Contract Law AMP - Offer And Acceptance

Question 1

An agreed upon price is a necessary element for a valid __________.

A contract for the sale of consumer goods

B requirements or output contract

C real property contract

D personal services contract

Answer 1

C

A contract for real property must state a price to be a valid contract. In other types of contracts, including those for personal services, consumer goods, and requirements or output contracts, the failure to state a price in the contract itself does not prevent the formation of the contract, if the parties intended to form a contract without the price being settled. QUESTION ID: K0033 Additional Learning

Question 2

To be valid, an offer for the sale of goods must include __________.

A A price term

B A quantity term

C An identified item

Answer 2

B

An offer for the sale of goods must include a quantity term to be valid. The quantity being offered must be certain or capable of being made certain, such as in a requirements or output contract. The offer need not contain a price term. The majority of jurisdictions and Article 2 hold that the court can supply a reasonable price if the parties intended to form a contract without the price being settled. The offer also does not need to refer to an identified item. An offer allowing a person to specify an item within a reasonable range of choices may be sufficiently definite to result in a contract if accepted. QUESTION ID: K0024A Additional Learning

Question 3

Once an offeree begins performance in response to an offer for a true unilateral contract, __________.

A A unilateral contract has been formed

B The offeree becomes bound to complete that performance

C The offer becomes irrevocable

Answer 3

C

An offer for a true unilateral contract becomes irrevocable once performance has begun. The offeree is given a reasonable time to complete performance. A unilateral contract is not formed until the total act of performance is complete. The offeree is not bound to complete performance and may withdraw at any time prior to completion. QUESTION ID: K0036A Additional Learning

Question 4

What is an option contract?

A A contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer

B A contract in which the offeror gives the offeree the option to accept by a promise or by the start of performance

C A contract in which the offeror offers to buy or sell goods in a signed writing that gives assurances that the contract will be held open for a specified period of time

Answer 4

A

An option contract is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer. Normally offers can be revoked at will by the offeror, even if he has promised not to revoke for a certain period. An option contract is an exception to this general rule, which limits the offeror’s power to terminate the offer. When a merchant offeror offers to buy or sell goods in a signed writing that gives assurances that the contract will be held open for a specified period of time, this is a merchant’s firm offer, not an option, and under Article 2 the promise to keep an offer open will be enforceable without the payment of consideration. An offer where the offeree has the option to accept by a promise or by the start of performance is an offer to form a bilateral contract, as opposed to a unilateral contract, which can only be accepted by performance. Under Article 2 and the Restatement (Second) of Contracts, all offers are deemed bilateral contracts unless clearly indicated otherwise. QUESTION ID: K0039A Additional Learning

Question 5

If it reasonably appears that the parties intended to make a valid contract, a court may apply the presumption that the parties’ intent was to include a reasonable term to rectify any __________ term.

A Missing

B Vague

C Unfair

Answer 5

A

If it appears the parties intended to make a contract and there is a reasonably certain basis for giving a remedy, the majority of jurisdictions and Article 2 hold that a court can supply a reasonable term for one that is missing. However, the presumption cannot be made if the parties have included a term that makes the contract too vague to be enforced. The problem then is that the parties have manifested an intent that cannot be determined. The concept of unconscionability allows a court to refuse to enforce a provision or an entire contract (or to modify the contract) to avoid unfair terms. If a court finds as a matter of law that a contract or any clause of the contract was unconscionable when made, the court does not simply apply a presumption that the parties’ intent was to provide a reasonable term. Instead, the court may: (i) refuse to enforce the contract; (ii) enforce the remainder of the contract without the unconscionable clause; or (iii) limit the application of any clause so as to avoid an unconscionable result. QUESTION ID: K0038A Additional Learning

Question 6

A quasi-contract is __________.

A Formed by language, oral or written

B Formed by conduct, rather than language

C Formed by a court to avoid unjust enrichment

Answer 6

C

A quasi-contract can be constructed by a court to avoid unjust enrichment by permitting the plaintiff to bring an action in restitution to recover the amount of the benefit conferred on the defendant. Quasi-contracts are not contracts at all; their only relationship to genuine contracts is historical. Express contracts are formed by language, oral or written. Implied contracts are formed by manifestations of assent other than oral or written language, i.e., by conduct. QUESTION ID: K0022C Additional Learning

Question 7

Which of the following scenarios best illustrates the Article 2 concept of “accommodation”?

A A seller of goods ships nonconforming goods to a buyer as an accommodation in an effort to make a counteroffer

B A seller of goods ships nonconforming goods to a buyer and seasonably notifies the buyer that the shipment is being offered only as an accommodation

C A seller of goods verbally rejects a buyer’s offer but, as an accommodation, makes a counteroffer for comparable goods

D A seller of goods verbally accepts a buyer’s order but proposes that the buyer accept as an accommodation nonconforming, comparable goods in place of those ordered

Answer 7

B

Under Article 2, an offer to buy goods for current or prompt shipment is construed as inviting acceptance either by a promise to ship or by current or prompt shipment of conforming or nonconforming goods. The shipment of nonconforming goods is an acceptance creating a bilateral contract as well as a breach of the contract—unless the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accommodation. The concept of accommodation applies to offers to buy goods for current or prompt shipment. If a seller of goods verbally rejects a buyer’s offer but makes a counteroffer for comparable goods, this is a simple case of a rejection and counteroffer, not an accommodation. Similarly, if a seller of goods verbally accepts a buyer’s order but proposes that the buyer accept nonconforming, comparable goods in place of those ordered, accommodation is not at issue. A contract was formed when the seller verbally accepted the buyer’s order. The Battle of the Forms provision of Article 2 may then be used to determine the content of that contract. If the seller merely ships nonconforming goods to a buyer in an effort to make a counteroffer, without notifying the buyer that the shipment is being offered only as an accommodation, the act of shipping nonconforming goods is an acceptance and breach, not a counteroffer. QUESTION ID: K0029B Additional Learning

Question 8

When can an offeror properly revoke an offer for a unilateral contract?

A Anytime before the offeree has completed performance

B Anytime before the offeree has begun performance

C Anytime before the offeree has promised performance

Answer 8

B

An offer for a true unilateral contract becomes irrevocable once performance has begun. Thus, an offeror can properly revoke an offer for a unilateral contract at any time before the offeree has begun performance. Unlike a bilateral contract, which may be deemed accepted when an offeree has promised performance, a unilateral contract can be accepted only by full performance. Thus, the promise of performance has no effect on the offeror’s ability to properly revoke an offer for a unilateral contract. Although the unilateral contract will not be formed until the offeree has completed performance, the offeror’s power to revoke the offer is limited once the offeree has begun performance. The offeree is given a reasonable time to complete performance, during which time the offer is irrevocable. Note that the offeree is not bound to complete performance—she may withdraw at any time prior to completion of performance. QUESTION ID: K0036B Additional Learning

Question 9

A merchant who offers to buy or sell goods in a signed writing that gives assurances that the offer will be held open is offering:

A A unilateral contract

B A merchant’s firm offer

C An option contract

D A confirmatory memo contract

Answer 9

B

Under Article 2, a merchant’s firm offer arises when a merchant offers to buy or sell goods in a signed writing that gives assurances that the offer will be held open. If no specific time frame is stated in the offer, a merchant’s firm offer will remain open for a reasonable time (but in no event may such period exceed three months). An option contract is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer for a period of time. An offer for a unilateral contract is one that can be accepted only by full performance. Note that the beginning of performance may create an option so that the offer is irrevocable. However, the offeree is not obligated to complete performance merely because he has begun performance, as only complete performance constitutes an acceptance of the offer. A confirmatory memo is not an offer. It is a method of satisfying the Statue of Frauds in contracts between merchants. The confirmatory memo rule states that 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: (i) he has reason to know of the confirmation’s contents; and (ii) he does not object to it in writing within 10 days of receipt. QUESTION ID: K0032B Additional Learning

Question 10

Under Article 2, when an offeree proposes additional or different terms during acceptance, the court will apply __________ to determine whether the additional or different terms become part of the contract.

A the battle of the forms provision

B gap fillers

C the mirror image rule

D the mailbox rule

Answer 10

A

The battle of the forms provision of Article 2 lists specific rules for determining what terms are included in a contract when the terms of acceptance do not match the terms of the offer. Article 2 has abandoned the mirror image rule, which requires an absolute and unequivocal acceptance of each and every term of the offer. Gap fillers are used when certain terms are not included in the contract; it does not apply to additional or different terms in the acceptance. The mailbox rule is applied to determine the timing of acceptance of a contract. QUESTION ID: K0035 Additional Learning

Question 11

A communication will not be considered to be definite and certain enough to be an offer if it is for the sale of goods and __________.

A is missing a quantity term

B states the quantity to be purchased and sold as “all that the seller produces”

C states the quantity to be purchased and sold as “all that the buyer requires”

D is missing the price term

Answer 11

A

A communication will not be considered to be definite and certain enough to be an offer if it is for the sale of goods and is missing a quantity term. The quantity term is the only term that is absolutely required to make a communication an offer when the sale of goods is involved. Most other terms can be implied or supplied later in the contract. A communication may be considered definite enough to be an offer for the sale of goods despite a missing price term. If the price term is not included, a reasonable price can be implied. The buyer’s requirements and the seller’s output are valid quantity terms sufficient to make a communication an offer for the sale of goods. Although these terms do not state a specific quantity, the quantity is capable of being made certain by reference to objective, extrinsic facts (i.e., the buyer’s actual requirements and the seller’s actual output). QUESTION ID: K0024 Additional Learning

Question 12

A merchant’s printed catalog containing a price quote is usually construed as __________.

A an invitation for an offer

B an offer by publication

C a contingent offer

D a merchant’s firm offer

Answer 12

A

Advertisements, catalogs, circular letters, and the like containing price quotations are usually construed as mere invitations for offers. There is no clearly identified offeree, and therefore there can be no offer of any type (so no contingent offer, merchant’s firm offer, or offer by publication). QUESTION ID: K0040 Additional Learning

Question 13

Which of the following does not interfere with an offeror’s right to revoke an offer?

A Detrimental reliance

B An option

C A merchant’s firm offer

D The Statute of Frauds

Answer 13

D

The Statute of Frauds is not relevant to an offeror’s power to terminate an offer. Generally, an offeror may terminate an offer any time before acceptance. The Statute of Frauds requires that certain contracts be memorialized in a writing to be enforceable and has nothing to do with the termination of offers. An option is a contract to keep an offer open. It requires consideration to be enforceable. An offer that is the subject of an option contract is irrevocable for as long as the option contract provides. A merchant’s firm offer is a written and signed offer for a sale of goods made by a merchant that gives assurances that the offer will remain open. Such an offer is irrevocable for the time stated in the offer, or if no time is stated, for a reasonable time, but in no event may such period exceed three months. Detrimental reliance can make an offer irrevocable as an option contract for a reasonable period of time. Detrimental reliance arises when a person makes an offer under circumstances such that he should reasonably expect that the offeree will rely on the offer to her detriment and the offeree does so rely. QUESTION ID: K0025 Additional Learning

Question 14

How can an offeree terminate an offer?

A By not accepting the offer within a reasonable time, even if no time period is specified in the offer

B By making a counteroffer to an option contract, within the option period

C By inquiring whether the offeror would consider a price different from that contained in the offer

Answer 14

A

An offeree can terminate an offer by not accepting the offer within a reasonable time, even if no time period is specified in the offer. An offeree must accept the offer within the time period specified in the offer or, if no time period is specified, within a reasonable time. If she does not do so, then she will have allowed the offer to terminate. Because an option is a contract to keep an offer open, a rejection of or a counteroffer to an option does not terminate the offer. The offeree is still free to accept the original offer within the option period unless the offeror has detrimentally relied on the offeree’s rejection. Simply inquiring whether the offeror would consider a price different from that contained in the offer will not terminate the offer so long as the inquiry is consistent with the idea that the offeree is still keeping the original proposal under consideration. The test is whether a reasonable person would believe that the original offer had been rejected. QUESTION ID: K0028B Additional Learning

Question 15

Which of the following is not really a contract?

A An implied-in-fact contract

B A quasi-contract

C A unilateral contract

D A bilateral contract

Answer 15

B

A quasi-contract is not really a contract at all. It is a remedy imposed by courts to avoid unjust enrichment by permitting the plaintiff to bring an action in restitution to recover a benefit conferred on the defendant. A bilateral contract is a type of contract. Traditionally the term is used to describe a contract in which a promise is exchanged for another promise. A unilateral contract is a type of contract. Traditionally the term is used to describe a contract in which a promise is exchanged for an act or other performance. An implied-in-fact contract is a type of contract. Traditionally the term is used to describe a contract that is formed by conduct (e.g., sitting in a barber’s chair). QUESTION ID: K0022 Additional Learning

Question 16

An offer for a bilateral contract can be accepted by __________.

A A promise to perform only

B Beginning performance only

C Full performance only

D A promise to perform or the beginning of performance

Answer 16

D

An offer for a bilateral contract may be accepted either by a promise to perform or by the beginning of performance. Note: Unless an offer specifically provides that it may be accepted only through performance, it will be construed as an offer to enter into a bilateral contract. In contrast, a unilateral contract can be accepted only by full performance. Note that the beginning of performance may create an option so that the offer is irrevocable. However, the offeree is not obligated to complete performance merely because he has begun performance, as only complete performance constitutes an acceptance of the offer. QUESTION ID: K0034B Additional Learning

Question 17

Article 2 has abandoned the __________, in favor of the __________.

A Mailbox rule; mirror image rule

B Mirror image rule; mailbox rule

C Battle of the forms provision; mirror image rule

D Mirror image rule; battle of the forms provision

Answer 17

D

Article 2 has abandoned the mirror image rule and instead uses the battle of the forms provision to deal with the proposal of additional or different terms by an offeree in a definite and timely acceptance. The mirror image rule insists on an absolute and unequivocal acceptance of each and every term of the offer. Any different or additional terms in the acceptance make the response a rejection and counteroffer. Under Article 2, the proposal of additional or different terms by the offeree in a definite and timely acceptance does not constitute a rejection and counteroffer, but rather is effective as an acceptance, unless the acceptance is expressly made conditional on assent to the additional or different terms. Whether the additional or different terms become part of the contract depends on whether or not both parties are merchants. This is often referred to as the battle of the forms provision. The mailbox rule has not been abandoned, and it is not an alternative to the Mirror Image Rule. The Mailbox Rule is a rule dealing with the timing of an acceptance. Under the Mailbox Rule, in most cases, acceptance by mail or similar means creates a contract at the moment of dispatch, provided that the mail is properly addressed and stamped. QUESTION ID: K0035A Additional Learning

Question 18

An option contract is a distinct contract in which __________ a promise not to revoke an outstanding offer.

A An offeree gives consideration for

B An offeror gives written assurances regarding

C A merchant makes

D A nonmerchant makes

Answer 18

A

An offer normally can be revoked at will by the offeror. An option contract is a distinct contract in which an offeree gives consideration for a promise by the offeror not to revoke an outstanding offer. Even if an offeror gives written assurances regarding a promise not to revoke for a certain period, the revocation-at-will rule applies unless the offeror’s power to terminate the offer has been limited in some way, such as by the creation of an option contract. Note that if the offeror could reasonably expect that the offeree would rely to her detriment on the written assurances and the offeree does so rely, the offer could be held irrevocable as an option contract, but the assurances alone are generally not enough to make an offer irrevocable. Under the Merchant’s Firm Offer rule in Article 2, a promise to keep an offer open will be enforceable without the payment of consideration when a merchant offers to buy or sell goods in a signed writing that gives assurances that the contract will be held open for a specified period of time. This is not the same as an option contract, which is a distinct contract and generally requires that the offeree give some consideration for the promise not to revoke. QUESTION ID: K0039B Additional Learning

Question 19

What is the effect of the destruction of the subject matter of an offer prior to acceptance?

A The offeree may accept the offer and sue the offeror for breach

B The offeree may accept the offer but bears the risk of loss

C The offeree’s power of acceptance is terminated

Answer 19

C

Destruction of the subject matter of an offer prior to acceptance terminates the offeree’s power of acceptance. Obviously, since the offeree’s power to accept has been terminated by operation of law, the offeree may no longer accept the offer. Since no contract is ever formed, the offeree cannot sue the offeror for breach. Once a contract is formed, a buyer often bears the risk of loss before receiving the goods purchased. To aid buyers in this situation (and a few others), Article 2 gives buyers a special property interest in goods as soon as they are identified as the ones that will be used to satisfy the contract (e.g., as soon as the seller sets them aside for the buyer). This special property interest is insurable, so that a buyer may obtain insurance for goods while they are being shipped to prevent loss in case of damage or destruction during shipment. But again, this applies to goods lost after the formation of a contract, not after a mere offer. QUESTION ID: K0026B Additional Learning

Question 20

Which of the following statements regarding revocation and acceptance of contract offers is correct?

A A revocation generally is effective when dispatched, and an acceptance generally is effective when dispatched.

B A revocation generally is effective when received, and an acceptance generally is effective when received.

C A revocation generally is effective when received, and an acceptance generally is effective when dispatched.

D A revocation generally is effective when dispatched, and an acceptance generally is effective when received.

Answer 20

C

A revocation generally is effective when received and an acceptance generally is effective when dispatched (i.e., the mailbox rule). Under the mailbox rule, if the offeree dispatches an acceptance before he receives a revocation sent by the offeror, a contract is formed. QUESTION ID: K0027 Additional Learning

Question 21

Under Article 2, a seller can accept an offer by shipping nonconforming goods to the buyer without committing a breach of the contract by:

A Shipping goods of an objectively greater value than those specified in the contract, thus avoiding any real damage to the buyer

B Not acting to accept the contract in any way before making shipment of the nonconforming goods, thus creating a counteroffer rather than an acceptance

C Seasonably notifying the buyer that the shipment of nonconforming goods is offered only as an accommodation

Answer 21

C

The shipment of nonconforming goods is an acceptance creating a bilateral contract as well as a breach of the contract—unless the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accommodation. Under Article 2, an offer to buy goods for current or prompt shipment is construed as inviting acceptance either by a promise to ship or by current or prompt shipment of conforming or nonconforming goods. Thus, the act of shipping nonconforming goods is itself an acceptance (and breach) and not a counteroffer, unless the seller takes the actual step of notifying the buyer that the shipment is being offered only as an accommodation. Shipping goods of an objectively greater value than those specified in the contract without notifying the buyer that these greater goods are being offered as an accommodation would still be considered a breach of contract, and the buyer may sue for any appropriate damages. QUESTION ID: K0029A Additional Learning

Question 22

Generally, whether a communication is deemed an offer depends upon __________.

A the subjective intention of the offeror to make an offer

B whether the offeror’s communication included the words “offer” or “promise”

C whether the offeror’s communication was in writing

D the objective or apparent intention of the offeror to make an offer

Answer 22

D

The objective or apparent intention of the offeror determines whether there has been an offer (i.e., a communication creating a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms. Sometimes stated as a manifestation of intent to enter into a contract). Contract law generally is governed by an objective test—how would reasonable people interpret the communications involved. The subjective intention of the offeror does not determine whether a communication is an offer. As explained above, contract law generally is governed by an objective test—how would reasonable people interpret the communications involved. Whether the offeror has communicated in writing does not determine whether a communication is an offer. Offers can be oral or even made by conduct (e.g., sitting in a barber’s chair can constitute an offer to pay the barber for a haircut even if no words are spoken). Whether the offeror has communicated the words “offer” or “promise” does not determine whether the communication is an offer. As discussed above, an offer is any communication creating a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms. The communication need not include the words “offer” or “promise”; indeed, words are not even necessary, as discussed above. QUESTION ID: K0023 Additional Learning

Question 23

If a sale involves both goods and services, __________.

A Article 2 of the Uniform Commercial Code will apply to the whole contract

B A court will determine which aspect is dominant and apply the law governing that aspect to the whole contract

C The common law rules for contracts will apply to the whole contract

Answer 23

B

If a sale involves both goods and services (e.g., a contract to paint a portrait), a court will determine which aspect is dominant and apply the law governing that aspect to the whole contract. Thus, the other choices are wrong. Note, however, if the contract divides payment between goods and services, then Article 2 will apply to the sale portion and the common law will apply to the services portion. QUESTION ID: K0021B Additional Learning

Question 24

An implied contract is __________.

A Formed by language, oral or written

B Formed by a court to avoid unjust enrichment

C Formed by conduct, rather than language

Answer 24

C

Implied contracts are formed by manifestations of assent other than oral or written language, i.e., by conduct. Express contracts are formed by language, oral or written. A quasi-contract can be constructed by a court to avoid unjust enrichment by permitting the plaintiff to bring an action in restitution to recover the amount of the benefit conferred on the defendant. Quasi-contracts are not contracts at all; their only relationship to genuine contracts is historical. QUESTION ID: K0022B Additional Learning

Question 25

When an offeree gives consideration for a promise by the offeror not to revoke an outstanding offer, this is known as __________.

A a requirements contract

B an accommodation

C a firm offer

D an option contract

Answer 25

D

An option contract is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer. A merchant’s firm offer is found under Article 2 under certain circumstances in which a promise to keep an offer open is enforceable even if no consideration has been paid to keep the offer open. In a requirements contract, a buyer promises to buy from a certain seller all of the goods the buyer requires, and the seller agrees to sell that amount to the buyer. Under some circumstances, a seller may ship nonconforming goods to a buyer as an accommodation. QUESTION ID: K0039 Additional Learning

Question 26

Under the Article 2 battle of the forms provision, whether additional or different terms proposed by the offeree during acceptance ultimately become part of a contract depends on whether or not __________.

A The offeree is a merchant

B The offeror is a merchant

C Both parties are merchants

D One of the parties is a merchant

Answer 26

C

Whether the additional or different terms become part of the contract depends on whether or not both parties are merchants. If any party to the contract is not a merchant, the additional or different terms are considered to be mere proposals to modify the contract. They do not become part of the contract unless the offeror expressly agrees. If both parties are merchants, additional terms in the acceptance become part of the contract unless they materially alter the terms of the offer, the offer expressly limits acceptance to the terms of the offer, or the offeror has already objected to the terms (or objects within a reasonable time after notice of them is received). Between merchants, some courts treat different terms in an acceptance the same as additional terms; other courts apply the knockout rule (i.e., conflicting terms are knocked out and replaced by gap-filling terms under the U.C.C.). QUESTION ID: K0035C Additional Learning

Question 27

Full performance is necessary to properly accept an offer for a(n) __________ contract.

A Option

B Bilateral

C Unilateral

Answer 27

C

Full performance is necessary to properly accept an offer for a unilateral contract. A bilateral contract may be accepted either by a promise to perform or by the beginning of performance. Unless an offer (including one for an option contract) specifically provides that it may be accepted only through performance, it will be construed as an offer to enter into a bilateral contract, which may be accepted either by a promise or by beginning performance. QUESTION ID: K0034C Additional Learning

Question 28

Under the common law, which of the following does not terminate an offer?

A A counteroffer

B A rejection

C An acceptance conditional upon additional terms

D An inquiry into changing the terms of the offer

Answer 28

D

An inquiry into changing the terms of the offer will not terminate the offer when it is consistent with the idea that the offeree is still keeping the original proposal under consideration. An express rejection is a statement by the offeree that she does not intend to accept the offer. Such a rejection will terminate the offer. A counteroffer serves as a rejection of the original offer as well as a new offer. An acceptance conditional upon additional terms is considered a counteroffer. QUESTION ID: K0028 Additional Learning

Question 29

Generally, which of the following statements is correct regarding the law governing contracts?

A Article 2 of the Uniform Commercial Code governs contracts for commercial services while the common law governs other contracts for services.

B Article 2 of the Uniform Commercial Code governs contracts for the sale of goods while the common law governs contracts for services and interests in land.

C Article 2 of the Uniform Commercial Code governs contracts for the sale of commercial interests in land while the common law governs other land sale contracts.

D Article 2 of the Uniform Commercial Code governs contracts for commercial sales while the common law governs contracts for the sale of goods by nonmerchants.

Answer 29

B

Article 2 of the Uniform Commercial Code governs contracts for the sale of goods, while the common law governs contracts for services and interests in land. Article 2 governs all contracts for the sale of goods. The term “goods” is defined as all things moveable. The common law governs contracts not involving goods (e.g., service contracts and contracts for interests in land). Contracts for the sale of commercial interests in land are not governed by Article 2. As stated above, Article 2 governs contracts for the sale of goods, and the common law governs other contracts. The fact that a contract involves the sale of a commercial interest in land does not bring the contract within Article 2. Contracts for commercial services are not governed by Article 2. The common law governs contracts not involving the sale of goods. The fact that a contract involves commercial services does not bring the contract within Article 2. Contracts for the sale of goods by nonmerchants are governed by Article 2. Article 2 governs all contracts for the sale of goods—whether the sale is by a merchant or nonmerchant, although Article 2 does have some special rules that apply only to merchants. QUESTION ID: K0021 Additional Learning

Question 30

An express contract is __________.

A Formed by a court to avoid unjust enrichment

B Formed by language, oral or written

C Formed by conduct, rather than language

Answer 30

Express contracts are formed by language, oral or written. Implied contracts are formed by manifestations of assent other than oral or written language, i.e., by conduct. A quasi-contract can be constructed by a court to avoid unjust enrichment by permitting the plaintiff to bring an action in restitution to recover the amount of the benefit conferred on the defendant. Quasi-contracts are not contracts at all; their only relationship to genuine contracts is historical. QUESTION ID: K0022A Additional Learning

Question 31

Which of the following would be in violation of the mirror image rule?

A An acceptance that makes implicit terms explicit

B An acceptance accompanied by an expression of dissatisfaction

C An acceptance with a request for clarification

D An acceptance with additional terms

Answer 31

D

The mirror image rule requires an absolute and unequivocal acceptance of each and every term of the offer. Under the mirror image rule, any different or additional terms in the acceptance make the response a rejection and counteroffer. In contrast, statements by the offeree that make implicit terms explicit, express dissatisfaction, or request clarification do not necessarily amount to a rejection and counteroffer. QUESTION ID: K0031 Additional Learning

Question 32

Under the common law, a counteroffer serves as:

A A mere inquiry that has no effect on the original offer

B A rejection of the original offer and a new offer

C A rejection of the original offer and an invitation for a new offer

Answer 32

B

A counteroffer is an actual offer made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in its terms. Traditionally, a counteroffer serves as a rejection of the original offer, as well as a new offer. Article 2 provides exceptions to this general treatment through its Battle of the Forms provision. In contrast to a counteroffer, a mere inquiry would not terminate an offer, so long as the inquiry is consistent with the idea that the offeree is still keeping the original proposal under consideration. The test is whether a reasonable person would believe that the original offer had been rejected. Similarly, an invitation for a new offer could be seen as a mere inquiry, if it were worded in such a way that a reasonable person would understand that the offeree was not rejecting the original offer. QUESTION ID: K0028A Additional Learning

Question 33

Which of the following is a true statement?

A A seller’s catalog listing the sale price of seller’s items is usually construed as an invitation for offers

B A seller’s offering circular letter sent to a buyer’s place of business and listing the sale price of seller’s items is usually construed as an offer

C An advertisement listing the sale price for a specific item and stating “first come, first served” is usually construed as an invitation for offers

D An advertisement in the newspaper listing the sale price of seller’s items is usually construed as an offer by publication

Answer 33

A

A seller’s catalog listing the sale price of seller’s items is usually construed as an invitation for offers. Advertisements in newspapers, catalogs, circular letters, and the like containing price quotations are usually construed as mere invitations for offers. The typical rationale given for this is that: (i) these items are considered too indefinite as to quantity or other terms, and (ii) offers to the general public, as opposed to specific offerees, may be overaccepted (i.e., number of acceptances may exceed number of products available). Advertisements that are specific and contain the phrase “first come, first served” are usually construed as offers because the terms are certain and definite and the offeree(s) is clearly identified. QUESTION ID: K0040A Additional Learning

Question 34

Which of these is necessary to form a contract?

A Apparent mutual assent

B A written or verbal agreement

C A subjective meeting of the minds

Answer 34

A

Apparent mutual assent is necessary to form a contract. The parties must be in agreement to form the “same bargain at the same time.” Courts will determine this using an objective measure, by which each party is bound to the apparent intention that he manifested to the other(s). An actual subjective meeting of the minds is not necessary. Rather, as stated above, courts use an objective measure. A contract need not be written or oral. An offer can be made and accepted by conduct (e.g., sitting in a barber’s chair can constitute an offer to pay the barber for a haircut even if no words are spoken). QUESTION ID: K0023A Additional Learning

Question 35

Which of the following most accurately lists the necessary elements for a merchant’s firm offer?

A A merchant offers to buy or sell goods, in a signed writing, and that writing gives assurances that the offer will be held open

B A merchant offers to buy or sell goods, to another merchant, and gives assurances that the offer will be held open for a specified time

C A merchant pays valuable consideration, to another merchant, to ensure that an offer will be held open

Answer 35

A

Under Article 2, a merchant’s firm offer arises when a merchant offers to buy or sell goods in a signed writing, and the writing gives assurances that the offer will be held open. If no specific time frame is stated in the offer, a merchant’s firm offer will remain open for a reasonable time (but in no event may such period exceed three months). For a merchant’s firm offer, it is not necessary that the offer be made to another merchant; only the offeror must be a merchant. Furthermore, while a merchant’s firm offer must be in writing, it need not be for a specified time; if no time is specified, it will remain open for a reasonable time (but in no event may such period exceed three months). A merchant’s firm offer differs from a traditional option contract in that no consideration need be paid to keep the offer open. QUESTION ID: K0032C Additional Learning

Question 36

When a published revocation of an offer is appropriate, the published revocation becomes effective at the moment it is __________.

A Read by the offeree

B Received by the offeree

C Published by the offeror

Answer 36

C

When revocation is by publication, revocation of the offer is effective when it is published. This rule for the revocation of published offers differs from the general rule that a revocation is effective when received by the offeree. At common law, a written communication is considered to have been “received” when it comes into the possession of the person addressed (or of someone authorized by him to receive it) or when it is deposited in some place authorized as the place for this or similar communications to be deposited. Similarly, under the U.C.C., a person receives notice when it comes to his attention, or it is delivered at a place of business through which the contract was made or another location held out by that person as the place for receipt of such communications. An organization receives a communication at the time it is brought (or should have been brought) to the attention of the individual conducting the transaction. As with the general rule, a revocation by publication need not be actually read by the offeree to be effective. QUESTION ID: K0027B Additional Learning

Question 37

A valid offer for a real estate contract must include:

A The identity of the land and a deed description of the property

B A deed description of the property and a price

C The identity of the land and a price

D The identity of the land but not the price or the deed description of the property

Answer 37

C

A valid offer for a real estate transaction must include the identity of land and a price. The land must be identified with some particularity, but a deed description is not required. Most courts will not supply a missing price term. The subject matter of the deal must be certain, because a court can enforce a promise only if it can tell with reasonable accuracy what the promise is. QUESTION ID: K0033A Additional Learning

Question 38

Which statement best summarizes the distinction between the standard method of acceptance for unilateral and bilateral contracts?

A A unilateral contract may be accepted either by a promise to perform or by the beginning of performance, whereas a bilateral contract may be accepted only by full performance.

B A unilateral contract may be accepted by the beginning of performance, whereas a bilateral contract may be accepted by a promise to perform.

C A unilateral contract may be accepted only by full performance, whereas a bilateral contract may be accepted either by a promise to perform or by the beginning of performance.

D A unilateral contract may be accepted by a promise to perform, whereas a bilateral contract may be accepted by the beginning of performance.

Answer 38

C

Most courts hold that an offer for a unilateral contract may be accepted only by full performance. In contrast, an offer for a bilateral contract may be accepted either by a promise to perform or by the beginning of performance. QUESTION ID: K0034 Additional Learning

Question 39

When might a court utilize an Article 2 “gap filler”?

A When one party to a contract for the sale of goods has the power to fix the price but fails to do so in good faith

B When the method set forth in the contract for determining a price for the sale of goods is too vague

C When the price is not included in a contract for the sale of goods

Answer 39

C

Article 2 includes some very specific “gap fillers” for situations where certain terms are not included in a contract for the sale of goods. Under Article 2, the price will be a reasonable price at the time of delivery if the price is not included in the contract. When one party to a contract for the sale of goods has the power to fix the price but fails to do so in good faith, the other party may either cancel the contract or fix a reasonable price herself. Unlike missing terms, gap fillers do not apply to vague terms. With missing terms, the court can presume that the parties’ intent was to include a reasonable term, but that presumption cannot be made if the parties have included a term that makes the contract too vague to be enforced. The problem then is that the parties have manifested an intent that cannot be determined. QUESTION ID: K0037B Additional Learning

Question 40

In an auction __________, the auctioneer may withdraw the goods at any time until he announces completion of the sale.

A In lots

B With reserve

C Without reserve

Answer 40

B

In an auction with reserve, the auctioneer may withdraw the goods at any time until he announces completion of the sale. In an auction without reserve, once the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time. In a sale by auction, if goods are put up in lots, each lot is the subject of a separate sale, each of which could be specified as with or without reserve. QUESTION ID: K0030A Additional Learning

Question 41

At common law, a written communication revoking an offer is considered “received” by an offeree at the moment:

A It comes into the offeree’s physical possession

B The offeror dispatches the communication, provided that the mail is properly addressed and stamped

C The offeree reviews the contents of the revocation

D The offeror relinquishes possession of the communication

Answer 41

A

A written revocation of an offer is effective when it is received by the offeree. At common law, a written communication is considered to have been “received” as soon as it comes into the physical possession of the person addressed (or of someone authorized by him to receive it) or when it is deposited in some place authorized as the place for this or similar communications to be deposited. The offeree need not review the contents of the revocation for it to be effective. The rule for revocation is different from the rule for acceptance, which generally creates a contract at the moment of dispatch, provided that the mail is properly addressed and stamped. QUESTION ID: K0027C Additional Learning

Question 42

Which of the following would satisfy the mirror image rule?

A A grumbling acceptance

B A conditional acceptance

C A partial acceptance

Answer 42

A

The mirror image rule insists on an absolute and unequivocal acceptance of each and every term of the offer. Any different or additional terms in the acceptance make the response a rejection and counteroffer. A grumbling acceptance (i.e., an acceptance accompanied by an expression of dissatisfaction) is an effective acceptance as long as it stops short of actual dissent. When an acceptance is made expressly conditional on the acceptance of new terms, it is a rejection of the offer and thus would not satisfy the mirror image rule. As stated above, the mirror image rule insists on an absolute and unequivocal acceptance of each and every term of the offer, thus a partial acceptance would violate the rule because some of the terms of the offer were not accepted. QUESTION ID: K0031B Additional Learning

Question 43

An offer is terminated by the death of the offeror unless:

A The offeree has no notice of the offeror’s death

B The offeree has paid consideration to keep the offer open

C The executor of the offeror’s estate wishes to keep the offer open

Answer 43

B

If either of the parties to an offer dies prior to acceptance, the offer is terminated unless one of the rules limiting an offeror’s power to terminate is applicable (e.g., in an option contract). It is not necessary that the other party has notice of the death. Also, because the offer is automatically terminated at the offeror’s death, it does not matter that the executor of the offeror’s estate wishes to keep the offer open. A new offer will need to be issued to the offeree to go forward with the transaction. QUESTION ID: K0026A Additional Learning