Question 1

Fact Pattern 12-B1 
Sal contracts with Tasty Pizza Company to deliver its products. Both parties change their minds, however, and inform each other that they would like to cancel the contract.
-Refer to Fact Pattern 12-B1. The next day, Sal changes her mind and again offers to deliver Tasty's products. Tasty is willing to deal, but for a new price. Sal and Tasty
A) may agree to a new contract, but it cannot include a new price.
B) may agree to a new contract that includes the new price.
C) must perform their original contract.
D) must perform the part of their original contract that is executory.

Accepted Answer

Since both parties have cancelled the original contract, they are free to negotiate a new contract with different terms, including a new price. Therefore, option B is correct. Option A is incorrect because there is no legal bar to negotiating a new price. Option C is incorrect because the original contract was cancelled by mutual agreement, and Option D is incorrect because the original contract was fully rescinded.

Question 2

Fact Pattern 12-B1 
Sal contracts with Tasty Pizza Company to deliver its products. Both parties change their minds, however, and inform each other that they would like to cancel the contract.
-Refer to Fact Pattern 12-B1. Sal and Tasty
A) may rescind their entire contract.
B) may rescind their contract to the extent that it is executory.
C) must perform their entire contract.
D) must perform the part of their contract that is executory.

Accepted Answer

Rescinding a contract to the extent that it is executory means that neither party is obligated to perform any future obligations under the contract, but any obligations that have already been performed or completed remain valid. In this case, since both parties changed their minds before any deliveries were made, the contract is likely still executory, and therefore they may rescind it to that extent.

Question 3

Fact Pattern 12-B2 
Dag and Enita are in an auto accident. Dag offers B $2,000 if Enita promises not to pursue her potential legal claim against Dag. Enita agrees. Later, Enita discovers that it will cost $1,500 to repair her car and $4,000 to cover the medical expenses for a latent injury.
-Refer to Fact Pattern 12-B2. The agreement between Dag and Enita is
A) a covenant not to sue.
B) an accord and satisfaction.
C) a release.
D) promissory estoppel.

Accepted Answer

The agreement between Dag and Enita is a release, which is a contract in which one party gives up the right to pursue a legal claim against another party. Enita promised not to pursue her potential legal claim against Dag in exchange for $2,000. The fact that Enita later discovers additional expenses does not invalidate the release agreement.

Question 4

General Credit Corporation's promise to pay its employees a year-end bonus "if it seems like a good idea at the time" is
A) an enforceable contract.
B) an illusory contract.
C) an unconscionable contract.
D) a unilateral contract.

Accepted Answer

The promise is an illusory contract because it does not create an obligation for General Credit Corporation to pay the bonus. The decision to pay the bonus is entirely subjective and depends on the company's discretion, which means that it is not a valid contract.

Question 5

Quinn promises to sell his recreational vehicle (RV) to Sid, who builds a structure behind his house in which to keep it. Quinn's later attempt to renege on the promise is
A) effective if Quinn did not ask Sid to build anything.
B) effective if Quinn wants to sell the RV to someone else.
C) not effective if Sid cannot obtain a similar RV for a similar price.
D) not effective if Sid detrimentally relied on Quinn's promise.

Accepted Answer

Quinn's attempt to renege on his promise is not effective if Sid detrimentally relied on the promise. Sid built a structure behind his house to keep the RV, indicating that he relied on Quinn's promise to sell it to him. As a result, Quinn cannot go back on his promise without causing harm to Sid's situation. Choice A is not correct because it does not consider the fact that Sid had invested time and resources into building the structure. Choice B is also not correct because Quinn made a promise to sell the RV to Sid, which creates an obligation that cannot be disregarded at his convenience. Choice C may be relevant, but the key factor is Sid's detrimental reliance on Quinn's promise, rather than the availability of a similar RV at a similar price.

Question 6

Milo files a suit against National Corporation under the doctrine of prom?issory estoppel. Milo must show that
A) Milo justifiably refused to fulfill a promise to National.
B) Milo justifiably relied on National's promise to his detriment.
C) National justifiably refused to fulfill a promise to Milo.
D) National justifiably relied on Milo's promise to its detriment.

Accepted Answer

To successfully file a suit under the doctrine of promissory estoppel, Milo must show that National made a promise to him, Milo reasonably relied on that promise, Milo suffered harm or loss as a result of his reliance, and enforcing the promise is necessary to avoid injustice. Option B stating that Milo justifiably relied on National's promise to his detriment is the correct answer.

Question 7

Collection of EZ Sales Company's debt to First Storage Corporation is barred by a statute of limitations. A new promise by EZ to pay the debt
A) may become enforceable if payments are made.
B) must be in writing.
C) requires consideration.
D) will not revive the obligation.

Accepted Answer

A new promise to pay a debt barred by the statute of limitations can become enforceable if the debtor makes payments, as this can be seen as an acknowledgment of the debt and a willingness to pay, effectively reviving the obligation.

Question 8

Speedy Assembly Company promises its employees a 10-percent raise at the end of the year if productivity has increased and management feels it is warranted. Speedy must
A) do nothing.
B) give the employees a 10-percent raise only at the end of the year.
C) give the employees a 10-percent raise only if produc?tivity increases.
D) give the employees a 10-percent raise under any circumstances.

Accepted Answer

The answer of Speedy Assembly Company promises its employees a...

Question 9

Carl pledges $1,000 to the Disaster Relief Organization (DRO). On the ba?sis of the pledge, DRO orders additional rescue equipment. Carl fails to pay. In DRO's suit, a court may enforce the pledge
A) according to the preexisting duty rule.
B) as an illusory promise supported by past consideration.
C) on a theory of accord and satisfaction.
D) under the doctrine of promissory estoppel.

Accepted Answer

The doctrine of promissory estoppel may be used in this case to enforce the pledge, despite the lack of consideration for the promise. This is because DRO relied on Carl's promise and suffered a detriment in ordering additional rescue equipment.

Question 10

Mei writes a check to Nat in an amount that represents half of her debt to him. On the back of the check, Mei includes the words "payment in full." Nat cashes the check. This dis?charges the entire debt
A) if the debt is liquidated.
B) if the debt is past due.
C) if the debt is unliquidated.
D) under no circumstances.

Accepted Answer

If the debt is unliquidated, then Mei's payment in full statement on the back of the check is considered a accord and satisfaction offer. If Nat cashes the check, he is accepting Mei's offer and the entire debt is discharged. However, if the debt is liquidated or past due, Mei's payment in full statement would not be considered a valid accord and satisfaction offer, and Nat would not be obligated to accept the partial payment as full satisfaction of the debt.

Question 11

After an accident with a driver for General Transport Company (GTC), Paul signs a covenant not to sue GTC for damages in a tort action if it pays for the damage to his car. This covenant
A) bars recovery only if GTC pays.
B) is an illusory contract.
C) is barred by the preexisting duty rule.
D) is unconscionable.

Accepted Answer

The covenant not to sue GTC for damages in a tort action is conditional upon GTC paying for the damage to Paul's car. Therefore, if GTC pays for the damage, Paul cannot sue for additional damages in a tort action. This is a valid and enforceable contract as long as the consideration is present.

Question 12

George and Holly disagree as to the exact amount one owes the other. They form a new agreement that, on fulfillment, will discharge the prior obli?gation. This is
A) a covenant not to sue.
B) an accord and satisfaction.
C) a release.
D) promissory estoppel.

Accepted Answer

An accord and satisfaction is an agreement formed between parties in which one party agrees to accept something different from what was originally owed, and the other party agrees to provide that different thing in satisfaction of the original obligation. This new agreement discharges the prior obligation.

Question 13

MicroCorp hires Nick to work for one month at a weekly salary of $400. A MicroCorp representative orally agrees two weeks later to double Nick's salary. This agree?ment is
A) enforceable because an employment contract is an adhesion contract.
B) enforceable because the parties have executed an accord and satisfaction.
C) unenforceable because Nick has incurred no additional detriment in ex?change for MicroCorp's promise.
D) unenforceable because Nick's performance is uncertain.

Accepted Answer

Nick did not incur any additional detriment in exchange for MicroCorp's promise to double his salary. Without any consideration, there cannot be a valid contract. Therefore, the agreement is unenforceable.

Question 14

Betty pledges to donate $1,000 to the Children's Hospital. On the basis of the pledge, the hospital orders additional equipment. Betty reneges on the pledge. The hospital sues Betty. If the court enforces the pledge, it will be
A) because Betty's performance is uncertain.
B) because of the unforeseen difficulties.
C) because the pledge is a gift.
D) under the doctrine of promissory estoppel.

Accepted Answer

The court is likely to enforce the pledge under the doctrine of promissory estoppel, which holds that a promise can be enforced even if it lacks consideration (something of value received in exchange) if the promisor can reasonably expect the promisee to rely on the promise, the promisee does rely on the promise, and injustice can only be avoided by enforcing the promise. Here, the hospital relied on Betty's promise in ordering additional equipment, and enforcing the pledge may be necessary to prevent injustice to the hospital. Option A is incorrect because Betty's performance was certain - she promised to donate $1,000. Option B is incorrect because there is no indication of unforeseen difficulties. Option C is incorrect because a pledge of a gift is still a promise that can be enforced if it meets the requirements of promissory estoppel.

Question 15

Fact Pattern 12-B2 
Dag and Enita are in an auto accident. Dag offers B $2,000 if Enita promises not to pursue her potential legal claim against Dag. Enita agrees. Later, Enita discovers that it will cost $1,500 to repair her car and $4,000 to cover the medical expenses for a latent injury.
-Refer to Fact Pattern 12-B2. In Enita's suit against Dag to recover her repair and medical expenses, Enita will most likely recover
A) half the amount to pay those costs over what Dag already paid Enita.
B) nothing.
C) the estimated amount to pay those costs and any other liability.
D) the exact amount to pay those costs and no more.

Accepted Answer

Enita agreed to a settlement with Dag by accepting $2,000 in exchange for not pursuing her legal claim. This agreement is likely considered a binding contract, preventing her from recovering additional amounts for the same claim.

Question 16

Ann is injured in an accident caused by Bob. Bob agrees to pay Ann $2,500 if she agrees to release Bob from further liability. Ann agrees. If Ann's damages ultimately exceed $2,500, Ann can
A) collect the balance from Bob in a breach-of-contract suit.
B) collect the balance from Bob in a tort suit.
C) collect the balance from Bob on the ground of unforeseen difficulties.
D) not collect the balance from Bob.

Accepted Answer

Ann agreed to release Bob from further liability in exchange for $2,500. This means that Ann cannot collect any further damages from Bob, even if her damages ultimately exceed $2,500. By accepting the payment and releasing Bob from further liability, Ann forfeited her right to pursue any additional claims against Bob arising from the accident.

Question 17

XL Retail Sales, Inc., promises its salaried employees a bonus at the end of the year if management thinks it is warranted. This promise is
A) enforce?able.
B) unenforce?able because it is not supported by consideration.
C) unenforce?able because the dollar amount is missing.
D) unenforce?able because the employees are paid salaries.

Accepted Answer

The promise is unenforceable because it lacks consideration, as the bonus is contingent on management's discretion and not a guaranteed obligation.

Question 18

Mary promises to pay her assistant Ned $10,000 in consideration of the ser?vices he provided over the years. Mary never pays Ned. Mary is
A) liable for payment of the $10,000.
B) liable only if Ned still works for Mary.
C) not liable, because the consideration is in the past.
D) not liable, because the consideration was unintentional.

Accepted Answer

The answer of Mary promises to pay her assistant Ned...

Question 19

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 extraordinary unforeseen difficulties will add consid?erable cost to the project, the agreement is
A) enforceable as an accord and satisfaction.
B) enforceable because of unforeseen difficulties.
C) unenforceable as an illusory promise.
D) unenforceable due to the preexisting duty rule.

Accepted Answer

The agreement is enforceable because unforeseen difficulties can justify a modification of the contract if they are extraordinary and not anticipated at the time the contract was made.

Question 20

Auto Body Repair Shop (ABRS) promises to pay Ben $1,000 a week to work for ABRS. Ben accepts and quits his job with Car Care Service. ABRS fails to provide a job for Ben. Ben has a cause of action based on
A) an illusory promise.
B) a release.
C) past consideration.
D) promissory estoppel.

Accepted Answer

ABRS made a promise to Ben which induced him to quit his job at Car Care Service. Even though there was no formal contract, Ben suffered a detriment by quitting his job and relying on ABRS's promise. Therefore, Ben may have a cause of action based on promissory estoppel.

Quiz 12: Consideration

Fact Pattern 12-B1 Sal contracts with Tasty Pizza Company to deliver its products. Both parties change their minds, however, and inform each other that they would like to cancel the contract. -Refer to Fact Pattern 12-B1. Sal and Tasty

General Credit Corporation's promise to pay its employees a year-end bonus "if it seems like a good idea at the time" is

Quinn promises to sell his recreational vehicle (RV) to Sid, who builds a structure behind his house in which to keep it. Quinn's later attempt to renege on the promise is

Milo files a suit against National Corporation under the doctrine of prom?issory estoppel. Milo must show that

Collection of EZ Sales Company's debt to First Storage Corporation is barred by a statute of limitations. A new promise by EZ to pay the debt

Speedy Assembly Company promises its employees a 10-percent raise at the end of the year if productivity has increased and management feels it is warranted. Speedy must

Carl pledges $1,000 to the Disaster Relief Organization (DRO) . On the ba?sis of the pledge, DRO orders additional rescue equipment. Carl fails to pay. In DRO's suit, a court may enforce the pledge

Mei writes a check to Nat in an amount that represents half of her debt to him. On the back of the check, Mei includes the words "payment in full." Nat cashes the check. This dis?charges the entire debt

After an accident with a driver for General Transport Company (GTC) , Paul signs a covenant not to sue GTC for damages in a tort action if it pays for the damage to his car. This covenant

George and Holly disagree as to the exact amount one owes the other. They form a new agreement that, on fulfillment, will discharge the prior obli?gation. This is

MicroCorp hires Nick to work for one month at a weekly salary of $400. A MicroCorp representative orally agrees two weeks later to double Nick's salary. This agree?ment is

Betty pledges to donate $1,000 to the Children's Hospital. On the basis of the pledge, the hospital orders additional equipment. Betty reneges on the pledge. The hospital sues Betty. If the court enforces the pledge, it will be

Ann is injured in an accident caused by Bob. Bob agrees to pay Ann $2,500 if she agrees to release Bob from further liability. Ann agrees. If Ann's damages ultimately exceed $2,500, Ann can

XL Retail Sales, Inc., promises its salaried employees a bonus at the end of the year if management thinks it is warranted. This promise is

Mary promises to pay her assistant Ned $10,000 in consideration of the ser?vices he provided over the years. Mary never pays Ned. Mary is

Auto Body Repair Shop (ABRS) promises to pay Ben $1,000 a week to work for ABRS. Ben accepts and quits his job with Car Care Service. ABRS fails to provide a job for Ben. Ben has a cause of action based on