Final exam

HCCC-BUSINESS LAW – SAMPLE CONTRACT TEST QUESTIONS

1. For an offer to be valid, it need only be: (1) definite and certain, (2) communicated to the offeree. F

2. To be definite and certain, an offer should specify all the terms and conditions of the contract. T

3. The communication of an offer is usually done in usual ways, including oral communication (in person or by telephone, television, or radio) and written communication (such as letters, faxes, e-mails or other written forms). T

4. Offers made in anger or jest, or those made under severe emotional strain are not made with the intent of entering into a valid, enforceable agreement. T

5. Any lack of seriousness of intent on the part of an offeror communicating an offer need not be apparent to a reasonable person. F

6. A call for a bid or estimate for materials to be furnished or work to be performed is not considered an offer, but rather a request for an offer or an invitation to negotiate that can be accepted or rejected by the person calling for the bid. T

7. An advertisement, such as one that appears every day in the newspaper or on television or radio, is generally regarded as an invitation to trade. T

8. When an advertisement offers a reward for information that might lead to the arrest of a criminal or for the return of a lost thing, it is regarded as a general offer to the public at large. T

9. An acceptance of a public offer by anyone, as indicated by the performance of the act, results in an un-enforceable contract. F

10. It is the general rule that an acceptance of an offer becomes effective when the parties so intend it to be effective. T

11. If the offer is silent as to the time the acceptance will be effective, then the “mailbox rule” states that an acceptance sent via the postal system or by courier (special messenger) is effective when received by the offeror. F

12. An acceptance communicated by telephone or fax is considered effective when received because the acceptance is communicated immediately. T

13. Silence may indicate acceptance or assent to an offer when both parties agree beforehand that this (silence) is to be the means of acceptance. T

14. A counter-offer is considered a conditional or qualified acceptance of an offer and is generally interpreted as a rejection of the initial offer and, therefore, that initial offer is not binding on the parties. T

15. It is a general rule of contract law that provides that the acceptance of an offer must be in the same terms as the offer and if there is any differences between the terms of the offer and the terms of the acceptance, the “acceptance” is considered a counteroffer which immediately rejects the initial offer. T

16. Offers are terminated only by revocation by offeror or rejection by offeree. F

17. An Offeror can take back, withdraw or revoke an offer provided that the offer has not been rejected or accepted by the Offeree. T

18. An offer, once rejected by the offeree, can not be revived or made into a counteroffer once the communication of the rejection has been received by the offeror. T

19. If an offeror acknowledges a rejection from the offeree, but the offeror restates the offer, then the offeree still has the opportunity to accept, reject or make a counteroffer. T

20. Fraud, is the intentional misstatement or nondisclosure of a material fact made by one party with the hope of influencing the other party for the benefit of the party who commits the fraud. T

21. One of the elements or requirements for there to be a fraud is that the misstatement be made with knowledge of its falsity or with reckless disregard of its truth. T

22. “Puffing” is a general expression of opinion (usually by a salesperson) that is used to persuade a prospective purchaser to buy a product. T

23. “Puffing” is the legal equivalent of a misrepresentation of a material fact. F

24. In the eyes of the law, “mistake” is a belief that is not in accord with the facts. T

25. In order for there to be a mistake in contract law, the mistaken belief must concern an existing fact and not a belief about what might happen in the future. T

26. In order for the law to declare a contract dissolved because of a mistake, the mistake must mutual as to subject matter and/or value of the subject matter of the contract. T

27. When someone uses a power to control the actions of another because of a special or confidential relationship over that other person and the power is used improperly or to his or her personal advantage, “duress” is said to exist. T

28. Undue influence is the act of applying unlawful or improper pressure or influence to a person in order to gain his or her agreement to a contract. F

29. A contract that involves parties who have unequal bargaining power and is usually considered a “take it or leave it deal” is known as an unconscionable contract. F

30. An contract of adhesion is one that is regarded as “shockingly unjust or unfair.” F

31. “Forbearance” is the promise to refrain from doing something that a party has a legal right to do or the promise of in-action. T

32. A valid contract does not exist if the consideration is a promise to perform an illegal act, or to avoid performing an act that is legally already required to be performed. T

33. Traditionally, the courts generally do not make any attempt to judge whether or not the exchange of Texpenses, is still bound by the terms of the contract. T

34. A “pre-existing duty” is a promise to pay an existing debt or to obey the law, or a similar promise of something already owed. T

35. A “barren promise” is an obligation that a party is already bound to or by law or by some other agreement, which means the party may not use this as consideration for a new agreement. T

36. A person who makes a promise without requiring some benefit in return has made a “gratuitous (gift) promise”. T

37. Agreements based on gratuitous promises are generally not enforceable. T

38. A promise to make or give someone a gift is a gratuitous promise. T

39. “Moral consideration” is when a person is not legally bound to do what he or she may feel obligated to do because of love, friendship, honor, sympathy, loyalty, conscience. T

40. The promise to repay someone for a benefit after it has already been received is known as “past consideration”. T

41. In contracts between a minor and a competent person, only the minor has the privilege of disaffirming or canceling the contract provided (except) it is a contract for what is termed “necessities of life”. T

42. For a minor to disaffirm a contract he or she entered into, that disaffirmance must be done before the minor reached the legal age of majority or within a reasonable period of time after reaching adulthood. T

43. If a minor is considered “emancipated” then he or she assumes many of the right and obligations of a person of legal age and is not protected by the law of contracts as it pertains to minors. T

44. Contracts involving a mentally incompetent person are usually considered voidable at the option of the mentally incompetent person and therefore such a contract can not be enforced against that person if he or she does not carry out the contract, excepting of course a contract that provided “necessaries of life” to the mentally incompetent person. T

45. If a person makes a contract while so intoxicated by alcohol or affected by drug use that he or she is unable to understand the nature and effect of the contract, it is voidable at his or her option when he/she becomes sober. T

46. A person who was so intoxicated by alcohol or affected by drug use that he or she is unable to understand the nature and effect of the contract, when no longer impaired, can chose to carry out the contract provided he or she does so within a reasonable period of time after no longer being impaired. T

47. The law does not protect minors who have committed a tort or a crime and this means that a minor is held responsible for injury to other persons, damaged property and damaging statements. T

48. A bilateral contract is one where a promise is offered seeking a promise in return. T

49. All contracts are not agreement but all agreements are contracts. F

50. All agreements are not contracts but all contracts are agreements. T

(PLEASE PROCEED TO MULTIPLE CHOICE QUESTIONS STARTING ON NEXT PAGE)

SECTION 2: MULTIPLE CHOICE. CHOOSE YOUR ANSWER BY CIRCLING THE LETTER REPRESENTING YOUR ANSWER TO EACH OF THE BELOW QUESTIONS OR STATEMENTS.

1. Jamieson lost an expensive pedigreed dog while at the park. He placed an advertisement in the Daily Journal, offering a $200.00 reward for the dog’s safe return. This offer is:

a. Valid, even though directed to thousands of readers, only one of whom could accept it and is known as a public offer.

b. Valid, provided there is a promise to accept the offer.

c. Not valid, because the offer is not specifying to whom the offeree is and, therefore, is reaching persons of unknown identity which makes the offer not definite or specific enough.

A

2. Fraud may be committed by:

a. Spoken or written words only.

b. By acts or conduct only.

c. By either written words or acts or conduct, or both.

d. In writing only.

C

3. The unintentional misstatement of a material fact that results in inducing another to enter into an agreement to his or her loss, is:

a. Fraud.

b. Intentional misrepresentation.

c. Just misrepresentation also known as innocent misrepresentation.

d. Unintentional fraud.

e. Neither of the above.

C

4. Chin, a collector of rare paintings, offered to sell a particular painting by Picasso (catalog number 1401) to Kovacs for $14,000.00. When it came time to exchange the painting for the money, it was obvious that Kovacs was expecting a different Picasso painting (bearing catalog number 1410). Chin was also surprised because he thought Kovacs wanted to buy the painting bearing catalog number 1401. Under these facts, the contract between Chin and Kovacs:

a. Is valid as the mistake was not mutual, but instead unilateral.

b. Is valid because Kovacs was still getting a Picasso which would still be worth a lot of money.

c. Is invalid because it lacked consideration due to the mistake.

d. Can be canceled by either party as the mistake was mutual and the mutual mistake concerned nature of the subject matter and/or its value.

D

5. A contract resulting from the use of undue influence is:

a. Voidable at the option of the party wrongfully influenced.

b. Void.

c. Voidable at the option of the person committing the undue influence.

d. Valid as long as the essential elements of a contract are present.

A

6. For there to be duress, the pressure exerted must be:

a. Only as to bodily harm.

b. Only in the form of a threat of bodily harm to an individual.

c. Only in the form of a threat of bodily harm to an individual’s family.

d. Only the threat of serious loss or damage to a person’s property.

e. Either the threat of bodily harm to an individual or his or her family or the threat of serious loss or damage to his or her property.

E

7. A pledge or subscription (which is a promise to donate money to a church, temple, mosque, college or other charitable organization) is considered:

a. Unenforceable as it is not supported by valid consideration.

b. Unenforceable because there is not a promise for a promise and there is no benefit to the person making the pledge.

c. Enforceable because they are for some worthy cause so the courts have generally held them enforceable as they are considered beneficial to society to enforce.

C

8. Contractual capacity is:

a. When an incompetent party to a contract has the ability to contract.

b. When a party does not understand the meaning of a contract nor is that person capable of such an understanding.

c. Considered to be possessed by a competent party to a contract meaning that he or she has normal mentality to be capable of understanding the meaning of a contract which means the ability to make a valid contract.

d. Someone who has not attained the age of majority of the state they are in when they make a contract but still has the capacity to understand the meaning of the contract.

C

9. Eakins was 17 years old and married. He has a full time job as a computer programmer and lives with his spouse in their own apartment (not with any parents). A doctor sued him to recover the cost of medical care and surgery provided to him. Eakins did not have medical insurance. In this situation, the Court would:

a. Declare the contract invalid since Eakins is a minor and protected as the result of that status.

b. Declare the contract voidable at the option of Eakins and let him decide whether he wanted to pay the doctor or not under some moral obligation.

c. Declare the contract valid and enforceable by the doctor. Eakins circumstances of being married and employed full time and living with his spouse (not his parents) made him emancipated and thus his minority status no longer protected him. Thus, he would have to pay the doctor for the services rendered.

D