M3-Contracts: Part 2

Question 1

Contracts entered into by one who has been adjudicated mentally incompetent are void rather than voidable. (true or false)

Answer 1

true

Question 2

A material breach generally will discharge the nonbreaching party. (true or false)

Answer 2

true

Question 3

In a NOVATION, the agreement is unchanged but one of the original parties is released and a new party is substituted into their place. (true or false)

Answer 3

true

Question 4

In a SUBSTITUTED CONTRACT, the original parties are both released from the original agreement but are BOTH bound by a new agreement. (true or false)

Answer 4

true

Question 5

Consequential damages are recoverable for breach of contract only to the extent they are foreseeable. And in every case, a non breaching party has a duty to mitigate damages-a duty to make reasonable efforts to cut down on losses resulting from the breach. Failure to do so will preclude the party from collecting damages that might have been avoided. (true or false)

Answer 5

true

Question 6

Unilateral mistake is a defense to what?

Answer 6

to a contract if the nonmistaken party knew or should have known of the mistake.

Question 7

The parol evidence rule prohibits introduction of prior written statements to vary the terms of a fully integrated contract, but it does not bar the introduction of subsequent oral or written agreements. (true or false)

Answer 7

true

Question 8

Which types of conditions affecting performance may validly be present in contracts?

Answer 8

A contract can have conditions:

• precedent
• subsequent
• concurrent

Question 9

Prevention of performance results in a discharge for breach of the implied duty of cooperation. (true or false)

Answer 9

true

A party to a contract will also be discharged through an accord and satisfaction.

Question 10

Undue influence is when:

Answer 10

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.

Question 11

Illegality of the services to be performed always results in a discharge of duties. (true or false)

Answer 11

true

This assumes that the services were legal at the time the contract was formed. If the services had been illegal at the time of attempted formation, there would be no contract.

The death of the party who is to receive the services, a mere increase in cost (doubling the cost), and mere bankruptcy of the party to receive the services will not result in discharge.

Question 12

The statute of limitations for breach of contract usually begins to run on the occurrence of the breach. (true or false)

Answer 12

true

Question 13

A minor has a reasonable time after reaching the age of majority to disaffirm contracts. (true or false)

Answer 13

true

Question 14

Contracts governed by the common law, especially construction contracts, do not allow rescission for minor breaches, but limit the the nonbreaching party to recovery of damages. (true or false)

Answer 14

true

Question 15

A “ratification” prior to reaching majority can be revoked and is not effective. (true or false)

Answer 15

true

Question 16

A statute of limitations requires that actions to enforce rights under a contract be brought within a certain time after breach has occurred. (true or false)

Answer 16

true

The statute of frauds, not statute of limitations, is concerned about who has signed the contract.

Question 17

The right to recover if there was intentional false statement involves the concept of ______?

Answer 17

scienter

Question 18

Oral statements offered to prove the meaning of a written contract involves the___________.

Answer 18

Parol evidence rule

Question 19

A liquidated damages clause is enforceable if at the time of contracting it appears that the amount of damages in case of breach would be difficult to assess and the amount is a reasonable approximation of damages and not a penalty. (true or false)

Answer 19

true

A liquidated damages clause is not enforceable if it constitutes a penalty, if actual damages would be easy to assess at the time the contract was made, or if the liquidated damages amount is not a reasonable approximation of actual damages.

Question 20

The common law defense of fraud requires a showing of intent to deceive. (true or false)

Answer 20

true

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.

Question 21

Fraud requires misrepresentation of a material fact. (true or false)

Answer 21

true

Ordinarily, opinions or statements of value do not constitute misrepresentations of material facts unless made by experts.

EX: Appraised value would constitute a misrepresentation of a material fact because it was made by an expert.

Question 22

An immaterial unilateral mistake is not a defense to a contract. A contract based on a mistake is voidable at the option of the adversely affected party. (true or false)

Answer 22

true

Question 23

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 evidences is permissible when:

Answer 23

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.

Question 24

A rescission does what?

Answer 24

“undoes” a contract and restores the parties to the positions they would have been in if no contract were made.

Question 25

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). (true or false)

Answer 25

true

Question 26

There is no requirement that the terms of a written contract be contained in a single writing with regard to the Statute of Frauds. (true or false)

Answer 26

true The $500 rule applies only to contract for the sale of goods under the UCC. The statute of frauds does not require the contract to be in writing- only that some writing reflects the material terms of the contract and that that writing is signed by the party sought to be held liable, not necessarily both parties. The statute of frauds does not apply to contracts that can be fully performed within one year.

Question 27

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. (true or false)

Answer 27

true

Question 28

A mutual mistake of a material fact will make a contract voidable at the option of the adversely affected party. (true or false)

Answer 28

true Generally, a unilateral mistake of fact does not make the contract voidable. The mistaken party can avoid a contract on the basis of a unilateral mistake only if the other party either knew or should have known of the mistake. Only mistakes as to material facts can make a contract unenforceable. Value generally is not a fact but, rather, is a matter of opinion.

Question 29

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. (true or false)

Answer 29

true therefore, specific performance would be available to enforce a contract for the sale of a patent.

Question 30

A promise to pay the debt of another must be evidenced by some type of writing to be enforceable. (true or false)

Answer 30

true

Question 31

An accord is an agreement to substitute one contract for another, and satisfaction is the execution of the accord. (true or false)

Answer 31

true

Question 32

A liquidated damage clause is a clause in a contract that specifies what damages will be if there is a breach. A liquidated damage clause is enforceable if the amounts is:

Answer 32

1) reasonable in relation to the actual harm done, and 2) NOT a penalty. Example: It is hard to imagine what kind of expenses that the landlord would incur due to late payment of rent that would justify adding on a daily cost that is actually greater than the daily rental rate.

Question 33

Duress is threatening speech or action that actually overcomes a person's free will and makes his or her apparent consent invalid. Thus, duress focuses on whether the wrongdoer's actions actually affected the other party. (true or false)

Answer 33

true