TEST 1

True/False

Indicate whether the sentence or statement is true or false.

____ 1. When a word in a contract has more than one meaning, it will be interpreted against the party who drafted the contract.

____ 2. An advertisement is generally considered to be an invitation to negotiate.

____ 3. All agreements create contractual obligations and will be enforced by the courts.

____ 4. A seller offering goods for sale in an auction through an auctioneer will create a binding contract.

____ 5. An oral contract that must be in writing to be enforceable is enforceable if the party against whom enforcement is sought admits, in court, to its existence.

____ 6. Charitable subscriptions are usually not enforceable.

____ 7. A contract does not need to be in writing to be enforceable if the contract makes performance within one year possible.

____ 8. The parol evidence rule permits the introduction at trial of evidence of the parties' contemporaneous oral agreements even if they differ from the terms of the parties' written contract.

____ 9. If a contract to do something in certain intervals over a period of more than one year is not in writing, it is not enforceable.

____ 10. A contract or a clause in a contract is illegal only if there is a specific statute that prohibits the action promised by the contract.

____ 11. Quasi contracts are not true contracts.

____ 12. If a contract is illegal, the party less at fault will usually be entitled to enforce it so long as it has not yet been fully performed.

____ 13. A court will enforce a contract in which the writing is clear and unequivocal according to its plain terms.

____ 14. If a transaction is tainted by fraud, the innocent party can rescind the contract.

____ 15. A life insurance contract is one of the most common examples of a third party beneficiary contract involving a donee beneficiary.

____ 16. With some exceptions, a party may delegate freely his or her duties under a contract.

____ 17. An express contract may be written or oral.

____ 18. A covenant not to compete will be upheld only if it is reasonable with respect to duration and geographical scope.

____ 19. To collect a reward for finding a lost object, the finder must have known about the reward when he or she found the object.

____ 20. An assignment of rights in real estate can always be prohibited.

____ 21. An offer to make a bilateral contract is accepted by a promise to perform.

____ 22. Rejection of an offer by the offeree will not necessarily terminate an offer.

____ 23. A unilateral mistake always affords the mistaken party a right to relief from the contract.

____ 24. Two parties can mutually agree to rescind a contract, at least to the extent that it is executory.

____ 25. A release must always be a signed writing.

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

Fact Pattern 12-2

Ethan contracts with Ethel to buy a ring from her. When both parties change their minds, they inform each other that they would like to cancel the contract.

____ 26. Refer to Fact Pattern 12-2. Imagine that the next day, Ethan changes his mind and again offers to buy the ring. Ethel is willing to sell, but for a higher price. Ethan and Ethel

a.	must perform their original contract.
b.	must perform the part of their original contract that is still executory.
c.	may agree to a new contract that includes the higher price.
d.	may agree to a new contract, but it cannot include the higher price.

____ 27. Suzanne goes to a bar, has a number of drinks, and, agrees to purchase aluminum shutters for double their normal price from a salesperson who happens to be sitting on the next stool. Suzanne is

a.	liable on the contract if she understood the legal consequences of the contract.
b.	liable on the contract even if she did not understand the legal consequences of the contract.
c.	not liable on the contract because the contract obviously favors the other party.
d.	not liable on the contract under any circumstances.

____ 28. Jed makes an honest but erroneous statement that misrepresents a material fact in a contractual transaction with Cynthia. Jed is guilty of

a.	fraud.
b.	duress.
c.	innocent misrepresentation.
d.	a unilateral mistake.

____ 29. Representatives of North American Delivery Service and United Products Corporation orally agree to several different contracts. The Statute of Frauds will bar enforcement of an oral contract for

a.	a sale of goods for $300.
b.	a sale of land.
c.	a task that will be performed within a year.
d.	none of the above.

____ 30. The doctrine of detrimental reliance is also known as

a.	reformation.
b.	promissory estoppel.
c.	unequivocal acceptance.
d.	laches.

____ 31. Red announces that he plans to paint his Rolls-Royce pink. Walker, who cannot bear the sight of pink Rolls-Royces, offers to pay Red $500 to paint the car a more traditional color. Walker's promise to pay is

a.	unenforceable even if Red paints the car a more traditional color.
b.	unenforceable because Red should not have considered painting the Rolls-Royce pink in the first place.
c.	enforceable because Red agreed to refrain from doing something that he was legally entitled to do.
d.	enforceable because Red preferred the pink color to the more traditional color as evidenced by his prior statement.

____ 32. Johann, a world renowned musician and composer, agrees to give ten violin lessons to Gregory in exchange for $1,000. Johann's attempt to assign his contract to Nick, an inexperienced violinist, will probably be

a.	permitted because contracts may be freely assigned.
b.	permitted because the contract is concerned with music lessons.
c.	prohibited because Johann and Nick have very different skill levels.
d.	prohibited due to the Statute of Frauds.

____ 33. Best Products, Inc., files a suit against City Trucking Service for breach of contract, based on what Best claims was City's offer. For a court to determine if a contract has been breached, under the common law, the offer must include terms that are

a.	exactly precise.
b.	reasonably definite.
c.	loosely approximate.
d.	vague or uncertain.

____ 34. Mike and National Computer Service (NCS) enter into an oral contract under which Mike agrees to program computers for NCS for two years. This contract is

a.	enforceable by Tom only.
b.	enforceable by Sally only.
c.	enforceable by either party.
d.	not enforceable.

____ 35. Ira persuades Jake to buy his sailboat by telling Ira that the boat sails "like the wind." Ira's statement is

a.	duress.
b.	fraud.
c.	puffery.
d.	undue influence.

Fact Pattern 12-1

Ned Contractors, Inc., begins construction of a mall for Van Development Corporation and after six months demands an extra $100,000. Van agrees to pay.

____ 36. Refer to Fact Pattern 12-1. Imagine that Ned offered no reason for the extra $100,000, but said only that it would stop working if Van did not agree to pay. The agreement is

a.	enforceable because the parties executed an accord and satisfaction.
b.	enforceable because of the unforeseen difficulties.
c.	unenforceable due to the preexisting duty rule.
d.	both a and b.

____ 37. Tyler offers to buy a laser printer, with a case of paper and an extra cartridge, from Rick for $200. Rick says, "Ok, but no paper and no extra cartridge." Rick

a.	accepted the offer.
b.	rejected the offer and made a counteroffer.
c.	rejected the offer without making a counteroffer.
d.	none of the above.

____ 38. What sort of contracts do not arise from a mutual agreement but are imposed by a court to avoid unjust enrichment?

a.	Express contracts
b.	Implied contracts
c.	Quasi contracts
d.	Unilateral contracts

____ 39. Al and Ben enter into a contract for the sale of a warehouse. Al promises to vacate the property, and Ben promises to pay, on July 1. Later, Al promises to take Sue out for lunch. The common law of contracts assures these parties of compliance with

a.	all of the promises.
b.	some of the promises.
c.	none of the promises.
d.	none of the above.

____ 40. Basil, a world-famous chef, signs a contract to give lessons in French cooking to Marge. Basil attempts to delegate his duties under the contract to Oliver, the operator of a hot dog concession. The delegation of duties will

a.	be valid.
b.	be valid only if Oliver is a highly regarded barbecue chef.
c.	not be valid because performance of the contract depends on Basil's unique skills.
d.	not be valid only if Marge detests barbecued foods.

____ 41. A-One Realtors contracts with Bright Investments, Inc., to sell Bright's office building for a commission on the sale. The elements of a contract do not include

a.	consideration.
b.	contractual capacity.
c.	legality.
d.	written form.

____ 42. If no time for acceptance is specified in an offer, then the offer will

a.	be a nullity.
b.	terminate within thirty days.
c.	terminate at the end of a reasonable period of time.
d.	none of the above.

____ 43. Tom and Sally enter into an oral contract under which Tom agrees to provide delivery service for Sally for six months. This contract is

a.	enforceable by Tom only.
b.	enforceable by Sally only.
c.	enforceable by either party.
d.	not enforceable.

____ 44. Larry says to Nora, "I would like to sell you my baseball card collection." This statement is not an offer because it

a.	does not describe the subject matter specifically.
b.	does not mention a price term.
c.	merely expresses an opinion.
d.	merely invites Nora to negotiate terms.

Fact Pattern 12-3

Russ pledges to donate $1,000 to the Center for AIDS Research (CARE). On the basis of the pledge, CARE orders additional lab equipment. Russ later reneges on the pledge. CARE sues Russ to honor the pledge.

____ 45. Refer to Fact Pattern 12-3. If the court refuses to enforce the pledge, it will be because

a.	the pledge is a gift.
b.	there is no known cure for AIDS.
c.	both a and b.
d.	none of the above.

____ 46. City Transport Corporation and Midwest Warehouses, Inc., enter into a lease for a warehouse. To be enforceable, the lease must be in writing if the warehouse is valued at

a.	$50.
b.	$500.
c.	$5,000.
d.	any of the above.

____ 47. Nora signs a covenant not to compete with her employer, National Sales Corporation. The covenant will be struck down

a.	if it is greater than necessary to protect a legitimate business interest.
b.	if it is not ancillary to the sale of a business.
c.	if Nora elects to avoid the covenant within a reasonable period of time.
d.	under no circumstances.

____ 48. Digital Electronics, Inc., makes an offer to the owners of National Computer Corporation to buy the entire company. The party with the power to revoke the offer is

a.	Digital Electronics, the offeror, only.
b.	National Computer, the offeree, only.
c.	either Digital Electronics or National Computer.
d.	none of the above.

____ 49. Todd sues Owen for fraud. Todd must prove that he suffered an injury

a.	to recover damages.
b.	only in certain situations involving physical injury.
c.	if there was a mutual mistake by the parties.
d.	none of the above.

____ 50. An officer of International Sales Corporation makes overtures to a representative of Global Distribution, Inc., regarding a business deal. Under the objective theory of contracts, the officer's words and conduct are held to mean whatever

a.	the officer subjectively intended them to mean.
b.	a reasonable person in the officer's position would think they meant.
c.	a reasonable person in the representative's position would think they meant.
d.	the representative subjectively thought they meant.

TEST 1

Answer Section

TRUE/FALSE

1. T

2. T

3. F

4. F

5. T

6. F

7. T

8. F

9. T

10. F

11. T

12. F

13.