Intermediate Business Contract Law Practice Quiz (24 questions)

All questions and answers

1. A party privately intends not to make a deal, but communicates and behaves in a way that would reasonably signal agreement to an outside observer. How does the objective standard assess assent?

By the reasonable outward appearance of agreement, rather than the party’s private thoughts
By the party’s uncommunicated intention, even when outward conduct suggests agreement
By whether both parties later agree that they privately intended to form a contract
By whether the party making the statement subjectively believed it was legally binding

By the reasonable outward appearance of agreement, rather than the party’s private thoughts

Explanation

The objective standard focuses on how assent reasonably appears to a third party, not on private thoughts. A party’s undisclosed intention therefore does not control simply because it differs from outward conduct.

2. A proposal is communicated to its recipient and shows intent to contract, but leaves one term unspecified. What additional requirement determines whether it can qualify as an offer?

The proposing party must show that the recipient has already performed
Its terms must be sufficiently definite, although a court may fill in missing terms
Its terms must specify every detail, because a court cannot supply an omitted term
The recipient must accept before the proposal can be treated as communicated

Its terms must be sufficiently definite, although a court may fill in missing terms

Explanation

An offer requires communication, intent to contract, and sufficiently definite terms, while a court may fill in missing terms. The competing view that every detail must be stated overlooks the court’s ability to supply some omissions.

3. A seller makes an offer, but before acceptance the subject matter is destroyed. What effect can this event have on the offer?

It can convert the offer into a counteroffer from the seller
It can preserve the offer until the original deadline passes
It can terminate the offer before the recipient accepts
It can make acceptance effective as soon as the recipient learns of the loss

It can terminate the offer before the recipient accepts

Explanation

Destruction of the subject matter is one event that may terminate an offer. The offer does not remain open merely because its original deadline has not yet passed.

4. One person physically forces another to sign an agreement; in a different case, a party signs after receiving an improper threat. How are the resulting agreements classified?

Both agreements are voidable because each party expressed agreement by signing
The physically compelled assent is void, while assent induced by an improper threat is voidable
The physically compelled assent is voidable, while assent induced by an improper threat is void
Both agreements are void because each involves conduct that undermines assent

The physically compelled assent is void, while assent induced by an improper threat is voidable

Explanation

Physical compulsion makes assent void, whereas an improper threat makes the contract voidable. Treating both as void overlooks the distinction between compulsion and a threat that gives the affected party a right to avoid the contract.

5. A claimant alleges fraud based on a false statement about an important fact. Which additional showing is required to establish fraud?

The statement concerned an opinion, and the claimant regarded it as more reliable than other advice
The speaker negligently misstated the fact, and the claimant relied on it regardless of justification
The claimant suffered a loss, even if the statement was accurate and the speaker lacked deceptive intent
The speaker knew the statement was false, intended to deceive, and the claimant justifiably relied on it

The speaker knew the statement was false, intended to deceive, and the claimant justifiably relied on it

Explanation

Fraud requires a material false representation, knowledge of its falsity, intent to deceive, and justifiable reliance. Negligent misstatement and reliance alone do not establish the knowledge and intent required for fraud.

6. A person is tricked about the nature of the document being signed, while another person understands the document but is deceived into signing it. What is the distinction between these forms of fraud?

Both forms make the contract voidable because each person knowingly signed a document
Both forms make the contract void because each involves a false representation
Fraud in the execution makes the contract void, while fraud in the inducement makes it voidable
Fraud in the execution makes the contract voidable, while fraud in the inducement makes it void

Fraud in the execution makes the contract void, while fraud in the inducement makes it voidable

Explanation

Fraud in the execution makes a contract void, whereas fraud in the inducement makes it voidable. The fact that both situations involve deception does not erase this difference in their legal effect.

7. A donor promises a gift with nothing exchanged in return. Which feature distinguishes enforceable consideration from this kind of gift?

A promise that the recipient values highly, even without a legal benefit or detriment
A promise made in writing, whether or not anything of legal value is exchanged
An exchange involving legal value, such as a benefit to the promisor or a detriment to the promisee
A transfer that is equal in market value to the promise, even without an exchange

An exchange involving legal value, such as a benefit to the promisor or a detriment to the promisee

Explanation

Consideration involves an exchange of legal value, shown by a benefit to the promisor or a detriment to the promisee. A recipient’s high regard for a gift does not itself create the required exchange.

8. A contractor agrees to perform the same work already required by an existing contract in exchange for extra payment. Does that existing duty supply new consideration for the modification?

Yes; any renewed promise to perform creates new consideration for the modification
No; performing a preexisting legal obligation does not supply new consideration
No; a modification cannot be supported by consideration even if new duties are added
Yes; the promisor’s increased payment itself makes the contractor’s existing duty new consideration

No; performing a preexisting legal obligation does not supply new consideration

Explanation

A preexisting contractual obligation does not provide new consideration for a modification. An added legal benefit or detriment could support a promise, but simply repeating the existing duty does not.

9. A debtor offers partial payment of a debt, first when the debt is undisputed and liquidated, and then when it is disputed and unliquidated. What is the effect of the partial payment in each situation?

It is sufficient to discharge either debt because the creditor accepted some payment
It is sufficient to discharge the undisputed liquidated debt, but insufficient to discharge the disputed unliquidated debt
It is insufficient to discharge either debt because the payment is only partial
It is insufficient to discharge the undisputed liquidated debt, but sufficient to discharge the disputed unliquidated debt

It is insufficient to discharge the undisputed liquidated debt, but sufficient to discharge the disputed unliquidated debt

Explanation

Partial payment cannot discharge an undisputed, liquidated debt, but it can discharge a disputed, unliquidated debt. The opposite classification incorrectly reverses the rule for these two kinds of debt.

10. A charity relies on a donor’s promise of a gift and seeks to enforce it despite the absence of consideration. Which doctrine can support enforcement?

The rule for partial debt payment, which turns the gift promise into a disputed debt
The preexisting-duty rule, which treats the donor’s promise as newly exchanged legal value
The rule for past consideration, which makes a prior charitable intention enforceable
Promissory estoppel, which can substitute for consideration and apply to charitable donations

Promissory estoppel, which can substitute for consideration and apply to charitable donations

Explanation

Promissory estoppel substitutes for consideration and can make gifts, including charitable donations, enforceable. The preexisting-duty rule addresses whether an existing obligation supplies new consideration, not enforcement of a relied-upon gift promise.

11. What is the general approach of courts to cases involving a violation of a statute or public policy?

They revise the bargain to remove the unlawful term.
They enforce the bargain if both parties consented.
They will not hear cases involving such violations.
They award damages to the party who performed first.

They will not hear cases involving such violations.

Explanation

Courts will not hear a case involving a violation of statutes or public policy. Consent between the parties does not, by itself, make an unlawful bargain enforceable.

12. Which agreement is an example of a bargain that may raise public-policy concerns?

A purchase agreement that sets a delivery date for inventory
A service contract that sets a fixed fee for completed work
A business sale that restricts the buyer's competition in selling the business
An employment agreement that specifies the worker's weekly schedule

A business sale that restricts the buyer's competition in selling the business

Explanation

Restrictions on competition in the sale of a business are among the public-policy grounds identified for illegal bargains. A routine delivery date does not, by itself, involve one of those grounds.

13. Which three groups have specific rules governing contractual capacity?

Landlords, tenants, and independent contractors
Debtors, employees, and business owners
Agents, beneficiaries, and corporate officers
Minors, incompetent persons, and intoxicated persons

Minors, incompetent persons, and intoxicated persons

Explanation

The capacity rules apply to minors, incompetent persons, and intoxicated persons. The other groups may enter contracts, but they are not the three groups identified for these rules.

14. An unratified contract was made by a 17-year-old who has now reached the age of majority. When may the former minor disaffirm it?

Only before reaching the age of majority
After a court places the other party under guardianship
After the other party confirms the contract in writing
Within a reasonable time after reaching majority

Within a reasonable time after reaching majority

Explanation

A minor may disaffirm an unratified contract while still a minor or within a reasonable time after reaching majority. A contract made by a person under guardianship is void, which is a different rule and does not set the disaffirmance period here.

15. Which statement correctly distinguishes contracts involving guardianship, mental illness, and intoxication?

A guardianship contract is void; the others are voidable, and an intoxicated person's contract may be ratified when sober.
A guardianship contract is voidable; the others are void, and sobriety confirms an intoxicated person's contract automatically.
All three contracts are voidable, though a guardian may ratify each one for the person.
A guardianship contract is valid; the others are voidable, and intoxication prevents later ratification.

A guardianship contract is void; the others are voidable, and an intoxicated person's contract may be ratified when sober.

Explanation

A contract made by a person under guardianship is void, while contracts made by a person with mental illness or defect and by an intoxicated person are voidable; the intoxicated person may ratify after becoming sober. Mental illness does not make the contract void under this distinction.

16. What role does the Statute of Frauds play in contract law?

It requires every contract to be written before either party can perform.
It prevents certain contracts from being formed unless they are written.
It sets writing requirements for enforcement of certain contracts.
It makes oral agreements invalid whenever a party later disputes them.

It sets writing requirements for enforcement of certain contracts.

Explanation

The Statute of Frauds is an enforcement mechanism that identifies contracts subject to writing requirements. It does not prevent the formation of a contract, contrary to a common misunderstanding.

17. Which agreement falls within the categories covered by the Statute of Frauds?

A month-to-month arrangement for routine services
An agreement to repair a machine within six months
A promise to answer personally for a decedent's debt
A promise to deliver goods within three months

A promise to answer personally for a decedent's debt

Explanation

An executor's or administrator's promise to answer personally for a decedent is among the specified categories. A service agreement performable within six months does not fall within the one-year category on that basis.

18. A party seeks to enforce a written agreement under the Statute of Frauds. Whose signature must the writing include?

The signature of a witness who observed the agreement
The signatures of both parties to the agreement
The signature of a court official approving the agreement
The signature of the party against whom enforcement is sought

The signature of the party against whom enforcement is sought

Explanation

The writing must include the parties, subject matter, and essential terms, and be signed by the party to be charged. Both parties' signatures are not required, despite the common misconception that they are.

19. A written contract states a fixed payment, but one party claims the parties orally agreed to a different amount. What does the Parol Evidence Rule generally do?

It makes the entire written contract unenforceable.
It excludes the oral agreement if it would change the written terms.
It replaces the written amount with the later oral agreement.
It allows the oral agreement to control if one party recalls it.

It excludes the oral agreement if it would change the written terms.

Explanation

The Parol Evidence Rule applies to written contracts and excludes oral agreements that would change their terms. A party's recollection of a different amount does not make that oral agreement controlling.

20. Which statement correctly compares the frequency of the three types of contract conditions?

Precedent conditions are the most common, while concurrent conditions are the rarest.
Concurrent conditions are the most common, while subsequent conditions are the rarest.
Subsequent conditions are the most common, while precedent conditions are the rarest.
Concurrent conditions are the rarest, while precedent conditions are the most common.

Concurrent conditions are the most common, while subsequent conditions are the rarest.

Explanation

Concurrent conditions occur most commonly, whereas subsequent conditions are the rarest type. Precedent conditions are a recognized category, but they are not identified as either the most common or the rarest.

21. A party commits a material breach, and the other party is no longer required to continue performing. Which contract-discharge route does this illustrate?

Discharge by prevention of performance
Discharge by substantial performance after a non-material breach
Discharge by completed performance
Discharge by material breach

Discharge by material breach

Explanation

A material breach can discharge a contract and release the other party from further performance. Prevention of performance is a separate discharge route involving an impediment to performance, rather than a material breach.

22. A buyer receives damages after a seller breaches a contract. What position are compensatory damages intended to put the buyer in?

The position the buyer would have occupied if the contract had never been made
The position the buyer would have occupied had the breach not occurred
A position that reimburses every expense, regardless of its connection to the breach
A position that punishes the seller for malicious conduct

The position the buyer would have occupied had the breach not occurred

Explanation

Compensatory damages aim to place the injured party in the position they would have occupied without the breach. Punishing malicious conduct is the purpose of punitive damages, not compensatory damages.

23. After being wrongfully fired, an employee seeks contract damages. What does the mitigation requirement call for?

The employee should try to find another job to limit the loss.
The employee should seek punitive damages for the employer’s conduct.
The employee should avoid taking work that pays less than the former job.
The employee should wait for the former employer to offer a replacement position.

The employee should try to find another job to limit the loss.

Explanation

Mitigation requires a person who has been fired to try to find another job, thereby limiting damages. Waiting for the former employer to provide a position does not satisfy that stated requirement.

24. A court orders a party to carry out the specific obligations promised in a contract. Which type of remedy is this?

Specific performance, an equitable remedy
Consequential damages, a monetary remedy
Mitigation, a limit on recoverable damages
Punitive damages, a remedy for malicious conduct

Specific performance, an equitable remedy

Explanation

Specific performance is an equitable remedy that requires a party to perform the contractual obligation. Consequential damages are monetary damages, not a court order to carry out the promised performance.

Study with flashcards

Lock in the answers with 63 flashcards on Intermediate Business Contract Law.

How does the objective standard judge a party’s assent?

By how it reasonably appears to a third party.

What three requirements must an offer satisfy?

Communication to the offeree, intent to contract, and sufficiently definite terms.

What may a court do when an offer’s terms are incomplete?

Fill in the missing terms.

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