Question 1

Jack offers Selena his bicycle for $75. Which of the following is an example of an illusory promise on Selena's part?

Accepted Answer

An illusory promise is one where the promisor has not definitively committed to anything, making the promise unenforceable because it lacks consideration. In choice B, Selena's statement "I'll take it if I decide to do so" does not commit her to anything specific, making it an illusory promise.

Question 2

If a check is marked "paid in full," which of the following is true under the UCC?

Accepted Answer

The answer of If a check is marked "paid in...

Question 3

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

Accepted Answer

Bailey is not entitled to the extra $10 because she had already agreed to bathe and groom Fluffy for $30, creating a preexisting duty. Changing the price after agreeing to the initial terms without a significant change in the scope of work does not entitle her to more money under the original agreement.

Question 4

Ronaldo says to Becky "I would like to make you my full-time business law tutor." Becky responds that she will think about it and let him know after she talks to Barry who also asked her to be a business law tutor. This is an example of:

Accepted Answer

An illusory promise is one where the promise is not really binding or lacks commitment to perform. Becky's response to think about it and consult with Barry before making a decision does not constitute a definite promise or commitment to Ronaldo, making it an illusory promise.

Question 5

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

Accepted Answer

The stylist will win because she performed additional work (highlights) beyond the initial agreement (hair trim) for an agreed extra payment, constituting valid consideration for Sonia's promise to pay the additional amount.

Question 6

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

Accepted Answer

The preexisting duty rule states that a promise to do something that one is already legally obligated to do is not considered sufficient consideration for a new contract. However, exceptions to this rule include unforeseen circumstances that significantly change the nature of the original contract and additional work or modifications that go beyond the scope of the original agreement. Past consideration, which refers to actions or benefits provided before the making of a promise, is not considered valid consideration for a new contract.

Question 7

Which of the following is NOT an example of the exception to the rule regarding liquidated debt?

Accepted Answer

C is not an example of an exception to the rule regarding liquidated debt because if a debtor disputes the amount owed and pays a portion that the creditor accepts, it may not necessarily settle the entire debt unless there's an agreement indicating such. The other options involve accepting something of value other than the exact debt amount in full settlement, which can be seen as exceptions.

Question 8

Every year, the World Bank gives over 181 countries a rating on the ease of doing business within the country. This is based on aggregate distance to frontier scores on 10 topics. Where does China generally fall in the "Enforcing Contracts" topic ranking?

Accepted Answer

The answer of Every year, the World Bank gives over...

Question 9

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

Accepted Answer

An accord and satisfaction is a legal agreement between parties to settle a debt for less than is owed, and upon payment of the agreed amount, the debt is fully discharged.

Question 10

Loren and Izra's contract is in dispute. Loren makes an offer to accept less money than the parties agreed on and Izra pays the new amount. Loren and Izra have completed a(n) ________.

Accepted Answer

An accord and satisfaction occurs when parties to a contract agree to change the obligation required under the contract and the new obligation is fulfilled. In this case, Loren and Izra agreed to change the amount of money to be paid, and Izra paid the new amount, completing an accord and satisfaction.

Question 11

When are promises based on past consideration enforceable?

Accepted Answer

Past consideration is generally not considered valid consideration for a new contract. However, a promise based on past consideration may be enforceable when it is necessary to avoid injustice, provided that the promise was made regarding a past event that the promisor was legally obligated to compensate for or that created a moral obligation to act.

Question 12

What can a business do to protect itself from a debtor's attempt to create an accord and satisfaction by sending the creditor a check with "paid in full" written on it?

Accepted Answer

To protect itself from a debtor's attempt to create an accord and satisfaction by sending a check marked "paid in full," a business can specify that any attempts to settle for less than the full amount owed must be directed to a specific address and/or person. This approach allows the business to control and manage such offers, preventing accidental acceptance of reduced payments as full settlement.

Question 13

Genny and Luke contract for Luke to build a home for Genny. Luke promises to build the house for $100,000 but a neighboring forest fire destroys the framing during construction. Luke must reframe the house. Does the preexisting duty rule prevent Luke from enforcing a contract in which he charges additional money to Genny?

Accepted Answer

The preexisting duty rule generally states that a party to a contract cannot demand additional compensation for performing a duty that is already required by the contract. However, if there are unforeseen circumstances that significantly change the nature of the original contract, such as a forest fire destroying part of the construction, this can provide an exception to the preexisting duty rule. In this case, the unforeseen circumstance (the forest fire) that destroyed the framing requires additional work not contemplated in the original agreement, allowing Luke to renegotiate the contract terms to include the additional work needed.

Question 14

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

Accepted Answer

Partial payment can be considered valid consideration if the debt is unliquidated, meaning the amount is in dispute or not determined, as the parties are settling the dispute by agreeing on a different amount.

Question 15

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

Accepted Answer

Emma is not entitled to recover because she had a preexisting duty to obey laws against speeding. In contract law, a valid contract requires that the promisee (Emma, in this case) must provide consideration, which is something of value or something that involves a legal detriment or forbearance. Since Emma already had a legal obligation to obey traffic laws, her promise to not speed does not constitute valid consideration.

Question 16

When an accord and satisfaction is at issue, what is the new agreement to pay less than the creditor claims is owed called?

Accepted Answer

An accord is the new agreement where the debtor and creditor agree on a lesser amount to settle the debt. Satisfaction occurs when the agreed-upon terms of the accord are fulfilled.

Question 17

If there is no dispute about the fact that money is owed and the amount of money owed in a contract, this is considered a(n) ________ debt.

Accepted Answer

A liquidated debt is one where there is no dispute about the fact that money is owed and the amount of money owed. This term is used in legal and financial contexts to indicate a clear, determined amount of debt.

Question 18

Raphael, who owes $10,000 to his credit card company, sends a check to the credit card company for $50 and marks the check "paid in full." The credit card company inadvertently cashes the check, but the mistake is caught two weeks later and they offer to repay Raphael his $50. Raphael does not respond. Does accord and satisfaction exist?

Accepted Answer

Accord and satisfaction require an agreement between the debtor and creditor where the creditor accepts a lesser amount as full payment. The key here is the creditor's acceptance of the lesser amount as full and final payment of the debt. In this case, the bank's action of offering to repay the $50 indicates that they did not accept the $50 as full payment of the debt. The timely offer to repay negates the possibility of accord and satisfaction because it demonstrates the bank's intention not to accept the $50 as full settlement of the $10,000 debt.

Question 19

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

Accepted Answer

A promise to do something that you are already obligated to do is considered a preexisting duty. This means that the promise does not constitute new consideration because the promisor is already legally bound to perform the duty.

Question 20

Lance contracts with Herman to fix the brakes on his car. The agreed upon amount is $750. When Herman is fixing the brakes, he notices that a wheel bearing needs replacement because it is completely broken. When Lance picks up his car the bill is $900. Lance says he will not pay this amount but the agreed upon $750. This is considered a(n) ________ debt.

Accepted Answer

The correct term is "unliquidated" because the additional $150 charge was not part of the original agreement and its amount is in dispute.

Quiz 15: Consideration