Chapter 11: Contract Nature and Terminology

Question 1

T or F: By supplying procedures for enforcing private agreements, contract law provides an essential condition for the existence of a market economy.

Answer 1

True

Question 2

T or F: A promisee has the right to expect or demand that something will or will not happen in the future.

Answer 2

True

Question 3

T or F: Under the objective theory of contracts, a contract is not enforceable without a clearly defined objective.

Answer 3

False

Question 4

T or F: One of the requirements of a valid contract is an adequate market for the deal’s goods or services.

Answer 4

False

Question 5

T or F: The term consideration refers to the deference shown by contracting parties to each other.

Answer 5

False

Question 6

T or F: Any contract that is not in writing is not enforceable.

Answer 6

False

Question 7

T or F: Once an offer is made, the offeror cannot revoke it.

Answer 7

False

Question 8

T or F: An executed contract is one that has been fully performed by both parties to it.

Answer 8

True

Question 9

T or F: If what is written in a contract is clear, a court will enforce the contract according to its obvious terms.

Answer 9

True

Question 10

Mel agrees to work as a freight broker for National Shipping Inc. In determining whether a contract has been formed, an element of prime importance is the parties’:
a. intent
b. objectives
c. subjective beliefs
d. motivations

Answer 10

a. intent

Question 11

Macy offers to sell his fitness watch for $50 to Nona. Nona promises to pay Macy the price. Later, they exchange the watch for the funds. A contract was created when:
a. Macy offered to sell the watch
b. Nona paid for the watch
c. Macy delivered the watch
d. Nona promised to pay for the watch

Answer 11

d. Nona promised to pay for the watch

Question 12

Fay offers to pay Grey $50 for a tennis lesson for Hetty. They agree to meet the day after tomorrow to exchange the cash for the lesson. These parties have:
a. no contract.
b. a bilateral contract.
c. a unilateral contract.
d. a third-party contract.

Answer 12

b. a bilateral contract

Question 13

On behalf of the jazz group Fusion, their manager Gabe agrees to a performance in Hilltop Amphitheatre on July 4. Gabe and Hilltop sign a written copy of the agreement. These parties have:
a. an implied contract
b. no contract
c. an express contract
d. quasi contract

Answer 13

c. an express contract

Question 14

Vicky asks Walt, a cobbler, to repair a pair of boots. There is no discussion of a price, and Vicky and Walt do not sign any documents. After the repair, Walt hands Vicky a bill. With respect to Vicky’s obligation to pay the bill, this is:
a. an implied contract
b. a quasi contract
c. no contract
d. an express contract

Answer 14

a. an implied contract

Question 15

Flo tells Ginger during a phone call that she will buy her textbook from last semester for $65. Ginger agrees. These parties have:
a. an express contract
b. a quasi contract
c. no contract
d. an implied contract

Answer 15

a. an express contract

Question 16

Rough Water LLC and Schafer enter into a contract for the delivery of a certain number of river rafts. Until the rafts are delivered and paid for, the parties have:
a. an executed contract.
b. no contract.
c. a quasi contract.
d. an executory contract.

Answer 16

d. an executory contract

Question 17

Jana, a nurse practitioner, renders aid to Kurtz, who is injured and unconscious. Jana can recover the cost of the aid from Kurtz:
a. on a quasi contract theory.
b. under no circumstances.
c. only if Kurtz recovers because of the aid.
d. only if Kurtz was aware of the aid.

Answer 17

a. on a quasi contract theory

Question 18

Sy enters into a contract with Truck Company to work as a driver. If a dispute arises over the deal, under the plain meaning rule, the court cannot consider any evidence not contained in the document if:
a. a contract term can be interpreted in more than one way.
b. the contract lacks a provision on a disputed issue.
c. the words in the contract appear clear.
d. the parties’ intent cannot be determined from the contract’s language.

Answer 18

c. the words in the contract appear clear.

Question 19

Sui enters into a contract with Trey to act as a personal sports trainer. If a dispute later arises over the parties’ promises, the court will interpret the contract according to:
a. what the parties now agree they intended.
b. the parties’ intent at the time they entered into the contract.
c. what the promisor claims was the parties’ intent.
d. what the promisee claims was the parties’ intent.

Answer 19

b. the parties’ intent at the time they entered into the contract.

Question 20

The ________ ________ governs all contracts except when it has been modified or replaced by _________ law, such as the Uniform Commercial Code (UCC), or by administrative agency regulations.

Answer 20

common law; statutory

Question 21

T or F: No aspect of modern life is entirely free of contractual relationships.

Answer 21

True

Question 22

Contract law is designed to provide ______ and ____________, as well as certainty, for both buyers and sellers in the marketplace.

Answer 22

stability and predictability

Question 23

an agreement that can be enforced in court; formed by two or more parties, each of whom agrees to perform or to refrain from performing some act now or in the future.

Answer 23

contract

Question 24

Contract disputes usually arise when there is a promise of ________ ___________.

Answer 24

future importance

Question 25

In determining whether a contract has been formed, the element of ________ is of prime importance.

Answer 25

intent

Question 26

In contract law, the element of intent is determined by the __________ ________ _____ ___________, not by the personal or subjective intent, or belief, of a party.

Answer 26

objective theory of contracts

Question 27

a theory under which the intent to form a contract will be judged by outward, objective facts as interpreted by a reasonable person, rather than by the party’s own secret, subjective intentions.

Answer 27

objective theory of contracts

Question 28

The four requirements that must be met before a valid contract exists are:

Answer 28

1. Agreement
2. Consideration
3. Contractual capacity
4. Legality

Question 29

Even if all four of the valid contract requirements are met, a contract may be unenforceable if the following two requirements are not met:

Answer 29

1. Voluntary consent
2. Form (The contract must be in whatever form the law requires. Some contracts must be in writing to be enforceable.)

Question 30

if the offeree can accept simply by promising to perform; no performance, such as payment of funds or delivery of goods, need to take place for this type of contract to be formed.

Answer 30

bilateral contract

Question 31

when does a bilateral contract come into existence?

Answer 31

the moment the promises are exchanged

Question 32

if the offeree can accept only by completing the contract performance.

Answer 32

unilateral contract

Question 33

When does a unilateral contract come into existence?

Answer 33

the moment when the contract is performed.

Question 34

a contract that by law requires a specific form, such as being executed under seal, to be valid.

Answer 34

formal contract

Question 35

What are two examples of formal contracts?

Answer 35

1. Negotiable instruments (checks, drafts, bills of exchange, etc.)
2. Letters of credit

Question 36

agreements to pay contingent on the purchaser’s receipt of invoices and bills of lading (documents evidencing receipt of, and title to, goods shipped).

Answer 36

letters of credit

Question 37

a contract that doesn’t require a specified form or formality in order to be valid.

Answer 37

informal contracts (or simple contracts)

Question 38

a contract in which the terms of the agreement are fully and explicitly stated in words, oral or written. (ex: a signed lease for an apartment or a house)

Answer 38

express contract

Question 39

a contract formed in whole or in part from the conduct of the parties (as opposed to an express contract)

Answer 39

implied contract

Question 40

What type of contract are these the requirements for?
1. The plaintiff furnished some service or property.
2. The plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected.
3. The defendant had a chance to reject the services or property and did not.

Answer 40

implied contract

Question 41

a contract that has been completely performed by both sides.

Answer 41

executed contract

Question 42

a contract that has not yet been fully performed.

Answer 42

executory contract

Question 43

a valid contract that may be legally avoided (canceled) at the option of one of the parties.

Answer 43

voidable contracts

Question 44

a valid contract rendered unenforceable by some statute or law.

Answer 44

unenforceable contracts

Question 45

a contract having no legal force or binding effect.

Answer 45

void contracts

Question 46

a fictional contract imposed on parties by a court in the interests of fairness and justice; usually, these contracts are imposed to avoid the unjust enrichment of one party at the expense of another.

Answer 46

quasi contracts

Question 47

when a contract’s writing is clear and unequivocal, a court will enforce it according to its obvious terms. The meaning of the terms must be determined from the face of the instrument (from the written document alone). The words– and their plain, ordinary meaning– determine the intent of the parties at the time that they entered into the contract.

Answer 47

the plain meaning rule

Question 48

a court will consider a contract to be ___________ in the following situations:
When the intent of the parties cannot be determined from the contract’s language.
When the contract lacks a provision on a disputed term.
When a term is susceptible to more than one interpretation.
When there is uncertainty about a provision.

Answer 48

ambiguous

Question 49

The court may consider _______ evidence when a term is ambiguous.

Answer 49

extrinsic