rejected because they did not conform to the plans. Parc refused to allow Glaze to complete the project and refused to pay Glaze any part of the contract price. Glaze sued for the value of the work performed. Which of the following statements is correct?

a. glaze will win because glaze substantially performed and parc prevented complete performance

b. glaze will lose because glaze materially breached the contract by buying the accessories

c. glaze will lose because glaze breached the contract by not completing performance

d. glaze will win because parc committed anticipatory breach

a. glaze will win because glaze substantially performed and parc prevented complete performance

Dunne and Cook signed a contract requiring Cook to rebind 500 of Dunne's books at 80¢ per book. Later, Dunne requested, in good faith, that the price be reduced to 70¢ per book. Cook agreed orally to reduce the price to 70¢. Under the circumstances, the oral agreement is:

a. enforceable, but proof of it is inadmissible into evidence

b. unenforceable, due to the Statute of Frauds, and proof of it is inadmissible into evidence

c. enforceable, and proof of it is admissible into evidence

d. unenforceable, because Dunne failed to give consideration, but proof of it is otherwise admissible into evidence

d. unenforceable, because Dunne failed to give consideration, but proof of it is otherwise admissible into evidence

Kaye contracted to sell Hodges a building for $310,000. The contract required Hodges to pay the entire amount at closing. Kaye refused to close the sale of the building. Hodges sued Kaye. To what relief is Hodges entitled?

a. punitive damages and compensatory damages

b. specific perforamance and compensatory damages

c. consequential damages or punitive damages

d. compensatory damages of specific performance

d. compensatory damages of specific performance

For which of the following contracts will a court generally grant the remedy of specific performance?

a. a contract for the sale of a patent

b. a contract for the sale of stock that is traded on a national stock exchange

c. a contract for the sale of fungible goods

d. a contract of employment

a. a contract for the sale of a patent

Ames Construction Co. contracted to build a warehouse for White Corp. The construction specifications required Ames to use Ace lighting fixtures. Inadvertently, Ames installed Perfection lighting fixtures, which are of slightly lesser quality than Ace fixtures, but in all other respects meet White's needs. Which of the following statements is correct?

a. ames did not breach the construction contract because the perfection fixturees were substantially as good as the ace fixturs

b. white’s recovery will be limited to monetary damages because ames’ breach of the construction contract was not material

c. ames must install ace fixtures or white will not be obligated to accept the warehouse

d. white will not be able to recover any damages form ames because the breach was inadvertent

b. white’s recovery will be limited to monetary damages because ames’ breach of the construction contract was not material

Dunlap contracted to work exclusively for Foster during June for $5,000. On May 31, Foster canceled the contract. Dunlap found another job during June for $3,000. Dunlap filed suit against Foster for breach of contract. Dunlap should recover what amount of compensatory damages?

a. $8,000

b. $2,000

c. $3,000

d. $5,000

b. $2,000

Gold contracted in writing to sell Hatch a used computer for $150. Hatch went to Gold's home with the money but Gold refused to deliver the computer. What would be the nature of Hatch's remedy against Gold?

a. punitive damages and compensatory damages only

b. specific performance only

c. compensatory damages only

d. specific performance and consequential damages only

c. compensatory damages only

Which of the following transactions correctly illustrates the doctrine of substantial performance?

a. leslie painted an entire room but failed to put the electrical outlet covers back on

b. a contract required hair styling to be done to Toby’s satisfaction, but Toby was, in good faith, dissatisfied with the completed result

c. a dentist competently completed the extraction of Lee’s tooth but mistakenly pulled the wrong one

d. blair ordered a dozen blue chairs from Kyle, but Kyle delivered a dozen red chairs

a. leslie painted an entire room but failed to put the electrical outlet covers back on

CJN Corp. contracts with James Inc. to sell it 130 acres of ocean-front property and requires James to submit the entire balance upon closing. CJN refuses to close the sale. James has which of the following remedies available to it?

a. specific performance and compensatory damages

b. punitive damages and compensatory damages

c. consequential damages or punitive damages

d. compensatory damages or specific performance

d. compensatory damages or specific performance

Which of the following concepts affect(s) the amount of monetary damages recoverable by the nonbreaching party when a contract is breached?

		Forseeability of damages	Mitigation of damages
	A.	No	Yes
	B.	No	No
	C.	Yes	No
	D.	Yes	Yes

d. Yes, Yes

Master Mfg., Inc. contracted with Accur Computer Repair Corp. to maintain Master's computer system. Master's manufacturing process depends on its computer system operating properly at all times. A liquidated damages clause in the contract provided that Accur pay $1,000 to Master for each day that Accur was late responding to a service request. On January 12, Accur was notified that Master's computer system failed. Accur did not respond to Master's service request until January 15. If Master sues Accur under the liquidated damage provision of the contract, Master will:

a. win, unless liquidated damage provision is determined to be a penalty

b. win, because under all circumstances liquidated damage provisions are enforceable

c. lose, because Accur’s breach was not material

d. lose, because liquidated damage provisions violated public policy

a. win, unless liquidated damage provision is determined to be a penalty

To cancel a contract and to restore the parties to their original positions before the contract, the parties should execute a:

a. revocation

b. release

c. novation

d. rescission

d. rescission

In general, a clause in a real estate contract entitling the seller to retain the purchaser's downpayment as liquidated damages if the purchaser fails to close the transaction, is enforceable:

a. only when the seller cannot compel specific performance

b. as a penalty, if the purchaser intentionally defaults

c. if the amount of the downpayment bears a reasonable relationship to the probable loss

d. in all cases, when the parties have a signed contract

c. if the amount of the downpayment bears a reasonable relationship to the probable loss

Knight signed a lease specifying that, if the $400-per-month rent was not received by the fifth of each month, Knight would owe the landlord $25 as liquidated damages, for every day that the rent was late. In January, Knight failed to pay the rent until the 21st of the month. The landlord insisted that Knight pay $800 because Knight owed $400 for the rent and $400 in late charges. What is most likely to be a court's ruling?

a. the landlord was prohibited from including a liquidated damages clause in Knight’s lease

b. the landlord was entitled to $800 because the lease provided for late charges of $25 per day

c. the late charges constituted a penalty because they were excessive

d. knight knowingly and voluntarily signed the lease and must pay the specified late charges

c. the late charges constituted a penalty because they were excessive

Under the UCC Sales Article, which of the following statements is correct concerning a contract involving a merchant seller and a non-merchant buyer?

a. only the seller is obligated to perform the contract in good faith

b. the contract will be either a sale or return or sale on approval contract

c. whether the UCC Sales Article is applicable does not depend on the price of the goods involved

d. the contract may not involve the sale of personal property with a price of more than $500

c. whether the UCC Sales Article is applicable does not depend on the price of the goods involved

Webstar Corp. orally agreed to sell Northco Inc. a computer for $20,000. Northco sent a signed purchase order to Webstar confirming the agreement. Webstar received the purchase order and did not respond. Webstar refused to deliver the computer to Northco, claiming that the purchase order did not satisfy the UCC Statute of Frauds because it was not signed by Webstar. Northco sells computers to the general public and Webstar is a computer wholesaler. Under the UCC Sales Article, Webstar's position is:

a. incorrect because only the buyer in a sale-of-goods transaction must sign the contract

b. incorrect because it failed to object the Northco’s purchaser order

c. correct because it was the party against whom enforcement of the contract is being sought

d. correct because the purchase price of the computer exceeded $500

b. incorrect because it failed to object the Northco’s purchaser order

Cookie Co. offered to sell Distrib Markets 20,000 pounds of cookies at $1.00 per pound, subject to certain specified terms for delivery. Distrib replied in writing as follows:

"We accept your offer for 20,000 pounds of cookies at $1.00 per pound, weighing scale to have valid city certificate."

Under the UCC:

a. no contract was formed because Distrib’s reply was a counteroffer

b. no contract was formed because Distrib included the weighing scale requirement in its reply

c. a contract will be formed only if Cookie agrees to the weighing scale requirement

d. a contract was formed between the parties

d. a contract was formed between the parties

Under the Sales Article of the UCC, which of the following statements is correct regarding the creation of express warranties?

a. express warranties must be part of the basis of the bargain between buyer and seller

b. express warranties must contain formal words such as warranty or guarantee

c. express warranties are not enforceable if made orally

d. express warranties cannot be based on statements made in the seller’s promotional materials

a. express warranties must be part of the basis of the bargain between buyer and seller

Under the Sales Article of the UCC, which of the following statements is correct regarding a good faith requirement that must be met by a merchant?

a. the merchant must provide more extensive warranties than the minimum required by law

b. the merchant must charge the lowest available price for the product in the geographic market

c. the merchant must adhere to all written and oral terms of the sales contract

d. the merchant must observe the reasonable commercial standards of air dealing in the trade

d. the merchant must observe the reasonable commercial standards of air dealing in the trade

The Sales Article of the UCC applies to which of the following types of contracts?

a. real estate

b. intangibles

c. goods

d. services

c. 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 the Sales Article of the UCC, will Patch win a suit to enforce the rain check?

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

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

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

d. yes, because the rain check met the requirements of a merchant’s firm offer even though no effective time period was stated

d. yes, because the rain check met the requirements of a merchant’s firm offer even though no effective time period was stated

Which of the following contracts is governed by the Sales Article of the UCC?

a. a sale of stock on the stock exchange

b. construction of a house by a professional builder

c. a sale of a used car by a nonmerchant

d. a sale of an acre of land by a real estate agent

c. a sale of a used car by a nonmerchant

On May 2, Handy Hardware sent Ram Industries a signed purchase order that stated, in part, as follows:

"Ship for May 8 delivery 300 Model A-X socket sets at current dealer price. Terms 2/10/net 30."

Ram received Handy's purchase order on May 4. On May 5, Ram discovered that it had only 200 Model A-X socket sets and 100 Model W-Z socket sets in stock. Ram shipped the Model A-X and Model W-Z sets to Handy without any explanation concerning the shipment. The socket sets were received by Handy on May 8.

Which of the following statements concerning the shipment is correct?

a. ram’s shipment is an acceptance of Handy’s offer

b. ram’s shipment is a counteroffer

c. handy’s order must be accepted by Ram in writing before Ram ships the socket sets

d. handy’s order can only be accepted by Ram shipping conforming goods

a. ram’s shipment is an acceptance of Handy’s offer

Jefferson Hardware ordered three hundred Ram hammers from Ajax Hardware. Ajax accepted the order in writing. On the final date allowed for delivery, Ajax discovered it did not have enough Ram hammers to fill the order. Instead, Ajax sent three hundred Strong hammers. Ajax stated on the invoice that the shipment was sent only as an accommodation. Which of the following statements is correct?

a. ajax’s shipment of Strong hammers is a counteroffer and no contract exists between Jefferson and Ajax

b. ajax’s shipment of Strong hammers is a breach of contract

c. ajax’s note of accommodation cancels the contract between Jefferson and Ajax

d. jefferson’s order can only be accepted by Ajax’s shipment of goods ordered

b. ajax’s shipment of Strong hammers is a breach of contract

EG Door Co., a manufacturer of custom exterior doors, verbally contracted with Art Contractors to design and build a $2,000 custom door for a house that Art was restoring. After EG had completed substantial work on the door, Art advised EG that the house had been destroyed by fire and Art was canceling the contract. EG finished the door and shipped it to Art. Art refused to accept delivery. Art contends that the contract cannot be enforced because it violated the Statute of Frauds by not being in writing. Under the Sales Article of the UCC, is Art's contention correct?

a. yes, because the contract cannot be fully performed due to the fire

b. yes, because the contract was not writing

c. no, because the cancellation of the contract was not made in writing

d. no, because the goods were specially manufactured for Art and cannot be resold in EG’s regular course of business

d. no, because the goods were specially manufactured for Art and cannot be resold in EG’s regular course of business

Under the Sales Article of the UCC, which of the following oral contracts for the sale of goods valued at more than $500 is most likely to be unenforceable?

a. a contract to sell fuel oil, where the contract is admitted to in court

b. a contract to sell furniture where half of the value of the shipment has been received and accepted

c. a contract to sell goods specially manufactured for the buyer

d. a contract to sell a work of art

d. a contract to sell a work of art

To satisfy the UCC Statute of Frauds regarding the sale of goods, which of the following must generally be in writing?

a. delivery terms

b. quantity of the goods

c. designation of the parties as buyer and seller

d. warranties to be made

b. quantity of the goods

Under the Sales Article of the UCC, which of the following requirements must be met for a writing to be an enforceable contract for the sale of goods?

a. the writing must contain a term specifying the quantity of the goods

b. the writing must contain the signature of the party seeking to enforce the writing

c. the writing must contain the signatures of all parties to the writing

d. the writing must contain a term specifying the price of the goods

a. the writing must contain a term specifying the quantity of the goods

Excusing performance of a contract due to very large unforeseen expenses not contemplated by the parties to the contract at the time of the formation of the contract is the definition of which of the following?

a. impossibility of performance

b. commercial impracticality

c. tender of performance

d. anticipatory repudiation

b. commercial impracticality

Under the Sales Article of the UCC, and unless otherwise agreed to, the seller's obligation to the buyer is to:

a. hold conforming goods and give the buyer whatever notification is reasonably necessary to enable the buyer to take delivery

b. deliver the goods to the buyer’s place of business

c. deliver all goods called for in the contract to a common carrier

d. set aside conforming goods for inspection by the buyer before delivery

a. hold conforming goods and give the buyer whatever notification is reasonably necessary to enable the buyer to take delivery

Under the Sales Article of the UCC, which of the following events will result in the risk of loss passing from a merchant seller to a buyer?

		Tender of the goods at the seller's place of business	Use of the seller's truck to deliver the goods
	A.	No	No
	B.	No	Yes
	C.	Yes	No
	D.	Yes	Yes

a. No, No