Business Law
Unit 2 – Contract Law
Assessment – Part I
Section I – Think Critically About Legal Concepts
Directions: Circle the letter that represents the word, or group of words, that correctly
completes the statement.
1. Which of the following is not one of the major requirements for a contract?
a. time
b. genuine assent
c. capacity
d. consideration
2. A valid offer must be communicated to the offeree and
a. the offeror must intend to create a legal obligation
b. the terms must be definite and complete
c. both a and b
d. none of these
3. An unaccepted offer may be terminated by
a. a counteroffer
b. a reasonable length of time
c. the rejection of the offeree
d. all of these
4. A firm offer is binding
a. for a state time
b. for not more than three months
c. even when nothing is paid by the offeree
d. all of these
5. There is no contract
a. without the exchange of money
b. without both offer and acceptance on mutually agreed terms
c. both a and b
d. none of these
6. Social arrangements
a. are not legal obligations
b. are legal contracts
c. are subject to breach of contract
d. none of these
7. Capacity to contract means that the person
a. has a genuine need for the goods or services purchased
b. has ample room to store goods that are purchased
c. has the ability, according to law, to understand his or her actions and the
effect of those actions
d. all of these
8. When the price is not specified in contracts between individuals who regularly deal
in such goods
a. the current market price is used as the basis
b. the highest market price is the basis
c. the lowest market price is the basis
d. the contract is null and void
9. Offers that require the offeree to accept by communicating the requested promise to
the offeree are
a. unilateral contracts
b. bilateral contracts
c. matching offer contracts
d. mirror image rules
10. When the terms of acceptance must exactly match the terms contained in the offer,
it is called
a. a unilateral contract
b. a bilateral contract
c. a matching offer contract
d. a mirror image rule.
11. A genuine agreement may be lacking due to
a. duress
b. fraud
c. undue influence
d. all of these
12. A mistake from failure to read a contract before signing is called
a. a fraudulent mistake
b. a mutual mistake
c. a unilateral mistake
d. none of these
13. Which of the following does not require mutual consideration?
a. an act
b. a gift
c. forbearance
d. a promise
14. Which of the following is not a part of consideration?
a. future performance
b. immediate performance
c. past performance
d. present performance
15. The statute of limitations specifies
a. the maximum amount of money one can receive on a claim
b. the time limit for bringing a lawsuit
c. the maximum amount of people who can file on the same claim
d. the time limit for consideration
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16. When consideration is provided to keep an offer open, it creates
a. a promissory estoppel
b. an option contract
c. a firm offer
d. none of these
17. An important exception to the general rule that mutual consideration is necessary
for a valid contract or binding promise is
a. promissory estoppel
b. option contract
c. firm offer
d. none of these
18. Parties who have special contractual rights are
a. minors
b. the intoxicated
c. the mentally incapacitated
d. all of these
19. In most states a minor can get back everything they gave even if
a. they are unable to return exactly what was received under the contract
b. the goods have been used or damaged
c. the goods have been lost, consumed, or destroyed
d. all of these
20. Some contracts of minors that cannot be disaffirmed are
a. court-approved contracts
b. enlistment in the armed services
c. educational loans
d. all of these
21. When the consideration by both parties has been given back, the contract is said to
be
a. disaffirmed
b. emancipated
c. necessary
d. ratified
22. The severance of the child-parent relationship is referred to as
a. disaffirmance
b. emancipation
c. ratification
d. none of these
23. Generally, a person lacking contractual capacity can disaffirm a contract for goods
and services that are not necessary
a. any time while still under the incapacity
b. within a reasonable time after attaining capacity
c. both a and b
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d. none of these
24. A contract made illegal by specific statute might involve
a. discrimination
b. usury
c. both a and b
d. none of these
25. When the court finds a contract illegal for unconscionability, it can
a. enforce the legal part and refuse to enforce the illegal part
b. refuse to enforce the contract
c. modify the terms of the contract to make it fair
d. all of these
26. The significance and classification of any breach is an issue of fact to be decided by
a. the parties involved
b. a panel of experts within that trade
c. a judge or jury
d. both a and b
27. The basic remedies for major breach of contract do not include
a. imprisonment
b. money damages
c. rescission and restitution
d. specific performance
28. Restitution is
a. permitting the injured party to recover money or property given to the
defaulting party
b. usually available when one party has delivered something of value to the
other in an attempt to contract
c. both a and b
d. none of these
29. Failure to perform a duty under a contract is a legal wrong, and even though there is
no actual injury, courts will award
a. compensatory damages
b. consequential damages
c. liquidated damages
d. nominal damages
30. An offer can be terminated by the offeror by
a. a counteroffer
b. revocation
c. both a and b
d. none of these
31. Remedies for fraud are
a. rescission
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b. damages
c. punitive damages
d. all of these
32. A promise may be enforced under the doctrine of promissory estoppel when
a. a person promises to do something that he or she is already obligated to do
by law
b. a person promises to do something that he or she is already obligated to do
by prior contract
c. someone intends a gift but consideration is not present
d. all of these
33. When there are conflicts between the typeset print and something typewritten or
handwritten, the contract is
a. determined by the later writings
b. determined by the original typeset print
c. unenforceable and void
d. inadmissible in court
34. In addition to discharge by complete performance, a contract may be discharged by
a. agreement
b. impossibility of performance
c. operation of law
d. all of these
35. One example of a debt that cannot be discharged under bankruptcy laws is a(n)
a. home mortgage loan
b. car loan
c. hospital bill
d. education loan
Section II – Apply Legal Practices
36. Dick had a verbal agreement with the Jones brothers to repair the barn for a specified
amount. The agreement was for half the money to be paid up front so supplies could be
purchased and the other half to be paid when the work was finished. After one week of
work, the Jones brothers never returned. Is a verbal agreement a binding contract?
Explain your answer.
37. Mary orders a box of Navel oranges and a box of Ruby Red grapefruit from the school
fundraiser. When her order came in, they had substituted regular grapefruit for the
Ruby Red grapefruit due to a lack of supply. Does Mary have to accept this substitution?
What can she do?
38. When it became clear that Dean’s parents needed someone to live in and help care for
them, Dean offered to do it. Within a month after moving in, he told his parents that he
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would continue to stay only if they signed all the real estate over to him and gave him
power of attorney on their bank accounts. Within four months after they did this, Dean
put his parents in a nursing home. Could this be considered undue influence? Could
there be cause for duress in this situation? Explain your answer.
39. Bruce told Meng that the motor had just been rebuilt in the truck he was selling to
Meng. Within four months after the purchase, the motor had to be replaced. Did Bruce
commit fraud? Explain your answer.
40. Jamie was failing in school. His father promised to give him $10 every time he received
an A on his report card. Jamie got excited and began studying. On his next report card,
he had three As. Was this a binding promise? Explain your answer.
41. Luisa combined her and Carol’s babysitting jobs for two weeks in January so Carol could
go on a skiing trip. In exchange, Carol promised to cover Luisa’s babysitting job for two
weeks in June so she could go to the beach. A day after Luisa arrived at the beach, she
returned home due to a hurricane coming ashore. She resumed her babysitting job once
home. Is Luisa still due consideration? Explain your answer.
42. Ling’s mother sells jewelry. Ling took the catalog to high school, and her friend Randi
ordered $200 worth of merchandise. When the merchandise was delivered, Randi
didn’t have the money to pay. Can she be forced to pay? Explain your answer.
43. George was doing some extensive landscaping and needed about three acres of Pete’s
property to completely finish the project. Pete agreed to sell George that portion of
ground, and they shook hands on it. After George had finished the project, which
included a paved driveway and a drainage system on the portion of land from Pete, Pete
insisted that because nothing was in writing, the property was still his. Can George get
title to the land in question? If he does not get title, can he recover his expenses for the
work he has done on it or will he have to pay damages for altering it?
44. Duane contracted with Eddy Brothers to have a new roof installed on his house. After
removing the old roof, the Eddy Brothers moved on to another job. However, they sent
the Ross Brothers to finish the roof. Within a year, the new roof was leaking. Who is
liable, Eddy Brothers, Ross Brothers, or both? Explain your answer.
45. Kathy had an agreement with the local medical group. The terms were that she would
work for them for two years at a specified rate after completion of her schooling to
repay their investment in her schooling. After working one year of her term, the clinic
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had to do some major cutbacks to offset rising medical costs. They cut her hours and
her rate of pay, making it impossible for her to repay her indebtedness within the two
years’ time. How does this affect her contract?
46. Beth saw a television ad promising a free "digital camera" to anyone who attended a
sales presentation at Rancho Relaxo Estates, a new condominium complex sited on the
bluffs above Newport Bay. Intrigued both by the prospect of a free camera and the
investment opportunity, she called the advertised 1-800 number and set up an
appointment. Sam, a Rancho Relaxo Estates salesperson, met her at the designated time.
Sam gave Beth a tour of the facilities and a glossy publication detailing the available
properties and their prices. Naturally enough, given his job, Sam touted the benefits of
investing in a condo and pressed Beth to "seize this great investment opportunity
immediately! These units won't last!"
"Wow," replied Beth, "It seems like an awfully important decision! Can you give me a
few days to decide?"
Sam, sensing that he risked losing the sale, smiled and said, "Of course! You've been so
nice to take the time to learn about Rancho Relaxo Estates, Beth, that I am willing to
hold my offer open for a few days. You're a smart woman, so I know you'll make the
right decision. I just want to make sure that you don't miss out on this great investment
opportunity."
Beth thought the matter over for some days, using the time to scrutinize her finances
and research the real estate market. Among other things, she learned that Rancho
Relaxo Estates was selling out pretty quickly. Finally, three days after she'd met with
Sam, she mailed him a letter indicating that she would like to buy a particular condo
she'd visited with him. She closed by asking him to call her, so that they could meet to
discuss financing.
After another week had passed, and her letter had received no response, Beth called
Sam. "I'm sorry, Beth, but things have been pretty crazy around here. Man, the market is
hot, hot, hot! The condo you wanted sold the day before I got your letter. I've still got
some similar units available, but you'll have to pay more; we raised our prices in
response to unprecedented demand."
Beth complained that Sam had promised her a few days to decide, but it availed her
nothing. "I can't sell what I don't have!" replied Sam. Then she remembered the digital
camera mentioned in the ad. "Of course," said Sam, "I'll send one right away." When
Beth got the camera, however, she discovered that it was a disposable camera that used
conventional film, called "digital" only because one had to use one's fingers to operate
it.
Analyze the rights and remedies of the parties under contract law.
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