University of South Carolina: ACCT 324 Connect Questions (Prof Hughes) Chapters 1-3 & 13-20,100% CORRECT

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University of South Carolina: ACCT 324 Connect Questions (Prof Hughes) Chapters 1-3 & 13-20 CHAPTER 1 1: Connect Questions Business law consists of that govern commercial relationships. domina... nt systems and practices conventional channels enforceable rules of conduct traditional regulatory bodies Business law consists of the enforceable rules of conduct that govern commercial relationships. In other words, buyers and sellers interact in market exchanges within the rules that specify the boundaries of legal business behavior. A garment manufacturing company wants to shift from being a supplier to a retailer. Which of the following will govern the legal aspects of this decision? Corporate law Business law Administrative law Employment law Business activities must follow legal guidelines. All contracts, employment decisions, and payments to a supplier are constrained and protected by business law. Each of the six functional areas of business: management, production and transportation, marketing, research and development, accounting and finance, and human resource management; sits on a foundation of business law. Which of the following is an intended and essential purpose of law? To impose checks on citizens. To demand respect. To rely upon the goodwill of others. To encourage social justice. The purposes of law include: providing order such that one can depend on a promise or an expectation of obligations, serving as an alternative to fighting, facilitating a sense that change is possible, but only after a rational consideration of options, encouraging social justice, guaranteeing personal freedoms, and serving as a moral guide by indicating minimal expectations of citizens and organizations. The difference between civil law versus criminal law is that, the guilty defendant of a: civil case is never incarcerated. criminal case is always incarcerated. civil case is either incarcerated or required to pay a fine. criminal case is never required to pay a fine. Guilty defendant of a civil case is never incarcerated. Typically, if defendant is found guilty, the victim receives some sort of compensation Which of the following laws would govern a dispute between a tenant and a landlord over payment of rent? Public law Private law Commercial law Corporate law Private law regulates disputes between private individuals or groups. A restaurant regularly overfills trash cans in the alley and improperly disposes left-over meat and other perishables. Which of the following laws will regulate this incident? Private law Criminal and public law Public and civil law Public law Public law controls disputes between private individuals or between groups and their government. The U.S. Code contains legislative acts passed by the . Senate U.S. Congress President House of Representatives Legislative acts are written into the United States Code when they are passed by Congress. Which of the following laws is defined as, “A collection of rules and laws put forth by legislating bodies”? Constitutional law Common law Statutory law Administrative law A collection of rules and regulations put forth by legislating bodies; considered the primary law under the constitution. A collection of rules and decisions made by government agencies is known as law. corporate common agency administrative The federal, state, and local governments have dozens of administrative agencies whose task is to perform a particular government function. Administrative law is the collection of rules and decisions made by all these agencies. Wong owned a laundry store in Colorado but had to move to Salt Lake City, Utah for personal reasons. He wants to establish another laundry store in the new city. He can find information regarding local taxes if he refers to: local statutes. local ordinances. local codes. local laws. Business managers must also be familiar with the local city and county ordinances that govern matters not covered by federal or state codes. These ordinances address important business considerations, such as local taxes, environmental standards, zoning, and building codes. New statutory law can revoke law. criminal private corporate case Case law, or common law, is law unless revoked later by new statutory law. Which of the following laws is especially significant for businesses that operate in multiple legal jurisdictions? Trade law Administrative law Case law Restatements of law Case law is especially significant for businesses that operate in multiple legal jurisdictions. Courts in two different business locations may interpret similarly worded statutes differently. A labor union at a match factory protested against the unhealthy conditions in which they were required to work. Management refused to make changes since all the workers had signed an employment contract stating that they were willing to work in any condition provided by the factory. Despite the legal contract, the labor union has decided to litigate. On what grounds would their case, most likely, be fought? Tradition Legal realism Natural law Legal positivism The term natural law describes certain ethical laws and principles believed to be morally right and “above” the laws devised by humans. Under natural law, individuals have not only basic human rights but also the freedom to disobey a law enacted by people if their conscience goes against it and they believe it is wrong. “Not letting morality interfere with the obedience of law” comes under which concept? Natural law Legal positivism Tradition Identification with the vulnerable The concept of legal positivism sees ones proper role as obedience to duly authorized law. That law is quite distinct from morality, and moral questions about the law should not interfere with ones inclination to obey it. Which of the following concepts come under legal realism? Law can never be enforced with complete consistency. Past practice was the product of careful thought. Some higher law or body of moral principles connects all of us in the human community. Certain ethical laws and principles believed to be morally right and “above” the laws devised by humans. Legal realism is based on the idea that, when ruling on a case, judges need to consider more than just the law; they also weigh factors such as social and economic conditions, since legal guidelines were designed by humans and exist in an ever-changing environment. They believe the law can never be enforced with complete consistency and argue that because judges are human, they will bring different methods of reasoning to very similar cases. Business law consists of the enforceable rules of conduct that govern commercial relationships. True False Because of the law, we rely on the goodwill and dependability of one another. True False In the absence of law, we would rely solely on the goodwill and dependability of one another. Public law controls disputes between private individuals or between groups and their government. True False Cyberlaw is based primarily on existing laws. True False Another name for case law is common law. True False Case law, also called common law, is the collection of legal interpretations made by judges. Case law interpretations are law unless they are revoked later by new statutory law. True False The term “stare decisis” means “reversing the decision.” True False The principle of “stare decisis” refers to “standing by their decision,” a reference to rulings made in higher courts that become a binding precedent for lower courts. The decision of a state supreme court is binding on a lower state court located in the state. True False When an issue is brought before a state court, the court will determine whether the state supreme court has made a decision on a similar issue, which creates a binding precedent or pattern of law the lower court must follow. Constitutions and statutes are complete in the sense of covering the detailed rules that affect government and business relations. True False Constitutions and statutes never cover all the detailed rules that affect relationships between government and business. Presidents claim the power to issue executive orders on the basis of their Article II, Section 1, constitutional power to “take care that the laws be faithfully executed.” True False The term “natural law” is another word for “legal positivism.” True False The term “natural law” describes certain ethical laws and principles believed to be morally right and “above” the laws devised by humans whereas the term “legal positivism” focuses on obedience to duly authorized law. Which of the following spell out what market participants may and may not legally do? Constitutions, legislatures, regulatory bodies, and courts Legislatures only Courts only Legislatures and courts, but not constitutions or regulatory bodies Constitutions, legislatures, and courts, but not regulatory bodies Which of the following would be relevant areas of business law to a human resource manager? Contracts, employment and labor law, and employment discrimination Contracts only Contracts and labor law, but not employment discrimination Employment and labor law, but not contracts None of the above because a human resource manager would be involved in work assignments only Relevant areas of business law applicable to human resource management involve agency law, contracts, employment and labor law, and employment discrimination. Laws are enforced by which of the following? State legislatures Federal Congress Community consensus Courts All the above A majority of citizens in a democracy can agree to permit certain authorities to make and enforce rules describing what behavior is permitted and encouraged in their community. These rules are what we refer to as the . Electoral college Community standard Democratic validation Stare decisis Law Assume a businessperson who owns a computer equipment store is delinquent in paying rent to the landlord. The resulting dispute focuses on law. Public Preferential Consensual Private Black lette Private law regulates disputes between private individuals or groups. If a computer store dumps waste behind its building in violation of local, state, or federal environmental regulations, the resulting dispute focuses on law. Public Preferential Consensual Private Black letter Public law controls disputes between private individuals or between groups and their government. Which type of law delineates the rights and responsibilities involved in relationships between persons and between persons and their government? Criminal Procedural Civil Natural Positive Civil law delineates the rights and responsibilities implied in relationships between persons and between persons and their government. Which type of law involves incidents in which someone commits an act against the public as a unit? Criminal Procedural Civil Natural Positive Assume a restaurant chain is forced to pay damages to a person who suffered food poisoning after eating at the restaurant. What type of law is involved? Public law only Private law only Civil law only Public, private, and civil law Private law and civil law Civil law identifies the remedies available when someone’s rights are violated, and private law regulates disputes between private individuals or groups. Assume the Securities and Exchange Commission prosecutes someone for insider trading. This prosecution is an example of law. Criminal Procedural Civil and natural Natural Positive Criminal law regulates incidents in which someone commits an act against the public as a whole, such as by conducting insider trading on the stock exchange. The is the supreme law of the land. U.S. Constitution Declaration of Independence U.S. Code Model Law Uniform Code The rules and regulations put forth by legislatures are referred to as law. Administrative Statutory Uniform Proper Secondary Legislative acts passed by state legislatures can be found in the . U.S. Code State codes Uniform Register State Reporter State Reference Manual Legislative acts are written into the appropriate state codes when they are enacted by state legislatures. Legislative acts passed by the U.S. Congress can be found in the . U.S. Code State codes Uniform Register State Reporter The State Reference Manual Legislative acts are written into the United States Code when they are passed by Congress. Reference: “Inattentive Driving.” Molly decided not to attend class and instead decided to drive off campus to check on her new dress for the upcoming dance feast. While driving, Molly is busy talking on her cell phone with her friend Sharon to convince her into going to the dance with Molly’s brother who has a big crush on Sharon. Unfortunately for Molly, there is a statute in her state outlawing talking on a cell phone while operating a motor vehicle. Molly crashes into the side of Sam’s new convertible when she looks down to pick up a can of soda she just dropped onto her new jeans. A police officer just down the street comes over to investigate. Molly explains to him that it was difficult to hold the cell phone in one hand, the soda in the other, and also drive. The officer was not impressed. Around that time, Sam comes along. He is furious regarding the significant dent in his new car. Molly says that she has insurance, and she will cover the whole incident. Sam says that is insufficient. The officer is annoyed because it is his lunch break. He tells Molly that she must obey the law, and proceeds to write several citations to her. The law in Molly’s state regulating cell phone usage would be classified as which of the following? A statute A type of common law An executive order A uniform law A negative law The assortment of statutes, or rules and regulations put forth by legislatures, is what we call statutory law. The group that urges states to enact model laws to provide greater uniformity of law is called the . Model Law on Uniform State Laws Organization Federal Uniform Law Commission National Conference of Commissioners on Uniform State Laws Model and Uniform Law Consortium Uniform Statutory Enforcement Commission When the organization in charge of proposing uniform laws proposes a statute, which of the following is true? All states must adopt the uniform statute within one year. All states must adopt the uniform statute within six months. The uniform statute automatically goes into effect without any action by state legislatures. A state legislature is not required to adopt the uniform statute; but if the state legislature decides to go forward with adoption, all portions of the statute must be adopted. A state legislature can ignore the proposed uniform law, adopt it in full, or adopt it in part. Case law can be revoked by . New statutes Precedent Stare decisis Critical law None of the above. Case law cannot be revoked The term involves the use of past decisions to guide future decisions. Commonality Precedent Restatement Uniformity Modeling The is a body of law significant to business activities including sales, banking, and warranty. Federal Business Code Model Business Code Uniform Transactional Model Uniform Commercial Code Marketing Transaction Code The Uniform Commercial Code is a body of law significant for business activities including sales laws and other regulations affecting commerce, such as bank deposits and collections, title documents, and warranties. When courts rely on precedent, they are obeying . Common analysis Res judicata Stare decisis In rem process Federal law stare decisis (“standing by their decision”), in which rulings made in higher courts become binding precedent for lower courts. Which of the following cases overturned prior precedent? Brown v. Board of Education Wygant v. Jackson Board of Education Planned parenthood of Southeastern Pennsylvania v. Casey Plessy v. Ferguson None of the above because precedent cannot be overturned Brown v. Board of Education did not follow the precedent established by Plessy v. Ferguson. Which of the following is true regarding administrative agencies? There are state administrative agencies, but no federal administrative agencies. There are federal administrative agencies, but no state administrative agencies. There are state and federal administrative agencies, but no local administrative agencies. Administrative agencies exist only at the local county level. Administrative agencies exist at the federal, state, and local level. Which of the following is true regarding treaties at the federal level? A treaty is generally negotiated by the executive branch and must then be approved by two- thirds of the Senate. A treaty is generally negotiated by the executive branch and must then be approved by two- thirds of the House of Representatives. A treaty is generally negotiated by the executive branch and must then be approved by two- thirds of the Senate and also by two-thirds of the House of Representatives. A treaty is generally negotiated by the executive branch and no approval by the Senate or House of Representatives is needed. A treaty is generally negotiated by the executive branch and must then be approved by two- thirds of the Senate and also by two-thirds of the state legislatures. Which of the following can issue executive orders? The president only State governors only The president and state governors The president, state governors, and Congress The president, state governors, Congress, and state legislatures Which of the following contains summaries of common law rules in a particular area of the law? U.S. Code State Administrative Codes Executive Proclamations Case Reporters Restatements of the Law Which of the following is an independent agency? The Federal Deposit Insurance Corporation The Consumer Product Safety Commission The General Services Administration The Small Business Administration The Office of Personnel Management 1-5 “Major Federal Administrative Agencies” reflects that the Consumer Product Safety Commission is an independent agency. Which of the following is an executive agency? The Federal Deposit Insurance Corporation The Federal Trade Commission The Securities and Exchange Commission The Federal Communications Commission The Nuclear Regulatory Commission 1-5 “Major Federal Administrative Agencies” reflects that the Federal Deposit Insurance Corporation is an executive agency. The concept of suggests that individuals should have the freedom to disobey a law enacted by people if their conscience goes against the law and they believe the law is wrong. Legal positivism Natural law Legal-realism Conscience reaction None of the above Assume a judge writes that she is deciding to enforce a law in question but that her decision does not mean that she sees the law as the morally correct rule. The judge would have leanings in the direction of . Legal positivism Natural law Legal realism Conscience reaction None of the above The concept of legal positivism sees ones proper role as obedience to duly authorized law. That law is quite distinct from morality, and moral questions about the law should not interfere with ones inclination to obey it. In which school of jurisprudence is the concept of stare decisis rooted? The Historical school Legal realism The cost-benefit analysis school Positivism Cultural reenactment Which of the following is reported in the Federal Reporter? Statutes Executive orders Common law Administrative laws Local ordinances The Federal Reporter is a case law reporter Which of the following is reported in the United States Code? Statutes Executive orders Common law Administrative laws Local ordinances US code of LAWS Which of the following is reported in the Code of Federal Regulations? Statutes Executive orders Common law Administrative laws Code of Federal Regulations Which of the following is based on the idea that, when ruling on a case, judges consider more than just the law; they also weigh factors such as social and economic conditions? Cost-Benefit Analysis Legal Realism Historical School Legal Positivism Executive Positivism Legal realism is based on the idea that, when ruling on a case, judges need to consider more than just the law; they also weigh factors such as social and economic conditions, since legal guidelines were designed by humans and exist in an ever-changing environment. Which approach to jurisprudence is based on choosing alternatives that maximize benefits and minimize costs, and is tied to the pursuit of efficiency? Cost-Benefit Analysis Legal Realism Historical School Legal Positivism Executive Positivism Candy wants to start an Internet business. She is told by the Chinese government that certain items on her site are objectionable and illegal, and that if she wants to do business in China, she must remove the objectionable material. Which of the following is true? Candy is within her rights and should stand her ground. She is a U.S. citizen, and so long as she obeys U.S. laws, she can do business in China. Candy is within her rights only if she petitioned her state senator and obtained his or her permission to proceed. If Candy wants to do business in China, she must abide by Chinese law. By international law, there is a set fee of $10,000 that Candy can pay if she wants to obey only U.S. law. If she pays that amount, she can continue in China without any modification. By international law, there is a set fee of $5,000 that Candy can pay if she wants to obey only U.S. law. If she pays that amount, she can continue in China without any modification. Candy should understand comparative law which studies and compares the laws in different countries. The Chinese government does not want its citizens to have access to certain information and Web sites; and to do business there, Candy must conform to the Chinese standards. CHAPTER 2: Connect Questions What is an ethical dilemma? Study and practice of decisions about what is good, or right. Application of ethics to the special problems and opportunities experienced by businesspeople. A problem about what a firm should do, for which no clear, right decision is available. The expectations that communities have from businesses. An ethical dilemma is a problem about what a firm should do, for which no clear, right decision is available. Reasonable people can expect to disagree about optimal solutions to ethical dilemmas. Why must firms honor, to some extent, the social responsibility to business? The community often imposes restrictions on firms that only provide a useful good or services. Firms are always subject to the implicit threat that legislation will impose social obligations on them. The community expects businesses to obey certain standards of fairness, except when the standards interfere with profit maximization. Most communities have similar expectations of businesses. The social responsibility of business consists of the expectations that the community imposes on firms doing business inside its borders. These expectations must be honored to a certain extent, even when a firm wishes to ignore them, because firms are always subject to the implicit threat that legislation will impose social obligations on them. he legality of a business decision is the standard that must be met. maximal moderate optional minimal But the existence of that minimum standard is essential for the development of business ethics. Acme manufactures food products and is opening a subsidiary in Country Z. The firm discovers that to obtain raw materials it has to bribe local officials and businesses in Country Z. The second option is to import raw materials from its own country, which will be expensive in the long-run. In this situation, Acme: is faced with an ethical dilemma. has no social responsibility toward Country Z. can apply the concept of virtue ethics. needs to only focus on profitability. Multinational companies face an ethical dilemma: They must decide whether to pay bribes or find alternative sources of supplies. The definition of business ethics refers to of business conduct. correct decisions standards legality definitive lists The definition of business ethics refers to standards of business conduct. It does not result in a set of correct decisions. Business ethics can improve business decisions by serving as a reminder not to choose the first business option that comes to mind or the one that enriches us in the short run. A company is caught bribing government officials in foreign countries in order to establish and maintain its affiliate branches there. The fines levied on the company fall under which act? Foreign Criminal Practices Act Sarbanes Oxley Act International Modernization Act Foreign Corrupt Practices Act Multinational giant Siemens AG was ordered to pay the largest Foreign Corrupt Practices Act (FCPA) fine in history after admitting to acts of bribery worldwide. Why must multinational companies take into account the different ethical understandings that prevail in a different country? Ethical conceptions shape business law and business relationships uniquely in each country. Law and business ethics serve as an interactive system—informing and assessing each other. Business ethics can never produce a list of correct business decisions that all ethical businesses will make. Legal rules that govern the exchange have been shaped in large part by our sense of commercial ethics. Increasingly, business leaders require sensitivity to the differences in legal guidelines in the various countries in which they operate. Which of the following is a way to take the universalization test for a business owner? Informing the public of the business decision before it is taken. Putting himself in the position of the stakeholder and judging the decision. Taking into account whether God would judge the decision to be correct or not. Considering the impact on the world if the decision were applied by all businesses. A third general guideline shares with the other two a focus on the “other”—the stakeholders whom our actions affect. Before we act, the universalization test asks us to consider what the world would be like were our decision copied by everyone else. Which of the following is called the ‘television test’ with regard to the WPH framework? Universalization Public disclosure Golden Rule Social Responsibility The public disclosure test is sometimes called the “television test,” for it requires one to imagine that one’s actions are being broadcast on national television. What is the intent of the Sarbanes Oxley Act? Promoting high standards of business ethics. Setting limitations for Internet usage in business. Encouraging stakeholders to take a more active role in business. Apprehending businesses who use unethical trading means. The Sarbanes-Oxley Act is intended to promote high ethical standards among business managers and employees through a series of stringent requirements and controls that regulate several different facets of corporate operation. Ethical relativism holds that morality is . objective neutral relative divine Ethical relativism is a theory of ethics that denies the existence of objective moral standards. Rather, according to ethical relativism, individuals must evaluate actions on the basis of what they feel is best for them. Morality is relative, and thus no one can criticize another’s behavior as immoral. Why is ethical fundamentalism difficult to follow? The unquestionable nature of rules is overly inflexible. It does not offer specific-enough criteria to be useful in many real-world situations. It denies the existence of any fixed moral standards. It does not say how to evaluate someone’s actions. Absolutism, or ethical fundamentalism, requires that individuals defer to a set of rules to guide them in the ethical decision-making process. The unquestionable nature of the rules in most absolutist repositories seems overly inflexible when applied to different situations. In response to the trade union’s demands, Firm Z holds an executive-level meeting. In the meeting, the executives weigh the monetary consequences of agreeing to the union’s demands. Which theory of business ethics are they following? Rule utilitarianism Consequentialism Act utilitarianism Cost benefit analysis One form of utilitarianism commonly applied by firms and government is cost-benefit analysis. When a business makes decisions based on cost-benefit analysis, it is comparing the pleasure and pain of its optional choices, as that pleasure and pain are measured in monetary terms. Which of the following statements is true according to the categorical imperative of deontology? A business manager should choose the action which yields the greatest amount of pleasure over pain for all involved. A business manager should put himself in the shoes of the person to be affected by his decision and then decide. No decision taken by the business manager can be wrong as morality is subjective. A business decision can be evaluated on the basis that it would be consistent for everyone in society to take the same decision. According to the categorical imperative of the deontological perspective, an action is moral only if it would be consistent for everyone in society to act in the same way. Which of the following theories of business ethics is most concerned with human relationships? Virtue ethics Deontology Ethics of care Utilitarianism The ethics of care holds that the right course of action is the option most consistent with the building and maintaining of human relationships. Those who adhere to an ethic of care argue that traditional moral hierarchies ignore an important element of life: relationships. Ethical conversation is primarily about finding the one and only right thing to do. True False Ethical conversation is less about finding the one and only right thing to do; it is about finding the better thing to do. Business ethics is the application of ethics to the special problems and opportunities experienced by businesspeople. True False The social responsibility of business consists only of the expectations employees have of employers. True False The social responsibility of business consists of the expectations that the community imposes on firms doing business inside its borders. Ethics is not an issue in accounting because of the primarily objective data involved in that field. True False The social responsibility of business consists of the expectations that the community imposes on firms doing business inside its borders. These expectations must be honored to a certain extent, even when a firm wishes to ignore them, because firms are always subject to the implicit threat that legislation will impose social obligations on them. In some countries, businesses must pay bribes in order to receive legitimate supplies. True False In an ethical analysis using the WPH Framework referenced in the text, owners are the most important stakeholders and should receive the greatest consideration in decision making regardless of the type of problem addressed. True False The WPH framework considers who the decision would affect, purpose (values), and how to make ethical decisions. The definition of stakeholder is the same as the definition of shareholder. True False The stakeholders of a firm are the many groups of people affected by the firm’s decisions. The community in which a firm operates would not be considered a stakeholder of the firm. True False The general community where a firm operates is a stakeholder of the firm. Situational ethics is the same thing as ethical relativism. True False Unlike ethical relativism, situational ethics allows us to judge other people’s actions. Consequentialism provides a rigid set of rules to follow regardless of the situation. True False In contrast to absolutism, consequentialism does not provide a rigid set of rules to follow regardless of the situation. Utilitarianism is a form of consequentialism. True False Which of the following is the application of ethics to special problems and opportunities experienced by those in business? Situational ethics Consequentialism Business ethics Sarbanes-Oxley principles Business utilitarianism Which of the following is the study and practice of decisions about what is good, or right? Morals Ethics Consequences Law Business A local Chamber of Commerce plans a seminar on “the social responsibility of business in our community.” What does that term reference? The responsibility of business to make profit for shareholders. The responsibility of business to have annual meetings. The expectations that the community imposes on firms doing business inside its borders. The expectations of employees regarding wage rates. The expectations of management in regard to adequate utility resources. Which of the following is true, as reflected in the case of Rexford Kipps v. James Cailler, regarding the immunity of public officials? Public officials are absolutely immune from suit based on their actions. Government officials are entitled to qualified immunity insofar as their conduct does not violate clearly established statutory rights of which a reasonable person would have known. Government officials are entitled to qualified immunity insofar as their conduct does not violate clearly established constitutional rights of which a reasonable person would have known. Government officials are entitled to qualified immunity insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known. Government officials are entitled to qualified immunity insofar as their conduct does not violate the First Amendment of the U.S. Constitution. Which of the following is true regarding a corporate code of ethics? A corporate code of ethics provides definitive lists of right and wrong decisions. A well-managed corporation does not need a code of ethics. A well-managed corporation tries to provide ethical leadership by establishing codes of ethics. A corporate code of ethics is legally mandated in all states pursuant to state law. A corporate code of ethics is required by federal law Well-managed firms try to provide ethical leadership by establishing codes of ethics for the firm. The complications associated with managerial decisions do not permit any ethical guide to provide definitive lists of right and wrong decisions. What is the system of “guanxi” used in China? It refers to a system of relationship building woven together by social ties. It refers to a system of strict ethical rules. It refers to a prohibition against criticism of government rules and regulations. It refers to a system by which business people attempt to avoid strict Chinese regulations. It refers to a system of smuggling. What do the letters “WPH” mean in reference to the “WPH Framework for Business Ethics” discussed in the text? Who, Purpose, and How When, Plan, and How Why, Procedure, and Hope Where, Plan, and Hope Where, Procedure, and How The WPH framework addresses whom a decision would affect, the purpose of the decision, and the guidelines on how to make ethical decisions. Which of the following is true under the WPH process of ethical decision making? The interest of management is ranked higher than that of employees when decisions are made. The interest of owners is ranked higher than that of both employees and management when decisions are made. When decisions are made, the interest of the community as a whole is considered last. The interest of management is ranked higher than that of employees when decisions are made, but the interest of owners is ranked higher than the interest of any group. None of the above is true. The framework addresses whom a decision would affect, the purpose of the decision, and the guidelines on how to make ethical decisions. There is no reference to ranking stakeholders at a higher level. Which of the following are stakeholders of a business? Shareholders Employees Customers Management All the above The stakeholders of a firm are the many groups of people affected by the firm’s decisions. Positive abstractions that capture our sense of what is good or desirable are called . Ethical ideas Values Conscience demands Desirable principles Action goals Which of the following are values in the WPH process of ethical decision making? Freedom only Security only Efficiency only Freedom and security, but not efficiency Freedom, security, and efficiency 2-6 “Primary Values and Business Ethics” outlines an efficient way to apply this second step in the WPH framework referencing the values of freedom, security, justice, and efficiency. The idea that we should interact with other people in a manner consistent with the manner in which we would like them to interact with us is called the . Equalization Rule Ethical Realization Rule Silver Rule Golden Rule Ten Commandments Rule What is the name of the law signed by President Bush in the wake of several corporate accounting scandals? The Sarbanes-Oxley Act The Public Accounting Act The Certified Public Accounting Act The Whaley-Mallicoat Act The Corporate Scandal Act The Corporate and Criminal Fraud Accountability Act, also known as the Sarbanes-Oxley Act, was signed by President Bush in 2002 in the wake of several corporate accounting scandals. Which of the following does the Public Company Accounting Oversight Board do? Ensure that auditors and public accounting firms compile accurate and truthful financial reports for the companies they audit. Require that companies devise a system that allows employees to report suspicions of unethical behavior. Require that the universalization test be used as the primary ethical guideline. Ensure that auditors and public accounting firms compile accurate and truthful financial reports for the companies they audit and also requires that companies devise a system that allows employees to report suspicions of unethical behavior. None of the above – there is no such board. According to the text, which of the following may be a part of the “how” in the WPH process of decision making? Public disclosure Values Profit maximization Whistle-blowing All the above The “public disclosure” test for ethical behavior is sometimes referred to as the test. Television Powell Self-conscious Golden Primary The “public disclosure” test for ethical behavior is sometimes referred to as the television test because it requires us to imagine that our actions are being broadcast on national television. The for ethical behavior seeks consideration of what the world would be like if a decision is copied by everyone else. Golden rule Universalization test Public disclosure Relevant disclosure World rule The universalization test for ethical behavior seeks consideration of what the world would be like if a decision is copied by everyone else. Which of the following is true regarding the universalization test for ethical behavior? It is the same as the public disclosure test. It has been discredited. It is the same as the golden rule test. It has been enacted into law by the Sarbanes-Oxley Act. None of the above The ethical theory that requires that we evaluate the morality of an action by imagining ourselves in the position of the person facing the ethical dilemma is called . Situational ethics Ethical relativism Absolutism Consequentialism Relativity ethics How is absolutism different from ethical relativism and situational ethics? It applies utilitarianism. It holds that a cost-benefit analysis should be applied. It holds that whether an action is moral does not depend on the perspective of the person facing the ethical dilemma. It applies virtue ethics. It applies corporate ethics principles. Unlike ethical relativism and situational ethics, absolutism holds that whether an action is moral does not depend on the perspective of the person facing the ethical dilemma. Which of the following is true regarding the relationship between ethical relativism and situational ethics? Like ethical relativism, situational ethics requires that we evaluate the morality of an action by imagining ourselves in the position of the person facing the ethical dilemma. Like ethical relativism, situational ethics allows us to judge the actions of others. Both theories hold that once we put ourselves in another person’s shoes, we can evaluate whether that person’s action was ethical. These theories are the same. There is no relationship between ethical relativism and situational ethics. Which of the following describes the theory of ethical relativism? Its only principle is the denial of the existence of objective moral standards. It holds that individuals must evaluate actions on the basis of what they feel is best for themselves based upon objective moral standards. It holds that since morality is relative, we have a basis upon which to criticize the behavior of others as immoral. It denies the existence of objective moral standards, it holds that individuals must evaluate actions on the basis of what they feel is best for them, but it does not hold that morality is relative. It denies the existence of objective moral standards; it holds that individuals must evaluate actions on the basis of what they feel is best for them; it holds that since morality is relative, no one can criticize another’s behavior as immoral. Which of the following requires that we see murder as a moral action as long as the murderer believes that the action is best for him or her? Absolutism Deontology Categorical Imperative Uncertainty of Thought Ethical Relativism Ethical relativism denies the existence of objective moral standards; it holds that individuals must evaluate actions on the basis of what they feel is best for them; it holds that since morality is relative, no one can criticize another’s behavior as immoral Which of the following theory of ethics denies the existence of objective moral standards? Ethical relativism Absolutism Social responsibility Ethical absolutism Absolute theory Which of the following is also referred to as ethical fundamentalism? Ethical relativism Absolutism Social responsibility Ethical absolutism Absolute theory Absolutism, or ethical fundamentalism, requires that individuals defer to a set of rules to guide them in the ethical decision-making process. Which of the following tells business managers to examine all the potential actions in each situation and choose the action that yields the greatest amount of pleasure over pain for all involved? Deontology Rule utilitarianism Act utilitarianism Absolutism Virtue ethics What is the basis of consequentialism? Deontology Categorical imperatives Inquiry into the consequences Disregard of consequences Act utilitarianism Consequentialism is a general approach to ethical dilemmas that requires that we inquire about the consequences to relevant people of our making a particular decision. Kantian ethics is involved with which of the following ethical theories? Deontology Act utilitarianism Rule utilitarianism Absolutism Situational ethics An ethical theory that urges managers to take those actions that provide the greatest pleasure after having subtracted the pain or harm associated with the action in question is called . Deontology Utilitarianism Kantian ethics Absolutism Ethical relativism A business manager who deceives everyone because the manager believes that deception maximizes pleasure over pain in a given situation is acting consistently with which ethical theory? Act deontology Ethical relativism Act utilitarianism Ethical fundamentalism Rule utilitarianism A business manager may consider it wrong to terminate a person whose spouse has terminal cancer because a firm has an absolute obligation to support its employees when they are vulnerable. The business manager is acting consistently with which ethical theory? Deontology Ethical relativism Act utilitarianism Ethical fundamentalism Rule utilitarianism A person who believes that they should not cheat on a drug test because if everyone did so, the drug test would be meaningless is applying a[n] . Ethics of care Virtual analysis Cost-benefit analysis Fundamentalist approach Categorical imperative According to the categorical imperative, an action is moral only if it would be consistent for everyone in society to act in the same way. Which of the following helps explain why the principle of deontology may be difficult to apply? People disagree about what duties we owe to one another. People disagree about whether consequences are positive or negative. People disagree about the ethics of care. People disagree about what duties we owe to one another and also whether consequences are positive or negative. People disagree about what duties we owe to one another, whether consequences are positive or negative, and about the ethics of care. The ethical system in which the development of virtues, or positive character traits such as courage, justice, and truthfulness, is the basis for morality is called . Absolutism decision Virtual analysis Virtue ethics Fundamentalist approach Categorical imperative Virtue ethics is an ethical system in which the development of virtues, or positive character traits such as courage, justice, and truthfulness, is the basis for morality. Which of the following consists of acting on the basis of the recognition that certain actions are right or wrong, regardless of their consequences? Act utilitarianism Rule utilitarianism Situational ethics Virtue ethics Deontology Deontology consists of acting on the basis of the recognition that certain actions are right or wrong, regardless of their consequences. What is a difficulty with the application of virtue ethics? The applicable categorical imperatives. The lack of agreement about the meaning of “the good life.” The applicable principle of rights. The ethics of care analysis. Both the applicable categorical imperatives and the lack of agreement about the meaning of “the good life.” The adherents believe that when one individual, the caregiver, meets the needs of one other person, the cared-for party, the caregiver is helping to meet the needs of all the individuals who fall within the cared-for party’s web of care. Deontology Utilitarianism Absolutism Virtue ethics Ethics of care The holds that the right course of action is the option most consistent with the building and maintaining of human relationships. Ethics of care Principle of virtue ethics Deontology Act utilitarianism Rule utilitarianism CHAPTER 3: Connect Questions Which of the following statements is true of appellate courts? Appellate courts hold trials Appellate courts primarily handle questions of facts Under the federal system, appellate courts are called district courts Appellate courts have the power to review previous judicial decisions Appellate courts have the power to review previous judicial decisions to determine whether trial courts erred in their decisions. Appellate courts do not hold trials. Which of the following is true of a ‘bench trial’? Judges cannot decide questions of law. There is no judge in the trial. There is no jury in the trial. Questions of facts are determined by the jury. In a bench trial(a trial with no jury), the judge decides questions of fact; in a jury trial, the jury decides questions of fact. When does a court acquire ‘in personam jurisdiction’ over a defendant? When the verdict is passed. When it gives him or her a copy of the complaints and summons. When a lawsuit is filed with the court. When the trial begins. A court acquires in personam jurisdiction over a person (the plaintiff) when she files a lawsuit with the court. The court acquires jurisdiction over the person the plaintiff is suing (the defendant) when it gives him a copy of the complaint and a summons. Why have most states enacted a long arm statute? It enables courts to serve defendants outside the state as long as the defendant has sufficient minimum contacts within the state. It enables courts to hear cases that fall within their jurisdiction but are geographically located in a different state. If a defendant has property in a state, it allows a plaintiff to file suit against the owner instead of his or her property. It opens doors to subject-matter jurisdiction that determines which court system can hear a particular case. Which of the following cases would fall under concurrent federal jurisdiction? Federal patent, trademark, and copyright cases Bankruptcy cases Cases involving admiralty law Federal-question cases Concurrent jurisdiction covers two types of cases: federal-question and diversity-of-citizenship cases. Federal-question cases require an interpretation of the United States Constitution, a federal statute, or a federal treaty. Who may file a motion for the change of venue? Prosecutor Defendant Plaintiff Jury If the location of the court where the plaintiff filed the case is an inconvenience to the defendant or if the defendant believes it will be difficult to select an unbiased jury in that venue, he may request that the judge move the case by filing a motion for a change of venue. The judge has the discretion to grant or deny the motion. Where in the federal court system are bankruptcy cases initially heard? Federal trial courts Intermediate appellate courts U.S. Supreme Court Special trial courts A small number of cases, however, do not begin in trial courts of general jurisdiction. For cases concerning certain subject matter, there are special trial courts. They hear bankruptcy cases, claims against the U.S. government, international trade and customs cases, and disputes over certain tax deficiencies. In a case between Mann versus Roberts in the state of Iowa, one party appealed the verdict of the state trial court. In the absence of an intermediate court of appeal, where would the case be heard? State Supreme Court Federal Trials Court State Trial Court Federal Circuit court Appeals from the state intermediate courts of appeal lead cases to the state court of last resort. Most states call this court the Supreme Court, although some states refer to it as the court of appeals. Because approximately half the states lack intermediate courts of appeal, appeals from trial courts in these states go directly to the state court of last resort. Which of the following is a necessary condition for a justifiable controversy? Courts rendering an advisory opinion. Judgment should solve an existing problem. Plaintiff should have a personal stake in the issue. The problem should be immediate. Three criteria are necessary for a case or controversy to exist. First, the relationship between the plaintiff and the defendant must be adverse. Second, actual or threatened actions of at least one of the parties must give rise to an actual legal dispute. Third, courts must have the ability to render a decision that will resolve the dispute. Usually the issue of arises when one party claims that the case is moot. personal stake controversy ripeness standing Usually, the issue of ripeness arises when one party claims that the case is moot—in other words, there is no point in the court’s hearing the case because no judgment can affect the situation between the parties. What is a pretrial motion? An initial attempt to solve the dispute informally by a negotiation or discussion. The first formal stage of a lawsuit. A judgment in favor of the plaintiff if the defendant fails to answer the complaint. A motion filed by either party to conclude the case early, after the pleading. The early pleadings establish the legal and factual issues of the case. After the pleadings, the plaintiff or defendant may file a motion to conclude the case early, eliminate some claims, or gain some advantage. A party may move, or request, that the court do almost anything pertaining to the case. What is meant by peremptory challenges? Written questions that one party sends to the other to answer under oath. A request for the court to consider that all the facts in the pleadings are true and to apply the law to those facts. Claims made by the defendant against the plaintiff that are sent with the answer to the complaint. A party can object to a certain number of potential jurors without citing a reason. In most states, each party has a certain number of peremptory challenges. These peremptory challenges allow a party to challenge a certain number of potential jurors without giving a reason. Peremptory challenges, however, may lead to abuse. What is a directed verdict? A verdict reached through an informal meeting of the judge with the attorneys representing the parties where the parties try to work out a settlement. A verdict for the defendant as the jury would have no legal basis for decision in favor of plaintiff even if it regarded the plaintiff’s claims to be true. A verdict given by recruited individuals who match the demographics of the jury. A verdict given in favor of the plaintiff when the defendant fails to answer the summons. Immediately following the plaintiff’s presentation of her case, the defendant may move for a directed verdict. This motion is a request for the court to direct a verdict for the defendant because even if the jury accepted all the evidence and testimony presented by the plaintiff as true, the jury would still have no legal basis for a decision in favor of the plaintiff. Which of the following motions is filed by the winning party after the trial ends? Motion for a judgment in accordance with the verdict Motion for a judgment notwithstanding the verdict Motion for a judgment as a matter of law Motion for a new trial Once the trial ends, the party who received the favorable verdict files a motion for a judgment in accordance with the verdict. Until the judge enters the judgment, the court has not issued a legally binding decision for the case. A is a written argument explaining why an appeal is being made. verdict motion settlement brief The appellant then files a brief or written argument, with the court. Appellants file briefs to explain why the judgment in the lower court was erroneous and why the appeals court should reverse it. The word “jurisdiction” comes from the Latin terms “juris,” meaning “law,” and “diction,” meaning “to speak.” True False In rem jurisdiction references jurisdiction over a person. True False Courts may have in rem jurisdiction (Latin for “jurisdiction over the thing”) even over property. Under federal statutory law, Internet transactions cannot be the basis for a finding of in personam jurisdiction. True False A federal district court established a “sliding-scale” standard in the 1997 case Zippo Mfg. Co. v. Zippo Dot Com, Inc. for determining whether a business that has Internet contact with a plaintiff in a different state satisfies the minimum-contacts standard. Subject-matter jurisdiction is a court’s power to hear certain kinds of cases. True False State courts have the power to hear all cases not within the exclusive jurisdiction of the federal court system. True False Concurrent federal jurisdiction means that both state and federal courts have jurisdiction over a case. True False Once a case is in the proper court system, venue determines which trial court in the system will hear the case. True False In some cases, the U.S. Supreme Court functions as a trial court of limited jurisdiction. True False A person who has the legal right to bring an action in court has standing. True False Intermediate courts of appeal exist in all states. True False True Intermediate courts of appeal, analogous to federal circuit courts of appeal, exist in approximately half the states. Under our system of justice, courts may issue advisory opinions. False The case or controversy (or justiciable controversy) requirement ensures that courts do not render advisory opinions. The defendant responds to a complaint with an answer. True False Because of its complicated nature, any complaint should be at least three pages long. True False A defendant who believes that he or she has a claim against the plaintiff would include a counterclaim with the answer. True False A reply is an answer to a counterclaim. True False A party only has a limited number of challenges for cause in jury selection. True False Peremptory challenges in jury selection may not be racially based. True False In most civil cases, a plaintiff must prove her case beyond a reasonable doubt. True False In most civil cases, a plaintiff must prove her case by a preponderance of the evidence. Only one party may appeal from a final judgment. True False Either party may appeal the judge’s decision on posttrial motions or on her or his final judgment. If an appellate judge agrees with the majority’s decision, but for different reasons, the judge may write a “concurring” opinion. True False On average, the U.S. Supreme Court hears 300 cases a year. True False The Supreme Court hears, on average, only 80 to 90 cases each year. Which of the following do appellate courts primarily handle? Questions of law Questions of fact Questions of law and fact Cases when they initially enter the legal system Questions of law and fact, and also cases when they initially enter the legal system Appellate courts primarily handle questions of law, not questions of fact. Which of the following is a question of fact? Whether a vehicle ran a traffic light Whether premeditation is necessary for a first degree murder conviction Whether speech is protected by the First Amendment What is necessary for service of process Whether a vehicle ran a traffic light and also what is necessary for service of process A question of fact is a question about an event or characteristic in a case. Laws which enable the court to serve a defendant outside the state as long as the defendant has sufficient minimum contacts within the state and it seems fair to assert jurisdiction is called . Minimum contact statutes Significant contact statutes Long-arm statutes In rem statutes Quasi in rem statutes Which of the following is the same as attachment jurisdiction? In rem jurisdiction Personal jurisdiction Subject matter jurisdiction Equitable jurisdiction Quasi in rem jurisdiction Courts can gain quasi in rem jurisdiction, or attachment jurisdiction, over a defendant’s property unrelated to the plaintiff’s claim. Adult siblings, John, Sam, and Andy, are in disagreement over how to split the proceeds of a piece of land left to them by a rich uncle who recently died. The uncle was a resident of Georgia, and the land is in Georgia; but neither John, Sam, nor Andy live there. Which of the following is true regarding jurisdiction over the dispute? A court in Georgia would not have jurisdiction. The case would have to be brought in a state in which at least one of the brothers lives. A court in Georgia would have in rem jurisdiction over the dispute. A court in Georgia would have in personam jurisdiction over the dispute. A court in Georgia would have jurisdiction over the dispute only if all brothers signed a consent form agreeing to bring the case in Georgia. A court in Georgia would have original jurisdiction, but appellate jurisdiction would be in a state in which at least one of the brothers lives. Courts have in rem jurisdiction (Latin for “jurisdiction over the thing”) over property. Susan ran a traffic light and did significant damage to Paul’s car. Susan has no insurance and no assets except for a farm. Which of the following is true? A court can try the case and following judgment for Paul, exercise quasi in rem jurisdiction over the farm and authorize its sale. Any excess over Paul’s amount of damages would go to Susan to compensate her for the trouble she had trying the case. A court can try the case and following judgment for Paul, exercise quasi in rem jurisdiction over the farm and authorize its sale. Any excess over Paul’s amount of damages would go to Paul. A court can try the case and following judgment for Paul, exercise quasi in rem jurisdiction over the farm and authorize its sale. Any excess over Paul’s amount of damages would go to the court system for its trouble. A court can try the case and following judgment for Paul, exercise quasi in rem jurisdiction over the farm and authorize its sale. Any excess over Paul’s amount of damages would be split between Susan and Paul. Assuming that Paul obtains a judgment in his favor, he has no rights to proceeds from the farm because it is real property, not subject to seizure. Courts can gain quasi in rem jurisdiction, or attachment jurisdiction, over a defendant’s property unrelated to the plaintiff’s claim. Any excess proceeds are returned to the owner. Will a plaintiff be allowed to assert jurisdiction over a defendant in the plaintiff’s state for a cause of action arising out of the defendant’s website? It depends on the nature and quality of commercial activity that an entity conducts over the Internet. Yes, for any type of action. Yes, but only if the defendant consented to jurisdiction in the plaintiff’s home state. Yes, but only if the defendant has actually physically been in the plaintiff’s home state within the 180 days prior to the filing of the complaint. No, not under any circumstances. Which of the following is true regarding state and federal court jurisdiction? State courts begin with exclusive jurisdiction until a federal court intervenes. In all cases, state courts have concurrent jurisdiction with the federal courts. Federal courts begin with exclusive jurisdiction until a state court intervenes. In all cases, state courts have exclusive jurisdiction unless the state’s Supreme Court grants jurisdiction to a federal court in the state. In some cases, state courts have exclusive jurisdiction; in some cases, state courts have concurrent jurisdiction with the federal courts; and state courts also have the power to hear all cases not within the exclusive jurisdiction of the federal court system. State courts have the power to hear all cases not within the exclusive jurisdiction of the federal court system; state courts also have exclusive jurisdiction over certain cases; and state courts at times have concurrent federal jurisdiction meaning that both state and federal courts have jurisdiction over a case. Which of the following is true regarding federal jurisdiction? There is no exclusive federal jurisdiction in civil matters. If a case falls within the federal jurisdiction, it may not fall within state jurisdiction. Some cases fall within both federal jurisdiction and state jurisdiction, but there is no exclusive federal court jurisdiction. Some cases fall within both federal jurisdiction and state jurisdiction, but that only occurs in criminal matters. Some cases fall within both federal jurisdiction and state jurisdiction, but the federal court system has exclusive jurisdiction over some cases. Federal courts have exclusive jurisdiction over claims arising under federal statutes that specify exclusive federal jurisdiction; federal courts at times have concurrent federal jurisdiction meaning that both state and federal courts have jurisdiction over a case. Over which of the following does the federal court system have exclusive jurisdiction? Admiralty cases only Bankruptcy cases only Copyright cases only None of the above Admiralty, bankruptcy, and copyright cases The federal court system has exclusive jurisdiction over very few cases: admiralty cases, bankruptcy cases, federal criminal prosecutions, lawsuits in which one state sues another state, claims against the United States, and cases involving federal copyrights, patents, or trademarks. Which of the following is a court’s power to hear certain kinds of cases? Subject-matter jurisdiction In kind jurisdiction In personam jurisdiction In loco jurisdiction In area jurisdiction Which of the following is needed for diversity-of-citizenship? Only that the plaintiff not reside in the same state as the defendant. Only that the plaintiff reside in the same state as the defendant. Only that the controversy concerns an amount in excess of $75,000. Only that the controversy concerns an amount in excess of $100,000. The plaintiff and the defendant reside in different states and the controversy concerns an amount in excess of $75,000. A diversity-of-citizenship case must satisfy two conditions: (1) The plaintiff(s) does (do) not reside in the same state as the defendant(s), and (2) The controversy concerns an amount in excess of $75,000. For purposes of diversity-of-citizenship, where does a corporation reside? The state of incorporation only. The state in which the corporation has its principal place of business only. The state in which the corporation has its principal place of business and the state of incorporation. Any state in which the corporation does business. Any state in which the corporation has done business within the last five years. The plaintiff can file the case in federal court initially, or the defendant can transfer the case to federal court by exercising her right of removal if the case is initially filed in state court. Assume a plaintiff files a case in the state court that could also have been filed in the federal court. Does the defendant have any choice in the matter? The defendant has a right to move the case to federal court. The defendant can have the case moved to federal court only if federal jurisdiction question is involved. The defendant can have the case moved to federal court only if the state trial court judge grants permission. The defendant can have the case moved to federal court only if the plaintiff’s filing expenses in state court are paid by the defendant. The defendant has no choice, and the case will stay in state court. The plaintiff can file the case in federal court initially, or the defendant can transfer the case to federal court by exercising her right of removal if the case is initially filed in state court. Which of the following is typically an appropriate venue in a lawsuit? Only the trial court where the defendant resides. Only the trial court where the plaintiff resides. Only the location where the dispute occurred if the lawsuit focuses on a particular incident. Both the trial court where the defendant resides and the trial court where the plaintiff resides. The trial court where the defendant resides and also the location where the dispute occurred if the lawsuit focuses on a particular incident. Usually, the trial court where the defendant resides is the appropriate venue; if the focus of the case is a particular incident, the trial court where the dispute occurred is an appropriate venue. Billy knows that he can bring his case against Bob in a state court in Tennessee. He is unsure, however, of which county in which to proceed. Which of the following address the proper county? In personam jurisdiction Venue Subject-matter jurisdiction Diversity jurisdiction Long-arm jurisdiction Once a court is in the proper court system, venue determines which trial court in the system will hear the case. What are the trial courts in the federal court system called? U.S. district courts U.S. circuit courts Federal circuit courts Federal jurisdictional courts Preemptory courts In the federal court system, the trial courts, or courts of original jurisdiction, are the U.S. district courts. How many circuits does the U.S. Court of Appeals have? 6 50 12 10 13 Assuming there are no vacancies, how many U.S. Supreme Court justices are there? 9 5 15 8 7 Which of the following is true of the Supreme Court in Japan? It consists of 13 justices. It hears at least 100 cases per year. Because of the Japanese emphasis on youth, justices are usually no more than 40 years old. There is no chief justice. None of the above are true. The Supreme Court of Japan, located in Tokyo, consists of 15 justices, including one chief justice. Because the justices ascend from lower courts, they are usually at least 60 years old. Because proving the unconstitutionality of a law is extremely difficult, the full bench generally hears fewer than 10 cases annually. Assume you know that Robert has told a lie about a friend of yours, Yolanda. You tell Yolanda that she should sue Robert for defamation, but she has no interest in that. Can you sue as the plaintiff on behalf of Yolanda? Yes, so long as you give any money received to Yolanda. Yes, but only if Yolanda signs a permission slip at the court. Yes, but only if the dispute is for an amount under $25,000. No, because there is no venue. No, because you have no standing. For a person to have standing, the outcome of a case must personally affect him or her. Which of the following is true regarding state courts of appeal? States only have an intermediate court of appeal if there is no state Supreme Court. In states that do not have an intermediate court of appeal, appeals go to the federal court of appeals. In states that do not have an intermediate court of appeal, there is no right of appeal to any court. All states in this country have intermediate courts of appeal. Not all states have intermediate courts of appeal; in those states, appeals go to the state court of last resort. The requirement ensures that courts do not render advisory opinions. Attachment Subject-matter jurisdiction Case or controversy In rem In personam Bob sued Jane over a motor vehicle accident. Bob and Jane settled the case prior to the trial for $1,000. The lawsuit is now . Ripe Moot Cased Standed Remanded A case is ripe if a judge’s decision is capable of affecting the parties immediately. Usually, the issue of ripeness arises when one party claims that the case is moot—in other words, there is no point in the court hearing the case because no judgment can affect the situation between the parties. A[n] is a judgment in favor of the plaintiff that occurs when the defendant fails to answer the complaint and the plaintiff’s complaint alleges facts that would support such a judgment. Default judgment Automatic judgment Delineated response judgment Dismissal Pleading judgment A defendant uses a[n] when her or his answer admits that the facts contained in the complaint are accurate but also includes additional facts that justify the defendant’s actions and provide a legally sound reason to deny relief to the plaintiff. Secondary answer Pleading defense Affirmative defense Formal answer Personam answer The plaintiff must provide the defendant in a lawsuit with a copy of the complaint. That process is called . Summons issuance Service of process Service delivery Subpoena delivery In personam service Which of the following is a document that notifies the defendant of the lawsuit and explains that if the defendant does not respond to the lawsuit within a certain period of time, a default judgment will be entered? Complaint Answer Summons Instructional guide Transactional analysis The court may grant a if after reviewing the pleadings, the judge determines that the only reasonable decision is in favor of the moving party. Motion for judgment on the pleadings Motion for summary judgment Motion for sanctions Motion for discovery Motion for production A motion for judgment on the pleadings is a request for the court to consider that all the facts in the pleadings are true and to apply the law to those facts. The court grants the motion if, after this process, it finds that the only reasonable decision is in favor of the moving party. The court may grant a if after reviewing the evidence in the case, there is no factual dispute and one party is entitled to judgment prior to trial. Motion for judgment on the pleadings Motion for summary judgment Motion for sanctions Motion for discovery Motion for production The judge grants a motion for summary judgment if, after examining the evidence, no factual disputes are found. Which of the following are tools of discovery? Interrogatories Depositions Summary motions Both interrogatories and depositions, but not summary motions Interrogatories, depositions, and summary motions Interrogatories are written questions that one party sends to the other to answer under oath. At a deposition, attorneys examine a witness under oath. Which of the following are written questions that one party sends to another to answer under oath? Interrogatories Depositions Inquiries Subpoenas Sworn assertions At a(n) , attorneys examine a witness under oath with a court reporter present. Deposition Interrogatory Inquiry Pre-trial conference Pre-trial mediation Billy, a witness to a motor vehicle accident, is gravely ill with cancer. Pat, who was injured in the accident, would like to preserve his testimony for trial in case he dies before the trial date. What should Pat do? Send interrogatories to Billy. Take Billy’s deposition. Send a request to admit to Billy that the accident was the defendant’s fault. Have a conference with the judge and Billy. There is nothing she can do. The parties may also use depositions when a witness is elderly, moving, or ill such that he may be unavailable at the time of the trial. Amber says at trial that Gwen told her that she saw Tom run the traffic light and hit Christy’s car. On what basis is Amber’s testimony objectionable? It is not objectionable. Hearsay Comprehension Preponderation Familiarity Hearsay is a testimony about what a witness heard another person say. Hearsay is impermissible because the opposing attorney cannot question the person who made the original statement to determine the statement’s veracity. Attorney Candy represents plaintiff Ann who is suing her neighbor for nuisance claiming that the neighbor plays music too late at night. Candy puts Ann on the stand and asks her questions. Candy is involved in which of the following? Direct examination Cross-examination Judicial examination Specific questioning Redirect questioning At a trial, first, the plaintiff’s attorney questions the witness in direct examination. If an appellate judge agrees with the majority’s decision, but for different reasons, the judge may write a opinion. Dissenting Referring Minority Concurring Referencing If a judge agrees with the majority’s decision, but for different reasons, the judge may write a concurring opinion, stating the reasons used to reach the majority’s conclusion. CHAPTER 13: Connect Questions A(n) is defined as "a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty." contract estoppel taint trade secret The Restatement (Second) of contracts defines a contract as “a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty.” Another way to think of a contract is as a set of legally enforceable promises. Which element of the contract consists of the bargained-for exchange or what each party gets in exchange for his or her promise under the contract? Contractual capacity Agreement Consideration Legal object A contract consists of four elements that are necessary for it to exist. These elements are the agreement, the consideration, contractual capacity, and a legal object. Consideration consists of the bargained-for exchange or what each party gets in exchange for his or her promise under the contract. Which element of the contract best describes the legal ability to enter into a binding agreement? Contractual capacity Acceptance Consideration Legal object Contractual capacity is the legal ability to enter into a binding agreement. Most adults over the age of majority have capacity; those under the age of majority, people suffering from mental illness, and intoxicated persons do not. Which of the following can be considered a defense to the enforcement of a contract? Lack of genuine assent Contract formation via the internet Lack of an oral agreement Lack of duress A contract is supposed to be entered into freely by both parties, but sometimes the offeror secures acceptance of the agreement through improper means such as fraud, duress, undue influence, or misrepresentation. In these situations, there is no genuine assent to the contract. Which of the following theories of contracts best explains the existence of a contract on the parties’ outward manifestations of intent and basing its interpretation on how a reasonable person would interpret it? The efficiency theory of contracts The substantive fairness theory The objective theory of contracts The bargain theory of consideration Contract law is based on an objective theory of contracts, which means we base the existence of a contract on the parties’ outward manifestations of intent and we base its interpretation on how a reasonable person would interpret it. Thus, the subjective intent of the parties is not usually relevant. The law of contracts is primarily: civil law. common law. public law. administrative law. Today’s law of contracts actually originated in judicial decisions in England, later modified by early courts in the United States. The law of contracts is primarily common law. Therefore, to find out what the law is, we could go to the Reporters and read the decisions, but it is easier to go to the Restatement (Second) of the Law of Contracts. Which of the following is true of the Uniform Commercial Code (UCC)? It was drafted by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action. UCC is also known as the case law. The UCC became law in each state that adopted it in whole. It was drafted to remedy some of the difficulties created by a patchwork of different laws governing commercial transactions. To remedy some of the difficulties created by a patchwork of different laws governing commercial transactions, the National Conference of Commissioners on Uniform State Laws and the American Law Institute drafted a set of commercial laws that could be applicable to all states. This effort was called the Uniform Commercial Code. A contract for the sale of a good falls under: Article 2 of UCC. common law. Article 2A of UCC. Article 8 of UCC. All contracts are governed by either the common law or the Uniform Commercial Code (UCC). If the contract is for the sale of a good, it falls under Article 2 of the UCC; if it is for anything else, it falls under the common law. A(n) is commonly defined as a promise in exchange for a promise. implied contract unilateral contract promissory estoppel bilateral contract If the offeror wants a promise from the offeree to form a binding contract, the contract is a bilateral contract, commonly defined as a promise in exchange for a promise. As soon as the promises are exchanged, a contract is formed and the parties’ legal obligations arise. A reward is a most common example of: a bilateral contract. a quasi-contract. a unilateral contract. a void contract. In a unilateral contract, the offeror wants the offeree to do something, not to promise to do something. Perhaps the most common kind of unilateral offer is a reward. The unilateral offer calls for an action, not a promise. Which of the following is intended to avoid unjust enrichment? A bilateral contract A quasi-contract A void contract An express contract Quasi-contracts are sometimes called implied-in-law contracts, but they are not actually contracts. Rather, in order to prevent one party from being unjustly enriched at the expense of another, the courts impose contractual obligations on one of the parties as if that party had entered into a contract. A void contract: is in effect not a contract at all, either its object is illegal or it has some defect so serious that it is not a contract. is one that contains all the four legal elements of a contract but the law prohibits the courts from enforcing it. is one in which both parties have the ability to either withdraw from the contract or enforce it. arises not from words but from the conduct of the parties. A void contract is in effect not a contract at all. Either its object is illegal or it has some defect so serious that it is not a contract. Sometimes a contract may be valid yet unenforceable when a law prohibits the courts from enforcing it. The statute of frauds requires that certain contracts must be evidenced by writing before they can be enforced A contract is if one or both parties has the ability to either withdraw from the contract or enforce it. voidable unenforceable void valid A contract is voidable if one or both parties have the ability to either withdraw from the contract or enforce it. If the parties discover the contract is voidable after one or both have partially performed, and one party chooses to have the contract terminated, both parties must return anything they had already exchanged under the agreement. A recognizance: is an agreement by the issuer to pay another party a sum of money on receipt of an invoice and other documents. arises when a person acknowledges in court that he or she will perform some specified act or pay a price upon failure to do so. is an unconditional written promise to pay the holder a specific sum of money on demand. arises when a person makes an informal contract to pay the holder a specific sum of money at a certain time. A recognizance arises when a person acknowledges in court that he or she will perform some specified act or pay a price upon failure to do so. A bond used as bail in a criminal case is a recognizance. The person agrees to return to court for trial or forfeit the bond. Which of the following is true of the rules that guide the interpretation of contracts? If the contract contains ambiguity, the judge should interpret it considering the interests of the drafter. If there is a conflict between general terms and specific ones, the general terms apply. If there is a conflict between preprinted and handwritten terms, the preprinted ones prevail. If numerals and numbers written out in words conflict, the written words prevail. While interpreting contracts, if there is a conflict between preprinted and handwritten terms, the handwritten ones prevail. If numerals and numbers written out in words conflict, the written words prevail. If there is a conflict between general terms and specific ones, the specific terms apply. The term “consideration” in relation to contracts involves parties acting in an ethical manner. True False Consideration is the bargained-for exchange or what each party gets in exchange for his or her promise under the contract. The Restatement of the Law Second, Contracts is not actually the law itself. True False The Restatement (Second) is not actually the law itself, although judges frequently cite it because it is an authoritative statement of what the law is. Whether a contract is bilateral or unilateral depends upon what response the offeror expects from the offeree. True False If the offeror wants a promise from the offeree to form a binding contract, the contract is a bilateral contract, commonly defined as a promise in exchange for a promise. In a unilateral contract, the offeror wants the offeree to do something, not to promise to do something. Today, courts hold that once an offeree begins performance, the offeror must hold the offer open for a reasonable time to allow the offeree to complete the performance. True False Quasi-contracts are actual contracts. True False Quasi-contracts are sometimes called implied-in-law contracts, but they are not actually contracts. If a quasi-contract is imposed, the amount of damages for a breach is based upon the fair market value of any service provided to the defendant. True False In order to recover under quasi-contract, there is no requirement that enrichment be unjust. True False There are limits to the quasi contract doctrine; specifically, the enrichment must be unjust. If a contract is valid, then it is enforceable. True False Sometimes, a contract may be valid yet unenforceable when a law prohibits the courts from enforcing it. Any contract that is not a formal contract is an informal contract, also called a simple contract. True False Any contract that is not a formal contract is an informal contract, also called a simple contract. Informal contracts may in fact be quite complex, but they are called “simple” because no formalities are required in making them. In the employer/employee context, the purpose of a covenant not to compete is to restrict what an employee may do after leaving a company. True False Which of the following was the result in the Case Opener in which Hallmark claimed that an arbitration ruling against a former employee should be upheld? The former employee was barred from proceeding in court because of the binding arbitration clause. The former employee was barred from proceeding in court based on the statute of limitations which expired while she was pursuing her remedies in arbitration. The former employee was allowed to proceed in court because she had exhausted her remedies in the arbitration arena. The former employee could proceed with an action in court because there was no consideration for the arbitration agreement and, therefore, no valid agreement. The former employee could proceed with an action in court because, as a matter of law, arbitration agreements are barred in the arbitration context. According to the court, “because there was no consideration from Hallmark, there was no binding contract to submit disputes to arbitration.” A[n] is a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty. Contract Offer Consideration Acceptance Legal object Which of the following consists of an offer by one party and an acceptance of the terms by another party? Legal object Agreement Coherence Alliance Concurrence The agreement consists of an offer by one party, called the offeror, to enter into a contract, and an acceptance of the terms of the offer by the other party, called the offeree. The person who makes an offer is called an . Offeree Offeror Agreeor Agree Inquiror The person who agrees to the terms of an offer by another party is called the . Offeree Offeror Agreeor Agree Inquiror Which of the following is a definition for consideration? Being cordial in the negotiation of contracts. Refraining from unethical behavior in the negotiation of contracts. Being cordial and refraining from unethical behavior in the negotiation of contracts. A bargained-for exchange. A contract negotiated in person as opposed to by telephone or e-mail. Consideration is the bargained-for exchange or what each party gets in exchange for his or her promise under the contract. Which of the following represents the legal ability to enter into a binding agreement? Majority Emancipation Contractual knowledge Contractual capacity Informed consent Which of the following are examples of people who do not have the capacity to enter into legally binding contracts? Those under the age of majority. People suffering from mental illness. Intoxicated persons. People under the age of majority and people suffering from mental illness, but not intoxicated persons. People under the age of majority, people suffering from mental illness, and intoxicated persons. Which of the following references the requirement that a contract not be either illegal or against public policy? Consideration Capacity Legal object Illegal prohibition Ethical requirement The term “legal object” means that to be enforceable, the contract cannot be either illegal or against public policy. Which of the following represents a lack of genuine assent? Acceptance secured through fraud. Acceptance secured through undue influence. Acceptance secured through misrepresentation. Acceptance secured through fraud or undue influence but not through misrepresentation. Acceptance secured through fraud, undue influence, or misrepresentation. Sometimes, the offeror (the party proposing the contract) secures acceptance of the agreement through improper means such as fraud, duress, undue influence, or misrepresentation. In these situations, there is no genuine assent to the contract, and the offeree (the person who agreed to or accepted the contract) may be able to raise that lack of genuine assent as a defense to enforcement of the agreement. An attorney who says that a contract lacks “the proper form” is typically referencing which of the following? The agreement lacked a proper offer. The contract lacked a proper acceptance. The contract lacked consideration. The contract lacked a writing. The contract lacked both an appropriate offer and an appropriate acceptance. Contract law is said to be based on a[n] theory, meaning that the existence and interpretation of the contract is based on the outward manifestations of intent by the parties. Subjective Objective Interpretive Appearing Unilateral As a general rule, the intent of the parties is not relevant when determining whether a contract exists; rather, what is relevant is how they represented their intent through their actions and words. Objective Subjective Unilateral Comprehensive Considered If a misunderstanding between the parties exists, and as a result of that misunderstanding the parties do not really come to a meeting of the minds, there is no contract. Mutual Unilateral Comprehensive Subjective Reasonable Which of the following are the two most important sources of contract law? Case Law and the Restatement of Law. Case Law and the Uniform Commercial Code. The Uniform Commercial Code and the Convention on Contracts for International Sales of Goods. Case Law and the Convention on Contracts for International Sales of Goods. The Convention on Contracts for International Sales of Goods and the Restatement of the Law, Contracts. Today’s law of contracts originated from judicial decisions in . France Italy Spain England Switzerland Today’s law of contracts actually originated in judicial decisions in England, later modified by early courts in the United States. The law of contracts is primarily law. Comprehensive Statutory Common Restated Modified Which of the following was propounded by prominent legal scholars, recruited by the American Law Institute? The Restatement of the Law Second, Contracts. The Convention on Contracts for the National Sales of Goods. Common Law. Common Law and the Convention on Contracts for International Sales of Goods. The Convention on Contracts for the National Sales of Goods and the Restatement of the Law Second, Contracts. Prominent legal scholars, recruited by the American Law Institute, organized the principles of the common law of contracts into the original Restatement of the Law, Contracts. The compilation has been revised and published as Restatement of the Law Second, Contracts. Which of the following is the reason the Uniform Commercial Code was drafted? Different states had different laws governing contracts which did not result in a smooth flow of interstate commerce. Some states had no law governing contracts. Federal law governing contracts was difficult to apply. The Uniform State Act on laws was not working The Restatement of the Law Second, Contracts was not being evenly and fairly applied. Which of the following articles are parts of the Uniform Commercial Code relevant to contracts? 2 and 2A 3 and 4 4 and 1B 5 and 8 6 and 10 A part of the Uniform Commercial Code relevant to contracts is Article 2, which governs contracts for the sale (exchange for a price) of goods (tangible, movable objects). Also relevant to contract law is UCC Article 2A, which governs contracts for the lease of goods. All contracts can be categorized as either or . Unilateral, complete Unilateral, trilateral Bilateral, trilateral Unilateral, bilateral Bilateral, complete A contract is commonly defined as a promise in exchange for a promise. Unilateral Trilateral Complete Bilateral Classified Harry promises to pay Frank $2,000 for a used car. At what point is there a binding contract? When the agreement is made. When the money is paid. When the car is delivered. Ten days after the car is delivered and approved. Twenty days after the car is delivered and approved. As soon as promises are exchanged, a contract is formed and the parties’ legal obligations arise. In a(n) contract, the offeror wants a performance to form the contract. Trilateral Bilateral Unilateral Complete Anticipatory Which of the following have all their terms clearly set forth in either written or spoken words? Implied contracts Express contracts Liquidated contracts Bilateral contracts Unilateral contracts In which of the following does a contract arise not from words but from the conduct of the parties? Implied contracts Express contracts Liquidated contracts Bilateral contracts Unilateral contracts Which of the following is sometimes referred to as an implied-in-law contract? Quasi-contracts Express contracts Implied-in-fact contracts Express contracts and implied-in-fact contracts Express contracts and quasi-contracts Which of the following is the most likely measure of recovery when a quasi-contract is involved? The amount set forth in the contract. The fair market value of the matter involved. The wholesale price of any good involved. The amount sought by the plaintiff in the Complaint. Damages will be computed the same way as they are computed for any other contract. In situations in which the court imposes a quasi-contract, the amount awarded will probably be based on fair market value. [n] contract is one that contains all the legal elements of a contract. Voidable Executed Formal Valid Approved A valid contract is one that contains all the legal elements of a contract. A valid contract may be when there is some law that prohibits the courts from enforcing it. Executed Executory Unenforceable Novated Condoned Which of the following is in effect not a contract at all? A voidable contract An executory contract An implied contract An executed contract A void contract A contract is if one or both of the parties have the ability to either withdraw from the contract or enforce it. Voidable Executory Implied Executed Void Which of the following contracts are usually voidable? Contracts entered into as a result of fraud. Contracts entered into as a result of duress. Contracts entered into as a result of undue influence. Contracts entered into as a result of fraud or duress, but not undue influence. Contracts entered into as a result of fraud, duress, or undue influence. Contracts entered into as a result of fraud, duress, or undue influence may be voided by the innocent party. Once all the terms of the contract have been fully performed, the contract is said to be . Executory Executed Anticipatory Ended Stopped As long as some of the duties under a contract have not yet been performed, the contract is considered . Executory Executed Anticipatory Ended Stopped Which of the following is an example of a formal contract? Contracts under seal. Executed contracts. Letters of credit. Contracts under seal and also letters of credit. Contracts under seal, letters of credit, and also executed contracts. The Restatement (Second) of Contracts identifies the following four types of formal contracts: (1) contracts under seal, (2) recognizances, (3) letters of credit, and (4) negotiable instruments. The reference to comes from the days when the contract was literally sealed by a piece of soft wax into which an impression was made. Implied-in-fact contracts Implied-in-law contracts Contracts under wax Contracts under seal Contracts under pressure How many states still allow a contract without consideration to be enforced if it is under sea Five Eight Ten Twenty Thirty A(n) arises when a person acknowledges in court that he or she will perform some specified act or will pay a price upon failure to do so. Contract under seal Voidable contract Recognizance Implied-in-fact Informal contract A is an agreement by the person who issues a letter to pay a sum of money on receipt of an invoice and other documents. Letter of agreement Letter of credit Letter of acknowledgement Negotiated credit instrument letter Letter of simple contract Which of the following are written documents signed by a party that makes an unconditional promise to pay a specific sum of money on demand or at a certain time to the holder of the instrument? Negotiable instrument Informal contracts Simple contracts Letters of credit Formal contracts Which of the following states that if a writing, or term in question, appears to be plain and unambiguous on its face, its meaning must be determined from the four corners of the instrument without resort to intrinsic evidence, with the words being given their ordinary meaning? The Interpretation Rule The Simple Rule The Understandable Rule The Plain Meaning Rule The Comprehensive Rule What was the result on appeal in the case of D.L. Peoples Group, Inc., v. Hawley, in which heirs of the defendant’s deceased employee claimed entitlement to workers’ compensation benefits based on a contract of employment entered into in Florida by the deceased employee, but the trial court ruled that Florida law was inapplicable? Because the last act necessary for the formation of the contract occurred in Florida, Florida workers’ compensation law applied. The workers’ compensation law of Florida was inapplicable because the last act necessary for the formation of the contract occurred in a state other than Florida. The workers’ compensation law of Florida applied because the defendant performed most of his work in Florida. The workers’ compensation law of Florida was inapplicable because the defendant performed most of his work outside of Florida. Florida workers’ compensation law applied because the contract at issue specifically designated the application of Florida law. Because the last act necessary to complete the agreement was performed in Florida, the contract was made in Florida. Accordingly, Florida workers’ compensation law was applied. CHAPTER 14: Connect Questions Which of the following is true of the intent by the offer or to be bound by an agreement? The courts interpret intent to contract, when the offeror is clearly joking or speaking in anger. The courts interpret intent to contract by the party’s outward manifestations and internal thought processes. The courts interpret intent to contract from the offeror’s internal thought processes. The courts interpret the parties’ words and actions the way a reasonable person would interpret them. The first element of the offer is intent. We interpret contracts using an objective standard, meaning the courts are concerned only with the party’s outward manifestations of intent, not internal thought processes. The courts interpret the parties’ words and actions the way a reasonable person would interpret them. Which of the following can be considered an offer? An invitation to negotiate An expression of possible interest in an exchange A bid An auction with reserve An invitation to negotiate or an expression of possible interest in an exchange is not an offer because it does not express any willingness to be bound by an acceptance. When a firm or government entity requests bids for a construction project, the request is just an invitation for contractors to make offers. The bids, however, would be offers. Which of the following is true of auctions? If an auction is with reserve, the auctioneer must accept the lowest bid. If nothing is stated to the contrary in the terms of the auction, an auction is presumed to be without reserve. In an auction with reserve, the seller is treated as making an offer to accept the highest bid and therefore must accept it. If an auction is with reserve, the auctioneer may refuse to sell the item if he is not satisfied with the size of the highest bid. If nothing is stated to the contrary in the terms of the auction, an auction is presumed to be with reserve, which means that the seller is merely expressing intent to receive offers. If an auction is without reserve, the auctioneer must accept the lowest bid; if it is with reserve, the auctioneer may refuse to sell the item if he or she is not satisfied with the size of the highest bid. Which of the following must be present for an offer to have a legal effect? Invitation to negotiate Definiteness Invitation to offer Communicating the intention to make an offer Under the common law, the terms of the offer must be definite and certain. In other words, all the material terms must be included. The material terms allow a court to determine damages in the event that one of the parties breaches the contract. They include the subject matter, price, quantity, quality, and parties. Ben overhears Adam’s offer to sell his cat to Shirley for $50. Under these circumstances: Ben is acting as Shirley’s agent in accepting the offer. Ben cannot form a contract with Adam by accepting the offer to Shirley. Ben can form a contract and accept the offer to Shirley, ignoring the element of communication. Ben can neither accept the offer made to Shirley nor make a new contract with Adam. Under the given circumstances, Ben cannot form a contract with Adam by accepting the offer to Shirley. If he says to Adam, “I’ll give you $50 for your cat,” he is not accepting the offer but, rather, is making a new offer. The offer must be communicated to the offeree or the offeree’s agent. Only the offeree (or his agent acting on his behalf) can accept the offer. In a(n) contract, the offeree gives the offeror a piece of consideration in exchange for holding the offer open for the specified period of time. option adhesion aleatory void An offeree who wishes to ensure that an offer will in fact be held open for a set period of time may do so by entering into an option contract with the offeror. In an option contract the offeree gives the offeror a piece of consideration in exchange for holding the offer open for the specified period of time. An offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer is: a solicitation. a rejection. a revocation. a counteroffer. A counteroffer is defined by the Restatement as “an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.” A counteroffer terminates the original offer. Jason sends Sara a letter offering to mow her yard every week during the summer for the price of $20 per week. Sara tells Jason she would indeed like him to cut her grass every week this summer but will pay him only $15 each week. Sara makes a(n): counteroffer. rejection. solicitation. revocation. Which of the following would terminate an offer without the awareness of the termination event by the offeree? An option contract Incapacity of the Offeror Physical inability of the offeree to perform Promissory estoppel An offer terminates immediately if the offeror dies or loses the legal capacity to enter into the contract, even if the offeree does not know of the terminating event. If the parties had already entered into an option contract to hold the offer open for a set period of time, however, the administrator of the offeror’s estate or the guardian of the offeror must hold the offer open until it expires in accordance with the option contract. Which of the following indicates that the terms of the acceptance must reflect the terms of the offer? The mailbox rule A counteroffer The mirror-image rule An adhesion contract When a bilateral contract is being formed under the common law, the mirror-image rule applies to the acceptance. The mirror-image rule says that the terms of the acceptance must mirror the terms of the offer. If they do not, no contract is formed. Instead, the attempted acceptance is a counteroffer. Amy offers to paint Louis’s house for $1000. The offer was complete and certain as to all material terms. The offer stated that acceptance by telephone was required. Within a reasonable time, Louis e-mailed Amy his acceptance. Which is a true statement about this situation? Louis has not accepted as required by the offeror and there is no contract. Louis has accepted because a telephone call is a reasonable means of acceptance. Louis has not accepted the offer within a reasonable time, so the contract does not exist. Louis has accepted the offer, but can terminate the offer anytime during the contract period. An offeror has the power to control the means by which the acceptance is communicated, so if the offeror specifies that only a certain means of communication will be accepted, then only an acceptance by that means forms a valid contract. If no means of communicating the acceptance is specified, any reasonable means is generally acceptable. Which of the following is true of the mailbox rule? It provides that both acceptance and revocation is valid when the offeree places it in the mailbox. It applies to instantaneous communications. It provides that a revocation is valid when the offeree places it in the mailbox. It provides that a revocation is effective only when the offeree receives it. The mailbox rule provides that, an acceptance is valid when the offeree places it in the mailbox, whereas a revocation is effective only when the offeree receives it. The mailbox rule is not applicable when there is instantaneous communication, such as over the phone, in person, or by telex. Which of the following is true of an authorized means of communication? The means by which the offeree can communicate acceptance to the offeror cannot be implied from the facts and circumstances surrounding the communication. A reasonable means of communication is acceptable, though the offer specifies that acceptance must be communicated by a specific mode. The means by which the offeree can communicate acceptance to the offeror can be expressly stated in the offer. E-mail must be used as a means of communication, if no mode of communication is specified in the offer. The means by which the offeree can communicate acceptance to the offeror may either be expressly stated in the offer, which is called an express authorization, or be implied from the facts and circumstances surrounding the communication of the offer to the offeree. If the offer merely authorizes certain modes of acceptance but does not condition acceptance on the use of those modes, use of an unauthorized means of acceptance, the acceptance is: void. not effective upon receipt by the offeror. effective upon dispatch. not effective until it is received by the offeror. Sometimes a rejection is dispatched, but before it is received, the acceptance is communicated to the offeror. The rejection: is effective on dispatch. is not effective until it is received. is valid and the contract will be terminated. is illegal. Courts interpret contracts using an objective standard. True False We interpret contracts using an objective standard, meaning the courts are concerned only with the party’s outward manifestations of intent, not internal thought processes. Only the offeree to whom an offer is directed can accept the offer. True False Only the offeree (or his agent acting on his behalf) can accept the offer. Once an offer is made, an offeror has no right to terminate it before receiving a reply. True False The offeror is said to be the “master of his or her offer” and, as such, can revoke it. An offer by a retailer to purchase seasonal goods from a wholesaler would not lapse sooner than an offer to purchase goods that could easily be sold all year long. True False What constitutes a reasonable amount of time for an offer to remain open varies, depending on the subject matter of the offer. An offer by a retailer to purchase seasonal goods from a wholesaler would lapse sooner than an offer to purchase goods that could be easily sold all year long. There are a limited number of circumstances under which silence can be an acceptance. True False There are a few situations in which silence can mean acceptance. If the subject matter of an offer is destroyed, the offer terminates after 10 days or notice of the death to the offeree, whichever comes first. True False If an offeree makes a mistake and sends an acceptance to the wrong address, there is an acceptance upon dispatch. True False If the subject matter of the offer is destroyed or becomes illegal, the offer immediately terminates. An “instructed authorization” occurs if the means by which an acceptance can be communicated to the offeror is expressly stated in the offer. True False If the offeree makes a mistake and sends the acceptance to the wrong address, there is no acceptance on dispatch. If an acceptance is received after a rejection is received, the acceptance is still valid. True False The means by which the offeree can communicate acceptance to the offeror may be expressly stated in the offer, which is called an express authorization. Under the Mailbox Rule, a valid contract has been formed if a rejection is dispatched, but before it is received, the acceptance is communicated to the offeror. True False What was the result in the Opening Case in which the plaintiff attempted to buy a jet from Pepsi for Pepsi points and some additional funds? The plaintiff prevailed, and Pepsi had to sell the jet as offered because Pepsi failed to specifically reserve details of the offer to a separate writing. The plaintiff prevailed, and Pepsi had to sell the jet as offered because Pepsi’s advertisement was considered an offer which the plaintiff validly accepted. The plaintiff prevailed, and Pepsi had to provide the jet as offered because Pepsi did not revoke the offer soon enough. The plaintiff did not prevail because the jet was unobtainable as a military aircraft. The plaintiff did not prevail because Pepsi reserved the details of the offer to a separate writing, and Pepsi had the authority to reject the plaintiff’s offer to purchase. In the Pepsi case, the court found that the commercial could not be regarded as sufficiently definite to be an offer, because it specifically reserved the details of the offer to a separate writing, the catalog. Which of the following is the first element of a contract? An agreement An intent An offer An acceptance A writing The first element of a contract is the agreement, which is made up of an offer and an acceptance. Constance asks Kathy if Kathy will sell her used business book for $50. What is the status of the negotiation? No offer has been made. An offer has been made, but it may be revoked prior to acceptance. An offer has been made that may not be revoked prior to acceptance. A contract has been entered into. A contract has been entered into, but it may be set aside at the option of either party. An invitation to negotiate or an expression of possible interest in an exchange is not an offer because it does not express any willingness to be bound by an acceptance. If nothing is stated to the contrary in terms of an auction, an auction is presumed to be . Without controls With controls Without reserve With reserve Without qualifications If nothing is stated to the contrary in the terms of the auction, an auction is presumed to be with reserve. In an auction , the seller is treated as making an offer to accept the highest bid. Without controls With controls Without reserve With reserve Without qualifications The terms of a contract are those terms that would allow a court to determine what the damages would be in the event that one of the parties breaches the contract. Important Significant Material Adequate Identifiable The material terms of a contract allow a court to determine damages in the event that one of the parties breaches the contract. Which of the following terms would be considered material terms? Subject matter Price Quantity Subject matter and price but not quantity Subject matter, price, and quantity Material terms include the subject matter, price, quantity, quality, and parties. In which of the following ways can an offer terminate? Revocation by the offeror only. Revocation by the offeror, or rejection or counteroffer by the offeree only. Revocation by the offeror, rejection or counteroffer by the offeree, or destruction of the subject matter. Only by revocation by the offeror after it has been held open for five days. Only by revocation by the offeror after it has been held open for ten days. Termination of an offer can occur in one of five ways: revocation by the offeror, rejection or counteroffer by the offeree, death or incapacity of the offeror, destruction or subsequent illegality of the subject matter of the offer, or lapse of time or failure of other conditions stated in the offer. Which of the following refers to the right of an offeror to revoke an offer? The offeror is the “controller of his offer.” The offeror is the “master of his offer.” The offeror is the “proponent of his offer.” The offeror is the “adjudicator of his offer.” The offeror is the “arbiter of his offer.” If a person wishes to ensure that an offer will in fact be held open for a set period of time, the person may do so by entering into a[n] contract with the offeror. Clear Explicit Unrevokable Option None of the above As a general rule, when is revocation effective? When it is mailed by the offeror. When it is received by the offeree. One day after it is made. Two days after it is made. Three days after it is made. Which of the following is true regarding the termination of an offer based on a rejection? Regardless of how long an offeror states that an offer will be held open, once the offeree rejects it, the offer is terminated. Even on rejection, an offer is not terminated until the expiration of the time period for which it was originally to remain open. An offer must remain open for at least two days before it is terminated following a rejection by an offeree. An offer must remain open for at least three days before it is terminated following a rejection by an offeree. An offer must remain open for at least four days before it is terminated following a rejection by an offeree. Which of the following is an offer made by an offeree to an offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer? A revocation An acceptance A counteroffer A cross offer A bilateral offer If a[n] contract exists, the administrator of an offeror’s estate must hold an offer open until it expires in accordance with the contract. Bilateral Unilateral Complete Option Bilateral or option If the subject matter of an offer is destroyed, the offer . Immediately terminates Is extended for seven days Is extended for fourteen days Is extended for twenty-one days Is extended for thirty days If the subject matter of an offer becomes illegal, what is the result? The offer immediately terminates. There is no effect as long as the offer was made at least one day before the subject matter of the offer became illegal. There is no effect as long as the offer was made at least ten days before the subject matter of the offer became illegal. There is no effect as long as the offer was made at least fifteen days before the subject matter of the offer became illegal. There is no effect as long as the offer was made at least thirty days before the subject matter of the offer became illegal. In the absence of a time condition in an offer, the offer will expire . In forty-eight hours In seven days In thirty days In forty-five days After a reasonable amount of time Which of the following is presumed to be a reasonable amount of time when considering whether an offer has expired? Forty-eight hours. Seven days. Thirty days. Forty-five days. There is no set amount of time, and what constitutes a reasonable amount of time varies depending upon the subject matter of the offer. Which of the following is a way in which an offeree can manifest intent to enter into a bilateral contract? By performance only. By a return promise only. By performance or by a return promise. By performance, by a return promise, or by a counteroffer. By a signed writing only. In which of the following ways may an offeree accept a unilateral contract? By making a counteroffer. By signed writing only. By either verbal acceptance or a signed writing. By performance. By performance, by a verbal acceptance, or by a signed writing. Gretchen offers $100 to anyone who can return her lost dog, Sparky. Haley returns the dog and requests the money. Gretchen says that there is no binding contract. Which of the following is true regarding Gretchen’s statement? Gretchen is incorrect because there is a binding bilateral contract. Gretchen is incorrect because there is a binding unilateral contract which Haley accepted by performing. Gretchen is correct because there is no binding bilateral contract. Gretchen is correct because there is no binding unilateral contract. Gretchen is correct because Haley acted incorrectly by her manner of attempted acceptance. If the offer is for a unilateral contract, the offeree can accept by providing the requested performance. When acceptance is examined under the common law, how do the basic requirements for a valid acceptance compare with those for a valid offer? The basic requirements for a valid acceptance are materially different from those for a valid offer. The basic requirements for a valid acceptance parallel those for a valid offer. The basic requirements for a valid acceptance are different from those for a valid offer only because an offer must be in writing. The basic requirements for a valid acceptance are different from those for a valid offer only because an acceptance must be in writing. The basic requirements for a valid acceptance are different from those for a valid offer only because an offer must be revoked immediately but acceptance can be withheld for a reasonable period of time. Under the common law, the basic requirements for a valid acceptance parallel those for a valid offer. There should be a manifestation of intent to be bound by the acceptance to the contract, agreement to the definite and certain terms of the offer, and communication to the offeror. Which of the following is a requirement for a valid acceptance? Manifestation of intent to be bound by the acceptance of the contract. Agreement to the definite and certain terms of the offer. Communication to the offeror. Manifestation of intent to be bound by the acceptance of the contract, agreement to the definite and certain terms of the offer, and communication of that to the offeror. Manifestation of intent to be bound by the acceptance to the contract and communication of a counteroffer to the offeror along with a writing specifying all pertinent terms. Which of the following is false regarding how the Japanese tend to view contracts? The Japanese tend to view contracts as ongoing relationships. The Japanese tend to view contracts as relationships in which parties work with each other to smooth out any problems that arise in performance. The Japanese tend to be suspicious of long, detailed contracts. The Japanese have a preference for flexible contracts. The Japanese do not desire that any terms be left to be decided later. The Japanese tend to view contracts as ongoing relationships in which parties work with each other to smooth out any problems that arise in performance of the contract. Often suspicious of long, detailed contracts, the Japanese have a distinct preference for short, flexible agreements that leave a number of terms to be decided later. Which of the following is true regarding the situation that occurs when a party has made a unilateral offer and another party has begun performance? The offeror has the right to revoke the offer at any time before performance has been completed. The offeror cannot revoke if at least one-third of the performance has been completed. The offeror cannot revoke if at least one-half of the performance has been completed. The offeror cannot revoke if at least three-fourth of the performance has been completed. The offeror must give the offeree a reasonable time in which to complete the performance. Inez, wishing to sell a used business law book, calls Janice and tells her that if she does not hear from her within twenty-four hours, she will assume that Janice wishes to purchase the book for $50. Which of the following is correct regarding the status of the proposed book sale? There is no contract because in this situation silence, cannot be used to form a contract. There can be no contract because the offer was not made in person. There can be no contract because the offer was not made in writing. Janice can avoid there being a contract only if she can prove by preponderance of the evidence that she did not hear about the offer before the stated expiration time. Janice can avoid there being a contract only if she can prove beyond a reasonable doubt that she did not hear about the offer before the stated expiration time. Although there are some exceptions, silence, as a general rule, cannot be used to form a contract. Which of the following sets forth the common law rule that the terms of an acceptance must mirror the terms of an offer? The Matching Rule The Complete Rule The Mirror-image Rule The Exact Rule The Parallel Rule Which of the following is generally true if no means of communicating an acceptance is specified in an offer? The acceptance must be in writing. The acceptance must be made verbally either by telephone or in person. No valid contract may be entered into because the offer must specify a means by which to accept. Acceptance may be made by any reasonable means. Acceptance must be made orally or in writing within twenty-four hours. Which of the following provides that an acceptance is valid when it is placed in the mailbox? The Acceptance Rule The Contract Rule The Reasonable Rule The Mailbox Rule The Contract Legality Rule Which of the following provides that a revocation is effective only when received by the offeree? The Acceptance Rule The Contract Rule The Reasonable Rule The Mailbox Rule The Contract Legality Rule Tina tells Barry that she will mow his yard for the summer for $800. Barry thinks about it and drops a note in the mail to Tina telling her that he rejects her offer. He thinks about it, however, and calls her to tell her that he accepts before she receives his rejection. Which of the following is true under the mailbox rule? The offer was no longer outstanding because of the rejection. Barry could not accept verbally. Barry validly accepted, but his acceptance was revoked when Tina received the rejection. The acceptance was invalid because the mailbox rule requires that the time of payment be specifically set forth before an acceptance is formalized. The acceptance is valid, and the rejection has no effect. Sometimes, a rejection is dispatched, but before it is received, the acceptance is communicated to the offeror. In that case, a valid contract has been formed because the rejection is not effective until it is received. Which of the following is true regarding the Uniform Commercial Code? It does not affect the making of an agreement and only applies after an agreement is formed. It applies only in situations not addressed at all by the common law. It applies only to clarify common law in situations in which the common law is unclear. It applies in all situations involving agreements. Some elements of a contract under the common law have been modified under the UCC for contracts for the sale of goods. Which of the following is true regarding distinguishing an offer from an invitation to negotiate? Whether an offer in fact existed is a question of law. Whether an offer in fact existed is a question of fact. Whether an offer in fact existed is a mixed question of law and fact. Whether an offer in fact existed depends solely on whether the alleged offer included a specific price. Whether an offer in fact existed depends solely on whether an acceptance of the alleged offer was made immediately so that the offeror knew he or she was bound. Prudence, a mean business law teacher, offers $50 to any student who will mow her lawn. Sam goes right over and begins mowing. Just before he finishes, Prudence goes over and tells him that she revokes her offer. Which of the following is true regarding Sam’s entitlement to payment? Sam is not entitled to payment because a bilateral contract was involved that could only be accepted by full performance prior to revocation. Sam is not entitled to payment because a unilateral contract was involved that could only be accepted by full performance prior to revocation. Sam is entitled to only a proportional recovery based on the amount of work he had done prior to the revocation because Prudence always retained the right to validly revoke. Sam is entitled to recover because a unilateral contract was involved, and he was entitled to a reasonable amount of time in which to complete the job. Sam is entitled to recover because a bilateral contract was involved, and he was entitled to a reasonable amount of time in which to complete the job. The offeror has the right to revoke the offer at any time before it has been accepted. This rule is slightly modified with respect to unilateral offers so that if one party has begun performance, the offeror must give the offeree a reasonable time to complete it. When buying software on the Internet, Molly clicks “OK” on an agreement governing the transaction and providing that disputes will be arbitrated. Which of the following is true regarding that type of agreement? Molly will not be bound in most states because of state laws prohibiting such agreements. Molly will not be bound unless she verbally confirmed the agreement with a company representative. Molly will not be bound because of a federal law making all such agreements invalid. Molly will not be bound because of a federal law approving some agreements of that type but making arbitration clauses contained therein invalid. None of the above is true. Which of the following is true regarding the Uniform Electronic Transactions Act? It eliminates all effects of the mailbox rule. It provides that offers may not be accepted electronically but otherwise retains aspects of the mailbox rule. It provides that acceptances may not be made electronically but otherwise retains aspects of the mailbox rule. It seems to create an electronic version of the mailbox rule. None of the above because there is no such act. CHAPTER 15: Connect Questions is what a person will receive in return for performing a contract obligation. Confirmation Obligation Consideration Forbearance Consideration is required in every contract. It is what a person will receive in return for performing a contract obligation. Consideration can be anything, as long as it is the product of a bargained-for exchange. In a business context, it is often (but not always) money. Joseph agrees to purchase Mary’s car for $1,000. For Mary, Joseph’s payment of $1,000 is: an advance. a forbearance. an obligation. a consideration. Consideration is what a person will receive in return for performing a contract obligation. Consideration can be anything, as long as it is the product of a bargained-for exchange. Here, Joseph agrees to purchase Mary’s car for $1,000. Joseph’s payment of $1,000 is the consideration Mary will receive for the car. Title to and possession of the car are the consideration Joseph will receive in exchange. A promise to stay in a job until a particular project is complete is an example of: a benefit to the promisor. a detriment to the promisor. a promise to do something for no consideration. a promise to refrain from doing something. Which of the following can be considered an example for a detriment to the promisee? A promise to your football coach to refrain from riding your motorcycle during football season even though you love riding it. A promise to stay in a job until a particular project is complete. A promise to cook dinner for your roommate for the next six months. A promise to stop drinking alcohol during exam week. A promise to stay in a job until a particular project is complete can be considered an example for a benefit to the promisor. This is a benefit to the employer. Promissory estoppel occurs when: the other party refrains from relying on the promise. the only way to avoid injustice is to enforce the promise. one party makes a promise without considering the other party’s reliance on it. the other party promised some consideration in exchange. For a promise to be enforced by the courts, there must be consideration. One exception to the rule requiring consideration is promissory estoppel. Promissory estoppel occurs when three conditions are met: one party makes a promise knowing the other party will rely on it, the other party does rely on the promise, and the only way to avoid injustice is to enforce the promise. Brian offers to sell Rachel his skis for $500. Rachel responds, “I’ll look at them in the morning, and if I like them, I’ll pay you.” At this point, she has not committed to doing anything. This is an example of: a novation. an illusory promise. a compromise. a promise. The above case is an illusory promise since Rachel has not committed to doing anything. An illusory promise is not consideration. Which of the following indicates a promisee’s performance rendered before the promisor’s promise was made? Illusory promise Promissory estoppel Past consideration Part consideration A promise cannot be based on consideration provided before the promise was made. For a promise to be enforceable, there must be bargaining and an exchange. Past consideration is no consideration at all. Which of the following is true of preexisting duty? If unforeseen circumstances cause a party to make a promise regarding an unfinished project, that promise is not a valid consideration. Performance of an existing contractual duty is a good consideration. Performance of a duty one is obligated to do under the law is not good consideration. If a party to a contract agrees to do additional work, the promise to do it is not a valid consideration. There are two parts to the preexisting duty rule: performance of a duty you are obligated to do under the law is not good consideration and performance of an existing contractual duty is not good consideration. A(n) contract is an agreement whereby the buyer agrees to purchase all his or her goods from one seller. requirement unconscionable output adhesion A requirement contract is an agreement whereby the buyer agrees to purchase all his or her goods from one seller. No quantity is stated in the contract. Under common law, such a contract would be void because the buyer has made no commitment and therefore there is no consideration. Which of the following is an agreement whereby the seller guarantees to sell everything he or she produces to one buyer? An aleatory contract An output contract An adhesion contract A requirement contract Mostly, in a liquidated debt: the disputes can be solved by entering into an accord and satisfaction. there is no dispute that money is owed or how much. there is a promise to pay consideration subsequently with the consent of the promisee. there is a dispute about the existence of the debt. Partial payment of a debt may or may not be valid consideration, depending on whether the debt is liquidated or unliquidated. In a liquidated debt, there is no dispute that money is owed or how much. The exception to the above rule regarding liquidated debt occurs when the debtor offers different performance. The promisee offering the promisor his/her asset in full settlement of the debt is an example for this. An unliquidated debt is a debt that: is unenforceable due to lack of consideration. has not been paid in full when settled. involves an honest dispute about the existence or amount of the debt. is due and certain with no dispute about the amount of the debt. In an unliquidated debt, the parties either disagree about whether money is owed or dispute the amount. They can settle for less than the full amount if they enter into an accord and satisfaction. The is the new agreement to pay less than the creditor claims is owed. accord illusory promise satisfaction composition In an unliquidated debt, the parties either disagree about whether money is owed or dispute the amount. They can settle for less than the full amount if they enter into an accord and satisfaction. The accord is the new agreement to pay less than the creditor claims is owed. Which of the following terms best describes a debtor’s payment of the reduced amount during the legal settlement of a disputed claim? Requirement Accord Composition Satisfaction In an unliquidated debt, the parties either disagree about whether money is owed or dispute the amount. They can settle for less than the full amount if they enter into an accord and satisfaction. The satisfaction is the debtor’s payment of the reduced amount. Which of the following is true of an accord and satisfaction? A debtor sending a check with “paid in full” written on it, does not create an accord and satisfaction, according to common law. A debt must be liquidated for an accord and satisfaction to be enforceable. A debtor must pay the amount they have agreed upon in satisfaction. A creditor agrees to accept as full payment, not less than he/she claims is owed, for an accord and satisfaction to be enforceable. Consideration is optional in every contract. True False In a bilateral contract, the consideration for a promise is a completed act. True False An exception to the rule requiring consideration is promissory estoppel. True False An illusory promise is not a consideration. True False As a rule, past consideration qualifies as consideration. True False In some cases, if past consideration was given with expectation of future payment, the court may enforce the promise. True False A promise to do something that you are already obligated to do is generally a valid consideration. True False Performance of a duty you are obligated to do under the law is not good consideration. The UCC permits requirement, but not output, contracts for the sale of goods. True False equirement and output contracts are permitted for the sale of goods. Partial payment of a debt may or may not be valid consideration, depending on whether the debt is liquidated or unliquidated. True False A liquidated debt may be the subject of an accord and satisfaction. True False In an unliquidated debt, the parties either disagree about whether money is owed or dispute the amount. They can settle for less than the full amount if they enter into an accord and satisfaction. Which of the following is what a person will receive in return for performing a contractual obligation? Consideration Acknowledgement Approval Accord Accession Sam promises his uncle, Bob, that he will lose 10 pounds and exercise every day during the spring semester in exchange for having his tuition paid for the fall semester. The uncle agrees; but after Sam has lost 10 pounds and exercised all semester, Bob refuses to pay saying that no contract existed. Which of the following is true? Consideration was present, there was an enforceable contract, and Bob has wrongfully refused to pay. There was no consideration present, and Bob has no obligation to pay. There was no consideration present, but Bob must pay under principles of promissory estoppels. There was consideration present, but Bob is not required to pay because the contract was illusory. There was consideration present, but Bob is not required to pay because Bob did not receive a benefit personally. Consideration may consist of a detriment to the promise. Which of the following are examples of consideration? A benefit to the promisor. A promise to do something. Both a benefit to the promisor and a promise to do something. An accepted offer. A valid counter offer. Consideration may consist of a benefit to the promisor, a detriment to the promisee, a promise to do something, or a promise to refrain from doing something. In a bilateral contract, the consideration for each promise is . A completed act The beginning of action in acceptance, even if it is not complete An acknowledgement A return promise An agreement In a unilateral contract, the consideration for a promise is . Action A return promise An acknowledgement Consideration An agreement Which of the following is an exception to the rule requiring consideration? Promissory agreement Promissory estoppel Quasi estoppel Quasi agreement Promissory performance Which of the following occurs when three conditions are met: one party makes a promise knowing the other party will rely on it; the other party does rely on it; the only way to avoid injustice is to enforce the promise? Promissory agreement Promissory estoppel Quasi estoppel Quasi agreement Promissory performance Which of the following would not be considered an example of consideration? A promise to stay in a job until a particular project is completed. A promise to your football coach to refrain from riding your motorcycle during football season even though you love riding it. A promise to cook dinner for your roommate for the next six months. A promise to stop drinking alcohol during exam week. A promise to pay your employees as required by law. Which of the following is true regarding the adequacy of consideration? Courts generally consider the adequacy of consideration in determining whether to enforce a contract. Courts consider the adequacy of consideration only if something is sold for less than 90% of its market value. Courts consider the adequacy of consideration only if something is sold for less than 80% of its market value. Courts consider the adequacy of consideration only if something is sold for less than 70% of its market value. Courts seldom consider the adequacy of consideration but will do so if fraud is involved. The court does not weigh whether a person made a good bargain. Conversely, if the court believes fraud or undue influence occurred, the court may look at the adequacy of consideration. As discussed in the case of Double AA builders, Ltd. v. Grand State Construction L.L.C., which of the following may be used to necessitate that a subcontractor perform according to the terms of its bid because the contractor has relied on the subcontractor’s bid? Consideration Primary consideration Promissory estoppel Reality estoppel Secondary consideration According to the court, “Promissory estoppel may be used to require that the subcontractor perform according to the terms of its bid to the contractor if the contractor receives the contract award, because the contractor has detrimentally relied on the subcontractor’s bid and must perform for a price based on that reliance.” Which of the following is false under the law in England? England has requirements for consideration. England does not recognize the exception of promissory estoppel. In England, specialty contracts or deeds are an additional exception to the requirement for consideration. In England, deeds are used to create enforceable promises of gifts to charity. In England, a deed is a document that creates a binding obligation between parties without consideration when certain formalities are honored. England has the same requirement for consideration as the United States and even shares the exception of promissory estoppel. Which of the following is true regarding illusory promises? Illusory promises are not consideration. Illusory promises are consideration. Illusory promises qualify as consideration only when past consideration is at issue. Illusory promises qualify as consideration only when promissory estoppel is at issue. Illusory promises are consideration only when a sale of goods is involved. Sam offers Betty his bicycle for $75. Which of the following is an example of an illusory promise on the part of Betty? “I’ll take it.” “I’ll take it if I decide to do so.” “I won’t pay $75, but I will pay $50.” “I’ll take it if you will let me try it out first and the brakes work well.” “I’ll take it if you will buy new tires.” An illusory promise occurs when there is no commitment to do anything. An illusory promise is not a promise at all. For a court to enforce a promise, must offer consideration. Only the offeror Only the offeree Only the acceptee Only the acceptor Both sides Which of the following was the result in the Case Opener in which the attorney sued to recover the value of 3 percent of the defendant’s stock based on the fact that he provided a loan to the defending company, and the directors later promised the stock to him? The court ruled that the attorney was not entitled to the value of the stock because it was offered as a gift. The court ruled that the attorney was entitled to the value of the stock because it was offered as a gift. The court ruled that the attorney was entitled to the value of the stock because it was consideration provided by the company. The court ruled that the attorney was entitled to the value of the stock based on promissory estoppels. The court ruled that the attorney was entitled to the value of the stock both because it was consideration provided by the company and also based on promissory estoppels. Under the , promises based on past consideration may be enforceable to the extent necessary to avoid injustice. Restatement (Second) of Contracts Uniform Commercial Code Restatement (Second) of Remedies Common law Civil law Under the Restatement (Second) of Contracts (a persuasive, though not binding, authority), promises based on past consideration may be enforceable “to the extent necessary to avoid injustice.” In some cases, if past consideration was given with expectation of future payment, the court may enforce the promise. A promise to do something that you are already obligated to do is . Valid consideration because it is illusory consideration Valid consideration only in the employment context Valid consideration because it is past consideration Valid consideration only if a sale of goods is involved Not valid consideration What does the preexisting duty rule mean? Performance of a duty one is obligated to do under the law is not good consideration. Performance of an existing contractual duty is not good consideration. A bilateral contract is not binding without past consideration. Performance of a duty one is obligated to do under the law is not good consideration, and performance of an existing contractual duty is not good consideration. Performance of an existing contractual duty is not good consideration, and a bilateral contract is not binding without past consideration. Performance of a duty you are obligated to do under the law is not good consideration. Yolanda agrees to bathe and groom Wendy’s dog, Fluffy Puff, for $30. Yolanda agreed to the price before seeing Fluffy Puff who is a chubby dog with lots of hair. Yolanda tells Wendy that if she is going to groom Fluffy Puff, the price will be $40. Wendy reluctantly agrees but tells Yolanda that she should not have been surprised that a dog named Fluffy Puff had lots of hair. Yolanda bathes and grooms Fluffy Puff, but Wendy will only pay $30. Which of the following is correct regarding Yolanda’s entitlement to the extra $10? Yolanda is entitled to the extra $10 because a valid bilateral contract existed. Yolanda is entitled to the extra $10 because a valid unilateral contract existed. Assuming the unforeseen circumstances rule does not apply, Yolanda is not entitled to the extra $10 because she had a preexisting duty to bathe and groom Fluffy Puff for $30. Assuming the unforeseen circumstances rule does not apply, Yolanda is not entitled to the extra $10 because Wendy’s promise to pay $30 was illusory. Assuming the unforeseen circumstances rule does not apply, Yolanda is not entitled to the extra $10 because past consideration was involved. Under the preexisting duty rule, performance of an existing contractual duty is not good consideration. Which of the following are exceptions to the preexisting duty rule? Unforeseen circumstances only. Additional work only. Past consideration only. Unforeseen circumstances and additional work, but not past consideration. Unforeseen circumstances, additional work, and past consideration. Sally goes to have her hair trimmed and agrees to pay $40 to the stylist. While there, Sally decides that she would also like highlights. The stylist informs her that highlights will cost an additional $30. Sally agrees to the price, gets the highlights, but refuses to pay the extra amount. What is the likely result in a dispute between Sally and the stylist and why? The stylist will win because she did additional work in exchange for the extra payment; and, therefore, Sally’s promise was supported by valid consideration. The stylist will win because she did additional work in exchange for the extra payment; and, therefore, a valid unilateral contract existed. The stylist will win unless Sally can show that she had previously received both a trim and highlights for $40. If she can prove that she previously received both for $40, then the past expectations rule applies. Sally will win because the stylist had a preexisting duty to have Sally’s hair look as good as possible. Sally will win because there was no valid consideration in exchange for the highlighting. If a party to a contract agrees to do additional work (more than the contract requires), the promise to do it is valid consideration. Under Article of the UCC, an agreement modifying a contract needs no consideration to be binding. One Two Three Five None of the above. There is no such rule in the UCC. Sam, who has a retail clothing store, orders 50 white shirts from XYZ manufacturer. He later calls a representative of XYZ and requests that blue shirts be sent instead. The representative agrees and sends a confirmation. Sam gets white shirts and complains. The XYZ representative says there was no consideration for the contract. Which of the following is the correct resolution of the dispute? Sam is correct because under the UCC, no additional consideration was needed. Sam is correct because a valid unilateral contract existed. The XYZ representative is correct because no additional consideration was provided. The XYZ representative is correct because no valid bilateral contract existed. The XYZ representative is correct because no additional consideration was provided, and no valid bilateral contract existed. Under Article 2 (sale of goods), an agreement modifying a contract needs no consideration to be binding. Mary has a pet shop and orders 50 packages of dog food for puppies from a supplier for a total cost of $1,000. Later she calls the supplier and changes the order to food for adult dogs. When 50 packages of puppy food arrive, Mary complains. The supplier tells her that the modification was not valid because nothing was put in writing. Mary says there was never an agreement that a writing was necessary for a modification. Which of the following is the correct resolution of the dispute? The supplier is correct because modification of orders of over $200 must be in writing. The supplier is correct because modification of orders of over $500 must be in writing. The supplier is correct because modification of orders of over $600 must be in writing. The supplier is correct because modification of orders of over $800 must be in writing. Mary is correct because under the circumstances, there was no requirement of a writing to modify the agreement. Under the UCC, no additional consideration is required for the modification of the agreement to be binding. Moreover, unless stated otherwise, such an agreement need not be in writing. A(n) contract is an agreement whereby the buyer agrees to purchase all goods from one seller. Supply Use Requirement Output Arranged A(n) contract is an agreement whereby the seller guarantees to sell everything he or she produces to one buyer. Supply Use Requirement Output Arranged Which of the following is true of a requirement contract under common law? It is valid so long as there is a writing setting forth the terms signed by the offeror. It is valid so long as there is a writing setting forth the terms signed by the offeree. It is valid so long as there is a writing setting forth the terms signed by the offeror and the offeree. It is valid so long as more than nominal consideration is provided. It is not valid because of the lack of consideration. Under common law, such a contract would be void because the buyer has made no commitment and therefore there is no consideration. Which of the following is true of an output contract under common law? It is valid so long as there is a writing setting forth the terms signed by the offeror. It is valid so long as there is a writing setting forth the terms signed by the offeree. It is valid so long as there is a writing setting forth the terms signed by the offeror and the offeree. It is valid so long as more than nominal consideration is provided. It is not valid because of the lack of consideration. No quantity is stated, and under common law, consideration is lacking. Which of the following is true of a requirement contract under the UCC? It is valid so long as the requirement is made in good faith. It is valid so long as there is a writing setting forth the terms signed by the offeree. It is valid so long as there is a writing setting forth the terms signed by the offeror and the offeree. It is valid so long as more than nominal consideration is provided. It is not valid because of the lack of consideration. Because requirement contracts are valued by merchants under the UCC, they are valid with the limitation that the requirement must be made in “good faith.” The consideration, then, is that the parties act in good faith. Which of the following is true of an output contract under the UCC? It is valid so long as the output is made in good faith. It is valid so long as there is a writing setting forth the terms signed by the offeree. It is valid so long as there is a writing setting forth the terms signed by the offeror and the offeree. It is valid so long as more than nominal consideration is provided. It is not valid because of the lack of consideration. Because output contracts are valued by merchants under the UCC they are valid, with the limitation that the output must be made in “good faith.” The consideration, then, is that the parties act in good faith. Which of the following is true regarding whether an accepted offer to pay part of a debt is consideration? Partial payment is consideration under all circumstances. Partial payment is not consideration under any circumstances. Partial payment is consideration if a liquidated debt is involved. Partial payment is consideration if an unliquidated debt is involved. Partial payment is consideration if either a liquidated or an unliquidated debt is involved. In an unliquidated debt, the parties either disagree about whether money is owed or dispute the amount. They can settle for less than the full amount if they enter into an accord and satisfaction. In a[n] debt, there is no dispute about the fact that money is owed and the amount of money owed. Actual Acknowledged Certain Liquidated Unliquidated In a[n] debt, the parties either dispute the fact that any money is owed or agree that some money is owed but dispute the amount. Disputed Unacknowledged Uncertain Liquidated Unliquidated Which of the following represents an accord and satisfaction? When a dispute over an unliquidated debt is settled and paid for less than the full amount. When a dispute over a liquidated debt is settled and paid for less than the full amount. When a dispute over an unliquidated debt is settled and paid for the full amount. When a dispute over a liquidated debt is settled and paid for the full amount. When a dispute over either an unliquidated or liquidated debt is settled and paid for less than the full amount. In an unliquidated debt, the parties either disagree about whether money is owed or dispute the amount. They can settle for less than the full amount if they enter into an accord and satisfaction. When an accord and satisfaction is at issue, the is the new agreement to pay less than the creditor claims is owed. Satisfaction Accord Both satisfaction and accord Written compromise Written acknowledgement In an accord and satisfaction, the accord is the new agreement to pay less than the creditor claims is owed. When an accord and satisfaction is at issue, the is the payment, by the debtor, of the reduced amount. Satisfaction Accord Both satisfaction and accord Fund transfer Bond In an accord and satisfaction, the satisfaction is the debtor’s payment of the reduced amount. Which of the following is true regarding an accord and satisfaction? When amounts agreed upon are paid, the debt is fully discharged. When amounts agreed upon are paid, the debt is fully discharged except for any late charges due on the initial indebtedness. When amounts agreed upon are paid, the debt is fully discharged except for any interest due on the initial indebtedness. When amounts agreed upon are paid, the debt is fully discharged except for any late charges and any interest due on the initial indebtedness. When amounts agreed upon are paid, the debt is fully discharged except for any late charges or interest due on the initial indebtedness, or attorney fees of the creditor that are due. Which of the following is true under the UCC regarding checks marked “paid-in-full”? If a business inadvertently cashes such a check, the business has 30 days from the date it cashed that check to offer repayment in the same amount to the debtor and avoid an accord and satisfaction. If a business inadvertently cashes such a check, the business has 60 days from the date it cashed that check to offer repayment in the same amount to the debtor and avoid an accord and satisfaction. If a business inadvertently cashes such a check, the business has 90 days from the date it cashed that check to offer repayment in the same amount to the debtor and avoid an accord and satisfaction. If a business inadvertently cashes such a check, the business has 120 days from the date it cashed that check to offer repayment in the same amount to the debtor and avoid an accord and satisfaction. The business has no recourse, and the debt is deemed discharged and satisfied. Which of the following was the result in the case Mast Long Term Care v. Forest Hills Rest Home, covered in the Case Nugget, in which the defendant's rest home claimed it was not bound by an agreement to buy all its drugs not commonly stocked from the plaintiff? The agreement was not enforceable because no price schedule was agreed upon. The agreement was not enforceable because it was an output contract. The agreement was not enforceable because it was a requirement contract. The agreement was enforceable based on promissory estoppel although consideration was lacking for a binding contract. The agreement contained sufficient consideration on the part of the plaintiff and defendant. CHAPTER 16: Connect Questions As a general rule, any contract entered into by a minor is . void valid voidable unilateral Today, in all but three states, a minor is someone under the age of 18. As a general rule, any contract entered into by a minor is voidable by the minor until he or she reaches the age of majority or a reasonable time thereafter. In a contract made by a minor: the minor has the right to disaffirm. siblings of the minor can disaffirm the contract on his/her behalf. parents of the minor can disaffirm the contract on his/her behalf. adult parties to the contract can disaffirm. Minors have the right, until a reasonable time after reaching the age of majority, to disaffirm or void their contracts because their contracts are voidable. It is only the minor who has the right to disaffirm, never the adult with whom the minor entered into the agreement. A(n) occurs when, after reaching the age of majority, the person states orally or in writing that he or she intends to be bound by the contract entered into as a minor. express ratification diaffirmance emancipation implied ratification Once a person reaches the age of majority, he or she may ratify, or legally affirm, contracts made as a minor. An express ratification occurs when, after reaching the age of majority, the person states orally or in writing that he or she intends to be bound by the contract entered into as a minor. Continuing to act in accordance with the contract, such as continuing to make regular payments after reaching the age of majority, constitutes: emancipation. express ratification. forbearance. implied ratification. An implied ratification occurs when the former minor takes some action after reaching the age of majority consistent with intent to ratify the contract. Once a person reaches the age of majority, he or she may ratify, or legally affirm, contracts made as a minor. Most courts find that continuing to act in accordance with the contract, such as continuing to make regular payments after reaching the age of majority, constitutes ratification. If a person has been adjudicated insane and has a guardian appointed, any contract the person attempts to enter into is: voidable. void. valid. unilateral. If a person has been adjudicated insane and has a guardian appointed, that person has no capacity to enter into contracts and any contract he does attempt to enter into is void. Guardians may also be appointed for persons who have been adjudicated habitual drunkards. The guardian has the sole legal capacity to enter into contracts on such a person’s behalf. If a person suffers from delusions that may impair his judgment but he can still understand that he is entering into a contract and understands the contract, his contract is: unenforceable. void. valid. voidable. Persons suffering from a mental illness or deficiency may have full, limited, or no legal capacity to enter into a binding contract, depending on the nature and extent of their deficiency. If a person suffers from mental problems yet still understands the nature of the contract and the obligations it imposes, that person may enter into a binding, legal agreement. Section 16 of the Restatement of Contracts, provides that contracts of an intoxicated person are if the other party had reason to know that intoxication rendered the person unable to understand the nature and consequences of the transaction. void voidable unenforceable valid Section 16 of the Restatement of Contracts, provides that contracts of an intoxicated person are voidable if the other party had reason to know that intoxication rendered the person unable to understand the nature and consequences of the transaction or unable to act in a reasonable manner in relation to the transaction. occurs when a party gives a loan at an interest rate exceeding the legal maximum. Usury Predatory lending Slander Gaming Usury occurs when a party gives a loan at an interest rate exceeding the legal maximum. The legal maximum interest rate varies from state to state, but it is easy to determine the rate of any given state. Almost as widespread as licensing statutes, statutes prohibiting usury are found on the books of nearly every state. Which of the following refers to agreements in which parties pay consideration for the chance, or opportunity, to obtain an amount of money or property? Predatory lending Gambling Defamation Usury The term gambling refers to agreements in which parties pay consideration (money placed during bets) for the chance, or opportunity, to obtain an amount of money or property. Industry officials, however, prefer to use the term gaming. All states regulate gambling. Which of the following is true of Sabbath laws? These laws limit the types of business activities in which parties can legally engage on Saturdays. These laws encourage store operations and all work on the “Lord’s day,” in all states. These laws typically do not apply to contracts for obtaining necessities, anything related to health or survival. According to this law, an executed or fully performed contract created on the “Lord’s day” can be rescinded. Sabbath laws limit the types of business activities in which parties can legally engage on Sundays. In Colonial times, these laws prohibited store operations and all work on the “Lord’s day” (Sunday). Today, these laws vary by state. Some Sabbath laws also make it illegal to enter into any contract on a Sunday. However, an executed, or fully performed, contract created on a Sunday cannot be rescinded. There are exceptions to Sabbath laws. Most states allow the performance of charity work on Sundays. In addition, the laws typically do not apply to contracts for obtaining “necessities,” including prescription medication, food, and anything else related to health or survival. Which of the following refers to a heavily one-sided agreement? An aleatory contract An output contract An express contract An unconscionable contract Heavily one-sided agreements are known as unconscionable agreements. The term unconscionable refers to the fact that the agreement in question is so unfair that it is void of conscience. These are so one-sided that the courts will not make the innocent party be harmed by fulfilling his or her contractual duties. Large differences between cost and price in a sales agreement is an example of: aleatory contract. substantive unconscionability. contract under seal. procedural unconscionability. Substantive unconscionability occurs when an agreement is overly harsh or lopsided. Examples for substantive unconscionability include: large differences between cost and price in a sales agreement and agreements in which one party is prevented from having equal benefit or has little to no legal recourse. The legal principle of means, both parties are equally responsible for the illegal agreement. in pari delicto tu quoque in aequali jure pro hominem When an agreement is deemed illegal, courts will usually label it void. The reason is the legal principle of in pari delicto, which means both parties are equally responsible for the illegal agreement. In that case, it does not make sense for the courts to attempt to salvage the agreement or reward either party. Which of the following is true of severable contracts? They are also known as indivisible contracts. They must be enforced or rejected in their entirety. They require complete performance by both parties. They are like numerous contracts in one. Severable contracts, also known as divisible contracts, contain multiple parts that can each be performed separately and for which separate consideration is offered. In essence, a severable contract is like numerous contracts in one. A(n) requires complete performance by both parties, even if it appears to contain multiple parts. These contracts must be enforced or rejected in their entirety and these are generally unenforceable. adhesion contract severable contract indivisible contract unconscionable contract An indivisible contract, requires complete performance by both parties, even if it appears to contain multiple parts. Indivisible contracts must be enforced or rejected in their entirety. If declaring parts of a contract void substantially alters it, the court is not likely to enforce the remaining portions. Today, married women have been removed from the category of those lacking contractual capacity, although in a few states their capacity to enter into certain kinds of contracts is still limited. True False Both a minor and the adult with whom the minor contracted may disaffirm a contract based upon the minor’s lack of majority. True False It is only the minor who has the right to disaffirm, never the adult with whom the minor entered into the agreement. In all states, parents are responsible for the torts of their minor children. True False In most states, minors, not their parents, are liable for a minor’s personal torts. As a general rule, parents are not liable for contracts entered into by their minor children. True False If a person’s mental deficiencies have resulted in his being adjudicated insane and a guardian has been appointed for him, he has no capacity to enter into contracts; and any contract he attempts to enter into is void. True False For purposes of determining capacity, intoxicated persons include those under the influence of alcohol, but not drugs. True False For purposes of determining capacity, intoxicated persons include those under the influence of alcohol or drugs. A contract of an intoxicated person for necessaries will be enforced for the reasonable value of the necessaries. True False A contract overturned due to having illegal subject matter or being illegal to perform is generally declared voidable. True False A contract overturned for illegal subject matter or for being illegal to perform is generally declared void. All exculpatory clauses are unlawful. True False While businesses closely linked to the public interest cannot enforce exculpatory clauses, not all such clauses are unlawful. In the law, when both parties are equally responsible for an illegal agreement, it is known as in pari delicto. True False Which of the following is an element of a legally binding contract? Inquiry Acknowledgement Capacity Knowledge Affirmance A person who has legal to contract is one who has the mental ability to understand his or her rights and obligations under a contract and, therefore, will presumably be able to understand how to comply with the terms of the agreement. Capacity Understanding Ratification History Consideration A person who has legal capacity has the mental ability to understand his or her rights and obligations under a contract and therefore presumably to comply with the terms. Which of the following is some sort of mental or physical defect that prevents a person from being able to enter into a legally binding contract? Immajority Capacity Chronic illness Incapacity None of the above Incapacity, or incompetence as it is sometimes called, is the possession of a mental or physical defect that prevents a natural person from being able to enter into a legally binding contract. Historically, which of the following were considered people with limited or no capacity? Minors Insane persons Women Minors and insane persons, but not women Minors, insane persons, and married women In most states, a person is given full legal capacity to enter into contracts when he or she becomes before reaching the age of majority. Emancipated Freed Released Employed Either released or employed Which of the following occurs when a minor’s parents or legal guardians give up their right to exercise legal control over the minor, typically when the minor moves out of the parents’ house and begins supporting himself or herself? Ratification Disaffirmance Emancipation Legal release Reaffirmance In most cases, when a minor marries, she or he is considered . Emancipated Freed Released Disaffirmed Either freed or disaffirmed depending on the circumstances Because their contracts are , minors have the right, until a reasonable time after reaching the age of majority, to or avoid their contracts. Void, disaffirm Void, affirm Void, resist Voidable, disaffirm Voidable, affirm Which of the following is the age of majority in Great Britain? 18 19 21 16 None of the above In Great Britain, there is no magical age at which a young person suddenly acquires the legal capacity to enter into a contract. Which of the following is true regarding the obligation of a minor on disaffirmance? In all states, a minor must return any consideration in his control but is entitled to a full refund of any purchase price regardless of the condition of the consideration when returned. In all states, a minor is entitled to a full refund without returning consideration. In all states, a minor must return any consideration in his control, must make restitution, and must pay for any loss in value of the collateral. In all states, a minor only receives a return of half the minor’s investment. The obligations of a minor upon disaffirmance vary from state to state. When must a disaffirmance of a contract based on minority occur? Before or within a reasonable time of the minor reaching the age of majority. Within 30 days of the minor reaching the age of majority. Within 60 days of the minor reaching the age of majority. Within 90 days of the minor reaching the age of majority. Within one year of the minor reaching the age of majority. As a general rule, most states will not allow a minor to disaffirm contracts for which of the following? Life insurance Health insurance Psychological counseling All of the above Life insurance and health insurance, but not psychological counseling Primarily for public policy reasons, in most states, courts or state legislatures have determined that the minor should not have the right to disaffirm contracts for life insurance, health insurance, psychological counseling, the performance of duties related to stock and bond transfers and bank accounts, education loan contracts, child support contracts, marriage contracts, and enlistment in the armed services. Which of the following is the majority rule regarding a minor’s misrepresentation of his or her age? That if a competent party relies on a misrepresentation in good faith, the minor gives up the right to disaffirm the agreement. That the minor must restore the competent party to that party’s precontract position before obtaining the disaffirmance. That the minor may disaffirm but that the competent party has the right to sue the minor in tort and recover damages for fraud. That misrepresentation does not affect the minor’s right to disaffirm the contract. That misrepresentation results in the minor receiving a return of only half the consideration he or she supplied. Which of the following is false regarding contracts for necessaries entered into by minors? A minor cannot disaffirm contracts for necessaries. A minor can disaffirm a contract for necessaries, but the minor will still be held liable for the reasonable value of the necessary. A contract for a necessary is a contract that supplies the minor with the basic necessities of life. The purpose of holding minors liable for necessaries is to ensure that minors are able to obtain the basic necessities of life when their parents will not provide them. Whether something is considered a necessary is related to whether the minor’s parents are willing to provide the item in question for the minor. Technically, minors can disaffirm contracts for necessaries, but they will still be held liable for the reasonable value of the necessary. Which of the following occurs when a person reaches the age of majority and states, either orally or in writing, that he or she intends to be bound by the contact entered in to as a minor? Implied ratification Express ratification Express novation Implied novation Disaffirmance A[n] occurs when a former minor does not specifically state that he affirms a contract entered into as a minor but takes some action that is consistent with intent to ratify the contract. Implied ratification Express ratification Express novation Implied novation Disaffirmance Which of the following is true regarding the ability of persons suffering from a mental illness to enter into a binding contract? Persons suffering from a mental illness never have capacity to enter into a binding contract. Persons suffering from a mental illness have full capacity to enter into a binding contract so long as they do not present a danger to themselves or others. Persons suffering from a mental illness have full capacity to enter into a binding contract so long as they inform the other party that they are in treatment. Persons suffering from a mental illness may have full, limited, or no legal capacity to enter into a binding contract depending on the nature and extent of their mental deficiency. Persons who suffer from a mental illness always have full capacity to enter into a binding contract. Guardians may be appointed for which of the following? Those who are adjudicated insane. Those who are adjudicated habitual drunkards. Those whose judgment has been impaired because of a condition such as Alzheimer’s. All of the above. Those who are adjudicated insane and those whose judgment has been impaired because of a condition such as Alzheimer’s, but not those who are adjudicated habitual drunkards. Which of the following is true if a contract is disaffirmed on the basis of intoxication? Each party to the contract must return the other to the condition he or she was in at the time the contract was entered into. The intoxicated person must be returned to the condition he or she was in at the time the contract was entered into, but that is not true for any other party. Any party other than the intoxicated person must be returned to the condition he or she was in at the time the contract was entered into. So long as the contract was objectively fair, neither party must be returned to the condition he or she was in prior to the time the contract was entered into. So long as the contract was subjectively fair in the opinion of the intoxicated party, neither party must be returned to the condition he or she was in prior to the time the contract was entered into. If the contract is disaffirmed on the basis of intoxication, each party must return the other to the condition he or she was in at the time they entered into the contract. Because does not favor intoxication, the courts tend to be unsympathetic to intoxicated parties and will fairly liberally interpret behavior that seems like ratification as ratifying the contract. Morality Popular opinion Medical literature Religion Public policy Which of the following is true regarding an agreement to commit a crime or a tort? An agreement to commit a crime is enforceable, but an agreement to commit a tort is unenforceable. An agreement to commit a tort is enforceable, but an agreement to commit a crime is unenforceable. An agreement to commit a crime is unenforceable, and an agreement to commit a tort is unenforceable unless a business tort is involved in which case the agreement is enforceable. An agreement to commit a crime is unenforceable except an agreement to commit white collar crime in which case the agreement is enforceable; and an agreement to commit a tort is unenforceable unless a business tort is involved in which case the agreement is enforceable. An agreement to commit a crime is unenforceable, and an agreement to commit a tort is unenforceable. If a legal contract is formed and the subject of the contract then becomes illegal under a new statute, the contract is . Discharged Enforced Disregarded Executed Executory How many states have statutes requiring that people working in certain professions obtain a license before practicing their craft? 50 49 45 30 25 Which of the following is a purpose of licensing statutes? To give the government some control over which people, and how many people, can perform certain jobs. To give the government a source of revenue. To protect the public’s health, safety, and welfare. All of the above. To encourage proper performance and to protect the public’s health, safety, and welfare; but not to give the government an avenue by which to regulate specific industries In addition to the value associated with proper performance, licensing statutes have three main purposes in addition to indicating this value. The first is to give the government some control over which people, and how many people can perform certain jobs. Second, by charging for licenses, the government can obtain revenue. The third purpose of licensing statutes, the protection of the public’s health, safety, and welfare, is related to the public interest. If a licensing statute is intended to protect the public’s health, safety, and welfare, an agreement with an unlicensed professional is typically deemed . Executed Enforceable without a fine Illegal and unenforceable Enforceable but with a fine Usury Which of the following occurs when a party gives a loan at an interest rate exceeding the legal maximum? No enforceable legal violation Interest prohibition Principle reduction Usury Plenary Which of the following is the maximum interest rate? 20% 15% 12% 10% It varies depending on the state involved. How many states engage in at least some regulation of gambling? 50 47 40 35 10 Which of the following is a term for laws that limit the types of business activities in which parties may legally engage on Sundays? Sabbath laws Blue laws True laws Sabbath and blue laws, but not true laws Sabbath laws, blue laws, and true laws Bob is hired to do computer sales for an electronics store. He agrees that if he leaves his employment, he will not work for another computer store within 25 miles for a period of two years. That type of agreement is called a[n] . Covenant not to compete Employment covenant Working covenant Termination agreement Public policy agreement A type of permissible restraints on trade is covenants not to compete in employment contracts. Covenants not to compete in employment contracts are legal in most states, but they must protect a legitimate business interest. The term refers to the fact that an agreement is so unfair that it is void of conscience. Unreasonable Outrageous Unconscionable Unrealistic Unbelievable A party who claims that he or she could not understand contractual terms because of tiny, hard-to- read print on the back of an agreement and the excessive use of legalese is referring to which of the following? Substantive unconscionability Adhesion conscionability Procedural unconscionability Exculpatory clauses An in pari delicto agreement. Procedural unconscionability describes conditions that impair one party’s understanding of a contract, as well as the integration of terms into a contract. These conditions can be anything from tiny, hard-to-read print on the back of an agreement to excessive use of legalese (unnecessarily technical legal language) or even a person’s inability to fully read a contract and ask questions before being required to sign. Which of the following involves overly harsh or lopsided substance in an agreement? Substantive unconscionability Adhesion conscionability Procedural unconscionability Exculpatory clauses An in pari delicto agreement A[n] contract is a contract created by a party to an agreement that is presented to the other party on a take-it-or-leave-it basis. Substantively unconscionable Adhesion Outrageous Procedurally unreasonable Unreasonable An adhesion contract is an agreement presented on a take-it-or-leave-it basis or as the only chance the presented party (the adhering party) will have to enter into it. A statement releasing one of the parties to an agreement from all liability, regardless of who is at fault or what the injury suffered is, would be referred to as a[n] agreement. Substantive agreement Adhesion agreement In pari delicto agreement Exculpatory Res Ipsa In the law, when both parties are equally responsible for an illegal agreement, it is known as . In pari delicto Procedurally unconscionable An adhesion contract A res ipsa contract A state decisis contract Which of the following are contracts that contain multiple parts which can each be performed separately and for which separate consideration is offered? Independent contracts Substantive contracts Adhesion contracts Justifiable contracts Severable contracts Severable contracts, also known as divisible contracts, contain multiple parts that can each be performed separately and for which separate consideration is offered. A[n] contract is one requiring complete performance by both parties, even if it appears as if the contract contains multiple parts. Adhesion Divisible Justifiable Indivisible Independent Which of the following was the result in the case in the text William Cavanaugh v. Margaret McKenna, the case in which the plaintiff was sued for opening a funeral home after she agreed to refrain from doing so in her divorce as part of a covenant not to compete with her ex-husband? That the agreement was invalid because it was not entered into in the context of either an employment agreement or the sale of a business. That the agreement was invalid because it was most analogous to the sale of a business and was unreasonable. That the agreement was valid because it was most analogous to an employment agreement and was reasonable. That the covenant was invalid because it did not contain an explicit time limitation. That the covenant was reasonable and valid and construed liberally because it was most analogous to the sale of a business According to the court: “Here, the covenant not to compete contained within the separation agreement is most analogous to the sale of a business. As such, the covenant not to compete should be construed more liberally.The Court finds that her covenant not to compete in the funeral business in the town of Wilmington for as long as Cavanaugh operates his funeral home there is reasonable in time and space.” CHAPTER 17: Connect Questions Without legal assent, a contract can be: under seal. voidable. unenforceable. void. To make business transactions smoother and more dependable, courts have developed rules about when an assent to do something is a legal assent, that is, a promise the courts will require the parties to obey. Without legal assent, the contract may be voidable. In contract law, is an erroneous belief about the facts of the contract at the time the contract is concluded. a mistake of fact undue influence a mistake of law duress In contract law, a mistake of fact is an erroneous belief about the facts of the contract at the time the contract is concluded. Legal assent is absent when a mistake of fact occurs. Which of the following is true of unilateral mistakes? A unilateral mistake is the result of an error by one party about a material fact. A unilateral mistake generally makes a contract void. Rescission is permitted for all unilateral mistakes. A unilateral mistake resulting from gross negligence would permit a court to invalidate a contract. Mistakes can be unilateral, the result of an error by one party about a material fact, that is, a fact that is important in the context of the particular contract. Because courts are hesitant to interfere when one of the parties has a correct understanding of the material facts of the agreement, a unilateral mistake does not generally void a contract. On rare occasions, however, rescission is permitted for unilateral mistakes. In a mutual mistake: when both parties are mistaken about a current or past material fact, either can choose to rescind the contract. rescission is not permitted. when both parties have mistaken beliefs about the subjective value of an item, the offeror can choose to rescind a contract. the agreement is real and valid and performance of the contract is required. In a mutual mistake, when both parties are mistaken about a current or past material fact, either can choose to rescind the contract. Rescission is fair because any agreement was an illusion: Ambiguity prevented a true meeting of the minds. A(n) results from a false statement about a fact material to an agreement that the person making it believed to be true. fraudulent misrepresentation negligent misrepresentation innocent misrepresentation concealment An innocent misrepresentation results from a false statement about a fact material to an agreement that the person making it believed to be true. The person had no knowledge of the claim’s falsity. He or she lacked scienter. A(n) is a consciously false representation of a material fact intended to mislead the other party. innocent misrepresentation fraudulent misrepresentation concealment negligent misrepresentation A fraudulent misrepresentation is a consciously false representation of a material fact intended to mislead the other party. It is also referred to as intentional misrepresentation. Here, scienter is clear that the factual claim is false or knows there is no basis for it. In some contract negotiations, one party makes a statement of material fact that he/she thinks is true, which he/she could have discovered by using reasonable care. The party has made a(n): concealment. nondisclosure. innocent misrepresentation. negligent misrepresentation. In some contract negotiations, one party makes a statement of material fact that he thinks is true. If he could have known the truth by using reasonable care to discover or reveal it, his statement is a negligent misrepresentation. Active hiding of the truth about a material fact is: negligence. nondisclosure. duress. concealment. Concealment is the active hiding of the truth about a material fact. For fraudulent misrepresentation to be the basis for a contract rescission, the statement of fact need not be an actual assertion. It can also be an act of concealment or nondisclosure. Removing 10,000 miles from the odometer on a car before selling it is an example of: negligence. duress. concealment. nondisclosure. Removing 10,000 miles from the odometer on your car before selling it is an example of concealment. Concealment is the active hiding of the truth about a material fact. is a failure to provide pertinent information about the projected contract. Negligence Duress Nondisclosure Concealment Nondisclosure is a failure to provide pertinent information about the projected contract. The courts have until recently been hesitant to use nondisclosure as a basis for rescinding a contract because it is a passive form of misleading conduct. refers to those special relationships in which one person takes advantage of a dominant position in a relationship to unfairly persuade the other and interfere with that person’s ability to make his or her own decision. Duress Unconscionability Undue influence Privity of contract People bargaining with their attorney, doctor, guardian, or relative are susceptible to being persuaded by unusual pressures unique to that relationship. This is an example of: undue influence. duress. lack of capacity. unconscionability. People bargaining with their attorney, doctor, guardian, relative, or anyone else in a relationship that includes a high degree of trust are susceptible to being persuaded by unusual pressures unique to that relationship. This is an example of undue influence. The essential element of undue influence is the existence of a dominant-subservient relationship. Contracts that result from undue influence are: void. voidable. unenforceable. valid. The assent that results from an undue influence may not be legal consent. The courts may see the undue influence of the relationship as interfering with the free choice required for an enforceable contract. Whatever contracts result from undue influence are voidable. Which of the following occurs when one party is forced into the agreement by the wrongful act of another? Duress Privity of contract Undue influence Duty to retreat Duress is a much more visible and active interference with free will than is undue influence. Duress occurs when one party is forced into the agreement by the wrongful act of another. When one party is forced to enter into a contract by the wrongful threat of another, the contract is voidable by the innocent party due to duress. Unconscionability leads to contracts. valid adhesion illegal aleatory Unconscionability leads to adhesion contracts. When one of the parties has so much more bargaining power than the other that he or she dictates the terms of the agreement, such an agreement can be rescinded on grounds of unconscionability. A mistake of fact is an erroneous belief about the facts of the contract at the time the contract is concluded. True False Mistakes in contract law result from untrue statements made by one party to the contract. True False For fraudulent misrepresentation to be the basis for a contract rescission, the statement of fact need not be an actual assertion. True False A negligent misrepresentation results when the party making the statement would have known the truth about the fact had he used reasonable care to discover or reveal it. True False When a fraudulent misrepresentation is at issue, intent to deceive may not be inferred. True False Intent to deceive can be inferred from the particular circumstances. Nondisclosure involves the active hiding of the truth about a material fact. True False Concealment is the active hiding of the truth about a material fact. Nondisclosure is a failure to provide pertinent information about the projected contract. Scienter is present when the party accused of making the fraudulent assertion believed that the assertion was false or made the claim without any regard for whether it was true or false. True False Undue influence refers to those special relationships in which one person has taken advantage of his or her dominant position in a relationship to unduly persuade the other person and interfere with that person’s ability to make his or her own decision. True False Threatening physical harm or extortion to gain consent to a contract is classified as undue influence. True False Duress occurs when one party threatens physical harm or extortion to gain consent to a contract. Unconscionability is a concept strictly limited today to the sale of goods. True False Although unconscionability has traditionally been limited to the sale of goods under the Uniform Commercial Code, many courts have not followed that tradition. When they see contracts written by one party and presented to the other with the threat to “take it or leave it,” they sometimes extend the idea of unconscionability beyond the sale of goods. Which of the following involves a promise to buy or sell that the courts will require the parties to obey? Bilateral assent A special agreement Legal assent Contractual affirmance Legal affirmance Without legal assent, a contract may be . Unmarketable Unchargeable Chargeable Illegal Voidable When a contract is voidable, it may be . Chargeable Rescinded Deassented Reassented Uncharged A voidable contract can be rescinded, or canceled, permitting the person who canceled the contract to require the return of everything she gave the other party Which of the following was the result on appeal in the Case Opener involving the claim that Michael Jordan owed $5 million based on his agreement to pay the plaintiff’s mother on the premise that he was the father although it was later determined that the child was not his? That the agreement to pay $5 million could be rescinded based on a mistake of fact. That the agreement to pay $5 million could be rescinded based on the mother’s fraud. That the agreement to pay $5 million could be rescinded based on either a mistake of fact or based on the mother’s fraud. That the agreement to pay $5 million could not be rescinded because Jordan was aware of a question about his parentage. That the agreement to pay $5 million could not be rescinded because Jordan waited too long in which to complain about the contract. The trial court agreed with Michael Jordan’s argument regarding a mutual mistake or fraudulent misrepresentation in the contract. Knafel appealed, and the court affirmed the lower court’s decision. Which of the following is false regarding European courts? In general, European courts agree with the reluctance of American courts to interfere with a contract just because the value of the item in question has changed since the agreement. The European courts assume parties have accepted the risk when they made the contract that the value might change later. European courts take a different approach to mistakes about the value of performance of the contract. European courts permit rescission of the contract for a mistake of value when the mistake involves more than 50 percent of the value at the time of the contract. None are false. All the above are true. When a mistake of fact occurs, is absent. Legal coherence Bilateral understanding Joint reasoning Contractual concurrence Legal assent A(n) mistake is the result of an error by one party about a material fact. Unclear Mutual Unilateral Clear Single A unilateral mistake is the result of an error by one party about a material fact, that is, a fact that is important in the context of the particular contract. A(n) mistake is a mistake that is shared by both parties to an agreement. Unclear Mutual Unilateral Clear Single Why is it important to distinguish between unilateral and mutual mistakes? Because it determines which contracts are considered fraudulent. Because it determines which contracts are voidable. Because it determines which contracts lack consideration. Because it determines how much may be awarded in damages under a contract. Because it determines whether punitive damages may be awarded. Because courts are hesitant to interfere when one of the parties has a correct understanding of the material facts of the agreement, a unilateral mistake does not generally void a contract. When both parties are mistaken about a current or past material fact, either can choose to rescind the contract. Rescission is fair because any agreement was an illusion. Although there are some exceptions, a[n] mistake does not generally void a contract. Unclear Mutual Unilateral Clear Single Because courts are hesitant to interfere when one of the parties has a correct understanding of the material facts of the agreement, a unilateral mistake does not generally void a contract. In cases where both parties to a contract are mistaken about either a current or a past material fact, either can choose to the contract. Uphold Confirm Rescind Refute Disclaim When both parties are mistaken about a current or past material fact, either can choose to rescind the contract. Rescission is fair because any agreement was an illusion. George offers to sell Penelope a ring that George found in his yard. He and Penelope look at the ring and decide that they are not sure what it is, probably just a shiny stone. Penelope pays George $10 for the ring. The ring turns out to be a diamond worth much more than $10. George wants the ring back, and Penelope refuses. What is the most likely result? The ring will be returned to George because of mutual mistake. The ring will be returned to George because of unilateral mistake. The ring will be returned to George because of equity. The ring will remain with Penelope unless George can establish that she was negligent in not recognizing the ring’s true value. The ring will remain with Penelope because the parties contracted on the assumption that they did not know the value of the ring. For a mutual mistake to interfere with legal consent, an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement must be present. Here, the parties agreed that the value was unknown when the ring was sold. Which of the following must a mutual mistake involve in order for a mutual mistake to interfere with legal consent? A basic assumption about the subject matter of the contract. A material effect on the agreement. A basic assumption about the subject matter of the contract and an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, but not a material effect on the agreement. A basic assumption about the subject matter of the contract, an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, and a material effect on the agreement. An admission by one of the parties that a misrepresentation occurred. A[n] misrepresentation results from a false statement about a fact material to an agreement that the person making the statement believed to be true. Wrongful Innocent False Misleading Illegal When a person who makes a misrepresentation has no knowledge about the falsity of the claim, it is said that the person lacked . Information Premeditation Planning Plotting Scienter Which of the following is true regarding the effect of an innocent misrepresentation on a contract? It permits the party that was misled by the false statement to rescind the contract. It permits the party who made the false statement to rescind the contract. It permits either the party that was misled by the false statement or the party who made the false statement to rescind the contract. The contract is automatically void and of no effect, and the party who was mislead may recover damages. It permits either the party that was misled by the false statement or the party who made the false statement to rescind the contract, and it also makes the contract void and of no effect. Innocent misrepresentations permit the misled party to rescind the contract. However, because the other party had no intent to mislead, the aggrieved party cannot sue for damages. Which of the following was the result on appeal in the case of Evan Rothberg v. Walt Disney Pictures, the case in the text in which the defendant allegedly used undue influence to obtain a release of employee benefits from a person in the hospital dying of AIDS? The court ruled that the defendant was rightfully entitled to a summary judgment ruling in its favor because there was no direct evidence of legal undue susceptibility on the part of the weaker party. The court ruled that the defendant was rightfully entitled to a summary judgment ruling in its favor because there was no direct evidence of application of excessive pressure by the stronger party. The court ruled that the defendant was subject to summary judgment both because there was no direct evidence of legal undue susceptibility on the part of the weaker party and also because there was no direct evidence of application of excessive pressure by the stronger party. The court ruled that the plaintiff was entitled to recover as a matter of law because there was sufficient proof of undue influence. The court ruled that a jury question was presented as to whether undue influence was present. Regarding the element of excessive pressure by the stronger party, the court noted that in most undue influence cases, such as this case, direct evidence is rarely obtainable and thus the jury must decide the issue on the basis of inferences drawn from all the facts and circumstances. Which of the following is true on appeal regarding the case of Mary W. Scott v. Mid-Carolina Homes, Inc. discussed in the “Case Nugget” in which the plaintiff sued to recover damages after a salesperson allegedly mistakenly refused to sell her a mobile home because of a bent frame but later sold it to someone else? The court refused to find that the defendant had the right to rescind the contract based on the alleged unilateral mistake. The court refused to find that the defendant had the right to rescind the contract because the plaintiff was presumed to know the law and should have realized the nature of the mistake. The court refused to find that the defendant had the right to rescind the contract because the plaintiff had not made a down payment. The court ruled that the defendant had the right to rescind the contract because a unilateral mistake was involved. The court ruled that the defendant had the right to rescind the contract because a mutual mistake was involved. In upholding the award to the plaintiff, the state supreme court explained that a contract may be rescinded for unilateral mistake only when the mistake has been induced by fraud, deceit, misrepresentation, concealment, or imposition of the party opposed to the rescission, without negligence on the part of the party claiming rescission; or when the mistake is accompanied by very strong and extraordinary circumstances that would make it a great wrong to enforce the agreement. Which of the following was the result on appeal in the case of Ronald Jackson and Willa Jackson v. Robert R. Blanchard, Helen M. Blanchard, Maynard L. Shellhammer, and Philip Schlemmer, the case in the text in which the defendants sued the sellers of property after finding well problems, septic discharge problems, and the presence of underground petroleum storage tanks? That problems with the well indicated a fraud on the part of the defendants and that the plaintiffs were entitled to rescission of the contract but that the other complaints failed to establish fraud. That the problems with the well indicated a fraud on the part of the defendants and that the other problems established mutual mistakes any of which justified rescission of the contract. That the plaintiffs were entitled to rescission for the sole reason that the septic discharge problems established a legal violation existing at the time the exchange occurred. That the plaintiffs were not entitled to rescission because they could not establish sufficient damages. That the plaintiffs were not entitled to rescission because they were unable to establish issues material to the parties’ agreement sufficient to establish mutual mistake. In China, which of the following is true regarding the treatment of fraudulent misrepresentations by outsiders? Outsiders have been fined but by law are allowed to continue operation in the country because of the country’s concern with joint ventures. Outsiders have been prohibited from doing further business with Chinese firms but not fined because of the country’s concern with joint ventures. Outsiders are jailed for at least 20 years by law. Outsiders are jailed for at least 10 years, fined heavily, and have all property confiscated. Outsiders have been fined heavily and refused permission to enter into more agreements with Chinese firms. In China, accusations of outsiders’ fraudulent misrepresentation have resulted in heavy fines and even refusals to allow the fraudulent party to enter into any more agreements with Chinese firms. A is a false representation of a material fact that is consciously false and intended to mislead the other party. Negligent misrepresentation Fraudulent misrepresentation Scienter misrepresentation All the above Negligent or fraudulent misrepresentation, but not a scienter misrepresentation Which of the following involves the active hiding of the truth about a material fact? Concealment Nondisclosure Negligence All the above Concealment and nondisclosure, but not negligence Which of the following refers to a failure to provide pertinent information about a projected contract? Concealment Nondisclosure Negligence All the above Concealment and nondisclosure, but not negligence In determining whether a mistake of fact occurred, what of the following is true? Courts look to determine whether a mistake of fact occurred at the time the contract was concluded. Courts look to determine whether a mistake of fact occurred during contract negotiations. Courts look to determine whether a mistake of fact occurred when the initial offer was made. Courts look to determine whether a mistake of fact occurred when an advertisement was made. Courts look to determine whether a mistake of fact occurred after the contract was concluded. Which of the following is present when a party making a false statement claims or implies that he or she has personal knowledge of the accuracy of the assertion? Scienter Intent to deceive Solicitation All the above Scienter and intent to deceive, but not solicitation Which of the following refers to special relationships in which one person has taken advantage of his or her dominant position in a relationship to unduly persuade the other person? Fraudulent misrepresentation Undue influence Pressing dominance Pressing persuasion Relationship dominance Undue influence refers to those special relationships in which one person takes advantage of a dominant position in a relationship to unfairly persuade the other and interfere with that person’s ability to make his or her own decision. Which of the following is found when one party was forced into an agreement by the wrongful act of another? Duress Negligence Fraud All the above Duress and fraud, but not negligence Which of the following is involved in a situation in which a person refuses to perform according to a contract unless the other person either signs another contract with the one making the threat or pays that person a higher price than was specified in the original agreement? Fraudulent duress Contractual duress Negligent duress Economic duress Specific duress Economic duress occurs when one party threatens the other’s economic interests. For instance, a person refuses to perform according to a contract unless the other person either signs another contract with the one making the threat or pays that person a higher price than specified in the original agreement. Mary and Jason discuss the fact that a new teacher is being hired for business law and other changes going on at the school. Jason mentions that he does not yet have a book, and Mary agreed to sell Jason a used business law book for $30 for the upcoming semester. When the new semester begins, the new business law teacher announces that a new business law text will be used that is available in the bookstore. Jason wants a refund. Which of the following is Mary’s best defense? That Jason knew of the change of teacher and bore the risk of mistake. That only a unilateral mistake was involved on Jason’s behalf because Mary was aware of the change and that, therefore, Jason is not entitled to a discharge. That a mutual mistake was involved and that Jason was, therefore, not entitled to a refund. That transactions involving goods are not subject to the defense of mistake. That she did not commit fraud and that, therefore, Jason is not entitled to rescission For a mutual mistake to interfere with legal consent, there must be an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement. Which of the following occurs when a party threatens to file a criminal lawsuit unless consent is given to the terms of a contract? Duress Undue influence Durable fraud Criminal influence Duress and undue influence, but not durable fraud Selma agreed to buy a used car from Hillary for $2,000. Hillary drew up the contract providing that the exchange would occur the next week. Unfortunately, Hillary was not very good with the keyboard and typed in $200 as the price of the car. Selma noticed that the contract said $200, not $2,000, and was very pleased. She signed it without saying anything. When it was time to make the exchange, Selma gave Hillary $200. In response to Hillary’s inquiry regarding an additional $1,800, Selma pulled out the contract and showed her that it said $200. Selma said that there was no mistake on her part because she knew exactly what she was doing and that she thought that Hillary had decided to give her a deal on the car. Which of the following is Hillary’s best argument? That a unilateral mistake was involved and that courts typically allow relief in situations involving unilateral mistakes as opposed to mutual mistakes. That the mistake resulted from a sale of goods, as opposed to the provision of services, and that courts are more likely to grant relief for a mistake when actual physical work is not involved. That because a bilateral contract, as well as a unilateral mistake was involved, most courts would grant relief. That the mistake resulted from an accidental clerical error and that it would be unconscionable to enforce the contract. None of the above because there is no argument that would help Hillary. On rare occasions, rescission is permitted for unilateral mistakes. Rescission is appropriate when the mistake was caused by a clerical error that was accidental and did not result from gross negligence; or the mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous. Which of the following was the result on appeal in the case in the text, Gary W. Cruse and Venita R. Cruse v. Coldwell Banker/Gruber Real Estate, Inc., in which the court examined the liability of a realtor when problems were discovered with a home marketed as “new”? That the realtor had merely engaged in sales talk when marketing the home as new which could not be relied upon by the purchasers. That the plaintiffs were barred from proceeding because they knew that the home builder had occupied the house. That the plaintiffs were barred from proceeding because they signed an “as is” disclaimer. That as a matter of law the plaintiffs were allowed to recover. That a jury question was presented on whether the plaintiffs could have justifiably relied on the defendants’ misrepresentation According to the court, “the evidence establishes that Graben Real Estate misrepresented a material fact and creates a jury question as to whether the Cruses could have justifiably relied upon this misrepresentation in deciding not to closely inspect the house before buying it.” When duress is at issue, the needed for legal consent has been removed by the specifics of the threat. Free will Knowledge Specifics Consideration Realization The injured party makes the case for duress by demonstrating that the threat left no reasonable alternatives and that the free will necessary for legal consent was removed by the specifics of the threat. Which of the following occurs when one of the parties to a contract has so much more bargaining power than the other that he or she dictates the terms of the agreement? Unfairness Cohesiveness Disconnection Unconscionability Unprovable such an agreement can be rescinded on grounds of unconscionability. The resulting contract from an agreement reached because one of the parties has so much more bargaining power than the other that he or she dictates the terms of the agreement is called which of the following? An outrageous contract An out-of-bounds contract An adhesion contract An untrue contract An unaffirming contract Which of the following occurs in Australia whenever an illegitimate threat is made to hold on to goods unless a payment is made or an agreement is entered into? Unconscionable duress Duress of goods Duress of merchandise Duress of trade Unreasonable duress Australia recognizes a special category called duress of goods, which occurs whenever one party makes an illegitimate threat to hold goods unless another party makes payment or enters into an agreement. The reasoning in innocent misrepresentation cases resembles the reasoning in a case. Duress Unilateral mistake Mutual mistake Fraudulent misrepresentation Negligent misrepresentation CHAPTER 18: Connect Questions Which of the following is true of statute of frauds? It does not allow time for careful consideration when entering into a contract by the parties. It attempts to ease contractual negotiations by avoiding writing the contract and other contractual formalities. It prevents parties from entering into contracts with which they do not agree. It prevents unreliable written evidence. One of the main purposes of the statute of frauds is to prevent parties from entering into contracts with which they do not agree. That is, it provides some degree of cautionary protection for the parties, who must carefully consider the terms, agree to them, write them out, and finally, sign the contract. The law assumes that these steps will allow time for careful consideration. Another main purpose of the statute of frauds is to prevent unreliable oral evidence from interfering with a contractual relationship. It attempts to ease contractual negotiations by requiring sufficiently reliable evidence to prove the existence and specific terms of a contract. Which of the following contracts fall within the statute of frauds? Contracts related to negligent misrepresentation Promises made in consideration of marriage Contracts for the sale of goods irrespective of the amount involved Promises related to an interest in acquisition and sale of businesses Only specific types of contracts are within the scope of the statute of frauds and thus required to be evidenced by writing. They are (1) contracts whose terms prevent possible performance within one year, (2) promises made in consideration of marriage, (3) contracts for one party to pay the debt of another if the initial party fails to pay, and (4) contracts related to an interest in land. Which of the following is true of contracts to be in writing whose terms prevent possible performance within one year? The possibility that a contract’s terms could be performed within one year does not remove the contract from the statute’s written requirements. If a contract can possibly be performed within a year, but such performance is highly unlikely, then the contract needs to be in writing to be enforceable. The one-year period begins from the day the contract is entered into. The test for compliance with the one-year rule, considers the possibility of completing the contract in one year as defined by the terms of the contract. The test for compliance with the one-year rule does not consider the likelihood of completing the contract within one year. Rather, it considers the possibility of completing the contract in one year. If a contract can possibly be performed within a year, even if such performance is highly unlikely, then the contract does not need a writing to be enforceable. A(n) is an agreement two parties enter into before marriage that clearly states the ownership rights each party enjoys in the other party’s property. coverture prenuptial agreement alimony nondisclosure agreement A prenuptial agreement is an agreement two parties enter into before marriage that clearly states the ownership rights each party enjoys in the other party’s property. While mutual promises to marry do not fall within the statute of frauds, prenuptial agreements do. A(n) occurs when a party outside a primary agreement promises to fulfill one of the original party’s obligations if the original party fails to fulfill it. privity of contract collateral promise primary obligation illusory promise A secondary obligation occurs when a party outside a primary agreement promises to fulfill one of the original party’s (primary debtor’s) obligations if the original party fails to fulfill it. These secondary obligations are also called secondary promises, collateral promises, or suretyship promises. Contracts that are required to be in writing by the statute of frauds include: contracts predicated on a condition precedent. contracts for the sale of goods irrespective of the amount involved. contracts for mortgage or lease of land and buildings. all promises for the international sale of goods. Contracts transferring other interests in land are within the statute of frauds. Mortgages and leases are within the statute because they are considered transfers of interest in land. The statute requires a writing as evidence of the contract, a claim to an oral contract for the sale of land is not enough to prove such a contract existed. Agreements for a sale in which the total price is $500 or more are required by the UCC, to be recorded in a written contract. This writing need only state the: names of the buyer and seller. method of payment. price of the goods. quantity to be sold. Agreements for a sale in which the total price is $500 or more are required by the UCC, Section 2-201, to be recorded in a written contract or a memorandum. This writing need only state the quantity to be sold; buyer, seller, price, and method of payment do not need to be included. Which of the following is true of the sufficiency of writing required by the statute of frauds? One or several documents can together make up the written agreement. The contract must be signed and the signature needs to be at the end. Actual invoice must be produced in all circumstances when entering into a contract. The written evidence must compulsorily be signed by both the parties. There are no specific requirements for the form of a written contract under the statute of frauds. In fact, one or several documents can together make up the written agreement under the statute. Required elements include the identification of the parties to the contract, the subject matter of the agreement, the consideration (if any), and any pertinent terms. A(n) is a statement made in court, under oath, or at some stage during a legal proceeding in which a party against whom charges have been brought admits that an oral contract existed, even though the contract was required to be in writing. assignment spoliation admission solicitation The statute of frauds allows certain exceptions. These exceptions are admission, partial performance, and promissory estoppel. An admission is a statement made in court, under oath, or at some stage during a legal proceeding in which a party against whom charges have been brought admits that an oral contract existed, even though the contract was required to be in writing. All states except Louisiana and California allow the admission exception. is the legal enforcement of an otherwise unenforceable contract due to a party’s detrimental reliance on an oral contract that within the statute of frauds is required to be in writing. Equitable estoppel Proprietary estoppel Estoppel by convention Promissory estoppel Under certain circumstances, when a party relies on an oral contract that within the statute of frauds is required to be in writing, the reliance can create a situation in which the contract is nevertheless enforceable. Promissory estoppel is the legal enforcement of an otherwise unenforceable contract due to a party’s detrimental reliance on the contract. The common law rule, which makes oral evidence of an agreement inadmissible if it is made before or at the same time as a writing that the parties intend to be the complete and final version of their agreement is the: contract of adhesion. parol evidence rule. mailbox rule. mirror image rule. Parol evidence rule, a common law rule makes oral evidence of an agreement inadmissible if it is made before or at the same time as a writing that the parties intend to be the complete and final version of their agreement. To smooth transactions by limiting the types of evidence admissible in such claims, the courts rely heavily on the parol evidence rule. ‘Parol’ in parol evidence rule means: silence. monetary transactions. speech or words. written agreement. Parol evidence rule, a common law rule makes oral evidence of an agreement inadmissible if it is made before or at the same time as a writing that the parties intend to be the complete and final version of their agreement. Parol in “parol evidence rule” means speech or words, specifically words outside the original writing. The purpose of the parol evidence rule is to: prevent evidence that substantially contradicts the agreement in its written form. include evidence of prior agreements and negotiations. fill in the missing details in a written document. avoid considering spoken and written words extrinsic to the original writing as an evidence. Therefore, evidence of prior agreements and negotiations, as well as contemporaneous agreements and negotiations, is typically excluded under the parol evidence rule. Which of the following statements is true of merger clauses? The merger clauses included in contracts are an attempt by the parties to signal the judges that the written contract is not the final statement of their agreement. All courts consider merger clauses to be conclusive proof of a contract. The merger clauses seek to blend other agreements either into the final agreement or into something explicitly identified as being outside the final agreement. The merger clauses in a contract increase the amount of guesswork courts must do in determining what is the final statement of the agreement. Sometimes, parties take the initiative and, in a merger clause, attempt to signal to judges that the written contract is intended to be the final and complete statement of their agreement. In essence, a merger clause seeks to blend other agreements either into the final agreement or into something explicitly identified as being outside the final agreement. When an entire contract is conditioned on something else’s occurring first, that first event is known as a(n) . constructive condition condition precedent integration clause condition subsequent Evidence of the existence of a condition precedent agreed to orally is admissible, as stated previously, because the contract is not modified by such evidence; rather, its enforceability is called into question. There is federal U.S. legislation titled “Statute of Frauds.” True False There is no federal legislation entitled “Statute of Frauds.” Rather, the statute exists as legislation at the state level. Contracts related to an interest in land fall within the statute of frauds. True False Under the pure dignity rule, contracts that would normally fall under the statute of frauds and need a writing if negotiated by the principal, must be in writing even if negotiated by an agent. True False In some states, under the equal dignity rule contracts that would normally fall under the statute and need a writing if negotiated by the principal must be in writing even if negotiated by an agent.. In some states, a promise to pay a debt that has already been discharged in bankruptcy must be in writing in order to be enforceable. True False Partial performance is an exception to the statute of frauds. True False Although the statute of frauds requires a writing for sales of interests in land, under the partial-performance exception, if the buyer in an alleged contract for the sale of land has paid any portion of the sale price, has begun to permanently improve the land, or has taken possession of it, the courts will consider the contract partially performed and this partial performance will amount to proof of the contract. In order for the statute of frauds to be satisfied, all parties to a contract must sign the writing. True False While it is standard for both parties to sign the agreement, because the writing is being offered as proof of an agreement, only the party against whom action is sought needs to have signed it. If a contract’s terms require that modification be in writing, oral modifications are inadmissible and unenforceable. True False TF The purpose of the parol evidence rule is to prevent attempts to use only oral evidence to prove agreements. True False The purpose of the parol evidence rule is to prevent evidence that substantially contradicts the agreement in its written form. Whenever a written agreement under the statute of frauds contains a serious, and obvious, typographical error, parol evidence is admissible to demonstrate that the error was indeed an error, as well as to set forth the proper term. True False When a court deems a contract integrated, parol evidence is admissible. True False When the courts deem a contract integrated, with some exceptions, parol evidence is inadmissible. Which of the following is false regarding written contracts? Disputes are easier to settle when contractual terms are solidified in writing. The moment of writing allows both parties to reconsider terms and ensure what they desire. In general, written contracts aid in the conduct of smooth business contracts. The idea of requiring a writing comes from an English act. All contracts must be in writing in order to be enforced. Only specific types of contracts are within the scope of the statute of frauds and thus required to be evidenced by a writing. In , the English Parliament passed the Act for the Prevention of Frauds and Perjuries. 1555 1677 1770 1776 1865 Which of the following is false regarding the statute of frauds? It relates to fraudulent contracts. It does not address illegal contracts. It does not exist at the federal level. The statute requires that certain contracts be in writing. It is not a unitary government act. As discussed in the text, a main purpose of the statute of frauds is to prevent unreliable evidence from interfering with a contractual relationship. Hearsay Oral Irrelevant Immaterial Hearsay and irrelevant Which of the following is a type of contract that falls within the scope of the statute of frauds? Contracts whose terms prevent possible performance within one year Contracts involving the provision of services Contracts involving the provision of any goods Contracts involving any debt All of the above Which of the following is a type of contract that falls within the scope of the statute of frauds? Contracts related to an interest in land Promises made in consideration of marriage Contracts related to any lease All of the above Contracts related to an interest in land and promises made in consideration of marriage, but not contracts related to any lease Agreements regarding marriage in which one party is gaining something other than a return on his or her promise to marry are within the statute of frauds and must be in writing. Additionally, within the statute of frauds, “land” encompasses not only the land and soil itself but anything attached to the land, such as trees or buildings; and the statute requires a writing as evidence of the contract. Under the Uniform Commercial Code, contracts for the sale of goods totaling more than must be in writing. $200 $300 $500 $600 $1000 Which of the following is true regarding the statute of frauds requirement involving contracts that cannot be performed within one year? The one-year period begins to run the day after the contract is created, not when the contract is scheduled to begin. Even if it is highly unlikely that a contract will be completed within one year, a contract does not come within the statute of frauds if it could be completed within one year. If a party contracts for lifetime employment, the contract does not have to be in writing in order to be enforceable. Contracts whose performance, based on the terms of the contract, could not possibly occur within one year fall within the statute of frauds. All of the above are true. The one-year period begins the day after the contract is created, not when it is scheduled to begin. The test for compliance with the one-year rule does not consider the likelihood of completing the contract within one year. Rather, it considers the possibility of completing the contract in one year. A contract for lifetime employment does not need to be in writing. A[n] agreement is an agreement two parties enter into before marriage that clearly states the ownership rights each party enjoys in the other party’s property. Preliminary Planned Approved Prenuptial Arranged Which of the following is false regarding the statute of frauds and promises made in consideration of marriage? Agreements regarding marriage in which one party is gaining something other than a return on his or her promise to marry are within the statute of frauds and must be in writing. Mutual promises to marry fall within the statute of frauds. Prenuptial agreements fall within the statute of frauds. A prenuptial agreement is not automatically enforceable just because it is in writing. When one party promises something to the other as part of an offer of marriage, the contract must be in writing to be enforceable. Which of the following is a term for contracts within the statute of frauds involving promises to pay a debt of another if the initial party fails to pay? Secondary obligations Primary promises Primary debts Third-party debts Commercial promises Which of the following are debts incurred in an initial contract? Secondary obligations Primary obligations Secondary promises Collateral promises Suretyship promises Which of the following is an exception as to when a secondary obligation needs to be in writing? The primary-purpose rule The resulting-fact rule The main-purpose rule The delineated rule The personal-obligation standard There is an exception under which a secondary obligation need not be in writing—the main-purpose rule. If the main purpose for incurring a secondary obligation is to obtain a personal benefit, the promise does not fall within the statute and does not have to be in writing. Within the statute of frauds, “land” encompasses not only the land and soil itself but anything to the land. Relating Adjacent Contracted Attached Pertinent Which of the following is false regarding the statute of frauds provision relating to an interest in land? The statute is intended to prevent oral claims to the existence of a contract for the sale of land. The statute requires a writing as evidence of a contract to sell land. A claim to an oral contract for the sale of land is not enough to prove a contract of sale existed. Mortgages are within the statute of frauds. No leases are within the statute of frauds. Contracts transferring other interests in land are also within the statute of frauds. Mortgages and leases are within the statute because they are considered transfers of interest in land. Which of the following are not considered an interest in land within the statute of frauds? Promises to sell crops annually. Agreements between parties for profit sharing from the sale of real property. Boundary disputes that have been settled through the use of land. All of the above. Promises to sell crops annually and agreements between parties for profit sharing from the sale of real property, but not boundary disputes that have been settled through the use of land. Which of the following was the result in the case in the text Shelby’s, Inc. v. Sierra Bravo, Inc., involving the issue of whether an agreement to deposit debris and soil on land and an alleged agreement to build a landing pad and waterway came within the statute of frauds? The court ruled that the agreement did not involve an interest in land and did not come within the statute of frauds. The court ruled that the agreement did involve an interest in land and, therefore, came within the statute of frauds. The court ruled that the agreement did not involve an interest in land but placed it within the statute of frauds in order to prevent injustice. The court ruled that the agreement fell within the statute of frauds but that an oral agreement was sufficient. None of the above. The court stated as follows: The contract in this case was not a “sale,” much less a sale of an interest in lands. Here, there was no transfer of ownership or title. The written agreement gave Appellant [Sierra] permission to deposit debris and soil on Respondent’s land, not the right to do so. The oral contract was for the construction of a waterway and building pad and passed no interest in the land. Which of the following sections of the Uniform Commercial Code addresses the requirement of a writing when a certain amount of goods are sold? 2-201 1-101 3-102 2-305 4-03 Which of the following is needed in order to satisfy the UCC’s requirement for a written document? The contract or memorandum needs only to state the price of the goods. The contract or memorandum needs only to state the quality of the goods. The contract or memorandum needs only to state the quantity to be sold. The contract or memorandum needs to state the price of the goods and the quality of the goods, but not the quantity to be sold. The contract or memorandum needs to state the price of the goods, the quality of the goods, and also the quantity to be sold. Under the in effect in some states, contracts that would normally fall under the statute of frauds and need a writing if negotiated by the principal must be in writing even if negotiated by an agent. Agency fraud rule Statute of agency Equal dignity rule Proportional agency rule Statute of responsibility Which of the following are exceptions to when the statute of frauds would apply although under normal circumstances it would apply? Admissions Partial performance Promissory estoppel All of the above Admission and partial performance, but not promissory estoppel Like most legal rules, the statute of frauds allows certain exceptions. These exceptions are (1) admission, (2) partial performance, and (3) promissory estoppel. There are also exceptions under the UCC. A[n] is a statement made in court, under oath, or at some stage during a legal proceeding in which a party against whom charges have been brought admits that an oral contract existed, even though the contract was required to be in writing. Admission Submission Deposition Interrogatory Confirmation All states except adhere to the admission exception to the statute of frauds. Hawaii and Alaska Louisiana and New York Louisiana and California Kentucky and Florida North Carolina and Montana Under , if the buyer in an alleged contract for the sale of land has paid any portion of the sale price, has begun to permanently improve the land, or has taken possession of the land, the courts will consider the contract partially performed, and this partial performance will amount to proof of the contract. Substantial performance Partial performance Sales substantiation The purchase proof rule The sales proof rule Which of the following involves the legal enforcement of an otherwise unenforceable contract due to a party’s detrimental reliance on the contract? Promissory estoppel Substantial estoppel Promissory rule Reliance rule Promissory reliance Even if they would normally have to be in writing, if applicable criteria are met, oral contracts for goods are enforceable. Retailed Wholesale Collateral Consumer Customized Which of the following are required elements for a writing to be considered sufficient under the statute of frauds? Identification of the parties to the contract. Identification of the subject of the agreement. Identification of the penalties for nonperformance. All of the above. Identification of the parties to the contract and the subject of the agreement, but not penalties for nonperformance. Which of the following is true regarding a signature on a document falling within the statute of frauds? There is no requirement of any signature of either party to satisfy the statute of frauds. Any party required to sign must sign at the beginning of the document. Any party required to sign must sign at the end of the document. Any party required to sign must sign both at the end and at the beginning of the document. So long as it is meant as a signature, a party required to sign may sign at any place on the document. Which of the following parties must sign a document coming within the statute of frauds? The party against whom action is sought The offeror only The offeree only Only a person who has agreed to pay the debt of another Any party to the contract While it is standard for both parties to sign the agreement, because the writing is being offered as proof of an agreement, only the party against whom action is sought needs to have signed it. Sam orally agreed to work as a computer programmer for ABC Co. Brandy, the president of ABC Co. entered into an agreement with Sam regarding his pay, and he signed an employee handbook including a provision that his employment was at will, meaning that at anytime he could quit or the company could discharge him. A month later, Sam received a three-year contract for employment with ABC Co. in the mail incorporating the amount of his salary and other issues he had discussed with Brandy. Sam signed it and mailed it back, but also changed the vacation provision to three weeks instead of one week. Bobby, the human resources manager for ABC Co. called Sam up after Bobby received the agreement and told Sam that the contract was only a draft for discussion purposes and that he was actually firing Sam because he seemed too focused on vacation. Assuming the court follows the reasoning of the court in the dispute discussed in the text involving Michael Gallagher and Medical Research Consultants, which of the following would be the most likely result in the dispute between Sam and ABC Co. if Sam claims he had a three-year contract of employment? ABC Co. will win because even if a three-year oral agreement for employment was made, it would not have been enforceable because the statute of frauds requires that agreements that cannot be completed within one year be in writing. Further, the draft Sam returned was not signed by ABC Co. ABC Co. will win because even if a three-year oral agreement for employment was made, Sam reopened negotiations by altering the later contract to provide that he was to receive three weeks vacation. ABC Co. had not signed that agreement and was free to reject it. ABC Co. will win because as a matter of law, no other document can alter the provisions of an employee handbook. A jury will decide if Brandy orally agreed to a three-year contract; and, if so, Sam gets his job back along with the extra weeks of vacation. As a matter of law, since the contract was sent to Sam, he receives a guarantee of employment for three years; but he does not get the extra weeks of vacation he inserted. This scenario was similar to the Gallagher case in the text in which the court found that even if the company involved had orally agreed to a three-year contract with the plaintiff, it would not have been enforceable because the statute of frauds dictates that agreements incapable of being completed within a year must be in writing. Further, the court noted that according to the statute of frauds, the draft that the employee faxed back to the company was also unenforceable because the party being charged must have signed the document and the company clearly had not. The rule is a common law rule that addresses the admissibility of oral evidence as it relates to written contracts. Oral admissibility Oral evidence Parol evidence Frauds evidence Deficient evidence What does the term “parol” in the “parol evidence rule" mean? Words establishing penalties Speech or words, specifically words outside the original writing Speech only outside the original writing Only another writing outside the original writing Only untrue speech outside the original writing What is a purpose of the parol evidence rule? To restrict oral evidence from being admitted that supports an agreement in its written form. To restrict written evidence from being admitted that supports an agreement in its written form. To restrict oral and written evidence from being admitted that supports an agreement in its written form. To restrict hearsay from being admitted that supports or contradicts an agreement in its written form. To restrict evidence from being admitted that substantially contradicts an agreement in its written form. When may a court rule that parol evidence may be admissible to further the court’s understanding of an agreement? When a court determines that there is significant disagreement regarding the complete and final version of the agreement. When a court determines that a written agreement does not represent a complete and final version of the agreement. When a court determines that there is disagreement between the parties over performance of the agreement once performance has actually started. When a court determines that the plaintiff failed to do sufficient research to determine if signing the agreement was advisable. When a court determines that either party failed to do sufficient research to determine if signing the agreement was advisable. Which of the following is false regarding the parol evidence rule? It is not limited to spoken words. It is a rule of evidence. It relates to substantive legal issues. It is not a unitary concept or rule. It is an amalgamation of different rules and conditions. The parol evidence rule is also not a rule of evidence; rather, it relates to the substantive legal issue of what constitutes a legally binding agreement. The parol evidence rule is also not a rule of evidence; rather, it relates to the substantive legal issue of what constitutes a legally binding agreement. The parol evidence rule applies to writings created at the same time as the written agreement. Writings created at the same time as a written agreement are more readily admitted as part of the written agreement than is oral evidence regarding conditions or terms in the final agreement. As long as contemporaneous written documents do not substantially contradict what is in the final writing, judges can deem these other writings to be part of the final written agreement. All of the above. The parol evidence rule applies to writings created at the same time as the written agreement, and contemporaneous writings are no more likely to be allowed into evidence than oral evidence regarding conditions or terms in the final agreement. Although the parol evidence rule applies to writings created at the same time as the written agreement, these writings tend to be treated differently than prior or contemporaneous oral agreements. That is, the writings are more readily admitted as part of the written agreement than is oral evidence regarding conditions or terms in the final agreement. As long as contemporaneous written documents do not substantially contradict what is in the final writing, judges can use their discretion to deem these other writings part of that agreement. A[n] agreement is a clause parties include in a written agreement within the statute of frauds that states that the written agreement accurately reflects the final, complete version of the agreement. Adhesion Complete Parol Merger Consolidation Which of the following are exceptions to the parol evidence rule? Contracts that have been subsequently modified Contracts conditioned on orally agreed-on terms Contracts that are not final as they are part written and part oral Contracts with ambiguous terms All the above Which of the following are written contracts intended to be the complete and final representation of the parties’ agreement? Complete contracts Integrated contracts Adhesion contracts Bilateral contracts Acknowledged contracts Integrated contracts are written contracts intended to be the complete and final representation of the parties’ agreement. One way parties can indicate their desire to create an integrated contract is through the use of a[n] clause. Complete Merger Adhesion Bilateral Acknowledged CHAPTER 19: Connect Questions occurs when a party to a contract transfers her rights to receive something under the contract to a third party. Novation Assignment Third-party contract Delegation Assignment occurs when a party to a contract—an assignor, transfers her rights to receive something under the contract to a third party—an assignee. When an assignor transfers her rights to an assignee, the assignor legally gives up all rights she had to collect on the contract. Which of the following is true of assignment of contracts? It represents the transfer of duties to assignees. The assignee cannot legally demand performance from the other party to the original contract. The assignor legally gives up all rights he had to collect on the contract, when he assigns his rights to the assignee. Rights cannot be transferred in an assignment. Bob agrees to sell his farm to Joseph for $80,000. He then transfers his right to receive Joseph’s payment to Kelly. This is an example of: third-party beneficiary contract. novation. delegation. assignment. Which of the following is true of the rights of the assignee? An assignee cannot be assigned the rights whose assignment would decrease the obligor’s risk or duties. An obligor cannot raise a defense for nonperformance against the assignee. An assignee cannot decline an assignment under any circumstance. An assignee cannot be assigned the rights to a contract which is personal in nature. The rights to a contract cannot be assigned when the contract is personal in nature, meaning the obligor has promised something specific to the person receiving it. Third parties cannot legally become the recipient in such situations unless the only part of a contract left to be fulfilled is the payment. Delegation refers to: transfer of duties. transfer of duties involving the delegator’s personal expertise. transfer of duties that relieve a delegator of duty to perform. transfer of rights. delegation occurs when a party to a contract—a delegator, transfers his/her duty to perform to a third party —a delegatee, who is not part of the original contract. Where assignments transfer rights to a contract, delegations transfer dutie John contracts with Sara to have her deliver machinery to his factory. Sara then transfer’s her duty to Gary, who delivers the machinery to John. This is an example of: third-party beneficiary contract. novation. assignment. delegation. Which of the following duties can be delegated? Duties in contracts that forbid delegations. Duties that are personal in nature requiring particular skills. Duties that involve delivering goods. Duties for which the delegatee’s performance will vary significantly from the delegator’s. Any nonpersonal duties in a contract can be delegated. For example, delivering goods, mowing a lawn, paying money, and painting a house are all considered nonpersonal duties because they do not require particular skill or expertise and most people could complete them. Thus, they can all be delegated. Michelle contracts with David to clean his house. In exchange, David will pay Michelle’s credit card debt. The credit card company is the: assignee. promisor. delegator. third-party beneficiary. A third-party beneficiary is created when two parties enter into a contract with the purpose of benefiting a third party, called the intended beneficiary. The beneficiary need not be named in the contract, as long as the terms of the contract or events occurring after its creation make it clear who he or she is. A third-party beneficiary: is created when two parties enter into a contract with the purpose of mutual benefit. occurs when a party to a contract, transfers his duty to perform to a third party, who is not part of the original contract. is created when two parties enter into a contract with the purpose of benefiting a third party. occurs when a party to a contract, transfers her rights to receive something under the contract to a third party. A(n) is a third party that benefits from a contract in which the promisor agrees to pay the promisee’s debt. promisor donee beneficiary creditor beneficiary incidental beneficiary There are two types of intended beneficiaries: creditor beneficiaries and donee beneficiaries. A creditor beneficiary is a third party that benefits from a contract in which the promisor agrees to pay the promisee’s debt. A donee beneficiary: is a third party beneficiary who cannot recover the value of the promised performance. is a third-party beneficiary who incidentally benefits from a contract. is a third-party beneficiary to whom a gift of performance is given. is a third-party beneficiary who is no longer a part of an agreement. Third parties who benefit from a contract in which a promisor agrees to give a gift to the third party are donee beneficiaries. The most common form of donee beneficiary contract is life insurance policies. In the will, Jake’s father has named Jake as the owner of his farm and named him as a beneficiary in his insurance policy. Jake is: the assignee by novation. a donee beneficiary. a creditor beneficiary. an incidental beneficiary. Creditor beneficiary can enforce rights against: both the promisor and promisee. only the promisor, in breach of insurance contracts. only the promisor. both the promisor and promisee, only for payment of money. When a donee beneficiary may enforce rights under a contract, he or she may do so only against the promisor because the promisee has no duty to the donee beneficiary. Conversely, creditor beneficiaries may sue the promisor or the promisee for performance because both these parties owe him or her a duty. When the contracting parties do not intend to benefit someone but unintentionally do so, that third party is a(n): incidental beneficiary. promisee. donee beneficiary. creditor beneficiary. When the contracting parties do not intend to benefit someone but unintentionally do so, that third party is an incidental beneficiary. Creditor and donee beneficiaries are both intended beneficiaries, and according to the Restatement, intended beneficiaries have the right to enforce a contract. Which of the following is true of incidental beneficiaries? Beneficiaries benefit from direct reception of contractual performance. Beneficiaries do not have the right to enforce the contract. Contracting parties intended to benefit the third party with their contract. Beneficiaries can enforce their rights under a contract whenever the contract is valid. There is no legally required wording to be used or forms to be filled out for assignments to be valid. True False Most countries do not grant third-party rights to contracts. True False Assignment of personal duties is generally permitted. True False Rights to a contract cannot be assigned when the contract is personal in nature, meaning the obligor has promised something specific to the person receiving it. Russia has modified the Russian Civil Code to reflect the freedom of assignments found in the American Uniform Commercial Code. True False Russia has modified its Civil Code to allow the same freedom of assignments of rights and duties found in the German code. A contract stating “I assign all of my rights under the contract” will generally be construed to be an assignment of rights but not duties. True False When a court cannot clearly tell what the parties intended, it usually considers the assignment to be of both rights and duties. An intended beneficiary is a third party to a contract who is intended to be directly benefited from the contract made by the contracting parties. True False A donee beneficiary is a third party that benefits from a contract in which the promisor agrees to pay the promisee’s debt in return for compensation plus interest. True False Donee beneficiaries are third parties who benefit from a contract in which a promisor agrees to give a gift to the third party. A donee beneficiary is a type of incidental beneficiary. True False Creditor beneficiaries can enforce their rights under a contract whenever the contract is valid. True False A factor that courts consider in determining whether a party is an incidental or intended beneficiary is whether the contract directly states that the third party is the benefiting party. True False Parties not in usually do not have rights to a contract. Acknowledged contract Diverse contract Privity of contract Close contract Privileged contract Parties not in privity of contract (anyone other than the contracting parties) usually do not have rights to a contract. Which of the following is a contractual party who agrees to do something for the other party? Obligor Obligee Assignor Assignee Boundee Which of the following is a contractual party who agrees to receive something from the other party? Obligor Obligee Assignor Assignee Boundee Which of the following occurs when a party to a contract transfers his or her rights to a contract to a third party? Assignment Referral Disgorgement Privity Transfer What is the term for the party to a contract who transfers his or her rights to a contract to a third party? Transferor Transferee Relator Assignor Assignee What is the term for the third party who receives an assignment of contract rights? Transferor Transferee Relator Assignor Assignee Which of the following is false regarding the rights of an assignee and assignor? Assignees essentially fill in for the assignor as the legal recipient of contractual duties. Assignees acquire the same contractual duties as the assignor had. Assignees are offered more protection than assignors. The obligor may raise any of the same defenses for nonperformance against the assignee that he would have been able to raise against the assignor. When an assignor transfers rights to an assignee, the assignor legally gives up all rights he or she previously had to collect on the contract. The assignee is offered no additional protections than the assignor when an assignment is made. Which of the following is needed in order for an assignment to be valid? UCC 2-301 Form UCC 4-305 Form Business 2-547 Form Business 4-298 Form None of the above. No form is required. Which of the following is true regarding oral assignments? In some cases, assignments may be made orally. The UCC requires that assignments be in writing when the amount being assigned is greater than $1,000. Assignments, regardless of the terms, are not covered by the statute of frauds. The UCC requires that assignments be in writing when the amount being assigned is greater than $2,000. Assignments may be made orally, and the UCC requires that assignments be in writing when the amount being assigned is greater than $1,000. Assignments covered by the statute of frauds must be in writing. Because it is difficult to prove the existence of assignments given orally, it is usually suggested they all be in writing. Which of the following is an exception to the general rule that rights to a contract cannot be assigned when a contract is personal in nature? When the only part of a contract left to be fulfilled is the payment. When nothing has been done on the contract at all. When no more than half the contractual duties have been performed. When no more than three-fourths of the contractual duties have been performed. There is no exception because rights to a contract that is personal in nature may generally be assigned. Rights to a contract cannot be assigned when the contract is personal in nature. Third parties cannot legally become the recipient in such situations unless the only part of a contract left to be fulfilled is the payment, because rights to payment can always be assigned. Sally agrees to mow Paul’s yard for $300 for the summer. Paul wishes to assign the contract to his grandmother. Sally objects because Paul’s yard is very small while his grandmother’s yard is over an acre. Which of the following is the correct legal outcome for the dispute between Sally and Paul? Sally will win because Paul’s attempted assignment would increase the duties to which she agreed. Sally will win because all assignments are invalid without the obligor’s consent. Sally will win unless Paul paid her the $300 in advance in which case Paul will win. Paul will win because he may validly assign the contract without Sally’s consent. Paul will win so long as he tells Sally about the assignment prior to the time she begins any performance whatsoever. Rights cannot be assigned when the assignment increases the risk or duties the obligor would face in fulfilling the original contract. When parties include a[n] clause in their contract, the parties are attempting to limit their ability to assign their rights under the contract. Antiobligation Antiassignment Anticontract Severability Integration Which of the following may be assigned even in the presence of an antiassignment clause? Assignments made by operation of law. Assignments for the right to receive monetary payments. Assignments for the right to receive damages for a breach of contract to sell goods or services. Assignments made by operation of law, and assignments for the right to receive monetary payments, but not assignments for the right to receive damages for a breach of contract to sell goods or services. Assignments made by operation of law, assignments for the right to receive monetary payments, and assignments for the right to receive damages for a breach of contract to sell goods or services. Antiassignment clauses do not affect assignments made by operation of law. If a law necessitates an assignment, such as in bankruptcy cases, the assignment is effective regardless of any contractual agreement to the contrary; the right to assign monetary payments cannot be denied; or the right to receive damages for a breach of contract to sell goods or services are unaffected by antiassignment clauses. Additionally, antiassignment clauses are not effective when law or public policy forbids assignments. Which of the following was the result in the case in the text Wesley Locke v. Ozark City Board of Education, in which an umpire was injured by an angry parent and sued claiming that he was an intended third-party beneficiary under a contract the defending board of education had with the Alabama High School Athletic Association requiring police protection which was not provided? The umpire won as a matter of law because of inadequate police protection. The umpire won as a matter of law because he was a third party beneficiary to the contract. The defending school board won as a matter of law because although the umpire was a third party beneficiary to the contract, it had provided adequate protection. The defending school board won as a matter of law because the umpire was not a third party beneficiary to the contract. The case was remanded for trial on the issue of whether adequate police protection was provided Which of the following states that in the case of multiple assignments of the same right, the first party granted the assignment is the party correctly entitled to the contractual right? The first-assignment-in-time rule The last-assignment-in-time rule The English rule The French rule The American rule Most states use the first-assignment-in-time rule, which gives the contractual right to the first party granted the assignment. Which of the following states that in the case of multiple assignments of the same right, the first assignee to give notice of assignment to the obligor is the party with rights to the contract? The first-assignment-in-time rule The last-assignment-in-time rule The English rule The French rule The American rule A minority of states have adopted the English rule, which states that the first assignee to give notice of assignment to the obligor is the party with rights to the contract. A[n] occurs when a party to a contract transfers his or her duty to perform to a third party who is not part of the original contract. Transfer Assignment Delegation Performance Unenforceable occurrence A party to a contract who transfers his or her duty to perform to a third party who is not part of the original contract is called a[n] . Delegatee Delegator Assignor Assignee Transferor A third party, who is not part of an original contract, but to whom duty to perform contained in the original contract is transferred is called a[n] . Delegatee Delegator Assignor Assignee Transferor Bill contracts with Judy to wash her car and then delegates the duty to Paul. Paul fails to wash the car. Which of the following is true regarding Bill’s duty to Judy, if any? Bill has no duty to Judy so long as she did not expressly object to the delegation. Bill has no duty to Judy regardless of whether she objected to the delegation. Bill continues to be bound to Judy to see that her car gets washed. Bill continues to be bound to Judy to see that her car gets washed only if the contract expressly prohibited delegation. Bill continues to be bound to Judy to see that her car gets washed unless he already paid Paul for the job. After making a delegation, the delegator is not relieved of his duty to perform. Paul and Mary have an agreement that Mary will buy Paul’s house. Later Mary orally assigns the right to buy the house to Ally, one of Paul’s former girlfriends. When Ally shows up with the money, Paul says “No way! You ditched me to date Rick. I’m not ever letting you get anything from me!” Assuming promissory estoppels is inapplicable, which of the following is true? Ally can only enforce the assignment if the agreement that Paul and Mary had was in writing. Ally can enforce the assignment. Ally cannot enforce the assignment because it was not in writing. Ally cannot enforce the assignment because Paul did not specifically grant Mary the power to assign the contract. Ally cannot enforce the assignment because assignments to purchase property cannot ever be assigned for public policy reasons. Assignments covered by the statute of frauds must be in writing. Because it is difficult to prove the existence of assignments given orally, it is usually suggested they all be in writing. Which of the following is true regarding assignment of rights in China? Free assignment of rights is permitted. Free assignment of rights is permitted only when a contract with a state authority is involved. Free assignment of rights is permitted only when a contract with a private party is involved unless the contract is one considered “for the good of the people.” Assignment of rights is illegal. When a private party is involved, the assignor must first get the obligor’s approval before an assignment is made. Most centrally planned economies, such as China, permit only limited assignability. When a contract is with the state, approval by the proper state authority must first be obtained unless the contract allows for assignments. If the contract is with a private party, the assignor must first get the obligor’s approval before an assignment can be made. A[n] is created when two parties enter into a contract with the intended end purpose of benefiting a third party. Third-party beneficiary Second-party beneficiary First-party beneficiary Assignment Creditor Beneficiary A[n] beneficiary is a third party to a contract who is intended to be benefited directly from the contract made by the contracting parties. Intended Incidental Preferred Collateral Ancillary The in a third-party beneficiary contract is the party to the contract who made the promise that benefits the third party. Promisee Promisor Obligor Obligee None of the above. There are no third-party beneficiary contracts, only second-party beneficiary contracts. The in a third-party beneficiary contract is the party to the contract who owes something to the promisor in exchange for the promise made to the third-party beneficiary. Promisee Promisor Obligor Obligee None of the above. There are no third-party beneficiary contracts, only second-party beneficiary contracts. Which of the following is a type of intended beneficiary? Creditor Donee Incidental All the above Creditor and donee, but not incidental A[n] beneficiary is a third party who benefits from a contract in which the promisor agrees to pay the promisee’s debt. Creditor Donee Incidental Promised Avowed A[n] beneficiary is a third party who benefits from a contract in which the promisor agrees to give a gift to the third party. Creditor Donee Incidental Promised Avowed Which of the following references the maturing of rights such that a party can legally act on the rights? Absoluting Gelling Forming Vesting Finishing Although an intended beneficiary can enforce rights to a contract, they cannot do so until the rights to the contract vest, or mature such that they can legally act on them. Creditor beneficiaries can enforce their rights under a contract whenever the contract is . Fair Incidental Valid Substantial Recognizable The state of New York does not grant a donee beneficiary the right to enforce a contract unless the promisee is connected to the donee through a relationship. Valid Recognized Substantial Familial Marital When a donee beneficiary may enforce rights under a contract, it may be done so only against the . Promisee Promisor Obligor Promisee and promisor, but not obligor Promisee, promisor, and obligor A[n] beneficiary is one who unintentionally gains a benefit from a contract between other parties. Incidental Creditor Donee Vested Accidental Which of the following is true regarding the rights of an incidental beneficiary to a contract to sue to recover incidental rights? An incidental beneficiary may sue to enforce incidental contractual rights so long as those rights have vested. An incidental beneficiary may sue to enforce incidental contractual rights only if the incidental beneficiary was once a creditor beneficiary. An incidental beneficiary may sue to enforce incidental contractual rights only if the incidental beneficiary was once a donee beneficiary. An incidental beneficiary may sue to enforce incidental contractual rights only if the incidental beneficiary is also a second-party beneficiary. An incidental beneficiary cannot sue to enforce a contract which provided incidental benefits. Which of the following is a consideration of courts in determining whether a person is an incidental or intended beneficiary? The courts ask if a reasonable person in the position of the party in question would believe the contracting parties intended to benefit the party in question. The courts ask if it is substantially certain that the contracting parties intended to benefit the party in question. The courts ask if it can be proven beyond a reasonable doubt that the contracting parties intended to benefit the party in question. The courts ask if the party in question paid something for the rights. The courts ask if the party in question paid at least $500 for the rights. Which of the following factors are considered by the court when determining whether a party is an intended or incidental beneficiary? Whether performance of the contract is done directly to the third party. The third party’s ability to control the specifics of performance of the contract. Whether the contract directly states that the third party is the benefiting party. Whether performance of the contract is done directly to the third party, and the third party’s ability to control the specifics of performance of the contract, but not whether the contract directly states that the third party is the benefiting party. Whether performance of the contract is done directly to the third party, the third party’s ability to control the specifics of performance of the contract, and whether the contract directly states that the third party is the benefiting party. Which of the following is true regarding an assignee’s acceptance of assigned rights? A creditor beneficiary must accept assignment of rights, but there is no requirement that a donee beneficiary do so. A donee beneficiary must accept assignment of rights, but there is no requirement that a creditor beneficiary do so. An assignee must agree to accept assigned rights, and there is a strict protocol for doing so. An assignee may decline an assignment if he has not agreed to it and declines in a timely fashion after learning of it. An assignee may only decline an assignment if a delegation of duties is also involved. CHAPTER 20: Connect Questions A is a particular event that must occur in order for a party’s duty to arise. If the event does not occur, the party’s duty to perform does not arise. condition subsequent constructive condition condition precedent concurrent condition Contracts containing conditions affecting the performance obligations of the parties are called conditional contracts. A condition precedent is a particular event that must occur in order for a party’s duty to arise. If the event does not occur, the party’s duty to perform does not arise. Which of the following is a future event that terminates the obligations of the parties when it occurs? Constructive condition Concurrent condition Condition precedent Condition subsequent A condition subsequent is a future event that terminates the obligations of the parties when it occurs. The conditions may be either implied by law or expressly inserted into the contract by the parties. Which of the following best defines a concurrent condition? It occurs when the parties are required to perform for each other simultaneously. It is a particular event that must occur in order for a party’s duty to arise. It is a future event that terminates the obligations of the parties when it occurs. It is intended to bring about justice and is imposed only when a literal interpretation of the contract would create an injustice. Concurrent conditions occur when each party’s performance is conditioned on the performance of the other. They occur only when the parties are required to perform for each other simultaneously. Parties, discharging their duty by making an offer to perform and being ready, willing, and able to perform is known as a: novation. tender. rescission. breach. In most situations, parties discharge their obligations by doing what they respectively agreed to do under the terms of the contract; this is called discharge by performance. Parties also discharge their duty by making an offer to perform and being ready, willing, and able to perform. This offer of performance is known as a tender. Which of the following occurs when a party unjustifiably fails to substantially perform his obligations under the contract? An anticipatory breach A repudiatory breach A material breach A partial breach A material breach discharges the nonbreaching party from his obligations under the contract. A material breach occurs when a party unjustifiably fails to substantially perform his obligations under the contract. It is often difficult to know when the court is going to determine that a breach is material. In novation: the parties mutually agree to discharge each other from the contract. the original parties and a third party all agree that the third party will replace one of the original parties and that the original party will then be discharged. the parties mutually agree to discharge each other from the contract by substituting a new agreement. the parties agree that one party will perform her or his duty differently from the performance specified in the original agreement. In novation, the original parties and a third party all agree that the third party will replace one of the original parties and that the original party will then be discharged. The original duties remain the same under the contract, but one party is discharged and the third party now takes that original party’s place. A seller, without knowledge of the buyer, changes the price of the contract. Under these circumstances: the contract can be discharged only by mutual agreement. the contract cannot be discharged, but a third party will replace one of the original parties and that the original party will then be discharged. the contract can be discharged by the operation of law due to alteration of contract. parties can discharge their obligations by doing what they respectively agreed to do under the original terms of the contract. The courts wish to uphold the sanctity of contracts. Therefore, if one of the parties materially alters a written contract without the knowledge of the other party, the courts have held that such alteration allows the innocent party to be discharged from the contract. An accord and satisfaction: is used when parties mutually agree to discharge each other from the contract. is used when the parties to the agreement want to replace one of the parties with a third party. is used when parties mutually agree to discharge each other from the contract by substituting a new agreement. is used when one of the parties wishes to substitute a different performance for his original duty under the contract. An accord and satisfaction is used when one of the parties wishes to substitute a different performance for his or her original duty under the contract. The promise to perform the new duty is called the accord, and the actual performance of that new duty is called the satisfaction. damages are foreseeable damages that result from special facts and circumstances arising outside the contract itself. Compensatory Punitive Nominal Consequential Consequential damages are foreseeable damages that result from special facts and circumstances arising outside the contract itself. These damages must be within the contemplation of the parties at the time the breach occurs. Nominal damages: are designed to put the plaintiff in the position he would have been in, had the contract been fully performed. are designed to punish the defendant and deter him and others from engaging in similar behavior in the future. are designed to signify that the plaintiff has been wronged by the defendant. are foreseeable damages that result from special facts and circumstances arising outside the contract itself. In a case where no actual damages resulted from the breach of contract, the court may award the plaintiff nominal damages. The award is typically for $1 or $5, but it serves to signify that the plaintiff has been wronged by the defendant. are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach. Consequential damages Liquidated damages Punitive damages Nominal damages Restitution is: the return of any property given up under the contract. an order requiring that the breaching party fulfill the terms of the agreement. the replacement of one of the parties to a contract. an order prohibiting a person from doing something. Restitution is the return of any property given up under the contract. Restitution and rescission are most frequently awarded in situations in which there is a lack of genuine assent. When a party enters into a contract because of fraud, duress, undue influence, or a bilateral mistake, the contract is voidable and the party who wants out may seek to avoid the contract or, in other words, may seek rescission and restitution. Which of the following can require specific performance? Sale of a car Sale of real estate Anything that can cause irreparable injury Personal service Courts are very reluctant to grant specific performance and will do so only when monetary damages simply are not adequate, typically because the subject matter of the contract is unique. Primarily for historical reasons, every piece of real property is considered unique. Therefore, an order for specific performance would often be the appropriate remedy for the breach of a contract for the sale of a piece of real estate. A(n) is an order either forcing a person to do something or prohibiting a person from doing something. delegation rescission restitution injunction An injunction is an order either forcing a person to do something or prohibiting a person from doing something. Most commonly, injunctions are prohibitions against actions. Such an injunction might be used, for example, as a remedy in a contract case involving a personal service. Jim, an employee with special skills who has agreed not to work for a competitor may be enjoined from breaching his contract and working for that competitor by: rescission. novation. restitution. injunction. An injunction is an order either forcing a person to do something or prohibiting a person from doing something. Most commonly, injunctions are prohibitions against actions Under ordinary circumstances, a party’s duty to perform the promise agreed to in a contract is absolute. True False Contractual conditions may be expressly inserted into the contract by the parties but may not be implied by law. True False Contracts containing conditions affecting the performance obligations of the parties are called conditional contracts. The conditions may be either implied by law or expressly inserted into the contract by the parties. Substitution of a party to a contract is called guaranteeing. True False Sometimes the parties to the agreement want to replace one of the parties with a third party. This substitution of a party is called novation. The most frequently awarded damages are compensatory damages. True False In a case where no actual damages result from the breach of a contract, the court may award the plaintiff nominal damages. True False Liquidated damages will be enforced based upon the free-will concept of contracts even if the liquidated damages amount is unreasonable. True False The courts generally enforce a liquidated damages clause as long as they appear to bear a reasonable relationship to what the actual costs will be. If the amount specified is so unreasonable as to not seem to bear any logical relationship to foreseeable costs, the courts declare the clause a penalty clause and do not enforce it. Rewriting a contract to reflect what the parties had agreed on is referred to as rescission. True False Reformation occurs when a written contract does not reflect the parties’ actual agreement or there are inconsistencies in the contract, and the written document is rewritten to reflect what the parties had agreed on. When an enforceable contract does not exist, the court may grant a recovery based on quasi- contract in order to prevent an injustice from occurring. True False When an enforceable contract does not in fact exist, the court may grant a recovery based on quasi- contract; that is, the court may impose a contract like obligation on a party to prevent an injustice from occurring. Restitution is the return of any property given up under the contract. True False A specific performance is an order requiring that the breaching party fulfill the terms of the agreement. True False Specific performance is sometimes called specific enforcement. It is an order requiring that the breaching party fulfill the terms of the agreement. When a party’s obligations under a contract are terminated, the party is said to be . Finished Terminated Completed Discharged Recoursed By which of the following may a party’s contractual obligations be terminated? Performance The failure of a condition to occur Operation of law All the above Performance and the failure of a condition to occur, but not operation of law Discharge may occur through performance, the happening of a condition or its failure to occur, material breach by one or both parties, agreement of the parties, and operation of law. Contracts containing conditions affecting the performance obligations of the parties are called contracts. Uncertain Conditional Unreasonable Voidable Void Which of the following are types of conditions? Precedent Subsequent Concurrent All the above Precedent and subsequent, but not concurrent A condition is a particular event that must occur in order for a party’s duty to arise. Precedent Subsequent Concurrent At large Certain A condition is a future event that terminates the obligations of the parties when it occurs. Precedent Subsequent Concurrent At large Certain Which of the following conditions occur when each party’s performance is conditioned on the performance of the other? Precedent Subsequent Concurrent At large Certain Which of the following describes conditions explicitly stated in the contract? Express Implied Conditional Concurrent Both express and conditional Express conditions are explicitly stated in the contract and are usually preceded by words such as conditioned on, if, provided that, or when. Which of the following describes conditions that are not explicitly stated but are inferred from the nature and language of the contract? Express Implied Conditional Concurrent Both express and conditional The parties’ discharge of their obligations by doing what they respectively agreed to do under the terms of the contract is called . Discharge by tender Discharge by performance Discharge by finishing Discharge by absolution Discharge by reason An offer of performance by being ready, willing, and able to perform is known as . Offering Showing Tender Completer Implied acceptance Which of the following are the two primary kinds of performance? Partial and significant Partial and complete Partial and substantial Complete and substantial Complete and significant Which of the following occurs when all aspects of the parties’ duties under the contract are carried out perfectly? Complete performance Substantial performance Significant performance Absolute performance Approved performance Complete performance occurs when all aspects of the parties’ duties under the contract are carried out perfectly. A contractual condition of satisfaction is considered a[n] condition that must be met before the other party’s obligation to pay for the performance arises. Partial Conditional Express Implied Partial and express A contractual condition of satisfaction may be judged by either a[n] or standard. Objective, express Subjective, express Objective, absolute Absolute, express Objective, subjective If a contract does not clearly specify that the satisfaction is to be personal, the standard applies. Express Subjective Objective Absolute Unbiased A occurs whenever a party fails to perform his or her obligations under the contract. Mishap Misoccurrence Breach Misdeed Mistake A[n] discharges the nonbreaching party from his or her obligations under the contract. Immaterial breach Substantial breach Material breach Delineated breach Crossed breach Which of the following occurs when a party unjustifiably fails to substantially perform his or her obligations under the contract? Immaterial breach Substantial breach Material breach Delineated breach Crossed breach Which of the following occurs when a contracting party refuses to complete the contract before the actual time of performance? Preemptive repudiation Anticipatory repudiation Advance refusal Advance repudiation Preparatory refusal Which of the following occurs when parties agree that they simply wish to discharge each other from their mutual obligations and therefore rescind or cancel the contract? Accord and satisfaction Novation Substituted contract Mutual rescission Alteration Which of the following occurs when, instead of canceling a contract, the parties substitute a new agreement in place of the original? Accord and satisfaction Novation Substituted contract Mutual recission Alteration Which of the following is used when, by agreement, one of the parties substitutes a different performance for his or her original duty under the contract? Accord and satisfaction Novation Substituted contract Mutual recission Alteration Which of the following occurs when the parties to the agreement wish to replace one of the parties with a third party? Accord and satisfaction Novation Substituted contract Mutual recission Alteration Which of the following is a way in which a contract may be discharged by operation of law? Alteration of the contract Bankruptcy Objective impossibility of performance All of the above Alteration of the contract and bankruptcy, but not objective impossibility of performance Alteration of the contract, bankruptcy, tolling of the statute of limitations, impossibility, commercial impracticability, and frustration of purpose are all situations in which a contract may be discharged by operation of law. Which of the following is used as a basis for discharge by operation of law when performance is still objectively possible but would be extraordinarily injurious or expensive to one party? Frustration of purpose Commercial impracticability Alteration of the contract Anticipatory repudiation Anticipatory renunciation Which of the following doctrine arose from the cases in England in which parties who had contracted for rooms along a parade route for the king’s coronation, received their money back when the coronation was canceled because the king became ill? Frustration of purpose Commercial impracticability Alteration of the contract Anticipatory repudiation Anticipatory renunciation Monetary damages are also referred to as damages. Equitable Fair Public Legal Injunctive Monetary damages are also referred to as legal damages or legal remedies. Which of the following damages are designed to put the plaintiff in the position he or she would have been in had the contract been fully performed? Equitable Compensatory Public Legal Punitive Compensatory damages are damages designed to put the plaintiff in the position he or she would have been in had the contract been fully performed. Which of the following are foreseeable damages within the contemplation of the parties at the time the contract was made, and that result from special facts and circumstances arising outside the contract itself? Consequential Punitive Liquidated Nominal Repugnant Which of the following types of damages are designed to punish the defendant and deter him and others from engaging in similar behavior in the future? Consequential Punitive Liquidated Nominal Repugnant When no actual damages result from the breach of a contract, the court may award the plaintiff damages. Consequential Punitive Liquidated Nominal Repugnant Under which of the following type of damages do the parties specify in advance the damages if there is a particular kind of breach? Consequential Punitive Liquidated Nominal Repugnant The obligation to use reasonable efforts to minimize damage resulting from a breach is referred as the duty to one’s damages. Reduce Remit Reform Mitigate Migrate To recover damages in a breach-of-contract case, the plaintiff must demonstrate that he used reasonable efforts to minimize the damage resulting from the breach. This obligation is referred to as the duty to mitigate one’s damages. From which country did equitable remedies, as applied in the U.S., grow? France Italy England Spain Portugal Why did equitable remedies come into being? To fashion remedies when the existing laws did not provide any adequate ones. To supplement compensatory damages with punitive damages. To provide a way to award nominal damages. To provide a way to award consequential damages. To provide a way to award certain parties liquidated damages. is the termination of the contract, and is the return of any property given up under the contract. Rescission, restitution Rescission, reformation Reformation, restitution Reformation, rescission Rescission, compensation Which of the following is true regarding the result in the case in the text Thrifty Rent-A-Car System v. South Florida Transport, in which the plaintiffs sued the defendant, the operator of a Thrifty franchise, for amounts owed but the defendant resisted payment on the basis that several hurricanes rendered the business operations commercially impractical? The court ruled that the bad weather completely excused the defendant’s performance. The court ruled that the parties had to jointly bear the burden of bad weather and that 50% of what the defendant owed would be excused. The court ruled that the defendant was legally entitled to additional time in which to pay, but that the defendant would be required to pay all amounts owed. The plaintiffs were entitled to recover because the defendant failed to anticipatorily repudiate the contract. The plaintiffs were entitled to recover for reasons including that hurricanes were not unexpected. The court ruled that the non-occurrence of hurricanes was not a basic assumption of the parties agreements. Additionally, there was no evidence that hurricanes made the cost of performance unduly burdensome, and the defendant was behind on its payments before the arrival of the hurricanes. College president Wally contracts with Alice to teach business law. Alice does a fine job teaching but gets mad at Wally and will not turn in grades. What type of order would Wally seek to require Alice to abide by her contract? An order of specific performance A compensatory order A nominal order A consequential order A demand order Specific performance is sometimes called specific enforcement. It is an order requiring that the breaching party fulfill the terms of the agreement. Which of the following requires that the breaching party fulfill the terms of the agreement? Specific obligation Specific performance Absolute obligation Specific absolute Absolute performance Which of the following is an order either forcing a person to do something or prohibiting a person from doing something? Specification Directive Instructional edict Demand Injunction [Show More]

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