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Chapter 13
Consideration
TRUE/FALSE QUESTIONS
B1. In contract law, the term consideration refers to the serious thought that
underlies a party’s intent to enter into a contract.
B2. If a promise is made, it can be enforced.
B3. To be legally sufficient, consideration must be evidenced by something
tangible.
B4. The element of bargained-for exchange distinguishes contracts from gifts.
B5. A determination of whether consideration exists depends on a comparison of
the values of the things exchanged.
2 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B6. Essentially, adequacy of consideration concerns the fairness of the bargain.
B7. A promise to do what one already has a legal duty to do constitutes legally
sufficient consideration.
B8. Risks ordinarily assumed in business constitute consideration for the
modification of a contract.
B9. A court is not likely to allow an exception to the preexisting duty rule even if
extraordinary difficulties arise that were totally unforeseen at the time a contract
was formed.
B10. Rescission is the substitution of one party to a contract for a third party, who
agrees to assume the contractual duties.
B11. Even if the terms of a contract express such certainty of performance that the
promisor has not definitely promised to do anything, the promise binds the
promisor.
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B12. An obligation is enforceable only if it is made in return for actions or events that
have already taken place.
B13. For accord and satisfaction to occur, the amount of the debt cannot be in
dispute.
B14. A release bars any further recovery beyond the terms stated in the release.
B15. In many states, a release contract must be in a signed writing.
B16. There can be no satisfaction unless there is first an accord.
B17. A covenant not to sue does not always bar further recovery.
B18. Under the doctrine of promissory estoppel, a promise will not be enforced
unless it is supported by consideration.
4 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B19. For the doctrine of promissory estoppel to be applied, there must be a clear
and definite promise.
B20. Statutes of limitations in all states require a debtor to pay a debt within a
specified period of time.
MULTIPLE-CHOICE QUESTIONS
B1. Aaron questions whether there is consideration for his contract with Banquet
Hall to exchange his musical performance of country tunes at select social
events for Banquet’s payment of a certain amount. To constitute consideration,
the value of whatever is exchanged must be
a. objectively worthy.
b. precisely adequate.
c. legally sufficient.
d. practically sound.
B2. Henry promises not to open his Hank’s Lunchbox Café before 10:00 A.M. if Isis,
who owns Isis’s Danish & Donuts next door, promises to close by 4:00 P.M.
Henry’s consideration is
a. the destruction of a legal relationship.
b. the creation of a legal relationship.
c. a forbearance.
d. an exchange of money.
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B3. Esmeralda promises to pay Fiorello $400 because “he does not have as much
money as other people.” Esmeralda’s promise is not enforceable because
a. society does not want gifts cheapened by making them legally
enforceable.
b. the redistribution of wealth on a one-to-one basis is not a valid social
goal.
c. Esmeralda could have paid more.
d. Fiorello has not given consideration in return.
B4. Quentin questions whether there is consideration for his contract with Rainey to
exchange his performance with the Symphonic Saxophone Sextet for her
payment of a certain amount. To constitute consideration, there must be
a. a payment.
b. a performance.
c. a bargained-for exchange.
d. serious thought underlying each party’s intent to contract.
B5. Valley Paragliders Association files a suit against Wing Designers, Inc.,
claiming that the consideration for their contract is inadequate. The court will
most likely not examine the adequacy of the consideration if
a. there is a large disparity in the amount of consideration exchanged.
b. the consideration involves the performance of services.
c. something of value passed between the parties.
d. the consideration is worth less than $100.
6 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B6. Mobile Minutes Company offers Nate an unlimited number of monthly phone
minutes for $4.50 per month. Nate accepts. If a dispute arises, a court would
likely
a. enforce the deal after questioning the adequacy of the consideration.
b. not question the adequacy of the consideration.
c. rewrite the deal after questioning the adequacy of the consideration.
d. set aside the deal after questioning the adequacy of the consideration.
B7. Genovese Contracting, Inc., agrees to build a warehouse for Hawthorne
Wholesale Distributors. When Genovese runs into the types of difficulties that
contractors ordinarily confront, Hawthorne agrees to pay extra compensation to
overcome them. Regarding the agreement to pay more, a court would likely
a. enforce it.
b. rescind it.
c. order the parties to renegotiate it.
d. not enforce it.
B8. Todos, Ltd., agrees to market the products of United Sales, Inc., in Venezuela.
When the government is unexpectedly overthrown in a revolution, Todos can
continue to fulfill its contract but only for a much higher price. United agrees to
pay but later files a suit to recover the difference. The court will most likely rule
that
a. a change in government is a risk ordinarily assumed in business.
b. an unforeseen difficulty supported the contract modification here.
c. Todos engaged in extortion or the so-called holdup game.
d. Todos had a preexisting duty to supply the goods at the initial price.
CHAPTER 13: CONSIDERATION 7
Fact Pattern 13-B1 (Questions B9–B10 apply)
Quik Downtown Delivery contracts with Rico’s Tacos to deliver its products. Both
parties change their minds, however, and inform each other that they would like to
cancel the contract.
B9. Refer to Fact Pattern 13-B1. The next day, Quik again offers to deliver Rico’s
products. Rico’s is willing to deal, but for a new price. Quik and Rico’s
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.
B10. Refer to Fact Pattern 13-B1. Quik and Rico’s
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.
B11. Industrial Engineering, Inc., promises to give stock options to Jasmine for
processes she has already designed for the firm. This promise is enforceable
a. because it is a new contract.
b. because it is an illusory promise.
c. because it is supported by past consideration.
d. under no circumstances.
8 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B12. Dave’s uncle tells Dave that if “he feels that Dave deserves it,” he will give
Dave $10,000 when Dave graduates from college. Dave’s uncle’s promise is
a. illusory.
b. a contract.
c. a forbearance.
d. a preexisting duty.
B13. Produce Packaging Company promises its employees a 10 percent raise at the
end of the year if productivity has increased and management feels the raise is
warranted. Produce Packaging 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 productivity increases.
d. give the employees a 10 percent raise under any circumstances.
B14. Apples & Pears Orchards contracts to hire Brigit for one year to tend the fruit in
its commercial orchards but reserves the right to cancel the employment on
thirty days’ notice at any time after Brigit begins work. This promise is
a. enforceable.
b. illusory.
c. unliquidated.
d. unforeseen.
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B15. Qiana writes a check to Payday Loans, Inc., in an amount that represents half
of her debt to the lender. On the back of the check, Qiana includes the words
“payment in full.” Payday agrees to accept the lesser sum and cashes the
check. This discharges 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.
B16. While sailboarding, Jolene is injured when Kilroy carelessly crosses her path.
Kilroy’s insurance company offers Jolene $50,000 to release Kilroy from
liability, and she accepts. Later, she learns that her injuries are more serious
than she realized. The release is
a. enforceable.
b. unenforceable because Jolene’s injuries are unforeseeably difficult.
c. unenforceable because Kilroy has a preexisting duty to pay.
d. unenforceable because the release is an illusory promise.
B17. Gustaf and Hilltop Country Club disagree as to the exact amount Hilltop owes
Gustaf for his landscaping work. They form a new agreement that, on
fulfillment, will discharge the prior obligation. This is
a. a covenant not to sue.
b. an accord and satisfaction.
c. a release.
d. promissory estoppel.
10 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B18. After an accident with a vehicle licensed to Guardian Security Company, Heidi
signs a covenant not to sue Guardian Security for damages in a tort action if it
pays for the damage to her car. This covenant is
a. a bar to recovery only if Guardian Security pays.
b. an illusory contract.
c. barred by the preexisting duty rule.
d. barred by the doctrine of promissory estoppel.
B19. Rudy files a suit against Shakes & Shingles, Roofing Contractor, Inc., under the
doctrine of promissory estoppel. Rudy must show that
a. he justifiably refused to fulfill a promise to Shakes & Shingles.
b. he justifiably relied on Shakes & Shingles’ promise to his detriment.
c. Shakes & Shingles justifiably refused to fulfill a promise to him.
d. Shakes & Shingles justifiably relied on his promise to its detriment.
B20. Readymade Credit Company loans Start-Up Enterprise, Inc., $150,000 to
invest in new equipment. If Start-Up fails to pay the loan within a specified
period, Readymade’s recovery of the debt will be barred by
a. the preexisting duty rule.
b. the doctrine of promissory estoppel.
c. a statute of limitations.
d. none of the choices.
ESSAY QUESTIONS
B1. In May, Zach agrees to work for Affordable Plumbing Supplies Company at
$800 per week for a year beginning June 1. The following January, Budget
Pipes & Fittings, Inc., offers Zach the same work at $900 per week. Zach tells
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Affordable Plumbing about the offer. Affordable Plumbing offers to enter into a
new contract with Zach at $875 per week. If Zach agrees, is the new Affordable
Plumbing contract enforceable? Why or why not?
B2. Chris promises Doreen $40,000 if she graduates from Eagle College. Doreen
enrolls in Eagle, attends full-time for four years, and graduates. When Doreen
asks Chris for $40,000, Chris says, “I don’t remember promising you $40,000.
But if there was a promise, it’s not enforceable, because we didn’t bargain for
it. And even if there was a promise that would otherwise be enforceable, I
revoke it now.” Can Doreen enforce Chris’s “promise”? Why or why not?