Sophia Business Law Exam 2 Questions With Verified Answers

A contract that has no legal effect is called a(n) _______ contract. - Answer void Checks, drafts, notes, and certificates of deposit are special forms of contracts recognized by the UCC. They require a special form and language for their creation and must meet certain requirements for transfer. These are examples of which of the following types of formal contracts? - Answer negotiable interests Your friend Buffy signs a contract to purchase a new BMW automobile from Luxury Motors. Buffy then pays for the car and Luxury Motors delivers the car to Buffy. Buffy's contract is an example of which of the following? - Answer an executed contract Alex, the owner of the new restaurant Rock & Shore, says to Gemma, a painter, "If you paint my shop by July 1, I will pay you $3,000." If Gemma does not paint the shop by July 1, there has been no acceptance, and Alex cannot sue Gemma for damages. If Gemma paints the shop by July 1, Alex owes Gemma $3,000. If Alex refuses to pay, Gemma can sue Alex to collect payment. Which of the following was created when Alex extended the job offer to Gemma? - Answer a unilateral contract A doctrine that permits judges to make decisions based on fairness, equality, moral rights, and natural law is called the doctrine of ________. - Answer equity For a contract to be enforceable, something of legal value must be given in exchange for a promise. Money, personal property, real property, provision of services, and the like, qualify as consideration. To which element of an enforceable contract does the scenario refer? - Answer consideration ___________ refers to a manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts. - Answer acceptance Alex, the owner of the new restaurant, Rock & Shore, says to Gemma, a painter, "If you promise to paint my store by July 1, I will pay you $3,000." Alex says, "I promise to do so." If Gemma fails to paint the restaurant, Alex can sue her and recover whatever damages result from her breach of contract. Similarly, Gemma can sue Alex if he refuses to pay her after she has performed as promised. Which of the following was created when Gemma agreed to paint the restaurant? - Answer a bilateral contract Two parties consent to a contract. However, in court, it's found that one of the parties obtained consent through duress. This scenario exemplifies which of the following defenses to the enforcement of contracts? - Answer genuineness of assent Leases of automobiles, leases of aircraft, and other leases involving goods are subject to which one of the following sources of contract law? - Answer Article 2A of UCC The *sale* of equipment, automobiles, computers, clothing, and such involve sales contracts subject to which one of the following sources of contract law? - Answer Article 2 of UCC Which of the following is a model act that establishes uniform legal rules for the formation and enforcement of electronic contracts and licenses? - Answer The Uniform Computer Information Transactions Act You make an verbal agreement to purchase your next-door neighbor's red bicycle. Your agreement is an example of which of the following? - Answer an express contract A contract that is either express or implied-in-fact is called an _______ contract. - Answer actual A contract in which the essential elements to create a valid contract are met but there is some legal defense to the enforcement of the contract is called a(n) ______ contract. - Answer unenforceable The following elements must be established to create a certain type of contract: 1. The plaintiff provided property or services to the defendant. 2. The plaintiff expected to be paid by the defendant for the property or services and did not provide the property or services gratuitously. 3. The defendant was given an opportunity to reject the property or services provided by the plaintiff but failed to do so. These elements are part of which kind of contract? - Answer an implied-in-fact contract Your friend Buffy signs a contract to purchase a new BMW automobile from Luxury Motors. She has not yet paid for the car, and Luxury Motors has not yet delivered the car to Buffy. Buffy's contract is an example of which of the following? - Answer executory contract A contract in which one or both parties have the option to void their contractual obligations is called a(n) ________ contract. - Answer voidable For which type of contract is no special form or method required for their creation, and thus, the parties to this contract can use any words they choose to express their contract? - Answer an informal contract Which of the following is an agreement by the issuer to pay a sum of money on the receipt of an invoice and other documents? - Answer letter of credit Which kind of contract meets all of the following characteristics? (1) consists of an agreement between the parties, (2) is supported by legally sufficient consideration, (3) is between parties with contractual capacity, and (4) accomplishes a lawful object - Answer a valid contract Which of the following says that the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties? - Answer objective theory of contracts An offer is made by an offeror to enter a contract, and that offer is accepted by the offeree. There is mutual assent by both parties. To which element of an enforceable contract does the scenario refer? - Answer agreement In which of the following does a party acknowledge in court that he or she will pay a specified sum of money if a certain event occurs? - Answer recognizance An equitable doctrine whereby a court may award monetary damages to a plaintiff for providing work or services to a defendant even though no actual contract existed is called the doctrine of __________. - Answer implied-in-law contract (quasi contract) A computer program or an electronic or other automated means used independently to initiate an action or respond to electronic records or performances in whole or in part, without review or action by an individual, is called an electronic ________. - Answer agent Occasionally, the express terms of a written contract are not clear on their face and must be interpreted. In such cases, reference may be made to certain sources outside the contract. Which source considers the conduct of contracting parties in prior transactions and contracts? - Answer course of dealing A model act that includes comprehensive laws that cover most aspects of commercial transactions is called ___________. - Answer the Uniform Commercial Code (UCC) Tangible items that are movable at the time of their identification to a contract are called _________. - Answer goods Which of the following establishes a comprehensive, uniform law covering the formation, performance, and default of leases in goods? - Answer Article 2A of UCC Jon is buying a new car, and he decides to sell his old car to his friend Greg. Greg and Jon enter into a contract that states that Greg will purchase Jon's old car for $7,000. This contract is intended to be a final expression of the parties' agreement. However, after Greg tenders the $7,000, he and Jon get into an argument over the car's price. Jon claims that, prior to the contract, Greg verbally agreed to actually pay $8,000 for the car. Jon's claim would be inadmissible in court under which of the following? - Answer the parole evidence rule A small farm enters into a contract to sell its corn to a cereal manufacturer. Their contract provides that a price for the corn will be set by the federal government. This unnamed amount is an example of which of the following types of open terms? - Answer an open price term When merchants negotiate sales contracts, they often exchange preprinted forms. These "boilerplate" forms usually contain terms that favor the drafter. Thus, an offeror who sends a standard form contract as an offer to the offeree may receive an acceptance drafted on the offeree's own form contract. This scenario raises important questions about whether there is a contract and, if so, what its terms are. Which UCC rule helps merchants to resolve this impasse? - Answer the battle of the forms A seller orally agrees to sell her couch to a buyer for $650. When the buyer tenders the purchase price, the seller asserts the Statute of Frauds and refuses to sell the couch to him. The seller is correct. The contract must be in writing to be enforceable because the contract price for the couch exceeds $499.99. Under which of the following rules is the seller correct? - Answer the UCC Statute of Frauds Occasionally, the express terms of a written contract are not clear on their face and must be interpreted. In such cases, reference may be made to certain sources outside the contract. Which source considers the previous conduct of contracting parties concerning the contract in question? - Answer the course of performance A cattle rancher contracts to purchase 1,000 bushels of "corn" from a farmer. The farmer delivers feed corn to the rancher. The rancher rejects this corn and demands delivery of corn that is fit for human consumption. If the parties did not have any prior course of performance or course of dealing that would indicate otherwise, _________ would be used to interpret the word "corn." - Answer usage of trade A(n) is a document that is issued by a bank on behalf of a buyer who purchases goods on credit from a seller that guarantees that if the buyer does not pay for the goods, then the bank will pay the seller. - Answer letter of credit If the parties to a sales contract do not agree on when to pay, payment is due at the time and place at which the buyer is to receive the goods. This unspecified date and location is an example of which of the following types of open terms? - Answer an open payment term Amtrak, a commercial train line, decides to lease a new kind of high-speed train that is manufactured by American Railcar Industries, Inc. To finance the train acquisition, Amtrak goes to National Bank. National Bank purchases the trains from American Railcar Industries, Inc., and National Bank then leases the trains to Amtrak. This is an example of which of the following? - Answer a finance lease The ________ rule is a UCC rule that provides that if both parties to an oral sales or lease contract are merchants, the Statute of Frauds writing requirement can be satisfied if (1) one of the parties to an oral agreement sends a written confirmation of the sale or lease within a reasonable time after contracting and (2) the other merchant does not give written notice of an objection to the contract within 10 days after receiving the confirmation. - Answer written confirmation A buyer offers to purchase 40 pairs of red stilettos from a seller. The seller's red stilettos are temporarily out of stock. The seller sends the buyer 40 pairs of silver stilettos and notifies the buyer that these stilettos are being sent a replacement. The buyer is free either to accept or to reject the silver stilettos. The seller's shipment of nonconforming goods is an example of which of the following? - Answer an accomodation On August 1, Tesla Motors offers to sell a Model S to Sara for $80,000. Tesla Motors signs a written assurance to keep that offer open to Sara until September 15. On September 10, Tesla Motors sells the car to another buyer. On September 15, Sara tenders $80,000 for the car. Tesla Motors is liable to Sara for breach of contract under which of the following? - Answer the firm offer rule In certain circumstances, the UCC permits an acceptance of a sales contract to contain additional terms and to act still as an acceptance rather than a counteroffer. This is known as which of the following? - Answer the additional terms rule You purchased a used car for $6,000, and paid in cash. Your purchase is a sale of a good subject to which of the following? - Answer Article 2 of the UCC A printer and a publishing company enter into a contract whereby the printer agrees to ship the printed books out to the publishing company's customers. However, the contract does not specify a shipper. In this case, the seller is obligated to make the shipping arrangements under which of the following types of open terms? - Answer open delivery term If the variety of goods to a sales contract is left open, the buyer is given the option of choosing those goods. This unspecified variety is an example of which of the following types of open terms? - Answer open assortment term Which of the terms below is often used in addition to the words writing and record and thus recognizes that UCC contracts and other information may be sent or stored by electronic means rather than in tangible writings? - Answer an electronic record A seller of goods located in Germany agrees to sell its goods on credit to a buyer located in Singapore but only if the buyer in Singapore submits a letter of credit from a bank guaranteeing payment if the buyer does not pay. This transaction is governed by which of the following? - Answer Article 5 of the UCC A sporting goods dealer is considered a(n) __________ for the goods sold in her store because she is a person who deals in the goods of the kind involved in the store's sales transactions and because, by her occupation, she holds herself out as having knowledge or skill peculiar to the goods involved in the transactions. - Answer merchant Goods that buyers and lessees order that are to be manufactured to the buyer's or lessee's unique specifications are called _________. - Answer specially manufactured goods A breach that occurs when one contracting party informs the other that he or she will not perform his or her contractual duties when due is called ________. - Answer anticipatory breach Pear Smartphones has discovered a new kind of silica, which will make light, inexpensive, virtually unbreakable glass for their phones. Pear Smartphones contracts to purchase the mining equipment necessary to collect the silica from Diggers Inc. The contract states that the equipment is to be delivered by July 1, 2018. The parties know that Pear Smartphones cannot start collecting the silica until it receives this equipment. It is uncertain how much silica the digging will yield. In their contract, the parties agree that Diggers Inc. will pay $20,000 per day for each day after July 1, 2018, that the equipment is not delivered. The potential $20,000/day payment is an example of which of the following? - Answer liquidated damages ____________ orders that wages, bank accounts, or other property of the breaching party that are in the hands of *third parties* be paid over to the nonbreaching party to satisfy a judgment. - Answer writ of garnishment On November 1, Dwight enters into a contract to purchase a house from Jim for $650,000. The closing date is set for December 1. On December 1, Dwight brings the money to the closing, but Jim does not appear at the closing and thereafter refuses to sell the house to Dwight. In this case, because each piece of real estate is considered unique, Dwight can bring an action of _____________ against Jim and obtain a court judgment ordering Jim to sell the house to Dwight. - Answer specific performance An agreement between the parties to a dispute whereby they agree that the decision and award cannot be appealed to the courts is called __________ - Answer binding arbitration The return of goods or property received from the other party to rescind a contract is called __________. - Answer restitution Mark Zuckerberg contracts with A-1 Construction Co. to have A-1 construct a new school building for $100 million. The architectural plans call for the installation of three-ply windows in the building. A-1 constructs the building exactly to plan except that it installs two-ply windows. A-1's two-ply windows are an example of which of the following? - Answer substantial performance _________ orders the sheriff or another government officer to seize property in the possession of the breaching party that he or she owns and to sell the property at auction to satisfy a judgment. - Answer writ of attachment Furniture Now is a store that rents furniture to low-income individuals, and these individuals take title to the furniture after having paid the cost of the furniture (which is often overpriced with high interest rates). Hazel, an elderly low-income person, has rented and purchased a living room set, a dining room set, and a bedroom set from Furniture Now. Hazel rents an HD television from Furniture Now and signs a contract that states that if Hazel falls more than three months behind in her television payments, Furniture Now can recover all of the furniture she had previously purchased from the store as liquidated damages. Because the actual damages are clearly determinable in advance and the liquidated damages are excessive and unconscionable, this liquidated damages clause would be considered a _________. - Answer Penalty Grace is a professional soccer player. She enters into a ten-year employment contract with a professional soccer team. However, later, Grace breaches the contract and enters into a contract to play for a competing professional soccer team. Here, the first team can obtain ________ to prevent Grace from playing for the other team during the remaining term of the original contract. - Answer an injunction An action to undo a contract that is available where there has been a material breach of contract, fraud, duress, undue influence, or mistake is called __________. - Answer rescission Starbucks contracts with a general contractor to build a new three-story MegaStarbucks that holds space for approximately 1,500 customers. The contract price is $150 million. However, after construction, Starbucks discovers that the completed building cannot support more than 700 customers because the contractor used inferior materials. The defect cannot be repaired without rebuilding the entire structure. Because this is __________, Starbucks may rescind the contract, recover any money that it has paid to the contractor, and require the contractor to remove the building. - Answer a material breach An implied covenant under which the parties to a contract not only are held to the express terms of the contract but also required to act in "good faith" and deal fairly in all respects in obtaining the objective of the contract is called _________. - Answer the tort of bad faith Kate is a professional soccer player, and she signs a five-year contract to play soccer for a professional team. Two years into the contract, another professional soccer team, with full knowledge of Kate's contract with the other team, offers Kate twice the amount of money that she is currently making to breach her contract and sign and play with the second soccer team. Kate then breaches her contract and signs to play for the second team. The first team can recover tort damages—including punitive damages—from the second team for the tort of ____________. - Answer interference with contractual relations A nonbreaching party's legal duty to avoid or reduce damages caused by a breach of contract is called ____________. - Answer mitigation of damages An unconditional and absolute offer by a contracting party to perform his or her obligations under a contract is called ________. - Answer tender of performance A contracting party's failure to perform an absolute duty owed under a contract is called _________. - Answer breach of contract Dina, who owns a women's retail store, contracts to purchase a large volume of cocktail dresses from a manufacturer for $75,000. At the time of performance, Dina pays the $75,000. She has performed her obligation under the contract once she tenders the $75,000 to the manufacturer. The manufacturer ships the cocktail dresses to Ashley when required to do so and Ashley accepts the cocktail dresses. This is an example of which of the following? - Answer complete performance Target, a major retailer, contracts with FlyLite, a major manufacturer of personal flight devices, to purchase one million of the first personal hoverboards produced by FlyLite at $200 per hoverboard. FlyLite plans to sell these hoverboards in its stores nationwide at $500 each, and FlyLite is aware that Target intends to resell the hoverboards. The popularity of the hoverboards guarantees that all those purchased by Target will be sold. However, due to mismanagement, FlyLite breaches this contract and fails to deliver the hoverboards to Target. Target cannot purchase the hoverboards elsewhere because FlyLite holds the copyright and trademark on the hoverboards. Therefore, Target can recover the lost profits on each lost sale as ________ from FlyLite—that is, the difference between the would-be sales price of the hoverboards ($500) and the purchase price of each ($200). - Answer consequential damages SalesCorp enters into a written contract to employ Maria as a chief operations officer of the company for two years, at a salary of $20,000 per month. After one year at work, SalesCorp informs Maria that her employment is terminated. This is a material breach of the contract. If Maria is unable to find a comparable job, she can sue SalesCorp and recover the salary for the remainder of her contract as _________. - Answer compensatory damages An office assistant makes an error when typing a contract, and both parties sign the contract without discovering the error. Later, a dispute over the contract arises and the error is discovered. The court can change the contract to correct the clerical error to read as the parties originally intended. The court's change is an example of which of the following? - Answer a reformation Damages awarded when the nonbreaching party sues the breaching party even though no financial loss has resulted from the breach are called _________ damages. - Answer nominal A nonjudicial, private resolution of a contract dispute is called ______. - Answer arbitration A contract provision that states that a breaching party is not responsible to pay consequential damages is called _________. - Answer disclaimer of consequential damages Beth wins a $40,000 judgment against Jill. Jill then refuses to pay the amount of the judgment to Beth. Jill currently works for Hilltop University. Thus, after receiving this writ of garnishment, Hilltop University must deduct the amount of the garnishment from Jill's wages before she is paid and remit this amount to Beth until the judgment is paid. Beth is able to obtain a postjudgment ________ from the court whereby the court orders Hilltop University to pay 25 percent of Jill's weekly disposable earnings (after taxes) directly to Beth. - Answer writ of garnishment Edward convinces Bella to invest in his company selling vacuum cleaners door to door. Bella then discovers Edward's business wasn't legal and that she invested in a fraudulent investment scheme. Bella sues Edward for fraud. Because it may take more than one year before the case is heard, Bella is afraid that Edward will transfer any money or property he has to avoid having to pay a judgment if he loses at trial. Bella can immediately make a motion to the court to have the court issue _______, which would order the seizure of Edward's property, pending the outcome of the lawsuit. - Answer writ of attachment