Question 1

An _____ contract is one that is partially or completely unperformed.
A) executed
B) executory
C) express
D) exculpatory
E) unenforceable

Accepted Answer

When the parties have not yet performed their agreement, it is called an executory contract.

Question 2

In case an offeror withdraws his/her offer, it is called _____.
A) rejection
B) reversion
C) novation
D) revocation
E) triangulation

Accepted Answer

When an offer terminates, the offeree's legal power to bind the offeror ends. An offer can terminate by the offeror's revocation which refers to withdrawing of an offer by its offeror. "I regret to inform you that I am withdrawing my offer."Refer To: Sidebar 8.4

Question 3

Aria phones Jessica and asks if she can borrow one of her dresses for an office party that weekend. Jessica agrees to this. However, when Aria goes to pick up the dress, Jessica refuses to give it to her. Which of the following statements is true of this situation?
A) Jessica has committed a breach of contract.
B) A bargained-for exchange has not occurred, so Jessica does not have to loan Aria the dress.
C) Jessica has promised Aria something of value, so she must loan her the dress.
D) A bargained-for exchange has occurred, so Jessica must loan Aria the dress.
E) Jessica has given a valid consideration, making the agreement between her and Aria a binding contract.

Accepted Answer

An important part of consideration is that it must be bargained for. Since Aria has not promised anything in return for Jessica, Jessica need not give the dress to Aria.

Question 4

Victor Enterprise Inc. writes a letter dated August 1 to Hallway Stores, offering to sell table lamps to Hallway Stores at $80 each for the next one month. In mid August, Victor Enterprises receives an offer from Shine Retailers to purchase the table lamps at a price of $85 each. Can Victor withdraw its offer to Hallway Stores?
A) Yes, as this is only an option.
B) No, since the doctrine of promissory estoppel is applicable.
C) Yes, the offer was simply an invitation to negotiate.
D) No, as this is a firm offer.
E) Yes, the offer may be withdrawn since it lacks consideration.

Accepted Answer

Under the UCC, the rules of consideration also do not apply to a firm offer. A firm offer exists when a merchant offering goods promises in writing that the offer will not be revoked for a period not to exceed three months. This promise binds the merchant, although the offeree buyer gives no consideration to support it. Refer to sidebar 8.7.

Question 5

Brett offers to sell his old, but working, cell phone to James for $65. James says he will accept the offer if Brett lowers the price to $60. James has:
A) made an unequivocal acceptance.
B) made a counteroffer.
C) demonstrated the mirror image rule.
D) entered into an option contract.
E) entered into an executory contract.

Accepted Answer

If the acceptance changes the terms of the offer or adds new terms, it is not really an acceptance but a counteroffer A counteroffer is also a rejection: "Your offer of $10,000 for the land is too low. I will sell it to you for $12,500."Refer To: Sidebar 8.4

Question 6

The deposited acceptance rule is also known as the _____ rule.
A) mirror image
B) mailbox
C) unilateral
D) bilateral
E) negotiation

Accepted Answer

Unless the offeror specifies a particular time, the acceptance usually binds the parties when the offeree dispatches it. Since the offeree frequently mails the acceptance, the acceptance becomes binding when it is "deposited." Hence the deposited acceptance rule is also called the mailbox rule. Since the offeree frequently mails the acceptance, the acceptance becomes binding when it is "deposited" with the postal service-hence the deposited acceptance rule, also called the mailbox rule.

Question 7

Josh's dog, Ginger, has run away so Josh places reward posters throughout the neighborhood offering $500 for anyone who brings Ginger home safely. Amanda, Josh's colleague sees Ginger and brings her back to Josh without ever seeing a poster. After returning the dog, Amanda then sees one of the reward posters and returns to claim the money. Which of the following is true of this situation?
A) Amanda is not entitled to the money because the offer was not communicated to her.
B) Amanda is not entitled to the money because she is Josh's colleague and acted in good faith.
C) Amanda is entitled to the money because the poster constituted an offer and is effective for the entire neighborhood.
D) Amanda is entitled to the money since performance of the requested act in the poster indicates acceptance.
E) Amanda is not entitled to the money since she did not communicate the acceptance of offer in writing.

Accepted Answer

Unilateral contracts are accepted by performing a requested act, not by making a promise.

Question 8

Valid consideration can include any promise to do something one has no obligation to do, refrain from doing something one has the right to do, or in the case of a unilateral contract, a performance when there is no obligation to do so. This is called as a(n) _____.
A) accord
B) legal detriment
C) release
D) negotiation
E) promissory estoppel

Accepted Answer

Valid consideration can include any promise to do something one has no obligation to do, refrain from doing something one has the right to do, or in the case of a unilateral contract, a performance when there is no obligation to do so. That is the definition of a legal detriment.

Question 9

According to the mirror image rule, _____.
A) the acceptance must exactly match the offer
B) to be enforceable, a contract must be accepted in writing by both the parties involved
C) the acceptance of an offer involves changing the terms of offer or adding new terms
D) terms of contract must be definite to be clear and enforceable
E) the contract becomes enforceable by performing a requested act, not by making a promise

Accepted Answer

For an acceptance to create a binding contract, standard contract law requires that the acceptance must "mirror" the offer, that is, must match it exactly. This is the mirror image rule.

Question 10

Mayra offers to sell her home to Hanna for "about $100,000 plus closing costs." Hanna accepts Mayra's offer but later, a dispute arises concerning the precise dollar amount of the purchase price. How will a court resolve this dispute?
A) The court will determine a reasonable price to be paid by Hanna.
B) The court will determine that Hanna pay only the figures mentioned in the contract.
C) The court will appoint a licensed real estate appraiser to determine the price to be paid by Hanna.
D) The court will require Hanna to pay the average of her price and Mayra's price.
E) The court will declare the purchase price and terms too indefinite to create a binding contract.

Accepted Answer

Under the common law of contracts, contractual terms must be definite and specific. An offer to purchase a house at a "reasonable price" cannot be the basis for a contract because of indefiniteness.

Question 11

Robert is about to graduate from his university and his parents tell him that because he is the first member of the family to graduate college, they want to buy him a new but inexpensive car. They have the money to buy the car and Robert is excited to get his gift. On graduation day, his parents tell him that they have decided to use the car money for a vacation and there will be no car.
A) Robert can successfully sue based on promissory estoppel.
B) Robert can successfully sue based on the promise of a gift.
C) Robert cannot sue because the promise was not reasonable and would not support promissory estoppel.
D) Robert cannot sue because he did not suffer any legal detriment in the receipt of the promise.
E) Robert can sue since the promise is his legal benefit and he suffered legal detriments.

Accepted Answer

Promises to make gifts are not binding, because no bargained-for consideration supports the promise.

Question 12

In contracts that are not between merchants selling goods, a promise to keep an offer open for a certain time period must be supported by the offeree's consideration. Such an agreement to not revoke an offer is called a(n) _____.
A) firm offer
B) option
C) promissory estoppel
D) novation
E) assignment

Accepted Answer

In contracts that are not between merchants selling goods, a promise to keep an offer open for a certain time period must be supported by the offeree's consideration. Such agreement to not revoke an offer is called an option.

Question 13

According to the mailbox rule:
A) a contract is formed when the offer is mailed.
B) a contract is formed when the offer is received.
C) a contract is formed when the acceptance is received.
D) a contract is formed when the acceptance is mailed.
E) a contract is formed when the offer is converted in a written document.

Accepted Answer

Unless the offeror specifies a particular time, the acceptance usually binds the parties when the offeree dispatches it. Since the offeree frequently mails the acceptance, the acceptance becomes binding when it is "deposited" with the postal service-hence the deposited acceptance rule, also called the mailbox rule.

Question 14

A(n) _____ contains a specific promise and a specific demand.
A) consideration
B) revocation
C) offer
D) capacity
E) novation

Accepted Answer

An offer contains a specific promise and a specific demand.

Question 15

An important exception to the rule requiring consideration to support a promise is the doctrine of _____. This doctrine arises when a promisee justifiably relies on a promisor's promise to his or her economic injury.
A) firm offer
B) consideration
C) termination
D) promissory estoppel
E) accord and satisfaction

Accepted Answer

The doctrine of promissory estoppel arises when a promisee justifiably relies on a promisor's promise to his or her economic injury.

Question 16

A(n) _____ contract is an agreement when one party has the right to withdraw from the promise made without incurring any legal liability.
A) executory
B) voidable
C) void
D) implied-in-fact
E) reciprocal

Accepted Answer

A voidable contract is an agreement when one party has the right to withdraw from the promise made without incurring any legal liability.

Question 17

Brandie is facing financial difficulties. Warren wants to help Brandie and tells her that he will pay her $1,000. But afterwards Warren refuses to pay the promised money to Brandie. Which of the following statements is correct?
A) Brandie is entitled to the payment because a promise is made and consideration has nothing to do with the agreement.
B) Warren need not pay Brandie because Brandie did not promise anything in return.
C) Warren must pay the money to Brandie because by promising her the money he has entered into an implied-in-fact contract.
D) Warren does not have to pay because of the mirror image rule.
E) Warren must pay the money to Brandie because by promising her the money he has entered into an executory contract.

Accepted Answer

All promises are not enforceable through legal action. There must be some incentive or inducement for a person's promise or it is not binding consideration,

Question 18

There must be some incentive or inducement for a person's promise or it is not binding. The legal mechanism for evaluating the existence of this incentive is "_____" which refers to the receipt of a legal benefit or the suffering of a legal detriment.
A) collusion
B) promissory estoppel
C) consideration
D) reversion
E) novation

Accepted Answer

There must be some incentive or inducement for a person's promise or it is not binding. The legal mechanism for evaluating the existence of this incentive is "consideration" which refers to the receipt of a legal benefit or the suffering of a legal detriment.

Question 19

Which statement is true concerning silence as a method of acceptance?
A) An offeree's silence implies that the offree will make a counter offer.
B) Parties' prior course of dealing may allow silence as a valid acceptance.
C) If the offer states that silence means acceptance, then the offeree must respond or there will be a valid contract.
D) Silence alone can be acceptance and basis of a binding contract.
E) Silence leads to acceptance of an offer due to the mirror image rule.

Accepted Answer

Silence may well imply acceptance if the parties previously dealt with each other by having the buyer take shipments from the seller unless the buyer notified the seller in advance not to ship.

Question 20

Under the UCC, the rules of consideration also do not apply to _____.
A) real estate sales
B) service contracts
C) firm offers
D) employment contracts
E) an option

Accepted Answer

Refer to sidebar 8.7. Under the UCC, the rules of consideration also do not apply to a firm offer. A firm offer exists when a merchant offering goods promises in writing that the offer will not be revoked for a period not to exceed three months.

Quiz 8: Contract Formation

An _____ contract is one that is partially or completely unperformed.

In case an offeror withdraws his/her offer, it is called _____.

Aria phones Jessica and asks if she can borrow one of her dresses for an office party that weekend. Jessica agrees to this. However, when Aria goes to pick up the dress, Jessica refuses to give it to her. Which of the following statements is true of this situation?

Brett offers to sell his old, but working, cell phone to James for $65. James says he will accept the offer if Brett lowers the price to $60. James has:

The deposited acceptance rule is also known as the _____ rule.

Valid consideration can include any promise to do something one has no obligation to do, refrain from doing something one has the right to do, or in the case of a unilateral contract, a performance when there is no obligation to do so. This is called as a(n) _____.

According to the mirror image rule, _____.

Mayra offers to sell her home to Hanna for "about $100,000 plus closing costs." Hanna accepts Mayra's offer but later, a dispute arises concerning the precise dollar amount of the purchase price. How will a court resolve this dispute?

In contracts that are not between merchants selling goods, a promise to keep an offer open for a certain time period must be supported by the offeree's consideration. Such an agreement to not revoke an offer is called a(n) _____.

According to the mailbox rule:

A(n) _____ contains a specific promise and a specific demand.

An important exception to the rule requiring consideration to support a promise is the doctrine of _____. This doctrine arises when a promisee justifiably relies on a promisor's promise to his or her economic injury.

A(n) _____ contract is an agreement when one party has the right to withdraw from the promise made without incurring any legal liability.

Brandie is facing financial difficulties. Warren wants to help Brandie and tells her that he will pay her $1,000. But afterwards Warren refuses to pay the promised money to Brandie. Which of the following statements is correct?

There must be some incentive or inducement for a person's promise or it is not binding. The legal mechanism for evaluating the existence of this incentive is "_____" which refers to the receipt of a legal benefit or the suffering of a legal detriment.

Which statement is true concerning silence as a method of acceptance?

Under the UCC, the rules of consideration also do not apply to _____.