Question 1

Bernie owes an undisputed amount to Wilde's Heating & Air Conditioning. Which of the following is true?

Accepted Answer

DA) An agreement to accept less than the full amount owed on an undisputed debt is not binding under the pre-existing duty rule, as there is no consideration for the promise to forgive the remainder of the debt. D) For an agreement to accept less than the full amount owed to be binding, it often must be in writing and signed by the debtor, according to the Statute of Frauds or similar principles, ensuring there is evidence of the new agreement.

Question 2

If Crosby and Dash are in disagreement as to the exact amount of money that Crosby owes Dash, then they may choose to form a new agreement at a set amount. If they both perform the new agreement, their conduct would be an example of

Accepted Answer

An accord and satisfaction occurs when two parties in a dispute agree on a different performance than originally agreed upon, and the new agreement is carried out. This resolves the dispute over the amount owed.

Question 3

An unliquidated debt can be described as

Accepted Answer

An unliquidated debt is a debt in which either the existence or amount is in dispute. It is not necessarily both aspects that are in question.

Question 4

A promise by Derkin Restaurants to buy all of the produce it needs this next year at an established price from Elfredo's Produce would be an

Accepted Answer

This is an enforceable requirements contract because Derkin Restaurants is promising to buy all the produce it needs for the next year from Elfredo's Produce at a predetermined price, creating a contract based on the buyer's requirements.

Question 5

Mid-American Oil had a contract with NSB Company to supply 1,000 gallons of oil by September 1. The contract contained a provision that required all modifications to be written and signed by the company presidents. In early August, an executive of Mid-American talked with the purchasing agent of NSB who orally agreed to two shipments of oil; one in September and the second one in December. By September 30, when only 500 gallons had been delivered, NSB sued. The likely outcome of this lawsuit is:

Accepted Answer

The contract contained a provision that required all modifications to be written and signed by the company presidents. Therefore, the oral agreement made by the executive of Mid-American and the purchasing agent of NSB is not enforceable. The Statute of Frauds requires that contracts for the sale of goods over $500 must be in writing to be enforceable.

Question 6

If Becky promises not to drink alcohol until she becomes a legal adult in exchange for Ben's promise of $1,000, the agreement is

Accepted Answer

The answer of If Becky promises not to drink alcohol...

Question 7

Bailey Co. and Spryt Bros. enter into a contract for the manufacture and sale of 400 lawn chairs. If both parties agree that a modification is necessary,

Accepted Answer

The best choice is C because an agreement to rescind the contract will terminate the contractual rights of both parties if neither of them had completed their obligations. This means that they would essentially cancel the original contract and enter into a new agreement, allowing them to modify the terms of the original contract. Options A, B, and D are incorrect because liquidating the contract, court supervision, and inadequate consideration are not necessary for modifying a contract if both parties agree to it.

Question 8

Yolanda was shoveling snow from her sidewalk, and just to be nice, she also shoveled snow from her neighbor Melody's walk. The next day, Melody promises that she will pay Yolanda $25 for shoveling snow from her walk. Has a contract been created?

Accepted Answer

Past consideration, which refers to an act done before a contract is made, is not considered valid consideration for a contract. Since Yolanda had already shoveled the snow without any prior agreement with Melody, Melody's subsequent promise to pay cannot create a valid contract based on past actions.

Question 9

Marco agrees to sell Clowns R Us some balloons. The contract states that Clowns may buy as many balloons as it wishes. This agreement is

Accepted Answer

This agreement is considered an illusory contract because it does not obligate Clowns R Us to buy any specific quantity of balloons, making the contract lack consideration and enforceability.

Question 10

Upon graduating from college, Kathy announced her plans to enter law school the following fall and to marry Rick in December. Kathy's father was afraid that marriage during her first year in law school might cause her to fall behind in her studies or cause her to drop out of school. He called Kathy and promised her $10,000 if she postponed her wedding until after completion of her first year of law school. Kathy agreed and postponed the wedding for a year. Kathy successfully completed her first year of law school, but soon thereafter, Kathy's father died. The administrator of her father's estate claimed she was not entitled to the $10,000 because there was no consideration for her father's promise. If Kathy sues the estate, she will probably be

Accepted Answer

There was consideration for the promise to postpone the wedding as Kathy agreed to postpone her wedding in exchange for $10,000 from her father. Therefore, the administrator of the estate is wrong in claiming that there was no consideration for the promise. As a result, Kathy will likely succeed in her lawsuit to recover the $10,000 promised to her by her father.

Question 11

Jamie is building a house on her lot. She invites Earnie of Earnie's Excavation to bid on the excavation job. Earnie observes that the lot next to Jamie's is also under excavation and the soil in that lot is normal and not excessively rocky. Based on the assumption that the soil in Jamie's lot will be similar, he and Jamie agree that the excavation will cost $3,000. When Earnie starts digging, he learns there is solid rock under Jamie's lot. Earnie says it will cost an extra $2,500 for the excavation work. Jamie agrees just to get the job done but later refuses to pay a dime more than $3,000. If Earnie sues, the most likely result would be

Accepted Answer

Earnie would likely win as the modification was due to unforeseen difficulties, which is an exception to the preexisting duty rule. However, the amount of the additional cost may be subject to negotiation or determination by a court. The UCC does not apply to this situation as it pertains to real estate and not goods, and the issue of good faith may be relevant but not determinative.

Question 12

Police Officer Paul apprehends a wanted criminal and then demands the $10,000 reward offered by Crime Stoppers. Which of the following statements is true?

Accepted Answer

Police Officer Paul is not entitled to the reward because he was under a preexisting duty to make the arrest. As a police officer, Paul has a duty to apprehend criminals and maintain public safety, so he was already required to make the arrest regardless of the reward. Therefore, his actions do not constitute valid consideration for the offer of the reward.

Question 13

If someone provides a service that he or she is already obligated to do, it is an example of

Accepted Answer

A preexisting duty is a duty that someone is already required to do. If someone provides a service that he or she is already obligated to do, it cannot be used as consideration in a contract because there is no new benefit being provided.

Question 14

A liquidated debt is one in which

Accepted Answer

A liquidated debt is a debt where the amount owed is clear and undisputed. This means that there is no question or disagreement about the amount owed.

Question 15

In January, Alex promised to pay Y-K Inc. $5,000 if it would refrain from filing suit against him on a breach of contract action. Y-K agreed and accepted a $5,000 check from Alex. Which of the following statements is correct?

Accepted Answer

Y-K's promise to refrain from suing Alex was supported by legal consideration (the payment of $5,000) and is therefore enforceable. This is a valid contract.

Question 16

Zero, Inc. agreed to build Millie a storage building for $8,000. After beginning the project, Zero realized that it could not complete the job and make a profit. Zero demanded $9,500 to complete the building. Millie agreed to pay the $9,500. When the project was complete, Millie tendered $8,000 to Zero for the job. If Zero sues Millie for the remaining $1,500,

Accepted Answer

In this scenario, the original contract was for $8,000, and Zero demanded an additional $1,500 to continue the project. Millie agreed to the new price, but did not receive anything in return for the extra $1,500. This means there was no legal consideration for the additional amount, and therefore, it cannot be enforced. The UCC does not apply in this case because the original contract was for services, not goods. Option A is incorrect because there was no new consideration for the additional $1,500. Option B is incorrect because Millie did not have a preexisting duty to pay any additional amounts over the original contract price.

Question 17

An agreement to settle a debt for less than the sum claimed is referred to as

Accepted Answer

An agreement to settle a debt for less than the sum claimed is called an accord. This is a binding contract between the creditor and the debtor where the debtor agrees to pay a lesser amount in exchange for the creditor releasing them from further liability.

Question 18

Regarding consideration, an act occurs when a person

Accepted Answer

Consideration requires that a party to a contract must do something that is not legally required in order to create a binding agreement. Compliance with the law or fulfilling an obligation under an existing contract do not necessarily satisfy the requirement of consideration.

Question 19

What is an output contract?

Accepted Answer

An output contract is a contract in which the seller agrees to sell all of its output to one buyer, and the buyer agrees to accept the entire quantity. This type of contract is commonly used in situations where the seller has limited production capacity and wants to ensure a steady market for its output.

Question 20

Mary owes $3,800 on her credit card. She sends the credit card company a check for $800 with the notation "payment in full" on the check. If the credit card issuer cashes the check,

Accepted Answer

The notation "payment in full" on a check may be subject to a UCC exception to the general rules for accord and satisfaction cases involving checks. Under the UCC, if a debtor sends a check with a "payment in full" notation for a disputed, unliquidated debt, the creditor can cash the check as a partial payment without accepting the "payment in full" notation. The creditor must notify the debtor within a certain timeframe of their intent to do so, and further negotiations or legal action may be necessary to resolve the remaining balance.

Quiz 13: Consideration