Chapter 12
Consideration
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. In contract law, “consideration” refers to the time that a party takes to evaluate a
deal.
B2. If a promise is made, it will be enforced.
B3. To be legally sufficient, consideration must include something of economic value.
B4. Failing to use the word consideration in an agreement means that no consideration
has been given.
142 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B5. A bargained-for exchange is one of the elements of consideration.
B6. A promise to do something that one has a prior legal duty to do is not consideration.
B7. Inadequate consideration may reflect a lack of bargained-for exchange.
B8. Risks ordinarily assumed in business constitute consideration for the modification of a
contract.
B9. Extraordinary difficulties that were unforeseen at the time a contract was formed do
not justify a demand for additional compensation.
B10. Rescission is the substitution of one party to a contract for a third party, who agrees
to assume the contractual duties.
B11. An obligation is enforceable only if it is supported by past consideration.
B12. Any promise made with respect to a past event is enforceable because the event is
certain—it has already occurred.
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B13. If a debt is in dispute, an accord and satisfaction cannot take place.
B14. A covenant not to sue always bars further recovery.
B15. An accord and satisfaction is used to discharge an unliquidated debt.
B16. In many states, a release requires a signed writing.
B17. A release bars further recovery beyond the terms stated in the release.
B18. Promissory estoppel requires reliance of a substantial and definite character.
B19. The doctrine of promissory estoppel does not apply unless there is a clear and definite
promise.
B20. A promise to pay a debt for which a statute of limitations bars recovery is an
unenforceable promise.
144 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
MULTIPLE CHOICE QUESTIONS
B1. Rollo promises to perform, for a price, shoe repair services in affiliation with Togs ‘n
Things, a clothing store. To support a contract, the consideration exchanged by the
parties must be
a. adequately considerate.
b. equally valuable.
c. legally sufficient.
d. wisely priced.
B2. Triple-D Cinemas promises to pay Shakir $1,000 to repair and clean its marquee. The
act of doing this work is
a. not consideration because its performance is a preexisting duty.
b. not consideration because its exchange is not a bargain.
c. consideration.
d. not consideration because its value is legally insufficient.
B3. Shila promises to pay Blaine $500 because “he does not have as much money as other
people.” Shila’s promise is
a. enforceable because society wants people to keep their promises.
b. enforceable because the redistribution of wealth is a valid social goal.
c. not enforceable because Shila could have given more.
d. not enforceable because Blaine has not given consideration in return.
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B4. Braxton questions whether there is consideration for his contract with Tawny to
exchange his accounting services for her payment of a certain amount. To constitute
consideration, there must be
a. a payment of money.
b. a performance of services.
c. a bargained-for exchange.
d. detrimental reliance.
B5. Sonic Board Corporation files a suit against Custom Fabricators Company, claiming
that the consideration for their contract is inadequate. The court will most likely not
examine the adequacy of the consideration if
a. there is a large disparity in the amount of consideration exchanged.
b. Sonic asserts that there is inadequate consideration.
c. something of value passed between the parties.
d. the consideration is worth less than $100.
B6. Chip’s Chips Company agrees to supply Delicioso Café with all the corn chips that it re-
quires for a year. A sudden demand for ethanol results in a shortage of corn, and the
price rises sharply. Chip’s asks Delicioso to pay a higher price for the chips. This
request is
a. invalid as an attempt at extortion or the so-called holdup game.
b. invalid under the preexisting duty rule.
c. valid as a risk ordinarily assumed in business.
d. valid due to the unforeseen difficulty of the sudden price increase.
146 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B7. Jeff offers Kelly $500 for her three-year-old laptop computer. Kelly accepts. If a
dispute arises, a court would likely
a. enforce the deal after questioning the adequacy of consideration.
b. not question the adequacy of the consideration.
c. rewrite the deal after questioning the adequacy of consideration.
d. set aside the deal after questioning the adequacy of consideration.
B8. Todos Ltd. agrees to supply United Steel, Inc., with minerals from Venezuela. When
the government is unexpectedly overthrown in a revolution, Todos can obtain the
goods only at a much higher price. United agrees to pay but later files a suit to recover
the difference. The court will most likely rule that
a. a change in government is a risk ordinarily assumed in business.
b. an unforeseen difficulty supported the contract modification here.
c. Todos engaged in extortion or the so-called holdup game.
d. Todos had a preexisting duty to supply the goods at the initial price.
Fact Pattern 12-B1 (Questions B9–B10 apply)
Sal contracts with Tasty Pizza Company to deliver its products. Both parties change their
minds, however, and inform each other that they would like to cancel the contract.
B9. Refer to Fact Pattern 12-B1. The next day, Sal changes her mind and again offers to
deliver Tasty’s products. Tasty is willing to deal, but for a new price. Sal and Tasty
a. may agree to a new contract, but it cannot include a new price.
b. may agree to a new contract that includes the new price.
c. must perform their original contract.
d. must perform the part of their original contract that is executory.
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B10. Refer to Fact Pattern 12-B1. Sal and Tasty
a. may rescind their entire contract.
b. may rescind their contract to the extent that it is executory.
c. must perform their entire contract.
d. must perform the part of their contract that is executory.
B11. Suki works for Renaldo. At the end of her first year, Renaldo promises to pay her a
bonus for her “four quarters of success.” Renaldo’s promise is
a. unenforceable because Suki’s performance was a preexisting duty.
b. unenforceable because Suki’s performance is past.
c. enforceable.
d. unenforceable because Suki’s performance is not legally sufficient.
B12. Metal Fabrication Corporation promises to give stock options to Sigourney for
processes she has already designed for the firm. This promise is
a. enforceable because it is a new contract.
b. enforceable because it is an illusory promise.
c. enforceable because it is supported by past consideration.
d. unenforceable.
B13. Speedy Assembly Company promises its employees a 10-percent raise at the end of
the year if productivity has increased and management feels it is warranted. Speedy
must
a. do nothing.
b. give the employees a 10-percent raise only at the end of the year.
c. give the employees a 10-percent raise only if productivity increases.
d. give the employees a 10-percent raise under any circumstances.
148 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B14. Joel contracts to hire Huong for one year to tend the orchids in his commercial
greenhouse but reserves the right to cancel the employment on one month’s notice at
any time after Huong begins work. This promise is
a. enforceable.
b. illusory.
c. unliquidated.
d. unforeseen.
B15. Mei writes a check to Nat in an amount that represents half of her debt to him. On the
back of the check, Mei includes the words “payment in full.” Nat cashes the check.
This discharges the entire debt
a. if the debt is liquidated.
b. if the debt is past due.
c. if the debt is unliquidated.
d. under no circumstances.
B16. In a skateboarding accident with Ryan, Starla is injured. Ryan’s insurance company’s
offers her $25,000 to release him from liability, and she accepts. Later, she learns that
her injuries are more serious than she realized. The release
a. bars Starla’s further recovery from Ryan.
b. is unenforceable because Starla’s injuries are unforeseeably difficult.
c. is unenforceable because Ryan has a preexisting duty to pay.
d. is unenforceable because the release is an illusory promise.
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B17. George and Hildy disagree as to the exact amount one owes the other. They form a
new agreement that, on fulfillment, will discharge the prior obligation. This is
a. a covenant not to sue.
b. an accord and satisfaction.
c. a release.
d. promissory estoppel.
B18. Quinn promises to sell his recreational vehicle (RV) to Sid, who builds a structure
behind his house in which to keep it. Quinn’s later attempt to renege on the promise
is
a. effective if Quinn did not ask Sid to build anything.
b. effective if Quinn wants to sell the RV to someone else.
c. not effective if Sid cannot obtain a similar RV for a similar price.
d. not effective if Sid detrimentally relied on Quinn’s promise.
B19. Gino files a suit against Free-Flo Plumbing Corporation under the doctrine of prom-
issory estoppel. Gino must show that
a. he justifiably refused to fulfill a promise to Free-Flo.
b. he justifiably relied on Free-Flo’s promise to his detriment.
c. Free-Flo justifiably refused to fulfill a promise to him.
d. Free-Flo justifiably relied on his promise to its detriment.
150 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B20. Credit & Debt Corporation loans Evelyn $25,000 to start a new business. Evelyn does
not pay, but Credit & Debt fails to sue within the time prescribed by the applicable
statute of limitations. Evelyn promises to pay a portion of the debt even though
recovery is barred. Credit & Debt can sue to recover
a. the entire debt.
b. the amount promised.
c. none of the debt.
d. the amount of the consideration for Evelyn’s later promise.
ESSAY QUESTIONS
B1. In May, Rolf agrees to work for Soda Sales Company at $800 per week for a year
beginning June 1. The following January, Tropic Beverages, Inc., offers Rolf the same
work at $900 per week. Rolf tells Soda about the offer. Soda offers to enter into a new
contract with Rolf at $875 per week. If Rolf agrees, is the new Soda contract enforce–
able? Why or why not?
B2. Cato promises Isabella $40,000 if she graduates from State College. Isabella enrolls in
State, attends full-time for four years, and graduates. When she asks Cato for $40,000,
he says, “I don’t remember promising you $40,000. But if there was a promise, it’s not
enforceable, because we didn’t bargain for it. And even if there was a promise that
would otherwise be enforceable, I revoke it now.” Can Isabella enforce Cato’s “prom–
ise”? Why or why not?
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