BLTE-10e Practice Quiz
Chapter 7:
Agreement and Consideration in Contracts
1. A constitutionally guaranteed freedom that permits persons to freely into contractual arrangements is known as:
a. Freedom from contract.
b. Contractual capacity.
c. Freedom of contract.
d. The freedom of public policy.
ANS:
a. Incorrect. Freedom from contract means that in some situations, parties will be excused from performing contracts into which they have entered.
b. Incorrect. Contractual capacity is a requirement for a valid contract, but it is not a freedom guaranteed by the U.S. Constitution.
c. Correct. Article I, Section 10, provides for this freedom.
d. Incorrect. There is no such freedom.
2. A bilateral contract in one in which:
a. Two promises are exchanged.
b. A promise is given in return for an act.
c. A third party guarantees the promise of one of the parties.
d. A unilateral contract accompanies an exchange of promises.
ANS:
a. Correct. A bilateral contract involves the exchange of promises. If all of the other requirements for a valid contract are met, both parties will be obligated to perform their respective promises.
b. Incorrect. This would be a unilateral contract.
c. Incorrect. A bilateral contract involves an exchange of parties between two parties.
d. Incorrect. A bilateral contract involves an exchange of parties between two parties.
3. Which of the following elements need not be proved to establish that an implied contract exists?
a. The defendant could have rejected the goods or services but did not.
b. The defendant was unable to and could not have rejected the goods or services.
c. The plaintiff provided some good or service to the defendant.
d. The plaintiff expected payment for some good or service and the defendant should have known this.
ANS:
a. Incorrect. This must be proved to establish the existence of an implied contract.
b. Correct. The plaintiff must show that the defendant could have rejected the service or property and did not.
c. Incorrect. This must be proved to establish the existence of an implied contract.
d. Incorrect. This is a necessary step in proving that an implied contract exists.
4. Ordinarily, agreement is evidenced by:
a. An offer alone.
b. An offer plus an acceptance of that offer.
c. A valid acceptance only.
d. Legal capacity.
ANS:
a. Incorrect. Agreement requires both an offer and an acceptance.
b. Correct. Agreement is evidenced by an offer and an acceptance.
c. Incorrect. A valid acceptance alone will not constitute agreement.
d. Incorrect. Legal capacity does not constitute agreement.
5. If Kim tells George, "You know, I've been thinking about selling my iPod for under $100," this constitutes:
a. A valid offer.
b. A counteroffer.
c. A preliminary negotiation.
d. A statement of intent.
ANS:
a. Incorrect. Kim is only expressing an intention to do something in the future. This is not a valid offer.
b. Incorrect. Kim had not made a counteroffer, she has only expressed an intent to do something in the future.
c. Incorrect. It does not appear that there is an invitation to negotiate here, only an expression of an intent to act later.
d. Correct. Kim is expressing her intention to act at a later time.
6. Filomena offers to sell Rhonda her rare book collection for $3,500. Rhonda states, “I like your book collection but I will not pay $3,500 for it, I’ll only pay $2,750,” what would Rhonda’s statement be called?
a. A revocation.
b. A rejection.
c. A contingent offer.
d. A counteroffer.
ANS:
a. Incorrect. A revocation happens when Filomena withdraws her offer.
b. Incorrect. A rejection happens when Rhonda says, "No thanks!" and that's all.
c. Incorrect. This offer is not contingent, it is a counteroffer.
d. Correct. Rhonda offered Filomena other terms from those originally proposed. This is a counteroffer.
7. A shrink-wrap agreement is one whose terms are:
a. disclosed on the outside of a shrink-wrapped product so that the buyer can review them before purchasing the product.
b. typically favorable to the buyer so that the seller does not have to contend with returned, unwrapped packages.
c. found inside a box in which the goods are packaged.
d. an agreement wrapped in a plastic substance.
ANS:
a. Incorrect. The terms of a shrink-wrap agreement are found inside a box in which the goods are packaged.
b. Incorrect. The terms of a shrink-wrap agreement are not typically favorable to the buyer.
c. Correct. The terms of a shrink-wrap agreement are found inside a box in which the goods are packaged.
d. Incorrect. This is not what is meant by the term shrink-wrap agreement.
8. Consideration is usually broken down into two parts, something of legally sufficient value and:
a. Some kind of income redistribution.
b. Some kind of coercive behavior.
c. A clear moral hazard.
d. A bargained-for exchange.
ANS:
a. Incorrect. This is not the second part of consideration (though a promise might involve a voluntary redistribution of income).
b. Incorrect. Consideration is a necessary component of a contract, and contracts are only valid if they are entered into voluntarily.
c. Incorrect. Moral hazards are not the second part of consideration.
d. Correct. The second part of consideration is a bargained-for exchange.
9. Rescission may be defined as:
a. The substitution of one contract party for another.
b. The revision of contract terms to reflect trade usage.
c. The full performance of a contract.
d. The unmaking of a contract to return the contract parties to the positions they occupied before the contract was made.
ANS:
a. Incorrect. This describes a novation.
b. Incorrect. This describes a kind of reformation.
c. Incorrect. Performance is not the same thing as rescission.
d. Correct. Rescission is a remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made.
10. In order for a court to apply the doctrine of promissory estoppel, four requirements must be met. Which of the following elements is not required?
a. Justice must not be served by enforcing the promise.
b. There must be a clear and definite promise.
c. There must have been substantial reliance on this promise.
d. The promisee must have justifiably relied on the promise.
ANS:
a. Correct. For the doctrine of promissory estoppel to be applied, courts require that justice will be better served by enforcing the promise.
b. Incorrect. This element is required.
c. Incorrect. This element is required to show promissory estoppel.
d. Incorrect. This is a required element.