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1
Chapter 11
Nature and Terminology
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
B1. Contract law demonstrates which excuses our society accepts for breaking
certain types of promises.
B2. Contract law does not distinguish between promises that create only moral
obligations and promises that are legally binding.
B3. In contract law, intent is determined by the personal or subjective intent, or
belief, of a party.
B4. One of the four requirements of a valid contract is an adequate price.
2 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B5. The term consideration refers to the legality of the subject matter of a contract.
B6. A bilateral contract comes into existence at the moment promises are
exchanged.
B7. A unilateral contract is formed at the moment when the contract is performed.
B8. Informal contracts include all contracts other than formal contracts.
B9. A negotiable instrument is a formal contract.
B10. In an express contract, the terms are fully and explicitly stated in words.
B11. A contract that has been fully performed by the parties is called an executory
contract.
B12. If a voidable contract is avoided, the promisee, but not the promisor, is
released from it.
CHAPTER 11: NATURE AND TERMINOLOGY 3
B13. An unenforceable contract is one that cannot be enforced because of certain
legal defenses against it.
B14. A void contract imposes certain legal obligations on the parties but is not
otherwise enforceable.
B15. A quasi contract is an actual contract.
B16. A party who has conferred a benefit on someone else unnecessarily can invoke
the principle of quasi contract to recover the cost.
B17. The doctrine of quasi contract generally can only be used when there is an
actual contract that covers the matter in controversy.
B18. When a contract’s writing is not clear, a court will enforce it according to its
obvious terms.
B19. If a contract term is ambiguous, a court can consider extrinsic evidence.
B20. A court will normally interpret the language of a contract according to what the
parties claim their intent was when they made it.
4 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
MULTIPLE-CHOICE QUESTIONS
B1. Sal assures Tom that she will deliver a truckload of hay to his cattle ranch. A
person’s declaration to do a certain act is part of the definition of
a. an expectation.
b. a moral obligation.
c. a prediction.
d. a promise.
B2. Smith & Jones, Accountants, agrees to perform an audit for Brick & Mortar
Stores, Inc. Whether or not this agreement meets all of the requirements of a
contract, the parties are likely to follow the rules of contract law because they
a. want to avoid potential disputes.
b. are conscious of those rules.
c. are not conscious of those rules.
d. have a moral obligation to do so.
B3. Lark promises to buy Mac’s used textbook for $60. Lark is
a. an offeror.
b. an offeree.
c. a promisee.
d. a promisor.
B4. Gilbert promises to buy Hadley’s iPod for $75. Hadley is
a. an offeree.
b. an offeror.
c. a promisee.
d. a promisor.
CHAPTER 11: NATURE AND TERMINOLOGY 5
B5. Brady accepts what he believes is an offer to work for Canyon River
Adventures, Inc., as a tour and fishing guide. In determining whether a contract
has been formed, an element of prime importance is
a. the price to be paid.
b the duration of the work.
c. the intent of the parties.
d. the subject of the contract.
B6. Cellphones & Calltime, Inc., makes an offer to Delores to enter into a contract
to work as a salesperson for a certain base salary plus commission for ninety
days subject to a one-year renewal based on her performance. Delores
accepts the offer. A valid contract requires
a. a price and a subject.
b. a duration and termination provision.
c. an offer and an acceptance.
d. specific quality standards.
B7. Jonah tells Levi he will give him an Xbox if Levi does Jonah’s chores for a
month. Levi promises to do the chores. Jonah and Levi have formed a
a. a bilateral contract.
b. a formal contract.
c. a unilateral contract.
d. no contract.
B8. Wilson buys a lottery ticket at his local gas station. Wilson has accepted an
offer for a
a. bilateral contract.
b. unilateral contract.
6 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
c. void contract.
d. unenforceable contract.
B9. A letter-of-credit agreement between Rural Feed Corporation and Soybean
Farms, Inc., requires Rural Feed’s bank to pay Soybean Farms on receipt of
invoices. This letter of credit is
a. a formal contract.
b. no contract.
c. an implied contract.
d. a quasi contract.
B10. Following negotiations, Office Park, Inc., enters into an informal contract with
Quality Janitorial Company for custodial services for Office Park’s buildings.
This means that the parties’ contract
a. requires no special form.
b. is freely open to either party’s interpretation.
c. is subject to change by either party, within reason.
d. is not yet completely formed.
B11. When Hester’s car breaks down, she asks Insta-Tow, Inc., to tow it to Jerry’s
Repair Shop. There is no discussion of a price, and Hester and Insta-Tow do
not sign any documents. Later, Insta-Tow sends Hester a bill. With respect to
Hester’s obligation to pay the bill, this is
a. an express contract.
b. an implied contract.
c. no contract.
d. a quasi contract.
CHAPTER 11: NATURE AND TERMINOLOGY 7
B12. Bilbo signs a lease agreement for an apartment with Cato, who owns and
manages the Deer Creek Apartments complex. These parties have
a. an express contract.
b. an implied contract.
c. a quasi contract.
d. no contract.
B13. Avatar, Inc., agrees to deliver t-shirts emblazoned with video game characters
for a certain price to Bling Bling Corporation. To constitute a contract, the terms
of this deal
a. must all be express.
b. must all be implied.
c. may be express, implied, or a mixture of both.
d. may be express or implied, but not both.
B14. Francie drives into Gage’s Auto Service and asks Hong, a Gage’s employee, to
replace a tire on Francie’s car. After Hong replaces the tire, but before Francie
pays for it, any contract between Francie and Gage’s is
a. executed.
b. executory.
c. void.
d. unenforceable.
B15. Robin claims that her contract with Stroud for tennis lessons is voidable. If their
contract is avoided,
a. both parties are released from it.
b. both parties must fully perform their obligations under it.
c. both parties will agree to a wholly different contract.
d. a wholly different contract is imposed “as if” the parties had agreed.
8 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B16. Sales Marketing Corporation and Tech Support, Inc., negotiate a contract. If
the contract has all of the elements necessary for one of the parties to enforce
it in court, it is
a. a valid contract.
b. a voidable contract.
c. a void contract.
d. an unenforceable contract.
B17. Mallory promises to buy illegal digital copies of movies from Napoleon, who
promises to deliver on October 31. These promises are most likely
a. enforceable.
b. valid.
c. void.
d. voidable.
B18. In a one-care auto accident, Carmel is rendered unconscious and otherwise
injured. At the scene, Dana, a physician, acts to save Carmel’s life. Later, Dana
seeks to recover for the cost of the aid. She is most likely to recover
a. nothing.
b. on a theory of an express contract.
c. on a theory of an implied contract.
d. on a theory of a quasi contract.
B19. Otto mistakenly pays property taxes that should have been assessed against
Pip. Otto can recover the amount from Pip in quantum meruit
a. even if Pip was not aware of the error.
b. only if Pip tried to conceal the error.
c. only if Pip was aware of the error.
d. only if Pip consents.
CHAPTER 11: NATURE AND TERMINOLOGY 9
B20. Sunny enters into a contract with Trey to act as his personal sports trainer. If a
dispute later arises and the contract contains unclear terms, the rules of
contract interpretation will give effect to
a. the parties’ intent as expressed in their contract.
b. what the promisor claims was the parties’ intent.
c. what the promisee claims was the parties’ intent.
d. what the parties now agree they intended.
ESSAY QUESTIONS
B1. On behalf of Meadow’s Edge Golf Course & Club, Norton signs and returns a
letter from Oralee, referring to her services as a resident golf pro and their
price. When Norton attempts to complete the deal, however, Oralee refuses,
claiming that they have no contract. Norton claims that they do. What standard
determines whether these parties have a contract?
B2. On May 1, Bobbi-Ann, a real estate agent, and Corporate Properties, Inc., a
commercial property owner, sign an agreement about the sale of Corporate
Properties’ office building. Under the terms, if a buyer makes a serious offer
within sixty days, Corporate Properties must pay Bobbi-Ann’s commission.
Bobbi-Ann puts signs on the building, ads in real estate pamphlets and a locally
focused Web site, and features the property in a “walking” tour online. On June
10 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
1, Corporate Properties tells Bobbi-Ann that it is canceling their arrangement.
Ten days later, Corporate Properties closes a sale on the building without
Bobbi-Ann’s participation. Bobbi-Ann files a suit against Corporate Properties
for the amount of her commission. In whose favor is the court likely to rule, and
why?
