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Flashcards in Chapter 6 Deck (41):

Green was adjudicated incompetent by a court having proper jurisdiction. Which of the following statements is correct regarding contracts subsequently entered into by Green?

All contracts are VOID


What is novation?

In a novation, the agreement is unchanged but one of the original parties is released and a new party is substituted into their place


What is a substituted contract?

In a substituted contract, the original parties are both released from the original agreement but are both bound by a new agreement.


Generally, which of the following contract rights are assignable?

Generally, all contract rights are assignable unless the assignment would result in a change in the obligor's risk. Thus, option contract rights generally are assignable. Rights to malpractice insurance are not assignable because the insurer's risk varies based on the identity (and characteristics) of the insured.


What is Undue Influence?

When a person in a position of trust or confidence takes unfair advantage of the RELATIONSHIP such that the other party's free will to contract is overcome.


To prevail on the defense of fraud in the inducement, a victim must prove that the:

The common law defense of fraud requires a showing of intent to deceive. Fraud in the inducement (as opposed to fraud in the execution) merely means that the victim was deceived as to the reason for the transaction.


The parol evidence rule?

prohibits evidence of prior oral or written agreements that seek to contradict the terms of a fully integrated contract (i.e., one intended as the complete agreement).


In which of the following situations does the first promise serve as valid consideration for the second promise?

A debtor's promise to pay $500 for a creditor's promise to forgive the balance of a $600 disputed debt.

Anything having legally recognized value can constitute consideration. If parties legitimately disagree as to the amount owed under their contract, a promise to compromise, such as the parties are doing here, has legal value and constitutes consideration since both parties are giving up the right to litigate the dispute.


Under the parol evidence rule, oral evidence will be excluded if it relates to:

The parol evidence rule generally bars evidence of prior or contemporaneous oral statements offered to vary the terms of a fully integrated written contract. Oral evidence is permissible when the contract is incomplete, ambiguous, invalid, or subject to a condition precedent, or when modification is made after the original contract is written. A contemporaneous oral agreement will be excluded.


To cancel a contract and to restore the parties to their original positions before the contract, the parties should execute a:

A rescission "undoes" a contract and restores the parties to the positions they would have been in if no contract were made


Kaye contracted to sell Hodges a building for $310,000. The contract required Hodges to pay the entire amount at closing. Kaye refused to close the sale of the building. Hodges sued Kaye. To what relief is Hodges entitled?

When a contract for the sale of real property is breached, the nonbreaching party can either recover compensatory damages (damages that compensate for the breach) or obtain specific performance (forced performance).


In determining whether the consideration requirement to form a contract has been satisfied, the consideration exchanged by the parties to the contract must be:

To be effective, consideration must be legally sufficient, which means something that the law recognizes as consideration.


Which of the following statements is true with regard to the Statute of Frauds?

The contract terms may be stated in more than one document.


What is duress?

Duress occurs when a person overcomes the will of another through wrongful force or threats of imminent force. Economic duress generally is not recognized as a defense to contract, and even where it is, it is usually required that the party taking advantage of the other party's poor financial condition must have caused the poor condition.


Yost contracted with Egan for Yost to buy certain real property. If the contract is otherwise silent, Yost's rights under the contract are:

Most contracts are assignable unless they involve personal services or the assignment would vary the risks or burdens of the contract. Normally a real estate contract is assignable.


On May 25, Fresno sold Bronson, a minor, a used computer. On June 1, Bronson reached the age of majority. On June 10, Fresno wanted to rescind the sale. Fresno offered to return Bronson's money and demanded that Bronson return the computer. Bronson refused, claiming that a binding contract existed. Bronson's refusal is:

In this problem, Fresno was an adult and Bronson was a minor at the time of contracting. The common law gives minors the right to disaffirm a contract anytime while a minor or within a reasonable time after becoming an adult. Only the minor has the right to disaffirm. The adult may not disaffirm the contract.


West, Inc. and Barton entered into a contract. After receiving valuable consideration from Egan, West assigned its rights under the Barton contract to Egan. In which of the following circumstances would West not be liable to Egan?

In an assignment for consideration, the assignor and obligor are both liable to the assignee. However, if the assignee releases the obligor, it will serve to release the assignor as well. Thus, if Egan (the assignee) releases Barton (the obligor), West (the assignor) will be released as well.


Which of the following types of mistake will generally make a contract unenforceable and allow it to be rescinded?

A mutual mistake of a material fact will make a contract voidable at the option of the adversely affected party


For which of the following contracts will a court generally grant the remedy of specific performance?

Specific performance is a court order to perform under the terms of a contract. Generally, it is available only in contracts for unique or rare property. A patent, by definition, is unique. Therefore, specific performance would be available to enforce a contract for the sale of a patent.


On December 1, Gem orally contracted with Mason for Mason to manage Gem's restaurant for one year starting the following January 1. They agreed that Gem would pay Mason $40,000 and that Mason would be allowed to continue to work for Gem if "everything worked out." On June 1, Mason quit to take a better paying job, alleging that the contract violated the statute of frauds. What will be the outcome of a suit by Gem for breach of contract?

As a general rule, under the statute of frauds, a contract that cannot be performed within one year from the time of its making is unenforceable absent proof of its material terms in a writing signed by the party being sued. Here, the contract by its terms could not be performed within a year from the time it was made and Gem cannot prove the material terms of the contract through a writing signed by Mason. Therefore, Gem would lose its breach of contract action.


Pierce owed Duke $3,000. Pierce contracted with Lodge to paint Lodge's house and Lodge agreed to pay Duke $3,000 to satisfy Pierce's debt. Pierce painted Lodge's house but Lodge did not pay Duke the $3,000. In a lawsuit by Duke against Pierce and Lodge, who will be liable to Duke?

Duke is a creditor of Pierce and Pierce made a contract with Lodge benefiting Duke, making Duke a creditor beneficiary of the Pierce-Lodge contract. If there is a breach of a contract benefiting a third party creditor, the creditor beneficiary may sue the promisor under the third party beneficiary contract or the party who owed the creditor the original debt under the original debt.


A unilateral contract is formed when?

a promise is made in exchange for an act


Under a contract governed by the UCC Sales Article, which of the following statements is correct?

Under Article 2 of the UCC the seller of goods may be excused from performance if the goods (subject matter of the contract) are accidentally destroyed before the risk of loss passes to the buyer and performance is thereby rendered impossible.


Kelly owed Connor $500. Connor agreed to accept Kelly's microwave oven instead of the money. Kelly immediately delivered the oven to Connor. Which of the following terms correctly describes this agreement?

An accord is an agreement to substitute one contract for another (the agreement to accept the microwave instead of the money), and satisfaction is the execution of the accord (here, the delivery of the microwave). Accord and satisfaction discharge the original duty.


Under the Sales Article of the UCC, which of the following statements is correct regarding risk of loss and title to the goods under a sale or return contract?

Title and risk of loss rest with the buyer until the goods are returned to the seller.


When may a buyer reject goods?

A buyer may reject goods if they do not conform to the contract in any way. This is known as the perfect tender doctrine.


Under the Sales Article of the UCC, which of the following statements is correct regarding a seller's obligation under a F.O.B. destination contract?

The seller is required to tender delivery of conforming goods at a specified destination.


As a general rule, the only essential terms under the UCC is?

quantity, and an output or requirements term is considered a sufficiently precise quantity.

Note that price doesn't have to be included


The Statute of Frauds requires contracts involving the sales of goods to be in writing if they exceed $500 , UNLESS these exceptions are present:

Specially manufactured (custom) goods
Written confirmation between merchants
Admission in court


Under the Sales Article of the UCC, a firm offer will be created only if the:

A firm offer (an offer that must remain open despite the absence of consideration) can be made only by merchants and must be in a signed writing.


Under the Sales Article of the UCC, the warranty of title:

The warranty of title is a guarantee from the seller that the goods are delivered free of all liens of which the buyer is unaware.


To establish a cause of action based on strict liability in tort for personal injuries that result from the use of a defective product, one of the elements the injured party must prove is that the seller:

An action for strict product liability will succeed only if the product was in a defective condition when sold, the seller was in the business of selling goods, the defect caused the plaintiff's injury, and the product was expected to and did reach the consumer without substantial change.


On an anticipatory breach of contract (or repudiation) the nonbreaching party has a right to demand?

assurances of performance or to cancel the contract.


Under the Sales Article of the UCC, which of the following statements is correct regarding the warranty of merchantability arising when there has been a sale of goods by a merchant seller?

The warranty arises as a matter of law when the seller ordinarily sells the goods purchased.


Which of the following statements applies to a sale on approval under the UCC Sales Article?

In a sale on approval, risk of loss passes to the buyer on approval of the goods.


Does the UCC follow the mirror image rule?



Anticipatory repudiation?

occurs when either the buyer or the seller indicates in advance of performance that he or she will not perform.


If the seller is a nonmerchant, such as one selling personal goods at a yard sale, risk of loss passes to?

the buyer upon the seller's tender of delivery of the goods to the buyer.


When do title and risk of loss for conforming goods pass to the buyer under a shipment contract covered by the Sales Article of the UCC?

When the goods are given to a common carrier


To obtain a patent, an applicant must show that the invention is

novel, useful, and not obvious to a person who works in the field


For a COMMON LAW contract?

The PRICE is necessary