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test on chapter 13-16

An assignment is effective but not necessarily enforceable from the moment it is made, regardless of whether the assignor notifies the obligor.


Claims for personal injury are generally assignable.


Norm and Frank have a legal contract that is silent with regard to an assignment of the contract. In order for Norm to assign all or part of his rights under a contract, Frank must grant such permission to Norm.


Contract prohibitions against assignments are invalid as a matter of public policy.


Velma, as a birthday present, assigns to Jim her contractual right to collect $50 from Wood Co., this would be a gratuitous assignment.


Brandon orally assigned his right to $100 from a lawn mowing contract to Will as a gift. This assignment is:

not valid because it was not in writing.

valid even though it was oral and there was no consideration from Will.

irrevocable once Brandon has told Will about the gift.

not valid because Will gave no consideration for the assignment.

valid even though it was oral and there was no consideration from Will.

In the Schauer v. Mandarin Gems of California, Inc. case, the court held:

the plaintiff was entitled to proceed with her contract claim against the jeweler because the jeweler must have understood that she was an intended beneficiary of the sales contract.

both of the contracting parties must intend to benefit the third party to create a right to sue in the third party.

a specific manifestation by the promisor of an intent to benefit the third person is required to create a third party beneficiary contract.

the plaintiff was a donee beneficiary and, as such, she had no right to sue.

the plaintiff was entitled to proceed with her contract claim against the jeweler because the jeweler must have understood that she was an intended beneficiary of the sales contract.

A spouse who is named the beneficiary of a life insurance policy would ordinarily be:
a creditor beneficiary.
an incidental beneficiary.
a donee beneficiary.
debtor beneficiary.

donee beneficiary

A nonparty to a contract may enforce the contract if the person is:
a donee beneficiary.
an incidental beneficiary.
a creditor beneficiary.
Both a and c.

Both a and c.

Johann, a well-known musician, agrees to give ten guitar lessons to Elton for $2,000. Nothing in the contract itself prohibits a delegation. If Johann delegates his obligation to Eugene, a second-year musical student and enthusiastic guitar player, then the delegation will probably be:

permitted because contracts may be freely delegated.

permitted because the contract is just for music lessons.
prohibited because the contract is for service from a specific person.
prohibited by the UCC because this is a sale of services.

prohibited because the contract is for service from a specific person.

Linda assigns to Ben a right to receive rent payments. The law implies the following warranty on Linda's part:

the tenant is solvent.

Linda actually has a right to the rental payments.

the tenant will actually pay.

No warranties are implied by law in an assignment.

Linda actually has a right to the rental payments.

Molly and Craig are the original parties to a contract. Craig is obligated to design a Website for Molly. They subsequently make an agreement with Eric that Eric should take the place of Craig and assume all of Craig's rights and duties under the contract. The agreement releases Craig from his obligations under the contract. This agreement is:

a novation.

A donee beneficiary:

usually does not give consideration in return for the gift.

Wright Company contracted with the city of St. Louis to train and employ disadvantaged youths. If Wright fails to fulfill the contract and is sued by one of the disadvantaged youths, the youth would:

lose, as he is an incidental beneficiary.

Tyron purchased a vacant lot and entered into a contract with BZ Inc. to construct a shopping center on the site. Douglas heard about this contract and built a restaurant on an adjoining piece of property because of the planned shopping center. Tyron was unable to raise the necessary capital and was unable to perform the contract with BZ, Inc. Douglas sued Tyron for breach of contract as a third party beneficiary. Douglas will probably:

lose as a third party incidental beneficiary.

An assignment is valid and enforceable against all parties:

from the moment the obligor is notified from any source.

Jerry purchased a laptop computer for his personal use from Computer City on an installment loan contract. The sales contract stated that in the event the contract is assigned to a third party, the purchaser (Jerry) promises he will not assert any claim or defense against the assignee which he might have against Computer City. Computer City immediately assigns the contract rights to Finance USA. The computer stops working within two weeks of the purchase.

In general, this type of waiver is not permitted in consumer contracts, so Jerry can raise his claim against Finance USA.

Generally, in comparison to a donee beneficiary, a creditor beneficiary has:

about the same legal rights.

Ted and Alice own their recreational vehicle subject to a security agreement to Third U.S. Bank to secure the repayment of the purchase money loan. Ted and Alice sell their RV to Bob and Carol, who agree to take over the loan payments to the bank. There is no novation with the bank. Under these facts, if Bob and Carol do not make the loan payments, Third U.S. Bank:

can sue Bob, Carol, Ted, and Alice.

Garth's Imports sold a car to Wally on credit for $30,000. Garth assigned to Cassandra all of his rights to receive money from Wally. Cassandra did not inform Wally of the assignment. Therefore, Wally continued to make the next three payments directly to Garth. Shortly thereafter, Garth left the country with the money. If Cassandra sues Wally for the missing three payments:

Cassandra will not be able to collect the money from Wally

Hannah orally agrees to sell her house to Brett for $175,000. If she delivers the deed to Brett with the expectation of payment in two weeks and he fails to pay, most courts will not enforce the contract since it was not in writing.


Bry, Inc. and Gangl Co. entered into an oral agreement for the sale of 3,000 sweaters. Both parties performed as required under the contract. Bry delivered the sweaters and Gangl accepted and paid for them. Since the contract is fully executed, it makes no difference that it was oral.


Parol evidence refers to anything (other than the written contract itself) that was said, done, or written before or as the parties signed the contract.


Either party may demand rescission of a fully executed oral contract if it was required to have been in writing under the statute of frauds.


Rest Well Hotel orally ordered 1,000 blankets monogrammed with its initials, RWH, from TriColor Textiles. TriColor had just finished monogramming the blankets when Rest Well called and canceled the order. TriColor will be able to enforce the agreement even though there was no writing.


Robin and Bellman, both merchants, orally agree to a contract for the sale of $5000 of accessories. Bellman, the buyer, sends to Robin, the seller, a written confirmation of the sale, which is sufficient against Bellman under the statute of frauds and which Bellman signs. Robin does not sign. Robin fails to perform the contract and does not ship out the goods. Bellman sues. This contract is:

enforceable even without Robin's signature because both parties are merchants.

In order to satisfy the statute of frauds, a writing must:

be signed by the defendant and contain the name of each party, the subject matter of the agreement, and the essential terms and promises.

Willis and Leslie orally agree to the sale of a parcel of land for $50,000: one-half payable now as a down payment; one-half payable in 30 days at the time of closing when the title will be transferred. The buyer, Willis, is to have possession immediately. Willis pays Leslie $25,000, takes possession of the land, and starts building a house. At the time of closing, Willis has made a substantial beginning on the house. However, Leslie refuses to transfer the title, claiming the oral contract is not enforceable. This contract is:

enforceable, because Willis has partially performed the oral contract and made improvements on the land.

Abby dies, and her good friend, Clay is appointed to administer Abby's estate. Abby's house was in poor condition, so Clay orally hired a contractor to make repairs. Clay also orally promised that if the estate could not pay the repair bill, he would pay it even though he does not live in the house and has no entitlement under Abby's estate. The estate does not pay the repair bill. Who can the contractor collect from, if anyone?

The contractor can collect from the estate only

Derek and Abyan were discussing business over lunch when they agreed on the sale of a five-acre parcel of land. Since neither of them had any paper with them, Derek wrote the following on a napkin: "Abyan agrees to purchase from Derek a 5-acre parcel located at the local address of 123 105th Street, St. Joseph, Minnesota, U.S.A. for the price of $4,500 per acre. Transfer of title, payment, and possession to take place on May 1, 2011." Abyan signed the napkin. On May 1, 2011, Derek was ready to close the deal and transfer title but Abyan refused to pay the purchase price. If Derek sues Abyan for the price of the land, the most likely result will be:

Derek will win because the writing is sufficient under the statute of frauds

Which of the following types of contracts cannot be either contradicted or supplemented by evidence of prior agreements or expressions?

Totally integrated contracts.

Claude agrees to lease his house to Irvin for nine months, the lease to begin six months from the signing of the contract. Under the statute of frauds:

the lease is required to be in writing because of the one-year rule.

The main difference between the UCC requirement for a writing for a contract for the sale of goods and the common law is that the:

UCC does not require all the terms of the agreement to be in writing

Amy Hudson has been trying to purchase Glen Cappel's antique desk for some time, but Glen has been reluctant to sell. One evening Glen said to Amy, "Okay, I'll sell the desk for $550." Amy replied, "Thank you, Glen. I accept." The agreement was not reduced to writing, but Glen and Amy did shake hands. Two days later, Amy sent Glen a letter outlining the terms of the agreement, and stating that she would deliver $550 cash according to the agreement within ten days. The letter was signed, "Best regards, Amy." Later, Amy had second thoughts, and refused to go through with the purchase. Nothing had been exchanged at this point. Glen:

can enforce the contract against Amy because the statute of frauds is satisfied under this situation.

Vicki entered into a written contract to buy a car from Valley Motors. The written contract included a provision that stated, "This writing is the full and final expression of the parties' agreement; anything said before signing or while signing is irrelevant." This is:

an integration clause.

Sonny, a college student, places a telephone order for a new computer from Computers, Inc. The price of the computer is $1500. The clerk who takes the order sends Sonny a copy of the invoice. The next week, Sonny calls back and tries to cancel his order.

Sonny can cancel the order; the invoice is unenforceable against him, as he did not sign the invoice.

Martin, Human Resources Director for Spring Co., sent Lynn the following signed letter: "This letter confirms our offer to you. We will pay for your moving expenses, up to $1,500. Your starting date will be February 1, and you will become eligible for health care benefits as of May 1. You will receive a starting salary of $36,500 annually, with reviews and eligibility for increases at six months, 12 months, and annually thereafter. Vacation will be for two weeks a year after one year." Spring fired Lynn eight months after she started to work, and Lynn sued arguing the letter constituted a memorandum of an oral contract for employment for five years. Is the letter sufficient to satisfy the statute of frauds?

No, to satisfy the statute of frauds, the memorandum must contain all essential terms of the contract.

The Uniform Electronic Transmission Act (UETA):

declares that a contract or signature may not be denied enforceability just because it is in electronic form.

Travis had too many beers at the baseball game. Ed realized Travis was so intoxicated he wouldn't know what he was doing, so he got Travis to sign a promise to sell his motorcycle to Ed for $50. When Travis gets sober, he may void the contract.


Alice offers to sell her car to Barry for $500, and Barry accepts. Alice's car has a market value of $1,000 but this fact is unknown to Alice. The contract is enforceable.


Pushy Pat, a persuasive salesman, talked Nice Nancy into purchasing something she didn't really need or want. Nice Nancy may rescind the contract because of undue influence.


A party to a contract has a duty to investigate the other party's factual statements.


All states allow the remedy of rescinding a contract for the sale of goods while still allowing the remedy of suing for damages.


Marty, a 16-year-old, contracted with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle. He agreed to make monthly payments until the purchase price plus interest were paid in full. It is three years later and Marty has not disaffirmed the contract and has made regular payments on the cycle since turning 18. Which of the following is correct?

Marty has ratified the contract and is now bound by its terms

When courts consider economic duress, they consider all the following factors EXCEPT:

relative size of the contract.

Deborah purchased a boat from Sun 'N Surf Marine. She later learned that the salesman had made misrepresentations to induce her to make the purchase. Under UCC Section 2-721, Deborah can rescind the contract:

and sue for damages whether the misrepresentation was fraudulent or innocent.

Mark's home had burned to the ground. When he met with his insurance adjuster, she accused him of burning down the house, and said she would have him criminally prosecuted if he didn't settle the claim for much less than the house was worth. Mark agreed to the settlement. If he changed his mind, he can probably rescind the settlement on the basis of:


When a party to a contract makes a unilateral mistake, the contract:

generally cannot be rescinded by the mistaken party unless the contract is unconscionable or it is proven that the nonmistaken party knew of the error.

Ron, a minor, goes to the hospital for treatment of the flu. On the new-patient form Ron signs, he agrees to pay for any care or treatment he receives. When billed for the treatment:

Ron must pay for the value of the benefit he received, because medical care is a necessary.

Mentally infirmed Sasha contracts to purchase a piano for $2,500 in 60 monthly installment payments. Six months later she tries to void the contract on grounds of mental impairment. A court will:

normally void the contract but will require Sasha to return the piano

Which of the following statements, if made by a seller who knows the statement to be untruthful, would not be misrepresentation of material fact resulting in a cause of action for fraud?

"There is no better car in the world.

In the case of Sepulveda v. Aviles, the New York Supreme Court, Appellate Division, found evidence of undue influence in:

Aviles's use of Seals' funds and credit cards

When a business is concerned about selling to minors because of their right to disaffirm contracts, the business might protect itself by:

requiring an adult co-signer

If Jane persuades Linda to buy her horse by telling Linda that the horse runs "like the wind," then Jane's statement is:


Jeff was a subcontractor, bidding on a contract for ACE Corp., the general contractor. When adding up the total of materials and labor, Jeff's secretary mistakenly moved the decimal point one place, ending up with a bid of $3500 rather than $35,000. ACE Corp. accepted Jeff's bid, mostly because all the other bids were over $30,000. When Jeff learned of the mistake, he tells ACE Corp. that he cannot do the job for $3500. If ACE Corp. sues to enforce this contract, what is the most likely result?

This is a unilateral mistake, but one where ACE Corp. knew that a mistake had been made. Jeff should be able to rescind the contract.

An agreement may violate public policy even if the agreement does not require a party to commit a crime, tort, or violate a statute.


If a court finds as a matter of law that a clause of a contract was unconscionable at the time the contract was made, the court must refuse to enforce the contract.


If a contract is made with a person required by law to hold a license, and the purpose of the license is protection of the public, the contract made by an unlicensed person will generally be unenforceable.


L & M loaned Joan $400 so that she could buy her textbooks for the current semester. L & M's terms for repayment of the loan (including interest) are, $200 in two months, $200 in four months, and another $100 at the end of the fifth month. The legal maximum rate of interest on this type of loan is six percent per annum. L & M's loan is usurious.


When Randy accepted a job with Buren Construction, Randy signed the following agreement, "Upon termination of my employment with Buren Construction, I agree never to work for another employer as an electrician." If Randy resigns from Buren Construction, this agreement would be upheld under the theory of freedom of contract.


Cynthia and Brian were friends. Brian was a dare devil. Because of his antics, Cynthia thought that Brian wasn't long for this life. Cynthia purchased a life insurance policy on Brian's life. Subsequently, Brian was killed in a car accident. Since Cynthia and Brian were friends, Cynthia had an insurable interest in his life and will be entitled to the insurance proceeds.


Virginia borrowed money from G & L Lending at 35% interest per year. The state maximum interest rate is 20% per year. Virginia defaulted on the loan. What amount can G& L collect from Virginia?
G & L will be able to collect the principal plus 20% interest per year.
G & L will be able to collect the principal but not any interest.
G & L will not be able to collect either the principal or interest.
Any one of the above may be correct. The answer depends on the particular state law

Any one of the above may be correct. The answer depends on the particular state law

Which of the following exculpatory clauses will most likely be enforceable?
An exculpatory clause that relieves a riding stable of negligence.
An exculpatory clause that relieves a riding stable of gross negligence.
An exculpatory clause that relieves a riding stable from intentional torts.
A riding stable's exculpatory clause that is hidden in an eight-page document that all riders are required to sign.

An exculpatory clause that relieves a riding stable of negligence.

E-mation entered into a contract with a consumer, Ezra, a recent immigrant to the United States, who spoke very little English, and had no formal education. The contract provided for Ezra to pay $2500 for a computer system. The system was worth $400. If E-mation sued Ezra for enforcement the contract, what is the most likely result?
The contract is enforceable because of the Statute of Frauds.
The contract is enforceable because of the parol evidence rule.
The contract is enforceable because of the underlying reference rule.
The contract is unenforceable because it is unconscionable.

The contract is unenforceable because it is unconscionable.

Barb has been a children's day care provider for several years in the small town of Sallton. She has decided to give it all up and move to the big city for excitement and adventure. She sells her business to Ken, agreeing not to open a competing business within five miles of Sallton for a period of nine months. After five months of the big city life, Barb is broke and moves back to Sallton. She opens a small day care business. Ken sues on the noncompete clause. What is the most likely result?
Ken wins. The agreement is enforceable.
Barb wins. The agreement is denying her the right to do the only thing she knows how to do.
Barb wins. The agreement is not enforceable because it is not ancillary to a legitimate bargain.
Barb wins. The agreement is not reasonable as to time

Ken wins. The agreement is enforceable.

In the case of Worldwide Insurance v. Klopp, the Supreme Court of Delaware found that:
a contract provision requiring arbitration and then permitting appeal by either party was void as unconscionable.
the contract provision requiring arbitration was clear, unambiguous, and fair to both parties.
the arbitration clause in Klopp's auto insurance contract was valid because it furthered the state policy favoring the use of arbitration to resolve disputes.
the automobile insurance policy was governed by UCC, Article 3

a contract provision requiring arbitration and then permitting appeal by either party was void as unconscionable.

Larry has the largest pizza business in the city. He learns that Henry is thinking of opening a competing pizza and pasta delivery business. Larry gives Henry $25,000 to not open his proposed business in the same city. Which statement is correct?
The contract is voidable at Larry's option.
The contract is void for lack of consideration.
The contract is illegal and void.
The contract is enforceable.

The contract is illegal and void.

A contract most likely will be declared unconscionable if:
it is unbalanced, making it unfair to one party.
it contains a cancellation clause.
it is oppressive and the weaker party did not fully understand the consequences of the agreement.

it is oppressive and the weaker party did not fully understand the consequences of the agreement.

An insurance contract is not considered to be a legalized form of gambling because:
one must have an insurable interest in the person being insured.
insurance contracts are underwritten by reputable companies.
insurance activities are regulated by the state department of insurance.
All of the above

one must have an insurable interest in the person being insured.

Suppose that Lenny Lawyer enters into an agreement with Cindy Client that his fee will be a percentage of the recovery Lenny obtains for Cindy in her pending divorce. State law makes such a contingency fee arrangement illegal in divorce actions. What will be the probable outcome if Lenny attempts to enforce the agreement?
The contract will be valid. Cindy would not have been able to afford an attorney otherwise and therefore Lenny was doing a public service.
The contract will be voidable at Cindy's option.
The contract will be void as violating a statute. Lenny will not be able to recover anything.

The contract will be void as violating a statute. Lenny will not be able to recover anything.

When Mohammed was hired by Pomico, Inc., he signed the following agreement, "Upon termination of my employment with Pomico, I agree not to work for a competing company within 30 miles of Pomico's headquarters for one year." This agreement, important to protecting secret information developed in the employer's business, is:
an unenforceable exculpatory agreement.
an unenforceable usurious agreement.
an enforceable bailment agreement.
an enforceable agreement not to compete.

an enforceable agreement not to compete.

Alpha and Xenon companies are both major international conglomerates. They are negotiating a contract whereby Alpha will install a computer system for Xenon. One clause in the contract states that Alpha will not be liable for damages caused by the negligent installation of the computer system, except that Alpha warrants the system and will fix any problem for a period of two years following installation. Alpha completes the installation of the computer system. Xenon loads extensive amounts of information on the system, but all of it is destroyed because Alpha negligently installed the memory chips. Alpha fixes the memory, but Xenon incurred significant expenses in recreating the lost information. Xenon sues for these expenses. Alpha defends with the noted clause in the contract.
Xenon wins; these types of clauses are never enforceable.
Xenon wins; exculpatory clauses are sometimes valid, but this one would not be valid.
Xenon wins; this exculpatory clause is not valid because it is unconscionable.
Alpha wins; this exculpatory clause is enforceable

Alpha wins; this exculpatory clause is enforceable.

Mike owns a house in a poor area of a large city. Mike is on disability and his total monthly income is $700. A sales representative visits his home, selling a water purification system. Mike signs a contract that calls for monthly payments of $500 for the next 10 years. The water system is worth no more than $1000. Mike thought he was signing a permission slip allowing the salesman to conduct a free water test to determine the toxins in the water. How would a court most likely describe this contract?
The contract is fully enforceable as written.
The contract is unenforceable because it is unconscionable.
The contract is enforceable, but only up to the value of the water system.
The contract is unenforceable because it is exculpatory

The contract is unenforceable because it is unconscionable.

In bailment cases, exculpatory clauses:
are very rarely used.
are somewhat more likely to be enforced than in other types of cases.
ordinarily involve an attempt to limit liability for damage to persons rather than property.
None of the above.

are somewhat more likely to be enforced than in other types of cases.

To be valid, a noncompete clause must be:
ancillary to a legitimate bargain.
reasonable in time, geographical area, and scope of activity when ancillary to the sale of a business.
necessary to protect trade secrets, confidential information, or customer lists developed over an extended time when ancillary to an employment contract.
all of the above

all of the above

Wendell, new to the area, selects a doctor from the telephone book and visits that doctor to have a splinter extracted. Unbeknownst to Wendell, the doctor has never passed the state licensing exams. Later, when Wendell discovers the truth, he refuses to pay his bill. If the doctor sues for recovery of the fee, will the court support the doctor's claim?
Yes, it was up to Wendell to verify the doctor's qualifications prior to having the splinter extracted.
No, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors.
It depends on whether Wendell's injury healed properly.

No, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors.

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