Deck 12: Consideration, Capacity, and Legality

Question 1

Rescission is the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made.

Answer 1

True

Question 2

In contract law, ratification is the act of accepting and giving legal force to an obligation that was previously not enforceable.

Answer 2

True

Question 3

To be legally sufficient, consideration must be evidenced by something tangible.

Answer 3

False

Question 4

A promise to do what one already has a legal duty to do constitutes legally sufficient consideration.

Question 5

A contract entered into by a minor is voidable at the option of either of the contracting parties.

Question 6

Under the doctrine of promissory estoppel, a promise will not be enforced unless it is supported by consideration.

Question 7

In contract law, "consideration" refers to the time that a party takes to evaluate a deal.

Question 8

Legally sufficient consideration is something of value in the eyes of the law.

Question 9

Parents are always liable for the contracts made by their minorchildren.

Question 10

A covenant not to sue is against public policy.

Question 11

Essentially, adequacy of consideration concerns the fairness of the bargain.

Question 12

All contracts between adults and minors are void.

Question 13

Performance can constitute the consideration that creates a contractual obligation.

Question 14

Contractual capacity includes the financial ability to pay for the benefits of a contract.

Question 15

A promise by one party to pay another for refraining from an action that one has a legal right to undertake is enforceable.

Question 16

A transaction that lacks a bargained-for exchange lacks an element of consideration.

Question 17

Contractual capacity refers to the legal ability to enter into a contract.

Question 18

Ordinarily, a minor can disaffirm a contract even though she has misrepresented her age.

Question 19

Disaffirmance is the legal avoidance, or setting aside, of a contractual obligation.

Question 20

An illusory promise is a promise that is enforceable without consideration.

Question 21

Aaron questions whether there is consideration for his contract with Banquet Hall to exchange his musical performance of country tunes at select social events for Banquet’s payment of a certain amount. To constitute consideration, the value of whatever is exchanged must be

A)objectively worthy.
B)precisely adequate.
C)legally sufficient.
D)practically sound.

Question 22

Valley Paragliders Association files a suit against Wing Designers, Inc., claiming that the consideration for their contract is inadequate. The court will most likely not examine the adequacy of the consideration if

A)there is a large disparity in the amount of consideration exchanged.
B)the consideration involves the performance of services.
C)something of value passed between the parties.
D)the consideration is worth less than $100.

Question 23

Any contract to commit a crime is unenforceable.

Question 24

A minor who enters into a contract for necessaries may disaffirm the contract but remains liable for the reasonable value of the goods.

Question 25

A contract that is void from the outset can be enforced in some circumstances.

Question 26

In most illegal contracts, both parties are considered to be equally at fault, and neither party can enforce it.

Question 27

If there is a statute that prohibits a certain act, a contract to do it is unenforceable.

Question 28

Frisco offers to buy a Gibson guitar owned by Hayden for twice what Hayden paid for it. She accepts and hands the guitar to Frisco. Her delivery of the guitar is

A)not consideration because her voluntary consent may be lacking.
B)not consideration because the exchange is not a bargain.
C)consideration.
D)not consideration because the value is not legally sufficient.

Question 29

A contract entered into by an intoxicated person is never valid.

Question 30

Gambling debts will be enforced even if their enforcement violates a statute.

Question 31

In certain circumstances, bargains are so oppressive that the courts relieve innocent parties of part or all of their duties.

Question 32

A contract that exculpates one party for negligence or other wrongdoing will often be viewed as unconscionable.

Question 33

A person who enters into a contract when he or she is intoxicated can void the contract under any circumstances.

Question 34

An exculpatory clause in an employment contract is usually enforceable.

Question 35

Contracts entered into by mentally incompetent persons can be valid.

Question 36

Digital Enterprise, Inc., promises to pay its employees a year-end bonus "if profits continue to be high and management agrees at the time." This is

A) ​an enforceable contract.
B) ​an illusory promise.
C) ​an option-to-cancel clause.
D) ​an output contract.

Question 37

A covenant not to compete included in the sale of an ongoing business is unenforceable.

Question 38

A covenant not to compete is enforceable only if it is reasonable in durationand geographic area.

Question 39

D’Sean promises to pay his personal assistant Edie $50,000 in consideration of the services she provided over the years. D’Sean never makes the payment. D’Sean’s promise is

A)enforceable for the entire $50,000.
B)enforceable to the extent of what Edie’s services were actually worth.
C)not enforceable because the consideration is in the past.
D)not enforceable because the failure to pay is an unforeseen difficulty.

Question 40

Whether a contract with an unlicensed professional is legal and enforceable depends on the purpose of the licensing statute.

Question 41

Rosalind, a seventeen-year-old, signs a contract to sell her car to Street Fleet Used Cars. The next day, Rosalind tells Street Fleet that she's decided not to sell the car. Rosalind is liable to Street Fleet for

A) ​the cost of a car of comparable value.
B) ​the value of her performance under the contract.
C) ​the amount of its profit on the deal.
D) ​nothing.

Question 42

Twyla's dock is damaged in an accident caused by Ulric's negligence. Twyla agrees not to sue him if he will pay for the damage. If Ulric fails to pay, Twyla can bring an action for breach of contract. This is

A) ​a covenant not to sue.
B) ​an illusory promise.
C) ​an unforeseen difficulty.
D) ​a release.

Question 43

Fletcher signs a contract to buy a new electric guitar and amplifier just before reaching the age of majority. After reaching the age of majority, Fletcher does not take possession or make payments. With respect to the contract, most courts would hold that this is

A) ​disaffirmance.
B) ​emancipation.
C) ​ratification.
D) ​rescission.

Question 44

While sailboarding, Jolene is injured when Kilroy carelessly crosses her path. Kilroy's insurance company offers Jolene $50,000 to release Kilroy from liability, and she accepts. Later, she learns that her injuries are more serious than she realized. The release is

A) ​enforceable.
B) ​unenforceable because Jolene's injuries are unforeseeably difficult.
C) ​unenforceable because Kilroy has a preexisting duty to pay.
D) ​unenforceable because the release is an illusory promise.

Question 45

Marketing Solutions Inc. promises to employ Niki as a software engineer. In reliance on the promise, Niki quits her job with Online Ad Company, but Marketing Solutions does not hire her. Most likely, Marketing Solutions is

A) ​liable to Niki under the concept of rescission and new contract.
B) ​liable to Niki under the doctrine of promissory estoppel.
C) ​liable to Niki under the preexisting duty rule.
D) ​not liable to Niki.

Question 46

Mica, a minor, signs a contract to pay National Health Club a monthly fee for twenty-four months to use its facilities. Six months later, after reaching the age of majority, Mica continues to use the club. This act is

A) ​a disaffirmance.
B) ​an emancipation.
C) ​a ratification.
D) ​a restitution.

Question 47

Alexis, a minor acting on her own, signs a contract to buy a motorcycle and accessories from Bad Bikes dealership. Later, after taking possession, Alexis disaffirms the deal. She

A) ​can keep the motorcycle and accessories.
B) ​can keep the motorcycle but not the accessories.
C) ​can keep the accessories but not the motorcycle.
D) ​must return both motorcycle and accessories.

Question 48

​Fact Pattern 12-1
Teatro Restoration, Inc., begins renovating an old theater for Urban Edge Productions, but after three months Teatro demands an extra $250,000. Urban Edge agrees to pay.
Refer to Fact Pattern 11-4. If Teatro says it is asking for the extra $250,000 because it has encountered extraordinary unforeseen difficulties that will add considerable cost to the project, the agreement is

A) ​enforceable as the consideration is past.
B) ​enforceable because of unforeseen difficulties.
C) ​unenforceable as an illusory promise.
D) ​unenforceable due to the preexisting duty rule.

Question 49

Vijay enters into a contract to sell his laptop to Winnie. Winnie takes possession of the laptop as a minor and continues to use it well after reaching the age of majority. Winnie has

A) ​expressly ratified the contract.
B) ​impliedly ratified the contract.
C) ​disaffirmed the contract.
D) ​none of the choices.

Question 50

On Victor's eighteenth birthday, he decides that he no longer wants to keep a fishing boat he bought from Water Craft, Inc., when he was seventeen. His right to disaffirm the deal will depend on

A) ​why Victor no longer wants to keep the boat.
B) ​why Victor entered into the contract to buy the boat.
C) ​whether Victor acts within a reasonable period of time.
D) ​whether Water Craft has the right to disaffirm.

Question 51

Maya's motorcycle is damaged in an accident caused by Luc's negligence. Luc agrees to pay Maya $25,000 if she agrees to release him from further liability. Maya agrees. If her damages ultimately exceed $25,000, she can

A) ​recover the balance for lack of consideration.
B) ​recover the balance because the consideration was past.
C) ​recover the balance due to unforeseen events.
D) ​not recover the balance.

Question 52

Intoxicated and not aware of the consequences, Umberto agrees to a two-year cell-phone service contract with Wander Talk, Inc., at more than the average market price. This contract is

A) ​enforceable.
B) ​not enforceable because contracting parties can change their minds.
C) ​not enforceable because the contract clearly favors Wander Talk.
D) ​not enforceable because Umberto was intoxicated enough to lack mental capacity when he agreed to it.

Question 53

Fay is mentally incompetent but has not been so adjudged by a court. Any contract Fay enters into is

A) ​voidable if Fay has a lucid interval at the time of contracting.
B) ​voidable if Fay lacks the capacity to comprehend the consequences.
C) ​voidable if the other party does not realize that Fay is incompetent.
D) ​unavoidable.

Question 54

Neil, a minor, attempts to return to its former owner, a set of skis that he recently bought, used, and wrecked, in a state in which a duty of restitution is imposed. Neil

A) ​can return the skis "as is" and avoid further liability.
B) ​is not required to return the skis due to his or her minority.
C) ​must return the skis and pay for the damage.
D) ​cannot return the skis unless they can be fully restored.

Question 55

Lydia, a minor, charges the cost of a smartphone at a Mobile Devices & Minutes store. Two nights later, Lydia loses the phone at Natural Foods restaurant. She disaffirms the phone's purchase. Lydia owes Mobile Devices the reasonable value of the phone

A) ​if it is deemed a necessary.
B) ​if it is deemed a luxury.
C) ​if it is deemed unique.
D) ​under no circumstances.

Question 56

Chet, a minor, signs a contract with Porsha, an adult. The contract is voidable at the option of

A) ​neither party.
B) ​Chet only.
C) ​either party.
D) ​Porsha only.

Question 57

​Fact Pattern 12-1
Teatro Restoration, Inc., begins renovating an old theater for Urban Edge Productions, but after three months Teatro demands an extra $250,000. Urban Edge agrees to pay.
Refer to Fact Pattern 12-1. If Teatro says it is asking for the extra $250,000 because ordinary business expenses have increased, the agreement is

A) ​enforceable as the consideration is past.
B) ​enforceable because of unforeseen difficulties.
C) ​unenforceable as an illusory promise.
D) ​unenforceable due to the preexisting duty rule.

Question 58

William obtains a loan from a bank at 4.5 percent interest. The state where he obtains the loan has a usury statute that limits interest rates to a 3.5 percent maximum. William's contract with the bank is

A) ​enforceable only if William does not attempt to disaffirm it.
B) ​enforceable only if the bank does not attempt to disaffirm it.
C) ​enforceable only if both William and the bank knew of the statute when the contract was signed.
D) ​not enforceable.

Question 59

​Fact Pattern 12-1
Teatro Restoration, Inc., begins renovating an old theater for Urban Edge Productions, but after three months Teatro demands an extra $250,000. Urban Edge agrees to pay.
Refer to Fact Pattern 12-1. If Teatro offers no reason for the extra $250,000, but says only that it will stop work if it is not paid, the agreement is​

A) ​enforceable as the consideration is past.
B) ​enforceable because of unforeseen difficulties.
C) ​unenforceable as an illusory promise.
D) ​unenforceable due to the preexisting duty rule.

Question 60

Serenity, a minor, obtains fruits and vegetables on credit from Virgil at Growers' Market. Later, Serenity disaffirms the purchase. Serenity owes Virgil

A) ​the reasonable value of the goods.
B) ​the retail value of the goods.
C) ​the wholesale value of the goods.
D) ​nothing.

Question 61

Metro City Mall requires its tenants to sign a lease that includes a clause releasing Metro from liability in the event of monetary or physical injury no matter who is at fault. Coco's Chocolate Creations signs a lease with the mall that contains the clause. This is

A) ​a covenant not to compete.
B) ​an adhesion contract.
C) ​an exculpatory clause.
D) ​an illusory promise.

Question 62

Nyoko signs a covenant not to compete with her employer, Midstate Distribution, Inc. The covenant will be enforced if it

A) ​does not require either party to obtain a business license.
B) ​is reasonable with respect to geographic area and duration.
C) ​relieves Midstate from liability for any injury to Nyoko due to simple negligence.
D) ​none of the choices.

Question 63

Boz runs an illegal gambling business and pays Colin, a police officer, not to interfere. The payments are discovered. Boz and Colin are sent to prison. With respect to the amount of the payments, Boz can recover

A) ​all of it.
B) ​none of it.
C) ​only as much as Colin has not spent.
D) ​only as much as Colin has spent.

Question 64

John obtains a loan from Liberty Credit Bank at an interest rate that exceeds the state's maximum. Liberty has

A) ​created a risk for the purpose of assuming it.
B) ​engaged in a restraint of trade.
C) ​violated a licensing statute.
D) ​committed usury.

Question 65

U-Can-Own-It Corporation sells appliances to less educated consumers, including Viv, on installment plans. U-Can-Own-It files a suit against Viv when she stops making payments. Viv claims that the deal is unconscionable. The court will most likely consider

A) ​the geographic area of the relevant market.
B) ​the parties' relative bargaining power.
C) ​the quality of related products in the general market.
D) ​the relation of this deal to those of other customers.

Question 66

Country Trucking Company contracts with Baldwin to transport crated goods to a certain destination for $5,000. \Country delivers the crates, but Baldwin does not pay. Country learns that the crates contained stolen goods. Country can

A) ​do nothing with respect to the contract.
B) ​recover $5,000 from Baldwin.
C) ​recover the goods but not the $5,000 from Baldwin.
D) ​recover the goods and the $5,000 from Baldwin.

Question 67

Through fraudulent means, Finlay induces Ethel to sign a contract to in-vest with him the profits from her business. When Ethel learns the truth, she may

A) ​only enforce the contract.
B) ​only recover what she invested with Finlay.
C) ​enforce the contract or recover what she invested with Finlay.
D) ​do nothing.

Question 68

Odina signs a covenant not to compete with her employer, Penultimate Sales Corporation. A court decides that the covenant is overly restrictive. The court will likely

A) ​enforce it as written so as not to undercut the freedom of contract.
B) ​enforce it but evaluate its effects over time.
C) ​reform its terms to prevent any undue burden.
D) ​refuse to enforce it unless Penultimate pays additional consideration.

Question 69

Centre City Properties, Inc., owns and manages a warehouse. DIY Home Improvement Stores agrees to lease the warehouse for six years. Under the lease, DIY is obligated to pay all of the utility costs. Two years into the term, DIY asks Centre City to modify the lease to provide that the utility costs will be split equally between them. The landlord agrees, but later decides it does not want to share the costs and refuses to pay. Is Centre City bound to its agreement to share the utility costs? Why or why not?​

Question 70

Dean, the president of Billing & Credit Company, promises to pay his employee Ewing, who is dangerously obese, $10 for every pound that he loses within the next two years. Ewing agrees, diets and exercises, loses 154 pounds, and asks Dean for $1,540. Dean refuses to pay, saying that he does not remember the promise, but that even if he did make it, there was no consideration, and Ewing's improved health is a sufficient benefit for his effort and sacrifice. Ewing files a suit against Dean. In whose favor is the court likely to rule, and why?

Question 71

To avoid liability for negligence, Mall Mart Discount Stores can normally obtain a court order to enforce

A) ​a covenant not to compete.
B) ​an adhesion contract.
C) ​an exculpatory clause.
D) ​none of the choices.

Question 72

Shannon signs a contract with Tevin, an unlicensed contractor, to build a deck and gazebo at the rear of her house. This contract is enforceable by

A) ​Shannon.
B) ​any third party who is not aware that Tevin is not licensed.
C) ​Tevin.
D) ​no one.