Question 1

A creditor's agreement to accept part payment as full settlement of a debt is enforceable

Accepted Answer

A creditor's agreement to accept part payment as full settlement of a debt is enforceable if the creditor receives additional consideration from the debtor. This additional consideration provides the necessary element to form a binding agreement on the new terms.

Question 2

Part payment of a liquidated claim

Accepted Answer

Part payment of a liquidated claim does not discharge the remainder unless there is additional consideration provided by the debtor, which can create a new agreement.

Question 3

Past consideration

Accepted Answer

Past consideration refers to a promise made in return for an act that has already occurred, which generally does not constitute valid consideration for a new contract because it does not involve a new exchange of value.

Question 4

The Wurzer Corporation entered into a written contract to hire Dixon in an executive position for six years for $200,000 a year. After three years, Dixon asked for a raise of $25,000 per year. Wurzer at first refused, but then agreed because of the pressure placed on him by Dixon. After the sixth year Dixon left his position with the Corporation and Wurzer sued for a return of the extra $25,000 per year for the three remaining years on Dixon's contract. Who should win the case?

Accepted Answer

Wurzer should win because the modification of the contract was not supported by new consideration. Dixon's pressure does not constitute valid consideration for the raise.

Question 5

If a person owes several people money, that person can give each of the creditors part of the total amount owed. If this arrangement is agreed to by all creditors, it is called

Accepted Answer

A composition of creditors is an agreement among creditors where they agree to accept less than the full amount owed to them by the debtor, often to avoid the debtor's bankruptcy or insolvency.

Question 6

Part payment of a debt can cancel a debt if there is an honest dispute over the correct amount of the debt called a(n) ____________________ claim.

Accepted Answer

The answer of Part payment of a debt can cancel...

Question 7

Refraining from doing something you have a legal right to do is called ____________________.

Accepted Answer

The answer of Refraining from doing something you have a...

Question 8

When a debtor and a creditor are in agreement about how much money is owed, the debt is said to be

Accepted Answer

When a debtor and a creditor agree on the amount of money owed, the debt is considered to be liquidated, meaning the amount is determined and acknowledged by both parties.

Question 9

Courts sometimes apply the doctrine of promissory estoppel to enforce a promise. This doctrine

Accepted Answer

Promissory estoppel allows for the enforcement of a promise even when there is no consideration, under certain conditions, to prevent injustice due to the promisee's reliance on the promise.

Question 10

Martin sold his used car to Nixon for $2,000. Later Martin discovered that the car was worth $3,000. Martin then claimed that Nixon owed him an additional $1,000. If Martin attempted to take legal action to collect the additional $1,000, he would be entitled to

Accepted Answer

In a legal context, the sale of the car for $2,000, once agreed upon by both parties, constitutes a binding contract. Martin's later discovery that the car was worth more does not entitle him to additional compensation under the agreed terms of the sale.

Question 11

Consideration that consists of a sacrifice by the offeree is called ____________________.

Accepted Answer

The answer of Consideration that consists of a sacrifice by...

Question 12

A beauty shop owner offered one of her employees a bonus of $100 over a six-month period if she would promise to give all customers excellent service. This promise by the beauty shop owner is

Accepted Answer

The promise is not valid because the employee is already legally obligated to provide excellent service as part of her job duties, so there is no new consideration for the promise of a bonus.

Question 13

Promises to make charitable subscriptions

Accepted Answer

Promises to make charitable subscriptions are exempted from the necessity of consideration because they are considered to be a moral obligation.

Question 14

Morton owed Dowd $1,000. The debt was due on May 1. The debt would not be discharged if

Accepted Answer

The answer of Morton owed Dowd $1,000. The debt was...

Question 15

____________________ is something of value given by each party to a contract to bind the agreement.

Accepted Answer

The answer of ____________________ is something of value given by...

Question 16

Modern courts now protect individuals from contracts that are so one-sided as to be ____________________.

Accepted Answer

The answer of Modern courts now protect individuals from contracts...

Question 17

Which agreement is unenforceable because of lack of valid consideration?

Accepted Answer

The answer of Which agreement is unenforceable because of lack...

Question 18

In which of the following situations would the courts enforce an oral agreement to pay extra compensation?

Accepted Answer

In situation C, the accountant is offering to provide a new or additional service (completing the audit significantly ahead of schedule) that goes beyond the terms of the original agreement. This can be seen as a new consideration, which is a key element in contract law for the enforcement of agreements. The promise of extra compensation in exchange for a new or additional service (completing the work much earlier than agreed) can be enforceable, even if the agreement is oral.

Question 19

Jennings found and returned Martin's lost wallet. Martin promised to give Jennings a reward the next day after he cashed a check. Martin is not legally bound to pay a reward as he promised, because the consideration for the promise was

Accepted Answer

The consideration for Martin's promise was past because Jennings had already found and returned the wallet before Martin promised a reward. In contract law, for a promise to be enforceable, the consideration must be present or future, not past.

Question 20

A composition of creditors

Accepted Answer

A composition of creditors is an agreement made between a debtor and their creditors in which the creditors agree to accept a partial payment in full satisfaction of the debts owed. This agreement is binding on all creditors once they agree to the terms, meaning they cannot later pursue the debtor for the full amount owed.

Quiz 8: Consideration