To make an offer, the offeror must appear to intend to create a binding obligation
Generally, advertisements, catalog prices, and circulars are offers that can be accepted
Social invitations can be offers
Advertisements that call for an act may be deemed to be a unilateral contract
If an offer is indefinite or vague, no contract arises from an attempt to accept it
Contractual intention is determined by objective standards
An otherwise vague contract may be clarified by references in the contract to other documents or agreements
An agreement cannot be enforced if it does not set forth every contractual detail
Contract terms may not be implied from conduct
When it is claimed that a contract is too indefinite to be enforced, a court will do its best to find the intent of the parties and thereby reach the conclusion that the contract is not too indefinite
A "best efforts" clause is always deemed too indefinite to be enforceable
A requirements contract is too vague to be a legally-enforceable agreement
An output contract is too vague to be a legally-enforceable agreement
An offer is effective only if it is communicated by the offeror in person
An offer gives the offeror the power to bind the offeree by contract
A revocation of an offer is ordinarily effective only when it is communicated to the offeree
Offers, acceptances of offers, and revocations of offers are all effective when mailed in a properly addressed envelope bearing the proper amount of postage
An option contract is a binding promise to keep an offer open for a stated period of time or until a specified date
An option is itself a contract to refrain from revoking an offer
A firm offer is an offer that states that it is to irrevocable, or irrevocable for a stated period of time
If the offeree purports to accept an offer but in so doing makes any change to the terms of the offer, such action is a counteroffer that rejects the original offer
If no time is stated for the duration of an offer, it continues indefinitely if the offer relates to durable goods or land
If an offer does not state how long it shall remain open, it remains open for ten days
If either the offeror or offeree dies or becomes mentally incompetent before the offer is accepted, the offer is automatically terminated
An acceptance must be absolute and unconditional
The fact that there has been a series of contracts between the parties and that one party's offer has always been accepted before by the other does not create any legal obligation to continue to accept subsequent offers
A party to existing contract can modify the agreement without the other party's actual acceptance or approval
Acceptance of an offer to form a unilateral contract need not be communicated to the offeror to be effective
A properly mailed acceptance takes effect when mailed, even if it never is received by the offeror
At an auction sale, a statement made by the auctioneer to draw forth bids constitutes an offer
The willingness of an offeror to enter into a contractual agreement regarding a particular subject is expressed by a(n)
offer
acceptance
contract
agreement
If not an offer, the first statement made by one of two persons is most properly termed a(n):
option
invitation to negotiate
A customer went into a store and saw a beautiful leather jacket bearing a price tag of $29. The customer handed the cahsier a $50 bill and said, "I accept, We have a deal." The cashier then noticed the price tag and told the customer an error had been made and that the price was $229. In this case:
the customer validly accepted the stores offer
the price tag was a firm offer
no contract was formed because the customer's offer was refused
the customer is the offeree
A customer requested a price from a carpenter on a teak cabinet to be built according to the buyer's specifications. Because teak wood is difficult to obtain, the customer agreed to pay the cost of the wood plus $175 and the carpenter agreed to build it. Which of the following is correct?
Although the price is somewhat unclear, the parties have entered into a contract
This is an agreement to agree, and is not binding
This agreement fails for indefiniteness
The carpenter is bound by the agreement, but not the customer
An offer that is indefinite may be clarified by reference to another writing through
incorporation
reference
annotation
indexing
An agreement that consists of two or more parts and calls for corresponding performance of each part by the parties is called a
partial contract
divisible contract
performance contract
divided
If an offeree accepts an offer before it is effectively revoked
a void contract is formed
a voidable contract is formed
an unenforceable contract is formed
a valid contract is formed
A(n) ___________ contract is a contract to buy all requirements of the buyer from the seller
output
essentials
necessaries
requirements
Under the Uniform Commercial Code (UCC); a firm offer applies to:
a written, signed offer by a merchant to buy or sell goods
an unwritten but definite offer to buy or sell goods
a written, signed offer by anyone to buy or sell goods
an unlimited, stipulated period of time
A counteroffer is a(n):
acceptance of the original offer
rejection of the original offer
acceptance of the original offer and invitation to further negotiate
a revocation of the original offer
A said to B, "I'll give you $100 for that bracelet." B replied, "$135." A said, "no thanks." B then said that B accepted the $100, but A was no longer interested and said there was no contract. B insists there is a contract. Result?
A's offer of $100 was open and accepted by B, thereby forming a contract
B's counteroffer of $135 terminated A's offer of $100
B's statement, "$135." was a negotiating statement that did not terminate A's original offer of $100
A's offer of $100 was irrevocable
An offer is terminated upon rejection by the offeree unless
the period of time for which the offeror agreed to keep the offer open has not yet expired
the offeror renews the offer
the offeree revokes the rejection
the offeree makes a counteroffer
If no termination date is specified for an offer, the offer will remain open
for one year
for six months
for a reasonable period of time
until someone accepts the offer
If an offeree dies before the offer has been accepted, the offer:
may be rejected by the surviving spouse of the offeree
may be accepted by the surviving spouse of the offeree
is automatically revoked by the death of the offeree
may be accepted by the guardian appointed for any minor children of the offeree
In general, an acceptance occurs when:
A particular form of words is stated to the offeror
a particular mode of expression is made to the offeror
the offeree reserves the right to reject the offer
a clear expression of the offeree's agreement to be bound by the terms of the offer occurs
When an offer has been accepted:
a subsequent revocation of the offer may serve to nullify the resulting contract
a contract is formed, assuming that all of the other elements of a contract are present
either party may withdraw from the resulting contract without consent
the acceptance is executory
If an offer requires that acceptance be communicated by a specific date and the acceptance is properly dispatched by the offeree on the final date,
no contract is formed, since the offeror will undoubtedly receive the dispatched acceptance after the deadline for acceptance
a contract is formed, but the contract is voidable at the election of the offeror
the acceptance is timely and a contract is formed, even though the offeror actually receives the acceptance by the deadline specified for acceptance
the acceptance is timely and a contract is formed, but only if the offeror actually receives the acceptance by the deadline specified for an acceptance
In an auction _________, the auctioneer takes bids as a gent for the seller with the understanding that no contract is formed until the seller accepts the transaction
without reserve
with reserve
without preserve
with preserve
At an auction sale, each bid is:
a counteroffer to the auctioneer's offer of the merchandise
an acceptance of the auctioneer's offer
an invitation to negotiate
an offer
Arthur made a bid at an auction by calling out of the amount of $250. The auctioneer ackowledged Arthur's bid. There were no higher bids, and before the fall of the auctioneer's hammer, Arthur announced that he was withdrawing the bid. The auctioneer said that it was too late for Arthur to withdraw his bid, because the bid had already been acknowledged. What is the result?
Arthur's bid is an ordinary offer that can be revoked
Arthur's bid is firm and cannot be withdrawn
Since the auctioneer had in fact acknowledged Arthur's bid, the bid became an option exercisable at the election of the seller
Since the auctioneer had in fact acknowledged Arthur's bid, a contract had been formed by way of offer and acceptance; accordingly, Arthur's subsequent attempt to withdraw his bid was ineffective
Certain persons cannot make contracts that will bind them
Contractual capacity can exist even though a party does not understand every provision of the contract
Ordinarily, every party to a contract is presumed to have a contractual capacity until the contrary is shown
Discriminatory and punitive in-capacities have largely disappeared
Factual incapacity is imposed because of the class or group to which a person belongs
A factual incapacity may exist when, because of a mental condition caused by medication, drugs, alcohol, illness, or age, a person does not understand that a contract is being made or understand its general nature
Generally, when a person of legal age makes a contract with a minor, the contract is voidable by either party
When a minor avoids contracts, the minor always must return the other contracting parties to their original financial positions
The "necessaries" of minors are precisely defined by law
When necessary medical care is provided to a minor, a parent is liable at common law for the medical expenses provided the minor child
At common law, a minor cannot be held contractually liable for his or her necessary medical expenses when the parent is unable or unwilling to pay
Ratification consists of any words or conduct of a former minor manifesting an intent to be bound by the terms of a contract made while a minor
A contract made by an incompetent person after a guardian has been appointed is voidable
An incompetent person may ordinarily avoid a contract in the same manner as a minor
A person who has drunk too much alcohol at a party and signs a contract may be able to rescind that contract
A unilateral mistake as to a fact does not affect the contract when the mistake is unknown to the other contracting party
The seller of a painting is not bound by the sales contract if the painting purchased was considered of little value and only later discovered to be valuable to the surprise of both buyer and seller
A party who speaks with a reckless disregard for the truth not knowing of the falsity of his or her words cannot be liable for fraud
Fraud requires a misstatement of either a fact or an option
Fraud requires intent that the listener rely on the false statement of fact
In order for fraud liability to arise, the listener must actually rely on the false statement of fact
Ordinarily, a party to a contract has no duty to volunteer information to the other party
As a general rule, the nondisclosure of information that is not asked for does not impose fraud liability or impair the validity of a contract
A claim of undue influence will be unsuccessful unless the contracting parties have a close relationship of trust
A contract obtained by physical duress is void
Contractual capacity is the ability to
read and write
sign a written contract
understand that a contract is being made and to understand its general nature
understand the legal meaning of the contract being made
A person lacks contractual capacity if
the person is a chronic alcoholic
the person is a drug addict
because of mental impairment, the person does not comprehend that a contract is being made or understand its consequences
all of the above
The key time for determining whether a party lacked contractual capacity is
the time the contract was made
the time the value of the bargain becomes clear
the time set for performance of the contract
the time the plaintiff expresses dissatisfaction with the contract terms
The maximum amount of time that a minor has to disaffirm a contract is
one year from the date of agreement
30 days from learning of his or her right to disaffirm
the age of majority
a reasonable period of time after reaching the age of majority
A minor cannot avoid a contract to purchase a car if the:
car has been destroyed
car has been damaged
car is used for non-commercial purposes
minor is able to return the car but does not do so
A minor cannot avoid a contract that has been
ratified
signed
processed
disallowed by the court
When a minor avoids a contract to purchase a car
the parents of the minor are liable for the purchase price
a relative who cosigned the contract is liable for the purchase price
a friend to whom the minor loaned the car is liable for thepurchase price
the automobile insurance company is liable for the purchase price
The obligation of a cosigner is discharged by:
the minority status of one of the parties
the majority status of one of the parties
the courts declaration of the contract's provision of necessaries
the payment of the debt
In which of the following cases is a contract between A and B binding?
A makes a mistake of material fact, and the mistake is unknown by B
A and B make the same mistake of the material fact
A recklessly but honestly misrepresents a material fact
A innocently misrepresents a material fact
An agreement is not binding when:
one party makes a mistake regarding a material fact
both parties make a mistake regarding a material fact
one party makes a mistake of law
A contract based on a mutual mistake in judgement is:
voidable by the adversely affected party
not voidable by the adversely affected party
void ab initio
none of the above
All of the following statements refer to an element of fraud except:
the defendant desired to obtain a financial benefit
the defendant made a false statement
the defendant knew that the statement was false or was recklessly indifferent regarding its truth
the defendant intended for the other party to rely on the false statement
Jack sells Jim a used car that Jack falsely described as having been driven only 12,000 miles. Fraud has occurred if:
Jim bought the car solely because of its color
Jim knew that the mileage was more than 12,000 miles
Jim relied upon Jack's statement
Jack is a merchant
I believe that I own a very valuable vase. I tell you this information and state that I will sell it to you for $800. I sell the vase to you, and you later find out that the vase is worth only $200. Fraud:
has occurred
has not occurred
can always be based upon a statement of opinion or value
A finding of undue influence would most likely not occur in a contract between
parent and child
attorney and client
neighbor and neighbor
guardian and ward
An apparently voluntary agreement may in fact not be voluntary if:
undue influence is present
physical duress is present
economic duress is present
Generally, a promise is legally enforceable even if nothing is given or received for the promise
Consideration is what a promisor demands and receives as the price for a promise
The fact that the consideration supplied by one party is slight when compared with the burden undertaken by the other party is immaterial
Consideration always must be an act or the promise to perform an act
Consideration is the bargained-for exchange between the parties to a contract
One promise may serve as consideration for many return promises
A promise to make a gift is enforceable
Charitable subscriptions by which individuals make pledges to finance the construction of a college building, a church or another structure for charitable purposes are binding to the extent that the donor should have reasonably realized that the charity was relying on the promise in undertaking the building program
True considerations occurs only when the value of one promise is equal to the value of the promise given by the other party
The promise of a creditor to refrain from collecting a debt is consideration for a promise by the debtor to modify the terms of the transaction
Forbearance may constitute consideration
An illusory promise creates a bilateral contract
A promise that in fact does not impose any obligation on the promisor is known as an elusive promise
A binding contract cannot contain a cancellation provision
Ordinarily, doing or promising to do what one is already under legal obligation to do is not consideration
A second promise to pay a contractor a higher amount on the original contract may be enforceable
In a contract for the sale of goods, any modification made by the parties to the contract must be supported by consideration to be binding
With regard to an unliquidated debt, payment by the debtor of less than the amount claimed by the creditor is consideration for the latter's agreement to release or settle the claim
If a merchant receives and cashes a check for partial payment of a debt and the check bears the notation that the amount is in full payment of a disputed sum, the total debt is released
Sara Student wished to pay off her $5,000 student loan. If she sends in a check for $3,000 and the creditor cashes the check, the debt will be fully satisfied provided the check is marked "paid in full."
In a composition of creditors, the various creditors of a single debtor mutually agree to accept a fractional part of their claims in full satisfaction of the claims
Past benefits already received by a promisor cannot be consideration for a later promise
In most states, promises made to another based on moral obligation lack consideration and are not enforceable
The doctrine of promissory estoppel is also known as the doctrine of beneficial reliance
Under the doctrine of promissory estoppel, a promisor may be prevented from asserting that his or her promise is unenforceable because the promisee gave no consideration for the promise
Damages recoverable in a case of promissory estoppel are determined by the profits that the promisee expected
Will the law enforce every promise
Yes, in all cases
Yes, with or without consideration
Generally yes, if consideration is given for the promise
Yes, but only if there is no consideration
Consideration is:
the concern shown by the other contracting party
what is demanded by the promisor as the price for the promise
a stand number of dollars
the concern of both contracting parties for the protection of the environment
Under the ______ approach, consideration is defined as a benefit received by the promisor or detriment incurred by the promisee
pro-con
I win, you lose
gain-loss
benefit-detriment
When there is no consideration for a promise, the agreement is:
a quasi contract
equitable
not binding
unethical
Courts will consider the adequacy of consideration when:
one party clearly has the better of the deal
one party has more business experience than the other
one party claims to have been defrauded
one party shows a much lower price nationally-advertised on television
Which of the following can be consideration for a promise?
Refraining from beating one's spouse
Promising to refrain from beating one's spouse
Refraining from smoking cigarettes
Refraining from using cocaine
For a bilateral contract to be enforceable there must be:
mutuality of obligation
an illusory promise
forbearance
adequacy of consideration
Examples of illusory promises include:
cancellation provisions
apparent promises
conditional obligations
real obligations
A cancellation provision:
makes a promise illusory
gives a person a free way out
is limited to the terms set forth by the provision
A contract in which one party agrees to purchase goods from another contingent upon the purchaser's ability to locate suitable financing is said to
be illegal
result from undue influence
contain a waiver
contain a conditional promise
Ordinarily, a promise to perform an existing legal obligation is:
not consideration
binding if the promisor promises to perform with extra care
binding if the promisor promises to perform to suit the personal satisfaction of the promisee
binding if the promisee would experience substantial loss due to breach of the promise
Which of the following is not consideration for a present promise
a good faith adjustment
compromise and release of claims
the promise to pay one's child support obligation, consistent with pre-existing court order
the performance of requested act
A landowner's promise to p ay a contractor a bonus to complete construction of a building according to the terms of a pre-existing contract between the landowner and the contractor is:
binding if the promise is in writing
binding, since the promise is made by a non-merchant
binding, since the promise is made to a merchant
ordinarily not binding on the promisor
An agreement to pay reasonable additional compensation to a contractor for the performance of pre-existing contract when the contractor faces extraordinary circumstances caused by unforeseen difficulties is called a:
good-faith adjustment
bribe
compensatory allowance
relief payment
The effect of the making of a partial payment to satisfy an admitted debt is an example of the rule that:
past benefits cannot be consideration for a later promise
a conditional promise may be consideration
doing what one is already under a legal obligation to do is not consideration
consideration must be adequate to be binding
The rule that doing or promising to do what one is already legally bound to do is not consideration applies to part payment made in satisfaction of a(n) ______ debt
unliquidated
superfluous
non-superfluous
liquidated
Consideration is not required in
contracts for the sale of goods
employment contracts
agreements to modify employment contracts
agreements to modify contracts for the sale of goods
When a debtor tender a check stating "paid in full" and the creditor cashes the check, the debt:
is always discharged
may be discharged if it is a liquidated debt
may be discharged if it is an unliquidated debt
is never discharged
Which of the following is not a necessary element of promissory estoppel?
The promisor and the promisee must engage in a bargained-for exchange
The promisor must intend or should reasonably expect that the promisee will rely on the promise
The promisee must in fact rely on the promise in some definite and substantial manner
Enforcement of the promise is the only way to avoid injustice
What damages are recoverable in a case of promissory estoppel
profits that the promisor expected
profits that the promisee expected
an amount necessary to restore the promisee to the position he or she would have been in had the promisee not relied on the promise
an amount necessary to restore the promisor to the position he or she would have been in had the promisor not relied on the promise
An agreement is illegal when either its formation or performance is a crime or tort, or its contrary to public policy
When an agreement is illegal, parties are usually not entitled to help from the courts
If an illegal agreement has already been performed parties can sue for damages
If a contract appears to be legal on its face, it will be enforceable even if it was entered into for an illegal purpose
When parties are not equally guilty, the least guilty party is granted relief when it is in the public interest
Even if part of a contract is illegal, the court may enforce a divisible, legal part of the contract
If a contract can be interpreted in two ways, one legal and the other illegal, the court will assume that the legal meaning was intended unless the contrary is clearly indicated
An agreement that calls for the comission of a civil wrong is illegal and void
In every contract there exists an expressed covenant of good faith and fair dealing
A provision in a contract that gives what the court believes is too much of an advantage over a buyer may be held void as unconscionable
Ordinarily, a court will not consider whether a contract is fair or unfair
Company wide standardized form contracts imposed on a "take-it-or-leave it" basis by a party with superior bargaining strength are called contracts of collusion
Substantive unconscionability has to do with matters of freedom of assent
When a court finds a clause of a contract unconscionable at the time it was made, it may enforce the remainder of the contract
Agreements that are contrary to public policy are not binding
Courts are quick to invalidate contracts on the ground that they are contrary to public policy because such contracts are so offensive to society
Legislation commonly requires that an installment-sale contract specify the cash price, down payment, finance charges and insurance costs
An unlicensed insurance broker who cannot personally recover a fee because of the absence of a license can effectively circumvent the statutory requirements by having a friend who is a licensed broker bill for the services and collect the payment for him
To stabilize the industry, manufacturers of the same or similar products may agree that each will market to its product in a specified geographic area of the country and will not market its product in the territory assigned to other manufacturers.
Agreements not to compete are void
A non-competition covenant may be held invalid because of vagueness concerning the duration and geographic area of restriction
When a nationally-known neurosurgeon in Chicago, Illinois sells her practice, the contract may specify that the seller will not practice within a 100-mile radius of Chicago for one year
Fees charged by a lender for the reasonable expense of making a loan, such as the cost of appraising property, are treated as interest for purposes of usury law
In most states the usury laws apply to loans made to both individuals and corporations
In the case of an illegal contract, both parties usually are prohibited from seeking relief in the courts
if the illegal contract has not been performed
if the contract has been partially performed
if the contract has been fully performed
Agreement that are illegal are
enforceable if one party acted in good faith
voidable by one of the parties
void
voidable by either party
Which party to an illegal agreement may get relief from the court
Plaintiff
Defendant
the less-guilty party, when public interest is advanced by granting relief
a doctor who was unlicensed at the time of the making of an agreement for the provision of medical services, but who later obtained a proper license
An illegal provision in a contract
causes the entire contract to be voidable
causes the entire contract to be rescinded
can be ignored by the parties in their performance of the remaining provisions of the contract, assuming that the remaining portions of the contract can stand on their own
can be ignored by the parties, because an illegal provision in a contract is not deemed substantial
An agreement to slander a third person would not be enforceable because slander is a(n)
crime
civil wrong
infringement of privacy
assualt
Dealing honestly, reasonably and in good faith
is implied in every contract for services
is implied in every contract for the sale of goods
is an expressed obligation in every contract
both a and b
A contract that is deemed to be too harsh or oppressive to one of the contracting parties may be unenforceable under the concept of
unilateral influence
bilateral influence
unconscionability
conscionability
One element involved in the determination of unconscionability is
the comparative bargaining power of the parties
the opportunity to make a contract for better terms with someone else
the course of the economy after the contract is made
whether a loss will be sustained by performance of the contract
The validity of a contract is not affected by
the effect of the contract on the community
the absence of good faith
the fact that the contract turned out to be a bad bargain for one of the parties
Today, what is an important element in determining the validity of a contract
the Uniform Contract Code
whether the agreement might harm the public welfare
whether the contract is wise or foolish
whether the contract operates unequally between the parties
Which of the following types of contracts might be unenforceable as contrary to public policy
a contract that is contrary to the protection of the public, welfare, health or safety
a contract that is contrary to the protection of the person
a contract that is contrary to the protection of recognized social institutions
Public policy
can be precisely defined
is frequently used by the courts as a reason to invalidate contracts
is protections from that which violates any established interest of society
Private lotteries, which generally are held to be illegal, involve three elements
prize, chance, and consideration
return, skill and wager
prize, skill and consideration
attractive return, minimal involvement and skill
Which of the following is not illegal?
an office football "pool" with a cash entry fee and cash prize
a raffle with an entry fee to win a car
a "giveaway" to every tenth person who buys meat at a butcher shop
a "giveaway" to every tenth person entering a department store
The failure to have a license will not render agreements void if the license
is based on formal education
is required for engaging in a particular business or trade
is a regulatory license
is readily obtainable by anyone who offers payment of a required fee
Which of the following agreements represent(s) an unreasonable restraint of trade?
a combination to create a monopoly
an agreement to obtain a "corner" on market
an association of merchants to increase prices
An agreement to restrain trade may be void on the grounds that it is
fraudulent
contrary to public policy
illegal lobbying
unfair to merchants
An agreement to compete is enforceable
in the sale of bussiness
between competitors
in contracts for the sale of goods
in contracts for the sale of securities
In an employment contract, agreements not to compete are
illegal
uniformly held to be in the public interest and therefore legal
valid only if the restriction protects the employee
valid, if the restriction is reasonable and necessary for the protection of the former employer
When money is loaned at a greater rate of interest than is allowed by law, ______ is committed
usury
credit misfeasance
petty theft
credit malfeasance
Which of the following is not an example of a state penalty for violating usury law?
restricting the lender to the recovery of the loan but no interest whatsoever
allowing the lender to recover the loan principal and interest up to the maximum contract rate
restricting the lender to the recovery of the loan plus seventy-fifty percent (75%) of the interest
requiring the lender to pay as a penalty, double the interest the borrower paid on a usurious loan
