Question 1

Axel, the owner of Bar-B-Q Café, announces that he plans to paint its front fluorescent red. Cleo, the owner of Delicate Dress Shop next door, promises to pay Axel $1,000 to use a more conservative color. Axel agrees. Cleo's promise is

Accepted Answer

Cleo's promise is enforceable because Axel agreed to refrain from painting his café a color he was legally entitled to choose, which constitutes valid consideration for Cleo's promise to pay.

Question 2

Baked Goods Company agrees to supply Comida Café with all the corn chips that it re?quires for a year. A sudden demand for ethanol results in a shortage of corn, and the price rises sharply. Baked Goods asks Comida to pay a higher price for the chips. This request is

Accepted Answer

The request is valid due to the unforeseen difficulty of the sudden price increase, which can be considered a legitimate reason to renegotiate the contract terms.

Question 3

Fact Pattern 12-A1 
Dave's Hobby Town and Eva's Yarn Shoppe are adjacent stores with adjoining parking lots. Dave offers Eva a discount on purchases from Dave's store if Eva will not tow the cars of Dave's customers who park in Eva's lot.
-Refer to Fact Pattern 12-A1. Dave's discount is legally sufficient consid?eration

Accepted Answer

Dave's discount on purchases from his store qualifies as legally sufficient consideration since it is a promise of something of value. The fact that it is a discount on purchases instead of cash does not make it inadequate consideration.

Question 4

Rollo promises to perform, for a price, shoe repair services in affiliation with Togs 'n Things, a clothing store. To support a contract, the consid?eration ex?changed by the parties must be

Accepted Answer

For consideration to be valid and support a contract, it must be legally sufficient. This means that it must have some value in the eyes of the law. It does not have to be equal in value to what is being promised, nor does it have to be wisely priced. Adequacy of consideration is not a requirement for a contract to be formed.

Question 5

Superior-Plus Properties, Inc., and Topps Construction Company sign a contract that specifies the amount to be paid. Additional compensation may be jus?tified by

Accepted Answer

The contract allows for additional compensation to be justified by "extraordinary difficulties unforeseen at the time of the contract," which is stated in the question. The other options, such as business risks and changes in market prices, are not mentioned in the contract and would not necessarily justify additional compensation unless explicitly stated. Therefore, only option C is a valid reason for additional compensation according to the contract.

Question 6

Fact Pattern 12-A2 
Brad defends against a breach-of-contract suit by College Credit Corporation by claiming that their deal-a student loan accruing interest at a certain rate and payable beginning on a certain date-was unfair because the consideration for their contract was inadequate.
-Refer to Fact Pattern 12-A2. "Adequacy" of consideration refers to

Accepted Answer

Adequacy of consideration refers to "how much" consideration is given, focusing on the fairness or equivalence of the exchange in the contract.

Question 7

Todos Ltd. agrees to supply United Steel, Inc., with minerals from Venezuela. When the gov?ern?ment is unexpectedly overthrown in a revolution, Todos can obtain the goods only at a much higher price. United agrees to pay but later files a suit to recover the difference. The court will most likely rule that

Accepted Answer

The answer of Todos Ltd. agrees to supply United Steel,...

Question 8

Jeff offers Kelly $1,000 for her three-year-old laptop computer. Kelly ac?cepts. If a dispute arises, a court would likely

Accepted Answer

The court would not question the adequacy of consideration in this case as it is a valid offer and acceptance without any indications of fraud, mistake, duress or undue influence. As long as the agreement is a legally enforceable contract, the court will not interfere in the voluntary transactions of the parties involved.

Question 9

National Business Company and One-State Sales, Inc., agree to si?multa?neously rescind their contract and enter into a new agreement under which their duties are the same. National later sues One-State to enforce the new agreement. The court

Accepted Answer

When parties rescind a contract and enter into a new agreement with the same terms, the preexisting duty rule may apply. However, courts have the discretion to allow the rescission and enforce the new agreement if there is evidence of new consideration or other valid reasons for the change. Therefore, the court may apply the preexisting duty rule or allow the rescission depending on the circumstances of the case.

Question 10

Coverage, Inc. (CI), coordinates an insurance network that includes 1 million potential patients. By contracting with CI, a medical provider gains access to the network in exchange for accepting pay?ments at lower than market rates. Doctors, Inc., contracts with CI but, when few patients are forthcoming, files a suit to recover the differ?ence between the contract and market rates. The court will most likely rule that the contract is

Accepted Answer

The contract is enforceable because there is consideration; Doctors, Inc. gains access to a large network of potential patients, which is a benefit, in exchange for accepting lower payments.

Question 11

Fact Pattern 12-A2 
Brad defends against a breach-of-contract suit by College Credit Corporation by claiming that their deal-a student loan accruing interest at a certain rate and payable beginning on a certain date-was unfair because the consideration for their contract was inadequate.
-Refer to Fact Pattern 12-A2. A court is most likely to evaluate the adequacy of consid?era?tion if

Accepted Answer

The court is most likely to evaluate the adequacy of consideration when there is a gross disparity in the value of the consideration exchanged. In this case, Brad is claiming that the consideration was inadequate, which implies that he believes there was a gross disparity in the value of the consideration exchanged. Therefore, choice D is the best answer.

Question 12

Fact Pattern 12-A3 
Cut-Rate Construction Company begins building a restaurant for Diners Restaurants, Inc., but after two months demands an extra $100,000. Diners agrees to pay.
-Refer to Fact Pattern 12-A3. If CCC offers, as a reason for the extra $100,000, that ordinary business expenses have increased, the agree?ment is

Accepted Answer

The agreement is unenforceable due to the preexisting duty rule, which states that a party cannot demand additional compensation for performing a duty they are already contractually obligated to perform.

Question 13

Jill promises to pay Kyle $500 because "he does not have as much money as other people." Jill's promise is

Accepted Answer

For a promise to be enforceable, there must be consideration exchanged between the parties. In this case, Kyle has not given anything of value in return for Jill's promise, so the promise is not enforceable. It is not relevant whether society wants people to keep their promises or whether the redistribution of wealth is a valid social goal.

Question 14

Fact Pattern 12-A2 
Brad defends against a breach-of-contract suit by College Credit Corporation by claiming that their deal-a student loan accruing interest at a certain rate and payable beginning on a certain date-was unfair because the consideration for their contract was inadequate.
-Refer to Fact Pattern 12-A2. If, as Brad claims, the consideration in this problem is inadequate, it may indicate a lack of

Accepted Answer

Consideration is one of the elements of a valid contract, and it refers to the exchange of something of value that induces the parties to enter into the agreement. For a contract to be enforceable, the consideration must be a bargained-for exchange, meaning that each party must have given something of value and received something of value in return. If one party's consideration is grossly disproportionate to the other's or lacks value altogether, the contract may be voidable due to a lack of mutual assent or a lack of consideration. Therefore, if Brad claims that the consideration in the contract was inadequate, it suggests that there was no bargained-for exchange or mutual assent between the parties.

Question 15

Digital Computers (DC) agrees to sell 100 hard drives to Eagle Computer Stores. Later, to obtain a higher profit, DC demands an extra $100 per drive to complete delivery. With no other source for DC drives, Eagle reluctantly agrees. Regarding this agreement, a court would likely

Accepted Answer

The court would likely not enforce the agreement because the demand for an extra $100 per drive constitutes economic duress. Eagle agreed under pressure without a reasonable alternative, making the contract modification unenforceable.

Question 16

Fact Pattern 12-A1 
Dave's Hobby Town and Eva's Yarn Shoppe are adjacent stores with adjoining parking lots. Dave offers Eva a discount on purchases from Dave's store if Eva will not tow the cars of Dave's customers who park in Eva's lot.
-Refer to Fact Pattern 12-A1. Eva's forbearance from towing is legally sufficient consid?eration

Accepted Answer

Eva's forbearance from towing constitutes a promise to not exercise a legal right she otherwise would have, which is a form of consideration. It is therefore legally sufficient consideration, regardless of whether Dave's customers actually park in Eva's lot or whether Eva's lot is full.

Question 17

Fact Pattern 12-A3 
Cut-Rate Construction Company begins building a restaurant for Diners Restaurants, Inc., but after two months demands an extra $100,000. Diners agrees to pay.
-Refer to Fact Pattern 12-A3. If CCC offers no reason for the extra $100,000, but says only that it will otherwise stop construction, the agreement is

Accepted Answer

The agreement is unenforceable due to the preexisting duty rule, which states that a party cannot demand additional compensation for performing a duty they are already contractually obligated to perform.

Question 18

Applied Methods Corporation promises to give stock options to Brad, a production designer, for processes he has already designed. This promise is

Accepted Answer

The promise is unenforceable because it is based on past consideration, which is not valid consideration for a new contract. Consideration must be something of value exchanged between the parties at the time of the agreement.

Question 19

Ida promises to pay Jon, her son, $15,000 if he obtains his degree at Kappa University, where he is currently in his second year. Jon graduates. Ida is

Accepted Answer

Ida promised to pay Jon $15,000 if he obtains his degree at Kappa University and Jon has indeed obtained his degree at Kappa University. Therefore, Ida is required to pay as per the agreement made between the two parties. Choice A and B are incorrect because there was a clear agreement made between Ida and Jon. Choice C is not relevant to the situation since whether a job is hard to find after college or not was not a condition of the agreement.

Question 20

Quality Steel Corporation files a suit against Rite Tool Company, claiming that the consideration for their contract is inadequate. The court will most likely not examine the adequacy of the considera?tion if

Accepted Answer

Courts typically do not evaluate the adequacy of consideration as long as something of value has been exchanged between the parties, indicating a valid contract.

Quiz 12: Consideration