Columbia Southern University Reality of Assent Discharge and Remedies Questions Note: Unit study guide is attached and all questions are multiple choice.Question 1
Which of the following are the two most important primary sources of contract law?
Case law and the restatement of law
Case law and the Uniform Commercial Code
The Uniform Commercial Code and the Convention on Contracts for International Sales of Goods
Case law and the Convention on Contracts for International Sales of Goods
The Convention on Contracts for International Sales of Goods and the Restatement of the Law Second, ContractsQuestion 2
Marcy’s mother, Sue, did not want her to date until she was older. She also wanted Marcy to attend law school. Just before Marcy started her freshman year in college, Sue told Marcy that if Marcy would refrain from dating until she received her law degree, then Sue would pay off all of Marcy’s school loans and throw in an extra $50,000. Marcy agreed and stated, “Thanks, Mom; when I graduate, I’m throwing you a big party for all you have done for me!” Sue smiles and hugs Marcy. Marcy finished law school and asked for payment of her loans, the $50,000 in cash, and for a car. Sue said, “No wayI know you went out on some dates during law school, and I never agreed on the car.” Marcy said those were just study nights and that her mother had never objected to Marcy’s frequent statements that she wanted a car upon graduation. Sue asks about the party. Marcy tells her that she is nuts because there is no way Marcy can afford a party since Sue has backed out of the deal. After some serious negotiation, Marcy and Sue settled their dispute with Sue agreeing to pay for half of Marcy’s school loans and for all of the expenses of Marcy’s upcoming wedding; Sue also agreed to forget about Marcy throwing a party for her. Was there sufficient consideration to support Marcy’s agreement to throw a party for Sue?
Yes, sufficient consideration was present.
No, there was insufficient consideration because Sue did not promise anything in exchange.
No, there was insufficient consideration because Marcy’s agreement was illusory.
No, because throwing a party is not of a monetary value such as to constitute consideration.
No, because close relatives are involved.Question 3
Stewart, the owner of ABC Construction, agreed with Joan, the owner of XYZ Hotel, that he would complete renovations on her upscale hotel on the beach in Florida by October 1. The amount due to Stewart under the contract was $250,000. The contract contained a clause by which Stewart would pay Joan $50,000 for each day he was late on completing the project. Unfortunately, an unexpected earthquake shook the area, and while the earthquake did not damage the hotel itself, Stewart encountered significant difficulty in getting supplies due to the high demand for building material following the earthquake. Because he believed that traveling himself to other states to obtain supplies would be prohibitively expensive, he delayed the project for two weeks while waiting for local stores to have sufficient supplies available. Stewart finished renovations six days late. Joan told Stewart that she owed him nothing but that he owed her $50,000. Stewart told Joan that he was suing for the entire $250,000 because it was not his fault the earthquake delayed matters. Assuming the earthquake does not affect Stewart’s liability for damages, which of the following is true regarding the provision that he will pay $50,000 for each day he is late?
It will be upheld based on freedom of contract.
It will be upheld because the penalty per day is less than one half of the amount due for the job.
It will be upheld as a stipulated amount.
It will be struck because parties are prohibited as a matter of law from specifying damages.
It will be struck as a penalty.Question 4
Which of the following occurs when a party unjustifiably fails to substantially perform his or her obligations under the contract?
Crossed breachQuestion 5
George offers to sell Penelope a ring that George found in his yard. He and Penelope look at the ring and decide that they are not sure what it is. Penelope pays George $10 for the ring. The ring turns out to be a diamond worth much more than $10. George wants the ring back, and Penelope refuses. What is the most likely result?
The ring will be returned to George because of mutual mistake.
The ring will be returned to George because of unilateral mistake.
The ring will be returned to George because of equity.
The ring will remain with Penelope unless George can establish that she was negligent in not recognizing the ring’s true value.
The ring will remain with Penelope because the parties contracted on the assumption that they did not know the value of the ring.Question 6
Which of the following is an example of consideration?
A benefit to the promisor but not a detriment to the promisee
A detriment to the promisee but not a benefit to the promisor
A promise to do something, a benefit to the promisor, or a detriment to the promisee
An accepted offer
A valid counterofferQuestion 7
A __________ is a FALSE representation of a material fact that is consciously false and intended to mislead the other party.
negligent misrepresentation, fraudulent misrepresentation, and scienter misrepresentation
negligent or fraudulent misrepresentation, but not a scienter misrepresentationQuestion 8
Distinguishing between unilateral and mutual mistakes is important because the classification bears on which contracts __________.
none of these because mutual mistakes are not recognized in the area of contractsQuestion 9
Courtney, who does not keep up with the price of current technology, agrees to buy a used computer from Jake for $2,500. Later, Brice tells Courtney that she made a really bad deal and that she could get an even better new computer for no more than $1,000. Courtney tells Jake that she is not giving him any money because he was not fair with her. Which of the following is the most likely result if Jake sues Courtney alleging breach of contract?
Jake will win only if he can establish that Brice is wrong and that the deal was actually reasonable.
Jake will win because the court would not weigh whether a good bargain was made.
Courtney will win if she can establish that she paid at least 75% more than the computer was actually worth.
Courtney will win if she can establish that she paid at least 50% more than the computer was actually worth.
Courtney will win if she can establish that she made a bad deal and that truly she was not aware of current prices of computers.Question 10
What are the elements of a binding contract?
Offer, acceptance, consideration, and assent
Acceptance, consideration, assent, and legal object
Agreement, offer, acceptance, and consideration
Agreement, consideration, contractual capacity, and assent
Agreement, consideration, contractual capacity, and legal objectQuestion 11
Which of the following is necessary to establish that a mutual mistake was made involving a basic assumption about the subject matter of a contract?
That the mistake involved the existence, quality, or quantity of the items to be exchanged
That the mistake involved whether a party could profit from the contract
That the mistake involved whether a party could profit from the contract or whether a party misunderstood the time constraints involved in regard to the contract
That the mistake involved the identity of parties to the contract or whether a party misunderstood the time constraints involved in regard to the contract
That the mistake involved a misunderstanding of law as to whether or not the UCC appliedQuestion 12
Consideration is defined as __________.
being cordial in the negotiation of contracts
refraining from unethical behavior in the negotiation of contracts
being both cordial and refraining from unethical behavior in the negotiation of contracts
a bargained-for exchange
a contract negotiated in person as opposed to by telephone or e-mailQuestion 13
For $300,000, Willis agrees to build a new home for Robert, who is very picky. Willis builds the home to Robert’s specifications with one exception. The faucets and linoleum flooring in a powder room are not exactly what Robert specified. That was a mistake on Willis’ part, but he had not intentionally failed to follow specifications. When Robert sees the powder room, he goes ballistic and tells Willis that he will not pay Willis anything for the house. It will take $300 to put in correct faucets and linoleum. Willis says that he is willing to pay $300 to put Robert in the position he would have been in had the correct faucets and linoleum been used, but that is all he is willing to pay. Which of the following is true regarding whether Willis breached the contract?
Willis did not breach the contract.
Willis materially breached the contract.
Willis substantially breached the contract.
Willis breached the contract, but the breach was not material.
Willis committed an anticipatory breach of the contract.Question 14
Which of the following is FALSE regarding rights of an assignee and assignor?
Assignees essentially fill in for the assignor as the legal recipient of contractual duties.
Assignees acquire the same rights as the assignor had.
Assignees are offered additional protection than assignors.
The obligor may raise any of the same defenses for nonperformance to the assignee that he or she would have been able to raise against the assignor.
When an assignor transfers rights to an assignee, the assignor legally gives up all rights he or she previously had to collect on the contract.Question 15
In a bilateral contract, the consideration for each promise is __________.
a completed act
the beginning of action in acceptance, even if it is not complete
a return promise
an agreementQuestion 16
The person who agrees to the terms of an offer by another party is called the __________.
Which of the following are the two primary kinds of performance?
Partial and significant
Partial and complete
Partial and substantial
Complete and substantial
Complete and significantQuestion 18
If the plaintiff is seeking legal damages which would put him or her in the same position he or she would have been in had the contract been fully performed, he or she is suing for __________ damages.
Which of the following is TRUE regarding illusory promises?
Illusory promises are not consideration.
Illusory promises are consideration.
Illusory promises qualify as consideration when past consideration is at issue.
Illusory promises qualify as consideration when promissory estoppel is at issue.
Illusory promises are consideration only when a sale of goods is involved.Question 20
Which of the following occurs when a party to a contract transfers his or her rights to a contract to a third party?
Beverly decides to go on a great trip to Hawaii. She needs someone, however, to take care of her two dogs, Creaky and Toady, while she is gone. Creaky has hives, and Toady passes gas frequently because of a digestive problem. Beverly hires Frank three months in advance, and they reach a contractual arrangement whereby Frank will be paid $200 for keeping the dogs for two weeks. Frank comes over two months before Beverly is set to leave, takes one look at Creaky and Toady, and declares that the dogs are too creepy to be around. Beverly then hires Alice who agrees to care of Creaky and Toady. Two weeks before Beverly is set to leave, however, Alice calls and tells her that she just broke both of her legs in an automobile accident, sustained other injuries, and has been put on bed rest for two months. Finally, Beverly hires Betty to care for the dogs and heads off to Hawaii, where she has a great time. Unfortunately, when Beverly returns home, she finds that Betty fell in love with Creaky and Toady and has absconded with them. It was a month before Beverly was able to get a court order, which required the dogs to be returned. Which of the following is true regarding Frank’s refusal to keep Creaky and Toady?
He committed an anticipatory repudiation.
He is not guilty of any breach because he gave Beverly sufficient warning that he was not willing to perform.
He is not guilty of any breach because of the frustration of purpose doctrine.
He is guilty of an immaterial breach because of the low value of the contract.
He is guilty of a nominal breach.Question 22
Bill contracts with Judy to wash her car and then delegates the duty to Paul. Paul fails to wash the car. Which of the following is true regarding Bill’s duty to Judy, if any?
Bill has no duty to Judy so long as she did not expressly object to the delegation.
Bill has no duty to Judy regardless of whether she objected to the delegation.
Bill continues to be bound to Judy to see that her car gets washed.
Bill continues to be bound to Judy to see that her car gets washed only if the contract expressly prohibited delegation.
Bill continues to be bound to Judy to see that her car gets washed unless he already paid Paul for the job.Question 23
Constance asks Kathy if Kathy will sell her used business book for $50. What is the status of the negotiation?
No offer has been made.
An offer has been made, but it may be revoked.
An offer has been made that may not be revoked.
A contract has been entered into.
A contract has been entered into, but it may be set-aside at the option of either party.Question 24
Harry accepts Frank’s offer to sell a used car for $2,000. At what point is there a binding contract?
When the agreement is made
When the money is paid
When the car is delivered
10 days after the car is delivered and approved
Hamer v. Sidway, the New York Court of Appeals found that forbearance:
negates the enforceability of a contract.
is not mandatory for a contract to be binding.
is sufficient consideration for a valid contract.
is insufficient consideration for a valid contract.
20 days after the car is delivered and approved UNIT V STUDY GUIDE
Contracts Part II: Assent, Discharge
and Remedies, Third-Party Contracts
Course Learning Outcomes for Unit V
Upon completion of this unit, students should be able to:
2. Interpret contract and lease assignments.
2.1 Apply key legal terms in contract law.
3. Evaluate delegation of contractual performance.
3.1 Recognize contractual assent and the situations which negate contractual assent.
3.2 Evaluate the equitable and legal remedies available for breach of contract.
3.3 Differentiate an assignment from a delegation of a contract.
Chapter 12: Reality of Assent, pp. 225238
Chapter 14: Discharge and Remedies, pp. 270287
Genuine assent in contracts is critical. The law has rules about when yes means yes. It is important to
recall the concepts from earlier in this course regarding offer and acceptance. Genuine assent can be
negated by mistake, misrepresentation, undue influence, or duress.
Certain problems with the acceptance of an offer may lead to a claim that the acceptance (the yes) was not
genuine, and, therefore, the contract is not valid. The law will allow certain contracts that lack genuine assent
to be voided, which is the ability to withdraw from the contract (also known as rescinding). At the core of legal
assent is free will and the belief that, generally, each person can look out for himself or herself.
Mistake: A mistake is legally defined in contract law as an erroneous belief about the facts of a contract at the
time it is concluded. When a mistake occurs, there is no legal assent.
For example, Sherwood contracted to purchase a cow from Walker. The cow named Rose was believed to be
barren. Sherwood agreed to purchase Rose for $80. If Rose were fertile, she would have been worth $750$1000. Walker later discovered that the cow was pregnant and refused to complete the transaction.
Sherwood sued and ultimately lost.
At trial, Walker showed that, at the time of the sale, both parties believed the cow to be barren, and both also
knew that the value of a fertile cow was much higher than that of a barren cow. The court determined that
mutual mistake by both parties was the substance of the agreement (Sherwood v. Walker, 1887).
Generally, unilateral mistakes that are errors by one party about a material fact do not void a contract. Courts
are reluctant to interfere with a contract when one of the parties has a correct understanding of the material
Misrepresentation: Misrepresentations are similar to mistakes; however, they involve an untruthful assertion
by one of the parties about a material fact. In Sherwood v. Walker (1887), neither man made a deliberately
untruthful statement. Under the same facts, had Walker told Sherwood that his cow was fertile when he knew
for a fact that she was not, this would constitute misrepresentation.
There are three varieties of misrepresentation: innocent misrepresentation, negligent misrepresentation, and
BBA 3210, Business Law
fraudulent misrepresentation. The primary difference is the mindset and intentions
Undue influence: This involves a person who holds a special relationship with another (e.g., doctorpatient,
lawyerclient), and this person uses his or her dominant position to take advantage of the other. The
persuasive efforts of the dominant person must have interfered with the weaker persons ability to make
Duress: This takes place when one party is forced into an agreement by the wrongful act of another; although
there is assent, it is not legal assent. For a court to rescind the agreement, the injured party must show that
the duress left no reasonable alternatives to agreeing to the contract.
Methods of Discharging a Contract and/or Remedies
Conditions: There are three varieties of legal conditions: condition precedent, condition subsequent, and
concurrent conditions. These conditions can be expressed (i.e., those explicitly stated in the contract) or
implied (i.e., those inferred from the nature and language of the contract).
Discharge by performance: Tender is defined as an offer by a party in a contract to perform, along with
being ready, willing, and able to perform a duty specified in that contract (Kubasek, Browne, Herron, Dhooge,
& Barkacs, 2016). Tender can trigger events later discussed under material breach.
There are two types of performance: complete performance and substantial performance. Substantial
performance has three elements, which are as follows:
1. completion of nearly all of the terms of the agreement;
2. an honest effort to complete all the terms, and
3. no willful departure from the terms of the agreement.
Courts will generally view substantial performance as performance, and the courts will discharge the partys
responsibilities under the contract. This may seem unfair; however, courts will often require the party who has
not quite fully performed to compensate the other party for any loss in value caused by the failure to meet all
the standards set forth in the contract. Cases of this nature will often turn on what is considered to be
substantial performance under the facts. In the textbook, this is precisely the question in Larry Pettit et al v.
Hampton and Beech, Inc. et al., 101 Conn. App. 502, 922 A.2d 300 (2007).
Discharge by material breach: A breach is a failure to perform obligations under contract. Not all breaches
result in discharge from the contract.
Material breaches are substantial breaches of a significant term of a contract that excuse the nonbreaching
party from further performance and give the nonbreaching party the right to recover damages. In contrast,
minor breaches may entitle the nonbreaching party to damages but not discharge.
Anticipated repudiation leads to discharge and allows for the nonbreaching party to immediately sue for
breach of contract. The nonbreaching party may allow the repudiating, nonperforming party to change his or
her mind and still perform.
Discharge by operation of law: This occurs when neither party acts or fails to act. In situations involving
bankruptcy, the tolling of the statute of limitations, impossibility, frustration of purpose, or commercial
impracticability, a contract may be discharged.
For example, the 18th Amendment of the United States Constitution effectively established the prohibition of
alcoholic beverages in the United States by declaring the production, transport, and sale of alcohol to be
illegal (U.S. Const. amend. XVIII). Any contracts involving activity made illegal by the 18th Amendment were
discharged by operation of law.
Assignment and Delegation
Contracts are typically exclusive agreements between the parties involved. There are two situations in which
a third party can gain rights to a contract to which he or she is not a party: an assignment or a delegation.
BBA 3210, Business Law
UNIT x STUDY GUIDE
Assignment: Consumer credit card debt is often assigned to third parties for collection.
For example, Carl
has a delinquent RichBank Visa credit card and owes over $5,000 in principal and interest. Carl receives a
letter stating that his debt has been assigned to Blood Stone Recovery Services (BSRS).
In this scenario, the original obligor was RichBank, who agreed to extend credit to Carl, the obligee, who
promised to pay RichBank back plus interest. RichBank became the assignor when they assigned their rights
to the contract to BSRS, the third party and assignee. When an assignor transfers rights to an assignee, the
assignor legally gives up all rights to collect on the contract. Therefore, RichBank cannot continue any
collection efforts from Carl. If he later sends them a payment, RichBank must reject it because they have no
legal right to it.
Additionally, the assignee acquires the identical rights the assignor had. Therefore, BSRS is only entitled to
collect fees plus interest according to the original terms in the agreement Carl signed with RichBank.
Delegation: Delegations are similar to assignments with a few key distinctions. Assignments transfer rights to
a contract, whereas delegations transfer duties. In delegations, the transferring partythe delegator
remains on the hook if the delegatee fails to fulfill the contract.
Kubasek, N., Browne, M. N., Herron, D. J., Dhooge, L. J., & Barkacs, L. (2016). Dynamic business law: The
essentials (3rd ed.). New York, NY: McGraw-Hill Education.
Sherwood v. Walker, 66 Mich. 568, 33 N.M. 919, (1887).
U.S. Const. amend. XVIII.
BBA 3210, Business Law
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