Business Law, 8e (Cheeseman)
Chapter 14 Statute of Frauds and Equitable Exceptions
1) Statute of Frauds is a state statute that requires certain types of contracts to be in writing.
2) In most states, contracts for the sale of goods for $900 do not require to be in writing.
3) In most states, contracts for the lease of goods with payments of $2000 require to be in
writing.
4) If an oral contract that should have been in writing under the Statute of Frauds is already
executed, neither party can seek to rescind the contract on the grounds of noncompliance with
the Statute of Frauds.
5) Trees, crops, minerals, and timber are barred from being included in contracts involving
interests in real property.
6) Built-in cabinets in a house would be considered as permanent parts of the real property.
7) Under the Statute of Frauds, any contract that transfers an ownership interest in real property
must be in writing to be enforceable.
8) A lease is an interest in real property given to a lender as security for the repayment of a loan.
9) A life estate will be transferred to another party in the event of the holder’s death.
10) The transfer of the right to use real property for a specified period of time is known as a
lease.
11) An easement is a form of real property security given by a borrower to a lender.
12) According to the Statute of Frauds, an executory contract that cannot be performed by its
own terms within one year of its formation must be in writing.
13) An easement contract occurs when one person agrees to answer for the debts or duties of
another person.
14) In a guaranty situation, there is only one contract among three parties.
15) The primary contract in a guarantee situation is between the debtor and the creditor.
16) In a guarantee situation, the guarantor’s liability is secondary.
17) A guaranty contract between people with no bad credit history can be oral.
18) The main purpose exception to the Statute of Frauds allows oral collateral contracts to be
enforced if there is a monetary benefit to the guarantor.
19) Equal dignity rule says that agents’ contracts to sell property covered by the Statute of Frauds
must be in writing to be enforceable.
20) Section 2-201(1) of the Uniform Commercial Code states that a unilateral promise to pay
money or property in consideration for a promise to marry must be in writing.
21) If Johnny made an oral contract with Peter to sell Peter his truck for $15,000, Johnny’s
eventual refusal to sell the truck is considered breach of contract.
22) Section 2A-201(1) of the Uniform Commercial Code states that lease contracts involving
payments of $1,000 or more must be in writing.
23) If a modification of the lease contract increases the lease payment to $1,000 or more, the
modification has to be in writing to be enforceable.
24) The doctrine of part performance allows the court to order an oral contract for the sale of
land or transfer of another interest in real property to be specifically performed if performance is
necessary to avoid injustice.
25) Any writing—including letters, telegrams, invoices, sales receipts, checks, and handwritten
agreements written on scraps of paper—can be an enforceable contract.
26) The signature of the person who is enforcing the contract is necessary.
27) A person’s nickname or initials that indicate his or her intent are not considered binding
signatures.
28) The UCC does not permit several writings to be integrated to form a single written contract.
29) Incorporation by reference is an integration made by express reference in one document that
refers to and incorporates another document within it.
30) Placing several documents in the same envelope indicates implied integration.
31) While interpreting contract words and terms, specific terms are presumed to qualify general
terms.
32) If there is an ambiguity in a contract, the ambiguity will be resolved in favor of the party who
drafted the contract.
33) Any oral or written words outside the four corners of the written contract are called parol
evidence.
34) Parol evidence rule stipulates that the contract is a complete integration and the exclusive
expression of the parties’ agreement.
35) Promissory estoppel is an equitable doctrine that permits enforcement of oral contracts that
should have been in writing.
36) The ________ requires certain contracts to be in writing.
A) part performance exception
B) common law of contracts
C) equal dignity rule
D) Statute of Frauds
37) Which of the following is an exception to the Statute of Frauds?
A) contracts under promissory estoppel
B) agents’ contracts
C) merger clause
D) prenuptial agreement
38) Which of the following contracts is required to be in writing in most states?
A) contracts for the sale of goods for $100
B) contracts for the lease of goods with payments of $500
C) promises to write a will
D) contracts falling under the promissory estoppel
39) Which of the following statements is true of the writing requirement of contracts, according
to the Statute of Frauds?
A) Contracts for the sale of goods for $500 need not be in writing.
B) Contracts for the lease of goods with payments of $101 must be in writing.
C) Finder’s fee contracts need not be in writing.
D) Promises made in consideration of marriage must be in writing.
40) Which of the following statements is true of the Statute of Frauds?
A) An executory contract that is not in writing even though the Statute of Frauds requires it to be
is enforceable by either party.
B) Executed oral contracts that should have been in writing under the Statute of Frauds can be
rescinded.
C) If an oral contract that should have been in writing under the Statute of Frauds is already
executed, either party may seek to rescind the contract.
D) Most states require contracts to pay compensation for services rendered in negotiating the
purchase of a business to be in writing.
41) Jonas enters into an oral contract with Chelsea to lease his house to her for $100,000.
Chelsea pays him $100,000 and moves in. A month later, Jonas learns that his state requires
contracts for the lease of goods with payments of $1,000 or more to be writing. Which of the
following options does either party have?
A) Jonas can evict Chelsea as the contract does not comply with the Statute of Frauds and is
hence void.
B) The contract cannot be rescinded by either party as it has already been executed.
C) Chelsea can rescind the contract on the grounds of noncompliance with the Statute of Frauds.
D) Jonas can rescind the contract on the grounds of noncompliance with the Statute of Frauds.
42) Which of the following is considered “real property?”
A) a fixture permanently affixed to a building
B) fifty-one percent partnership in a firm
C) a club membership
D) diamond jewelry
43) Which of the following is an interest in real property given to a lender as security for the
repayment of a loan?
A) lease
B) mortgage
C) life estate
D) easement
44) Which of the following phrases explains the term lease?
A) an interest in real property given to a lender as security for the repayment of a loan
B) an interest in real property for a person’s lifetime
C) the transfer of the right to use real property for a specified period of time
D) a right to use someone else’s land without owning or hiring it
45) Ida moves to New York from Poland and wants to live in an apartment. However, she does
not have sufficient money to buy one. Her colleague Henry allows Ida to live in his old
apartment for a year, if she pays him $25,000. This contract would be considered a(n) ________.
A) lease
B) mortgage
C) installment
D) easement
46) Which of the following interests in real property transfers to another person after the present
holder’s death?
A) easement
B) mortgage
C) EMI
D) life estate
47) A right to use someone else’s land without owning or leasing it is called ________.
A) mortgage
B) easement
C) life estate
D) leasehold
48) Which of the following is an instance of a mortgage?
A) Richard pays Ellen $1000 a month to live in her apartment.
B) Richard pays Ellen $12,000 a year to live in her apartment.
C) Richard gives his country estate as collateral to a bank from where he has borrowed money to
buy an apartment.
D) Richard lives in an apartment for thirty years and upon his death, the apartment is transferred
to somebody else.
49) Which of the following grants a person the right to use real property for a specified period of
time?
A) lease
B) mortgage
C) sale
D) barter
50) The ________ states that an executory contract which cannot be performed by its own terms
within one year of its formation must be in writing.
A) parol evidence rule
B) common law of contracts
C) merger clause
D) one-year rule
51) Which of the following does the one-year rule state?
A) Every contract in writing is subject to yearly renewal.
B) The terms of a written contract can be modified within a year of its formation.
C) A contract that cannot be performed on its own terms within a year should be in writing.
D) Valid contracts cannot be rescinded by either party until a year after their formation.
52) Good Faith Consultants partnered with QuickFind IT Solutions for a period of six months.
After three months, they wanted to extend the contract by two years. According to the Statute of
Frauds, which of the following holds true for the contract?
A) The modification to the duration of the contract should be in writing.
B) A new contract must be formed.
C) The contract can be oral both before and after modification.
D) Only the original contract should be in writing.
53) A(n) ________ occurs when one person agrees to answer for the debts or duties of another
person.
A) main purpose exception
B) mortgage
C) guaranty contract
D) implied integration
54) A ________ is a person who agrees to pay a debt if the primary debtor does not.
A) secondary contractor
B) third-party contractor
C) lessee
D) guarantor
55) In a guaranty situation, the original contract is between the ________.
A) creditor and the guarantor
B) debtor and the creditor
C) debtor and the guarantor
D) creditor and the lessee
56) Which of the following statements is true of a guaranty contract?
A) The guaranty contract is between the guarantor and the debtor.
B) A guaranty contract need not be in writing.
C) The guarantor’s liability is secondary.
D) The original contract is between the creditor and the guarantor.
57) Nina wants to borrow money from Tina but Tina refuses to lend the money unless another
person promises to pay the money in case Nina cannot clear the debt. James agrees to pay the
debt if Nina does not. James is the ________ in this transaction.
A) creditor
B) debtor
C) guarantor
D) facilitator
58) The ________ states that if the main purpose of a transaction and an oral collateral contract
is to provide pecuniary benefit to the guarantor, the collateral contract does not have to be in
writing to be enforced.
A) merger clause
B) leading object exception
C) collateral contract rule
D) parol evidence rule
59) The ________ says that agents’ contracts to sell property covered by the Statute of Frauds
must be in writing to be enforceable.
A) merger clause
B) common law of contracts
C) doctrine of equity
D) equal dignity rule
60) Section 2-201(1) of the Uniform Commercial Code is the basic Statute of Frauds provision
for ________.
A) sales contracts
B) lease contracts
C) all contracts involving interests in real property
D) mortgage contracts
61) Section 2A-201(1) of the Uniform Commercial Code states which of the following?
A) All lease contracts must be in writing.
B) Lease contracts involving payments of $1,000 or more must be in writing.
C) All sales contracts must be in writing.
D) Sales contracts involving payments of $500 or more must be in writing.
62) Section 2-201(1) of the Uniform Commercial Code states which of the following?
A) All lease contracts must be in writing.
B) Lease contracts involving payments of $1,000 or more must be in writing.
C) All sales contracts must be in writing.
D) Sales contracts involving payments of $1,000 or more must be in writing.
63) Santos told his friend Ernesto that he would sell Ernesto his car for $5,000. However, on the
day of the sale, Santos refused to sell the car for the agreed-upon price and demanded more
money. Which of the following statements is true in this context?
A) Ernesto can sue Santos as their oral sales contract was binding.
B) Santos has violated Section 2-201(1) of the UCC.
C) The oral contract to trade a car for $5,000 is not binding, according to the UCC.
D) Santos has violated Section 2A-201(1) of the UCC.
64) Jim’s landlord insists on a written agreement to lease his apartment for $25,000 in order to
comply with ________ of the UCC.
A) Section 2-201(1)
B) Section 2A-201(1)
C) the merger clause
D) the equal dignity rule
65) The doctrine of ________ allows the court to order an oral contract for the sale of land or
transfer of another interest in real property to be specifically performed if it has been partially
performed and performance is necessary to avoid injustice.
A) part performance
B) undue performance
C) equitable performance
D) promissory estoppel
66) Which of the following statements is true of signature on a written contract?
A) The contract should be signed by the party who seeks enforcement.
B) The signature of the person who is enforcing the contract is not necessary.
C) The signature must appear at the end of the writing.
D) A person’s nickname or initials are not binding legal signatures.
67) ________ refers to the integration made by express reference in one document that refers to
and incorporates another document within it.
A) Implied integration
B) Incorporation by reference
C) Executory contract
D) Merger clause
68) Which of the following statements is true of interpreting contract words and terms?
A) Where a preprinted form contract is used, preprinted words prevail over typed words.
B) Preprinted words prevail over handwritten words.
C) Specific terms are presumed to qualify general terms.
D) If there is an ambiguity in a contract, the ambiguity will be resolved in favor of the party who
drafted the contract.
69) If a provision in a contract refers to the subject matter as “dollars,” which of the following
specific terms would qualify the general term?
A) currency
B) pounds
C) bills
D) Australian dollars
70) Any oral or written words outside the four corners of a written contract are termed as
________.
A) parol evidence
B) exclusive integration
C) leading object exception
D) main purpose exception
71) ________ says that if a written contract is a complete and final statement of the parties’
agreement, any prior or contemporaneous oral or written statements that alter, contradict, or are
in addition to the terms of the written contract are inadmissible in court regarding a dispute over
the contract.
A) Main purpose exception
B) Leading object exception
C) Parol evidence rule
D) Promissory estoppel
72) ________ stipulates that the contract is a complete integration and the exclusive expression
of the parties’ agreement.
A) Promissory estoppel
B) Merger clause
C) Main purpose exception
D) Leading object exception
73) In which of the following cases is parol evidence admitted by a court?
A) when the plaintiff reduces the value of damages he expects
B) when the evidence explains ambiguous language
C) when the defendant does not wish to appeal
D) when the defendant takes the case to the appellate court
74) ________ is an equitable doctrine that permits enforcement of oral contracts that should have
been in writing.
A) Promissory estoppel
B) Merger clause
C) Main purpose exception
D) Leading object exception
75) Under which of the following conditions does a promissory estoppel provide for the
enforceability of an oral contract?
A) when the promise induces action or forbearance of action by another
B) when the reliance on the oral promise was unforeseeable
C) when enforcing the oral promise provides for faster resolution of the case
D) when the oral promise provides for reduced damages to the defendant
76) Explain the creation and working of guaranty contracts.
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77) Why is it a bad idea for Edward and his landlord to make an oral lease contract for $30,000?
Suggest an alternative and explain how it is beneficial to an oral contract.
78) How are contract words and terms interpreted?
79) When is parol evidence admitted in court?
80) Explain the doctrine of equitable estoppel.