Chapter 10
Nature and Terminology
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
B1. Contract law shows what excuses our society accepts for breaking certain types of
promises.
B2. Contract law provides stability and predictability for buyers and sellers.
B3. A party’s intent to enter into a contract is judged by their personal, subjective intent
or belief.
B4. One of the elements of a valid contract is a fair price.
B5. “Consideration” refers to the legality of the subject matter of a contract.
B6. A bilateral contract comes into existence at the moment an offer is made.
B7. An offer to form a unilateral contract is accepted by a promise to perform.
B8. A contract can be created only when a promise is given in exchange for another
promise.
B9. Informal contracts include all contracts other than formal contracts.
B10. A promissory note is a formal contract.
B11. In an express contract, the terms are fully stated in words.
B12. An implied contract is implied from the words of the parties.
B13. An executory contract is one that has been fully performed.
B14. If a voidable contract is avoided, the parties to it are released from it.
B15. An unenforceable contract is one that cannot be enforced because of certain legal
defenses against it.
B16. A void contract produces legal obligations on the parties but is not otherwise
enforceable.
B17. A quasi contract is a true contract.
B18. A party who confers a benefit on someone else unnecessarily can invoke the principle
of quasi contract to recover the cost.
B19. The existence of an express contract does not bar an action in quasi contract
concerning the same transaction.
B20. When the words in a contract have more than one meaning, they are cut from the
contract.
MULTIPLE CHOICE QUESTIONS
B1. Viola assures Wendell that she will deliver a truckload of pine seedlings to his tree
farm. A person’s manifestation of an intent to act in a specified way is part of the
definition of
a. an expectation.
b. a moral obligation.
c. an ethical principle.
d. a promise.
B2. Digital Architecture, Inc., agrees to design robotic software for equipment owned by
Chassis Assembly Corporation. Whether or not this agreement meets all of the
requirements of a contract, the parties are most likely to follow the rules of contract
law because they
a. want to avoid potential disputes.
b. are conscious of those rules.
c. are not conscious of those rules.
d. have a moral obligation to do so.
B3. Cassandra accepts what she believes was an offer to work for Destination Vacations,
Inc., as a chef. In determining whether a contract has been formed, an element of
prime importance is
a. the condition of the workplace.
b the duration of the work.
c. the intent of the parties.
d. the subject of the contract.
B4. Jack promises to buy Kelly’s computer for $400. Jack is
a. an executor.
b. an offeree.
c. a promisee.
d. a promisor.
B5. Lilith promises to buy Marv’s handheld game-player for $75. Marv is
a. an executee.
b. an offeror.
c. a promisee.
d. a promisor.
B6. Stu makes an offer to Tina to enter into a contract. Tina accepts the offer. A valid
contract requires
a. an offer only.
b. an acceptance only.
c. an offer and an acceptance.
d. neither an offer nor an acceptance.
B7. Paco offers to pay Quik Delivery (QD) $50 if it picks up and delivers to him a package
from Rich within 30 minutes. QD can accept the offer only by meeting the deadline. If
QD performs as directed, these parties will have
a. a bilateral contract.
b. a trilateral contract.
c. a unilateral contract.
d. no contract.
B8. An agreement between Pinnacle Oil Company and Omega Refinery, Inc., requires
Omega’s bank to pay Pinnacle on receipt of invoices and bills of lading. This letter of
credit is
a. a formal contract.
b. no contract.
c. an implied contract.
d. a quasi contract.
B9. Cameron enters a coffee shop in which she has an open account, fills a cup of coffee,
holds it so the cashier can see it, acknowledges the cashier’s nod, and walks out with
the coffee, knowing that she will be billed for it at the end of the month. Cameron has
formed
a. an express contract.
b. an implied contract.
c. no contract.
d. a quasi contract.
B10. On behalf of the rock group Uno, their manager Thalia agrees to a performance in
Seaside Amphitheatre on July 4. Rex, acting for Seaside, sends a written copy of the
agreement to Thalia to be signed. If Thalia signs the copy, the parties will have
a. an express contract.
b. an implied contract.
c. a quasi contract.
d. no contract.
B11. Macro Corporation and Micro, Inc., enter into an agreement. To constitute a contract,
the terms
a. must all be express.
b. must all be implied.
c. may be express, implied, or a mix of both.
d. may be express or implied, but not both.
B12. Following negotiations with Lester’s Landscaping for maintenance services for a lawn
and garden, Moore enters into an informal contract. This means that the parties’
contract
a. requires no special form.
b. is not enforceable.
c. is not a true contract.
d. is voidable.
B13. Cole drives into Dino’s Service Station and asks Erin, the attendant, to fill the tank in
Cole’s sport utility vehicle. After Erin fills the tank, but before Cole pays for the gas,
any contract between Cole and Dino’s is
a. executed.
b. executory.
c. quasi.
d. unenforceable.
B14. Vernon claims that his contract with Ulani for catering services is voidable. If their
contract is avoided
a. both parties are released from it.
b. both parties must fully perform their obligations under it.
c. a wholly different contract is agreed to.
d. a wholly different contract is imposed “as if” the parties had agreed.
B15. Debit & Credit Accounting Services and Brickwork Construction Company negotiate a
contract. If it has all of the elements necessary for one of the parties to enforce it in
court, it is
a. a valid contract.
b. a voidable contract.
c. a void contract.
d. an unenforceable contract.
B16. Dot, a real estate agent, tells Elbert, a home seller, that her commission is 12 percent.
Elbert agrees that Dot can sell his house but refuses to sign a contract unless the
amount of the commission is reduced. After Dot sells the house, Elbert refuses to pay
12 percent. Dot is most likely to recover
a. nothing.
b. on a theory of an express contract.
c. on a theory of an implied contract.
d. on a theory of a quasi contract.
B17. Courtney promises to buy illegal digital copies of music and movies from Devin, who
promises to deliver on August 15. These promises are most likely
a. enforceable.
b. valid.
c. void.
d. voidable.
B18. Ada mistakenly pays property taxes that should have been assessed against Bud. Ada
can recover the amount from Bud in quantum meriut
a. even if Bud was not aware of the error.
b. only if Bud tried to conceal the error.
c. only if Bud was aware of the error.
d. under no circumstances.
B19. In negotiations with Diamond Refining Company, Coastal Oil, Inc., insists that their
contract be drafted according to certain plain language laws. These laws concern the
phrasing of
a. contracts that include unfamiliar legal terms.
b. ads that contain vague guaranties.
c. instruction manuals that are difficult to follow.
d. epithets that are too colorful.
B20. Cory enters into a contract with Diane to act as her personal sports trainer. If they
later dispute the meaning, and the contract contains unclear terms, the rules of
contract interpretation will give effect to
a. the parties’ intent as expressed in their contract.
b. what the defendant claims was the parties’ intent.
c. what the plaintiff claims was the parties’ intent.
d. what the parties now agree they intended.
ESSAY QUESTIONS
B1. Cody signs and returns a letter from Deb, referring to Deb’s Double-D Ranch and its
price. When Cody attempts to complete the deal, Deb refuses, claiming that they have
no contract. Cody claims they do. What standard determines whether these parties
have a contract?
B2. On May 1, Faith, a real estate agent, and Grace, a commercial property owner, sign an
agreement to find a buyer for Grace’s office building. Under the terms, if a buyer
makes a serious offer within sixty days, Grace must pay Faith’s commission. Faith puts
signs on the building, ads in real estate pamphlets and a local newspaper, and
features the property in a “walking” tour on the Internet. On June 1, Grace tells Faith
that she is canceling their arrangement. Ten days later, Grace closes a sale on the
building without Faith’s participation. Faith files a suit against Grace for the amount of
her commission. In whose favor is the court most likely to rule and why?
