Question 1

a. How does Article 2 of the UCC modify the common law of contracts with regard to consideration? 
b. Explain how output and requirements contracts differ from illusory promises.

Accepted Answer

The answer of a. How does Article 2 of the...

Question 2

Discuss the concept of adequacy of consideration.

Accepted Answer

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Question 3

Which of the following are the two basic elements to consideration?

Accepted Answer

The two basic elements to consideration are bargained-for exchange and legal sufficiency. Bargained-for exchange means that there is a mutual exchange of promises or performances between the parties. Legal sufficiency means that the consideration has some value in the eyes of the law. Choices B, C, and D are not correct because they either use incorrect terminology or do not capture both elements of consideration.

Question 4

Aunt Ellie promises her 21-year-old nephew, Robbie, that she will pay him $100 if he quits smoking for a month. If Robbie does, is there a binding contract?

Accepted Answer

By quitting smoking for a month, Robbie is giving up his legal right to smoke. This constitutes consideration, which is necessary for a binding contract to exist. Aunt Ellie's promise to pay $100 is the offer, and Robbie's quitting smoking is the acceptance. Therefore, there is a binding contract.

Question 5

Nancy, who lives in Birdville, wants to open a McHenry Roast Chicken franchise. Mark, a representative of McHenry, told Nancy, "If you will buy a lot and build a building in River City, we will give you a franchise." Nancy bought the lot and built the building as instructed only to discover that McHenry had awarded the franchise to a large corporation. McHenry claims no liability to Nancy since there was no consideration. Which statement best describes the situation?

Accepted Answer

McHenry is liable to Nancy based on the concept of promissory estoppel, which applies when a promise is made that the promisor should reasonably expect to induce action or forbearance on the part of the promisee, the promisee justifiably relies on the promise, and injustice can only be avoided by enforcing the promise. Nancy's actions were based on McHenry's promise, leading to her financial expenditure.

Question 6

Marilyn contracted with Bravo Builders to build an addition to her house for $15,000. After digging the foundation, Bravo decides that it will take more work and more concrete than it had originally thought and that it will need to charge an additional $5,000 for the job. Assuming Marilyn agrees, which of the following is correct?

Accepted Answer

This is a modification of a preexisting contract, which under common law must be supported by additional consideration on the part of Bravo Builders. In order for a modification to a contract to be enforceable, both parties must agree to the modification and receive some form of consideration (something of value) in exchange for the modification. In this case, Marilyn would be agreeing to pay an additional $5,000, but Bravo Builders would need to offer some form of additional consideration, such as additional work or materials, in order for the modification to be enforceable.

Question 7

Define consideration.

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Question 8

What transactions are enforceable even though they are not supported by consideration?

Accepted Answer

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Question 9

Sam owes $5,000 to the First National Bank for a student loan which will come due on January 1 next year. He has been offered a two-year graduate fellowship, but he will not be able to pay the loan back if he accepts the fellowship. The bank manager tells Sam that if he pays $3,000 now, they will forgive the loan. Should Sam accept the offer?

Accepted Answer

The early payment of the loan constitutes consideration, which is a necessary element for a valid contract. By offering to pay $3,000 now instead of the full $5,000 later, Sam provides something of value (consideration) in exchange for the bank's promise to forgive the remaining debt. This makes the agreement legally binding.

Question 10

Alice says to Brian, "If I decide to buy a digital camera next year, I will buy it from you." This is an example of:

Accepted Answer

An illusory promise is a statement that appears to assure a commitment or guarantee but upon closer examination, does not actually bind the party to any obligation or course of action. In this case, Alice's statement does not commit her to buying a camera; it merely states a possibility contingent on her future decision, making it an illusory promise.

Question 11

Ken, a research chemist, has been promised a fellowship with a stipend of $20,000 to do research on synthetic fuel oil. Under the terms of the fellowship, Ken is free to use the money as he sees fit. Ken decides to build his own laboratory, so he will not have to rent one. He hires a carpenter who begins working on shelving and cabinets in the laboratory. Then Ken receives a telegram saying the fellowship has been canceled. No reason is given for the cancellation. If Ken sues, will he be able to collect the money from the foundation which promised the fellowship? Explain your answer using legal terminology.

Accepted Answer

The answer of Ken, a research chemist, has been promised...

Question 12

Breton owes Parkerson $750, which is due on June 1. Discuss the sufficiency of consideration if Breton offers Parkerson:
(a) $600 in full settlement on June 1 if the debt is undisputed;
(b) $600 in full settlement on April 10 if the debt is undisputed; and
(c) $500 on June 1 to settle the debt if the amount of the debt is validly disputed.

Accepted Answer

The answer of Breton owes Parkerson $750, which is due...

Question 13

Mary agrees to sew Georgia's prom dress for $50 plus costs. Georgia decides that she wants ruffles around the neck and calls Mary who says it will now cost $60. When Mary finishes the dress (with ruffles), Georgia must pay:

Accepted Answer

The modified agreement is supported by additional consideration, which is the addition of ruffles. Therefore, Georgia must pay the new price of $60.

Question 14

William agrees to drill a well up to 200-feet deep for John's rural cabin. The contract price is $3,000. After drilling 100 feet, William strikes solid granite rock. He talks to John and explains that this is highly unusual for the area and could not have been anticipated at the time of entering into the contract. He offers to get a special drill, but says it will cost him more money, so that he will be unable to complete the project for the agreed price. Because John is anxious to have the well, he agrees to pay William an additional $1,000 to complete the job. However, once the well is finished, he changes his mind and now says he will pay only the originally agreed-upon amount. What is the result?

Accepted Answer

The parties effectively agreed to a substitute contract when John agreed to pay an additional $1,000 due to unforeseen circumstances (striking solid granite), which made the original contract terms impracticable. This new agreement supersedes the original contract, obligating John to pay the additional amount.

Question 15

There are certain transactions that require consideration in order to be enforceable. These include:

Accepted Answer

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Question 16

In a contract for the sale of lawn care services, an issue arises about whether the homeowner would receive disproportionately less in service than the lawn care company would receive in compensation. This disparity may be relevant to the:

Accepted Answer

Disproportionate compensation may be relevant to defenses and remedies such as unconscionability, which addresses unfair terms in a contract.

Question 17

Orwin, owner of a used furniture store, gives Maggie a signed offer to buy her living room furniture for $800. This offer:

Accepted Answer

Under the UCC, a signed written offer by a merchant to buy or sell goods is irrevocable for a reasonable time, not exceeding three months, even without consideration.

Question 18

Which of the following is not correct with regard to consideration?

Accepted Answer

Legal sufficiency of consideration means that something of legally sufficient value must be given in exchange for a promise. This is not the same as adequacy of consideration, which refers to the fairness of the bargain. The law does not require consideration to be adequate, as long as it is legally sufficient.

Question 19

In DiLorenzo v. Valve & Primer Corporation , the court held:

Accepted Answer

The court held that there was no consideration for the stock option, and promissory estoppel did not apply because DiLorenzo did not prove detrimental reliance.

Question 20

Herb promises to give his nephew, Curt, his old TV when the new one he ordered arrives. Explain whether this promise is enforceable, and include in your discussion the concept of "bargained-for exchange."

Accepted Answer

The answer of Herb promises to give his nephew, Curt,...

Quiz 12: Consideration

a. How does Article 2 of the UCC modify the common law of contracts with regard to consideration? b. Explain how output and requirements contracts differ from illusory promises.