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Name:
Class:
Date:
Ch 11 Consideration
1. Courts enforce all promises in the interests of simple morality.
a.
True
b.
False
2. Consideration can be a promise or an act.
a.
True
b.
False
3. Agreeing not to open a competing business could be consideration.
a.
True
b.
False
4. The UCC requires consideration for agreements modifying contracts for the sale of goods.
a.
True
b.
False
5. Billy owes a liquidated debt of $3000 to Rayna, his personal weight trainer. Billy sends Rayna a check for $300 on
which he has marked, "Payment in Full." If Rayna cashes the check she will not be able to successfully sue Billy for the
remainder of the debt.
a.
True
b.
False
6. Boris sky dives out of a plane and gets hung up in a tree, hopelessly suspended and swinging precariously in his
parachute from the branches of the tree. Natasha sees that he is in trouble and comes to his rescue. Once Boris is safely on
the ground, he gratefully promises to give Natasha half of his life savings. When he changes his mind, Natasha will
probably be unsuccessful in enforcing his promise.
a.
True
b.
False
7. Raul agrees to paint Mike's house for $1,000. Before finishing, Raul states it is too hot to finish, and Mike offers to pay
$1,200 if Raul finishes. Mike's statement that he will pay $1,200 is unenforceable.
a.
True
b.
False
8. Contracts in which one party agrees to buy all his requirements of certain goods from the other party are generally
unenforceable because there is no definite amount.
a.
True
b.
False
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Ch 11 Consideration
9. An illusory promise is valid consideration.
a.
True
b.
False
10. Contracts generally do not require bargaining that leads to an exchange between the parties.
a.
True
b.
False
11. Courts normally require consideration to be approximately equal on both sides of the bargain.
a.
True
b.
False
12. Section 2-306 of the UCC expressly disallows output contracts in the sale of goods.
a.
True
b.
False
13. Denton agreed to build a cedar deck for the Thrashers for $7,000. After he began the work, the Thrashers asked him to
add cedar flower boxes at one side. Denton replied he would, but it would cost an additional $600. The Thrashers would
not be obligated to pay the additional sum because the original agreement already obligated Denton to complete the deck
for $7,000.
a.
True
b.
False
14. Pastor Tom was employed by the First Church for 40 years. On Pastor Tom's retirement there was no adequate
pension plan. Two months after the retirement, a wealthy parishioner, in consideration for Pastor Tom's 40 years of
faithful service and for being such a "sweet" man, promised to pay him $500 per month for the rest of his life. This
promise probably is not enforceable.
a.
True
b.
False
15. Hilda owes Lex $3,000, which is an undisputed amount. If she offers him her car in full settlement of the debt and he
accepts, the agreement is binding and he can no longer claim she owes him anything on the original debt.
a.
True
b.
False
16. An agreement to pay a lesser amount to settle an unliquidated debt is:
a.
enforceable, as there is consideration.
b.
unenforceable, as there is no consideration.
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Ch 11 Consideration
c.
enforceable in only some states.
d.
unenforceable as a violation of public policy.
17. In the historic case of Hamer v. Sidway, the nephew:
a.
lost, as there was no consideration.
b.
lost, as the uncle was dead.
c.
won, as there was consideration.
d.
won, as there was a completed gift.
18. What phrase explains how a requirements contract can be valid?
a.
“will buy 100 percent of output”
b.
“willing to accept the entire quantity”
c.
“no consideration needed”
d.
“in good faith”
19. Peter Dementas helped Jack Tallas with numerous personal and business chores towards the end of his life.
Two months before his death, Tallas dictated a memorandum to Dementas, in Greek, stating: PETER K.
DEMENTAS is my best friend I have in this country, ... he treats me like a father and I think of him as my own
son. ...For all the services Peter has given me all these years, I owe to him the amount of $50,000 (Fifty
Thousand Dollars). I will shortly change my will to include him as my heir. Tallas signed the memorandum, but
he did not in fact alter his will to include Dementas.
This was a real case. The Utah appeals court would rule:
a.
there was no consideration to support Tallas’s promise.
b.
there is a “moral obligation” exception to the requirement of consideration, and therefore Tallas’s promise was
supported by consideration.
c.
because Utah does not recognize the “moral obligation” exception to the requirement of consideration,
Dementas prevails.
d.
the trial court’s finding that the services rendered by Dementas to Tallas were performed gratuitously was
erroneous.
20. "I'll sell you my car if I decide to sell it" is an example of:
a.
a conditional offer.
b.
an unliquidated offer.
c.
a unilateral contract.
d.
an illusory promise.
21. In January, Alex promised to pay Y-K Inc. $5,000 if it would refrain from filing suit against him on a breach of
contract action. Y-K agreed and accepted a $5,000 check from Alex. Which of the following statements is correct?
a.
Y-K's promise to refrain from suing Alex was not supported by legal consideration.
b.
Y-K's promise to refrain from suing Alex was supported by legal consideration and is enforceable.
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Ch 11 Consideration
c.
This is an accord and satisfaction, and Y-K cannot sue.
d.
The courts would apply promissory estoppel in this situation.
22. Zero, Inc. agreed to build Millie a storage building for $8,000. After beginning the project, Zero realized that it could
not complete the job and make a profit. Zero demanded $9,500 to complete the building. Millie agreed to pay the $9,500.
When the project was complete, Millie tendered $8,000 to Zero for the job. If Zero sues Millie for the remaining $1,500:
a.
Zero will win because there was consideration for the additional $1,500.
b.
Zero will win because Millie had a pre-existing duty to pay any additional amounts.
c.
Zero will lose because there was no legal consideration to support the additional $1,500.
d.
Zero will lose because the UCC does not require consideration to modify an existing contract.
23. Walter worked nights as a clerk in a fast-food store. On his last work shift, Walter's boss told him, "I'm really grateful
for the year that you have worked here. I am going to give you a bonus of $1,000 in your last paycheck." When Walter got
his last paycheck, there was no bonus. If Walter sues, the likely result will be:
a.
Walter will win, as the promise is enforceable.
b.
Walter will lose, as he gave no consideration.
c.
Walter will lose unless the promise was in writing.
d.
Walter will win, as no consideration is required to modify an employment contract.
24. An unliquidated debt can be described as:
a.
a debt in which both its existence and amount is in dispute.
b.
a debt in which the existence or amount is in dispute.
c.
a debt disputed by the creditor but not the debtor.
d.
a debt undisputed by either party.
25. A promise by Derkin Restaurants to buy all of the produce it needs this next year at an established price from Elfredo's
Produce would be an:
a.
enforceable requirements contract.
b.
enforceable output contract.
c.
unenforceable, illusory contract.
d.
unenforceable promise based on past consideration.
26. Bernie owes an undisputed amount to Wilde’s Heating & Air Conditioning. Which of the following is true?
a.
If Wilde’s agrees to accept less than the full amount as full payment, the agreement is not binding.
b.
The undisputed amount is also known as an unliquidated amount.
c.
If the parties agree to settle for less than the full amount, their agreement is governed by the ruling in Henches
v. Taylor.
d.
If Wilde’s agrees to accept less than the full amount, the agreement is only binding if it is in writing and
signed by Bernie.
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Ch 11 Consideration
27. Police Officer Paul apprehends a wanted criminal and then demands the $10,000 reward offered by Crime Stoppers.
Which of the following statements is true?
a.
Police Officer Paul is not entitled to the reward because past consideration is never valid consideration.
b.
Police Officer Paul is entitled to the reward because he puts his life on the line every day.
c.
Police Officer Paul is not entitled to the reward because he was under a pre-existing duty to make the arrest.
d.
Police Officer Paul is not entitled to the reward but may have an argument under promissory estoppel.
28. If Rudy offers Oscar $200 for his laptop valued at $600 and Oscar agrees, a court will probably:
a.
set aside the agreement as being unfair.
b.
set aside the agreement because the consideration is inadequate.
c.
not set aside the agreement based on the adequacy of the consideration.
d.
not set aside the agreement because of the UCC.
29. Jamie is building a house on her lot. She invites Earnie of Earnie's Excavation to bid on the excavation job. Earnie
observes that the lot next to Jamie's is also under excavation and the soil in that lot is normal and not excessively rocky.
Based on the assumption that the soil in Jamie's lot will be similar, he and Jamie agree that the excavation will cost
$3,000. When Earnie starts digging, he learns there is solid rock under Jamie's lot. Earnie says it will cost an extra $2,500
for the excavation work. Jamie agrees just to get the job done but later refuses to pay a dime more than $3,000. If Earnie
sues, the most likely result would be:
a.
Jamie wins, as Earnie was under a preexisting duty to dig the basement.
b.
Earnie wins as this modification is governed by the UCC and consideration is not required to enforce a
modification of the agreement.
c.
Jamie wins as Earnie was not acting in good faith and just wanted to put Jamie in a situation where she didn't
have a choice but to agree to more money.
d.
Earnie wins, as the modification was due to unforeseen difficulties.
30. If Becky promises not to drink alcohol until she becomes a legal adult in exchange for Ben's promise of $1,000, the
agreement is:
a.
enforceable because Becky is giving up the right to do something she would otherwise be entitled to do.
b.
enforceable because the agreement accomplishes Ben's goal of keeping Becky from drinking.
c.
not enforceable because Becky does not have a legal right to drink alcohol.
d.
not enforceable because Becky is a minor and could disaffirm the contract.
31. Upon graduating from college, Kathy announced her plans to enter law school the following fall and to marry Rick in
December. Kathy's father was afraid that marriage during her first year in law school might cause her to fall behind in her
studies or cause her to drop out of school. He called Kathy and promised her $10,000 if she postponed her wedding until
after completion of her first year of law school. Kathy agreed and postponed the wedding for a year. Kathy successfully
completed her first year of law school, but soon thereafter, Kathy's father died. The administrator of her father's estate
claimed she was not entitled to the $10,000 because there was no consideration for her father's promise. If Kathy sues the
estate, she will probably be:
a.
unsuccessful because her father's death terminated the contract.
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Ch 11 Consideration
b.
successful, as there was consideration.
c.
unsuccessful because her father received no benefit.
d.
unsuccessful because it was merely fatherly advice not to get married during the first year of law school.
32. Under the Uniform Commercial Code, an agreement modifying a contract:
a.
always requires consideration.
b.
requires consideration only when the sale of goods is involved.
c.
may not require consideration.
d.
requires consideration only when one of the parties is incompetent.
33. Mary owes $3,800 on her credit card. She sends the credit card company a check for $800 with the notation “payment
in full” on the check. If the credit card issuer cashes the check:
a.
Mary’s balance will automatically be paid in full if the $3,800 amount was a liquidated debt.
b.
Mary’s balance will automatically be paid in full regardless of whether the amount of $3,800 was liquidated or
unliquidated.
c.
the check may be subject to a UCC exception to the general rules for accord and satisfaction cases involving
checks.
d.
Mary’s balance will automatically be paid in full if the $3,800 amount was an unliquidated debt.
34. If Crosby and Dash are in disagreement as to the exact amount of money that Crosby owes Dash, then they may
choose to form a new agreement at a set amount. If they both perform the new agreement, their conduct would be an
example of:
a.
a rescission.
b.
a contract modification.
c.
a preexisting duty.
d.
an accord and satisfaction.
35. An agreement in which a buyer agrees to buy all the goods produced by a manufacturer is known as:
a.
a requirements contract.
b.
an output contract.
c.
an exclusive dealing contract.
d.
an option contract.
36. The Plaza Hotel contracts with EZ Lawn to have EZ mow the grass on the Plaza grounds for the next 10 years.
However, there is a clause in the contract that states if the hotel chooses, the contract may be terminated provided Plaza
pays EZ $2,000 on termination. Which of the following is correct?
a.
The contract is unenforceable because the option to cancel clause makes the contract an illusory promise.
b.
The contract is unenforceable because the $2,000 is past consideration.
c.
The contract is unenforceable because only one party has the option to cancel.
d.
The contract is enforceable because the option to cancel clause is supported by consideration.
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Ch 11 Consideration
37. Mid-American Oil had a contract with NSB Company to supply 1,000 gallons of oil by September 1. The contract
contained a provision which required all modifications to be written and signed by the company presidents. In early
August, an executive of Mid-American talked with the purchasing agent of NSB who orally agreed to two shipments of
oil; one in September and the second one in December. By September 30, when only 500 gallons had been delivered,
NSB sued. The likely outcome of this lawsuit is:
a.
NSB wins because the modification was not supported by new consideration.
b.
NSB wins because the modification has to be in writing.
c.
Mid-American Oil wins because the UCC governs this case and no new consideration is required.
d.
Mid-American Oil wins because new consideration was present.
38. Bailey Co. and Spryt Bros. enter into a contract for the manufacture and sale of 400 lawn chairs. If both parties agree
that a modification is necessary:
a.
the surest way to modify the contract is to liquidate it.
b.
they may not do so without court supervision.
c.
an agreement to rescind the contract will terminate the contractual rights of Bailey Co. and Spryt Bros. if
neither of them had completed their obligations.
d.
courts will generally not enforce a cancellation and modification of a contract unless one party received
inadequate consideration under the original contract.
39. Marco agrees to sell Clowns R Us some balloons. The contract states that Clowns may buy as many balloons as it
wishes. This agreement is:
a.
a requirements contract.
b.
an output contract.
c.
an illusory contract.
d.
an enforceable contract.
40. The Kelsoe v. International Wood Products, Inc. case was an example of:
a.
promissory estoppel.
b.
partial performance.
c.
illusory promises.
d.
lack of consideration.
41. Discuss the concept of consideration.
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Ch 11 Consideration
42. Frank's Furniture Company promised in a written agreement to purchase as much walnut wood "as it desires" from
Forestry Products, Inc. If Frank's purchased walnut wood from another source and Forestry Products sued, what is the
likely result?
43. What two exceptions did the UCC create for accord and satisfaction check cases?
44. Shirley Rhone suffered injuries when a truck struck the vehicle in which she was riding. State Auto Mutual Insurance
Co. was the insurer involved and provided personal injury coverage. Shirley went to see Dr. Allen, a chiropractor who
provided treatments 32 times over a 3-month period. Dr. Allen billed State Auto in three separate billings. After paying
the first two billings in full, State Auto expressed concern about whether Dr. Allen's charges were excessive. State Auto
hired Chiropractic Consultants, Inc. to evaluate Dr. Allen's billings. The consultants advised that Dr. Allen's billings were
indeed excessive. State Auto then telephoned Dr. Allen and offered a partial payment to settle the account. After this
conversation, State Auto issued and sent a check for $864 payable to Dr. Allen. On the face of the check, State Auto noted
the total amount allocated to each claim and typed "settlement in full." On the reverse side it said, "The endorsement of
this draft by the payee constitutes a clear release and full settlement of the claim or account shown on the other side."
Upon receipt of the check, Dr. Allen cashed the check. He then sought payment of an additional $895. State Auto claims
there was an accord and satisfaction with respect to the amount due for services rendered by Dr. Allen. What are the
requirements of an accord and satisfaction? Were those requirements met in this case?
45. Douros Realty & Construction Co. had a lead on a "prime" piece of real estate. Although Douros did not have a listing
agreement with the seller of the property, he contacted Kelley Properties. Douros knew that Kelley was looking for a
location for a commercial development. Douros contacted Kelley stating only that he had the "finest, most outstanding,
viable location in the county and it just came on the market." Douros said he would reveal the location of the property and
the owner's name if Kelley would sign an agreement which would require Kelley to pay a 10% commission if a sale of the
property resulted. The agreement was signed. Four months later, Kelley bought the property after negotiating the deal
himself. Kelley claims he does not owe a commission to Douros because there was insufficient consideration to support
the payment of commission so large. Kelley claims that all Douros did in the entire transaction was to reveal the location
of the property and the owner's name. Was there sufficient consideration to make this promise enforceable?
46. Shelby hired Evan to drill a well on her property for $3,000. They both thought the soil and subsoil were normal for
the area, but after he started drilling, Evan found a layer of rock that required him to purchase a special drill and required
an extra ten hours of work. Evan demanded an extra $1,000 to complete the job. Discuss whether Shelby is liable for the
additional $1,000.
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Ch 11 Consideration
