A contract is essentially an agreement that creates an obligation.
Every contract has only two parties
Only the parties who signed the original contract can have rights with respect to that contract
A reward offered to the public for the return of lost property is not considered an offer.
An offer may be made only to a specific person.
An express contract is one in which the agreement is shown by acts and conduct of the parties.
The effect of an implied contract is not the same as the effect of an express contract.
An agreement that contemplates the performance of an act prohibited by law usually is void
An executed contract results from the complete performance by all parties of the contract.
A bilateral contract is essentially an exchange of promises
A unilateral contract may be described as a promise for an act
A contract never can be both executory and unilateral
The principle behind the quasi contract is to prevent unjust enrichment.
The elements of a contract include all of the following except
an illegal purpose
A party to a contract may be:
all of the above
To have a contract you must have:
both an offer and an acceptance
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):
A contract under which one or both parties have not yet fully performed is termed a(n):
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
The plaintiff in a quasi-contractual action can recover:
the reasonable value of the benefit conferred upon the defendant
To create an offer, an offeror must intend, or it must appear that the offeror intends, to be bound to a contractual relationship.
Generally, advertisements, catalog prices, and circulars are offers that can be accepted.
A court will do its best to find the intent of parties to an agreement provided that the agreement is not too indefinite
A vague contract may be clarified by references in the contract to other documents or agreements
An agreement cannot be enforced if it does not set forth every detail.
Contract terms may not be implied from conduct
A term of a written contract that is too vague to have a definite meaning sometimes may be ignored
A person returning lost property without knowing that a reward was offered cannot sue the owner for the reward.
Offers, acceptances of offers, and revocations of offers are all effective when mailed in a properly addressed envelope bearing the proper amount of postage
An option is itself a contract to refrain from revoking an offer.
A firm offer cannot be revoked.
Counteroffers are limited to offers that directly contradict the original offer
In most cases, an offeree may ignore any offer.
An acceptance must be absolute and unconditional
Acceptance of an offer to form a unilateral contract need not be communicated to the offeror to be effective.
A properly mailed acceptance takes effect when mailed, even if it never is received by the offeror.
The willingness of an offeror to enter into a contractual agreement regarding a particular subject is expressed by a(n):
If not an offer, the first statement made by one of two persons is most properly termed a(n):
invitation to negotiate
A customer went into a store and saw a beautiful leather jacket bearing a price tag of $29. The customer handed the cashier a $50.00 bill and said, "I accept. We have a deal." The cashier then noticed the price tag and told the customer an error had been made and that the price was $229. In this case:
no contract was formed because the customer's offer was refused
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):
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
If no termination date is specified for an offer, the offer will remain open:
for a reasonable time
A young woman received an unordered diamond ring in the mail along with a bill for $850. She called the store and was told it was a sales promotion and she should pay for the ring or return it. She said, "Thank you for the free ring." The young woman kept the ring, did not pay, and was sued. Result?
The young woman may keep the ring without liability
At an auction sale, each bid is:
Certain persons cannot make contracts that will bind them.
Ordinarily, every party to a contract is presumed to have contractual capacity until the contrary is shown
Generally, when a person of legal age makes a contract with a minor, the contract is voidable by either party
If any party to a contract does not have contractual capacity, the contract is either voidable or void
Once a contract has been affirmed, it no longer can be avoided
When a minor avoids contracts, the minor always must return the other contracting parties to their original financial positions
Parents are liable for contracts signed by their minor children if the terms are reasonable.
A contract made by an incompetent person after a guardian has been appointed is voidable.
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
A person who has drunk too much alcohol at a party and signs a contract may be able to rescind that contract
A unilateral mistake regarding expectations or the law does not have any effect on a contract
Fraud requires that the plaintiff intend to deceive.
A fraudulent statement has no effect unless relied upon
Increasingly, parties to a contract are being required to disclose defects or conditions that are unknown to and not obvious to the other party
There is a growing trend to treat fine print as not binding on the injured party without regard to whether fraud was involved.
A claim of undue influence will be unsuccessful unless the contracting parties have a close relationship of trust.
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
When a minor avoids a contract to purchase a car:
a relative who cosigned the contract is liable for the purchase price.
A person lacks contractual capacity if:
because of mental impairment, the person does not comprehend that a contract is being made or understand its consequences
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
All of the following statements refer to an element of fraud except:
the defendant desired to obtain a financial benefit
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.
An apparently voluntary agreement may in fact not be voluntary if:
all of the above
In a bilateral contract, which is an exchange of promises, each promise is consideration for the other promise.
Consideration always must be an act or the promise to perform an act
One promise may serve as consideration for many return promises
A promise to make a gift is enforceable
True consideration occurs only when the value of one promise is equal to the value of the promise given by the other party
Forbearance may constitute consideration
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
A binding contract cannot contain a cancellation provision.
If a merchant receives and cashes a check for partial payment of a debt and the check bears the notation that the amount is in full payment of a disputed sum, the total debt is released
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"
In a composition of creditors, the various creditors of a single debtor mutually agree to accept a fractional part of their claims in full satisfaction thereof
Past benefits already received by a promisor cannot be consideration for a later promise.
A promise to make a contribution to a church is binding even though the promisor does not receive anything for the promise.
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
Inadequacy of consideration may be evidence of:
all of the above
Which of the following can be consideration for a promise?
refraining from smoking cigarettes
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:
Consideration no longer is required in a number of situations including
all of the above
Which of the following is not a necessary element of promissory estoppel?
a bargained-for exchange
An agreement is illegal when either its formation or performance is a crime or a tort, or it is contrary to public policy.
It generally is incorrect to use the phrase "illegal contract" because, if an agreement is illegal, the courts do not recognize it as a contract and the agreement is void.
Even if part of a contract is illegal, the court may enforce a divisible, legal part of the contract
If a contract can be interpreted in two ways, one legal and the other illegal, the court will assume that the legal meaning was intended unless the contrary is clearly indicated.
An agreement to sell hammers and screwdrivers to a buyer who intends to use them as burglar's tools is void if the intention of the buyer is known to the seller.
In the case of merchant sellers, good faith is defined as "honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade."
Ordinarily, a court will not consider whether a contract is fair or unfair
Unconscionability and fraud are synonymous terms.
When a nationally known neurosurgeon in Chicago, Illinois, sells her practice, the contract may specify that the seller will not practice within a 100-mile radius of Chicago for one year.
A charge added to the unpaid balance due on a revolving charge account generally is not subject to the law of usury.
Agreements that are illegal are:
A provision in a contract which is illegal
will be ignored by the parties if the remaining portions of the contract can stand on their own.
A contract that is deemed to be too harsh or oppressive to one of the contractual parties may be unenforceable under the concept of:
Today, what is an important element in determining the validity of a contract?
social consequence of a contract
Private lotteries, which generally are held to be illegal, involve three elements:
prize, chance, and consideration
Which of the following is not illegal?
a "giveaway" to every tenth person entering a department store
The failure to have a license will not render agreements void if the license:
is readily obtainable by payment of a fee.
When money is loaned at a greater rate of interest than is allowed by law, ____ is committed
A father's oral promise to his daughter and her fiancée made in consideration of their contemplated marriage is binding when made in the course of a serious discussion.
A contract for the sale of goods with a price of $500 or more requires written proof to be enforceable
A signed letter from an employer setting forth details of an oral contract of employment satisfies the statute of frauds
An insurance company cannot refuse to pay the fire loss of the buyer of a house on the grounds that the sales contract for the house was not binding because it was not properly signed.
The parol evidence rule generally excludes words spoken before or at the time a written contract was executed from contradicting the terms of the contract.
The parol evidence rule is based on the theory that either there never was an oral agreement or, if there was, the parties purposely abandoned it when they executed their written contract.
The parol evidence rule does not apply to changes made after the signing of the contract.
Details of performance of a contract not expressly stated in a contract often will be implied by the court.
The past performance of the parties under a continuing contract is important in determining what the contract means
Customs and trade usage can override the express provisions of a contract
An oral understanding is not binding if:
the parties intended to formalize their understanding with a written agreement.
An oral contract can be enforced when it relates to:
the purchase of a television set for $200.
The standard statute of frauds
requires that a contract for the sale of land be evidenced by a writing
A promise to pay a debt must be in writing if:
the promise is to pay the debt of another
The statute of frauds applies to:
a promise by an executor to pay a claim against the estate out of his or her personal funds.
A writing that satisfies the requirement of a writing under the statute of frauds could be evidenced by
all of the above
The parol evidence rule
applies to complete written contracts
Parol evidence generally is admissible to explain
Parol evidence may be admitted to show that a provision was omitted as the result of:
all of the above
Parol evidence may be admissible to
prove the modification or termination of a contract
A contract is created by which the terms are stated to be for consideration in the amount of $3,000. If typewritten in the contract is the term "Four thousand dollars," while the amount of $3,000 is printed within the form:
the contract will be interpreted to be for $4,000.
When an insurance policy is ambiguous, the policy is interpreted
against the insurer
By virtue of an agency, one person can make contracts at numerous places with many different parties at the same time
is a relationship by which the principal is authorized to act on behalf of an agent in negotiating and making contracts with third persons
An agency may be created to perform almost any act that a principal could lawfully do.
to control" test determines whether an individual is an agent, an employee, or an independent contractor.
A special agent is authorized by the principal to transact all affairs in connection with a particular type of business or trade or to transact all business at a certain place.
A written authorization of agency is called a power of attorney
An agent's duties must be expressly stated in the agency agreement and may not be implied from the principal's words or conduct
person is authorized by the principal to transact all affairs in connection with a particular type of business or trade or to transact all business at a certain place, that person is a __________ agent
The scope of an agent's authority may be determined from the
all of the above.
When the principal's words or conduct leads a third person to reasonably believe that a party is authorized to act as his or her agent but this is not true, and the third person relies on that appearance, this creates a case of __________ authority.
John's son was not his agent but contracted to purchase a computer in the name of John. When John learned of this, John sternly rebuked his son but continued to use the computer for several weeks. After losing interest in the computer, John offered to return it, saying that the purchase was unauthorized. John:
ratified the purchase by John's conduct.
An agent's duty of loyalty to the principal is breached by
all of the above.
An agent is under a duty to obey:
all lawful instructions given by the principal.
duty of an agent to act with the care that:
a reasonable person would exercise under the circumstances.
A durable power of attorney may be terminated by
revocation by a competent principal or by the death of the principal
When a person purports to act as an agent for a principal, an implied warranty arises that such person has authority to do so.
If an agent's act causes loss to the third person, that third person may generally hold the agent liable for the loss
An agent's liability as a party to a contract with a third person is affected little by the degree of disclosure of the principal.
If the principal is not disclosed, the agent is necessarily the other contracting party and is bound to the contract.
An agent should never sign a contract using "by" or "per" and then his or her name.
Agents are themselves liable for harm caused third persons by the agents' fraudulent, intentional, or negligent acts.
A principal may be liable to a third person for an agent's unauthorized contracts.
agent making a proper contract with a third person on behalf of a disclosed principal:
has no personal liability on the contract
of the following is a defense to an action against an agent for breach of the implied warranty of authority?
The third person knew that the agent was acting beyond the authority given by the principal.
Smyth is an agent for L. T. Adams. To avoid becoming a party to any contract that Smyth signs for Adams, Smyth should sign in which of the following ways?
L. T. Adams, per John Smyth
An agent who commits a tort and a crime is:
liable for both the tort and the crime.
The concept of imposing liability for the fault of another is known as __________ liability.
tort or crime is committed by an employee
vicarious liability could be imposed on the employer if the act was committed within the course of employment
decisions hold the principal liable for which actions of the agent?
both a. and b.
Which of the following parties is not liable for torts?
the owner of property when the tort is committed by an independent contractor