Question 1

Police Officer Paul apprehends a wanted criminal and then demands the $10,000 reward offered by Crime Stoppers.Which of the following statements is true?
A)Police Officer Paul is not entitled to the reward because past consideration is never valid consideration.
B)Police Officer Paul is entitled to the reward because he puts his life on the line every day.
C)Police Officer Paul is not entitled to the reward because he was under a pre-existing duty to make the arrest.
D)Police Officer Paul is not entitled to the reward but may have an argument under promissory estoppel.

Accepted Answer

Police Officer Paul was under a pre-existing duty to make the arrest as it is part of his job as a police officer. Therefore, he cannot claim the reward as consideration for performing a duty he was already obligated to do. This is known as the pre-existing duty rule in contract law.

Question 2

An agreement in which a buyer agrees to buy all the goods produced by a manufacturer is known as
A)a requirements contract.
B)an output contract.
C)an exclusive dealing contract.
D)an option contract.

Accepted Answer

An output contract is an agreement where the buyer agrees to purchase all of the goods or services that a seller can produce.

Question 3

A promise by Derkin Restaurants to buy all of the produce it needs this next year at an established price from Elfredo's Produce would be an
A)enforceable requirements contract.
B)enforceable output contract.
C)unenforceable, illusory contract.
D)unenforceable promise based on past consideration.

Accepted Answer

This is an enforceable requirements contract because Derkin Restaurants is promising to buy all of the produce it needs for the next year at a set price from Elfredo's Produce, which means Derkin's purchase obligations are determined by its actual requirements or needs.

Question 4

An agreement to settle a debt for less than the sum claimed is referred to as?
A)a promisory estoppel.
B)an accord.
C)a satisfaction.
D)rescission.

Accepted Answer

An agreement to settle a debt for less than the sum claimed is referred to as an accord. This term is often used in contract law to refer to an agreement between two parties to resolve a dispute or fulfill an obligation for less than the full amount originally claimed. Once the accord is fulfilled, it is referred to as a satisfaction.

Question 5

Walter worked nights as a clerk in a fast-food store.On his last work shift,Walter's boss told him,"I'm really grateful for the year that you have worked here.I am going to give you a bonus of $1,000 in your last paycheck." When Walter got his last paycheck,there was no bonus.If Walter sues,the likely result will be
A)Walter will win, as the promise is enforceable.
B)Walter will lose, as he gave no consideration.
C)Walter will lose unless the promise was in writing.
D)Walter will win, as no consideration is required to modify an employment contract.

Accepted Answer

The promise of a bonus was not supported by consideration. Walter did not provide any additional service or give up anything of value in exchange for the bonus promise, so therefore the promise is not enforceable.

Question 6

If someone provides a service that he or she is already obligated to do,it is an example of
A)a promissory estoppel.
B)a past consideration.
C)an illusory promise.
D)a preexisting duty.

Accepted Answer

A preexisting duty refers to a situation where a person is already obligated to perform a service, and therefore cannot claim consideration for doing what they were already bound to do.

Question 7

Upon graduating from college,Kathy announced her plans to enter law school the following fall and to marry Rick in December.Kathy's father was afraid that marriage during her first year in law school might cause her to fall behind in her studies or cause her to drop out of school.He called Kathy and promised her $10,000 if she postponed her wedding until after completion of her first year of law school.Kathy agreed and postponed the wedding for a year.Kathy successfully completed her first year of law school,but soon thereafter,Kathy's father died.The administrator of her father's estate claimed she was not entitled to the $10,000 because there was no consideration for her father's promise.If Kathy sues the estate,she will probably be
A)unsuccessful because her father's death terminated the contract.
B)successful, as there was consideration.
C)unsuccessful because her father received no benefit.
D)unsuccessful because it was merely fatherly advice not to get married during the first year of law school.

Accepted Answer

In this scenario, Kathy's father made a promise to her and she made a corresponding agreement to postpone her wedding. This delay caused her to suffer a detriment by delaying her wedding plans. Therefore, there was consideration on both sides of the contract, making it valid. The fact that her father passed away does not affect the validity of the contract.

Question 8

Under the Uniform Commercial Code,an agreement modifying a contract
A)always requires consideration.
B)requires consideration only when the sale of goods is involved.
C)may not require consideration.
D)requires consideration only when one of the parties is incompetent.

Accepted Answer

Under the Uniform Commercial Code (UCC), specifically UCC 2-209, an agreement modifying a contract for the sale of goods does not require consideration to be binding.

Question 9

Mary owes $3,800 on her credit card.She sends the credit card company a check for $800 with the notation "payment in full" on the check.If the credit card issuer cashes the check,
A)Mary's balance will automatically be paid in full if the $3,800 amount was a liquidated debt.
B)Mary's balance will automatically be paid in full regardless of whether the amount of $3,800 was liquidated or unliquidated.
C)the check may be subject to a UCC exception to the general rules for accord and satisfaction cases involving checks.
D)Mary's balance will automatically be paid in full if the $3,800 amount was an unliquidated debt.

Accepted Answer

The notation "payment in full" on a check only constitutes an accord and satisfaction if it is made in good faith as part of a genuine dispute over the amount owed. If the debt is liquidated (meaning both parties agree on the exact amount owed), then the check can satisfy the debt. However, if the debt is unliquidated (meaning there is disagreement over the amount owed), then the check may not be considered an accord and satisfaction. Therefore, there may be a UCC exception that applies to this case, and the credit card company may still be able to pursue the remaining balance.

Question 10

In January,Alex promised to pay Y-K Inc.$5,000 if it would refrain from filing suit against him on a breach of contract action.Y-K agreed and accepted a $5,000 check from Alex.Which of the following statements is correct?
A)Y-K's promise to refrain from suing Alex was not supported by legal consideration.
B)Y-K's promise to refrain from suing Alex was supported by legal consideration and is enforceable.
C)This is an accord and satisfaction, and Y-K cannot sue.
D)The courts would apply promissory estoppel in this situation.

Accepted Answer

Y-K's promise to refrain from suing Alex was supported by legal consideration because Alex promised to pay $5,000 and Y-K agreed to refrain from suing in exchange. This is a valid contract and enforceable.

Question 11

Marco agrees to sell Clowns R Us some balloons.The contract states that Clowns may buy as many balloons as it wishes.This agreement is
A)a requirements contract.
B)an output contract.
C)an illusory contract.
D)an enforceable contract.

Accepted Answer

This agreement is considered an illusory contract because it does not obligate Clowns R Us to buy any specific quantity of balloons, making the contract lack mutuality of obligation.

Question 12

Jamie is building a house on her lot.She invites Earnie of Earnie's Excavation to bid on the excavation job.Earnie observes that the lot next to Jamie's is also under excavation and the soil in that lot is normal and not excessively rocky.Based on the assumption that the soil in Jamie's lot will be similar,he and Jamie agree that the excavation will cost $3,000.When Earnie starts digging,he learns there is solid rock under Jamie's lot.Earnie says it will cost an extra $2,500 for the excavation work.Jamie agrees just to get the job done but later refuses to pay a dime more than $3,000.If Earnie sues,the most likely result would be
A)Jamie wins, as Earnie was under a preexisting duty to dig the basement.
B)Earnie wins as this modification is governed by the UCC and consideration is not required to enforce a modification of the agreement.
C)Jamie wins as Earnie was not acting in good faith and just wanted to put Jamie in a situation where she didn't have a choice but to agree to more money.
D)Earnie wins, as the modification was due to unforeseen difficulties.

Accepted Answer

According to the doctrine of unforeseen difficulties, if the parties base their contract on a mutual assumption about a fact that later turns out to be untrue, and that assumption was a basic assumption of the contract, then the contract can be modified or even discharged. Here, Jamie and Earnie agreed on a price based on the assumption that the soil in her lot was similar to that of the lot next door. However, when Earnie started digging, he discovered solid rock, which was an unforeseen difficulty. Therefore, Earnie can request an additional payment, and he is likely to win the case.

Question 13

If Becky promises not to drink alcohol until she becomes a legal adult in exchange for Ben's promise of $1,000,the agreement is
A)enforceable because Becky is giving up the right to do something she would otherwise be entitled to do.
B)enforceable because the agreement accomplishes Ben's goal of keeping Becky from drinking.
C)not enforceable because Becky does not have a legal right to drink alcohol.
D)not enforceable because Becky is a minor and could disaffirm the contract.

Accepted Answer

The answer of If Becky promises not to drink alcohol...

Question 14

Zero,Inc.agreed to build Millie a storage building for $8,000.After beginning the project,Zero realized that it could not complete the job and make a profit.Zero demanded $9,500 to complete the building.Millie agreed to pay the $9,500.When the project was complete,Millie tendered $8,000 to Zero for the job.If Zero sues Millie for the remaining $1,500,
A)Zero will win because there was consideration for the additional $1,500.
B)Zero will win because Millie had a pre-existing duty to pay any additional amounts.
C)Zero will lose because there was no legal consideration to support the additional $1,500.
D)Zero will lose because the UCC does not require consideration to modify an existing contract.

Accepted Answer

C) Zero will lose because there was no legal consideration to support the additional $1,500. In contract law, a modification of a contract requires new consideration to be binding. Since Zero had a preexisting duty to complete the project for the agreed price of $8,000, demanding more money to fulfill that same obligation does not constitute new consideration.

Question 15

An unliquidated debt can be described as
A)a debt in which both its existence and amount is in dispute.
B)a debt in which the existence or amount is in dispute.
C)a debt disputed by the creditor but not the debtor.
D)a debt undisputed by either party.

Accepted Answer

An unliquidated debt is a debt in which the existence or amount is in dispute. It means that either party disputes either the existence of the debt or the amount owed.

Question 16

If Rudy offers Oscar $200 for his laptop valued at $600 and Oscar agrees,a court will probably
A)set aside the agreement as being unfair.
B)set aside the agreement because the consideration is inadequate.
C)not set aside the agreement based on the adequacy of the consideration.
D)not set aside the agreement because of the UCC.

Accepted Answer

The court is unlikely to set aside the agreement based on the adequacy of consideration because the law recognizes that parties are free to bargain as they see fit, and will generally not interfere with the agreed-upon price unless there is evidence of fraud, duress, or undue influence. The fact that the laptop is worth more than the amount offered does not necessarily render the consideration inadequate, as long as both parties are aware of the value and agree to the terms.

Question 17

Mid-American Oil had a contract with NSB Company to supply 1,000 gallons of oil by September 1.The contract contained a provision which required all modifications to be written and signed by the company presidents.In early August,an executive of Mid-American talked with the purchasing agent of NSB who orally agreed to two shipments of oil;one in September and the second one in December.By September 30,when only 500 gallons had been delivered,NSB sued.The likely outcome of this lawsuit is:
A)NSB wins because the modification was not supported by new consideration.
B)NSB wins because the modification has to be in writing.
C)Mid-American Oil wins because the UCC governs this case and no new consideration is required.
D)Mid-American Oil wins because new consideration was present.

Accepted Answer

The contract contained a provision that required all modifications to be in writing and signed by the company presidents. Therefore, the oral agreement between an executive of Mid-American and the purchasing agent of NSB is not valid. NSB can sue and win, as the contract clearly states that modifications must be in writing.

Question 18

Bailey Co.and Spryt Bros.enter into a contract for the manufacture and sale of 400 lawn chairs.If both parties agree that a modification is necessary
A)the surest way to modify the contract is to liquidate it.
B)they may not do so without court supervision.
C)an agreement to rescind the contract will terminate the contractual rights of Bailey Co. and Spryt Bros. if neither of them had completed their obligations.
D)courts will generally not enforce a cancellation and modification of a contract unless one party received inadequate consideration under the original contract.

Accepted Answer

An agreement to rescind a contract will terminate the contractual rights of both parties if neither has completed their obligations. This allows both parties to mutually agree to end the original contract and potentially enter into a new agreement that better suits their needs or circumstances.

Question 19

If Crosby and Dash are in disagreement as to the exact amount of money that Crosby owes Dash,then they may choose to form a new agreement at a set amount.If they both perform the new agreement,their conduct would be an example of
A)a rescission.
B)a contract modification.
C)a preexisting duty.
D)an accord and satisfaction.

Accepted Answer

The scenario described is an example of an accord and satisfaction, where the parties agree to a new set amount to settle the dispute (accord) and then perform the new agreement (satisfaction). This is different from a rescission, which involves canceling a previous contract entirely, a contract modification, which is a change to an existing contract, or a preexisting duty, which refers to a duty that already existed under a previous contract.

Question 20

Bernie owes an undisputed amount to Wilde's Heating & Air Conditioning.Which of the following is true?
A)If Wilde's agrees to accept less than the full amount as full payment, the agreement is not binding.
B)The undisputed amount is also known as an unliquidated amount.
C)If the parties agree to settle for less than the full amount, their agreement is governed by the ruling in Henches v. Taylor.
D)If Wilde's agrees to accept less than the full amount, the agreement is only binding if it is in writing and signed by Bernie.

Accepted Answer

A creditor is not legally obligated to accept a lesser amount as full payment, even if the amount is undisputed. Therefore, any agreement to accept less than the full amount must be supported by new consideration or some other legally binding element, like a signed writing.

Quiz 13: Consideration

Police Officer Paul apprehends a wanted criminal and then demands the $10,000 reward offered by Crime Stoppers.Which of the following statements is true?

An agreement in which a buyer agrees to buy all the goods produced by a manufacturer is known as

A promise by Derkin Restaurants to buy all of the produce it needs this next year at an established price from Elfredo's Produce would be an

An agreement to settle a debt for less than the sum claimed is referred to as?

If someone provides a service that he or she is already obligated to do,it is an example of

Under the Uniform Commercial Code,an agreement modifying a contract

Mary owes $3,800 on her credit card.She sends the credit card company a check for $800 with the notation "payment in full" on the check.If the credit card issuer cashes the check,

In January,Alex promised to pay Y-K Inc.$5,000 if it would refrain from filing suit against him on a breach of contract action.Y-K agreed and accepted a $5,000 check from Alex.Which of the following statements is correct?

Marco agrees to sell Clowns R Us some balloons.The contract states that Clowns may buy as many balloons as it wishes.This agreement is

If Becky promises not to drink alcohol until she becomes a legal adult in exchange for Ben's promise of $1,000,the agreement is

An unliquidated debt can be described as

If Rudy offers Oscar $200 for his laptop valued at $600 and Oscar agrees,a court will probably

Bailey Co.and Spryt Bros.enter into a contract for the manufacture and sale of 400 lawn chairs.If both parties agree that a modification is necessary

If Crosby and Dash are in disagreement as to the exact amount of money that Crosby owes Dash,then they may choose to form a new agreement at a set amount.If they both perform the new agreement,their conduct would be an example of

Bernie owes an undisputed amount to Wilde's Heating & Air Conditioning.Which of the following is true?