Question 1

Two friends,Ann and Mary,are having margaritas at happy hour.There had been no discussion of who would pay for the drinks.After the third round of drinks,Ann said,"I will pay for everything tonight including your drinks." A couple of minutes later,Ann says,"I've changed my mind.I just remembered that they might be having layoffs at my job tomorrow." Mary wants to force Ann to perform on her promise and threatens to sue.In this circumstance,a court would:

Accepted Answer

Ann's promise to pay for the drinks was a gratuitous promise, meaning it was made without consideration or exchange of value, and therefore not legally enforceable.

Question 2

In which of the following situations is there adequate consideration on the part of the promisor to support enforcement of a contract?

Accepted Answer

The answer of In which of the following situations is...

Question 3

An illusory promise is:

Accepted Answer

An illusory promise is one where the promisor retains discretion over whether to perform, making it non-binding and not sufficient consideration.

Question 4

An agreement to settle an earlier contract that was in dispute is:

Accepted Answer

An agreement to settle an earlier contract that was in dispute is known as an accord and satisfaction. This means that both parties have entered into a new agreement, which terminates the original contract. The accord is the agreement to resolve the dispute, while the satisfaction is the performance of the new agreement.

Question 5

Worldwide Motor Company promised to buy all its needs,"taking into account tires purchased from other tire companies," for automobile tires from Good Tire Co. ,and Good promised to sell these tires.The contract also provided that Worldwide could cancel the contract at any time,without penalty,and could buy tires from other manufacturers if it so desired.This contract is:

Accepted Answer

The contract is unenforceable because Worldwide's promise is illusory; it can cancel at any time and buy from others, meaning there is no mutuality of obligation.

Question 6

Jean had just received a promotion and substantial raise.Jean felt her raise would give her much more spending money,thus she planned to buy a new sports car.Jean felt she did not need to worry about receiving the best price for her old car,which she thought was worth about $3,000.She sold the car for $500.In fact,the car was worth $5,000,and Jean had not taken into account the additional taxes on her extra income.Jean also decided that for a single mother a sports car would not be very practical.Jean wanted to return the $500 to the purchaser and get her car back.Assuming that Jean will return the $500 to the buyer,Jean can:

Accepted Answer

The court would not inquire into the difference in the value of the consideration.

Question 7

Cheryl hired Golden Construction Co.to build a house for her.The plans for the house were complex,and expert workmanship was required.After the house was completed,Cheryl liked it so much that she promised to pay Golden a $4,000 bonus.Later,Golden demanded the money,but Cheryl refused to pay it.Golden sues.What is the most probable result?

Accepted Answer

The answer of Cheryl hired Golden Construction Co.to build a...

Question 8

Lisa enters into a contract with Acme Groceries,Inc. ,in which she promises to purchase groceries "as she determines appropriate in the future" from Acme,and Acme promises to sell such groceries to Lisa.This is an example of:

Accepted Answer

Lisa's promise is illusory because it lacks a firm commitment to purchase any specific quantity of groceries, making it unenforceable.

Question 9

Frieda is at a Denver Broncos Football game,and she is being bothered by several extremely drunk spectators in nearby seats.She asks a security officer to do something,but the security officer refuses.She then offers the security officer $100 if he'll stop the problem.He agrees,then warns the drunk spectators,after which the problem stops.Frieda refuses to pay the security officer.Is there sufficient consideration in this agreement?

Accepted Answer

The answer of Frieda is at a Denver Broncos Football...

Question 10

Caterer agrees with Bride to cater Bride's wedding reception for $12 per plate.On the wedding day,Caterer calls Bride saying that some things have come up,and she will have to charge $16 a plate in order to do the catering.Bride agrees.Which is true?

Accepted Answer

The answer of Caterer agrees with Bride to cater Bride's...

Question 11

Seasonal Selections,Inc.enters into a contract with Arthur's Tree Farm to purchase all of the balsam fir tree boughs that it will need to make Christmas wreaths for the Christmas season.This contract is:

Accepted Answer

This contract is a requirements contract, where Seasonal Selections, Inc. agrees to buy all the balsam fir tree boughs it will need from Arthur's Tree Farm. It is not an illusory contract because the quantity is specified, and it is not based on a promise that lacks consideration as both parties have agreed to the terms. It is not a void contract based on illegal consideration. It is not an outputs contract as it is based on the buyer's requirements rather than the seller's outputs.

Question 12

Lode Mines enters into a contract with Ajax Photo Labs,whereby Ajax agrees to purchase all its requirements of silver needed for photo finishing during the next year,from Lode,at $4.00 per ounce.Over the last 4 years,Ajax has used an average of 10,000 ounces of silver per year.Lode only produces about 15,000 ounces of silver per year.About 2 months into the contract,the price of silver skyrockets to $50 per ounce.Ajax immediately orders an additional 50,000 ounces from Lode.Lode refuses to deliver,and Ajax sues.What is the most likely outcome?

Accepted Answer

Requirements contracts are enforceable, but they require the parties to act in good faith. Ajax's sudden increase in demand from 10,000 to 50,000 ounces, especially after a price spike, suggests bad faith, as it likely exceeds their actual requirements.

Question 13

Which of the following constitutes legal consideration?

Accepted Answer

Legal consideration requires an exchange between the parties involved. Option B describes a promise based on a change in duties and payments, which represents a valid exchange. The other options - A, C, D, and E - don't involve a valid exchange and therefore don't meet the requirements for legal consideration.

Question 14

When a seller promises a buyer to sell to he/she all of an item that it produces,this results in:

Accepted Answer

This is an example of an enforceable output contract where the seller agrees to sell all of the production output to the buyer. This type of contract is valid as long as the buyer's demands are not disproportionate to the previous output of the seller.

Question 15

Frank is a loyal employee who has spent much time above and beyond the call of duty promoting his employer's company on weekends.Frank's boss says to him,"Because of all this extra work you have done,you'll get a $1,000 bonus next month." Because of this statement:

Accepted Answer

The promise of a bonus is based on past consideration, which is not valid consideration for a contract. Therefore, the company is not legally obligated to pay.

Question 16

Farmer Smith hires Joe to drill a new well.Joe looks at the drilling site and quotes Smith a price of $500 for the new well.After drilling a short distance,Joe discovers hard bedrock,which is unexpected in this locality.To drill through this would take substantially more time and cost more.Joe says he will continue,but only if Smith pays him $2,000.Smith agrees.Smith's promise to pay an increased amount is enforceable because:

Accepted Answer

This is an unforeseen circumstance. The unforeseen circumstance of encountering hard bedrock was not anticipated in the original agreement between Smith and Joe. Therefore, the new agreement to pay an increased amount is enforceable.

Question 17

Which of the following most likely constitutes legal consideration?

Accepted Answer

A promise to buy all that the promisor needs of an item without specifying a minimum quantity is legally binding because it is based on a requirement or need, and therefore constitutes consideration.

Question 18

There is an existing contract calling for Seller to deliver 1,000 widgets to Buyer.Buyer says to Seller,"I would like to buy 100 additional units at the same price." Seller responds,"We promise to sell you the 100 extra units if we decide not to sell them to other customers." Regarding only the sale of the extra 100 units:

Accepted Answer

The seller's promise is illusory because it is conditional on their decision, which means they are not actually bound to perform. Therefore, there is no consideration.

Question 19

Ricky signs a 2-year contract to play basketball for the Jolters,for $100,000 per game.Right before a big game,Ricky goes to the owner and says that he will not play unless the owner pays him an additional $5,000 per game.The owner,being desperate,agrees.Now that the season is over,Ricky demands his additional compensation,but the owner refuses to pay.Ricky sues.Most likely:

Accepted Answer

Ricky was already under a prior duty to play basketball for the Jolters under the initial contract. A modification to a contract requires new consideration to make it enforceable. In this case, there is no new consideration on Ricky's part to warrant the additional $5,000 per game, and therefore the modification is not valid. The owner will likely win the lawsuit.

Question 20

Ralph is injured in an automobile accident.The other driver pays Ralph $10,000,and Ralph agrees not to sue that other driver.This is an example of:

Accepted Answer

The answer of Ralph is injured in an automobile accident.The...

Quiz 3: Consideration and Equity