Business Law, 8e (Cheeseman)
Chapter 11 Consideration and Promissory Estoppel
1) To be enforceable, a contract must be supported by consideration.
2) If a contract that was lacking in consideration is performed by the parties, the parties cannot
subsequently assert lack of consideration to undo the performed contract.
3) Promissory estoppel is an equity doctrine that permits parties to enforce of a contract that
includes consideration.
4) A promise is something of legal value given in exchange of a consideration.
5) Forbearance of a legal right can be provided as consideration.
6) A consideration need not be of legal value to be enforceable.
7) A contract is considered to be supported by legal value if the promisor suffers a legal
detriment.
8) Considerations can only be monetary or economic in nature.
9) An out-of-court settlement in exchange for dropping a lawsuit is an example of consideration.
10) A contract is considered to be supported by legal value if the promisee receives a legal
benefit.
11) For a gift promise to be enforceable, the promisee must offer a consideration.
12) A gift promise requires the promisee to provide consideration.
13) A gift promise is enforceable if the promisor withdraws from his promise.
14) A completed gift promise cannot be rescinded for lack of consideration.
15) Contracts based on illegal consideration are valid.
16) Illusory promises require both parties to perform their contractual obligations.
17) Illusory promises are enforceable if one of the parties has performed their contractual
obligation.
18) An illusory promise is an example of a contract that lacks consideration.
19) Preexisting duty promise is unenforceable because of the introduction of a new
consideration.
20) The preexisting rule allows for midstream changes to be enforceable in a contract.
21) A promise based on past consideration is not enforceable.
22) Contracts falling under past consideration are unenforceable due to a preexisting
consideration.
23) A new promise can include a past consideration for it to be enforceable.
24) In an output contract, the buyer agrees to make all of its purchase from one buyer.
25) Output contracts serve the legitimate business purposes of assuring the seller of a purchaser
for all its output.
26) A requirements contract is a contract in which a buyer agrees to purchase all of its
requirements for an item from one seller.
27) A requirements contract is unenforceable due to lack of consideration.
28) Imposition of the best-efforts duty provides sufficient consideration to make a contract
enforceable.
29) An accord is enforceable even though no new consideration is given.
30) If the accord is performed, it is called a satisfaction.
31) Once an accord has been reached, the original contract cannot be enforced under any
circumstance.
32) An accord is a compromise reached between two parties to settle a claim.
33) If the accord is not satisfied, the other party can sue to enforce the accord.
34) Promissory estoppels can be invoked for cases that include consideration.
35) A promissory estoppel is usually used to provide a remedy to a party who has relied on
another party’s promise.
36) ________ is an equity doctrine that permits a court to order enforcement of a contract that
lacks consideration.
A) Illusory promise
B) Gift promise
C) Promissory estoppel
D) Option contract
37) Which of the following is true about a promissory estoppel?
A) It is invoked in cases having option contract infringements.
B) It permits a court to order enforcement of a contract that lacks consideration.
C) It allows for a party to claim goods, which were revoked, for which it has already paid
consideration.
D) It is invoked in cases that involve a promissory note to pay considerations at a later time.
38) A contract is said to have legal value if ________.
A) both the promisor and the promisee receive a legal benefit
B) the promisor suffers a legal detriment
C) the promisee suffers a legal detriment
D) the promisee receives a legal benefit
39) Under which of the following conditions is a contract said to have legal value?
A) the promisor receives a legal benefit
B) the promisor suffers a legal detriment
C) both promisor and promisee receives a legal benefit
D) both promisor and promisee suffers a legal detriment
40) To meet contractual legality, considerations must be ________.
A) beneficial to both parties involved
B) detrimental to both parties involved
C) mentioned in writing in the contract
D) bargained-for exchange of promise for performance
41) Mark, who recently won a lottery, tells Sean that he will split his lottery winnings with him,
if Sean can arrange an interview between Sean’s boss and Mark. Sean talks to his boss and the
meeting is arranged. But when Sean goes to collect half of Mark’s lottery winnings, Mark refuses
to pay. What is the act of consideration in this scenario?
A) Mark telling Sean he will split his lottery winnings with him
B) Sean arranging the interview
C) Mark going for the interview
D) Sean asking for half of the lottery winnings
42) Which of the following can convert a gift promise into an enforceable promise?
A) if the promisee offers a consideration
B) if the promisor offers a consideration
C) if the promisee receives a legal benefit
D) if the promisor suffers a legal detriment
43) Which of the following is true of a gift promise?
A) A gift promise can be enforced in a court of law.
B) A completed gift promise cannot be cancelled for lack of consideration.
C) A gift promise contains considerations.
D) The promisee can take legal action if the promisor does not uphold the promise.
44) Which of the following lacks consideration?
A) bargained-for exchange
B) gift promise
C) illusory promise
D) preexisting duty
45) ________ is a promise to refrain from doing an unlawful act, and therefore is a promise that
will not support a contract.
A) Preexisting duty
B) Illusory promise
C) Illegal consideration
D) Gift promise
46) Which of the following is true about an illegal consideration?
A) Contract requires that either both parties suffer legal detriment.
B) Contract requires that the promisor receives a legal benefit.
C) Contract requires that the promisee suffer a legal detriment.
D) Contracts based on illegal consideration are void.
47) With regards to unenforceable contracts, an extortion call in which a man agrees to pay
money in return for his family’s safety would be considered as a(n) ________.
A) preexisting duty
B) illusory promise
C) illegal consideration
D) past consideration
48) A contract into which both parties enter but in which one or both of the parties can choose
not to perform their contractual obligations is known as ________.
A) illusory promise
B) gift promise
C) preexisting duty
D) illegal consideration
49) Why does an illusory contract lack consideration?
A) because the consideration promised is unlawful and therefore void
B) because the person promises to perform an act or do something he is already under an
obligation to do
C) because one or both parties can choose not to perform their contractual obligations
D) because the compensation paid is for work done in the past
50) Mary buys a lottery ticket and promises to buy her friend Sharon a new pair of shoes if she
checks the lottery results while Mary is away. Sharon agrees to do so, provided she has the time
for it. What kind of contract do Mary and Sharon have?
A) preexisting duty
B) past consideration
C) illegal consideration
D) illusory promise
51) Mary buys a lottery ticket and promises to buy her friend Sharon a new pair of shoes if she
checks the lottery results while Mary is away. Sharon agrees to do so, provided she has the time
for it. If Sharon fails to check the results and Mary wins the lottery, which of the following
would be true for the contract between Mary and Sharon?
A) Mary can claim for breach of contract against Sharon.
B) Sharon can claim for breach of contract against Mary.
C) Neither Mary nor Sharon can claim breach of contract.
D) Mary’s promise is supported by consideration.
52) A promise lacks consideration if a person promises to perform an act or do something he is
already under an obligation to do. This is called a(n) ________.
A) illegal consideration
B) preexisting duty
C) gift promise
D) illusory promise
53) Dean Campenella is a detective with the California state police. During the investigation of a
missing child, Campenella found new clues that led to the capture of a serial killer involved in
another case. Since Campenella was not involved in the serial killer case, and found the clues
while investigating another case, Campenella demanded a special reward from the state police
department for helping catch the killer. But his demand was declined citing lack of consideration.
Campenella’s demand lacks consideration under which of the following?
A) preexisting duty
B) illegal consideration
C) gift promise
D) illusory promise
54) Hartman, who has worked for Aratize Inc. for 25 years, is retiring. Upon hearing the news of
his retirement, the president of Aratize announces a bonus of $250,000 to Hartman for his
exceptional services toward Aratize thus far. But upon retiring, Hartman isn’t paid the bonus.
Hartman decides to sue the president and Aratize to recover the promised bonus. Which of the
following is true of this case?
A) It will be enforceable in court because it is a gift promise.
B) It will not be enforceable in court because of past consideration.
C) It will not be enforceable because the president is not authorized to make such a promise.
D) It will not be enforceable because it is an unlawful consideration.
55) Corey desperately needs to get to the airport and decides to take his neighbor Tanner’s help.
Tanner agrees to help and drives Corey to the airport. Upon arrival at the airport, Corey promises
to pay Tanner $25 towards gas money. Which of the following contracts does Corey’s promise
fall under?
A) illegal consideration
B) illusory promise
C) preexisting duty
D) past consideration
56) Corey desperately needs to get to the airport and decides to take his neighbor Tanner’s help.
Tanner agrees to help and drives Corey to the airport. Upon arrival at the airport, Corey promises
to pay Tanner $25 towards gas money. Which of the following would have made the contract
between Corey and Tanner enforceable?
A) if Tanner had driven Corey to the airport in the past
B) if Corey, upon arrival, had promised to pay gas money to Tanner whenever he could
C) if the promise to pay gas money had been made before the trip was made
D) if Tanner was contracted to drive Corey to the airport as a duty
57) A contract in which a seller agrees to sell all of its production to a single buyer is known as
a(n) ________.
A) requirements contract
B) output contract
C) best-efforts contract
D) option contract
58) Which of the following is true about output contracts?
A) It cannot contain the best-efforts clause.
B) It provides the seller with reduced selling costs.
C) It assures the purchaser that the seller will use their best efforts to achieve the contract’s
objective.
D) It assures the seller of a purchaser for all its outputs.
59) Which of the following is true for a buyer with an output contract?
A) The buyer cannot sue the seller in case the seller plans to share its output with another buyer.
B) The buyer can choose to buy when and what he wants from the seller.
C) The buyer is obliged to buy all the goods sold from the seller.
D) The buyer cannot enforce the best-efforts clause in the output contract.
60) A(n) ________ is a contract in which a buyer agrees to purchase all of its requirements for an
item from one seller.
A) option contract
B) requirements contract
C) best-efforts contract
D) output contract
61) Poweroxi Inc. produces rocket propellant fuel that is used in space shuttles. NASA is an
agency that requires rocket propellant fuel to send its rockets to space. NASA enters into a
contract with Poweroxi Inc. to purchase all of the propellant fuel it will need this year from
Poweroxi. What would this contract be an example of?
A) requirements contract
B) output contract
C) option contract
D) yield contract
62) Poweroxi Inc. produces rocket propellant fuel that is used in space shuttles. NASA is an
agency that requires rocket propellant fuel to send its rockets to space. NASA enters into a
contract with Poweroxi Inc. to purchase all of the propellant fuel it will need this year from
Poweroxi. Which of the following would constitute a breach in contract?
A) if Poweroxi sold to another purchaser
B) if Poweroxi sold to another purchaser at a lower price
C) if NASA purchased fuel from another seller
D) if NASA stopped purchasing from Poweroxi due to lack of need
63) ________ is an agreement whereby the parties agree to accept something different in
satisfaction of the original contract.
A) Counteroffer
B) Accord
C) Promissory estoppel
D) Mirror image acceptance
64) Toughones, a car part manufacturer, entered into a contract to license computer software
from a Vizera Inc. for $250,000. This software is to be used to keep track of inventory, accounts
receivable, and other financial data. After the software was installed, the computer system
worked but it had a few glitches. Toughones refused to pay the full amount in the contract. To
settle the dispute, the parties agree that $180,000 is to be paid as full and final payment for the
software. Toughones paid the $180,000 as agreed. What kind of agreement did Toughones and
Vizera reach in the end?
A) accord and satisfaction
B) preexisting duty
C) counteroffer
D) mirror image acceptance
65) James’s attempt to make a new contract is void because it lacks consideration under the
________ concept.
A) illegal consideration
B) gift promise
C) past consideration
D) preexisting duty
66) To avoid legal nuisance, Frasier decides to compromise with James. He asks James to fix a
tap in the barn for $250, and modify the current contract to include the tap in the barn. James
agrees to this, and does as asked, while Frasier remade the contract. Which of the following
would this kind of settlement be referred to as?
A) duress
B) past consideration
C) accord
D) mirror image rule acceptance
67) Which of the following is true for an accord?
A) The accord terminates the original contract.
B) The nonbreaching party cannot enforce the original contract if the accord is not satisfied.
C) It is enforceable even though no new consideration is given.
D) An accord is only reached when both parties of the contract fail to meet their contractual
obligations.
68) If Catapipes Plumbing plans to withdraw its bid, what legal doctrine can help AtlasNow from
being meted out injustice due to lack of consideration?
A) promissory estoppel
B) freedom of contract
C) acquiescence
D) exclusionary rule
69) Why does Catapipes’s consideration have legal value?
A) It is a gift promise contract.
B) It is a bargained-for-exchange contract.
C) It is an illusory promise contract.
D) The consideration is an example of past consideration.
70) Which of the following is true for applying promissory estoppels to a contract?
A) Both parties must suffer legal detriment.
B) Injustice would be caused if the promise were not enforced.
C) They can be applied for illusory promise contracts.
D) They can be applied for gift promise contracts.
71) What is contract consideration?
72) Explain the preexisting duty principle in private sector contracts.
73) What is a best-efforts contract?
74) What is accord and satisfaction in contractual terms?
75) Give an account of promissory estoppels.