Understanding Business and Personal Law

Unit 2: Entering Into Contracts

Entering Into Contracts

1.
One problem with the will theory of contract law is that
A)people lie when asked if they had exchanged things of equal value.
B)the courts tend to favor industrial capitalism and the profit-making system.
C)it is difficult to know what the parties were thinking when they entered into an agreement.
D)the courts tend to disagree on the form that a contract should assume.
2.
A genuine agreement exists when
A)when things of value are exchanged.
B)a valid offer is met by a valid acceptance.
C)a counteroffer is made to the original offeror.
D)one party proposes something to another.
3.
An offer of a reward is an example of a(n)
A)voidable contract.
B)unenforceable contract.
C)bilateral contract.
D)unilateral contract.
4.
To succeed in a lawsuit for fraud, there must be a(n)
A)relationship between the offeror and offeree.
B)written contract in place.
C)intentional misrepresentation of fact.
D)bilateral mistake in the contract.
5.
A unilateral mistake is
A)an excuse to avoid a contract.
B)one way to avoid fulfilling a contract.
C)an expectation that the contract will be rescinded.
D)an error on the part of one of the parties of the contract.
6.
Threats to a person's business or income causing a contract to be entered into without real consent is called
A)defective duress.
B)economic duress.
C)emotional duress.
D)physical duress.
7.
The age of majority is
A)the age of legal adulthood.
B)age 21 in most states.
C)when most states allow the purchase of alcoholic beverages.
D)one day after a person's 18th birthday.
8.
A minor who marries and gives up all rights to parental support is considered
A)ratified.
B)emancipated.
C)abandoned.
D)a minor.
9.
Ratification can only be accomplished
A)when both parties of the contract agree.
B)two weeks prior to the 18th birthday.
C)upon a minor reaching the age of majority.
D)when a business advertisement directly targets minors.
10.
If a mentally impaired person does not have a guardian, then
A)all his or her assets are frozen.
B)his or her contracts are voidable.
C)he or she has no rights as an adult.
D)the reasonable time clause has no effect.
11.
One type of consideration, known as forbearance, can be defined as
A)promising to give up something you have the legal right to keep.
B)giving up something you have the legal right to keep.
C)doing something that you have the legal right not to do.
D)not doing something that you have the legal right to do.
12.
If the parties to a contract cannot agree to the actual amount owed, the amount is said to be
A)in dispute.
B)an accord and satisfaction.
C)an unclaimed debt.
D)an accord without satisfaction.
13.
An agreement to meet a friend for dinner is not legally binding because
A)it is a promise for a future event.
B)there is no signed firm offer.
C)social engagements are considered illusory promises.
D)the friend has given nothing in exchange for the promise.
14.
If you enter into a contract with someone who is required to have a license but does not, the contract could be deemed
A)a conspiracy.
B)in situs.
C)a tort.
D)invalid.
15.
Price fixing
A)discourages competition and lowers prices.
B)discourages competition and raises prices.
C)encourages competition and lowers prices.
D)encourages competition and raises prices.
16.
A restrictive covenant is a(n)
A)efficient way to determine prices.
B)agreement that is generally not upheld in court.
C)promise not to compete.
D)example of price fixing.
17.
The purpose of the Statute of Frauds is to
A)require that certain contracts be in writing.
B)provide the court the ability to void an illegal contract.
C)avoid contracts that take more than a year to perform.
D)provide an enforceable contract for the purchase of items that cost less than $500.
18.
The following types of contracts must be in writing:
A)contracts to pay the debts of others, contracts requiring less than a year to perform, and contracts in consideration of marriage.
B)contracts to pay the debts of others, contracts requiring more than a year to perform, and contracts for the sale of goods valued at $500 or more.
C)contracts involving union representation, contracts requiring less than a year to perform, and contracts for the sale of goods valued at $500 or more.
D)contracts in consideration of marriage, contracts involving equitable estoppel, and contracts for the sale of goods of $500 or more.
19.
Parol evidence may be introduced to show that
A)the Statute of Frauds does not apply in a certain situation.
B)the particular contract did not need to be in writing.
C)certain terms were agreed to but incorrectly typed in the contract.
D)photocopies are the only copies available.
20.
A tender is
A)an offer to do what you have agreed to do under the contract.
B)the ability to bring suit against a party who did not fulfill the terms of the contract.
C)a required amount of money stated in the contract.
D)a debt that is excused when the debtor dies.
21.
Accord and satisfaction is often used to
A)mutually release both parties from the contract.
B)allow one party to pay money instead of the performance required in the contract.
C)settle an honest agreement about an amount owed.
D)discharge a contract for impossibility of performance.
22.
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.
23.
The transfer of a duty under a contract is called a(n)
A)delegation.
B)novation.
C)assignment.
D)privity of contract.
24.
If you fail to perform the duties set out in the terms of the contract,
A)incidental damages will be owed.
B)a breach of contract will occur.
C)an injunction will be issued.
D)an equitable remedy will be owed.
25.
The remedy of specific performance can only be used when
A)money damages are not sufficient to give relief.
B)a party is prevented from performing an act of some sort.
C)there is a mitigation of damages.
D)actual damages are greater than incidental damages.
26.
People can enter into an implied contract without ever saying a word.
A)TRUE
B)FALSE
27.
A billboard promoting a new car for sale is considered an offer to enter into a contract.
A)TRUE
B)FALSE
28.
When a counteroffer is made, the original offeror is still obligated to accept.
A)TRUE
B)FALSE
29.
To be held accountable for fraud, the party making the false representation must know it is false.
A)TRUE
B)FALSE
30.
When a unilateral mistake is made, the contract can usually be avoided.
A)TRUE
B)FALSE
31.
An example of undue influence is the requirement of a merchant to pay a fee for "protection."
A)TRUE
B)FALSE
32.
If a minor misrepresents his or her age, then he or she has committed fraud.
A)TRUE
B)FALSE
33.
Contracts made by minors are not voidable by the minor.
A)TRUE
B)FALSE
34.
Many states give minors the capacity to enter into contracts for car insurance and life insurance.
A)TRUE
B)FALSE
35.
The courts enforce charitable pledges just as if they were contracts.
A)TRUE
B)FALSE
36.
Under the doctrine of promissory estoppel, a promise may be enforceable without consideration.
A)TRUE
B)FALSE
37.
The courts will enforce promises of future gifts even if there is no consideration.
A)TRUE
B)FALSE
38.
In pari delicto means that one party knows that a contract is illegal, while the other party thinks it is legal.
A)TRUE
B)FALSE
39.
Charging more than the maximum legal interest rate is usury.
A)TRUE
B)FALSE
40.
Any contract that tries to influence your representatives in Congress to use their position for private gain is unenforceable.
A)TRUE
B)FALSE
41.
The Statute of Frauds pertains to all contracts.
A)TRUE
B)FALSE
42.
Contracts requiring less than a year to perform do not have to be in writing.
A)TRUE
B)FALSE
43.
If you don't understand something in a contract, cross it out before you sign it.
A)TRUE
B)FALSE
44.
A mutual release is an agreement between two parties to accept substantial performance of the contract.
A)TRUE
B)FALSE
45.
If you hired an artist to paint your picture and he died before the portrait was complete, the contract would be discharged.
A)TRUE
B)FALSE
46.
The statute of limitations for failure to perform contracts for the sale of goods is four years in most states.
A)TRUE
B)FALSE
47.
Consideration is necessary for an assignment to be valid.
A)TRUE
B)FALSE
48.
A delegation is a transfer of rights to another party.
A)TRUE
B)FALSE
49.
A novation is an agreement whereby an original party to a contract is replaced by a new party.
A)TRUE
B)FALSE
50.
The two chief equitable remedies are specific performance and mitigation of damages.
A)TRUE
B)FALSE
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