1. The rules of contract law are often followed to avoid potential disputes.
1. If a contractual promise is not fulfilled, the person who made it is not
subject to the sanctions of a court.
1. The only requirement of a valid contract is that it be voluntarily entered
into.
1. A unilateral is a promise for an act.
1. No offer may be revoked before it is accepted.
1. An agreement is evidenced by a single event: an offer.
1. A statement of future intent—“I plan to sell my 700–pound sow”—is an
offer.
1. To be effective, an offer must be communicated to the offeree.
1. An acceptance subject to new conditions implicitly rejects the offer.
1. Under the mailbox rule, an acceptance takes effect at the time it is
sent.
1. In contract law, “consideration” refers to the courtesy that one party
shows another in negotiating a deal.
1. Parties are not usually free to bargain as they wish.
1. A contract is void if one of the parties was intoxicated at the time of
its formation.
1. A contract to do something that is prohibited by statutory law is void.
1. A contract is always enforceable even if one party is aware that the
other party made a mistake of fact.
1. Misrepresentation of a material fact can occur through conduct alone.
1. Forcing someone to enter into a contract through fear created by
threats is duress.
1. A contract involving property of any kind must be in writing to be
enforceable.
1. As a general rule, contract duties can be delegated.
1. An incidental third party beneficiary can sue to enforce the contract.
1. Phil agrees to work for Vacation Resorts, Inc., as a chef. In
determining whether a contract has been formed, an element of prime
importance is
a. the parties’ intent.
b. Phil’s rate of pay.
c. the duration of the work.
d. Vacation Resorts’s facilities.
1. On behalf of the jazz group Synco-Passion, their manager Raul agrees
to a performance in the Quay Club on May 1. Portia, acting for Quay
Club, sends a written copy of the agreement to Raul to be signed.
Typically, businesspersons put their contracts in writing to
a. ensure proof of the contracts’ existence.
b. create substance from form.
c. obtain a check or other negotiable instrument.
d. practice their “letters of credit.”
1. When Jeff’s car breaks down, he asks Kwik Tow, Inc., to tow it from
its location to Lou’s Repair Shop. There is no discussion of a price,
and Jeff and Kwik do not sign any documents. After the tow, Kwik
sends Jeff a bill. With respect to Jeff’s obligation to pay the bill, this is
a. an express contract.
b. an implied contract.
c. a voidable contract.
d. no contract.
1. Scot enters into a contract with Tiffany that later proves voidable at
Tiffany’s option. If she elects to avoid the contract
a. both parties are released from it.
b. neither party is released from it.
c. only Scot is released from it.
d. only Tiffany is released from it.
1. Yvon asks Zach, “Do you want to buy one of my fishing rods?” This is
a. a valid offer.
b. not a valid offer because the terms are not definite.
c. not a valid offer because Yvon did not state an intent.
d. not a valid offer because Zach did not respond.
1. Grant offers to sell his Honda Civic for $10,000 to Ivy. Referring to the
prices for similar Hondas, Ivy says, “I’ll pay no more than $5,000.”
Grant says, “Forget it.” Grant’s offer was terminated by
a. Grant.
b. Honda.
c. Ivy.
d. no one—Grant’s offer is still open.
1. Deepwater Mining Corporation offers to sell East China Refining, Inc., a
certain quantity of unrefined oil. If East China sends an acceptance via
Deepwater’s authorized mode of communication, it will be effective
when it is
a. in transit.
b. received.
c. sent.
d. written.
1. Tomato Farms (TF) offers to sell Unified Grocers, Inc., a boxcar load of
tomatoes. The offer is sent via overnight delivery because an
acceptance is required urgently. It would be most reasonable for Unified
to accept via
a. a fax, a letter, or a phone call to TF within two weeks.
b. a fax sent to TF as soon as the offer is received.
c. a letter mailed to TF within two days.
d. a phone call to TF within five business days.
1. Kelsey promises to pay Jon, her son, $5,000 if he obtains his degree
at Ivy University, where he is currently in his second year. Jon
graduates. Kelsey is
a. not required to pay, because Jon was already at Ivy.
b. not required to pay, because obtaining a degree benefits Jon.
c. required to pay, because a job can be hard to find after college.
d. required to pay, because Jon obtained a degree at Ivy.
1. Under a contract with Bucolic Farms, Agro Excavation, Inc., begins
digging an agricultural pond. In mid-project, Agro asks for $15,000 over
the contract price, claiming an increase in the “cost of doing business.”
Bucolic agrees but later refuses to pay. Their agreement is
a. unenforceable because Agro’s performance was a preexisting
duty.
b. unenforceable because Bucolic’s promise was illusory.
c. enforceable.
d. unenforceable because its performance is unforeseeably difficult.
1. Panini Vittles, Inc., contracts with Qino to deliver its sandwiches. Later,
the parties decide to cancel their contract. They can
a. rescind their entire contract.
b. rescind their contract to the extent that it is executory.
c. rescind their contract if they make a new contract at the same
time.
d. not rescind their contract.
1. Jenna, a minor acting on her own, signs a contract to buy a horse and
its tack from Field Equine Ranch. Later, after taking possession of the
horse and tack, Jenna disaffirms the deal. She
a. can keep the horse and the tack.
b. can keep the horse but not the tack.
c. can keep the tack but not the horse.
d. must return both the horse and the tack.
1. Jolie signs a contract with Keaton, an unlicensed physician, to perform
plastic surgery—a medical procedure. This contract is enforceable by
a. Jolie.
b. Jolie’s medical insurance company.
c. Keaton.
d. no one.
1. Danton, a popular performer, dies. His spouse Caitlin sells their house
to Buck. Unknown to Caitlin or Buck, in one of the closets is the mas–
ter recording of an unreleased album. With respect to this recording,
Buck can
a. keep it because Caitlin should have known about it.
b. keep it because the sale of a house includes everything in it.
c. not keep it because there was no voluntary consent to its sale.
d. not keep it because the sale of a house includes nothing in it.
1. Sylvia creates a profile for Today’s Date, Inc., an online dating service.
She exaggerates her appealing features and posts a photo of her friend
Uva, whom Sylvia thinks is prettier. Enticed by the profile, Van
subscribes to the service so that he can contact Sylvia. Van is most
likely a victim of
a. undue influence.
b. fraud.
c. mistake.
d. nothing.
1. Maya is a stockbroker. Nora believes that the price of OK Goods, Inc.
(OKGI), a widely traded stock, is going to increase substantially.
Through Maya, Nora buys 500 shares of OKGI at $10 per share, but
the price soon drops to $2. Nora can successfully recover from Maya
a. nothing.
b. the amount of the purchase price.
c. the amount of the purchase price plus the expected increase.
d. the amount of the purchase price plus the unexpected decrease.
1. Lyra induces Moe to enter into a contract for the sale of an apartment
about which Lyra fraudulently misrepresents a number of material facts.
Lyra tells Moe that her commission is 6 percent, but their signed,
written contract states “12 percent.” The Statute of Frauds governs
a. contracts that are induced by fraud.
b. contracts that must be in writing to be enforceable.
c. the admissibility in court of oral evidence.
d. the reformation of oral and written statements into one contract.
1. Loren and Kendra enter into a contract for the distribution of Loren’s
produce to local restaurants for which he agrees to pay Kendra. Kendra
transfers her right to payment under the contract to County Bank. This
transfer is
a. a delegation.
b. an assignment.
c. a third party beneficiary contract.
d. prohibited.
1. Grande Properties, Inc., and Investment Capital Corporation enter into a
contract for a sale of land. To be enforceable, the contract must be in
writing if the land is valued at
a. more than $500.
b. more than $5,000.
c. more than $50,000.
d. any price.
1. Vicky contracts with Rashad for the delivery of hospice services to
benefit Sigmund. This is
a. a delegation.
b. an assignment.
c. a third party beneficiary contract.
d. not an enforceable contract.
1. Ed, a businessperson, is a friend of Fran, the owner of a candy store.
Every day, Ed spends five minutes in Fran’s candy store, looking at the
candy and usually buying one or two candy bars. One afternoon, Ed
goes into the store, looks at the candy, and picks up a $1 candy bar.
Ed waves the candy at Fran without saying a word and walks out. Is
there a contract? If so, how would it be classified in terms of formation,
performance, and enforceability?
1. On May 1, Brand Name Industries, Inc. (BNI), sent Carol a letter, via
overnight delivery, offering to employ her to audit BNI’s financial state–
ments for the current year for $1,000. In the letter, BNI stated that
Carol had ten days to accept. On May 5, Carol sent BNI a fax that
stated, “The price for the audit seems too low. Would you consider
paying $1,200?” BNI received the fax. The next day, Dan offered to
conduct the audit for $800. On learning of Dan’s offer, Carol
immediately e-mailed BNI, agreeing to do the work for $1,000. BNI
received this e-mail on May 7. Explain why BNI and Carol do, or do
not, have a contract.
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