The Legal Environment of Business, 8e (Kubasek)
Chapter 9 The Law of Contracts and Sales – I
1) A contract is defined as ________.
A) a formal writing that is signed and notarized as required by law
B) a legally enforceable exchange of promises
C) an exchange of a promise for an act, whether or not it is legally enforceable
D) an exchange of goods or money for services or barter
2) Contract law is grounded in ________.
A) state and federal case law and statutes including the Uniform Commercial Code
B) state and federal case law that now supersedes the Uniform Commercial Code
C) the Uniform Commercial Code alone, which now supersedes state and federal case law
D) the Commerce Clause of the U. S. Constitution
3) What purpose does the Restatement of the Law of Contracts accomplish?
A) It interprets the U. S. Constitution in areas relating to the Commerce Clause.
B) It summarizes contract principles as determined by legal scholars.
C) It supersedes the old Uniform Commercial Code.
D) It serves as an implied contract form in cases where there is no written instrument.
4) Article 2 of the Uniform Commercial Code (UCC) applies to contracts covering ________.
A) real property
B) professional services
C) employment
D) the sale of goods
5) Which of the following is an example of a contract that would be governed by Article 2 of the
Uniform Commercial Code (UCC)?
A) Bill agrees to sell his farm to Sam for $200,000.
B) Chantelle agrees to work for Jenna as her personal secretary for $50 an hour for the next year.
C) Dwayne buys a used car from Tom’s Autos for $7,000.
D) Carlo leases a car for a year from EZ Cars for $2,000 per month.
6) Article 2A of the Uniform Commercial Code (UCC) prescribes a set of uniform rules for the
creation and enforcement of contracts ________.
A) covering financial services
B) for the sale of leases of goods
C) covering employment
D) for the sale of electronic data
7) An exchange between parties of oral or written promises that are enforceable in a court of law
is a(n) ________.
A) implied contract
B) exchange contract
C) express contract
D) quasi-contract
8) A contract established by the conduct of the parties is a(n) ________.
A) implied contract
B) exchange contract
C) express contract
D) quasi-contract
9) A contract that is established by the conduct of a party rather than by the party’s written or
spoken words is known as an implied-in-________ contract.
A) law
B) equity
C) fact
D) presumption
10) Which of the following is an example of an offer to make a unilateral contract?
A) Jose offers to sell Melinda his car for $20,000.
B) Martin offers to fund the renovation of Billy’s farm to help ease his debt problems.
C) Robert offers to take Jasmine to the park on Thursday if it does not rain.
D) Helena offers to pay $300 to anyone who finds her lost puppy and returns it to her.
11) Which of the following statements defines a bilateral contract?
A) the exchange of one promise for another promise
B) the exchange of a promise for an act
C) the exchange of two or more promises for two or more acts
D) a contract that will be performed twice
12) A(n) ________ contract is a contract that at its formation has an illegal object or serious
defects.
A) executory
B) executed
C) void
D) voidable
13) A(n) ________ contract gives one of the parties the option of withdrawing from the
agreement.
A) executory
B) executed
C) void
D) voidable
14) A(n) ________ contract involves the exchange of a promise for an act.
A) unilateral
B) bilateral
C) executed
D) executory
15) Which of the following is an example of a void contract?
A) Missy orally agrees to lease Bob’s house for $950 a month.
B) Kallie agrees in writing to pay Will $400,000 to mug her uncle.
C) Jamal, who is 15, agrees to buy a stereo from Stereo World for $5,000.
D) Roberto orally agrees to buy Jim’s art collection for $150,000.
16) Which of the following would render a contract voidable?
A) the contract being unilateral
B) one of the parties to the contract committing a crime
C) one of the parties to the contract being underage
D) the contract being bilateral
17) Sean agrees to restore Janine’s car for $2,000. Janine agrees to this amount. However, she
will pay Sean only after the restoration is complete. This is an example of a(n) ________.
A) quasi-contract
B) executed contract
C) bilateral contract
D) executory contract
18) Contracts are essential to the workings of a private-enterprise economy.
19) Contract law is grounded in the case law of the state and federal courts, as well as state and
federal statutory law.
20) The Restatement of the Law of Contracts summarizes contract principles as set out by the
U.S. Supreme Court.
21) A contract that is established by the conduct of a party rather than by the party’s written or
spoken words is an implied contract.
22) A unilateral contract is an exchange of a promise for an act.
23) A bilateral contract is an exchange of one promise for another promise.
24) An executory contract is a contract the terms of which have been performed.
25) A unilateral contract is a court-imposed agreement to prevent the unjust enrichment of one
party when the parties have not previously agreed to an enforceable contract.
26) A void contract is a contract that at its formation has an illegal object or serious defects.
27) A voidable contract is a contract that gives one of the parties the option of withdrawing from
the agreement.
28) Explain the difference between an express contract and an implied contract.
29) Explain the difference between a unilateral contract and a bilateral contract.
30) Explain the differences among void, voidable, and valid contracts.
31) Which of the following is not a required element for a legally enforceable contract?
A) legal offer
B) legal acceptance
C) fair bargain
D) genuine assent
32) Which of the following is not a required element for a legally enforceable contract?
A) consideration
B) competent parties
C) legal object
D) valid counteroffer
33) Which of the following statements is true of a legal offer?
A) The offer must be communicated to the party intended by the offeror.
B) Industry custom and prior dealings are irrelevant when determining whether the terms of the
offer are definite.
C) Courts consider what was in the person’s mind when entering the contract.
D) The contractual process ends with the legal offer.
34) Mrs. Jones offers to sell her house to Smith for $200,000. Smith says he will pay no more
than $185,000. Which of the following statements would be true at common law?
A) Mrs. Jones and Smith have negotiated a settlement.
B) Smith’s price is close enough to constitute acceptance of Mrs. Jones’s original offer, but the
contract price will be set at $200,000.
C) Smith has terminated the original offer and now has set forth a counteroffer.
D) Mrs. Jones’s offer remains open and so does Smith’s counteroffer.
35) According to the Uniform Commercial Code Section 2-207, which of the following is true
with regard to non-merchants dealing with the sale of goods?
A) A counteroffer by the offeree does not constitute a rejection, and the additional term added by
the offeree will automatically become part of the contract.
B) A counteroffer by the offeree does not constitute a rejection, but the additional term added by
the offeree will not become part of the contract.
C) A counteroffer terminates the negotiation and triggers the terms of the Restatement of the
Law of Contracts.
D) A counteroffer constitutes a rejection of the original offer, but the parties may continue to
negotiate the contract terms.
36) Under the Uniform Commercial Code, a merchant can prevent additional terms contained in
a counteroffer from being added to the contract by ________.
A) citing the limitations described in the Restatement of the Law of Contracts
B) applying the mailbox rule
C) issuing a written objection to the added terms within 90 days of receipt
D) objecting to the added terms within a reasonable time
37) An offeree can forestall a revocation by using a(n) ________.
A) attachment
B) garnishment
C) option
D) enforceable contract
38) An offeror can be given an amount of money to keep the offer open for a time, which is
usually ________ days.
A) 15
B) 30
C) 60
D) 90
39) Section 2-________ of the Uniform Commercial Code deals with electronic communication
of an acceptance by an offeree.
A) 213
B) 207
C) 202
D) 201
40) Which of the following is true of Section 2-213 of the Uniform Commercial Code with
regard to electronic communication?
A) Legally defensible acceptance cannot be communicated using electronic communication.
B) Electronic communication of an acceptance is legally defensible but only if the recipient is
aware that it has arrived.
C) A company that sends an acceptance electronically must include a clause that indicates
acceptance of the agreement can be made electronically.
D) Acceptance occurs when the electronic communication is received, even if the recipient is
unaware that it has arrived.
41) When is a legal acceptance by email effective?
A) when the email is sent
B) when the email arrives
C) when the offeror reads it
D) offers cannot be validly accepted by email
42) ________ is defined as a bargained-for exchange of promises in which a legal detriment is
suffered by the promisee.
A) Acceptance
B) Garnishment
C) Consideration
D) Restatement
43) James works for the county fire department and has not had a raise in three years. When he
shows up at the mayor’s house to put out a fire, he sees the mayor standing outside. James tells
the mayor that he will put out the fire only if the mayor agrees to give him a raise. The mayor
agrees. In this scenario, which of the following statements is true?
A) A valid contract exists because all the elements of a valid contract are present.
B) A valid contract does not exist because the value of the consideration for the mayor’s promise
is inadequate.
C) A valid contract exists because of the past consideration rule.
D) A valid contract does not exist because of the preexisting duty rule.
44) Celine offered Jenna $50 for a six carat diamond necklace. Jenna immediately agreed to sell
it to Celine. However, after Jenna went home and looked at it again, she decided that the
necklace was worth a lot more than $50. She told Celine she could not sell her the necklace for
such a low price. In this scenario, did the parties have an enforceable contract?
A) yes, because all the elements of a valid contract are present
B) no, because the value of the consideration for the necklace is inadequate
C) no, because of the preexisting duty rule
D) no, because of the past consideration rule
45) The doctrine of promissory estoppel is used when the requirements of ________ are not met.
A) garnishment
B) acceptance
C) consideration
D) restatement
46) Roberto has an art collection valued at $1,000,000. He has promised to donate his collection
to a local arts foundation if that foundation satisfactorily obtains donations of equal value from
other sources. The foundation manages to obtain matching donations. However, when Roberto
died, his will stated that he had left his collection to his nephew, Michael. If the foundation sues,
which of the following is true?
A) Since Michael is the beneficiary of Roberto’s will, the arts foundation cannot collect.
B) The arts foundation will be awarded the art collection based on the quasi-contract.
C) The arts foundation will be awarded the art collection based on the doctrine of promissory
estoppels.
D) The art foundation cannot contest the will since they are not immediate family.
47) An illusory promise can be defined as a ________.
A) contract providing that only one of the parties need perform, only if he or she chooses to do
so
B) contract not supported by consideration since the promise is supported by an illegal act
C) promise that lacks consideration since the person promises to perform an act or do something
she already has an obligation to do
D) contract based on love and affection
48) Raj may sell his car to Hazel for $1,000 on Friday if he feels like it. If he refuses to sell her
the car on Friday, can she sue him for breach of contract?
A) yes, because they formed a valid, enforceable contract
B) no, because Raj made an illusory promise
C) no, because of the preexisting duty rule
D) no, because the consideration from Hazel was inadequate
49) Which of the following contracts would be void due to fraudulent misrepresentation?
A) Mikhail wants Ivana to sign a contract for the sale of her apartment. He tells her that if she
does not sign the contract, he will harm her son.
B) Janet owns a pair of zircon earrings. She sells them claiming they are diamonds and receives a
much higher price for them.
C) Carla unknowingly sells a painting to a collector thinking it’s genuine. However, the collector
finds out that it actually is an imitation.
D) Gary has been the McGill family attorney for decades. When he needs investors for his
business, he convinces Mr. McGill to invest in the new business.
50) Which of the following contracts would be void due to duress?
A) Mikhail wants Ivana to sign a contract for the sale of her apartment. He tells her that if she
does not sign the contract, he will harm her son.
B) Janet owns a pair of zircon earrings. She sells them claiming they are diamonds and receives a
much higher price for them.
C) Carla unknowingly sells a painting to a collector thinking it’s genuine. However, the collector
finds out that it actually is an imitation.
D) Gary has been the McGill family attorney for decades. When he needs investors for his
business, he convinces Mr. McGill to invest in the new business.
51) Which of the following contracts would be void because of undue influence?
A) Mikhail wants Ivana to sign a contract for the sale of her apartment. He tells her that if she
does not sign the contract, he will harm her son.
B) Janet owns a pair of zircon earrings. She sells them claiming they are diamonds and receives a
much higher price for them.
C) Carla unknowingly sells a painting to a collector thinking it’s genuine. However, the collector
finds out that it actually is an imitation.
D) Gary has been the McGill family attorney for decades. When he needs investors for his
business, he demands that Mr. McGill invest in the new business.
52) Which of the following statements is true about a court’s willingness to rescind a contract
due to a mistake?
A) Courts are more willing to rescind a contract when a unilateral mistake has occurred.
B) Courts are equally willing to rescind a contract whether the mistake is unilateral or bilateral.
C) Courts are more willing to rescind a contract when a bilateral mistake has occurred.
D) Neither a unilateral nor a bilateral mistake constitutes sufficient reason to rescind a contract.