Question 1

Daniel is a senior at State University. Brian, Daniel's father, is concerned about Daniel's study habits, given that Daniel spends most of his evenings at the campus pub instead of the library. Brian promises Daniel that he will send him on an expense-paid trip to Europe after his graduation if Daniel spends at least five evenings a week studying in the campus library for the remainder of his senior year. After returning home from his graduation, Daniel asks Brian about the European trip. Brian replies, "Your education was your reward. I don't owe you a trip to Europe." Brian is:

Accepted Answer

If,in exchange for the promisor's promise,the promisee refrains from doing,or agrees not to do,something he/she has a legal right to do,that provides legal value.This definition does not require that an act or a promise have monetary value to amount to consideration.Daniel's act of keeping his father's request exchange for the promise the latter has made is enough consideration for the promise to be binding and enforceable.

Question 2

Joe and Jack have a written contract whereby Joe agrees to sell Jack a plot of land for $100,000. Later, without terminating the first contract, the parties modify the deal so that Joe sells Jack the same plot of land for $125,000. The second agreement is not a contract because:

Accepted Answer

In order for a modification to a contract to be valid, there must be additional consideration, which means something of value must be given by one party in exchange for the promise of the other party. In this case, there is no indication that Jack gave Joe anything of value in exchange for the increased purchase price, which means there was no consideration and the modification is not a valid contract. The first contract does not need to be terminated for a modification to be valid, and while Joe's promise might be illusory in some cases, that is not the issue here. There is also no general rule that written contracts for the sale of land cannot be modified, although specific contracts might have clauses that limit modification.

Question 3

Consideration can be a(n) _____ in the case of a bilateral contract.

Accepted Answer

Consideration can be an act in the case of a unilateral contract or a promise in the case of a bilateral contract.

Question 4

James owns Great Expectations, a trendy restaurant in Manhattan. He enters into a contract with Mary, who makes and sells pastries. The contract states that Mary will "supply all of Great Expectation's needs" for pastries for the next year. Is this contract enforceable?

Accepted Answer

This contract is enforceable because it is a requirements contract, which means that Mary is obligated to provide all of the pastries that Great Expectations needs for the next year. The quantity of goods to be purchased is not specified because it will depend on the needs of the buyer (James) over the course of the year.

Question 5

A contract that involves obligations on the part of manufacturers and distributors is called a(n):

Accepted Answer

An exclusive dealing contract is a type of contract between a manufacturer or distributor and a buyer, where the seller agrees to sell all or a significant portion of their goods or services to the buyer, and the buyer agrees to purchase only from that seller for a specified period of time. It involves obligations on the part of manufacturers and distributors to provide exclusive supplies to the buyer.

Question 6

Which of the following is true of consideration?

Accepted Answer

Gross inadequacy of consideration can give rise to an inference of fraud for setting aside a contract. The other options are incorrect. A promise can be deemed a consideration in a bilateral contract, the legal value of consideration need not be equal to the actual value, and a preexisting moral obligation is generally not deemed a consideration.

Question 7

John promised the other co-owners of the ship Sea Fairy that he would insure the ship for an upcoming voyage. However, John fails to insure the ship. The ship is shipwrecked in a turbulent sea. The co-owners sue John for breach of contract. Will they succeed?

Accepted Answer

John's promise was purely gratuitous;he had neither asked for nor received anything in exchange for making it.Therefore,it was unenforceable because it was not supported by consideration.

Question 8

Which of the following is often used by agreements that try to make gratuitous promises look like true bargains?

Accepted Answer

Nominal consideration is often used in agreements to make gratuitous promises look like true bargains by including a small amount of consideration that does not truly reflect the value of the promise. This helps to create the appearance of a legal contract, even though there may not be true consideration exchanged. Past consideration refers to consideration that was given before the promise was made, and is generally not valid consideration for a contract. Composition agreements involve multiple parties agreeing to settle their debts or obligations for a lesser amount than they owe, and a requirements contract is one in which a buyer agrees to purchase all of their necessary goods from a specific seller. Neither of these options is directly related to making gratuitous promises look like true bargains.

Question 9

Ron was employed by Mass Co in 1970. At that time, he was given an employee handbook that described the particular steps that had to be taken before an employee could be fired. Later on, in 2000, Mass published a new handbook by which all workers status were changed to employment-at-will workers. Mass then fired Ron. Ron claimed he was terminated without cause and was not afforded procedures described in the 1970 handbook, such as an appeal or review of the decision. He sued Mass under breach of contract based upon the 1970 employee handbook. Will he succeed?

Accepted Answer

The modifications made in 2000 were not by mutual consent and for consideration, and therefore cannot supersede the terms and conditions described in the 1970 employee handbook. Ron can still sue Mass for breach of contract based on the terms outlined in the 1970 handbook.

Question 10

Chica, a women's clothing store, held a "prize drawing" for a $500 shopping spree on Saturday that it had advertised throughout the week. Participation in the drawing required being at the store by noon and completing an application form that included personal information and placing it in a box. The information would then be put into a database for marketing purposes. Fashion consultants offering merchandise for sale greeted customers arriving at the store on Saturday morning. Joy was the winner of the drawing. Has she given consideration for the prize?

Accepted Answer

Joy gave consideration by coming to the store, completing the application form and providing personal information for the store's marketing purposes. Her physical presence and completion of the form constitutes valid consideration. The fact that fashion consultants were offering merchandise for sale does not make it a requirement for consideration, nor does the convenience of the store's location.

Question 11

X and Y have a contract which obligated X to sell Y 100 boxes of screws for $100. The parties orally modify the contract so that X will sell Y the same 100 boxes of screws for $125. The second agreement is:

Accepted Answer

The second agreement is binding by virtue of being mutually agreed on. Both parties have agreed to modify the original contract, and there is consideration (increased price) for the modification. It is not an outputs contract because the quantity is specified (100 boxes) and it is not a preexisting legal obligation because the original contract did not specify a price increase.

Question 12

Patricia has requested extra payment because abnormal subsurface rock formations made excavation on the construction site far more costly and time-consuming than could have been reasonably expected. The court will:

Accepted Answer

Many courts enforce an agreement to modify an existing contract if the modification resulted from unforeseen circumstances that a party could not reasonably be expected to have foreseen,and which made that party's performance far more difficult than the parties originally anticipated.

Question 13

Contracts in which one party to the agreement agrees to buy all of the other party's production of a particular commodity is called a(n):

Accepted Answer

An output contract is an agreement in which one party agrees to purchase all of the other party's production of a particular commodity. This type of contract is commonly used in the agricultural industry or in manufacturing, where a buyer wants to ensure a steady supply of a certain product without having to negotiate each purchase separately. A requirements contract is similar, but it is an agreement in which one party agrees to supply all of the other party's needs for a particular product or service. A composition agreement is an agreement in which multiple creditors agree to accept a partial payment in full satisfaction of a debtor's obligations. Nominal consideration refers to a token amount of money exchanged in a contract to make it legally binding, but it is not relevant to the question.

Question 14

Daniel owes Casey a debt, the amount of which is subject to a good faith dispute. The parties agree to settle the debt, with Daniel promising to pay Casey $15,000 and Casey promising to release Daniel on a $25,000 debt. The settlement agreement:

Accepted Answer

The settlement agreement is supported by consideration as both parties are making promises to give up something of value (Daniel is promising to pay $15,000 and Casey is promising to release Daniel on a $25,000 debt). Therefore, there is sufficient consideration to make the agreement binding.

Question 15

An agreement in which a party promises to supply all the other party's needs for a particular commodity is called a(n):

Accepted Answer

In a requirements contract, one party agrees to supply all of the other party's needs for a particular commodity. This type of contract is commonly used in situations where one party is a manufacturer or supplier and the other party is a retailer or distributor. The agreement helps to guarantee a steady supply of the commodity for the retailer or distributor, while also providing the manufacturer or supplier with a guaranteed customer.

Question 16

Dan, President of BAZ Co., is happy with the extraordinary performance of Naomi, a BAZ Co. senior accountant. Dan informs Naomi that because of her superlative work in the past fiscal year, he is going to give her a 5 percent raise effective next month. Naomi, who has never heard of anyone at BAZ Co. getting a raise, is thrilled and thanks Dan. Later that day, Dan realizes that giving Naomi this raise might cause all senior accountants to demand salary increases. Dan decides not to give Naomi a raise after all. He believes that his promise to give her a raise is not legally binding. Dan is correct because:

Accepted Answer

The fact that a promisee's act or promise provides legal value is not,in itself,a sufficient basis for finding that it amounted to consideration.In addition,the promisee's act or promise must have been bargained for and given in exchange for the promisor's promise.In effect,it must be the price that the promisor asked for in exchange for making his promise.

Question 17

In order to satisfy the consideration requirement to form a contract, the consideration exchanged by the parties must:

Accepted Answer

Consideration must be legally sufficient, meaning it must have some sort of value or benefit to each party and not be something illegal or against public policy. It does not necessarily have to have a monetary value, nor does it have to be equal in value between the parties. The subjective intent of the parties is also not the determining factor in whether consideration is valid.

Question 18

Sigmund enters into a contract with Carl. The terms are that Sigmund will purchase all the gasoline that he wants to purchase in 2011, at a price of $2.50 per gallon, and Carl agrees to sell on those terms. This is an example of a(n):

Accepted Answer

This is an example of an illusory promise because Sigmund can purchase as much or as little gasoline as he wants, making the promise one-sided and lacking consideration. As a result, this contract may not be enforceable.

Question 19

The general common law rule on contract modifications holds that an agreement to modify an existing contract requires a(n):

Accepted Answer

The general common law rule on contract modifications is that an agreement to modify an existing contract requires new and independent consideration. This means that both parties must receive something new or different in exchange for modifying the contract. This is to ensure that the modification is supported by a bargained-for exchange and is not simply a gratuitous promise.

Question 20

Jack went to the ABC Casino to gamble. ABC offers its customers one free spin of the Million Dollar Wheel if they fill out an application form. Jack filled out the form, spun the Million Dollar Wheel, and won. However, now ABC refuses to pay, claiming that because Jack did not purchase his chance at the Million Dollar Wheel, Jack gave no consideration and therefore, no contract was formed. Identify the accurate statement.

Accepted Answer

In order for a contract to be formed, there must be an exchange of legal consideration, which can include acts or promises. Filling out the application form can be seen as an act, and therefore qualifies as consideration. Therefore, a contract was formed when Jack filled out the application and spun the Million Dollar Wheel. ABC owes Jack the winnings from his spin.

Quiz 12: Consideration

Joe and Jack have a written contract whereby Joe agrees to sell Jack a plot of land for $100,000. Later, without terminating the first contract, the parties modify the deal so that Joe sells Jack the same plot of land for $125,000. The second agreement is not a contract because:

Consideration can be a(n) _____ in the case of a bilateral contract.

James owns Great Expectations, a trendy restaurant in Manhattan. He enters into a contract with Mary, who makes and sells pastries. The contract states that Mary will "supply all of Great Expectation's needs" for pastries for the next year. Is this contract enforceable?

A contract that involves obligations on the part of manufacturers and distributors is called a(n) :

Which of the following is true of consideration?

John promised the other co-owners of the ship Sea Fairy that he would insure the ship for an upcoming voyage. However, John fails to insure the ship. The ship is shipwrecked in a turbulent sea. The co-owners sue John for breach of contract. Will they succeed?

Which of the following is often used by agreements that try to make gratuitous promises look like true bargains?

X and Y have a contract which obligated X to sell Y 100 boxes of screws for $100. The parties orally modify the contract so that X will sell Y the same 100 boxes of screws for $125. The second agreement is:

Patricia has requested extra payment because abnormal subsurface rock formations made excavation on the construction site far more costly and time-consuming than could have been reasonably expected. The court will:

Contracts in which one party to the agreement agrees to buy all of the other party's production of a particular commodity is called a(n) :

Daniel owes Casey a debt, the amount of which is subject to a good faith dispute. The parties agree to settle the debt, with Daniel promising to pay Casey $15,000 and Casey promising to release Daniel on a $25,000 debt. The settlement agreement:

An agreement in which a party promises to supply all the other party's needs for a particular commodity is called a(n) :

In order to satisfy the consideration requirement to form a contract, the consideration exchanged by the parties must:

Sigmund enters into a contract with Carl. The terms are that Sigmund will purchase all the gasoline that he wants to purchase in 2011, at a price of $2.50 per gallon, and Carl agrees to sell on those terms. This is an example of a(n) :

The general common law rule on contract modifications holds that an agreement to modify an existing contract requires a(n) :