Deck 15: Consideration

Question 1

Consideration is optional in every contract.

Answer 1

False

Question 2

In a unilateral contract, the consideration for a promise is a[n] ____.

A) Action
B) Return promise
C) Acknowledgement
D) Consideration
E) Agreement

Answer 2

Action

Question 3

Sue is three months behind on her mortgage, and her lender filed negative information affecting her credit rating. Sue mailed one monthly payment to the lender along with a letter providing that she was making the payment on condition that the lender removes negative material sent to credit reporting agencies affecting her credit rating. The lender cashed the check but did not remove the negative information. Sue sues the bank for breach of contract. Which of the following is the most likely result?

A) The bank will win because under the preexisting duty rule, Sue was already legally obligated to make the payment, and there was no consideration to support the contract.
B) The bank will win because under federal law, once correct negative information is reported regarding a customer, it can be removed only if it is found to be untruthful.
C) The bank will win because under state law, once correct negative information is reported regarding a customer, it can be removed only if it is found to be untruthful.
D) Sue will win because the bank's cashing the check constituted acceptance of her offer, and a valid contract existed.
E) Sue will win because the bank had an obligation to notify her that it was not accepting her offer before cashing the check.

Answer 3

The bank will win because under the preexisting duty rule, Sue was already legally obligated to make the payment, and there was no consideration to support the contract.

Question 4

As a general rule, past consideration qualifies as consideration.

Question 5

In a bilateral contract, the consideration for each promise is ____.

A) A completed act
B) The beginning of action in acceptance, even if it is not complete
C) An acknowledgement
D) A return promise
E) An agreement

Question 6

Which of the following is what a person will receive in return for performing a contract obligation?

A) Consideration
B) Acknowledgement
C) Approval
D) Accord
E) Accession

Question 7

Which of the following is an exception to the rule requiring consideration?

A) Promissory agreement
B) Promissory estoppel
C) Quasi estoppel
D) Quasi agreement
E) Promissory performance

Question 8

Sam promises his uncle, Bob, that he will lose 10 pounds and exercise every day during the spring semester in exchange for having his tuition paid for the fall semester. The uncle agrees; but after Sam has lost 10 pounds and exercised all semester, Bob refuses to pay saying that no contract existed. Which of the following is true?

A) Consideration was present, there was an enforceable contract, and Bob has wrongfully refused to pay.
B) There was no consideration present, and Bob has no obligation to pay.
C) There was no consideration present, but Bob must pay under principles of promissory estoppels.
D) There was consideration present, but Bob is not required to pay because the contract was illusory.
E) There was consideration present, but Bob is not required to pay because Bob did not receive a benefit personally.

Question 9

Which of the following was the result on appeal in the Case Opener involving the alleged breach of an oral contract based on the plaintiff lawyer loaning a corporate client funds and the client later reneging on a promise, made in gratitude, to give the lawyer 3 percent of the company's stock?

A) That the promise to transfer the stock flowed from the loan transaction and was enforceable by the plaintiff.
B) That the promise was unenforceable because lawyers may not loan clients money.
C) That the promise was enforceable only if the total the plaintiff received in funds did not violate state usury laws involving maximum interest rates.
D) That the promise was not enforceable because it was a gift.
E) That the promise was enforceable as a gift.

Question 10

A promise to do something that you are already obligated to do is generally a valid consideration.

Question 11

A liquidated debt may be the subject of an accord and satisfaction.

Question 12

In some cases, if past consideration was given with expectation of future payment, the court may enforce the promise.

Question 13

An exception to the rule requiring consideration is promissory estoppel.

Question 14

In a bilateral contract, the consideration for a promise is a completed act.

Question 15

One consideration in determining whether consideration is sufficient to support a contract for the sale of goods under the UCC is whether both parties received a good deal under UCC rules and principles.

Question 16

Which of the following is not an example of consideration?

A) A promise to stay in a job until a particular project is complete.
B) A promise to your football coach to refrain from riding your motorcycle during football season even though you love riding it.
C) A promise to cook dinner for your roommate for the next six months.
D) A promise to buy skis for $300 if you like them.
E) A promise to stop staying out late at night during exam week.

Question 17

An illusory promise is not a consideration.

Question 18

Partial payment of a debt may or may not be valid consideration, depending on whether the debt is liquidated or unliquidated.

Question 19

Which of the following was the result on appeal in Thelma Agnes Smith v. David Phillip Riley, the case in the text in which the plaintiff who had lived with the defendant out of wedlock for several years sought after they broke up to enforce two agreements regarding the sale and assignment of property to her?

A) The court ruled in favor of the defendant on the basis that a recitation of nominal consideration of $1 along with love and affection was insufficient consideration to support a conveyance.
B) The court ruled in favor of the plaintiff on the basis that a recitation of nominal consideration of $1 along with consideration of love and affection was adequate consideration to support the agreements.
C) The court ruled in favor of the defendant on the basis that the plaintiff's previous deposit of funds into a joint checking account was insufficient consideration for the later agreements.
D) The court ruled in favor of the plaintiff on the basis that the plaintiff's previous deposit of funds into a joint checking account was sufficient consideration for the later agreements.
E) The court ordered the parties to divide on a 50/50 basis the assets in question based on their domestic partnership.

Question 20

Which of the following was the judge's ruling in Jamil Blackmon v. Allen Iverson, the case in the text in which the plaintiff alleged that the defendant, a professional athlete, wrongfully failed to pay him a percentage of proceeds received from using the nickname "The Answer" in merchandising although the defendant agreed to do so after the plaintiff suggested the use of the nickname?

A) That consideration was lacking because the defendant was not bound to use the nickname.
B) That the defendant's promise to pay was past consideration insufficient to create a binding contract.
C) That consideration was present and that the defendant was liable to the plaintiff.
D) That the issue of consideration was irrelevant because consideration was not required in this type of contract.
E) That the defendant was required to pay the plaintiff only half of the percentage initially offered because a gift situation was involved.

Question 21

As discussed in the case of Double AA Builders Ltd., v. Grand State Construction L.L.C., which of the following may be used to necessitate that a subcontractor perform according to the terms of its bid because the contractor has relied on the subcontractor's bid?

A) Consideration
B) Primary consideration
C) Promissory estoppel
D) Reality estoppel
E) Secondary consideration

Question 22

In a[n] ______ debt, the parties either dispute the fact that any money is owed or agree that some money is owed but dispute the amount.

A) Disputed
B) Unacknowledged
C) Uncertain
D) Liquidated
E) Unliquidated

Question 23

Sally goes to have her hair trimmed and agrees to pay $40 to the stylist. While there, Sally decides that she would also like highlights. The stylist informs her that highlights will cost an additional $30. Sally agrees to the price, gets the highlights, but refuses to pay the extra amount. What is the likely result in a dispute between Sally and the stylist and why?

A) The stylist will win because she did additional work in exchange for the extra payment; and, therefore, Sally's promise was supported by valid consideration.
B) The stylist will win because she did additional work in exchange for the extra payment; and, therefore, a valid unilateral contract existed.
C) The stylist will win unless Sally can show that she had previously received both a trim and highlights for $40. If she can prove that she previously received both for $40, then the past expectations rule applies.
D) Sally will win because the stylist had a preexisting duty to have Sally's hair look as good as possible.
E) Sally will win because there was no valid consideration in exchange for the highlighting.

Question 24

For a court to enforce a promise, ______ must offer consideration.

A) The offeror but not the offeree
B) The offeree but not the offeror
C) The acceptee but not the acceptor
D) The acceptor but not the acceptee
E) Each side to the contract

Question 25

Which of the following is true regarding illusory promises?

A) Illusory promises are not consideration.
B) Illusory promises are consideration.
C) Illusory promises qualify as consideration only when past consideration is at issue.
D) Illusory promises qualify as consideration only when promissory estoppel is at issue.
E) Illusory promises are consideration only when a sale of goods is involved.

Question 26

Which of the following is true regarding whether an accepted offer to pay part of a debt is consideration?

A) Partial payment is consideration under all circumstances.
B) Partial payment is not consideration under any circumstances.
C) Partial payment is consideration if a liquidated debt is involved.
D) Partial payment is consideration if an unliquidated debt is involved.
E) Partial payment is consideration if an exception applies to the general rule that partial payment is not consideration for an unliquidated debt.

Question 27

Which of the following occurs when three conditions are met: one party makes a promise knowing the other party will rely on it; the other party does rely on it; the only way to avoid injustice is to enforce the promise?

A) Promissory agreement
B) Promissory estoppel
C) Quasi estoppel
D) Quasi agreement
E) Promissory performance

Question 28

Which of the following is true regarding the adequacy of consideration?

A) Courts generally consider the adequacy of consideration in determining whether to enforce a contract.
B) Courts consider the adequacy of consideration only if something is sold for less than 90% of its market value.
C) Courts consider the adequacy of consideration only if something is sold for less than 80% of its market value.
D) Courts consider the adequacy of consideration only if something is sold for less than 70% of its market value.
E) Courts seldom consider the adequacy of consideration but will do so if fraud is involved.

Question 29

Which of the following would not be considered an example of consideration?

A) A promise to be on time for class all semester.
B) A promise to stop drinking sports drinks.
C) A promise to walk the neighbor's dog.
D) A promise to call the police if the neighbor's alarm system should go off while they are on vacation.
E) A promise to pay your employees as required by law.

Question 30

Which of the following is true under the UCC regarding checks marked "paid-in-full"?

A) If a business inadvertently cashes such a check, the business has 30 days from the date it cashed that check to offer repayment in the same amount to the debtor and avoid an accord and satisfaction.
B) If a business inadvertently cashes such a check, the business has 60 days from the date it cashed that check to offer repayment in the same amount to the debtor and avoid an accord and satisfaction.
C) If a business inadvertently cashes such a check, the business has 90 days from the date it cashed that check to offer repayment in the same amount to the debtor and avoid an accord and satisfaction.
D) If a business inadvertently cashes such a check, the business has 120 days from the date it cashed that check to offer repayment in the same amount to the debtor and avoid an accord and satisfaction.
E) The business has no recourse, and the debt is deemed discharged and satisfied.

Question 31

Which of the following is true regarding the rating the World Bank gives China in relation to the ease of doing business there?

A) China is rated in the top 10.
B) China is ranked near the middle.
C) China is ranked in the bottom 25.
D) China is ranked in the bottom 10.
E) China is ranked last.

Question 32

When an accord and satisfaction is at issue, the ______ is the payment, by the debtor, of the reduced amount.

A) Satisfaction
B) Accord
C) Seal
D) Written compromise
E) Written acknowledgement

Question 33

In a[n] ______ debt, there is no dispute about the fact that money is owed and the amount of money owed.

A) Actual
B) Acknowledged
C) Certain
D) Liquidated
E) Unliquidated

Question 34

In return for his oral promise to pay her $100, Penny promises her uncle that she will not violate laws against speeding for one year. Penny abides by her promise, but her uncle refuses to pay. Which of the following is true regarding whether Penny is entitled to the money?

A) Penny is entitled to the money because she upheld her part of the bargain.
B) Penny is not entitled to recover because she had a preexisting duty to obey laws against speeding.
C) Penny is not entitled to recover because obeying traffic laws was actually good for her, not something that would constitute a detriment.
D) Penny is not entitled to recover unless the agreement was put under seal.
E) Penny is entitled to recover, but only ½ of the amount, because a family member is involved and the agreement was not in writing.

Question 35

A promise to do something that you are already obligated to do is ____.

A) Valid consideration because it is illusory consideration
B) Valid consideration only in the employment context
C) Valid consideration because it is past consideration
D) Valid consideration only if a sale of goods is involved
E) Not valid consideration

Question 36

Yolanda agrees to bathe and groom Wendy's dog, Fluffy Puff, for $30. Yolanda agreed to the price before seeing Fluffy Puff who is a chubby dog with lots of hair. Yolanda tells Wendy that if she is going to groom Fluffy Puff, the price will be $40. Wendy reluctantly agrees but tells Yolanda that she should not have been surprised that a dog named Fluffy Puff would have lots of hair. Yolanda bathes and grooms Fluffy Puff, but Wendy will only pay $30. Which of the following is correct regarding Yolanda's entitlement to the extra $10?

A) Yolanda is entitled to the extra $10 because a valid bilateral contract existed.
B) Yolanda is entitled to the extra $10 because a valid unilateral contract existed.
C) Assuming the unforeseen circumstances rule does not apply, Yolanda is not entitled to the extra $10 because she had a preexisting duty to bathe and groom Fluffy Puff for $30.
D) Assuming the unforeseen circumstances rule does not apply, Yolanda is not entitled to the extra $10 because Wendy's promise to pay $30 was illusory.
E) Assuming the unforeseen circumstances rule does not apply, Yolanda is not entitled to the extra $10 because past consideration was involved.

Question 37

When an accord and satisfaction is at issue, the ______ is the new agreement to pay less than the creditor claims is owed.

A) Satisfaction
B) Accord
C) Seal
D) Compromise
E) Acknowledgement

Question 38

Which of the following is true regarding the preexisting duty rule?

A) Unforeseen circumstances is an exception, but additional work and past consideration are not exceptions.
B) Additional work is an exception, but unforeseen circumstances and past consideration are not exceptions.
C) Past consideration is an exception, but unforeseen circumstances and additional work are not exceptions.
D) Unforeseen circumstances and additional work are exceptions, but past consideration is not an exception.
E) Unforeseen circumstances and past consideration are exceptions, but additional work is not an exception.

Question 39

Sam offers Betty his bicycle for $75. Which of the following is an example of an illusory promise on the part of Betty?

A) "I'll take it."
B) "I'll take it if I decide to do so."
C) "I won't pay $75, but I will pay $50."
D) "I'll take it if you will let me try it out first and the brakes work well."
E) "I'll take it if you will buy new tires."

Question 40

Which of the following is true regarding an accord and satisfaction?

A) When amounts agreed upon are paid, the debt is fully discharged.
B) When amounts agreed upon are paid, the debt is fully discharged except for any late charges due on the initial indebtedness.
C) When amounts agreed upon are paid, the debt is fully discharged except for any interest due on the initial indebtedness.
D) When amounts agreed upon are paid, the debt is fully discharged except for any late charges and for any interest due on the initial indebtedness.
E) When amounts agreed upon are paid, the debt is fully discharged except for any late charges or interest due on the initial indebtedness, or attorney fees of the creditor that are due.

Question 41

Define and discuss promissory estoppel, and give an example of when it would be applied.

Question 42

Tina, an experienced pool contractor, and Bruce agree on a price for Tina to build a pool in Bruce's backyard. While the area is not known for rocks, unfortunately Tina unexpectedly encounters a significant problem with solid rock in the backyard when she starts to dig. She tells Bruce that unless she receives an extra $5,000, she cannot complete the job. Bruce agrees thinking to himself that he has a way out. When Tina finishes the pool, Bruce refuses to pay the additional $5,000. Which of the following is the most likely result of their dispute?

A) Bruce will be required to pay because a typical, unilateral contract is involved, and he got the benefit of his bargain.
B) Bruce will be required to pay because a typical, bilateral contract is involved, and he got the benefit of his bargain.
C) Bruce will be required to pay because unforeseen circumstances are an exception to the preexisting duty rule.
D) Bruce will not be required to pay because he provided no additional consideration, and the preexisting duty rule applies.
E) Bruce will only be required to pay ½ of the agreed upon amounts because of the calculations involved under the preexisting duty rule.

Question 43

"Bank Robbery." Safe Bank was robbed of a significant sum of cash by a robber later identified as Victor Victory. Safe Bank offered a reward of $10,000 to anyone who captured or provided information leading to the capture of Victor. Ted, a police officer in town, promised Safe Bank officials that he would apprehend Victor. While on duty, Ted arrested Victor at a hamburger joint in town. He found Victor based upon a hunch he had after Ursula, who dated Victor, told him about various places Victor enjoyed eating. The bank refuses to pay either Ursula or Ted any of the reward money.

-Which of the following is true regarding the offer of the reward?

A) It pertained to a bilateral contract that could be accepted only with consideration consisting of a promise.
B) It pertained to a bilateral contract that could be accepted only with consideration consisting of performance.
C) It pertained to a bilateral contract that could be accepted with consideration consisting of a promise or performance.
D) It pertained to a unilateral contract that could be accepted with consideration consisting of a promise.
E) It pertained to a unilateral contract that could be accepted with consideration consisting of performance.

Question 44

Which of the following was involved when the government, in attempting to help AIG, agreed with AIG to lend AIG up to $85 billion in exchange for nearly 80 percent of AIG's stock?

A) An accord and satisfaction
B) An accord but not a satisfaction
C) A unilateral contract
D) A bilateral contract
E) An unliquidated contract

Question 45

Which of the following is true regarding the effect of a debtor offering to pay less money than is owed as full payment on a debt when the debt itself, in its entirety, is in dispute, and the creditor agrees?

A) A liquidated debt is involved, and there is an accord and satisfaction.
B) A liquidated debt is involved, and there is an accord but no satisfaction.
C) A liquidated debt is involved, and there is neither a satisfaction nor an accord.
D) An unliquidated debt is involved, and there is an accord and satisfaction.
E) An unliquidated debt is involved, and there is an accord but not satisfaction.

Question 46

Which of the following was the result in the case in the text Hamer v. Sidway, in which, after performance by his nephew, an uncle reneged on a promise to the nephew to pay him $5,000 if the nephew refrained from drinking liquor, using tobacco, swearing, and playing cards or billiards for money until he was 21 years of age?

A) That because refraining from the conduct at issue benefited his character and health, the nephew could not recover.
B) That no consideration was involved, and the nephew could not recover because the consideration from him did not consist of money or goods.
C) That no consideration was involved, and the nephew could not recover because the proof established that the nephew had no interest in engaging in the items at issue, and avoiding them was no detriment to him.
D) That the nephew could recover because he supplied consideration.
E) That the nephew could recover, but only under promissory estoppel an amount compensating him for his reliance on the promise.

Question 47

Assuming no exception applies, which of the following is true regarding the effect of a debtor offering to pay less money than is owed as full payment on a debt for which there is no dispute over the amount or existence of the debt, and the creditor agrees?

A) A liquidated debt is involved, and there is an accord and satisfaction.
B) A liquidated debt is involved, and there is an accord but no satisfaction.
C) A liquidated debt is involved, and there is neither a satisfaction nor an accord.
D) An unliquidated debt is involved, and there is an accord and satisfaction.
E) An unliquidated debt is involved, and there is an accord but not satisfaction.

Question 48

Assuming no exception applies, which of the following is true regarding the effect of a debtor offering to pay less money than is owed as full payment on a debt for which there is a dispute over the amount of the debt, and the creditor agrees?

A) A liquidated debt is involved, and there is an accord and satisfaction.
B) A liquidated debt is involved, and there is an accord but no satisfaction.
C) A liquidated debt is involved, and there is neither a satisfaction nor an accord.
D) An unliquidated debt is involved, and there is an accord and satisfaction.
E) An unliquidated debt is involved, and there is an accord but not satisfaction.

Question 49

"Garage Sale." Richard, who is cleaning out his garage, offers to sell Dawn a used computer for $200. Dawn replies that "I'll think about it and buy it if I decide to do so." Richard also calls Denise and offers to sell Denise a used business law book for $50. She asks if she can clean his apartment in return for the book instead of pay cash, and he agrees. Richard also agrees to sell a communications book for $5 to Jill who promises to pick it up the next day. Meanwhile, Sam comes to visit and offers Richard $45 for the business law book. Richard sells it to him because he decides his apartment is clean enough. Sam also offers Richard $50 for the used computer. Richard sells it to Sam because he does not expect to hear from Dawn. Sam sees the communications book and offers Richard $45 for it. Richard decides to forget about Jill and proceeds to sell the book to Sam for $45. The next day Denise shows up to clean Richard's apartment and is very angry because Richard did not save the book for her. Denise claims that Richard breached their contract because they had a deal. Richard says that they never had a deal because no consideration was present. He also said that even if cleaning house would be considered consideration, any housekeeping done would have been wholly inadequate to support receipt of the book because his house was already clean. Jill is also angry because Richard sold the communications book and informs him that he breached the contract he had with her. Richard tells her that he had no obligation to hold the book for her because they had a unilateral contract. Two days after they first talked, Dawn tells Richard that she would like the computer. She tells him that her response bound him and that he should have awaited her action. Richard tells Sam that he needs to return everything for a full refund. Sam refuses.

-Which of the following is true regarding whether Richard breached a contract with Dawn?

A) Dawn's statement created an illusory promise which cannot be enforced.
B) Richard breached the contract because he had an obligation to wait a reasonable length of time on Dawn's response, and waiting only two days was not reasonable.
C) Richard did not breach the contract with Dawn because he waited a reasonable amount of time before disposing of the computer.
D) Richard did not breach the contract with Dawn because it was for the sale of goods and, therefore, a typical contract.
E) Richard did not breach the contract, but Dawn can recover based on promissory estoppel.

Question 50

"Garage Sale." Richard, who is cleaning out his garage, offers to sell Dawn a used computer for $200. Dawn replies that "I'll think about it and buy it if I decide to do so." Richard also calls Denise and offers to sell Denise a used business law book for $50. She asks if she can clean his apartment in return for the book instead of pay cash, and he agrees. Richard also agrees to sell a communications book for $5 to Jill who promises to pick it up the next day. Meanwhile, Sam comes to visit and offers Richard $45 for the business law book. Richard sells it to him because he decides his apartment is clean enough. Sam also offers Richard $50 for the used computer. Richard sells it to Sam because he does not expect to hear from Dawn. Sam sees the communications book and offers Richard $45 for it. Richard decides to forget about Jill and proceeds to sell the book to Sam for $45. The next day Denise shows up to clean Richard's apartment and is very angry because Richard did not save the book for her. Denise claims that Richard breached their contract because they had a deal. Richard says that they never had a deal because no consideration was present. He also said that even if cleaning house would be considered consideration, any housekeeping done would have been wholly inadequate to support receipt of the book because his house was already clean. Jill is also angry because Richard sold the communications book and informs him that he breached the contract he had with her. Richard tells her that he had no obligation to hold the book for her because they had a unilateral contract. Two days after they first talked, Dawn tells Richard that she would like the computer. She tells him that her response bound him and that he should have awaited her action. Richard tells Sam that he needs to return everything for a full refund. Sam refuses.

-Which of the following is true regarding the dispute between Richard and Sam regarding whether Sam must return anything?

A) Sam must return the computer only.
B) Sam must return the business law book only.
C) Sam must return the communications book only.
D) Sam must return the computer, the business law book, and the communications book.
E) Sam does not legally have to return anything.

Question 51

"Trick or Treat?" Penny has significant credit card debt following her diving trip with her boyfriend, Sam, to the Grand Cayman islands. Some of the diving trips cost more than she expected, and these extra expenses were unforeseen. Penny recently took a business law class and thought that she might be able to find a way out of her troubles. She owed $2,000 to Credit Card Company A and $3,000 to Credit Card Company B. She also owed $2,000 to the local dive shop for diving equipment she purchased for the trip. Penny is in negotiations with the dive shop over that amount because she had a problem with a mask fogging on the trip and had to replace it while on the trip at a charge of $100. While the mask issue did not significantly interfere with the trip, Penny thought that she should get at least some deduction on the overall bill. Penny called Credit Card Company A and told them that she was a poor student and could not afford to pay the entire $3,000 she owed. The representative of Credit Card Company A, who was working her last day, told Penny just to pay $50, and that would be considered payment in full. The representative sent Penny an e-mail to that effect. Penny was very pleased and went right out and quit her job at the campus bookstore because she did not really like dealing with student problems and thought that with the reduction from Credit Card Company A, she would have no problem in regard to having extra money. Although her parents supplied her with a large monthly allowance, Penny had the job at the bookstore so that she would have more money for clothes shopping and fun activities. In relation to Credit Card Company B, Penny called up and once again pled her case as a poor student. She talked Credit Card Company B into taking a used car with a blown-up engine worth around $1,000 in exchange for the debt. Penny did not lie about the value of the car, but she made it sound as good as possible. Transfer details regarding the car were worked out through e-mail. Finally, Penny sent the dive shop a check for $1,000 marked "paid in full." Much to her surprise and pleasure, the dive shop did indeed cash the check. Penny, however, was distraught to find that within 30 days, Credit Card Company A sent her a bill for $1,950; Credit Card Company B sent her a bill for $3,000; and from the dive shop she received a check for $1,000 along with a bill for $2,000. Faced with all these claims, Penny decided to look for work. She ended up two weeks later with a job selling beauty products that she liked much better than the bookstore job. It did not require dealing with pesky students. Assume all credit card company representatives had authority to make the agreements at issue.



-What is Credit Card Company A's best argument in relation to enforcing Penny's obligations?

A) That the agreement constituted a bad deal for the card company.
B) That only past consideration was involved.
C) That student debt is not dischargeable as a matter of law and that the card company owed no obligation to Penny regardless of statements made.
D) That its promise was clearly an illusory promise that Penny should have known could not be enforced once the card company discovered the true circumstances.
E) That no consideration existed for its promise, and that based on Penny's circumstances and behavior, enforcing the debt would not result in injustice to Penny.

Question 52

"Trick or Treat?" Penny has significant credit card debt following her diving trip with her boyfriend, Sam, to the Grand Cayman islands. Some of the diving trips cost more than she expected, and these extra expenses were unforeseen. Penny recently took a business law class and thought that she might be able to find a way out of her troubles. She owed $2,000 to Credit Card Company A and $3,000 to Credit Card Company B. She also owed $2,000 to the local dive shop for diving equipment she purchased for the trip. Penny is in negotiations with the dive shop over that amount because she had a problem with a mask fogging on the trip and had to replace it while on the trip at a charge of $100. While the mask issue did not significantly interfere with the trip, Penny thought that she should get at least some deduction on the overall bill. Penny called Credit Card Company A and told them that she was a poor student and could not afford to pay the entire $3,000 she owed. The representative of Credit Card Company A, who was working her last day, told Penny just to pay $50, and that would be considered payment in full. The representative sent Penny an e-mail to that effect. Penny was very pleased and went right out and quit her job at the campus bookstore because she did not really like dealing with student problems and thought that with the reduction from Credit Card Company A, she would have no problem in regard to having extra money. Although her parents supplied her with a large monthly allowance, Penny had the job at the bookstore so that she would have more money for clothes shopping and fun activities. In relation to Credit Card Company B, Penny called up and once again pled her case as a poor student. She talked Credit Card Company B into taking a used car with a blown-up engine worth around $1,000 in exchange for the debt. Penny did not lie about the value of the car, but she made it sound as good as possible. Transfer details regarding the car were worked out through e-mail. Finally, Penny sent the dive shop a check for $1,000 marked "paid in full." Much to her surprise and pleasure, the dive shop did indeed cash the check. Penny, however, was distraught to find that within 30 days, Credit Card Company A sent her a bill for $1,950; Credit Card Company B sent her a bill for $3,000; and from the dive shop she received a check for $1,000 along with a bill for $2,000. Faced with all these claims, Penny decided to look for work. She ended up two weeks later with a job selling beauty products that she liked much better than the bookstore job. It did not require dealing with pesky students. Assume all credit card company representatives had authority to make the agreements at issue.



-Which of the following would be the result in a majority of states in regard to Penny's obligation to the dive shop?

A) That because the debt was unliquidated and the dive shop cashed the check, an accord and satisfaction occurred, and Penny owes nothing.
B) That because the debt was liquidated, no accord and satisfaction occurred, and Penny owes the full $2,000.
C) That in order to satisfy equitable principles, the parties would split the remaining debt with Penny owing $1,000.
D) That under the UCC, Penny would be required to pay the full amount, but the dive shop would be estopped from charging any interest.
E) That because the dive shop offered, through issuance of the check, full repayment, no accord and satisfaction existed; Penny owes the full $2,000.

Question 53

Christen graduates from college, receives a job offer across the country, and moves there giving up her apartment and cancelling all the other job interviews. After she gets there, she is told that there is no job. What may she recover in most states?

A) Nothing
B) Reliance damages
C) Liquidated damages
D) Acknowledged damages
E) Approved damages

Question 54

"Trick or Treat?" Penny has significant credit card debt following her diving trip with her boyfriend, Sam, to the Grand Cayman islands. Some of the diving trips cost more than she expected, and these extra expenses were unforeseen. Penny recently took a business law class and thought that she might be able to find a way out of her troubles. She owed $2,000 to Credit Card Company A and $3,000 to Credit Card Company B. She also owed $2,000 to the local dive shop for diving equipment she purchased for the trip. Penny is in negotiations with the dive shop over that amount because she had a problem with a mask fogging on the trip and had to replace it while on the trip at a charge of $100. While the mask issue did not significantly interfere with the trip, Penny thought that she should get at least some deduction on the overall bill. Penny called Credit Card Company A and told them that she was a poor student and could not afford to pay the entire $3,000 she owed. The representative of Credit Card Company A, who was working her last day, told Penny just to pay $50, and that would be considered payment in full. The representative sent Penny an e-mail to that effect. Penny was very pleased and went right out and quit her job at the campus bookstore because she did not really like dealing with student problems and thought that with the reduction from Credit Card Company A, she would have no problem in regard to having extra money. Although her parents supplied her with a large monthly allowance, Penny had the job at the bookstore so that she would have more money for clothes shopping and fun activities. In relation to Credit Card Company B, Penny called up and once again pled her case as a poor student. She talked Credit Card Company B into taking a used car with a blown-up engine worth around $1,000 in exchange for the debt. Penny did not lie about the value of the car, but she made it sound as good as possible. Transfer details regarding the car were worked out through e-mail. Finally, Penny sent the dive shop a check for $1,000 marked "paid in full." Much to her surprise and pleasure, the dive shop did indeed cash the check. Penny, however, was distraught to find that within 30 days, Credit Card Company A sent her a bill for $1,950; Credit Card Company B sent her a bill for $3,000; and from the dive shop she received a check for $1,000 along with a bill for $2,000. Faced with all these claims, Penny decided to look for work. She ended up two weeks later with a job selling beauty products that she liked much better than the bookstore job. It did not require dealing with pesky students. Assume all credit card company representatives had authority to make the agreements at issue.



-Which of the following should be the result in regard to Penny's obligation to Credit Card Company B?

A) That the company is not bound by its promise because the debt was liquidated.
B) That because Penny offered and the company accepted a different performance in discharge of the obligation, the company is bound.
C) That because the car is worth only $1,000, nowhere near the amount of the debt, the company is released from its promise.
D) That under equitable principles, upon disaffirming the agreement, Penny may keep the car, and the company must take a deduction of 50% on all amounts due.
E) That under equitable principles, upon disaffirming the agreement, Penny must transfer the car to the company, and the company must take a deduction of 50% on all amounts due after sums received from the sale of the car are credited to Penny's account.

Question 55

Tina, an experienced pool contractor, and Bruce agree on a price for Tina to build a pool in Bruce's backyard. Tina discovers that she did not initially figure in enough of a charge for labor. She tells Bruce that unless she receives an extra $5,000 with which to hire workers, she cannot complete the job. Bruce agrees thinking to himself that he has a way out. When Tina finishes the pool, Bruce refuses to pay the additional $5,000. Which of the following is the most likely result of their dispute?

A) Bruce will be required to pay because a typical, unilateral contract is involved, and he got the benefit of his bargain.
B) Bruce will be required to pay because a typical, bilateral contract is involved, and he got the benefit of his bargain.
C) Bruce will be required to pay because unforeseen circumstances are an exception to the preexisting duty rule.
D) Bruce will not be required to pay because he provided no additional consideration, and the preexisting duty rule applies.
E) Bruce will only be required to pay ½ of the agreed upon amounts because of the calculations involved under the preexisting duty rule.

Question 56

"Garage Sale." Richard, who is cleaning out his garage, offers to sell Dawn a used computer for $200. Dawn replies that "I'll think about it and buy it if I decide to do so." Richard also calls Denise and offers to sell Denise a used business law book for $50. She asks if she can clean his apartment in return for the book instead of pay cash, and he agrees. Richard also agrees to sell a communications book for $5 to Jill who promises to pick it up the next day. Meanwhile, Sam comes to visit and offers Richard $45 for the business law book. Richard sells it to him because he decides his apartment is clean enough. Sam also offers Richard $50 for the used computer. Richard sells it to Sam because he does not expect to hear from Dawn. Sam sees the communications book and offers Richard $45 for it. Richard decides to forget about Jill and proceeds to sell the book to Sam for $45. The next day Denise shows up to clean Richard's apartment and is very angry because Richard did not save the book for her. Denise claims that Richard breached their contract because they had a deal. Richard says that they never had a deal because no consideration was present. He also said that even if cleaning house would be considered consideration, any housekeeping done would have been wholly inadequate to support receipt of the book because his house was already clean. Jill is also angry because Richard sold the communications book and informs him that he breached the contract he had with her. Richard tells her that he had no obligation to hold the book for her because they had a unilateral contract. Two days after they first talked, Dawn tells Richard that she would like the computer. She tells him that her response bound him and that he should have awaited her action. Richard tells Sam that he needs to return everything for a full refund. Sam refuses.

-Which of the following is true regarding Jill's claim that by selling the communications book for a higher price, Richard breached the contract he had with her?

A) Jill is correct.
B) Jill is correct only if she can establish that she had prior dealings with Richard.
C) Jill is correct only if she can establish that she had provided past consideration in addition to the amount she agreed to pay for the book.
D) Jill is incorrect because her acceptance was illusory.
E) Jill is incorrect because the amount she agreed to pay was significantly less than the fair market value of the book and, therefore, did not amount to consideration.

Question 57

Which of the following is true regarding the effect of a debtor offering to pay a different type of payment, for example, goods instead of money, on a debt for which there is not a dispute over the amount or existence of the debt, and the creditor agrees?

A) A liquidated debt is involved, and there is an accord and satisfaction.
B) A liquidated debt is involved, and there is an accord but no satisfaction.
C) A liquidated debt is involved, and there is not a satisfaction or an accord.
D) An unliquidated debt is involved, and there is an accord and satisfaction.
E) An unliquidated debt is involved, and there is an accord but not satisfaction.

Question 58

"Bank Robbery." Safe Bank was robbed of a significant sum of cash by a robber later identified as Victor Victory. Safe Bank offered a reward of $10,000 to anyone who captured or provided information leading to the capture of Victor. Ted, a police officer in town, promised Safe Bank officials that he would apprehend Victor. While on duty, Ted arrested Victor at a hamburger joint in town. He found Victor based upon a hunch he had after Ursula, who dated Victor, told him about various places Victor enjoyed eating. The bank refuses to pay either Ursula or Ted any of the reward money.

-In a lawsuit between the bank and Ted regarding the reward funds, who is likely to prevail and why?

A) The bank is likely to prevail because Ted only provided past consideration.
B) The bank is likely to prevail because Ted had a preexisting duty to catch Victor.
C) The bank is likely to prevail because Ted's promise to catch Victor was illusory.
D) Ted is likely to prevail because his promise to catch Victor resulted in a binding bilateral contract.
E) Ted is likely to prevail because an enforceable unilateral contract exists based on his performance.

Question 59

"Bank Robbery." Safe Bank was robbed of a significant sum of cash by a robber later identified as Victor Victory. Safe Bank offered a reward of $10,000 to anyone who captured or provided information leading to the capture of Victor. Ted, a police officer in town, promised Safe Bank officials that he would apprehend Victor. While on duty, Ted arrested Victor at a hamburger joint in town. He found Victor based upon a hunch he had after Ursula, who dated Victor, told him about various places Victor enjoyed eating. The bank refuses to pay either Ursula or Ted any of the reward money.

-In a lawsuit between the bank and Ursula, regarding the reward funds, who is likely to prevail and why?

A) The bank is likely to prevail because Ursula only provided past consideration.
B) The bank is likely to prevail because Ursula was tainted by being Victor's girlfriend.
C) The bank is likely to prevail because no valid bilateral contract existed.
D) Ursula is likely to prevail because a valid bilateral contract existed.
E) Ursula is likely to prevail because an enforceable unilateral contract exists based on her provision of information leading to the capture of Victor.

Question 60

"Garage Sale." Richard, who is cleaning out his garage, offers to sell Dawn a used computer for $200. Dawn replies that "I'll think about it and buy it if I decide to do so." Richard also calls Denise and offers to sell Denise a used business law book for $50. She asks if she can clean his apartment in return for the book instead of pay cash, and he agrees. Richard also agrees to sell a communications book for $5 to Jill who promises to pick it up the next day. Meanwhile, Sam comes to visit and offers Richard $45 for the business law book. Richard sells it to him because he decides his apartment is clean enough. Sam also offers Richard $50 for the used computer. Richard sells it to Sam because he does not expect to hear from Dawn. Sam sees the communications book and offers Richard $45 for it. Richard decides to forget about Jill and proceeds to sell the book to Sam for $45. The next day Denise shows up to clean Richard's apartment and is very angry because Richard did not save the book for her. Denise claims that Richard breached their contract because they had a deal. Richard says that they never had a deal because no consideration was present. He also said that even if cleaning house would be considered consideration, any housekeeping done would have been wholly inadequate to support receipt of the book because his house was already clean. Jill is also angry because Richard sold the communications book and informs him that he breached the contract he had with her. Richard tells her that he had no obligation to hold the book for her because they had a unilateral contract. Two days after they first talked, Dawn tells Richard that she would like the computer. She tells him that her response bound him and that he should have awaited her action. Richard tells Sam that he needs to return everything for a full refund. Sam refuses.

-Which of the following is true regarding Richard's claim regarding the inadequacy of house cleaning as consideration?

A) Richard is correct because cleaning house would not constitute a benefit to the promisor.
B) Richard is correct because cleaning house would not constitute a detriment to the promisee.
C) Richard is correct because Denise had only promised - she had not actually performed.
D) Although, contrary to Richard's assertion, house cleaning can be consideration, it was not in this case because his apartment was already fairly clean.
E) Richard is incorrect because house cleaning would constitute consideration that would support a contract, and the court would not likely be concerned with the fact that the cleaning duties would be light.

Question 61

Frank is building a home for Debby that is to be completed by December 31^st. Frank tells Debby that he needs to hire additional workers in order to have the home done by that time and that she needs to pay him an extra $10,000. Debby says that she will pay. Frank finishes the home and asks for his $10,000. Debby refuses to pay. What is the likely result if Frank sues? Discuss whether you believe the result is ethical and equitable.

Question 62

In your opinion, should the law require that consideration be in an amount similar in value to the item or services being transferred in order for a contract to be enforceable? Discuss why or why not.

Question 63

What is the preexisting duty rule?

Question 64

Henry's boss, Jacob, tells him that because he has been such a valuable employee, he will receive an extra week of vacation. When Henry decides to schedule the vacation, he reminds Jacob of his statement. Jacob says that he has changed his mind and that he really cannot afford to let Henry off. Henry says that Jacob has breached the contract he had with Jacob for an extra vacation week. Assuming injustice cannot be established, who is right and why regarding whether a valid contract for an extra week off existed?