Reference no: EM13789807

Part A:

1) Common law as a source of law for contracts:

a. comes primarily from federal law

b. comes exclusively from state law

c. comes exclusively from federal law

d. comes primarily from state law

e. comes equally from state and federal law

2) A contract is formed by the performance of the requested act in what kind(s) of contract?

a. bilateral

b. unilateral

c. both A and B

d. neither A nor B

3) What is required for a contract to be an express contract?

a. It is written.

b. Agreement has been inferred.

c. It is written and signed.

d. It is performed immediately after formation.

e. It is performed for mutual benefit.

4) What kind of contract is based on the conduct of the parties?

a. express

b. action-oriented

c. implied-in-fact

d. implied-in-law

e. quasi-contract

5) Under the objective theory of contracts, a contract could result from an offer made:

a. in jest

b. in anger

c. due to a need to sell an item quickly

d. due to undue excitement

6) What is the distinguishing characteristic that makes a contract a formal contract?

a. a signature by both parties

b. the contract being in writing

c. a legal requirement that the contract be in a specific form

d. all possible scenarios are addressed in the contract terms

7) Otto approaches Edie and says, "If you pick up my new suit for me at the mall tomorrow, I'll pay you $20." Edie replies, "I don't know if I'll have time to get it, but I'll see if I get a chance." As a result of this conversation, which of the following is true?

a. Otto and Edie have formed a bilateral contract.

b. Edie has a legal obligation to use her best efforts to pick up the suit.

c. A contract will be formed only if Edie picks up the suit.

d. The contract which they have formed is voidable because Edie did not obligate herself.

8) Tim and his boss conspire by contract to cheat the IRS out of money. The boss later changes her mind. What is the status of the contract with respect to Tim?

a. It is a valid contract.

b. It is a void contract.

c. It is a voidable contract.

d. It is a unenforceable contract.

9) Chad is sixteen years old. He went to a local used-car dealership and looked at an automobile. The salesperson never asked Chad his age, nor asked for identification. Chad agreed to purchase the vehicle, and then shortly thereafter changed his mind. What is the status of the contract with respect to Chad?

a. It is an illegal contract.

b. It is a void contract.

c. It is a voidable contract.

d. It is a valid contract.

10) Which of the following are necessary to meet the requirements of a definite offer?

a. identification of the parties, subject matter, and quantity

b. consideration to be paid

c. time of performance

d. A, B, and C

e. A and B only

11) In general, who can effectively accept an offer for a unilateral contract?

a. Any person who performs the action requested in the offer, which can occur either before or after learning of the offer.

b. Any person who performs the action requested in the offer, so long as the offer had been communicated to that person prior to the performance of the act.

c. Any person who promises to perform the action requested in the offer, which can occur either before of after learning of the offer.

d. Any person who promises to perform the action requested in the offer, so long as the offer had been communicated to that person prior to the making of the return promise.

12) Which of the following will not generally automatically terminate an open offer?

a. death of the offeror

b. death of the offeree

c. changed economic circumstances

d. destruction of the subject matter of the contract

e. supervening illegality of the object of the contract

13) The mailbox rule means which of the following?

a. Offers and acceptances must be communicated through the mail in order to be effective.

b. Offers and acceptances are effective when placed in the mail.

c. A properly dispatched acceptance is effective even if the offeror never receives it.

d. A revocation is effective when sent.

14) Sandy notices a dog tied to a chain behind a fence and recognizes it as belonging to an acquaintance who lives a couple of blocks away. Sandy goes to the acquaintance's house and says, "Your dog is tied up in someone's yard, and for $100 I will tell you where." The dog's owner says, "No way! I can't believe you won't simply tell me where the dog is!" The dog's owner drives around the neighborhood and finds the dog and retrieves it. The next day Sandy notices an advertisement in the paper where the owner offered a reward of $200 for information leading to the return of her dog. Sandy is:

a. entitled to $100 because she made a counteroffer to the $200 reward offer, thereby lowering the amount she can claim

b. entitled to $200 solely because she gave the dog's owner information leading to the return of the dog

c. entitled to the $200 because she offered to pay money and the reward offer was outstanding

d. not entitled to any money because she rejected the original offer and the dog's owner did not accept Sandy's counteroffer

e. not entitled to any money because Sandy did not have prior knowledge to any reward

15) Susan offered to sell her couch to Martin for $200. Martin said that $200 was too much, but that he would give her $125. Susan said no. Then, Martin said that he would pay Susan the entire $200.

a. Martin has accepted Susan's original offer.

b. Martin's statement that he would give Susan $125 was a rejection of Susan's original offer.

c. Martin's statement that he would give Susan $125 was an offer by Martin.

d. A and C only are true.

e. B and C only are true.

16) Which is true about consideration?

a. A legal detriment must be suffered.

b. A benefit must be received.

c. A legal benefit must be received or legal detriment must be suffered.

d. Each party must suffer a legal detriment.

17) "Legal detriment" in the context of consideration means:

a. giving up an existing legal right

b. taking on a new legal duty

c. giving up an existing legal right or taking on a new legal duty

d. being found guilty in a criminal case

e. getting the short end of the deal in a contract

18) The requirement that consideration be bargained-for means that:

a. the consideration in a contract must be exchanged simultaneously

b. the values of the consideration cannot be greatly different between parties

c. the inducement for each party to give consideration was the consideration of the other party

d. one party determines the consideration to be given by each party

19) Which of the following constitutes legal consideration?

a. a promise to make a gift

b. a promise based upon a change in duties and payments

c. a promise based upon a moral obligation

d. a promise based upon past consideration

e. a promise based upon a preexisting duty

20) Shirley promised Jill that she would give her $50,000 if she won the lottery. Shirley later won the lottery and gave Jill $50,000. Shirley later changed her mind and demanded the money back. What happened?

a. Shirley had to give the money to Jill because she promised it in certain terms and Jill was willing to accept.

b. Shirley did not have to give the money, but once she did, Jill did not have to return it.

c. Shirley had to give the money, but Jill had to return it when Shirley asked that she do so.

d. Shirley did not have to give Jill the money, and Jill had to return it.

21) The main purpose for making contracts involving minors voidable at the minor's option is:

a. to protect the minor from unscrupulous adults

b. to reduce the amount of litigation in the courts

c. to support the policy of not enforcing gift promises.

d. to punish adults for entering into contracts with minors

e. to prevent minors from entering into contracts

22) A computer retailer sells some computer games to a minor. This contract is:

a. unenforceable

b. voidable

c. void

d. enforceable

23) The contract of a person who has been adjudicated insane, but enters into a contract during a lucid interval, is:

a. void

b. voidable by the insane person

c. voidable by either party

d. unenforceable

e. valid

24) A minor, unable to live at home, contracts to rent an apartment for one year at $600 per month. After living there for three months, he disaffirms the contract. The reasonable value of that apartment was only $500 per month. Assuming no rent has been paid, the minor must pay which of the following?

a. Nothing; the contract has been disaffirmed.

b. $1,800; the contract rate for three months.

c. $1,500; the reasonable value for three months.

d. $7,200; the contract rate for one year.

e. $6,000; the reasonable rate for one year.

25) Julie buys an auto from John when she is 17. When she turns 21, Julie decides that she does not want the automobile. The age of majority in Julie's state is 18. Can Julie disaffirm this contract?

a. Yes; all contracts made while a minor may be disaffirmed.

b. Yes; Julie has a "reasonable time" after reaching majority to disaffirm this contract, and she acted within a "reasonable time."

c. No; Julie had a "reasonable time" within which to disaffirm the contract, but a "reasonable time" has passed.

d. No; to disaffirm the contract, Julie must have acted before she turned 18. Now it is too late.

Part B:

1) Which type of contract, bilateral or unilateral, is more common in business? Why? Under what circumstance would someone prefer one or the other? What are the advantages of each type for the offeror? For the offeree?

2) What problems in connection with offer and acceptance might arise in an online auction situation? Are there any rules that could address these?

3) Ginger is a Certified Public Accountant in practice by herself in Centerville. She merges her practice with that of Heap, Big, and Co. Part of the merger agreement states that if Ginger should ever leave Heap, Big, and Co., she promises not to practice public accounting in Centerville for a period of five years after leaving. Discuss the requirements for a valid covenant not to compete and discuss whether or not this particular covenant is enforceable.