Business Law Midterm 1

113 terms by DigitalDJ21 

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Chapters 12-15

Ordinarily, every party to a contract is presumed to have contractual capacity until the contrary is shown.

True

As the social force of protecting the person has gained recognition, many concepts of contractual incapacity have been abolished.

True

Discriminatory and punitive incapacities have largely disappeared.

True

Generally, when a person of legal age makes a contract with a minor, the contract is voidable by either party.

False

Once a contract has been affirmed, it no longer can be avoided.

True

Parents are liable for contracts signed by their minor children if the terms are reasonable.

False

The parent of a minor is liable for payment of the purchase price of a contract that the minor has avoided.

False

The appointment of a guardian for an insane person does not avoid a contract made by the person the day before the guardian was appointed.

True

A person who has drunk too much alcohol at a party and signs a contract may be able to rescind that contract.

True

A unilateral mistake regarding expectations or the law does not have any effect on a contract.

True

The seller of a painting is not bound by the sales contract if the painting purchased was considered of little value and only later discovered to be valuable to the surprise of both buyer and seller.

True

A party who speaks with a reckless disregard for the truth not knowing of the falsity of his or her words cannot be liable for fraud.

False

Fraud requires that the plaintiff intend to deceive.

True

A fraudulent statement has no effect unless relied upon.

True

Increasingly, parties to a contract are being required to disclose defects or conditions that are unknown to and not obvious to the other party.

True

Contractual capacity is the ability to:

understand that a contract is being made and to understand its general nature.

The key time for determining whether a party lacked contractual capacity is:

the time the contract was made.

The maximum amount of time that a minor has to disaffirm a contract is:

a reasonable period of time after reaching the legal age.

A minor cannot avoid a contract to purchase a car if the:

minor is able to return the car but does not do so.

A minor cannot avoid a contract that has been:

ratified

When a minor avoids a contract to purchase a car:

a relative who cosigned the contract is liable for the purchase price.

The obligation of a cosigner is discharged by:

the payment of the debt.

In which of the following cases is a contract between A and B binding?

A makes a mistake of material fact.

A person unable to read is bound by signing a paper without obtaining an explanation of it, unless:

the other contracting party knows of the signer's disability.

An agreement is not binding when:

both parties make a mistake regarding a material fact.

When a mutual or bilateral mistake is one of law, then:

the contract generally is binding.

All of the following statements refer to an element of fraud except:

the defendant desired to obtain a financial benefit.

Jack sells Jim a used car that Jack falsely described as having been driven only 12,000 miles. Fraud has occurred if:

Jim relied upon Jack's statement.

I believe that I own a very valuable vase. I tell this to you and state that I will sell it to you for $800. I sell the vase to you, and you later find out that the vase is worth only $200. A fraud:

ordinarily has not occurred.

Generally, advertisements, catalog prices, and circulars are offers that can be accepted.

False

The bid of each contractor for a job is considered an offer.

True

A court will do its best to find the intent of parties to an agreement provided that the agreement is not too indefinite

True

A vague contract may be clarified by references in the contract to other documents or agreements.

True

Contract terms may not be implied from conduct.

False

A contract to buy all the buyer's requirements from the seller at a stated price is too vague to be a contract.

False

A person returning lost property without knowing that a reward was offered cannot sue the owner for the reward.

True

A firm offer cannot be revoked.

False

Counteroffers are limited to offers that directly contradict the original offer.

False

If an offer does not state how long it shall remain open, it remains open for ten days.

False

In most cases, an offeree may ignore any offer.

True

An acceptance must be absolute and unconditional.

True

The addition of any new terms in the acceptance, including terms that relate to mere clerical detail, converts the acceptance into a counteroffer.

False

Acceptance of an offer to form a unilateral contract need not be communicated to the offeror to be effective.

True

At an auction, the bidders make offers and they cannot be withdrawn.

False

If not an offer, the first statement made by one of two persons is most properly termed a(n):

invitation to negotiate.

A customer requested a price from a carpenter on a teak cabinet to be built according to the buyer's specifications. Because teak wood is difficult to obtain, the customer agreed to pay the cost of the wood plus $175 and the carpenter agreed to build it. Which of the following is correct?

Although the price is somewhat unclear, the parties have entered into a contract.

An offer that is indefinite may be clarified by reference to another writing through:

incorporation

An agreement that consists of two or more parts and calls for corresponding performances of each part by the parties is called a:

divisible contract.

If an offeree accepts an offer before it is effectively revoked:

a valid contract is formed.

A binding promise to keep an offer open for a stated period of time or until a specified date is called a(n):

option contract.

A counteroffer is a(n):

rejection of the original offer.

A said to B, "I'll give you $100 for that bracelet." B replied, "$135." A said, "NO thanks." B then said that B accepted the $100, but A was no longer interested and said there was no contract. B insists there is a contract. Result?

B's counteroffer of $135 terminated A's offer of $100.

An offer is terminated upon rejection by the offeree unless:

the offeror renews the offer.

If no termination date is specified for an offer, the offer will remain open:

for a reasonable time.

In general, an acceptance occurs when:

a clear expression of acceptance occurs.

When an offer has been accepted:

a binding agreement probably is formed.

An acceptance made in a telegram that never is delivered to the offeror:

is effective as an acceptance at the time that it is given by the offeree to the telegraph office for sending to the offeror.

At an auction sale, each bid is:

an offer.

Arthur made a bid at an auction by calling out the amount of $250. The auctioneer noted Arthur's bid. There were no higher bids, and Arthur called out that he was withdrawing the bid. The auctioneer said that it was too late to withdraw the bid.

Arthur's bid is an ordinary offer that can be revoked.

Only the parties who signed the original contract can have rights with respect to that contract.

False

An offer may be made only to a specific person.

False

An offerer makes an offer to an offeree.

True

Contracts for amounts more than $1 million must be made under seal or they are not binding.

False

A recognizance is an agreement by which one party admits or recognizes that a specified sum of money is owed to another party.

False

An express contract is one in which the agreement is shown by acts and conduct of the parties.

False

Implied-in-fact contracts and implied-in-law contracts are essentially the same.

False

The effect of an implied contract is not the same as the effect of an express contract.

False

A voidable contract is one that is otherwise valid but may be rejected or set aside by one of the parties.

False

An executory contract has been entered into but not yet fully performed.

True

An executed contract results from the complete performance by all parties of the contract.

True

When a contract is fully performed by one party, it is called a unilateral contract.

False

A bilateral contract is essentially an exchange of promises.

True

An option contract gives one of the parties an absolute right to enter into a second contract at a later date.

True

A quasi contract may arise in a situation in which no contract exists.

True

The elements of a contract include all of the following except:

an illegal purpose.

The promisor in a contract agreement also may be called the:

obligor

To have a contract you must have:

both an offer and an acceptance.

Negotiable instruments are:

formal contracts

An implied contract is shown by:

acts of the parties

A legally binding agreement that can be rejected at the option of one of the parties is called a(n):

voidable contract

An executory contract is:

entered into but not fully performed.

A bilateral contract consists of a:

promise for a promise.

An offer of a reward for the arrest and conviction of a criminal is an example of:

a unilateral contract.

The main thrust of the quasi contract is to:

prevent unjust enrichment.

A contract that has been set aside is said to have been:

avoided

The plaintiff in a quasi-contractual action can recover:

the reasonable value of the benefit conferred upon the defendant.

The concept of consideration has clearly been phased out of the law.

False

In a bilateral contract, which is an exchange of promises, each promise is consideration for the other promise.

True

In most cases, consideration will result in a benefit to the promisor and imposition of some burden or detriment to the promisee.

True

One promise may serve as consideration for many return promises.

True

A promise to make a gift is enforceable.

False

The promise of a creditor to forbear collecting a debt is consideration for a promise by the debtor to modify the terms of the transaction.

True

Forbearance may constitute consideration.

True

An unenforceable promise will constitute consideration as long as the parties to the contract appear to be in agreement.

False

A promise by a coat factory to pay $0.25 per button for any buttons that it orders from the ABC Button Company constitutes consideration.

False

A binding contract cannot contain a cancellation provision.

False

Arresting 100 persons guilty of crime can be consideration for the promise made to a police officer to pay a bonus for making such arrests.

False

If a claimant knows that there is no merit in the claim itself but is using the claim to force an issue, a settlement of the claim based on partial payment lacks consideration.

True

Sara Student wished to pay off her $5,000 student loan. If she sends in a check for $3,000 and the creditor cashes the check, the debt will be fully satisfied provided the check is marked "paid in full."

False

Past benefits already received by a promisor cannot be consideration for a later promise.

True

Promissory estoppel does not require that the promisee's detrimental reliance on the promise be reasonably foreseeable to the promisor.

False

Will the law enforce every promise?

Generally yes, if consideration amongst other elements is present.

Consideration is:

what is demanded by the promisor as the price for the promise.

In a unilateral contract, the consideration for the promise is:

the doing of the act called for by the promisor.

In a unilateral contract, the doing of a requested act is also the:

acceptance of the offer of the promisor.

When there is no consideration for a promise, the agreement is:

not binding.

A contract in which one party agrees to purchase goods from another contingent upon the purchaser's ability to locate suitable financing is said to:

contain a conditional promise.

Ordinarily, a promise to perform an existing legal obligation is:

not consideration.

A promise to pay a contractor a bonus to complete construction of a building according to the contract is:

ordinarily not binding on the promisor.

An agreement to provide a realistic additional compensation for a contractor who performed a contract despite formidable unforeseen difficulties is called a:

good-faith adjustment.

The effect of the making of a partial payment to satisfy an admitted debt is an example of the rule that:

doing what one is bound to do is not consideration.

Which of the following is not a necessary element of promissory estoppel?

a bargained-for exchange

What constitutes detrimental reliance sufficient to satisfy the promissory estoppel rule:

has been diluted by court interpretation in recent years.

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