Exam: 060470RR - Contracts, Part 1
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Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page
break, so be sure that you have seen the entire question and all the answers before choosing an answer.
1. Finn agrees to pay $100 to anyone who will paint his house. Will hears about the offer and paints. Finn refuses to pay, saying Will never formally accepted Finn's offer. Which of the following is true?
A. Will has to formally accept, but can do so within a reasonable time after painting.
B. This is a unilateral contract and painting constituted acceptance.
C. Offer and acceptance are irrelevant if one of the parties changes position.
D. This is a bilateral contract, and Will didn't accept. (incorrect)
2. Ty and Cher were discussing a business venture over dinner. Cher had several glasses of wine and became visibly intoxicated. Ty and Cher continued to discuss the venture and formed a contract in which Ty received 80% of the profits resulting from the venture and Cher received 20%, even though Cher agreed to invest the majority of the money. Ty agreed to contribute his expertise and services to the venture. The next morning, Cher realized her terrible mistake. Cher's best chance to avoid the contract with Ty is to say that
A. she was drunk at the time the contract was formed.
B. the contract is unconscionable.
C. the contract is fraudulent.
D. Ty doesn't have the expertise and services required for the venture.
3. Carlos promises to pay $100 for someone to paint his house. Timothy hears about the offer and paints Carlos's house on 123 Oak Street. However, Carlos intended that his other house, at 456 Maple Street, be the one to be painted and refuses to pay Timothy, claiming that there's no contract because they never discussed which house would be painted. If Carlos has a legal right to payment, it's most likely based on
A. fraud.
B. implied-in-law contract.
C. implied-in-fact contract.
D. express contract.
4. Regan marries at age 17. Then, she enters into a contract with Art to purchase an automobile for $10,000. She later changes her mind and wants to void the contract. Which of the following is true?
A. Regan can't void the contract because she is married.
B. Regan can void the contract because she is married.
C. Regan can void the contract because she is a minor.
D. Regan can't void the contract because she is over 15.
5. Ken threatens to tell everyone that Bob is a child molester unless Bob agrees to enter into a contract with Ken. Bob agrees and signs the contract. If Bob later challenges the contract, what are the best grounds for doing so?
A. Misrepresentation
B. Economic distress
C. Emotional duress
D. Fraud
6. On the Internet, Sara came across a software package she wanted to download. To download the software, she had to read a disclaimer and click an "I Agree" button. Sara didn't bother to read the contents of the "Agreement and Warranties" disclaimer, but she clicked "I Agree." The software caused her computer to crash. Sara filed suit against the company that ran the website, and the company's defense is that the "Agreement and Warranties" disclaimer to which Sara agreed disclaimed any responsibility for such
occurrences. The most likely result is that Sara will
A. win her lawsuit because she didn't the read disclaimer.
B. lose her lawsuit because the disclaimer will be enforced.
C. lose her lawsuit because she didn't read the disclaimer, which isn't enforceable.
D. win her lawsuit because disclaimers aren't enforceable.
7. Jackie tells a group of friends that she plans to sell her home. Meg asks how much Jackie hopes to get for the house, and Jackie replies, "$50,000." Meg says, "I accept your offer. I'll purchase your house for $50,000." No contract exists because
A. the offer isn't properly communicated.
B. Jackie doesn't seriously intend to enter a contract.
C. Jackie's statements are merely preliminary negotiations.
D. the terms of the offer aren't reasonably certain.
8. Carrie decides to offer Shelley the opportunity to purchase her motorcycle for just $500. Carrie told Jim, a mutual friend of Shelley and her, that she intended to make the offer. Later, Carrie changes her mind. Shelley approaches Carrie and says she accepts the offer. No contract was formed most likely because
A. Jim was acting as an agent for Shelley without telling Carrie.
B. Carrie didn't possess a serious, objective intention.
C. the terms of the offer weren't definite enough to form a contract.
D. Carrie never communicated the offer to Shelley.
9. Jack is a mature-looking 17-year-old who lives at home with his parents. Jack wants to purchase an automobile. Jack goes to Discount Car Sales, where Bud, the car salesman, never considers that Jack may be a minor. Bud sells Jack a car, with the agreement that Jack will pay Bud $100 per month over the next five years for the car. Which of the following is true?
A. Jack can disaffirm the contract because of his status as a minor at the time the contract was formed.
B. Bud can disaffirm the contract because of Jack's status as a minor at the time the contract was formed.
C. Despite Jack's status as a minor, Bud can prohibit Jack from disaffirming a contract for a necessary (or basic) need.
D. Bud can hold Jack's parents liable for Jack's contract, because Jack was a minor living in their home at the time the contract was formed.
10. Lance e-mails Fred, offering to buy his motorcycle for $750. Fred replies, agreeing. Later, Fred declines to honor the agreement, claiming that e-mail agreements aren't enforceable. In both the initial email and the reply Lance and Fred typed their names. Which of the following is true?
A. There's no contract because e-mail agreements aren't enforceable.
B. There's no contract because contracts must have hand-written signatures to be enforceable.
C. There's no contract because the e-mails weren't witnessed.
D. The e-mails constitute a contract if Lance and Fred have agreed that electronic signatures can be used to create the agreement.
11. Dave is declared insane and committed to an asylum. Dave escapes and goes to a car dealership, where he enters into a contract with Larry to buy a sports car. Which of the following statements is true?
A. Only Larry can void the contract.
B. Only Dave can void the contract.
C. To void the contract, Dave must prove he is insane.
D. Because Dave is legally insane, the contract is void.
12. Patty visits Big Grocery store and sees a table with bananas on it. Patty picks up a bunch of bananas, walks to checkout, and hands them to the cashier. This is
A. no contract.
B. an implied-in-law contract.
C. an express contract.
D. an implied-in-fact contract.
13. Ed contracts with Nathan to kill Nathan's mother-in-law for $1,000. Which element of consideration is missing from this contract?
A. Legality of consideration
B. Consideration wasn't a bargained-for exchange
C. Adequacy of consideration
D. All the elements of consideration are present
14. Tom is selling his motorcycle to Carl. Tom tells Carl that the motorcycle runs perfectly, though he knows that the motorcycle leaks oil. Carl purchases the motorcycle and discovers the problem. Which of the following is true?
A. Tom committed passive fraud.
B. Tom committed fraud in the inception.
C. Tom committed active fraud.
D. Tom hasn't committed fraud.
15. Josh runs over Barbara's dog. Barbara promises not to sue Josh if he pays her $200. Josh pays $200. Then Barbara sues, claiming an agreement not to sue doesn't constitute consideration. Which of the following is true?
A. Agreement not to sue isn't consideration.
B. Such contracts violate public policy and therefore are unenforceable.
C. Agreement not to sue is consideration.
D. Agreement not to sue is consideration only if it approximates what a court would have awarded.
16. Jordan is charged with a crime, and Jeff is chosen to be on the jury. Jordan offers to pay Jeff $500 if he votes not guilty. Jeff does so, but Jordan refuses to pay. Jeff sues Jordan for breach of contract. Jeff will
A. win because Jordan materially breached.
B. lose because the contract is usurious.
C. win because of the statute of frauds.
D. lose because the contract is against public policy.
17. Tyler offers to dance naked on Main Street if Corey will mow Tyler's yard. Corey mows Tyler's yard. Which of the following statements is not potential grounds for setting aside the contract?
A. Lack of serious intent to contract
B. Illegality of consideration
C. Inadequacy of consideration
D. All of the above are potential grounds for setting aside the contract
18. Esther lives with a caregiver on whom she is greatly dependent and trusts. The caregiver persuades Esther to sign a contract with the caregiver that greatly favors the caregiver. If the contract is set aside, it will likely be on what grounds?
A. Duress
B. Fraud
C. Mistake
D. Undue influence
19. Candice hires Otto to work as a tax preparer in Candice's tax return business. The employment contract restricts the ability of Otto to set up a competing business or engage in tax preparation services if Otto leaves Candice's employ. Otto discovers he likes this kind of work and wants to set up his own tax return business. He asks you whether the restrictions in his contract with Candice will be enforceable. You should tell him that
A. restrictive covenants regarding future employment will be enforceable if the value of the consideration given for the covenant equals the value of the income loss that would be caused by enforcing the agreement.
B. any restriction regarding employment is unenforceable as against public policy.
C. restrictive covenants regarding future employment will be enforceable if they're reasonable.
D. any restriction regarding employment will be enforceable as long as there was adequate consideration.
20. Larry thinks the necklace owned by Samantha is worth a million dollars. Larry offers a million dollars to Samantha for the necklace, and she accepts. Later, Larry has the necklace appraised and learns it's worth only $10,000. Which of the following is true?
A. Larry can have the contract set aside on grounds of mistake.
B. Samantha has the right to rescind the contract and have the necklace returned.
C. Larry can't have the contract set aside on grounds of mistake.
D. Larry can have the contract set aside on grounds of capacity.
