BUS 241 Spring, 2014-Contract Law and UCC Article 2 only

BUS
241
Spring,
2014
Exam: Contract Law and UCC Article 2 only
STUDENT
NAME: ____________________________
PART
I
A. Please read carefully each of the following
true/false questions, making sure to mark a response for each question,
selecting the most correct response.
Value: 1 point per question. (Note:
Scantrons will be provided in class on ___________ , when the
exam is due.)

(T)(F)
1. Contract law is one of the most
significant areas of law relating to business and commerce.
(T)(F)
2. The party that breaches a contract
will be subject to legal but not equitable penalties because a contract
is a legal document.
(T)(F) 3.
An executed contract is one that has been fully performed.
(T)(F)
4. Quasi-contracts do not arise from a
mutual agreement by the parties but are imposed by courts to avoid unjustly enriching a party who should not
profit from improper behavior.
(T)(F)
5. Advertisements are generally
treated as offers, which if accepted, become immediately binding.
(T)(F)
6. A rejection of an offer by the
offeree will not necessarily terminate an offer.
(T)(F)
7. Under the common law, the mirror
image rule permitted the offeree’s acceptance of a contract to vary to
some degree
from the offeror’s offer.
(T)(F)
8. For the doctrine of promissory
estoppel (detrimental reliance) to apply, there still must be a contract with adequate consideration.
(T)(F)
9. In order for consideration to have
“legally sufficient value”, it must consist of goods or money.
(T)(F)10. In general, promises based on moral
obligations are always enforceable due to the pre-existing duty rule.
(T)(F)11. A promise to do what one already has a
legal duty to do is not consideration.
(T)(F)12. Parents still owe a legal duty to provide
food, clothing, and shelter for their children regardless of emancipation.
(T)(F)13. The fact that a minor has a right to
disaffirm a contract permits an adult who is a party to that very same contract to cancel it without penalty or
liability.
(T)(F)14. In some states, some contracts for such
things as student loans and insurance may not be disaffirmed by a minor under any circumstances.
(T)(F)15. Only a legal guardian can enter into a
legally binding contract on behalf of a person who has been adjudicated
as mentally incompetent.
(T)(F)16. Mistakes in judgment as to value or
quality will always be grounds to permit voiding a contract.
(T)(F)17. Fraudulent contracts may be voided based
on the argument that the innocent party was unable to consent to the agreement due to the fraud.
(T)(F)18. Restrictive covenants and covenants not to
compete are always struck down because they are unreasonable restraints of trade.
(T)(F)19. Impossibility, excusing performance of a
contract, is measured objectively.
(T)(F)20. If Rose and Peter sign a contract in which
Peter agrees to buy a handmade shawl from Rose, then the fact that
Peter decides to breach the contract will give Annie, a close friend of Rose,
the right to sue Peter for
his breach.
(T)(F)21. An accord and satisfaction discharges the
original contract upon the offer of the accord.
(T)(F)22. Because of the uncertainty that they add
to contracts, conditions must be express.
(T)(F)23. The termination of an enforceable
contract by full performance of the duties is called discharge.
(T)(F)24. Specific performance is the remedy
customarily used when one party has breached a contract for the sale of ordinary goods.
(T)(F)25. A third party who is not in privity of
contract but who has rights under the contract and can enforce the contract against the obligor is
said to be an intended beneficiary.

B. Multiple Choice. Select the best answer to each of the following questions. Each correct answer is valued at 2 points
each.

25. Seasonal Selections, Inc. sends a copy of its
catalog to William along with a personalized computer-generated letter inviting
him to purchase any two items in the catalog at the advertized price. Has Seasonal Selections made an offer?
A. Yes, the letter is an offer.
B. It is an offer only if William is already a
customer.
C. The catalog and letter are an offer, because
there is no room to negotiate a price.
D. Seasonal has not made an offer.

26. Moral obligations do not form an enforceable
contract because what element is missing?.
A. Agreement.
B. Consideration.
C. Contractual capacity.
D. Lawful object.

27. Artist Annie works and displays her paintings
in a local gallery. Millionaire Marty
sees her work and is particularly interested in a seascape painting. Annie says she will sell it for $50,000. Marty tells her he really likes the painting;
however, he will only buy it if the price is $45,000. Which of the following is correct?
A. Marty’s counteroffer terminates Annie’s offer
of $50,000.
B. If Annie agrees to Marty’s offer, she will be
bound by a contract to sell the painting for $45,000.
C. If Annie rejects the offer, Marty cannot then
agree to the $50,000 price and bind Annie.
D. All of the above.

28. Under this rule, the offeree must accept the
terms made by the offeror.
A. Mirror image rule.
B. Proper dispatch rule.
C. Mailbox rule.
D. Acceptance upon dispatch rule.

29. Edward Employee has organized birthday
parties for all the other employees in his office for 10 years. One day, Brenda Boss tells Edward he has done
such a great job, she is going to pay him an extra $200 this month. However, when Edward gets his check, it is
the same amount it has always been.
Which of the following is correct?

A. Brenda’s promise is unenforceable because it
is based on past consideration.
B. Brenda’s promise is unenforceable because it
is based on an illusory promise.
C. Brenda’s promise is enforceable because
Edward performed a service for the company and deserves to
be paid.
D. None of the above.

30. If a contract is a complete and final
statement of the parties’ agreement, any prior or contemporaneous oral or
written statements that alter, contradict, or are in addition to the terms of
the contract are inadmissible in court regarding a dispute over the contract
based on which one of the following legal concepts?
A. The integration clause.
B. The rule for international contracts.
C. The rule against perpetuities.
D. The parol evidence rule.

31. If you are the nonbreaching party, you must
still do this to avoid or reduce damages caused by a breach of contract.
A. Mitigation.
B. Nominal damages.
C. Recission.
D. Restitution.

32. The standard which a jury must use to weigh
the evidence in a contract case is referred to as
A. The subjective standard of proof.
B. The statute of frauds.
C. The writ of mandamus.
D. The
objective theory of contracts.

33. Prior to signing a written agreement
for hotel accommodations that provided for no refunds, the hotel manager stated to
the guest, “We will give refunds if you have a good reason.” Assuming that there was no fraud on the part of
the hotel:

A.
The guest can introduce evidence of the oral statement to prove her
entitlement to a refund.

B.
The oral statement will take precedence over the terms of the written
agreement.
C. The oral statement will be ignored by the
court.
D. The contract is against public policy
because of its mixture of oral and written terms.

34. You go to the Cosmic Runners Supply
Store, where the sales person shows you some shoes and says, “In a race, these shoes pick up the cosmic energy from
the runners around you and channel it into your own legs. This causes
everyone with these shoes to run twice as fast as in normal shoes.” In your next race, you do only slightly better than usual and sue for
fraud. What will happen?
A. You would lose because the statement did not
contain any factual assertion.
B. You would lose because your reliance was not
justified.
C. You
would win if most runners do not go twice as fast is the cosmic shoes.
D. Proving
only that the salesperson intended to deceive you is enough to win your fraud
case.

35. Joe contracts with Woodworker to build a
custom built-in walnut desk for $1,800, which Joe pays in advance. Woodworker
gets the job 75% done and stops working.
Joe shops around, and finds someone who finishes the job for $800. How much could Joe recover from Woodworker in
a breach of contract suit?
A. $0.
B. $450.
C. $800.
D. $1,800.

36. Jerry Lee was a professional singer. He entered into a contract to sing at a concern
sponsored by ABC Co. He also entered into a contract to sell his house to
Mary. Before either contract could be
performed, Jerry dies. Both ABC and Mary
sue for breach. What results?
A. Jerry’s estate wins; both
contracts are unenforceable because of Jerry’s death.
B. Both ABC and Mary win; both contracts are
fully enforceable.
C. Mary wins, but ABC loses.
D. ABC wins, but Mary loses.

37. Which of the following is not a general rule
of contract interpretation?
A. Ordinary words are given their ordinary
meaning.
B. Specific terms qualify or override general
terms.
C. Handwritten terms prevail over printed terms.
D. Ambiguities in a contract are resolved in
favor of the party who drafted the contract.

38. The owner of a dance studio tells Rupert that
if he takes just one dance lesson for $50, his life will change forever. Rupert takes the lesson and his life remains
the same. The dance instructor’s statements
could be described as:
A. Statements of fact.
B. Fraud in the inception.
C. Statements of opinion or sales talk.
D. Anticipatory repudiation.

39. What is required in order for a court to
issue an injunction?
A. Any breach of contract will justify an
injunction.
B. Any breach of contract that causes injury to
the other party will justify this remedy.
C. Any situation that entitles the award of
specific performance.
D. Any situation that demonstrates mitigation of
damages.
E. A showing that the party requesting the
injunction would suffer irreparable injury without the injunction.

40. When an employer breaches an employment
contract, what obligation does the employee have in seeking substitute
employment?
A. Because it was the employer who breached, the
employee has no obligation to seek substitute employment.
B. The employee must accept any employment
available with the same employer, but is not required to seek employment with a different
employer.
C. The employee is obligated to
accept any employment for which the employee is qualified.
D. The employee is obligated to accept
substitute employment only if it is comparable employment.

41. “Benefit of the bargain” is another way to
refer to which type of damages?
(a)
Compensatory damages.
(b)
Punitive damages.
(c)
Reliance damages.
(d)
Liquidated damages.

42. The provisions for cure and cover under
Article 2 of the UCC:
A. Encourage the filing of lawsuits quickly when
any breach occurs.
B. Promote buyers and sellers working together
to resolve their differences in the event of any breach.
C. Have nothing to do with breach.
D. Relate only to sales of goods which have not
been identified to the contract.

43. The doctrine of caveat emptor means:
(a)
Let the seller beware.
(b)
Let the buyer beware.
(c)
Let the seller be liable for all damages.
(d)
That the legal remedy must be just and
fair.

44. Which of the following would be a breach of
the implied warranty of merchantability?
(a)
A lawnmower that does not cut the grass.
(b)
A cherry pit in a cherry pie, if using the
foreign substance test.
(c)
Gasoline designed for automobiles that a
consumer uses in a kerosene stove, causing an explosion.
(d)
A stereo that has been stolen by the
seller.

45. The basic philosophy of the drafters of the
Uniform Commercial Code reflects which of the following beliefs?
(a)
That since law professors were appointed
to draft the Code, their legal theories and ideas of how business should be run
were the only ones to consider.
(b)
That a common sense approach,
incorporating the ways businessmen actually operate, was the best way to
rewrite commercial law.
(c)
That reliance on the Code Merchant of
England was the way to reform modern commercial law.
(d)
That it should be left up to each state to
devise its own modern code, since each state is sovereign.

46. The implied warranty of fitness for human
consumption:
(a)
Applies to food purchased anywhere from a
merchant.
(b)
Is applied using one of two tests to
determine if the warranty has been breached.
(c)
Does not require a stated warranty.
(d)
Applies only to situations where a
non-food item has caused the injury.
(e)
A, B, and C are all correct.

47. Reviewing the requirements for buyers and
sellers who are considered merchants under the Code, the element that makes all
these provisions function well is:
(a)
The combined concepts of void and voidable
title.
(b)
The concept of identification to the
contract.
(c)
The concept of good faith, as honesty in
fact and acting in a commercially reasonable manner.
(d)
The imposition of harsh penalties for
failure to fully perform a contract and the frequent use of punitive damages.

48. A logical outgrowth of the application of
warranty provisions under Article 2 resulted in
(a)
Changes in the law regarding intentional
torts.
(b)
Changes in the law regarding professional
errors and omissions.
(c)
Changes in the law of tort, extending
strict liability to products.
(d)
No other changes in the law.

49. A statement that a trailer has a capacity of
3,000 pounds would be treated as
(a)
A statement of opinion.
(b)
An implied warranty.
(c)
An express warranty.
(d)
Seller’s puff.

50. Once goods have been identified to the
contract:
(a)
The buyer has greater rights to the goods
than the seller.
(b)
The seller’s creditors cannot take the
goods.
(c)
The buyer has an insurable interest in the
goods.
(d)
All of the above.

BONUS: For up to 5 additional points, please analyze
the following: (Note: this only requires a few sentences to answer,
but be sure to include your legal theory.)

Kerry
finds a big green ring in the street.
She shows it to Leroy, who says, “Wow.
That could be valuable.” Neither
Kerry nor Leroy knows what the ring is made of or whether it is valuable. Kerry sells it to Leroy for $100, saying,
“Don’t come griping if it turns out to be worth two dollars.” Leroy takes the ring to a jeweler who tells
him it is an unusually perfect emerald, worth at least $75,000. Kerry sues to rescind the contract. What will the court decide (i.e. does Kerry
win or lose), and what legal theory
will be used to determine if Kerry gets the ring back?