Smith and Robersons Business Law

17th Edition Mann Test Bank

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Chapter 09 Introduction to Contracts

TRUEFALSE

1. Contracts are primarily governed by the Uniform Commercial Code.

(A) True

(B) False

Answer : (B)

2. The difference between an express contract and an implied in fact contract is the manner in
which assent is manifested.

(A) True

(B) False

Answer : (A)

3. A negotiable instrument, such as a check, is not a formal contract.

(A) True

(B) False

Answer : (B)

4. A quasi contract is another name for an oral contract.

(A) True

(B) False

Answer : (B)

5. During the twentieth century it became harder to enter into a contract as well as to get out of
one.

(A) True

(B) False

Answer : (B)

6. "I promise to pay you $100 if you will promise to fix my car next month." This is an offer for a
unilateral contract.
(A) True

(B) False

Answer : (B)

7. A contract for the sale of a copyright is governed by Article 2 of the Uniform Commercial Code.

(A) True

(B) False

Answer : (B)

8. Maria posted several signs in the neighborhood offering $50 for the return of her lost cat. Dave
calls to get a description of the cat and tells Maria, "I'll look for your cat." A contract is formed by
Dave's call to Maria.

(A) True

(B) False

Answer : (B)

9. Malaki has a contract to purchase a new smartphone. The law governing this contract is Article 2
of the UCC.

(A) True

(B) False

Answer : (A)

10. All written contracts are considered to be formal contracts.

(A) True

(B) False

Answer : (B)

11. If a person who has been declared incompetent by the courts enters into an agreement, that
agreement is void, because it does not meet all the requirements of a binding contract.

(A) True

(B) False

Answer : (A)
12. A contract to sell five acres of land is governed by Article 2 of the UCC.

(A) True

(B) False

Answer : (B)

13. The Restatement is not law, but is highly persuasive in the courts.

(A) True

(B) False

Answer : (A)

14. Each party to a contract must intentionally exchange a legal benefit or incur a legal detriment as
an inducement to the other party to make a return exchange.

(A) True

(B) False

Answer : (A)

15. There are two principal types of contracts: commercial contracts between a business and a
customer and personal contracts between two individuals.

(A) True

(B) False

Answer : (B)

16. Katelyn breaches a contract with Noah in a state where the statute of limitations is six years.
Seven years later Noah wants to sue. The contract is unenforceable, rather than void or voidable.

(A) True

(B) False

Answer : (A)

17. Quasi contract is another name for a contract that is implied in fact.

(A) True

(B) False
Answer : (B)

18. Article 2 of the Uniform Commercial Code does not apply to the sale of services.

(A) True

(B) False

Answer : (A)

19. The usual method of showing the mutual assent necessary to create a contract is by offer and
acceptance.

(A) True

(B) False

Answer : (A)

20. A valid contract is one that meets all of the requirements of a binding contract.

(A) True

(B) False

Answer : (A)

21. The Restatement defines a contract as "a promise or set of promises for the breach of which the
law gives a remedy, or the performance of which the law in some way recognizes as a duty."

(A) True

(B) False

Answer : (A)

22. A noncontractual promise may be enforceable where there has been justifiable reliance on the
promise.

(A) True

(B) False

Answer : (A)

23. Edie says to Jeff, "If you will mow my lawn, I will give you fifteen dollars." Under these facts, no
contract is formed until Jeff finishes mowing the lawn.
(A) True

(B) False

Answer : (A)

24. A contract to sell life insurance is covered by Article 2 of the Uniform Commercial Code.

(A) True

(B) False

Answer : (B)

25. Alice makes a material misrepresentation of fact to Lila, and based upon the
misrepresentation, Lila enters into a contract. Lila now realizes she was deceived and wants to get
out of the contract. This contract is voidable at Lila's option.

(A) True

(B) False

Answer : (A)

26. Ann makes a material misrepresentation of fact to Brian, and based upon the misrepresentation,
Brian enters into a contract. Ann now thinks that the contract is not fair to her. This contract is
voidable at Ann's option.

(A) True

(B) False

Answer : (B)

27. Mike, the owner of a yogurt shop, orders 500 quarts of yogurt from his supplier. Nothing,
however, is said by either party about the price or method of payment. The supplier ships the yogurt
as ordered. Since this is a contract implied in fact, Mike must pay his supplier for the yogurt.

(A) True

(B) False

Answer : (A)

28. Amendments to Article 2 of the UCC were promulgated in 2003 to reflect developments in the
law and business practices and to accommodate electronic commerce.

(A) True
(B) False

Answer : (A)

29. Common law relating to the formation of contracts has little relevance in the business world
today.

(A) True

(B) False

Answer : (B)

30. An implied in fact contract is formed by conduct.

(A) True

(B) False

Answer : (A)

31. Ron says to Matt, "If you design and landscape my front lawn by the time I return from Paris
next month, I will pay you $5,000." Matt does not respond but has the landscaping done by the time
Ron returns. This is an example of a unilateral contract.

(A) True

(B) False

Answer : (A)

32. If a contract is not clearly unilateral or bilateral, the courts presume that the parties intended a
unilateral contract.

(A) True

(B) False

Answer : (B)

MULTICHOICE

33. The Uniform Commercial Code would be applied in which of the following situations?

(A) A contract for landscape services

(B) A contract for sale of patent rights

(C) A contract for the purchase of farmland

(D) A contract to buy living room furniture

Answer : (D)

34. Lee has been declared incompetent by the court and is under the care of his sister. Without his
sister's knowledge, Lee rents the 30,000-seat civic center for his birthday party. Lee's contract to
rent the civic center is best described as a:

(A) valid contract.

(B) voidable contract.

(C) void contract.

(D) quasi contract.

Answer : (C)

35. A contract in which both parties exchange promises is a:

(A) voidable contract.

(B) bilateral contract.

(C) unilateral contract.

(D) quasi contract.

Answer : (B)

36. Caroline signs a contract to work as a sales rep for Incellmed Corporation for a period of two
years. This contract is governed by:

(A) Article 2 of the UCC.

(B) state common law.

(C) federal statute.

(D) the law of quasi contract.

Answer : (B)

37. Contract law:

(A) has seen little change during the nineteenth and twentieth centuries.

(B) has experienced an expansion of the absolute freedom of contract during the twentieth century.
(C) today usually recognizes contractual obligations whenever the parties manifest an intent to be
bound.

(D) requires privity between parties seeking to enforce contractual rights.

Answer : (C)

38. Any property other than an interest in real property is:

(A) goods.

(B) personal property.

(C) tangible property.

(D) intangible property.

Answer : (B)

39. Contracts are governed primarily by:

(A) state common law.

(B) federal common law.

(C) statutory law.

(D) federal case law.

Answer : (A)

40. Promissory estoppel is a contractual doctrine that includes the following considerations:

(A) The courts use the doctrine of promissory estoppel to enforce unilateral promises.

(B) Under this doctrine the promisor reasonably expects that the promisee, in reliance on the
promise, will be induced by the nature of the promise to take action or refrain from taking action
and the promisee does so.

(C) The courts will not, under any circumstance, enforce promises that do not include all four of the
elements of contract.

(D) None of these apply to promissory estoppel.

Answer : (B)

41. Article 2 of the Uniform Commercial Code deals with what type of property?

(A) Real
(B) Personal

(C) Intangible

(D) Business

Answer : (B)

42. Steven intentionally makes a material misrepresentation of fact regarding his motorcycle to
Thelma who agrees to buy the motorcycle based upon the misrepresentation. This contract is:

(A) void.

(B) voidable.

(C) executed.

(D) unenforceable.

Answer : (B)

43. Brian makes a material misrepresentation of fact regarding his horse to Rosalind while out
riding one day. Later that day, Rosalind makes an offer to buy the horse. Brain accepts without
correcting his earlier misrepresentation of fact. In this case:

(A) Brian may avoid the contract.

(B) Rosalind may avoid the contract.

(C) either or both Brian or Rosalind may avoid the contract.

(D) neither Brian nor Rosalind may avoid the contract.

Answer : (B)

44. Tate enters into a contract with Smith under the terms of which Smith is to pay Tate $7,000 and
Tate is to build a garage, repair a boat, and build a doghouse. If the doghouse has not yet been built,
which term describes the type of contract in existence?

(A) Quasi contract

(B) Executed contract

(C) Illusory contract

(D) Executory contract

Answer : (D)

45. Which of the following is correct with regard to a contract?

(A) All contracts must be in writing.

(B) A person who deposits money in a bank account has entered into a contract with the bank.

(C) A contract may be for a tortious purpose.

(D) To be valid, a contract must be bilateral and cannot be unilateral.

Answer : (B)

46. According to the UCC, an enforceable agreement involving the transfer of title of goods from a
seller to a buyer for a price is called a(n):

(A) commercial contract.

(B) express contract.

(C) formal contract.

(D) sale.

Answer : (D)

47. Which of the following contracts is covered by Article 2 of the Uniform Commercial Code?

(A) The sale of a house

(B) The sale of a new car

(C) An employment agreement

(D) A sale of automobile insurance

Answer : (B)

48. Contract law is significant in that it is basic to other fields of law such as:

(A) sales of personal property.

(B) commercial paper.

(C) secured transactions.

(D) All of these.

Answer : (D)

49. Contracts that are implied in law:

(A) are obligations imposed by law on grounds of justice and equity.

(B) are intended to prevent unjust enrichment.

(C) do not rest upon the assent of the contracting parties.

(D) All of these.

Answer : (D)

50. Which of the following is characteristic of contract law during the twentieth century compared
with contract law in the nineteenth century?

(A) Privity of contract gained in importance.

(B) Many of the formalities of contract formation were relaxed.

(C) Contract liability is absolute and escape from liability, once assumed, is rare.

(D) There is a narrower view of contract damages.

Answer : (B)

51. Express contracts and implied contracts are:

(A) both genuine contracts.

(B) equally enforceable.

(C) voidable for lack of capacity.

(D) All of these.

Answer : (D)

52. A(n) ____ contract is one in which the parties have manifested their agreement by oral or written
language, or both.

(A) express

(B) implied

(C) executory

(D) formal

Answer : (A)

53. Which of the following is NOT always necessary in order for a valid contract to be formed?

(A) Mutual assent

(B) Legality of purpose

(C) A writing

(D) Competent parties

Answer : (C)

54. Sage offers to pay Allison $450 if Allison will paint her apartment while she is out of town on
vacation for two weeks. Allison makes no promise but tells Sage that she will think about it. While
Sage is out of town, Allison paints the apartment. This is best described as a(n):

(A) unilateral contract.

(B) quasi contract.

(C) implied in fact contract.

(D) bilateral contract.

Answer : (A)

55. According to the Restatement, manifesting an intention to act or an intention to refrain from
acting in a specified manner is considered to be:

(A) an implied in fact contract.

(B) an express contract.

(C) a promise.

(D) a quasi contract.

Answer : (C)

56. One of the changes in contract law between the nineteenth century and the twentieth century is
that in more recent times:

(A) contractual liability, once assumed, can rarely be escaped.

(B) contract damages are viewed more narrowly and equitable remedies are no longer available.

(C) privity of contract is required.

(D) intended third-party beneficiaries may sue in their own right.

Answer : (D)

57. Which of the following is not generally required in order to have a valid contract?

(A) Mutual assent

(B) A lawful purpose

(C) Fairness of the bargain

(D) Parties who have contractual capacity

Answer : (C)

58. An obligation imposed by law where there has been no agreement or expression of assent by
word or act on the part of either party involved is a(n):

(A) implied in fact contract.

(B) express contract.

(C) void contract.

(D) quasi contract.

Answer : (D)

59. Abe is involved in an automobile accident and is injured. While he is unconscious, the police call
an ambulance which takes him to a hospital. Abe is treated at the hospital and released a day later.
The hospital sends him a bill for $2,400, which Abe refuses to pay, claiming it is too high and he
never consented to the treatment because he was unconscious. Abe:

(A) has entered into a unilateral contract with the hospital and therefore will have to pay the bill.

(B) has a quasi-contractual agreement with the hospital.

(C) has entered into an implied in fact contract with the hospital.

(D) and the hospital have entered into a bilateral contract, the terms of which require that he pay
the bill.

Answer : (B)

60. Ken promises not to foreclose on a mortgage that he holds on an office complex that Christopher
owns. In reliance on this promise, Christopher expends $200,000 to remodel the complex. Which of
the following is correct with regard to Ken's promise?

(A) Ken's promise not to foreclose is unsupported by consideration.

(B) Ken's promise is noncontractual.

(C) Ken's promise will be enforced against him based upon the doctrine of promissory estoppel.

(D) All of these.

Answer : (D)
61. A valid contract may be unenforceable for which reason(s)?

(A) Failure to satisfy the Statute of Frauds

(B) Running of the Statute of Limitations

(C) Lack of capacity

(D) All of these reasons

Answer : (C)

62. Anna by mistake delivers to Bob a plain, unaddressed envelope containing $50 intended for
Cora. Bob:

(A) can keep the money.

(B) is under a contractual obligation to return the money.

(C) has a quasi-contractual obligation to return the money.

(D) has an implied in fact obligation to return the money.

Answer : (C)

63. Sales of personal property are governed by Article ____ of the Uniform Commercial Code (UCC).

(A) 1

(B) 2

(C) 3

(D) None of these.

Answer : (B)

64. A promise against public policy:

(A) can be contractual.

(B) is enforceable if the parties have capacity and mutual assent and they exchange consideration.

(C) has no legal remedy available for breach.

(D) must be in writing to be enforceable.

Answer : (C)

65. Which of the following is an informal contract?

(A) A letter of credit.

(B) A written contract for the sale of a 5-acre tract of land.

(C) A check.

(D) A recognizance.

Answer : (B)

ESSAY

66. List and discuss the essential elements of a contract.

Graders Info :

Contractual elements are: (1) mutual assent; (2) consideration; (3) legality of object; and (4) capacity
of the parties. In addition, in a limited number of instances, a contract must be in writing to be
enforceable. The parties to a contract must manifest by words or conduct that they have agreed to
enter into a contract. The usual method of showing mutual assent is by offer and acceptance.
Consideration is the intentional exchange of a legal benefit or legal detriment as an inducement to
the other party to make a return exchange. The purpose of a contract must not be criminal, tortious,
or otherwise against public policy. The parties to a contract must have contractual capacity.
Adjudicated incompetents have no legal capacity to contract. Minors, incompetent persons, and
intoxicated persons have limited capacity to contract.

67. Lance has a contract with Smith to resurface a driveway at the Smith residence. Lance by
mistake stops at the Jones residence and resurfaces Jones' driveway. Jones lives next door to Smith
and knows that Lance is at the wrong residence. Jones, however, says nothing and watches while
Lance resurfaces his driveway. Is Jones under any contractual obligation to pay Lance for
resurfacing his driveway? Explain your answer.

Graders Info :

Yes. In addition to express and implied in fact contracts there are implied in law contracts or quasi
contracts. A quasi-contractual obligation is imposed by law to prevent injustice. Jones is obligated
under quasi-contract because he had knowledge of the benefit he received and did not prevent
Lance from conferring this benefit.

68. What is a formal contract? How does a formal contract differ from an informal contract?

Graders Info :

A formal contract is legally binding because of its particular form or mode of expression. For
example, a contract under seal, a negotiable instrument, a letter of credit, or a recognizance is a
formal contract. A formal contract differs from an informal contract because informal contracts,
which may be oral or written, do not depend on mere formality for their legal validity.

69. Discuss how the common law of contracts, Article 2 of the Uniform Commercial Code, and the
Restatement of the Law of Contracts combine to form the law of contracts. Is there a difference
between how a court would regard Article 2 of the UCC and the Restatement of the Law of
Contracts? Why? Explain your answer.

Graders Info :

The basic law of contracts is state common law. The Restatement of the Law of Contracts is an
authoritative statement of the common law in the United States. The UCC has been adopted by the
legislatures of all states, except Louisiana. Article 2 of the UCC deals with sales of goods, which are
defined as tangible, movable personal property. All other contracts are governed by state common
law. The UCC is state statutory law, whereas the Restatements are authoritative reference works,
but they do not represent the law of every state in the United States.

70. What is the difference between a valid contract and a void contract?

Graders Info :

A valid contract is one that meets all the requirements of a binding contract. It is an enforceable
promise or agreement. A void contract is an agreement that does not meet all of the requirements of
a binding contract. It is merely a promise or agreement having no legal effect.

71. Distinguish between: (a) express and implied contracts; (b) executed and executory contracts;
and (c) bilateral and unilateral contracts.

Graders Info :

(a) A contract in which the parties manifest assent in words, either oral or written, is called an
express contract; a contract formed by conduct is an implied contract. Implied contracts are also
called implied in fact contracts. The difference between express and implied contracts is in the
manner in which the parties manifest assent. Both are genuine contracts and are equally
enforceable. (b) A contract that has been fully carried out by all of the parties is an executed
contract. The term executory contract applies to contracts that are still partially or entirely
unperformed by one or more of the parties. (c) When a contract is formed by the exchange of
promises, each party is under a duty to the other. Each party is both a promisor (the party making a
promise) and a promisee (the party to whom a promise is made). This is referred to as a bilateral
contract. A unilateral contract occurs when only one of the parties has made a promise and the other
party must perform an act or forbear from acting to form the contract. A unilateral contract is
formed when the promisee performs the act or makes the requested forbearance.

72. What is the doctrine of promissory estoppel and when is it used?

Graders Info :

Promissory estoppel is a doctrine used to enforce noncontractual promises where there has been
justifiable reliance on the promise and justice requires the enforcement of the promise. It is used to
avoid injustice when the promisor reasonably expected that the promisee, in reliance on the
promise, would be induced to take definite and substantial action or to forbear, and the promisee
does take such action or does forbear. In such a situation, a court will enforce the promise to the
extent necessary to avoid injustice.