Contract Law AMP - Defenses

Question 1

The Statute of Frauds requires:

Athe handwritten signature of the party sought to be held liable on some document acknowledging the existence of the contract.

B a signed writing for suretyship promises that primarily serve the pecuniary interest of the promisor.

C one or more writings that reflect the material terms of the contract, signed by the person sought to be held liable.

D a formal written contract signed by both parties to the agreement.

Answer 1

C

To satisfy the Statute of Frauds, there must be one or more writings signed by the person sought to be held liable on the contract that reflect the material terms of the contract. The Statute of Frauds does not require a formal written contract signed by both of the parties. For example, a letter, receipt, or a check containing the material terms (e.g., quantity for sale of goods) and signed by the party to be charged satisfies the Statute of Frauds. The needed signature need not be handwritten, but the document or documents must include the material terms of the contract, not just acknowledge the existence of the contract. Generally, the Statute of Frauds requires that suretyship promises be in writing and signed by the party to be held liable. However, there is an exception for suretyship promises that primarily serve the pecuniary interest of the promisor; they are not within the Statute of Frauds. QUESTION ID: K0045 Additional Learning

Question 2

The confirmatory memo rule applies __________.

A To all sales contracts covered by Article 2, whether or not the parties are merchants

B As long as the sender of the confirmatory memo is a merchant

C As long as the recipient of the confirmatory memo is a merchant

D Only if both parties to the agreement are merchants

Answer 2

D

The Statute of Frauds requires that contracts for the sale of goods for a price of $500 or more be evidenced by a writing signed by the parties sought to be bound. The confirmatory memo rule is an exception, which allows a contract to be enforceable without a writing signed by the party to be bound, in this case the recipient of the confirmatory memo. Under the confirmatory memo rule, in contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under the Statute of Frauds to bind the sender, it will also bind the recipient if he has reason to know of the confirmation’s contents and does not object to it in writing within 10 days of receipt. QUESTION ID: K0049C Additional Learning

Question 3

When both parties entering into a contract are mistaken about an existing fact relating to the agreement, __________.

A the contract is voidable if the mistake concerns a basic assumption on which the contract is made

B the contract is voidable if the mistake concerns the value of the subject matter of the contract

C the contract is void if the mistake concerns a basic assumption on which the contract is made

D the contract is void if the mistake concerns the value of the subject matter of the contract

Answer 3

A

When both parties entering into a contract are mistaken about an existing fact relating to the agreement, the contract is voidable by the adversely affected party if the mistake concerns a basic assumption on which the contract is made. A mistake concerning a basic assumption on which the contract is made makes the contract voidable, not void. If the parties to a contract make a mistaken assumption as to the value of the subject matter, that mistake generally will not be remedied. Thus, in that case, the contract is neither voidable nor void. QUESTION ID: K0041 Additional Learning

Question 4

Which of the following service contracts must satisfy the Statute of Frauds to be enforceable?

A A contract for the client’s personal care during an illness of unknown duration

B A contract for a specific task that will take approximately 12 months to complete

C A contract for one month of service that is to begin 13 months in the future

D A contract for the lifetime of the client

Answer 4

C

A contract that by its terms cannot be performed within one year is subject to the Statute of Frauds. The date runs from the date of the agreement and not from the date of performance. Thus, a contract for one month of service that is to begin 13 months in the future must satisfy the Statute to be enforceable. If the contract is possible to complete within one year, it is not within the one-year prong of the Statute of Frauds, even though actual performance may extend beyond the one-year period. A specific task that will take approximately 12 months to complete might be completed in less time. Likewise, a contract for the client’s personal care during an illness of unknown duration might be completed in less than a year if the client recovers quickly. A contract for the lifetime of the client is not within the Statute because it is capable of performance within a year since the client could die at any time. QUESTION ID: K0047 Additional Learning

Question 5

To be enforceable under the Statute of Frauds, which of the following must be in a writing signed by the parties sought to be bound?

A All leases of real estate for more than one year

B All leases of real estate

C Only agreements for the sale of real estate, not leases

D All leases of real estate for more than six months

Answer 5

A

Under the Statute of Frauds, a promise creating an interest in land must be evidenced by a writing. This includes not only agreements for the sale of real property, but also other agreements pertaining to land, such as leases for more than one year. It is not necessary that all leases, such as a six-month lease, be in writing. Only those leases of real estate for more than one year are covered by the Statute. QUESTION ID: K0042B Additional Learning

Question 6

At common law, the Statute of Frauds requires _____________ signed by ____________.

A A formal contract; the party to be held liable

B A writing or writings reflecting the material terms of the contract; the party to be held liable

C A writing or writings reflecting the material terms of the contract; both parties

D A formal contract; both parties

Answer 6

B

To satisfy the Statute of Frauds, there must be one or more writings that reflect the material terms of the contract signed by the person sought to be held liable on the contract. The Statute does not require both parties to sign, only the party to be charged. The Statute of Frauds does not require a formal written contract or the signature of both parties. For example, a letter, receipt, or a check containing the material terms (e.g., quantity for sale of goods) and signed by the party to be charged satisfies the Statute of Frauds. QUESTION ID: K0045B Additional Learning

Question 7

Which of the following will always render a contract voidable?

A A mutual mistake as to the value of the subject matter of the contract

B A unilateral mistake as to a basic assumption on which the contract is made

C A unilateral mistake as to the value of the subject matter of the
contract

D A mutual mistake as to a basic assumption on which the contract is made

Answer 7

D

A mutual mistake as to a basic assumption on which the contract is made will render a contract voidable by the adversely affected party. If only one of the parties is mistaken about facts relating to the agreement (i.e., a unilateral mistake), that mistake will not prevent formation of a contract unless the nonmistaken party knew or had reason to know of the mistake made by the other party. If the parties to a contract make a mistaken assumption as to the value of the subject matter of the contract, that mistake generally will not be remedied, whether such mistake is mutual or unilateral. QUESTION ID: K0041A Additional Learning

Question 8

When two merchants enter into an oral contract for the sale of goods and one party sends to the other party a signed, written confirmation of the agreement, it:

A Binds only the sender because it is signed only by the sender

B Binds both the sender and the recipient, provided the recipient actually read the document and did not object in writing within 10 days of receipt

C Binds both sender and the recipient, provided the recipient signs the confirmation within 10 days of receipt

D Binds both the sender and recipient, provided the recipient had reason to know of its contents and did not object in writing within 10 days of receipt

Answer 8

D

Under the confirmatory memo rule, in contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under law to bind the sender, it will also bind the recipient if he has reason to know of the confirmation’s contents and does not object to it in writing within 10 days of receipt. The recipient need not actually read the document; it is binding if the recipient had reason to know of its contents. Even though the memo is generally signed only by the sender, the recipient is bound; the recipient’s signature is not necessary. QUESTION ID: K0049A Additional Learning

Question 9

When dealing with a contract for the sale of goods, in which of the following situations is a writing required for the contract to be enforceable?

A The party against whom enforcement is sought admits to the contract in court

B The contract price was originally less than $500, but was later modified to a price of $500

C The goods were accepted by the buyer

D The goods are to be specially manufactured for the buyer and the seller has made substantial beginning in their manufacture

Answer 9

B

In determining whether a contract is for $500 or more, Article 2 gives effect to any modification; thus even if the contract price was originally less than $500, if the contract is later modified to fall within the Statute, it must comply with the Statute’s writing requirements to be enforceable. If goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business, a writing is not required once the seller has made a substantial beginning in their manufacture or commitments for their purchase. If the party against whom enforcement is sought admits in pleadings, testimony, or otherwise in court that the contract was made, the contract is enforceable without a writing for the quantity of goods admitted. If goods are accepted, the contract is enforceable without a writing to the extent of the quantity of goods accepted. QUESTION ID: K0048 Additional Learning

Question 10

A contract entered into between an infant and an adult is __________.

A voidable by the infant but binding on the adult

B voidable by either party

C void

D voidable by the adult but binding on the infant

Answer 10

A

Infants (generally those younger than age 18) lack capacity to enter into a contract binding on themselves. Adults have the capacity to bind themselves under a contract. Thus, a contract entered into between an infant and an adult is voidable by the infant but binding on the adult. QUESTION ID: K0043 Additional Learning

Question 11

Under the confirmatory memo rule, in contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under the Statute of Frauds to bind the sender, it will also bind the recipient if:

A The recipient has reason to know of the confirmation’s contents
and does not object to it in writing within 10 days of receipt

B The recipient has knowledge of the confirmation’s contents and confirms the contents in a signed writing within 10 days of receipt

C The recipient knows or has reason to know of the confirmation’s contents and admits orally to the substance of the memo in court
testimony

Answer 11

A

Under the confirmatory memo rule, in contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under the Statute of Frauds to bind the sender, it will also bind the recipient if the recipient has reason to know of the confirmation’s contents and does not object to it in writing within 10 days of receipt. If the recipient were to confirm the contents in a signed writing, the confirmatory memo rule would no longer be necessary because that writing could be used to satisfy the Statute of Frauds. Similarly, if the recipient admits orally to the substance of the memo in court testimony, the contract is enforceable without use of the confirmatory memo rule. When a party admits in pleadings, testimony, or otherwise in court that an oral contract was made, the contract is enforceable without a writing, but only up to the quantity of goods admitted. QUESTION ID: K0049B Additional Learning

Question 12

When a court refuses to enforce a provision of a contract to avoid “unfair” terms, it is applying the concept of:

Apari delicto

B promissory estoppel

C unconscionability

D disaffirmance

Answer 12

C

The concept of unconscionability allows a court to refuse to enforce a provision of a contract to avoid unfair terms. There are two types of unconscionability: substantive unconscionability based on lopsided terms, and procedural unconscionability based on unfair surprise or unequal bargaining power. A party might be able to successfully seek relief from a contract based on a defense of illegality, if the party is not in pari delicto, i.e., as culpable as the other party to the illegal contract. An infant might apply the concept of disaffirmance by choosing to disaffirm a contract he entered into before reaching the age of majority. Promissory estoppel allows a promise, unenforceable due to a lack of consideration, to be enforced if necessary to prevent injustice. QUESTION ID: K0050 Additional Learning

Question 13

Mutual mistake can be a defense to the formation of a contract if:

A The mistake concerns the value of the subject matter of the contract

B The mistake concerns a basic assumption on which the contract is made

C The adversely affected party bore the risk of the mistake

D The mistake has any effect on the agreed-upon exchange

Answer 13

B

Mutual mistake can be a defense to the formation of a contract if the mistake concerns a basic assumption on which the contract is made. Such a mistake renders the contract voidable by the adversely affected party if the mistake has a material effect on the agreed-upon exchange (not any effect on the agreed-upon exchange) and the party seeking avoidance did not assume the risk of the mistake. Thus the answer choice stating that the adversely affected party bore the risk of the mistake is incorrect. A mistaken assumption as to the value of the subject matter generally will not be remedied. QUESTION ID: K0041B Additional Learning

Question 14

A service contract that by its terms __________ is subject to the Statute of Frauds.

A Cannot be performed within one year

B Might extend to longer than one year

C Is for the lifetime of one of the parties

Answer 14

A

The Statute of Frauds requires that certain contracts be evidenced by a writing signed by the parties sought to be bound. A service contract that by its terms cannot be performed within one year is subject to the Statute of Frauds. The date runs from the date of the agreement and not from the date of performance. If the contract might extend to longer than one year, but it is still possible to complete within one year, it is not within the one-year prong of the Statute of Frauds, even though actual performance may extend beyond the one-year period. A contract for the lifetime of one of the parties is not within the Statute because it is capable of performance within a year, since a person can die at any time. QUESTION ID: K0047B Additional Learning

Question 15

A 17-year-old contracts to buy his neighbor’s car. The neighbor is 25 years old. The agreement between the two parties is:

A Voidable by the minor but not by the neighbor

B Binding as to both parties

C Voidable by the neighbor but not by the minor

D Voidable by both parties

Answer 15

A

In a contract between a minor and an adult, the contract is binding as to the adult and voidable as to the minor. Minors under the age of 18 (also called infants) lack capacity to enter into a contract binding on themselves. Adults have the capacity to bind themselves under a contract. Thus, a contract entered into between a minor and an adult is voidable by the minor but binding on the adult. QUESTION ID: K0043B Additional Learning

Question 16

What is the Statute of Frauds?

A A statute that contains special rules for all contracts involving the
sale of goods

B A statute that allows a court to enforce a promise without consideration when necessary to prevent injustice

C A statute requiring that certain types of agreements must be evidenced by a writing signed by the party sought to be bound

Answer 16

C

In most instances, an oral contract is valid. However, under the Statute of Frauds, certain types of agreements must be evidenced by a writing signed by the party sought to be bound. Article 2 of the Uniform Commercial Code contains special rules for all contracts involving the sale of goods. Goods are defined as all thing movable at the time they are identified to be sold under the contract. Using the doctrine of promissory estoppel, a court can enforce a promise without consideration when necessary to prevent injustice when the facts indicate that the promisor should be estopped from not performing. QUESTION ID: K0045C Additional Learning

Question 17

Which one of the following contracts involving an interest in land does not come within the Statute of Frauds?

A A contract to buy and sell real estate and divide the profits

B A mortgage contract

C A contract forming an easement of more than one year

D A contract for a lease of real property for more than one year

Answer 17

A

A contract to buy and sell real estate and divide the profits does not come within the Statute of Frauds even though the end result may be an interest in land. A contract creating an easement of more than one year is an interest in land covered by the Statute of Frauds. A mortgage contract is an interest in land covered by the Statute of Frauds. A contract for a lease of real property for more than one year is an interest in land covered by the Statute of Frauds. QUESTION ID: K0042 Additional Learning

Question 18

A writing is not required to enforce a contract that would otherwise be covered by the Statute of Frauds if:

A Both parties are merchants

B Both parties are nonmerchants

C The party against whom enforcement is sought admits to the existence of the contract in court

D The party seeking to enforce the contract offers evidence of prior dealings between the parties

Answer 18

C

The Statute of Frauds requires that certain contracts be evidenced by a writing signed by the parties sought to be bound. However, if the party against whom enforcement is sought admits in pleadings, testimony, or otherwise in court that the contract was made, the contract is enforceable without a writing (but in such a case the contract is not enforced beyond the quantity of goods admitted). Prior dealings alone are not enough to remove a contract from the requirements of the Statute of Frauds. Just because the parties had an agreement in the past does not mean there is sufficient proof of a current agreement. In some such cases, estoppel could be applied where it would be inequitable to allow the Statute of Frauds to defeat a meritorious claim, but for that to occur the party seeking to enforce the agreement would need to show that enforcement is necessary to prevent injustice. An example of this would be if the other party falsely and intentionally told the plaintiff the contract is not within the Statute of Frauds or said he would reduce the agreement to a writing but failed to do so. The Statute of Frauds applies to both merchants and nonmerchants. There is no general exception to the Statute of Frauds just because both parties are merchants. Note, however, that under the merchant’s confirmatory memo rule, in contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under the Statute of Frauds to bind the sender, it will also bind the recipient if the recipient has reason to know of the confirmation’s contents and does not object to it in writing within 10 days of receipt. QUESTION ID: K0048B Additional Learning

Question 19

Which one of the following contracts is considered void, rather than voidable?

A A contract made by a mentally incompetent person

B A contract made by an infant

C A contract induced by duress or coercion

D A contract involving illegal consideration

Answer 19

D

Illegal consideration or subject matter renders a contract void and unenforceable. Contracts may be illegal because they are inconsistent with the Constitution, violate a statute, or violate public policy. Contracts induced by duress or coercion are voidable and may be rescinded as long as not affirmed. A contract entered into by a mentally incompetent person (i.e., one whose mental capacity is so deficient that he is incapable of understanding the nature and significance of a contract) is voidable. Mentally incompetent persons may affirm or disaffirm the contract during a lucid interval. Infants lack the capacity to enter into a contract binding on themselves. A contract entered into by an infant is voidable by the infant. QUESTION ID: K0044 Additional Learning

Question 20

Which of the following contracts must be evidenced in writing?

A A contract between business partners to buy and sell real estate and divide the profits

B A mortgage contract

C A contract to build a building

D A six-month lease of a parcel of land

Answer 20

B

Under the Statute of Frauds, a promise creating an interest in land must be evidenced by a writing. This includes not only agreements for the sale of real property, but also other agreements pertaining to land, such as a mortgage contract. Some contracts may have an end result involving an interest in land, but they still do not come within the Statute. For example, a contract to build a building or a contract to buy and sell real estate and divide the profits do not come within the Statute. A lease of a parcel of land for more than one year is also covered by the Statute, but a six-month lease is not. QUESTION ID: K0042A Additional Learning

Question 21

Under the Statute of Frauds, an oral contract for the sale of goods priced at $500 or more is unenforceable against the buyer.
Which of the following scenarios is not an exception to this general rule?

A The goods were specially manufactured for the buyer

B The buyer admits to the oral contract in court pleadings

C The contract price was originally $450 but was later modified to $500

D The buyer received and accepted the goods in question

Answer 21

C

A $450 contract modified to $500 is not within any exception to the Statute of Frauds. The Statute of Frauds requires that certain contracts be evidenced by a writing signed by the parties sought to be bound. This includes contracts for the sale of goods for a price of $500 or more. In determining whether a contract is for $500 or more, Article 2 gives effect to any modification. Thus, even if the contract price was originally less than $500, if the contract is later modifies so as to fall within the Statute, it must comply with the Statute’s writing requirements to be enforceable. If the party against whom enforcement is sought, in this case the buyer, admits in pleadings, testimony, or otherwise in court that the contract was made, the contract is enforceable without a writing (but in such a case the contract is not enforced beyond the quantity of goods admitted). If goods are either received and accepted or paid for, the contract is enforceable. However, the contract is not enforceable beyond the quantity of goods accepted or paid for. Thus, if only some of the goods called for in the oral contract are accepted or paid for, the contract is only partially enforceable. A contract for specially manufactured goods (i.e., goods that are to be specially manufactured for the buyer and are not suitable for sale to others by the seller in the ordinary course of his business) can be enforced without a writing when the seller has reasonably indicated that the goods are for the buyer and made a substantial beginning in their manufacture or committed for their purchase before notice of a repudiation was received. In this case, the question indicates that the manufacture of the goods was actually completed (by using the past tense “manufactured”); so the exception would apply. QUESTION ID: K0048A Additional Learning