Business Law Midterm

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Business Law Midterm
2012-03-20 01:12:24
Business Law

Section 2 exam
Show Answers:

  1. Every valid contract must have four elements. They are:
    • - Agreement
    • - Consideration
    • - Capacity
    • - Legality
  2. An agreement has two elements. They are:
    Offer and Acceptance
  3. What is a Bilateral contract?
    A promise in exchange for a promise
  4. What is a Unilateral contract?
    A promise in exchange for an act
  5. What is an example of an Implied contract?
    Contracts that are made because of the circumstances, without either party saying or writing a word
  6. What is one claim that a party who is being sued for breach of contract may raise to support his claim that the contract is not enforceable?
    • - Implied form
    • or
    • - Lack of Assent
  7. Marie says to Dan: “I’m thinking about selling my salon. I’d probably want $100,000 for it.” Dan immediately writes a check to Marie for $100,000. The parties have a valid contract for the sale of the salon. (T/F)
    • F
    • (This is a statement of future intent and therefore Marie does not have the kind of serious intent needed to constitute a valid offer)
  8. The law does not consider agreements to agree to be
    enforceable contracts. (T/F)
    • F
    • (Parties may make an agreement that states that they will enter into a contract at some point in the future and then describes some of the essential terms that they will include in their final contract)
  9. Advertisements are not enforceable offers. (T/F)
    • T
    • (Ads are classified as invitations to
    • negotiate, not offers)
  10. Contracts must have at least four definite terms. What are they?
    • -Identify of the parties
    • -Description of the subject matter
    • -Offer/Acceptance
    • -Consideration
  11. Ann offers to sell Tim her antique book collection for $25,000. Dan says, “I’m interested in buying the collection, but that price is too high.” “How about my paying $17,000”? What has occurred here?
    • - Tim has rejected Ann’s offer
    • - Tim has made a counter-offer
    • - Tim’s statement is an offer that Ann may accept or reject
  12. What element is necessary in order for an option contract to be enforceable?
    • The potential buyer must give additional consideration in
    • order for the seller to keep the offer open.
  13. Name the four circumstances under which an offer
    will be terminated by operation of law.
    • - Lapse of time
    • - Destruction of the subject matter
    • - Death or disability on the part of one who has agreed to performpersonal services
    • - Supervening illegality
  14. Silence may constitute acceptance (T/F)
  15. An offer is effective when the intended recipient
    of the offer actually receives it. (T/F)
    • F
    • ( An offer is effective when made [when it leaves the control of the offeror] )
  16. Art sends Jane an email offering to sell his business to her for $2,000,000. The email states, “If you wish to accept this offer, you must send me your written, signed acceptance via UPS next day delivery. “ Jane sends Art an email that says, “I accept your offer.” The parties have:
    No Contract at all

    (Art required an acceptance that was written, signed and sent via UPS for next day delivery. If Jane wishes to accept Art’s offer, the manner in which she accepts must comply with Art’s terms)
  17. Sara, a 17 year old Michigan resident. She tells the salesman at a used car dealership that she is 21, and shows him ID that confirms her age as 21. She purchases a car for cash, leaves the lot and totals the car two days later. Because Sara is actually a minor, she may return the car to the dealership, disaffirm the contract and get a full refund of the purchase price (T/F)
  18. Sara leaves the dealership and before the accident, the salesman runs a credit check on her, just out of curiosity. He discovers that she is a minor. He may call Sara, disaffirm the contract and demand the return of the car. (T/F)
    • F
    • (The minor may disaffirm contractualobligations. Adults who do business with minors may not disaffirm. They are stuck with the deal)

  19. Tony’s very wealthy parents kick him out of the house and tell him he must take care of himself. Tony is 17 years old. He has a decent job that pays enough to permit him to pay for an apartment. He signs a lease with a landlord in an upscale neighborhood in Grosse Pointe. This lease is a valid, enforceable contract. (T/F)
    • T
    • (Tony’s parents are no longer providing him with shelter, so he may contract for this necessary on his own. He is entitled to rent an apartment that is similar to the home in which he grew up)
  20. Allie is an adult. She becomes totally intoxicated after her acquaintance, Deb, has slipped drugs into her beers without her knowledge. Her friends and the bartender observe her disturbing condition and know that she has consumed only two beers. While intoxicated, Allie agrees to sell Deb her 2012 Ford Fusion for $2,000. This contract is enforceable because Allie is an adult and therefore responsible for her behavior and decisions. (T/F)
  21. Mrs. Smith is totally incompetent and a court has ruled her to be. Her son is her court appointed guardian. One day Mrs. Smith goes to the local store and buys a $20,000 fur coat using her credit card. Her son wants to return the coat for a full refund. In order to accomplish this, he needs to:
    Show the store manager the guardianship papers and automatically void the contract as a matter of law.
  22. Mrs. Jones has Alzheimer’s disease and has moments or days when she is mentally and emotionally fully functional. On a day when she is clear headed and able, she purchases a purebred pit bull puppy for $800. The dog is delivered to her the next day. From a legal standpoint and ignoring the problems of factual proofs, what will occur?
    Mrs. Jones will be bound by the contract because she was competent at the time she made the contract.
  23. There are at least four kinds of contracts that will be unenforceable because they violate a law/statute. They are:
    • - Contracts to commit a crime
    • - Gambling contracts
    • - Contracts that are usurious i.e. include an interest rate that is above the legal limit
    • - Contracts that violate licensing statutes.
  24. Dynamo Company requires all of its employees to sign a covenant not to compete as a condition of employment. In order to be enforceable, these covenants (contracts) must be
    Reasonable in terms of time, geography, and the position of the employee
  25. The Statute of Frauds requires that contracts between individuals and corporations be signed by the party against whom enforcement of the contract is sought. (T/F)
  26. There are five kinds of contracts that fall within the Statute of Frauds (meaning that given the subject matter, an oral agreement is not enforceable). Name as many as you can
    • - Contracts involving real estate
    • - Contract that by their terms cannot be completed within one year
    • - Contracts in consideration of marriage (Pre-nups)
    • - Contracts for the sale or lease of good valued over $500
    • - Collateral contracts (agreements to serve as guarantor of another’s debt).
  27. Tom, a CEO of an accounting firm, tells Sara that he will employ her beginning on October 30, 2011 and for the rest of her life. Under the Statute of Frauds, this commitment does not need to be in writing to be enforceable. (T/F)
    • T
    • (It is possible for this contract to be performed within one year because Sara may die within that time)
  28. In December 2011, Bill and Amy make an oral agreement for the sale of Bill’s house to Amy with a closure date of April 1, 2012. Bill vacates the house in February and Amy starts to make significant improvements to the property. One improvement is a new $30,000 kitchen. Bill does not object to all the work. Just before the closing date, Bill tells Amy he has changed his mind and will not sell. He says that because the contract was not in writing he is not obliged to sell the house. Amy sues to force Bill to sell her the house. What will Most likely happen
    • The court will enforce the sale using the doctrine of promissory estoppel.
    • (Promissory estoppel may be used to enforce a
    • promise or contract even when the subject matter of the contract (here real estate) would normally place the agreement within the Statute of Frauds and require a writing)
  29. In order to be enforceable, prenuptial agreements must be in writing. (T/F)
  30. Joe orally agrees with Tim to purchase Tim’s antique book collection for $1,000.00. Joe tells his wife that he has reached this agreement with Tim. Joe’s statement is an admission that will require him to honor the commitment to Tim even though the agreement was not in writing. (T/F)
    • F
    • (The only admissions that will serve to bind a party to a commitment are those made in conjunction with a legal proceeding)
  31. Teri is a dog breeder. One day, Karen and Teri are having coffee at Starbucks. Karen says she wants to buy a puppy from Teri’s dog’s latest litter. Teri says she is not sure she wants to sell the pups. Karen takes a Starbuck’s napkin and writes on it: I will accept one male puppy from your latest litter and pay $800.00 for it. Karen has:
    Made an enforceable commitment to purchase a male pup from Teri for $800.00.
  32. The Parol Evidence Rule says that when the parties have executed a written contract a court will not consider:
    Any evidence, oral or written, that falls outside of the plain meaning of the contract itself
  33. Describe one instance in which a court might consider Parol Evidence when evaluating the meaning of a contract.
    • - Fraud or mistake
    • or
    • - Ambiguity
    • or
    • - Clear error