Business Law: Text & Cases, Chapter 13

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1

Kim promises to pay Leo $500 to install a sump pump in Kim’s warehouse. Leo completes the installation. The act of installing the pump

a. ​imposes a moral obligation on Kim to pay Leo.

b. ​imposes no obligation on Kim unless she is satisfied with the job.

c. ​is not sufficient consideration because it is not goods or money.

d. ​is the consideration that creates Kim’s obligation to pay Leo.

d. ​is the consideration that creates Kim’s obligation to pay Leo.

2

Rose questions whether there is consideration for her contract to perform with Saxophone Symphony. To constitute consideration, there must be

a. ​a payment.

b. ​a performance.

c. ​a bargained-for exchange.

d. ​serious thought underlying each party’s intent to contract.

c. ​a bargained-for exchange.

3

Ross promises to pay Sara, his niece, $5,000 if she obtains her degree at Tech University, where she is in her third year. Sara graduates. Ross is

a. ​not required to pay because Sara was already at Tech.

b. ​not required to pay because obtaining a degree benefits Sara.

c. ​required to pay because a job can be hard to find after college

d. ​required to pay because Sara obtained a degree at Tech.

d. ​required to pay because Sara obtained a degree at Tech.

4

Sports Bar & Grill and Tea & Tarts Bakery are adjacent businesses with adjoining parking lots. Sports Bar offers Tea & Tarts a discount on purchases if the bakery will not tow the cars of Sports Bar’s patrons who park in the bakery’s lot.

Refer to Fact Pattern 13-1. Sports Bar’s discount is legally sufficient consideration

a. ​because it is a promise of something of value.

b. ​only if Sports Bar adds a cash rebate.

c. ​only if Tea & Tarts uses it.

d. ​under no circumstances.

a. ​because it is a promise of something of value.

5

Jenny promises to pay Kay $500 because “she does not have as much money as other people.” Jenny’s promise is

a. ​enforceable because society wants people to keep their promises.

b. ​enforceable because the redistribution of wealth is a valid social goal.

c. ​not enforceable because Jenny could have paid Kyle more.

d. ​not enforceable because Kay has not given consideration in return.

d. ​not enforceable because Kay has not given consideration in return.

6

Rory questions whether there is consideration for his contract with Silver Spurs Club to exchange his performance of country music on certain dates for Silver’s payment of a certain amount. To constitute consideration, the value of whatever is exchanged must be

a. ​objectively worthy.

b. ​precisely adequate.

c. ​legally sufficient.

d. ​practically sound.

c. ​legally sufficient.

7

Pie in the Sky Aircraft Inc. files a suit against Quest Engineering Inc., claiming that the consideration for their contract is inadequate. The court will most likely not examine the adequacy of the consideration if

a. ​there is a large disparity in the amount of consideration exchanged.

b. ​the consideration involves the performance of services.

c. ​something of value passed between the parties.

d. ​the consideration is worth less than $100.

c. ​something of value passed between the parties.

8

Frisco offers to buy a Gibson guitar owned by Hayden for twice what Hayden paid for it. She accepts and hands the guitar to Frisco. Her delivery of the guitar is

a. ​not consideration because her voluntary consent may be lacking.

b. ​not consideration because the exchange is not a bargain.

c. ​consideration.

d. ​not consideration because the value is not legally sufficient.

c. ​consideration.

9

Boyd defends against a breach-of-contract suit by College Credit Corporation by claiming that their deal—a student loan accruing interest at a certain rate and payable beginning on a certain date—was unfair because the consideration for their contract was inadequate.

Refer to Fact Pattern 13-2. A court is most likely to evaluate the adequacy of consideration if

a. ​a thing exchanged has no intangible value to one of the parties.

b. ​something exchanged is not of direct economic or financial value.

c. ​the items exchanged were of unequal value.

d. ​there is a gross disparity in the value of the consideration exchanged.

d. ​there is a gross disparity in the value of the consideration exchanged.

10

Boyd defends against a breach-of-contract suit by College Credit Corporation by claiming that their deal—a student loan accruing interest at a certain rate and payable beginning on a certain date—was unfair because the consideration for their contract was inadequate.

Refer to Fact Pattern 13-2. “Adequacy” of consideration refers to

a. ​“how much” consideration is given.

b. ​legally sufficient value in the eyes of the law.

c. ​the intangible value to a contracting party of a thing exchanged.

d. ​the substantiality of the consideration exchanged.

a. ​“how much” consideration is given.

11

Boyd defends against a breach-of-contract suit by College Credit Corporation by claiming that their deal—a student loan accruing interest at a certain rate and payable beginning on a certain date—was unfair because the consideration for their contract was inadequate.

Refer to Fact Pattern 13-2. If, as Boyd claims, the consideration in this problem is inadequate, it may indicate a lack of

a. ​accord in Boyd’s satisfaction with the value of the deal.

b. ​voluntary consent.

c. ​flexibility on the part of College Credit to accommodate Boyd’s needs.

d. ​“heft,” “substance,” or “weight” in the terms of the contract.

b. ​voluntary consent.

12

Kent buys Lizzie’s house for $100,000, which is the fair market value of the house. If the contract is later disputed in court, the court is likely to declare Kent’s consideration

a. ​inadequate.

b. ​past.

c. ​legally sufficient.

d. ​illusory.

c. ​legally sufficient.

13

Stephen offers Theresa $1,000 for her collection of rare coins. She accepts. If a dispute arises, a court would likely

a. ​enforce the deal after questioning the adequacy of consideration.

b. ​not question the adequacy of the consideration.

c. ​rewrite the deal after questioning the adequacy of consideration

d. ​set aside the deal after questioning the adequacy of consideration.

b. ​not question the adequacy of the consideration.

14

Under a contract with Valley Vineyard, Walsh begins grading a terraced hillside for the planting of grapes. Halfway through the project, Walsh asks for $5,000 over the contract price, claiming an increase in the “cost of doing business.” Valley agrees but later refuses to pay. Valley’s agreement to pay more is

a. ​unenforceable because Walsh’s performance was a preexisting duty.

b. ​unenforceable because Valley’s promise was illusory.

c. ​enforceable.

d. ​unenforceable because Walsh’s request modified the contract.

a. ​unenforceable because Walsh’s performance was a preexisting duty.

15

Maria is the sheriff of Narez, Texas. Oscar robs a Narez gas station and a $500 reward is offered for his capture. When, later, Maria finds and arrests him, with respect to the reward, she can

a. ​collect it.

b. ​not collect it because she had a preexisting duty to capture Oscar.

c. ​not collect it because it is not legally sufficient consideration.

d. ​not collect it because it would be unconscionable.

b. ​not collect it because she had a preexisting duty to capture Oscar.

16

Sal contracts with Tasty Pizza to deliver its products. Both parties change their minds, however, and inform each other that they would like to cancel the contract.

52. Refer to Fact Pattern 13-3. Sal and Tasty

a. ​may rescind their entire contract.

b. ​may rescind their contract to the extent that it is executory.

c. ​must perform their entire contract.

d. ​must perform the part of their contract that is executory.

b. ​may rescind their contract to the extent that it is executory.

17

Sal contracts with Tasty Pizza to deliver its products. Both parties change their minds, however, and inform each other that they would like to cancel the contract.

Refer to Fact Pattern 13-3. The next day, Sal changes his mind and again offers to deliver Tasty’s products. Tasty is willing to deal, but for a new price. Sal and Tasty

a. ​may agree to a new contract, but it cannot include a new price.

b. ​may agree to a new contract that includes the new price.

c. ​must perform their original contract.

d. ​must perform the part of their original contract that is executory.

b. ​may agree to a new contract that includes the new price.

18

Delightful Weddings, LLC, and Event Catering Inc. have an executory contract. They agree to rescind their contract and simultaneously enter into a new contract. If the initial contract was subject to a preexisting duty, the new contract will most likely be

a. ​unenforceable.

b. ​enforceable.

c. ​valid.

d. ​voidable.

a. ​unenforceable.

19

D’Sean promises to pay his personal assistant Edie $50,000 in consideration of the services she provided over the years. D’Sean never makes the payment. D’Sean’s promise is

a. ​enforceable for the entire $50,000.

b. ​enforceable to the extent of what Edie’s services were actually worth.

c. ​not enforceable because the consideration is in the past.

d. ​not enforceable because the failure to pay is an unforeseen difficulty.

c. ​not enforceable because the consideration is in the past.

20

Teatro Restoration, Inc., begins renovating an old theater for Urban Edge Productions, but after three months Teatro demands an extra $250,000. Urban Edge agrees to pay.

56. Refer to Fact Pattern 13–4. If Teatro offers no reason for the extra $250,000, but says only that it will stop work if it is not paid, the agreement is

a. ​enforceable as the consideration is past.

b. ​enforceable because of unforeseen difficulties.

c. ​unenforceable as an illusory promise.

d. ​unenforceable due to the preexisting duty rule.

d. ​unenforceable due to the preexisting duty rule.

21

Teatro Restoration, Inc., begins renovating an old theater for Urban Edge Productions, but after three months Teatro demands an extra $250,000. Urban Edge agrees to pay.

Refer to Fact Pattern 13–4. ​If Teatro says it is asking for the extra $250,000 because ordinary business expenses have increased, the agreement is

a. ​enforceable as the consideration is past.

b. ​enforceable because of unforeseen difficulties.

c. ​unenforceable as an illusory promise.

d. ​unenforceable due to the preexisting duty rule.

d. ​unenforceable due to the preexisting duty rule.

22

Teatro Restoration, Inc., begins renovating an old theater for Urban Edge Productions, but after three months Teatro demands an extra $250,000. Urban Edge agrees to pay.

Refer to Fact Pattern 13–4. If Teatro says it is asking for the extra $250,000 because it has encountered extraordinary unforeseen difficulties that will add considerable cost to the project, the agreement is

a. ​enforceable as the consideration is past.

b. ​enforceable because of unforeseen difficulties.

c. ​unenforceable as an illusory promise.

d. ​unenforceable due to the preexisting duty rule.

b. ​enforceable because of unforeseen difficulties.

23

Industrial Engineering, Inc., promises to give stock options to Jasmine for processes she has already designed for the firm. This promise is enforceable

a. ​because it is a new contract.

b. ​because it is an illusory promise.

c. ​because it is supported by past consideration.

d. ​under no circumstances.

d. ​under no circumstances.

24

Digital Enterprise, Inc., promises to pay its employees a year-end bonus “if profits continue to be high and management agrees at the time.” This is

a. ​an enforceable contract.

b. ​an illusory promise.

c. ​an option-to-cancel clause.

d. ​an output contract.

b. ​an illusory promise.

25

Desi’s Uncle Eduardo tells Desi, “If I feel you deserve it at the time, I will give you a new car when you graduate from college.” This promise

a. ​is illusory.

b. ​is enforceable.

c. ​relies on forbearance.

d. ​consists of a preexisting duty.

a. ​is illusory.

26

Brick and Carmen are in an auto accident. Brick offers Carmen $2,000 if she promises not to pursue her potential legal claim against Brick. Carmen agrees. Later, Carmen discovers that it will cost $1,500 to repair her car and $4,000 to cover the medical expenses for a latent injury.

Refer to Fact Pattern 13-5. The agreement between Brick and Carmen is

a. ​a covenant not to sue.

b. ​an illusory promise.

c. ​a release.

d. ​promissory estoppel.

c. ​a release.

27

Brick and Carmen are in an auto accident. Brick offers Carmen $2,000 if she promises not to pursue her potential legal claim against Brick. Carmen agrees. Later, Carmen discovers that it will cost $1,500 to repair her car and $4,000 to cover the medical expenses for a latent injury.

Refer to Fact Pattern 13-5. In Carmen’s suit against Brick to recover her repair and medical expenses, Carmen will most likely recover

a. ​half the amount to pay the costs over what Brick already paid Carmen.

b. ​nothing.

c. ​the estimated amount to pay those costs and any other liability.

d. ​the exact amount to pay those costs and no more.

b. ​nothing.

28

Molly’s motorcycle is damaged in an accident caused by Luc’s negligence. Luc agrees to pay Molly $25,000 if she agrees to release him from further liability. Molly agrees. If Molly’s damages ultimately exceed $25,000, she can

a. ​recover the balance for lack of consideration.

b. ​recover the balance because the consideration was past.

c. ​recover the balance due to unforeseen events.

d. ​not recover the balance.

d. ​not recover the balance.

29

After an accident with a vehicle licensed to Guardian Security Company, Heidi signs a covenant not to sue Guardian Security for damages in a tort action if it pays for the damage to her car. This covenant is

a. ​a bar to recovery if Guardian Security pays.

b. ​an illusory contract.

c. ​barred by the preexisting duty rule.

d. ​barred by the doctrine of promissory estoppel.

a. ​a bar to recovery if Guardian Security pays.

30

Twyla’s dock is damaged in an accident caused by Ulrich’s negligence. Twyla agrees not to sue him if he will pay for the damage. If Ulrich fails to pay, Twyla can bring an action for breach of contract. This is

a. ​a covenant not to sue.

b. ​an illusory promise.

c. ​an unforeseen difficulty.

d. ​a release.

a. ​a covenant not to sue.

31

While sailboarding, Jolene is injured when Kirby carelessly crosses her path. Kirby’s insurance company offers Jolene $50,000 to release Kirby from liability, and she accepts. Later, Jolene learns that her injuries are more serious than she realized. The release is

a. ​enforceable.

b. ​unenforceable because Jolene’s injuries are unforeseeably difficult.

c. ​unenforceable because Kirby has a preexisting duty to pay.

d. ​unenforceable because the release is an illusory promise.

a. ​enforceable.

32

Rudy files a suit against Shakes & Shingles, Roofing Contractor, Inc., under the doctrine of promissory estoppel. Rudy must show that

a. ​he justifiably refused to fulfill a promise to Shakes & Shingles.

b. ​he justifiably relied on Shakes & Shingles’ promise to his detriment.

c. ​Shakes & Shingles justifiably refused to fulfill a promise to him.

d. ​Shakes & Shingles justifiably relied on his promise to its detriment.

b. ​he justifiably relied on Shakes & Shingles’ promise to his detriment.

33

Marketing Solutions Inc. promises to employ Niki as a software engineer. In reliance on the promise, Niki quits her job with Online Ad Company, but Marketing Solutions does not hire her. Most likely, Marketing Solutions is

a. ​liable to Niki under the concept of rescission and new contract.

b. ​liable to Niki under the doctrine of promissory estoppel.

c. ​liable to Niki under the preexisting duty rule.

d. ​not liable to Niki.

b. ​liable to Niki under the doctrine of promissory estoppel.

34

Carly pledges to donate $10,000 to Disaster Recovery Inc. (DRI). On the basis of the pledge, DRI orders additional supplies. If Carly does not fulfill the pledge, a court may enforce it

a. ​under the preexisting duty rule.

b. ​on the basis of unforeseen difficulties.

c. ​as an illusory promise.

d. ​under the doctrine of promissory estoppel.

d. ​under the doctrine of promissory estoppel.

35

Sports Bar & Grill and Tea & Tarts Bakery are adjacent businesses with adjoining parking lots. Sports Bar offers Tea & Tarts a discount on purchases if the bakery will not tow the cars of Sports Bar’s patrons who park in the bakery’s lot.

Refer to Fact Pattern 13-1. Tea & Tarts’s forbearance from towing is legally sufficient consideration

a. ​because it is a promise of something of value.

b. ​only if Sports Bar’s patrons park in Tea & Tarts’s lot.

c. ​only if Tea & Tarts’s customers cannot park in its lot because it is full.

d. ​under no circumstances.

a. ​because it is a promise of something of value.