CHAPTER 9 – INTRODUCTION TO CONTRACTS
TRUE/FALSE
1. One purpose of contract law is to make business matters more predictable.
2. Some of the elements of a contract are agreement, consideration, legality, and capacity.
3. Robert offers to buy a car from Jane for $400. Jane must accept this offer in order to form an
enforceable contract.
4. Strawly Corp. runs an “adult bookstore” in Metro City, leasing the building from MegaCorp. Then,
Metro City passes an ordinance prohibiting the sales of the types of merchandise found in “adult
bookstores.” Strawly is still bound to the contract.
5. Contracts for the sale of fabric, automobiles, computers, furniture, and paper clips would all be
governed by Article 2 of the Uniform Commercial Code.
6. A valid contract can legally be voided by either party.
7. Lucy and Rick sign a contract in which Lucy agrees to deliver 10 boxes of chocolates in exchange for
Rick’s promise to pay $5 per box. Lucy delivers the candy. Rick pays for the goods. This contract is
fully executory.
8. All oral contracts are quasi-contracts until they are completely executed.
9. Mary goes into Honest Harry’s Electronics and purchases a TV. Mary agrees to pay for the TV in 30
days on the store’s “30 days same as cash” plan. This is an executory contract.
10. Valerie promises Teresa that she will pay Teresa $75 if Teresa will clean Valerie’s house by noon on
Saturday. If Teresa cleans the house by noon on Saturday and Valerie pays the $75, then this is an
implied, bilateral, executory contract.
11. On Monday, Mick puts an offer in the mail to Sheri to sell his guitar for $50. Monday night when
jamming with his buddies, he decides he will really miss his old guitar and has second thoughts about
selling it. Tuesday morning he puts a revocation in the mail informing Sheri he has changed his mind
and the guitar is no longer for sale. The revocation is effective on Tuesday morning.
12. When promissory estoppel is used by the courts, it is because there is NOT an enforceable contract
present.
13. A letter of intent summarizes progress made during business negotiations, but more importantly, it
creates a binding contract.
14. Alex promises to pay $100 to anyone who finds his lost watch. Kate finds and returns the watch to
Alex after hearing of the reward money. Alex and Kate have an enforceable unilateral contract.
15. Mr. Johnson has paid his neighbor’s son Desmond $25 every week for 8 weeks to wash and wax his
car. There was never any agreement as to how many weeks this would happen. On the 9th week,
Mr. Johnson refused to pay Desmond claiming he never agreed to this deal. Desmond is out of luck,
because Mr. Johnson is right.
MULTIPLE CHOICE
1. Jerry offers to shovel the snow from Ben’s driveway for $35. Ben replies “OK.” This is an example of:
a.
an implied, unilateral contract.
b.
an express, unilateral contract.
c.
an implied, bilateral contract.
d.
an express, bilateral contract.
2. The common law governs contracts for:
a.
services.
b.
real estate.
c.
employment.
d.
All of the above.
3. When Myrtle comes home from work one evening, she finds that her yard has been mowed and
trimmed. Later, a man comes to collect for the yard work done. Myrtle refuses to pay for the work
since she has never seen the man before and did not hire him to do her yard work. Which of the
following answers is most accurate?
a.
This is an implied, unilateral contract and she must pay the price requested by the man.
b.
This is an express, voidable contract that either party may avoid.
c.
The court would order Myrtle to pay the reasonable value of the yard work because of the
benefit conferred on her.
d.
Myrtle would not have to pay for the yard work.
4. Miles purchased a lawnmower with an attached warning that said, “The manufacturer is not
responsible in the case of an injury caused by the lawnmower.” If Miles is injured because of a defect
in the mower and sues the lawnmower manufacturer, he will most likely:
a.
lose, as he agreed to not hold the lawnmower manufacturer liable.
b.
lose, as he assumed the risk.
c.
win, as this warning would be unenforceable.
d.
win, as all lawnmower manufacturers are strictly liable.
5. Mike made the following offer to Mick: “I will pay you $500 if you agree to paint my house.” Mick
replied that he would. At this point, the contract is an:
a.
executed, bilateral, express contract.
b.
executory, bilateral, implied-in-law contract.
c.
executory, unilateral, express contract.
d.
executory, bilateral, express contract.
6. What is not required to establish promissory estoppel?
a.
A promise made by the defendant.
b.
A promise made by the plaintiff in response to the defendant’s promise.
c.
Reliance on the defendant’s promise.
d.
Enforcing the promise is the only way to avoid injustice.
7. Shelly offers to sell Jane goods both parties know are stolen. Jane accepts the offer, and agrees to pay
for the goods. Later, Jane refuses to accept or pay for the goods. If Shelly sues Jane for breach of
contract, what is the probable result?
a.
The law would enforce this valid, enforceable contract.
b.
Jane would win as this is a voidable contract.
c.
Shelly would win as this is a unilateral contract.
d.
The law would not enforce Jane’s promise, as it does not have a lawful purpose.
8. Larry goes to his barber who has cut his hair for the past several years. The barber proceeds to cut his
hair as they talk about the most recent snow storm to hit the area. This is an example of a:
a.
unilateral, implied contract.
b.
bilateral, implied contract.
c.
unilateral, express contract.
d.
bilateral, express contract.
9. Robert, a minor, buys a stereo from Jane for $200. State law allows a minor to disaffirm contracts
within a reasonable time after turning 18. Robert disaffirms the contract the day after turning 18 and
returns the stereo.
a.
This contract was a valid contract, Robert cannot disaffirm.
b.
This contract was a voidable contract, Robert can disaffirm.
c.
This contract was a void contract.
d.
This contract was unenforceable because it needed to be in writing to be enforceable.
10. Patty is a poor college student struggling to work and keep up with her studies. Fred, her uncle,
promises to pay Patty support of $200 per month for the next six months. Although Fred didn’t ask her
to, she quits her current job in order to devote full time to her studies for the next six months. Fred
makes one payment and then stops with no explanation. If Patty sues, what is the likely result?
a.
Fred would win, as he did not ask Patty to quit her job.
b.
Patty would win, as a contract was formed when Fred promised to pay her the support.
c.
Fred would win, as family members cannot sue each other for breach of an oral promise.
d.
Patty may win under the doctrine of promissory estoppel.
11. The basic distinction between a bilateral contract and a unilateral contract is that:
a.
only one promise is involved in a bilateral contract.
b.
only one promise is involved in a unilateral contract.
c.
the Statute of Frauds applies to one and not the other.
d.
one is enforceable, the other is not.
12. The courts will find an implied contract when:
a.
justice demands it.
b.
conduct of the parties indicates they intended an agreement.
c.
there is promissory estoppel.
d.
there is undue influence.
13. Courts may award damages called “quantum meruit”:
a.
which means “as much as he deserved.”
b.
which is money the court believes the plaintiff morally ought to have.
c.
even though there was no valid contract entitling the plaintiff to it.
d.
All of the above.
14. On January 16, Deb offers to sell her waterbed to Colleen for $600. Colleen accepts and agrees to pay
Deb $600 on January 27. Which of the following is correct?
a.
On January 16, the contract was executory.
b.
On January 16, the contract was executed.
c.
This contract is a unilateral contract.
d.
There is no contract until January 27.
15. An express contract:
a.
must be in writing.
b.
may be inferred by the conduct of the parties involved.
c.
has both parties setting forth their intentions.
d.
is not valid in many states.
16. Which of the following represents a unilateral offer?
a.
“I will pay you $50 if you mow my lawn.”
b.
“I will pay you $50 if you promise to trim that tree.”
c.
“I will pay you $50 for your CD player.”
d.
“I will pay you $50 for your backpack.”
17. Walter enters a dentist office and points to a damaged tooth. The dentist, Matt, treats the tooth. If
Walter refused to pay and Matt sued:
a.
Walter would win as there was no contract.
b.
Walter would win because of the UCC.
c.
Matt would win; this is an implied contract.
d.
Matt would win in quantum meruit.
18. Jennifer has offered to sell her laptop computer for $750 to Jack. She tells Jack that the computer is
only six months old but, in fact, it is three years old, and Jennifer wants to unload the lemon. Jack
agrees to buy the computer based on Jennifer’s representations. This contract is:
a.
a void agreement because of the fraud involved.
b.
a voidable contract, one that Jack can void.
c.
a voidable contract, one that Jennifer can void.
d.
a void contract because of the UCC.
19. Which of the following types of property would be goods under the Uniform Commercial Code?
a.
A promissory note.
b.
A stock.
c.
A patent.
d.
A computer.
20. John enters into a contract to paint Chad‘s house. When Chad decides on a color, John will buy the
paint and paint the house for the price of $2,500. This contract is governed by:
a.
the common law of contracts governs because this is a mixed contract (one for services
and goods).
b.
the common law of contracts governs because the predominant factor of the contract is for
the sale of services and not goods.
c.
the Uniform Commercial Code governs because a sale of goods is involved.
d.
both the common law and the Uniform Commercial Code will govern this contract.
21. Zena enters into a contract with Steeley Company to purchase a washer and dryer. She doesn’t
understand the financing terms, but signs the agreement anyway because she needs the appliances. The
financing terms are beyond the legal limits on interest rates, and she is unable to make all of her
payments when they are due. Steeley sues. The court would:
a.
be exercising judicial restraint if it requires Zena to pay as she promised, even if the
agreement was unfair and unwise.
b.
have to rewrite the contract to be fair to both parties.
c.
have to declare the contract void since it contained illegal terms.
d.
use the theory of promissory estoppel to remedy any unfavorable terms in the contract.
22. Contracts that do not arise from mutual agreement but are created by courts to avoid unjust enrichment
are:
a.
express contracts.
b.
implied contracts.
c.
quasi-contracts.
d.
unilateral contracts.
23. Which of the following is probably a valid offer?
a.
“I couldn’t sell my moped for less than $150.”
b.
“If you would sell me this land, I would build a community park on part of it.”
c.
“Silly Soda — Buy one, get one FREE!” (newspaper ad)
d.
“I will sell you this digital camera for $40.”
24. Floyd offers to sell his 1967 Ford Mustang convertible to Tim. Before they conclude their
negotiations, Floyd dies. Which of the following is true?
a.
Floyd’s heirs must sell the car to Tim.
b.
Floyd’s heirs must continue to negotiate the offer and sell the car, if a reasonable price can
be determined.
c.
The offer terminates automatically upon Floyd’s death.
d.
There is a contract if Tim accepts before learning of Floyd’s death.
25. Collector Carl displays his beer can collection at the local swap meet. Mary sees the collection and is
interested in buying it. Carl says he will sell the collection for $1,500. Mary says she really likes the
collection but is only willing to pay $1,000. Which of the following is correct?
a.
Mary’s counteroffer terminates Carl’s offer of $1,500.
b.
If Carl rejects Mary’s counteroffer, she can still accept Carl’s offer of $1,500.
c.
Neither offer is valid. Who would ever pay $1,000 or $1,500 for a beer can collection?
d.
Mary’s offer is a firm offer. Carl has an exclusive right to consider her offer for a
reasonable period of time.
ESSAY
1. List and briefly describe the basic elements of a contract.
2. ACME, Inc. is a software producer that entered into a verbal agreement with XYZ Corporation
wherein XYZ agreed to buy ACME’s newly developed software. The agreement also provided that
ACME would supply training personnel, as well as technical personnel, to work with XYZ employees
in installing and learning the software. What law governs this agreement?
3. Preferred Contractors was a general contractor and owner of a condominium complex which was
under construction. Barrett, a subcontractor, had been hired by Henderson Plumbing, another
subcontractor, to help it complete the plumbing work on the project. When Henderson began using
shoddy installation procedures and subsequently fell behind the scheduled completion time for the
project, Preferred Contractors urged Barrett to correct Henderson’s mistakes and to finish the job.
Barrett refused to continue until he knew who would pay him, since he feared Henderson’s financial
position was shaky. Nonetheless, Preferred Contractors’ job superintendent told Barrett to go ahead
even if Barrett and Preferred Contractors had no contract because “he would use his influence to try to
help Barrett get his money.” Barrett finished the work and sent a $7,500 bill to Henderson, which was
never paid. When Barrett later sent the bill to Preferred Contractors, these facts emerged: Preferred
Contractors told him that due to Barrett’s failure to notify Preferred Contractors promptly of
Henderson’s non-payment, Preferred Contractors had already paid Henderson in full and therefore
would not pay twice for the work. Discuss the best possible theory of recovery Barrett may argue.
4. Rameriz and Cox enter a contract obligating Cox to supply Rameriz with 2,000 bushels of corn by the
end of September. Weather conditions are poor and Cox is unable to grow that much corn himself, but
could obtain enough to make up the required difference at a financial loss. Discuss the general purpose
of contracts and the result of seeking enforcement of this contract both in a court exercising judicial
restraint and in a court practicing judicial activism.
5. Briefly discuss how an offer can be accepted. Include offers for both bilateral and unilateral contracts.
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