Test #2 – Chapter 8-10, 14
Study Guide - BUS 121 - Test Date: 25 September – 2 October
Chapter 8
1. As a general rule, when is revocation effective?
When it is received by the offeree.
2. When acceptance is examined under the common law, how do the basic requirements for a valid
acceptance compare with those for a valid offer?
The basic requirements for a valid acceptance parallel those for a valid offer.
3. Which of the following are the two most important sources of contract law?
Case law and Uniform Commercial Code
4. Which of the following is true regarding when an offer may be rejected by an offeree?
Regardless of how long an offeror states that an offer will be held open, once the offeree
rejects is, the offer is terminated.
5. If nothing is stated to the contrary in terms of an auction, an auction is presumed to be ______.
With reserve
6. In which of the following ways may an offeree accept a unilateral contract?
By performance
7. Silence can be an acceptance when the offeree receives the benefits of the offered services with
reasonable opportunity to reject them and knowledge that some form of compensation is
expected, but remains silent.
True
8. Constance asks Kathy if Kathy will sell her used business book for $50. What is the status of the
negotiations?
No offer has been made
9. Under common law, when does formation of an agreement begin?
When the offeror makes an offer to the offeree
10. Which of the following is the first element of a contract?
An agreement
11. If a person wishes to ensure that an offer will in fact be held open for a set period of time, the
person may do so by entering into a[n] ______ contract.
Option
12. Any contract that is not a formal contract is an informal contract, also called a simple contract.
True
13. Which of the following is presumed to be a reasonable amount of time when considering whether
an offer has expired?
There is no set amount of time, and what constitutes a reasonable amount of time varies
depending on the subject matter of the offer
14. Which of the following provides that an acceptance is valid when it is placed in the mailbox?
The Mailbox Rule
15. An offeror has no right to terminate an offer.
False
16. The law of contracts is primarily ______ law.
Common
17. Whether a contract is bilateral or unilateral depends upon what response the offeree expects from
the offeror.
False
18. If an acceptance is received after a rejection is received, the acceptance is still valid.
False
19. All contracts can be categorized as either ______ or ______ contracts.
Unilateral or bilateral
20. The ______ terms of a contract are those terms that would allow a court to determine what the
damages would be in the event that one of the parties breaches the contract.
Material
Chapter 9
1. Which of the following is a true statement of a requirements contract under common law?
It is not valid because of the lack of consideration
2. Which of the following is what a person will receive in return for performing a contractual
obligation?
Consideration
3. Sam, who has a retail clothing store, orders 50 white shirts from XYZ manufacturer. He later
calls a representative of XYZ and requests that blue shirts be sent instead. The representative
agrees. Sam gets white shirts and complains. The XYZ representative says that blue shirts are
more expensive because they are in greater demand and that there was no consideration for the
modification to the contract. Which of the following is the correct resolution of the dispute?
Sam is correct because under the UCC no additional consideration was needed
4. An unliquidated debt may be the subject of an accord and satisfaction.
True
5. Which of the following is true regarding past consideration?
It is not consideration that will support a binding contract
6. Consideration is optional in every contract.
False
7. Which of the following occurs when one party makes a promise knowing the other party will rely
on it, the other party does rely on it, and the only way to avoid injustice is to enforce the promise?
Promissory estoppel
8. Which of the following is true under the UCC regarding checks marked “paid-in-full”?
If a business inadvertently cashes such a check, the business has 90 days from the date it
cashed that check to offer repayment in the same amount to the debtor and avoid an accord
and satisfaction
9. Which of the following is an exception to the rule requiring consideration?
Promissory estoppel
10. An illusory promise is not consideration.
True
11. For a court to enforce a promise, ______ must offer consideration.
The offeror and offeree
12. Yolanda agrees to bathe and groom Wendy's dog, Fluffy, for $20. Yolanda agreed to the price
before seeing Fluffy, a very plump, grouchy Pembroke Welsh Corgi dog with lots of hair.
Yolanda tells Wendy that if she is going to groom Fluffy, the price will be $30. Wendy agrees
although noting that the dog is named "Fluffy." Yolanda bathes and grooms Fluffy, but Wendy
will only pay $20. Which of the following is correct regarding Yolanda's entitlement to the extra
$10?
Assuming the unforeseen circumstances rule is inapplicable, Yolanda is not entitled to the
extra $10 because she had a preexisting duty to bathe and groom Fluffy for $20.
13. A[n] ______ contract is an agreement whereby the buyer agrees to purchase all his goods from
one seller.
Requirement
14. Which of the following is true of an output contract under common law?
It is not valid because of the lack of consideration
15. Past consideration, as a rule, qualifies as consideration.
False
16. Which of the following would not be considered as an example of consideration?
A promise to pay your employees as required by law
17. A promise to do something that you are already obligated to do is generally valid consideration.
False
18. Which of the following are reasons for disregard of the preexisting-duty rule?
Unforeseen circumstances and additional work, but not past consideration
19. In a[n] ______ debt, there is no dispute about the fact that money is owed and the amount of
money owed.
Liquidated
20. Courtney, who does not keep up with the price of current technology, agrees to buy a used
computer from Jake for $2,500. Later, Jake tells Courtney that she made a really bad deal and that
she could get an even better new computer for no more than $1,000. Courtney tells Jake that she
is not giving him any money because he was not fair with her. Which of the following is the most
likely result if Jake sues Courtney alleging breach of contract?
Jake will win because the court would not weigh whether a good bargain was made
Chapter 10
1. If a person’s mental deficiencies have resulted in his being adjudicated insane and a guardian has
been appointed for him, he has no capacity to enter into contracts, and any contract he attempts to
enter is void.
True
2. Guardians may be appointed for which of the following?
Those who are adjudicated insane, those whose judgment has been impaired because of a
condition such as Alzheimer’s, and also those who are adjudicated habitual drunkards
3. Which of the following is true regarding the ability of persons suffering from a mental illness to
enter into a contract?
Persons suffering from a mental illness may have full, limited, or no legal capacity to enter
into a binding contract depending on the nature and extent of their mental deficiency
4. Under federal law parents are responsible for the torts of their minor children without any
showing of lack of supervision on the part of the parents.
False
5. Which of the following occurs when a person reaches the age of majority and states, either orally
or in writing, that he or she intends to be bound by the contract entered into as a minor.
Express ratification
6. Exculpatory clauses are illegal as a matter of law.
False
7. For purposes of determining capacity, intoxicated persons include those under the influence of
alcohol, but not drugs.
False
8. Historically, which of the following were considered people with limited or no capacity?
Minors, insane persons, and women
9. Which of the following is true if a contract is disaffirmed on the basis of intoxication?
Each party to the contract must return the other to the condition he or she was in at the
time the contract was entered into
10. Which of the following is a term for laws that limit the types of business activities in which
parties may legally engage on Sundays?
Sabbath and blue laws, but not true laws
11. A party who claims that he or she could not understand contractual terms because of tiny, hardto-read print on the back of an agreement and the excessive use of legalese is referred to as which
of the following?
Procedural unconscionability
12. In the law, when both parties are equally responsible for an illegal agreement is known as in pari
delicto.
True
13. Which of the following is false regarding contracts for necessaries entered into by minors?
A minor cannot disaffirm contracts for necessities
14. How many states have statutes requiring that people working in certain professions obtain a
license before practicing their craft?
50
15. When must a disaffirmance of a contract based on minority occur?
Before or within a reasonable time of the minor’s reaching the age of majority
16. The term ______ refers to the fact that an agreement is so unfair that it is void of conscience.
Unconscionable
17. Which of the following occurs when a party gives a loan at an interest rate exceeding the legal
maximum?
Usury
18. In most states a person is given full legal capacity to enter into contracts when he or she becomes
______ before reaching the age of majority.
Emancipated
19. Which of the following is true in regard to how Chinese law treats contracts entered into by
minors?
Children between ten and eighteen are deemed competent for entering into certain
contracts appropriate to each child’s mental state
20. A statement releasing one of the parties to an agreement from all liability, regardless of who is at
fault or what the injury suffered is, would be referred to as a[n] ______.
Exculpatory
Chapter 14
1. Identification of when the risk of loss attaches is important in regards to the right of
indemnification for damaged goods.
True
2. Under Article 2(A) of the UCC which of the following is defined as a transfer of the right to
possession and use of goods for a term in return for consideration?
A lease
3. What did the court rule on appeal in Alfonso Candela v. Port Motors, Inc., the case in the text in
which the plaintiff sued the defendant for breach of warranty of title claiming that he was sold a
stolen car?
That a defendant selling stolen goods, regardless of good faith, can never pass a voidable or
good title to the buyer
4. Which of the following are considered goods under the UCC?
Minerals taken from real estate and sold by the owner and soil taken from the real estate
and sold by the owner, but not the right, sold by the owner to another party, to remove soil
from the real estate
5. Which of the following occurs when goods are delivered to a buyer via a common carrier, such as
a trucking line?
A common-carrier delivery contract
6. Under Article 2(A) of the UCC, a ______ is a person who acquires the right to possession and use
of goods under a lease.
Lessee
7. Under the UCC, how may an acceptance be made?
By any reasonable means of communication
8. Which of the following articles of the UCC governs sales and contracts?
2
9. Which of the following are types of conditional contracts?
Sale-on-approval contracts and sale-or-return contracts, but not condition-on-sale contracts
10. A contract that combines goods with a service is a ______ sale.
Mixed
11. Which of the following does a seller have in order to indicate ownership of goods when goods are
in some kind of storage so the seller cannot transfer physical possession of them?
Either a negotiable document of title, a nonnegotiable document of title, or a contract or
other instrument showing ownership that is not a negotiable or nonnegotiable document of
title
12. Which of the following occurs when the purchased goods are transferred to the buyer from the
seller at either the time of the sale or some time later by the seller’s delivery?
A simple delivery contract
13. In a conditional sales contract, a ______ occurs when the seller and buyer agree that the buyer
may return the goods at a later time.
Sale-or-return contract
14. All states, except Louisiana, follow the ______ common law.
English
15. Which of the following applies when Article 2 is silent on an issue of sales contract formation or
interpretation and there is no state statutory law in place of that matter?
Common law rules
16. Which of the following is true if an owner entrusts the possession of goods to a merchant who
deals in goods of that kind?
The merchant can transfer all rights in the goods to a buyer in the ordinary course of
business
17. The UCC requires that consideration be provided for the modification of a contract.
False
18. The UCC pertains to all business transactions.
False
19. The UCC does not recognize the concept of unconscionability.
False
20. If a buyer and seller execute a contract and the seller subsequently places the goods with a
common carrier for delivery to the buyer, the parties have executed a common-carrier delivery
contract.
True