Question 1

Which of the following terms refers to force or threat of force?
A) rescission
B) misrepresentation
C) undue influence
D) duress
E) revocation

Accepted Answer

Duress means force or threat of force. The force may be physical or, in some instances, economic.

Question 2

In which of the following cases does the legal power of the offeree to bind the offeror end?
A) When the offeree accepts the offer
B) When the offeror is declared insane before acceptance of the offer by the offeree
C) When the subject matter of the contract is destroyed after the acceptance of the offer
D) When the offeror accepts the counteroffer
E) When the offeror attempts to retract the offer after its acceptance by the offeree

Accepted Answer

When an offer terminates, the offeree's legal power to bind the offeror ends. Termination by operation of law occurs when the offeror no longer has the capacity to make the offer due to being insane or dead.

Question 3

Smith Inc.sends a letter dated August 1 to Cervaille Stores,offering to sell 20 table lamps to Cervaille Stores at $80 each.Cervaille Stores provides a consideration of $160 to Smith Inc.to keep the offer open for at least two weeks.In the second week of August,Smith Inc.receives an offer from Shine Retailers Inc.to purchase the table lamps at a price of $85 each.Can Smith withdraw its offer made to Cervaille Stores?
A) Smith cannot withdraw its offer as the agreement is in the form of an option.
B) Smith cannot withdraw its offer since the doctrine of promissory estoppel is applicable.
C) Smith can withdraw its offer as the offer was simply an invitation to negotiate.
D) Smith cannot withdraw its offer as this is a firm offer.
E) Smith can withdraw its offer as the consideration makes it enforceable as a property transfer.

Accepted Answer

In this scenario, Smith Inc. cannot withdraw its offer made to Cervaille Stores as it is an option. Under the Uniform Commercial Code, the rules of consideration also do not apply to a firm offer. A firm offer exists when a merchant offering goods promises in writing that the offer will not be revoked for a period not to exceed three months. This promise binds the merchant, although the offeree buyer gives no consideration to support it.

Question 4

Which of the following statements is true about the consideration in a contract?
A) Courts usually enforce contractual promises in the absence of consideration.
B) The amount of the consideration is the most important and relevant part of a contract for a legal action.
C) The consideration must be contemporaneous and a part of both parties' understanding of the contract terms.
D) The consideration in any unilateral contract is usually absent.
E) Performance made before parties discuss their agreement counts as a consideration.

Accepted Answer

The amount of the consideration is generally irrelevant. An important part of consideration is that it must be bargained for. In other words, the consideration must be contemporaneous and a part of both parties' understanding of the contract terms.

Question 5

Valid consideration can include any promise to do something one has no obligation to do,refrain from doing something one has the right to do,or in the case of a unilateral contract,a performance when there is no obligation to do so.This is known as a(n)______.
A) exculpation
B) legal detriment
C) release
D) negotiation
E) promissory estoppel

Accepted Answer

Valid consideration can include any promise to do something one has no obligation to do, refrain from doing something one has the right to do, or in the case of a unilateral contract, a performance when there is no obligation to do so. That is the definition of a legal detriment.

Question 6

Dustin,who is 17 years old,purchased a car from Speed Auto Sales Inc.for $1,000.The following year,Dustin's father gifted him a brand new car on his 18th birthday.Dustin returned the car that he had purchased to Speed Auto Sales the next day,and he demanded his money back.At the time of disaffirmance,Dustin was 18-the age at which he was considered an adult in his jurisdiction.Will this disaffirmance be enforceable in the court of law?
A) The disaffirmance will not be enforceable since Dustin did not give Speed Auto Sales a signed revocation.
B) The disaffirmance will be enforceable since Dustin disaffirmed during the year he attained adulthood.
C) The disaffirmance will not be enforceable since the disaffirmance must be written when the price exceeds $500.
D) The disaffirmance will be enforceable since courts and laws always rule in the favor of minors.
E) The disaffirmance will not be enforceable since Dustin attained adulthood, and disaffirmance can be expressed only by a minor.

Accepted Answer

In this scenario, the disaffirmance will be enforceable in the court of law. The minor may disaffirm a contract any time before reaching the age of majority, which is usually 18, and for a reasonable time after reaching majority. If the minor fails to disaffirm within a reasonable time after reaching majority, the minor is said to ratify the contract.

Question 7

Tristam,an insurance agent,wants Philomena to purchase the insurance policy of his choice.Despite Philomena's resistance to accept his offer,Tristam compels her to purchase the policy by exerting his physical force on her and forces her to sign the insurance documents.Which of the following has been most likely used by Tristam to complete the contract arrangements?
A) duress
B) misrepresentation
C) undue influence
D) misstatement
E) fraud

Accepted Answer

In this case, Tristam uses duress to establish a contractual relationship with Philomena. Duress means force or threat of force. The force may be physical or, in some instances, economic.

Question 8

The legal mechanism for evaluating the existence of an incentive for a person's promise to establish a binding contract and acts as a receipt of a legal benefit or the suffering of a legal detriment is ______.
A) collusion
B) accord and satisfaction
C) consideration
D) reversion
E) novation

Accepted Answer

There must be some incentive or inducement for a person's promise or it is not binding. The legal mechanism for evaluating the existence of this incentive is consideration, the receipt of a legal benefit or the suffering of a legal detriment.

Question 9

Which of the following statements is true about the acceptance of an offer?
A) Bilateral contracts are predominantly accepted by the offeree performing the act.
B) Unilateral contracts are accepted by making a promise.
C) The language of an offer is optional in determining the nature of contract and its acceptance.
D) Counteroffer usually means an acceptance of an offer.
E) Acceptance must follow the mirror image rule to create a binding contract.

Accepted Answer

For an acceptance to create a binding contract, standard contract law requires that the acceptance must "mirror" the offer, that is, must match it exactly. This is the mirror image rule.

Question 10

An important exception to the rule requiring consideration to support a promise is the doctrine of ______.This doctrine arises when a promisee justifiably relies on a promisor's promise to his or her economic injury.
A) firm offer
B) consideration
C) termination
D) promissory estoppel
E) accord and satisfaction

Accepted Answer

An important exception to the rule requiring consideration to support a promise is the doctrine of promissory estoppel. This doctrine arises when a promisee justifiably relies on a promisor's promise to his or her economic injury. The promisor must know that the promisee is likely to rely on the promise.

Question 11

Which of the following statements is true about minors as parties to a contract?
A) A contract into which a minor has entered is voidable at the election of the minor.
B) A minor can be legally bound to contractual promises involving necessaries of life such as shelter and medical care.
C) In a number of states, courts do not hold a minor who has misrepresented his or her age.
D) A minor can explicitly ratify a contract and forego disaffirmance even before reaching the age of majority.
E) Upon ratification, a minor gains the right to disaffirm.

Accepted Answer

A contract into which a minor has entered is voidable at the election of the minor. The minor can disaffirm the contract and legally recover any consideration that has been given an adult, even if the minor cannot return the adult's consideration.

Question 12

Which of the following statements is true about a promise to make a gift?
A) Upon delivery of the item, a true gift can be enforceable as a property transfer.
B) Promissory estoppel prevents a gift from being enforceable.
C) A promise to make a gift is binding as a contract as it usually supports the bargain.
D) A promise to make a gift becomes an option when it has a clause in the agreement that revokes the gift.
E) Insignificant consideration in return for a great one raises concerns that the exchange is actually not a gift.

Accepted Answer

The promise to give something to another-in other words, a promise to make a gift-is not binding as a contract because no bargained-for consideration supports the promise. Note that a true gift can be enforceable as a property transfer (not a contract), but it requires delivery of the item. Moreover, even a promise to make a gift may be enforceable under a non-contract theory called promissory estoppel.

Question 13

Robert is about to graduate from his university.His parents tell him that as he is the first member of the family to graduate college,they want to buy him a new but inexpensive car.They have the money to buy the car,and Robert is excited to receive his gift.On graduation day,his parents tell him that they have decided to use the car money for a vacation and that there will be no car.In this situation,can Robert sue his parents?
A) Robert can successfully sue based on promissory estoppel.
B) Robert can successfully sue based on the promise of a gift.
C) Robert cannot sue because the promise was not reasonable and did not follow the mailbox rule.
D) Robert cannot sue because he did not suffer any legal detriment in the receipt of the promise.
E) Robert can sue since the promise is his legal benefit, and it is an implied-in-fact contract.

Accepted Answer

In this case, Robert cannot sue his parents. The promise to give something to another-in other words, a promise to make a gift-is not binding as a contract because no bargained-for consideration supports the promise.

Question 14

Systek 22 Inc.made a promise to Garrett offering him a job with an annual salary of $150,000 and at least two years of employment.Since Garrett had to move to New York for the new job,Systek 22 also offered to reimburse all of his moving expenses.Based on this promise,Garrett resigned from his job at another firm that offered him an annual salary of $100,000.When Garrett moved to New York,his employment with Systek 22 was terminated,because the company found a candidate who was willing to work for a lesser salary.Which of the following is true of this situation?
A) Garrett cannot sue Systek 22 since the promise was oral.
B) Garrett can sue Systek 22 under the doctrine of promissory estoppel.
C) Garrett cannot file a lawsuit since a promise of employment is always subject to market conditions.
D) Garrett can sue Systek 22 only for the moving expenses that Garrett can prove he incurred.
E) Garrett cannot sue Systek 22 since the reasons for termination will be accepted in court as a legal detriment.

Accepted Answer

In this scenario, Garrett can sue Systek 22 Inc. under the doctrine of promissory estoppel. An important exception to the rule requiring consideration to support a promise is the doctrine of promissory estoppel. This doctrine arises when a promisee justifiably relies on a promisor's promise to his or her economic injury. Promissory estoppels often are used to prevent a party who has made a unilateral offer from withdrawing the offer after the requested work has begun.

Question 15

Brandie is facing financial difficulties.Warren wants to help Brandie,and tells her that he will loan her $1,000.Later,Warren refuses to loan the promised money to Brandie.In the context of this scenario,which of the following statements is true?
A) Warren must loan the money to Brandie because a promise is made and consideration has nothing to do with the agreement.
B) Warren need not loan the money to Brandie because Brandie did not promise anything in return.
C) Warren must loan the money to Brandie because he has entered into an implied-in-fact contract by promising her the money.
D) Warren does not have to loan the money to Brandie because of the mirror image rule.
E) Warren must loan the money to Brandie because he has entered into an executory contract by promising her the money.

Accepted Answer

In this scenario, Warren need not loan the promised money to Brandie because Brandie does not promise anything in return. Not all promises are enforceable through legal action. There must be some incentive or inducement for a person's promise or it is not binding. The legal mechanism for evaluating the existence of this incentive is consideration, the receipt of a legal benefit or the suffering of a legal detriment.

Question 16

In contracts that are not between merchants selling goods,a promise to keep an offer open for a certain time period must be supported by the offeree's consideration.Such agreement to not revoke an offer is called a(n)______.
A) firm offer
B) option
C) promissory estoppel
D) novation
E) accord

Accepted Answer

In contracts that are not between merchants selling goods, a promise to keep an offer open for a certain time period must be supported by the offeree's consideration. Such agreement to not revoke an offer is called an option.

Question 17

Tony's Carpets Inc.wants to charge $9.80 a yard for installing a carpet for Serenity Bookstore but accidentally states $8.90 a yard in the bid.Serenity Bookstore accepts Tony's Carpets' bid.Tony's Carpets made a ______.
A) bilateral mistake
B) unilateral mistake
C) mutual mistake
D) rescission mistake
E) contractual mistake

Accepted Answer

In this case, the mistake made by Tony's Carpets is a unilateral mistake. A unilateral mistake arises when only one of the parties to a contract is wrong about a material fact.

Question 18

If a minor fails to disaffirm a contract within a reasonable time after reaching majority,the minor is said to ______ the contract.
A) transcend
B) terminate
C) rescind
D) ratify
E) breach

Accepted Answer

If a minor fails to disaffirm a contract within a reasonable time after reaching majority, the minor is said to ratify the contract. In addition, a minor can explicitly ratify a contract and forego disaffirmance, but only after reaching the age of majority.

Question 19

Which of the following terms refers to a person's ability to be bound by a contract?
A) legality
B) capacity
C) usability
D) negotiability
E) measurability

Accepted Answer

Capacity refers to a person's ability to be bound by a contract. Minors, intoxicated persons, and mentally incompetent persons are three classes of persons as classified by courts to lack capacity to be bound by contractual promises.

Question 20

Aria asks Jessica if she can borrow an outfit for an office party and Jessica agrees.When Aria picks an outfit,Jessica refuses to give it to her.Which of the following statements is true of this situation?
A) Jessica has committed a breach of contract.
B) A bargained-for exchange has not occurred, so Jessica does not have to loan the outfit to Aria.
C) Jessica has promised Aria something of value, so she must loan her the outfit.
D) The contract between Aria and Jessica is terminated as Aria makes a counteroffer.
E) Jessica has given a valid consideration, thereby making the agreement between her and Aria a binding contract.

Accepted Answer

An important part of consideration is that it must be bargained for. In other words, the consideration must be contemporaneous and a part of both parties' understanding of the contract terms. In this scenario, since Aria has not promised anything in return for Jessica, Jessica need not give the outfit to Aria.

Quiz 8: Contract Formation

Which of the following terms refers to force or threat of force?

In which of the following cases does the legal power of the offeree to bind the offeror end?

Which of the following statements is true about the consideration in a contract?

Valid consideration can include any promise to do something one has no obligation to do,refrain from doing something one has the right to do,or in the case of a unilateral contract,a performance when there is no obligation to do so.This is known as a(n) ______.

The legal mechanism for evaluating the existence of an incentive for a person's promise to establish a binding contract and acts as a receipt of a legal benefit or the suffering of a legal detriment is ______.

Which of the following statements is true about the acceptance of an offer?

An important exception to the rule requiring consideration to support a promise is the doctrine of ______.This doctrine arises when a promisee justifiably relies on a promisor's promise to his or her economic injury.

Which of the following statements is true about minors as parties to a contract?

Which of the following statements is true about a promise to make a gift?

Brandie is facing financial difficulties.Warren wants to help Brandie,and tells her that he will loan her $1,000.Later,Warren refuses to loan the promised money to Brandie.In the context of this scenario,which of the following statements is true?

In contracts that are not between merchants selling goods,a promise to keep an offer open for a certain time period must be supported by the offeree's consideration.Such agreement to not revoke an offer is called a(n) ______.

Tony's Carpets Inc.wants to charge $9.80 a yard for installing a carpet for Serenity Bookstore but accidentally states $8.90 a yard in the bid.Serenity Bookstore accepts Tony's Carpets' bid.Tony's Carpets made a ______.

If a minor fails to disaffirm a contract within a reasonable time after reaching majority,the minor is said to ______ the contract.

Which of the following terms refers to a person's ability to be bound by a contract?

Aria asks Jessica if she can borrow an outfit for an office party and Jessica agrees.When Aria picks an outfit,Jessica refuses to give it to her.Which of the following statements is true of this situation?