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
A1. Some promises are not legally binding.
A2. Resolving whether a promise should be enforced is a function of contract law.
A3. If a contractual promise is not fulfilled, the person who made it may be required to
perform the promised act.
A4. The intention to enter into a contract is judged by outward, objective facts as
interpreted by a reasonable person.
A5. The only requirement of a valid contract is that it be voluntarily entered into.
A6. Every contract involves at least three parties.
A7. “Consideration” refers to the voluntary consent of all of the parties to a contract.
A8. A unilateral contract is formed when the one receiving the offer completes the re-
quested act or performance.
A9. No offer may be revoked before it is accepted.
A10. A check is a formal contract.
A11. Informal contracts are usually based on their substance rather than their form.
A12. An express contract must be in writing.
A13. An implied contract is not an actual contract.
A14. If a voidable contract is ratified, the parties must fully perform their respective legal
obligations.
A15. An executed contract is one that has been fully performed.
A16. A quasi contract is a fictional contract.
A17. A void contract is enforceable if it is in writing.
A18. The doctrine of quasi contract can be used only when there is an actual contract that
covers the matter in controversy.
A19. Plain language laws regulate some types of contracts to require “legalese.”
A20. A reasonable, lawful, and effective meaning will normally be given to all of a
contract’s terms.
MULTIPLE CHOICE QUESTIONS
A1. Phil agrees to work for Vacation Resorts, Inc., as a chef. In determining whether a
contract has been formed, an element of prime importance is
a. the parties’ intent.
b. Phil’s rate of pay.
c. the duration of the work.
d. Vacation Resorts’s facilities.
A2. Crosby believes that he and Dakota agreed he would act as her personal sports trainer
for seven workout sessions. In a later dispute, the existence of any contract can be
judged by
a. the parties’ statements at the time of their alleged contract.
b. what the defendant claims was the parties’ intent.
c. what the plaintiff claims was the parties’ intent.
d. what the parties agree they intended.
A3. Expert Pavers, Inc., contracts with Fabricated Building Corporation to repave
Fabricated’s parking lot for which Fabricated agrees to pay. The elements of this, and
any other, contract include
a. capability.
b. consideration.
c. formation.
d. practicality.
A4. Mona asserts that a deal she entered into with Nate is an unenforceable contract.
Defenses to the enforcement of a contract include
a. a desire not to perform.
b. adverse economic consequences.
c. results that do not match expectations.
d. the lack of a party’s voluntary consent.
A5. Freida and Gail enter into a bilateral contract, which is created when Freida gives a
promise in exchange for Gail’s
a. payment of money only.
b. performance of a particular act only.
c. promise only.
d. prudent awareness only.
A6. Clay offers to pay Dorianne $50 for a golf lesson for Estee. They agree to meet the day
after tomorrow to exchange the cash for the lesson. These parties have
a. a bilateral contract.
b. a trilateral contract.
c. a unilateral contract.
d. no contract.
A7. Opie offers to sell his guitar to Pinky for $100. Pinky agrees. They complete and sign a
printed form, and Pinky gives Opie a check for the price. This check is
a. a formal contract.
b. an informal contract.
c. a simple contract.
d. no contract.
A8. On Monday, Neil tells Outdoor Landscaping, Inc., that he will pay Outdoor $500 if a
variety of tasks are completed by Friday. On Wednesday, when Outdoor is more than
half done with the work, Neil says that he has changed his mind. Under the present–
day view, these parties had
a. an expired contract when Neil said that he had changed his mind.
b. a quasi contract when Neil said that he would pay for certain work.
c. a unilateral contract as soon as Outdoor began to perform.
d. no contract.
A9. On behalf of the jazz group Synco-Passion, their manager Raul agrees to a
performance in the Quay Club on May 1. Portia, acting for Quay Club, sends a written
copy of the agreement to Raul to be signed. Typically, businesspersons put their
contracts in writing to
a. ensure proof of the contracts’ existence.
b. create substance from form.
c. obtain a check or other negotiable instrument.
d. practice their “letters of credit.”
A10. Flo tells Gregor that she will buy his textbook from last semester for $65. Gregor
agrees. Flo and Gregor have
a. an executed contract.
b. an express contract.
c. an implied contract.
d. a quasi contract.
A11. When Jeff’s car breaks down, he asks Kwik Tow, Inc., to tow it from its location to
Loyal Repair Shop. There is no discussion of a price, and Jeff and Kwik do not sign any
documents. After the tow, Kwik sends Jeff a bill. With respect to Jeff’s obligation to
pay the bill, this is
a. an express contract.
b. an implied contract.
c. a quasi contract.
d. no contract.
A12. Following negotiations with Merchants Storage Company, Lonny enters into an
informal contract to clean the loading dock. This means that the parties’ contract
a. requires no special form.
b. must be drafted “in form” to be valid.
c. is indefinite and imprecise.
d. does not exist.
A13. Sam and Tiffany enter into an implied contract. This is a contract in which the parties’
conduct
a. defines the contract’s terms.
b. finds the contract’s facts.
c. terminates any unintended consequences.
d. undercuts any terms based on the facts.
A14. Scot enters into a contract with Tiffany that later proves voidable at Tiffany’s option. If
she elects to avoid any duty to perform under the contract
a. both parties are released from it.
b. neither party is released from it.
c. only Scot is released from it.
d. only Tiffany is released from it.
A15. Holiday Sales Company and Global Distributors, Inc., enter into a contract for the
delivery of imported specialty goods. Until the goods are delivered and paid for, these
parties have
a. an executory contract.
b. no contract.
c. a quasi contract.
d. an informal contract.
A16. Mia, a physician, renders aid to Noel, who is injured and unconscious. Mia can recover
the cost of the aid from Noel
a. even if Noel was not aware of the aid.
b. only if Noel recovers because of the aid.
c. only if Noel was aware of the aid.
d. under no circumstances.
A17. Green Grocers, Inc., enters into a contract with Hiway Transport Company for the
delivery of a shipment of fresh produce. In a later dispute between these parties over
the delivery, the doctrine of quasi contract cannot be used because
a. both of the parties involved are businesses.
b. at least one of the parties had greater bargaining power.
c. the subject of the contract was a service.
d. there is an actual contract covering the subject in dispute.
A18. Phil enters into a contract with Quality Resorts, Inc., to work as a chef. Under the plain
meaning rule, the meaning of this contract must be determined by reference to
a. any available evidence.
b. any relevant extrinsic evidence.
c. the face of the instrument.
d. the later testimony of the parties.
A19. Diaz and Cuzco enter an express contract for the construction of a warehouse. Express
contract terms are given, in relation to the parties’ course of performance,
a. less priority.
b. the same priority.
c. no priority.
d. more priority.
A20. National Grocers, Inc., enters into a contract with Overland Shipping Company for the
delivery of a shipment of fresh produce. If ambiguities appear in the contract, they will
be construed against
a. the party who drafted the contract.
b. the party with the greater bargaining power.
c. the promisor.
d. the promisee.
ESSAY QUESTIONS
A1. Ed, a businessperson, is a friend of Fran, the owner of a candy store. Every day, Ed
spends five minutes in Fran’s candy store, looking at the candy and usually buying one
or two candy bars. One afternoon, Ed goes into the store, looks at the candy, and
picks up a $1 candy bar. Ed waves the candy at Fran without saying a word and walks
out. Is there a contract? If so, how would it be classified in terms of formation,
performance, and enforceability?
A2. On May 1, Local Cartage Company and Modern Computers, Inc., orally agree that
Local Cartage will pick up from National Chip Corporation and deliver to Modern
Computers’ manufacturing plant a certain number of computer chips on each Monday
in May. Under the agreement, Modern Computers will pay for the delivery services on
June 1. On May 1, is this contract express, implied in fact, or implied in law? On May
31, after all of the deliveries have been made, is the contract executed or executory?