A. Please read carefully each of the following true/false questions, making sure to mark a response for each question, selecting the most correct response. Value: 1 point per question. (Note: Scantrons will be provided in class on ___________ , when the exam is due.)
(T)(F) 1. Contract law is one of the most significant areas of law relating to business and commerce.
(T)(F) 2. The party that breaches a contract will be subject to legal but not equitable penalties because a contract
is a legal document.
(T)(F) 3. An executed contract is one that has been fully performed.
(T)(F) 4. Quasi-contracts do not arise from a mutual agreement by the parties but are imposed by courts to avoid unjustly enriching a party who should not profit from improper behavior.
(T)(F) 5. Advertisements are generally treated as offers, which if accepted, become immediately binding.
(T)(F) 6. A rejection of an offer by the offeree will not necessarily terminate an offer.
(T)(F) 7. Under the common law, the mirror image rule permitted the offeree’s acceptance of a contract to vary to some degree from the offeror’s offer.
(T)(F) 8. For the doctrine of promissory estoppel (detrimental reliance) to apply, there still must be a contract with adequate consideration.
(T)(F) 9. In order for consideration to have “legally sufficient value”, it must consist of goods or money.
(T)(F)10. In general, promises based on moral obligations are always enforceable due to the pre-existing duty rule.
(T)(F)11. A promise to do what one already has a legal duty to do is not consideration.
(T)(F)12. Parents still owe a legal duty to provide food, clothing, and shelter for their children regardless of emancipation.
(T)(F)13. The fact that a minor has a right to disaffirm a contract permits an adult who is a party to that very same contract to cancel it without penalty or liability.
(T)(F)14. In some states, some contracts for such things as student loans and insurance may not be disaffirmed by a minor under any circumstances.
(T)(F)15. Only a legal guardian can enter into a legally binding contract on behalf of a person who has been adjudicated
as mentally incompetent.
(T)(F)16. Mistakes in judgment as to value or quality will always be grounds to permit voiding a contract.
(T)(F)17. Fraudulent contracts may be voided based on the argument that the innocent party was unable to consent to the agreement due to the fraud.
(T)(F)18. Restrictive covenants and covenants not to compete are always struck down because they are unreasonable restraints of trade.
(T)(F)19. Impossibility, excusing performance of a contract, is measured objectively.
(T)(F)20. If Rose and Peter sign a contract in which Peter agrees to buy a handmade shawl from Rose, then the fact that Peter decides to breach the contract will give Annie, a close friend of Rose, the right to sue Peter for
his breach.
(T)(F)21. An accord and satisfaction discharges the original contract upon the offer of the accord.
(T)(F)22. Because of the uncertainty that they add to contracts, conditions must be express.
(T)(F)23. The termination of an enforceable contract by full performance of the duties is called discharge.
(T)(F)24. Specific performance is the remedy customarily used when one party has breached a contract for the sale of ordinary goods.
(T)(F)25. A third party who is not in privity of contract but who has rights under the contract and can enforce the contract against the obligor is said to be an intended beneficiary.
B. Multiple Choice. Select the best answer to each of the following questions. Each correct answer is valued at 2 points each.
25. Seasonal Selections, Inc. sends a copy of its catalog to William along with a personalized computer-generated letter inviting him to purchase any two items in the catalog at the advertized price. Has Seasonal Selections made an offer?
A. Yes, the letter is an offer.
B. It is an offer only if William is already a customer.
C. The catalog and letter are an offer, because there is no room to negotiate a price.
D. Seasonal has not made an offer.
26. Moral obligations do not form an enforceable contract because what element is missing?.
A. Agreement.
B. Consideration.
C. Contractual capacity.
D. Lawful object.
27. Artist Annie works and displays her paintings in a local gallery. Millionaire Marty sees her work and is particularly interested in a seascape painting. Annie says she will sell it for $50,000. Marty tells her he really likes the painting; however, he will only buy it if the price is $45,000. Which of the following is correct?
A. Marty’s counteroffer terminates Annie’s offer of $50,000.
B. If Annie agrees to Marty’s offer, she will be bound by a contract to sell the painting for $45,000.
C. If Annie rejects the offer, Marty cannot then agree to the $50,000 price and bind Annie.
D. All of the above.
28. Under this rule, the offeree must accept the terms made by the offeror.
A. Mirror image rule.
B. Proper dispatch rule.
C. Mailbox rule.
D. Acceptance upon dispatch rule.
29. Edward Employee has organized birthday parties for all the other employees in his office for 10 years. One day, Brenda Boss tells Edward he has done such a great job, she is going to pay him an extra $200 this month. However, when Edward gets his check, it is the same amount it has always been. Which of the following is correct?
A. Brenda’s promise is unenforceable because it is based on past consideration.
B. Brenda’s promise is unenforceable because it is based on an illusory promise.
C. Brenda’s promise is enforceable because Edward performed a service for the company and deserves to
be paid.
D. None of the above.
30. If a contract is a complete and final statement of the parties’ agreement, any prior or contemporaneous oral or written statements that alter, contradict, or are in addition to the terms of the contract are inadmissible in court regarding a dispute over the contract based on which one of the following legal concepts?
A. The integration clause.
B. The rule for international contracts.
C. The rule against perpetuities.
D. The parol evidence rule.
31. If you are the nonbreaching party, you must still do this to avoid or reduce damages caused by a breach of contract.
A. Mitigation.
B. Nominal damages.
C. Recission.
D. Restitution.
32. The standard which a jury must use to weigh the evidence in a contract case is referred to as
A. The subjective standard of proof.
B. The statute of frauds.
C. The writ of mandamus.
D. The objective theory of contracts.
33. Prior to signing a written agreement for hotel accommodations that provided for no refunds, the hotel manager stated to the guest, “We will give refunds if you have a good reason.” Assuming that there was no fraud on the part of the hotel:
A. The guest can introduce evidence of the oral statement to prove her entitlement to a refund.
B. The oral statement will take precedence over the terms of the written agreement.
C. The oral statement will be ignored by the court.
D. The contract is against public policy because of its mixture of oral and written terms.
34. You go to the Cosmic Runners Supply Store, where the sales person shows you some shoes and says, “In a race, these shoes pick up the cosmic energy from the runners around you and channel it into your own legs. This causes everyone with these shoes to run twice as fast as in normal shoes.” In your next race, you do only slightly better than usual and sue for fraud. What will happen?
A. You would lose because the statement did not contain any factual assertion.
B. You would lose because your reliance was not justified.
C. You would win if most runners do not go twice as fast is the cosmic shoes.
D. Proving only that the salesperson intended to deceive you is enough to win your fraud case.
35. Joe contracts with Woodworker to build a custom built-in walnut desk for $1,800, which Joe pays in advance. Woodworker gets the job 75% done and stops working. Joe shops around, and finds someone who finishes the job for $800. How much could Joe recover from Woodworker in a breach of contract suit?
A. $0.
B. $450.
C. $800.
D. $1,800.
36. Jerry Lee was a professional singer. He entered into a contract to sing at a concern sponsored by ABC Co. He also entered into a contract to sell his house to Mary. Before either contract could be performed, Jerry dies. Both ABC and Mary sue for breach. What results?
A. Jerry’s estate wins; both contracts are unenforceable because of Jerry’s death.
B. Both ABC and Mary win; both contracts are fully enforceable.
C. Mary wins, but ABC loses.
D. ABC wins, but Mary loses.
37. Which of the following is not a general rule of contract interpretation?
A. Ordinary words are given their ordinary meaning.
B. Specific terms qualify or override general terms.
C. Handwritten terms prevail over printed terms.
D. Ambiguities in a contract are resolved in favor of the party who drafted the contract.
38. The owner of a dance studio tells Rupert that if he takes just one dance lesson for $50, his life will change forever. Rupert takes the lesson and his life remains the same. The dance instructor’s statements could be described as:
A. Statements of fact.
B. Fraud in the inception.
C. Statements of opinion or sales talk.
D. Anticipatory repudiation.
39. What is required in order for a court to issue an injunction?
A. Any breach of contract will justify an injunction.
B. Any breach of contract that causes injury to the other party will justify this remedy.
C. Any situation that entitles the award of specific performance.
D. Any situation that demonstrates mitigation of damages.
E. A showing that the party requesting the injunction would suffer irreparable injury without the injunction.
40. When an employer breaches an employment contract, what obligation does the employee have in seeking substitute employment?
A. Because it was the employer who breached, the employee has no obligation to seek substitute employment.
B. The employee must accept any employment available with the same employer, but is not required to seek employment with a different employer.
C. The employee is obligated to accept any employment for which the employee is qualified.
D. The employee is obligated to accept substitute employment only if it is comparable employment.
41. “Benefit of the bargain” is another way to refer to which type of damages?
(a) Compensatory damages.
(b) Punitive damages.
(c) Reliance damages.
(d) Liquidated damages.
42. The provisions for cure and cover under Article 2 of the UCC:
A. Encourage the filing of lawsuits quickly when any breach occurs.
B. Promote buyers and sellers working together to resolve their differences in the event of any breach.
C. Have nothing to do with breach.
D. Relate only to sales of goods which have not been identified to the contract.
43. The doctrine of caveat emptor means:
(a) Let the seller beware.
(b) Let the buyer beware.
(c) Let the seller be liable for all damages.
(d) That the legal remedy must be just and fair.
44. Which of the following would be a breach of the implied warranty of merchantability?
(a) A lawnmower that does not cut the grass.
(b) A cherry pit in a cherry pie, if using the foreign substance test.
(c) Gasoline designed for automobiles that a consumer uses in a kerosene stove, causing an explosion.
(d) A stereo that has been stolen by the seller.
45. The basic philosophy of the drafters of the Uniform Commercial Code reflects which of the following beliefs?
(a) That since law professors were appointed to draft the Code, their legal theories and ideas of how business should be run were the only ones to consider.
(b) That a common sense approach, incorporating the ways businessmen actually operate, was the best way to rewrite commercial law.
(c) That reliance on the Code Merchant of England was the way to reform modern commercial law.
(d) That it should be left up to each state to devise its own modern code, since each state is sovereign.
46. The implied warranty of fitness for human consumption:
(a) Applies to food purchased anywhere from a merchant.
(b) Is applied using one of two tests to determine if the warranty has been breached.
(c) Does not require a stated warranty.
(d) Applies only to situations where a non-food item has caused the injury.
(e) A, B, and C are all correct.
47. Reviewing the requirements for buyers and sellers who are considered merchants under the Code, the element that makes all these provisions function well is:
(a) The combined concepts of void and voidable title.
(b) The concept of identification to the contract.
(c) The concept of good faith, as honesty in fact and acting in a commercially reasonable manner.
(d) The imposition of harsh penalties for failure to fully perform a contract and the frequent use of punitive damages.
48. A logical outgrowth of the application of warranty provisions under Article 2 resulted in
(a) Changes in the law regarding intentional torts.
(b) Changes in the law regarding professional errors and omissions.
(c) Changes in the law of tort, extending strict liability to products.
(d) No other changes in the law.
49. A statement that a trailer has a capacity of 3,000 pounds would be treated as
(a) A statement of opinion.
(b) An implied warranty.
(c) An express warranty.
(d) Seller’s puff.
50. Once goods have been identified to the contract:
(a) The buyer has greater rights to the goods than the seller.
(b) The seller’s creditors cannot take the goods.
(c) The buyer has an insurable interest in the goods.
(d) All of the above.
BONUS: For up to 5 additional points, please analyze the following: (Note: this only requires a few sentences to answer, but be sure to include your legal theory.)
Kerry finds a big green ring in the street. She shows it to Leroy, who says, “Wow. That could be valuable.” Neither Kerry nor Leroy knows what the ring is made of or whether it is valuable. Kerry sells it to Leroy for $100, saying, “Don’t come griping if it turns out to be worth two dollars.” Leroy takes the ring to a jeweler who tells him it is an unusually perfect emerald, worth at least $75,000. Kerry sues to rescind the contract. What will the court decide (i.e. does Kerry win or lose), and what legal theory will be used to determine if Kerry gets the ring back?
