Business Law, 8e (Cheeseman)
Chapter 10 Agreement
1) A contract requires an offer and an acceptance.
2) An offer is not effective until it is actually received by the offeree.
3) An agreement is created when the offeree receives the offer.
4) The offeree must be objectively intended to be bound by the offer for the offer to be effective.
5) The offer must be communicated to the offeree for the offer to be effective.
6) Identification of the subject matter and quantity would be an implied term.
7) Identification of the parties of a contract would be an express term.
8) Implied terms in a contract can be supplied by the courts.
9) Advertisements are considered to be invitations to make an offer.
10) A reward is a form of bilateral contract.
11) Unless otherwise expressly stated, an auction is considered an auction with reserve.
12) In an auction with reserve, the seller retains the right to refuse the highest bidder.
13) In an auction with reserve, the bidder can withdraw his bid after an acceptance has been
indicated from the offeror.
14) In an auction with reserve, the bidder is the offeror.
15) In auction without reserve, the seller is the offeree.
16) In an auction without reserve, the seller is obliged sell the goods to the highest bidder.
17) In an auction with reserve, the bidder is the offeror.
18) An offeror can revoke his or her offer even after an agreement or acceptance has been
reached.
19) A rejection of an offer is not effective until it is actually received by the offeror.
20) A counteroffer is a rejection of the original offer.
21) During a counteroffer, the previous offeror remains the offeror.
22) An option contract is terminated upon the death of the offeror.
23) An offer is terminated if the subject matter of the offer is destroyed.
24) If the object of an offer is made illegal prior to the acceptance of the offer, then the offer
terminates.
25) An offer terminates upon the expiration of a stated time in the offer.
26) If no time is stated in an offer, then the offer stays valid indefinitely.
27) Bilateral contracts is accepted only upon the offeree’s performance of the required act.
28) Only the offeree has the legal power to accept an offer and create a contract.
29) An offer that is made to two or more persons jointly must be accepted jointly.
30) A contract is created upon an equivocal response to an offer from the offeree.
31) An unequivocal acceptance must not contain conditions or exceptions.
32) To meet the mirror image rule, the offeree must accept the terms of the offer without
modification.
33) Under the mailbox rule, an acceptance is only effective when it is received.
34) If an offeree dispatches a rejection before an acceptance, then the rejection will not be
applicable.
35) An offer cannot stipulate that acceptance must be by a specified means of communication.
36) A(n) ________ is a voluntary exchange of promises between two or more legally competent
persons to do, or refrain from doing, an act.
A) offer
B) advertisement
C) agreement
D) proposal
37) What is the key difference between an agreement and a contract?
A) A contract is always enforceable in the court of law, while an acceptance may or may not be.
B) A contract can only be between two individuals, while an acceptance can have two or more
people involved.
C) A contract required mutual assent from all parties, while an acceptance need only be accepted
a majority of people involved.
D) A contract need not be legally binding, while an agreement must be legally binding.
38) Section 24 of the Restatement (Second) of Contracts defines a(n) ________ as the
manifestation of willingness to enter into a bargain, so made as to justify another person in
understanding that his assent to that bargain is invited and will conclude it.
A) order
B) offer
C) advertisement
D) revocation
39) The ________ theory of contracts states that the intent to contract is judged by the reasonable
person standard and not by the subjective intent of the parties.
A) objective
B) relational
C) collateral
D) bargain
40) A term in a contract that can reasonably be supplied by the courts is referred to as a(n)
________.
A) intent term
B) unconditional term
C) objective term
D) implied term
41) Which of the following statements is true of an offer that was not communicated?
A) The offer stays valid for 30 days from the date of creation.
B) The offer cannot be accepted by the offeree if not communicated.
C) The offeree can claim an offer that was not communicated.
D) It is considered to be an implied term.
42) An invitation to make an offer or an actual offer is referred to as a(n) ________.
A) proposal
B) reward
C) advertisement
D) bid
43) Which of the following would be considered an offer to form a unilateral contract?
A) advertisement
B) auction without reserve
C) reward offer
D) auction with reserve
44) Which one of the following would constitute a reward?
A) a person buying a car after seeing an ad about it
B) a person returning a lost item after seeing an ad about it
C) a seller accepting a bid for an item
D) a seller making an invitation for offers
45) Which of the following is true for legally claiming a reward?
A) A promise of completing the requested act is sufficient for a claimant to claim the reward.
B) Knowledge of the reward before completing the requested act is necessary to claim the
reward.
C) The claimant can claim the reward even if he or she came to know of the reward subsequent
to completing the act.
D) The offeror cannot withdraw the reward once the offer has been placed in the public domain.
46) In which of the following types of offers does the seller offer the goods for sale?
A) revocation
B) reward
C) auction with reserve
D) auction without reserve
47) Which of the following is true for an auction with reserve?
A) The seller retains the right to refuse the highest bidder.
B) Invitations to make an offer are not allowed.
C) Goods cannot be withdrawn from sale after the offer has been made.
D) A bid once made cannot be withdrawn and is legally binding.
48) Which of the following is true for an auction without reserve?
A) The bidder is considered the offeror.
B) The seller need not accept the highest bid.
C) The goods on sale cannot be withdrawn.
D) The auctioneer is not allowed to set a minimum bid.
49) A(n) ________ is a withdrawal of an offer by the offeror that terminates the offer.
A) rejection
B) advertisement
C) revocation
D) counteroffer
50) A response by an offeree that contains terms and conditions different from or in addition to
those of the offer is called a(n) ________.
A) rejection
B) counteroffer
C) revocation
D) acceptance
51) Which of the following statements is true about a revocation?
A) It can be made by the offeree.
B) It needs to reach the offeree to be effective.
C) It can be done even after acceptance of the offer.
D) It can be applied to an option contract.
52) Which of the following statements is true about a counteroffer?
A) An offeree that makes the counteroffer is still considered the offeree.
B) A counteroffer terminates the existing offer.
C) A counteroffer can only be made by the offeror.
D) A counteroffer need not be communicated to the offeror.
53) Luke offered to sell his farm to Kent at $75,000, an offer which Kent declined. A week later,
Luke offered to sell the farm for $65,000, stating that it was the final offer, it was valid for one
month, and that he would not alter it. Two days later, Kent replied by saying that he was willing
to pay $60,000 for the farm. A week after Luke received Kent’s offer, Luke declined it. Ten days
after that, Kent agreed to buy the farm for $65,000, but Luke refused to sell the farm. Kent
decided to sue Luke for a breach of contract. The judge ruled in favor of Luke. Which one of the
following is the reason for the ruling in Luke’s favor?
A) Luke’s original offer of $75,000 is still valid, even though rejected.
B) Kent’s counteroffer of $60,000 had rendered the offer for $65,000 invalid.
C) Kent’s acceptance was past the set time period in the offer.
D) Kent acted in an incompetent manner with regards to the offer.
54) Jennifer had put up a reward offer, in the local newspaper, for her lost watch for two weeks
now. But after buying a new watch, Jennifer decided to not pursue her old watch, and so decided
not to put up the reward offer in the third week. Betty, who found the watch, and saw the reward
offer, returned the watch to Jennifer during the third week. Which of the following would be true
about Betty receiving or not receiving the reward?
A) Betty will not receive the reward as Jennifer had already revoked it.
B) Betty will not receive the reward as Jennifer had stopped publishing the reward offer.
C) Betty cannot claim the reward because she had not performed all the requested acts.
D) Betty can claim the reward because Jennifer had not published a notice of revocation.
55) An agreement that an offeror will not sell his property for a specified period subsequent to
the offeree paying consideration to the offeror is referred to as a(n) ________.
A) unequivocal acceptance
B) contract of adhesion
C) option contract
D) firm offer
56) Which of the following is true about an option contract?
A) If the offeree chooses not to buy the property then money paid in consideration must be
returned.
B) If money is paid as consideration, then that is not applied to the sale price.
C) Death or incompetency of either party terminates an option contract.
D) The offer cannot be revoke during the option period.
57) If a fire destroys an office building that has been listed for sale, the offer is automatically
terminated due to ________.
A) supervening illegality
B) death or incompetency of the offeror
C) destruction of the subject matter
D) lapse of time
58) Peter has two houses that he plans to sell, numbered Lot 1 and Lot 2. Each priced at
$800,000. David has shown interest in buying Lot 2, but could not make up his mind on the final
offer, so he asks Peter to give him a week to decide and Peter accepts. But David takes two
weeks to get back to Peter with a counteroffer. Before he could give David a reply to his
counteroffer, Peter is killed in a fire that burned down Lot 1. Which of the following would be
true of this case?
A) The offer is terminated due to lapse of time.
B) The offer is terminated due to destruction of the subject matter.
C) The offer is terminated due to death of the offeror.
D) David can still buy the house for Peter’s original offer.
59) An offer is terminated on the grounds of “supervening illegality” when ________.
A) the set period in the offer has expired
B) the subject matter in the offer has been destroyed
C) a statute or court decision deems an object of the offer unlawful
D) the offeror or offeree passes away prior to the offer being accepted
60) Techstate, a hardware manufacturer in the United States, has an existing contract with a
client based in the Republic of Karthasia, which is going through a domestic political crisis. The
resulting upheaval in that country has led to some of the shipments to the client being destroyed
by warring factions. As a sanction against the country, the United States government places an
embargo on all exports to that country by U.S. firms. What will be the state of the contract
between Techstate and the client in Karthasia after the embargo?
A) It will be terminated due to destruction of subject matter.
B) It will be terminated due to incompetency of the offeror.
C) It will be terminated due to lapse of time.
D) It will be terminated due to supervening illegality.
61) An offer is terminated on the grounds of “lapse of time” if ________.
A) the offeror dies before the offeree has accepted the offer
B) the offer is not communicated to the offeree
C) the offeror has communicated to the offeree a set time which is not mentioned in the offer
D) the offer is not accepted within a stated time period
62) George made an offer to Jacob to sell his house for $1 million. The offer was received by
Jacob on the 1st of May, and stipulated that he had 13 days to accept. But Jacob could not
arrange the money, and on 16th May made a counteroffer to George to buy the house for
$850,000. Which of the following is true about the original offer made by George to Jacob?
A) It is terminated by the counteroffer.
B) It is still valid as the house has not been sold.
C) It is invalid due to lapse of the stated time.
D) It is invalid due to incompetency of the offeree.
63) ________ is a manifestation of assent by the offeree to the terms of the offer in a manner
invited or required by the offer as measured by the objective theory of contracts.
A) Acceptance
B) Revocation
C) Proposal
D) Counteroffer
64) The legal power to accept an offer belongs to the ________.
A) offeror
B) offeree
C) agent
D) seller
65) Mandy has decided to sell her iPad, and makes an offer to her friend Shelly for $250. Shelly
tells Mandy she is willing to buy the iPad, but would be glad if Shelly could lower her asking
price. Mandy lowered the price to $210 and Shelly bought it. Which of the following would
describe Shelly’s response to Mandy for her first offer?
A) counteroffer
B) rejection
C) equivocal acceptance
D) grumbling acceptance
66) Quentin is a member of the Album of the Month Club and receives a new music CD every
month without fail. The Club usually gives its members a time period within which they can
reject the selection and stop shipment of the CD, failing which the CD will be shipped. Last
month, Quentin received a CD from Album of the Month Club, a copy of which a friend had
already gifted him. He had not found time to reject the offer as he was away. Quentin could not
reject the CD and had to buy it. What kind of an offer-acceptance model does Album of the
Month Club have?
A) mirror image rule acceptance
B) silence as acceptance
C) acceptance-upon-dispatch
D) unequivocal acceptance
67) The mirror image rule states that ________.
A) the offeree’s counteroffer should match the value of the offeror’s offer
B) the offeree is allowed to modify the terms of the offer
C) the offeror can modify the terms of the offer even after the offeree has accepted it
D) the offeree must accept the terms as stated in the offer
68) Which of the following contradicts the mirror image rule?
A) silence as acceptance
B) option contract
C) counteroffer
D) acceptance-upon-dispatch
69) The ________ states that an acceptance is effective when it is dispatched, even if it is lost in
transmission.
A) rule of silence as acceptance
B) mirror image rule
C) mailbox rule
D) mutual assent rule
70) Which of the following is a difference between acceptance and revocation?
A) Revocation is valid only if the offeree receives it, while an offeree’s acceptance is valid when
dispatched.
B) Revocation can be done by the offeror or offeree, while an acceptance can only be done by
the offeree.
C) An acceptance must be received by the offeror to be valid, while a revocation need not be
received by the offeree.
D) A revocation can be made after acceptance, while an acceptance cannot be made after
revocation.
71) ________ is a stipulation in an offer that says the acceptance must be by a specified means of
communication.
A) Option contract
B) Mirror image rule
C) Implied authorization
D) Express authorization
72) The term ________ refers to a mode of acceptance that is indicated from what is customary
in similar transactions, usage of trade, or prior dealings between the parties.
A) express authorization
B) implied authorization
C) option contract
D) unequivocal acceptance
73) Which of the following describes Ron’s action of deciding not to sell his computer?
A) revocation
B) rejection
C) counteroffer
D) unequivocal acceptance
74) Ron’s response to sell the computer to Carl is considered as a(n) ________.
A) mirror image rule acceptance
B) rejection
C) counteroffer
D) equivocal response
75) Carl’s response to Ron’s offer is considered as a(n) ________.
A) mirror image rule acceptance
B) rejection
C) unequivocal acceptance
D) counteroffer
76) Give an account of the express terms that are parts of an offer.
77) How can an offeror revoke an offer?
78) Give an account of termination of offer due to lapse of time.
79) Explain the importance of “time of acceptance” of contracts.
80) Explain implied and express modes of acceptance.