The Legal Environment of Business and Online Commerce, 7e (Cheeseman)
Chapter 10 Performance and Breach of Traditional and E-Contracts
1) A unilateral mistake is a mistake in which only one party is mistaken about a material fact
regarding the subject matter of a contract.
2) A material fact is a fact that is irrelevant to the subject matter of a contract but pertains to the
conduct of the parties.
3) An ambiguity in a contract may constitute a mutual mistake of a material fact.
4) If there has been a mutual mistake, the contract cannot be rescinded.
5) A unilateral mistake occurs if both parties know the object of the contract but are mistaken as
to its value.
6) Intentional misrepresentation is considered fraud.
7) To be actionable as fraud, the misrepresentation must have been the sole factor in inducing the
innocent party to enter into the contract.
8) The term “scienter” refers to the knowledge that a representation is false or that it was made
without sufficient knowledge of the truth.
9) A misrepresentation is considered fraud even if it is made without intent to deceive another
party.
10) The measure of damages awarded to the innocent party for fraud is the difference between
the value of the property as represented and the actual value of the property.
11) Duress is a situation in which one party threatens to do a wrongful act unless the other party
enters into a contract.
12) Duress only occurs where a threat involves physical harm.
13) Duress occurs when one person takes advantage of another person’s mental, emotional, or
physical weakness and unduly persuades that person to enter into a contract.
14) Trees, crops, minerals and timber are not considered real property and are thus barred from
being included in contracts involving interests in real property.
15) 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.
16) According to the equal dignity rule, agents’ contracts to sell property covered by the Statute
of Frauds must be in writing to be enforceable.
17) The one-year rule states that an executory contract that cannot be performed by its own terms
within one year of its formation must be in writing.
18) 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.
19) 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.
20) The signature of the person who is enforcing the contract is necessary.
21) Parol evidence rule stipulates that the contract is a complete integration and the exclusive
expression of the parties’ agreement.
22) A covenant is an unconditional promise to perform.
23) Unilateral rescission of a contract constitutes a breach of that contract.
24) The agreement whereby the parties agree to accept something different in satisfaction of the
original contract is called restitution.
25) Substantial performance of a contract constitutes material breach.
26) Which of the following is true of a unilateral mistake?
A) Only one mistake or ambiguity is present in the subject matter of the entire contract.
B) Out of several contracts drafted simultaneously between two parties, one has a mistake in its
subject matter that does not concern the other contracts.
C) Only one party is mistaken about a material fact regarding the subject matter of a contract.
D) A single mistake about a material fact in the subject matter of a contract appears several times
in the contract.
27) Heather chooses to buy a scarf at Macy’s and reads the price on the tag as $50. She uses her
credit card to pay for the scarf and post-purchase, she notices that the price tag actually says
$500. This is an instance of a(n) ________.
A) bilateral mistake
B) mutual mistake of value
C) innocent misrepresentation
D) unilateral mistake
28) A contract involving mutual mistake of value is ________.
A) rescindable
B) voidable
C) non-rescindable
D) void
29) ________ is an event that occurs when one person consciously decides to induce another
person to rely and act on a misrepresentation.
A) Fraudulent misrepresentation
B) Unilateral mistake
C) Bilateral mistake
D) Erroneous misrepresentation
30) In order to prove fraud, which of these elements must be shown?
A) The innocent party knew the wrongdoer.
B) The innocent party was the one who detected fraud.
C) The wrongdoer assumed a false identity.
D) The innocent party relied on the wrongdoer’s representation.
31) ________ is a situation in which one party threatens to do a wrongful act unless the other
party enters into a contract.
A) Scienter
B) Duress
C) Battery
D) Assault
32) Which of the following scenarios makes Tim liable for undue influence?
A) He uses a false identity, borrows $10,000 from Kelly, and disappears with the money.
B) He threatens to kill Carlos if Carlos does not sign a contract that transfers all his property to
Tim.
C) He takes advantage of his grandmother’s illness and persuades her to sign a will leaving all
her property to him.
D) He threatens to bring a lawsuit against Carlos if Carlos does not make him a partner in his
firm.
33) 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 car
D) diamond jewelry
34) 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
35) 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) handshake deals
36) 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 in 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.
37) Which of the following does Section 2A-201(1) of the Uniform Commercial Code state?
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.
38) ________ 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
39) A party who owes a duty of performance under a contract is called the ________.
A) obligor
B) assignor
C) assignee
D) oblige
40) Kimlon Informatics has to recover $5000 from a client for its services. The recovery period
is 100 days but Kimlon needs the money immediately. It sells the right of collecting money from
its client to Quikcollect, a collection agency. Here, Kimlon Informatics is the ________.
A) obligor
B) obligee
C) subassignee
D) assignee
41) ________ refers to a third party who is not in privity of contract but who has rights under the
contract and can enforce the contract against the promisor.
A) Third-party contractor
B) Assignee
C) Sub-assignee
D) Intended third-party beneficiary
42) Which of the following phrases explain the term covenant?
A) an unconditional promise to perform
B) a breach of contract
C) mutual rescission of a contract
D) successive assignments of a right
43) Which of the following is true of covenants and conditions?
A) A covenant is a conditional promise to perform.
B) A condition becomes a covenant if it is met.
C) A contract cannot contain conditions to excuse performance.
D) A party cannot sue over breach of a covenant by the other party.
44) ________ refers to a condition that requires the occurrence of an event before a party is
obligated to perform a duty under a contract.
A) Condition precedent
B) Condition subsequent
C) Concurrent condition
D) Implied condition
45) KnockKnock is a manufacturer of stainless-steel locks which are well known for their
durability. The company contacts a new supplier and forms a supply contract. The contract states
that KnockKnock would only purchase steel from the supplier if the material supplied was high-
grade Type 102 stainless steel. This is an instance of a ________.
A) condition subsequent
B) concurrent condition
C) covenant
D) condition precedent
46) ________ refers to a condition whose occurrence or nonoccurrence of a specific event
automatically excuses the performance of an existing contractual duty to perform.
A) Condition precedent
B) Condition subsequent
C) Concurrent condition
D) Implied condition
47) James hires Franco for a painting job. Their contract explicitly states that Franco’s
employment can be terminated if he is employed by another party during the contract period.
Two weeks into the job, James finds out that Franco is also working for a painting agency two
blocks away and terminates his employment. This is an instance of ________.
A) Condition precedent
B) Condition subsequent
C) Concurrent condition
D) Implied condition
48) Which of the following is true of discharge of performance by agreement?
A) A partially executed contract cannot be rescinded.
B) Mutual rescission requires parties to enter into a second agreement that expressly terminates
the first one.
C) A party is allowed to rescind a contract without the consent of the other party.
D) Unilateral rescission is not regarded as breach of contract.
49) Which of the following refers to an agreement that substitutes a new party for one of the
original contracting parties and relieves the existing party of liability on the contract?
A) novation
B) substituted contract
C) mutual rescission
D) accord
50) Lionel Richmond is a soccer player who has a six-year contract with the Christshire United
soccer team. Two years into the contract, he meets with an accident which results in the complete
amputation of his right leg. On what basis is Richmond discharged from further performance of
the contract?
A) Novation
B) Substituted contract
C) Accord and satisfaction
D) Discharge by impossibility
51) ________ is a clause in a contract in which the parties specify certain events that will excuse
nonperformance.
A) Approval clause
B) Express condition
C) Force Majeure
D) Implied-in-fact condition
52) Which of the following statements is true of a breach of contract?
A) Strict performance by a party discharges that party’s duties under the contract.
B) Inferior performance constitutes a minor breach of contract.
C) Substantial performance constitutes a material breach.
D) The most common remedy for a breach of contract is an award of equitable remedies.
53) Which of the following terms refers to an unconditional and absolute offer by a contracting
party to perform his or her obligations under a contract?
A) injunction
B) writ of garnishment
C) tender of performance
D) writ of attachment
54) Poole Contractors makes a contract with Delta Resources to pay $50,000 for the supply of
500 truckloads of sand within next week. Delta Resources delivers the sand in two days after the
contract was made. Poole Contractors pays the $50,000 promised in the contract. This is an
instance of ________.
A) substantial performance
B) material breach
C) minor breach
D) strict performance
55) A(n) ________ breach of a contract occurs when a party renders inferior performance of his
or her contractual obligations.
A) material
B) minor
C) anticipatory
D) defensive
56) Which of the following is true of monetary damages?
A) Monetary damages are available only for material breaches of contract.
B) Dollar damages are not monetary damages.
C) Compensatory damages are not monetary damages.
D) Consequential damages are monetary damages.
57) Mary buys a new toaster for $500. The toaster’s label bears a disclaimer stating that the
manufacturer is not liable for consequential damages. On Monday morning, while Mary is using
the toaster, it emits sparks and damages the electric wiring in the kitchen. The electrician tells
Mary that the toaster malfunctioned and that the cost of repairs in her kitchen would come up to
$2000. What can Mary recover from the manufacturer of the toaster?
A) $500
B) $2500
C) $2000
D) no damages can be recovered
58) An award of ________ orders the breaching party to perform the acts promised in a contract.
A) reformation
B) injunction
C) restitution
D) specific performance
59) ________ refers to an equitable doctrine that permits the court to rewrite a contract to
express the parties’ true intentions.
A) Reformation
B) Injunction
C) Conjunction
D) Garnishment
60) Kinetosphere Automation Inc. (K.A.) makes a mandatory employment contract with all its
employees. The contract states that K.A.’s employees are not to work for any other organization
while they are employed by K.A. If K.A. finds an employee who is also serving another
company, it can approach the court to obtain a(n) ________ to prevent the employee from
working in the other company.
A) restitution
B) rescission
C) injunction
D) subjugation
61) How is a mistake different from an act of fraud?
62) Explain the creation and working of guaranty contracts.
63) Distinguish between conditions and covenants.
64) Distinguish between minor breach and material breach.
65) As a part of a downsizing initiative, Richmond and Sons fired an employee before his
employment contract lapsed. Is the employee responsible to mitigate damages? Explain.
66) In a(n) ________ mistake, only one party is mistaken about a material fact regarding the
subject matter of the contract.
67) A(n) ________ exists if both parties know the object of the contract but are mistaken as to its
value.
68) Intentional misrepresentation is commonly referred to as ________.
69) ________ refers to the knowledge that a representation is false.
70) ________ refers to a situation in which a party threatens to do a wrongful act unless another
party enters into a contract.
71) The ________ is an equitable doctrine that 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.
72) The ________ says that agents’ contracts to sell property covered by the Statute of Frauds
must be in writing to be enforceable.
73) A(n) ________ refers to a promise in which one person agrees to answer for the debts or
duties of another person.
74) ________ of the UCC is the basic Statute of Frauds provision for sales contracts.
75) A(n) ________ is a clause in a contract which stipulates that it is a complete integration and
the exclusive expression of the parties’ agreement.
76) The term ________ refers to any oral or written words outside the four corners of a written
contract.
77) An obligee who transfers a right is known as a(n) ________.
78) A(n) ________ is a party who is unintentionally benefited by other people’s contracts.
79) A(n) ________ is an unconditional promise to perform.
80) ________ is an action to undo a contract.