Chapter 12. Consideration
1. Consideration can be present regardless of whether the parties intend an exchange.
a. True
b. False
2. In some states a promise under seal is binding without consideration.
a. True
b. False
3. Past actions unbargained for by the parties in an agreement can become valid consideration for a contract.
a. True
b. False
4. Dana gives care to Marnie’s dog when Dana finds Marnie‘s dog ill on the side of the road. After Marnie locates her
dog, Marnie promises to reimburse Dana for the cost of treating the dog. Marnie‘s promise is binding, because there
is a bargained-for-exchange.
a. True
b. False
5. In most, if not all, cases where there is a legal detriment to the promisee, there is also a legal benefit to the promisor.
a. True
b. False
6. The central idea behind consideration is that the parties have intentionally entered into a bargained-for exchange with
one another and have given each other something in exchange for a promise or performance.
a. True
b. False
7. The Code has changed the common law rule regarding modification of a preexisting contract by providing that a
contract for the sale of goods can be effectively modified by the parties without new consideration, provided they
intend to do so and act in good faith.
a. True
b. False
8. Sandy‘s private secretary promises to keep the contents of a letter she typed secret if Sandy will give her the next
day off with pay. If the secretary takes the day off, Sandy has to pay her for the day.
a. True
b. False
9. The adequacy of consideration, while not important to the existence of consideration, may be relevant to the
availability of certain defenses or remedies.
a. True
b. False
10. The parties to a contract may modify the agreement with no additional consideration by simply substituting a new
contract.
a. True
b. False
11. Contracts generally require adequacy of consideration where the consideration given by both parties is of fair value
and equitable.
a. True
b. False
12. In a unilateral contract, a promise is exchanged for an act or forbearance to act.
a. True
b. False
13. “Consideration” does not require an actual benefit to both sides of an agreement.
a. True
b. False
14. If Sam agrees to sell to Thomas all of the tomatoes he wants at $25 a bushel, there is no contract because of a lack
of consideration.
a. True
b. False
15. A few states provide by statute that the parties need to provide no new consideration when modifying any contract.
a. True
b. False
16. The element of exchange is absent where a promise is given for an act that has already been done.
a. True
b. False
17. According to the UCC, only a merchant can make a firm offer to a buyer.
a. True
b. False
18. An exclusive dealing contract is one type of contract which is illusory because it lacks consideration.
a. True
b. False
19. An agreement to sell the entire production of a particular plant to a particular purchaser is a requirements contract.
a. True
b. False
20. The Abbot Corporation contracts with the Baker Corporation to sell to Baker its entire production. After signing the
agreement, Abbot can increase its production from one shift to two shifts and Baker will have to buy all of the
doubled production.
a. True
b. False
21. The performance of a pre-existing contractual duty which is neither doubtful nor the subject of an honest dispute is
legally sufficient consideration to support a second contract.
a. True
b. False
22. Under the common law, in order to be enforceable, a modification of an existing contract must be supported by
mutual consideration.
a. True
b. False
23. The Restatement provides that a promise following the rendering of emergency services is binding even if not
supported by consideration if necessary to prevent injustice.
a. True
b. False
24. In settling a liquidated debt, payment of a smaller amount before the due date would constitute consideration, but
paying a lesser amount on the due date at an agreed-upon different place of payment would not be legally sufficient
consideration.
a. True
b. False
25. Legal sufficiency of consideration and adequacy of consideration are virtually synonymous terms.
a. True
b. False
26. In a bilateral contract, if one party is not bound, neither party is bound.
a. True
b. False
27. Jerry received a bill for $300 from Johnson for a tune-up Johnson had performed on Jerry’s car. Jerry called Johnson
and told him, “The car runs no better now than before the tune-up. I am sending you $100 and no more.” Johnson
received the $100 check which was marked “paid in full” and cashed it. Jerry is still liable to Johnson for $200.
a. True
b. False
28. Legal detriment means the obtaining by the promisor of that which he had no prior legal right to obtain.
a. True
b. False
29. A conditional promise is a promise the performance of which depends upon the happening or nonhappening of an
event not certain to occur.
a. True
b. False
30. Charitable subscriptions are one of the most frequently occurring applications of the doctrine of promissory estoppel.
a. True
b. False
31. Consideration exchanged for a promise does not require both legal detriment to the promisee and legal benefit to the
promisor.
a. True
b. False
32. If a promise is illusory, mutuality of obligation is lacking.
a. True
b. False
33. An illusory promise has the form of a promise but imposes no real obligation.
a. True
b. False
34. Fran negligently drove her truck through Nick’s fence, causing damage. If she promises to pay Nick $1,500 if he
does not bring a lawsuit against her, Nick accepts and forms a unilateral contract by not filing suit. His forbearance
is consideration.
a. True
b. False
35. Otherwise illusory promises may be transformed by some courts into actual promises by implying an obligation of
good faith and fair dealing.
a. True
b. False
36. A promise to pay $1,000 a year to a local police officer to not have your store vandalized is legally unenforceable
under the rule that makes performance of a pre-existing legal obligation legally insufficient consideration.
a. True
b. False
37. D owes C a past-due undisputed debt of $500. D sees C in a bar and pays him $400. C then says to D, “Forget
about the other $100 you owe me. I’m glad to get the $400.” C’s promise to discharge the remainder of the debt is
binding.
a. True
b. False
38. The term “past consideration” is not really consideration at all because the law will not find a contract where there is
no bargained-for-exchange.
a. True
b. False
39. Contracts binding without consideration include promises to pay debts barred by a statute of limitations and debts
discharged in bankruptcy.
a. True
b. False
40. In most states, a contract under seal is binding without consideration.
a. True
b. False
41. A liquidated debt is an obligation the existence or amount of which is in dispute.
a. True
b. False
42. Consideration has only one basic element, which is a bargained–for exchange.
a. True
b. False
43. A unilateral contract may consist of a promise exchanged for an act or forbearance.
a. True
b. False
44. Pablo promises to sell to Candice an automobile for $12,000, for which Candice promises $12,000. A bilateral
contract exists.
a. True
b. False
45. A modification of a preexisting contract occurs when the parties agree to change one or more of its terms and, under
the common law, must be supported by mutual consideration to be enforceable.
a. True
b. False
46. Aunt Ellie promises her 21–year-old nephew, Robbie, that she will pay him $100 if he quits smoking for a month. If
Robbie does, is there a binding contract?
a. No, because Robbie gave no benefit to Aunt Ellie
b. No, because Robbie did not suffer any detriment
c. Yes, because stopping smoking will benefit Robbie’s health
d. Yes, because Robbie gave up a legal right
47. Janet promises Eli $4,000 for one of his original paintings on the condition that she receive $1 million from her
mother‘s will. Janet has made:
a. an illusory promise.
b. a legally sufficient promise unless Janet knew at the time she made the promise that she could not inherit the
$1 million.
c. a conditional promise which is not sufficient to form consideration.
d. a legally inadequate promise, and the courts will therefore not enforce it.
48. Stan purchased 400 pairs of gloves from Isaac at a contract price of $800. Fifty of the gloves were defective, and a
dispute arose as to the amount due and owing under the contract. Stan refuses to pay the $800, and Isaac is
threatening to sue. Which of the following is correct with regard to this transaction?
a. If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount, the substitute
agreement is enforceable.
b. If Isaac agrees to accept $600 to settle the dispute and Stan pays that amount, Isaac can still sue for the
balance of $200 and will win the lawsuit.
c. Stan is under a pre-existing legal obligation to pay the $800.
d. Stan must return the defective gloves to Isaac, who must replace them. Then, Stan must pay the $800.
49. Which of the following would most likely be enforceable?
a. An agreement supported by past consideration
b. A substitute agreement to settle an undisputed debt
c. A debt agreed to seven years ago in a state where the statute of limitations is six years
d. A promise following the rendering of emergency services that is not supported by new consideration