Final Exam

Question 1

After an assignment, only the assignee has a right to the obligor’s performance.

True or False?

Answer 1

True

Question 2

The person who makes an assignment is the assignor.

True or False?

Answer 2

True

Question 3

A gratuitous assignment is always revocable.

True or False?

Answer 3

False

Question 4

Consideration is required in order to have a valid assignment.

True or False?

Answer 4

False

Question 5

The general rule is that an assignee stands in the shoes of the assignor. He acquires the rights of the assignor but no new or additional rights.

True or False?

Answer 5

True

Question 6

Arthur enters into a contract with Bob as a result of Bob’s fraud in the inducement. Under the contract, Bob has the right to the payment of $100. Bob assigns the right to the $100 to Carl. Arthur may not assert the defense of fraud in the inducement to avoid paying Carl the $100.

True or False?

Answer 6

False

Question 7

A gratuitous assignment is generally valid and enforceable.

True or False?

Answer 7

True

Question 8

The delegation of a duty still leaves the delegator responsible for the performance of the duty.

True or False?

Answer 8

True

Question 9

An incidental beneficiary has no right to enforce a contract.

True or False?

Answer 9

True

Question 10

An intended donee beneficiary may enforce the contract only against the promisor.

True or False?

Answer 10

True

Question 11

In some states, the vesting of a third party’s rights occurs only when the third party learns of the contract and assents to it.

True or False?

Answer 11

True

Question 12

Some states have statutes which prohibit an employee from assigning his future wages.

True or False?

Answer 12

True

Question 13

A valid assignment requires that notice be given to the obligor.

True or False?

Answer 13

False

Question 14

An assignor normally guarantees that the obligor will pay the assigned debt.

True or False?

Answer 14

False

Question 15

Though contractual duties generally are delegable; a delegation will not be permitted if the nature of the duties is personal in that the obligee has a substantial interest in having the delegator perform the contract.

True or False?

Answer 15

True

Question 16

When the assignee gives consideration in exchange for an assignment, there is a contract between the assignor and the assignee that prevents the assignor from revoking the assignment without the assent of the assignee.

True or False?

Answer 16

True

Question 17

The right to property other than money, such as goods or land, is not assignable.

True or False?

Answer 17

False

Question 18

A promisor and a promisee may provide that the benefits under a contract will never vest in a third person.

True or False

Answer 18

True

Question 19

In a novation, the delegator is discharged and the third party becomes directly bound upon his promise to the obligee.

True or False?

Answer 19

True

Question 20

A contract in which a party (the promisor) promises to render a certain performance not to the other party (the promisee) but to a third person (the beneficiary) is called a third party beneficiary contract.

True or False?

Answer 20

False

Question 21

A creditor beneficiary is a type of incidental beneficiary

True or False?

Answer 21

False

Question 22

The law governing assignments arises solely from the common law of contracts.

True or False?

Answer 22

False

Question 23

Pedro has a contract to build a garage. He delegates the wiring job to a local electrician who improperly performs it. Pedro is responsible, even though he delegated the duty.

True or False?

Answer 23

True

Question 24

An assignor is bound by any express warranties he makes to the assignee with respect to the right assigned

True or False?

Answer 24

True

Question 25

Contractual duties are assignable.

True or False?

Answer 25

False

Question 26

Lauren received a $1,500 scholarship to attend the local community college. She decides not to attend college that year, so she can assign her right to the money to her friend, Sean.

True or False?

Answer 26

False

Question 27

Rick has a contract with a home repair company to paint his house and landscape his yard. When he realizes that he will have some unexpected medical expenses, he calls the home Repair Company to cancel the contract. Rick’s next door neighbor can sue Rick to enforce the contract, because if Rick improves his own property, his neighbor’s property will also be worth more money.

True or false?

Answer 27

False

Question 28

The Restatement and Article 2 of the Code provide that, unless circumstances indicate the contrary, a contract term that prohibits the assignment of a contract bars only the delegation to the assignee of the assignor’s duty of performance and does not bar the assignment of contract rights.

True or false?

Answer 28

True

Question 29

In a third-party beneficiary contract, the third party’s rights arise after the contract is made.

True or false?

Answer 29

False

Question 30

The Restatement adopts the majority American rule and provides that, where there are successive assignments of the same right, the first assignee in point of time prevails.

True or false?

Answer 30

False

Question 31

Third party rights in contracts can arise by assignment of rights, delegation of duties, or express terms in third party beneficiary contracts.

True or False?

Answer 31

True

Question 32

The UCC imposes a writing requirement on all assignments of $500 or more.

True or false?

Answer 32

False

Question 33

The UCC prohibits assignments of $5,000 or more.

True or false?

Answer 33

False

Question 34

Ron owes Lloyd $500 due March 1. Lloyd assigns his right to the money to Lou, but neither Lloyd nor Lou notifies Ron. On March 1, Ron pays Lloyd the $500. Ron is not discharged from his obligation, but is liable to Lou for the money.

True or false?

Answer 34

False

Question 35

In England and in a minority of states, the first of two or more assignees to give notice to the obligor is entitled to the assigned performance.

True or false?

Answer 35

True

Question 36

Donee beneficiaries and incidental beneficiaries are called intended beneficiaries.

True or false?

Answer 36

False

Question 37

Assignment of rights is the voluntary transfer to a third party of the rights arising from a contract.

True or False?

Answer 37

True

Question 38

In an assignment or delegation, the third parties’ rights or duties arise after the contract is made.

True or false?

Answer 38

True

Question 39

The student government of State University has a contract with a famous rock band to perform at the university on homecoming weekend. The band cannot assign its rights and delegate its duties under this contract.

True or false?

Answer 39

True

Question 40

Generally, rights under an option contract are not assignable.

True or false?

Answer 40

False

Question 41

As a general rule, most contract rights are assignable.

True or false?

Answer 41

True

Question 42

Unless otherwise provided by statute, an assignment may be oral.

True or false?

Answer 42

True

Question 43

A partial assignment is a transfer of a portion of the contractual rights to one or more assignees.

True or false?

Answer 43

True

Question 44

As a general rule, partial assignments of contract rights are not enforceable.

True or false?

Answer 44

False

Question 45

An agreement between Greg and Margaret to marry one another cannot be transferred to a third party.

True or false?

Answer 45

True

Question 46

The voluntary transfer of a contractual right to a third party is known as a(n):

A. Implied warranty.
B. Assignment.
C. Delegation.
D. Novation.

Answer 46

B. Assignment.

Question 47

A(n) ____ is a method of discharging a contract in which a third party becomes bound upon a promise to the obligee.

A. Assignment
B. Delegation
c. Partial assignment
D. Novation

Answer 47

D. Novation

Question 48

A(n) ____ is a third party who obtains possible benefits but no rights under a contract.

A. Incidental beneficiary
B. Intended beneficiary
C. Assignor
D. Donee beneficiary

Answer 48

A. Incidental beneficiary

Question 49

A(n) ____ is an intended beneficiary of a contract who receives the benefits of the contract as a gift.

A. Incidental beneficiary
B. Intended beneficiary
C. Assignor
D. Donee beneficiary

Answer 49

A. Incidental beneficiary

Question 50

Anita owes Brad $75,000. Brad signs a written statement granting Glen a gratuitous assignment of his rights from Anita. Brad delivers the signed statement to Glen before Brad dies.

A. The delivery of the statement makes the assignment irrevocable.
B. The assignment is terminated upon Brad’s death.
C. The signing of the statement makes the assignment irrevocable.
D. The assignment is invalid, because it is revocable.

Answer 50

A. The delivery of the statement makes the assignment irrevocable.

Question 51

Which of the following duties would not be delegable?

a. John has a contractual duty to pay Isaac $50.

b. Karl has a contractual duty to deliver 50 bushels of corn to Michael by October 1.

c. Jeffrey has a duty to mow Georgia’s lawn at least once a week.

d. Arthur has a duty to teach an accounting class at a community college during the fall semester.

Answer 51

D. Arthur has a duty to teach an accounting class at a community college during the fall semester.

Question 52

Theresa has a contract to teach eighth grade at Washington Middle School. She decided she could make more money writing a book, so she assigns her teaching contract to her friend, Stephanie, who is also a licensed teacher.

a. The duties under the teaching contract are nondelegable.

b. The duties which Theresa has attempted to delegate are personal in nature.

c. If the school district agrees to accept Stephanie’s services, a novation would occur, which would relieve Theresa of her obligation to the school district.

d. All of the above are correct.

Answer 52

d. All of the above are correct.

Question 53

Annette entered into a contract with a local truck dealer to have a new truck delivered to her daughter, Sue, as a graduation present. In this contract, Sue is:

a. An incidental beneficiary.
b. A donee beneficiary.
c. A creditor beneficiary.
d. An assignor.

Answer 53

b. A donee beneficiary.

Question 54

Professor Dought has a life insurance policy on his own life that provides that in the event of his death, his mother will receive the proceeds. Professor Dought’s mother is a(n):

a. Incidental beneficiary.
b. Creditor beneficiary.
c. Donee beneficiary.
d. Assignee.

Answer 54

c. Donee beneficiary.

Question 55

Bill wants to buy a new car. He goes to the bank to get a loan for the purchase, and signs an agreement to pay $10.00 per month in premiums on a term life insurance policy which names the bank as the recipient of the policy proceeds in the event of his death before the loan is repaid. The bank is a(n):

a. Incidental beneficiary.
b. Creditor beneficiary.
c. Donee beneficiary.
d. Assignee.

Answer 55

b. Creditor beneficiary.

Question 56

Betty owes Agatha $1,000. On March 1 Agatha, for value, assigned the debt to Clara. Thereafter, on March 30 Agatha assigned the same right to Diane.

a. Under the American rule, Clara will prevail over Diane.

b. Under the English rule, the first assignee to notify Betty will prevail.

c. Under the Restatement rule, the first assignee to notify Betty will prevail.

d. Both (a) and (b) are correct.

Answer 56

d. Both (a) and (b) are correct.

Question 57

Courts will enforce contracts for the benefit of all but which of the following?

a. Donee beneficiaries
b. Creditor beneficiaries
c. Incidental beneficiaries
d. Intended beneficiaries

Answer 57

c. Incidental beneficiaries

Question 58

Bill has a right against Heather and assigns it for $100 to Dan. Later, Bill grants Heather a release. Bill:

a. Is liable to Dan for damages because he breached an implied warranty.

b. Has no liability to Dan because he did not expressly warrant that he would not impair the assignment.

c. Has no liability to Dan because the only implied warranty he made was that the assigned right actually existed at the time of the assignment.

d. Was acting contrary to public policy by assigning a contractual right for money.

Answer 58

a. Is liable to Dan for damages because he breached an implied warranty.

Question 59

Stark enters into a contract with a contractor to build a large shopping mall in River City. Donner will benefit from this contract since his restaurant is adjacent to the planned mall. Donner in this instance is a(n):

a. Implied beneficiary.
b. Partial beneficiary.
c. Donee beneficiary.
d. Incidental beneficiary.

Answer 59

d. Incidental beneficiary.

Question 60

The party to whom a contractual duty of performance is owed is known as the:

a. Obligee.
b. Obligor.
c. Assignee.
d. Assignor.

Answer 60

a. Obligee.

Question 61

Mr. Homayer hired Blake Painters to paint his house. Blake decides it has too many jobs and delegates the duties to the Andrews Company. Andrews does a poor job, and drips paint on the Homayers’ flowers and windows.

a. Mr. Homayer can sue both Blake and Andrews.

b. Mr. Homayer can sue Blake, but he cannot sue Andrews.

c. Mr. Homayer can sue Andrews, but he cannot sue Blake.

d. Mr. Homayer cannot sue, because he has accepted the benefits of the assignment.

Answer 61

a. Mr. Homayer can sue both Blake and Andrews.

Question 62

Mary goes to a stockbroker, purchases 50 shares of a certain stock, and instructs the broker to register the stock in her husband Warren’s name. If this stock is intended as a Valentine’s Day gift, Warren becomes a(n):

a. Donee beneficiary.
b. Transferee.
c. Delegatee.
d. Assignee.

Answer 62

a. Donee beneficiary.

Question 63

When contract terms prohibiting the assignment of rights exist, most courts will:

a. Strictly construe them.

b. Interpret a general term prohibiting assignments as rendering any assignment ineffective.

c. Award the obligor no right to damages for breach of a general term prohibiting assignments.

d. All of the above

Answer 63

a. Strictly construe them.

Question 64

Which of the following is NOT true concerning the requirements for an effective assignment?

a. The assignment must be voluntary.
b. Consideration is required.
c. There must be an intention to make the assignee the owner of the right.
d. The assignment may be either written or oral.

Answer 64

b. Consideration is required.

Question 65

Which of the following involves a creditor beneficiary relationship?

a. A contract where the insured names a bank with which he has a loan as the beneficiary of a life insurance policy

b. A contract between an employer and a union representing the employees, which contract is made for the benefit of the employees

c. A contract between the owner of a building and the contractor stating that the contractor will pay his employees at a stated rate

d. A contract between a governmental unit and business for services to be rendered to area citizens

Answer 65

a. A contract where the insured names a bank with which he has a loan as the beneficiary of a life insurance policy

Question 66

Lynne is the intended beneficiary of a third-party contract. Her rights have vested. In an action by Lynne to enforce the promise, the promisor may assert the defense of:

a. rescission.
b. contractual modification.
c. fraud.
d. All of the above.

Answer 66

c. fraud

Question 67

Which of the following involves an invalid assignment that a court would not enforce?

a. An assignment of a savings account accompanied by the delivery of the passbook

b. An assignment lacking consideration

c. An assignment of an automobile liability insurance policy accompanied by the delivery of the policy

d. An assignment in writing signed by the assignor and delivered to the assignee

Answer 67

b. An assignment lacking consideration

Question 68

Noel and Lyle have a contract whereby Noel is to perform routine construction services according to the blueprints Lyle provided. Noel assigns the contract to David. As a result of this assignment:

a. Lyle can bring suit based upon detrimental reliance.

b. Noel has no more rights or responsibilities with regard to the contract.

c. Noel no longer has any rights under the contract, but he remains responsible for the duties he agreed to perform.

d. Noel has all of his rights under the contract, but he has no responsibility for the performance of the duties.

Answer 68

c. Noel no longer has any rights under the contract, but he remains responsible for the duties he agreed to perform.

Question 69

Brice owns a parcel of land that is encumbered by a mortgage held by the First National Bank. Brice agrees to sell the land to Paul for $50,000. Brice and Paul together go to the First National Bank to discuss the sale and purchase with the banker. Brice, Paul, and the banker sign an agreement stating that Paul will assume the mortgage and that Brice will be discharged from all further liability on the mortgage.

a. The bank is a third party donee beneficiary.

b. The bank can collect from Brice if Paul defaults.

c. Brice is a third party beneficiary of the agreement between Paul and the bank.

d. The agreement among the three is a novation.

Answer 69

d. The agreement among the three is a novation.

Question 70

Anita owes Brad $75,000. Brad signs a written statement granting Carla a gratuitous assignment of his rights from Anita. Brad dies prior to delivering the statement to Carla.

a. Brad’s death has no effect on the assignment.

b. The assignment is terminated upon Brad’s death.

c. The signing of the statement makes the assignment irrevocable.

d. The assignment is invalid because it is gratuitous.

Answer 70

b. The assignment is terminated upon Brad’s death.

Question 71

Odessa owes Kevin $2,000. On July 1, Kevin assigns the right to the $2,000 to Troy. Thereafter, on July 15, Kevin assigns the same right to Donna, who in good faith gives value for it and knows nothing about the first assignee.

a. Troy has the right to the payment of $2,000.

b. Donna has the right to the $2,000.

c. Neither Troy nor Donna can claim the $2,000.

d. The rule differs in different states. Depending on which rule a state follows, the answer will vary.

Answer 71

d. The rule differs in different states. Depending on which rule a state follows, the answer will vary.

Question 72

Barbara owes Arturo $2,000. On July 1, Arturo assigns the debt to Charles. Thereafter on July 15, Arturo assigns the same right to Dennis, who in good faith gives value for it and knows nothing about the first assignee. Dennis immediately notifies Barbara of the assignment.

a. Under all of the rules, Charles has priority since he was the first assignee in time.

b. Under the majority rule, Dennis has priority.

c. Under the English Rule, Dennis has priority.

d. Under the English Rule, Charles has priority.

Answer 72

c. Under the English Rule, Dennis has priority.

Question 73

Under Section 2-210 of the Code, unless circumstances indicate to the contrary, a contract that prohibits an assignment:

a. Prohibits both an assignment of rights and a delegation of duties under the contract.

b. Prohibits only a delegation of the delegator’s duty of performance and not the assignment of rights.

c. Renders any subsequent assignment ineffective.

d. Both (a) and (c).

Answer 73

b. Prohibits only a delegation of the delegator’s duty of performance and not the assignment of rights.

Question 74

Notice of an assignment:

a. Must be given to the obligor.

b. Cuts off any defenses based on subsequent agreements between the obligor and assignor.

c. Precludes subsequent setoffs and counterclaims of the obligor that arise out of entirely separate matters.

d. All of the above.

e. Only (b) and (c).

Answer 74

e. Only (b) and (c).

Question 75

The law governing assignments is found in Articles ____ and ____ of the Uniform Commercial Code (UCC), as well as the common law.

a. 1 and 2
b. 2 and 4
c. 2 and 9
d. 3 and 4

Answer 75

c. 2 and 9

Question 76

A gratuitous assignment is rendered irrevocable if, prior to the attempted revocation, the assignee:

a. Receives payment of the claim from the obligor.

b. Obtains a judgment against the obligor.

c. Neither of the above. A gratuitous assignment is always revocable.

d. Both (a) and (b).

Answer 76

d. Both (a) and (b).

Question 77

What is an assignment?

Answer 77

An assignment is the voluntary transfer of a contractual right.

Question 78

What is a delegation?

Answer 78

A delegation is the transfer of a contractual duty or obligation.

Question 79

What does it mean to “assign a contract?”

Answer 79

The term “assign a contract” is frequently used to include both the transfer of contractual rights and the transfer of contractual duties.

Question 80

What is a third party beneficiary?

Answer 80

A third party beneficiary is one who benefits from a promise made in a contract but who is not a party to the contract.

Question 81

A contract contains the provision, “Walter Hamilton promises to pay Faye Weeks $1,200 for a 2003 V-6 motor provided that Phelps’ Garage approves the quality of the motor.” This provision:

a. Makes the contract unenforceable since Walter’s promise is illusory.

b. Creates an express condition which must be met before Walter’s duty to pay arises.

c. Cannot create an express condition because it lacks the necessary words “on condition that.”

d. Cannot be valid since it makes Walter’s duty to pay dependent upon the opinion of a third party.

Answer 81

b. Creates an express condition which must be met before Walter’s duty to pay arises.

Question 82

William has a contract to build a new office building for Angela. The contract contains a provision requiring William to furnish a certificate of occupancy from the building inspector before Angela is required to pay. This provision is:

a. An express condition.
b. An implied-in-fact condition.
c. An implied-in-law condition.
d. A condition subsequent.

Answer 82

a. An express condition.

Question 83

Which of the following is a contract with a condition subsequent?

a. Rhonda enters into a contract to buy a new car conditional upon her getting a loan from her bank.

b. Roger bought a VCR, but he may return the VCR within ten days and get all of his money back.

c. Both (a) and (b) are examples of a condition subsequent.

d. Neither (a) nor (b) is an example of a condition subsequent.

Answer 83

b. Roger bought a VCR, but he may return the VCR within ten days and get all of his money back.

Question 84

A(n) ____ is a substituted contract that involves an agreement among three parties to substitute a new promisee in place of an existing promisee, or to replace an existing promisor with a new one.

a. Accord
b. Satisfaction
c. Novation
d. Mutual rescission

Answer 84

c. Novation

Question 85

A(n) ____ is a contract between a promisee and a promisor by which the promisee agrees to accept and the promisor agrees to render a substituted performance in satisfaction of an existing contractual duty.

a. Accord
b. Mutual rescission
c. Material alteration
d. Movation

Answer 85

a. Accord

Question 86

Which of the following is/are correct with regard to conditions subsequent?

a. Conditions subsequent are quite common in contracts.

b. A “sale or return” contract is an example of a contract with a condition subsequent.

c. A condition subsequent must occur before performance is due under a contract.

d. All of the above are correct.

Answer 86

b. A “sale or return” contract is an example of a contract with a condition subsequent.

Question 87

Bill recently borrowed $50 from Ricardo for a couple of weeks. Bill, still short of cash, tells Ricardo, “I will wash and wax your car in exchange for the $50 I owe you.” Ricardo tells Bill, “OK, that’s great!” Ricardo’s performance of his new duty will be a(n):

a. Accord.
b. Novation.
c. Rescission.
d. Satisfaction.

Answer 87

d. Satisfaction.

Question 88

On November 1, Paula and Roberta enter into a contract where both parties are obligated to perform on December 31. On December 1, Paula tells Roberta, “I can, in no way, perform my duties in our contract.” This statement is a(n):

a. Marital alteration
b. Anticipatory repudiation
c. Nonmaterial breach since the statement is made before December 31.
d. Accord

Answer 88

b. Anticipatory repudiation

Question 89

A and B enter into a contract on January 1 of this year. A’s friend C tells A, “The law generally restricts the time within which an action can be brought by either party to a contract.” C’s statement is:

a. False.

b. True, because of statutes of limitation.

c. True, because of the law of repudiation.

d. True, because of covenants not to sue.

Answer 89

b. True, because of statutes of limitation.

Question 90

The Code greatly alters the common law doctrine of material breach by adopting what is known as the:

a. Perfect tender rule.
b. Anticipatory repudiation rule.
c. Prevention of performance rule.
d. Discharge by operation of rule law.

Answer 90

a. Perfect tender rule.

Question 91

Unless one of the parties contractually assumes the risk, the ____ discharges a contract if supervening circumstances make fulfillment of the purpose which both parties had in mind impossible.

a. Bankruptcy law
b. Frustration of purpose doctrine
c. Perfect tender rule
d. Subjective impossibility doctrine

Answer 91

b. Frustration of purpose doctrine

Question 92

Meg has contracted to paint a portrait of Julio, but dies before completing the portrait. Which of the following is correct?

a. Meg’s executor must find a capable artist to complete the work to Julio’s satisfaction.

b. Meg’s contractual duty is discharged due to objective impossibility.

c. A novation must be entered between Julio and a third person in order to discharge Meg’s duty under the contract.

d. Meg’s contractual duty is discharged due to subjective impossibility.

Answer 92

b. Meg’s contractual duty is discharged due to objective impossibility.

Question 93

Refusal of a tender of performance by one party to a bilateral contract will:

a. Be treated as a repudiation, excusing the tendering party from further duty of performance under the contract.

b. Not discharge either party from further duty of performance under the contract.

c. Be considered a condition subsequent.

d. None of the above.

Answer 93

a. Be treated as a repudiation, excusing the tendering party from further duty of performance under the contract.

Question 94

Conditions may be classified:

a. By how they are imposed.

b. By when they affect a duty of performance.

c. Both (a) and (b); they are not mutually exclusive.

d. Neither (a) nor (b).

Answer 94

b. By when they affect a duty of performance.

Question 95

Which of the following would be considered a material breach of a contract?

a. Partial performance that omits some essential part of the contract.

b. Delivery of 50 chairs in a contract that calls for 100 chairs.

c. An intentional breach of the contract.

d. All of the above would be material breaches.

e. Only (a) and (b) above would be material breaches.

Answer 95

d. All of the above would be material breaches.

Question 96

Russell promises Marty $1,500 if he will completely landscape Russell’s yard. Which of the following would discharge Russell’s obligations to pay under this contract?

a. Marty leaves a one-foot strip of land barren.

b. Marty doesn’t begin work on the landscaping until after he finishes two other jobs.

c. Marty doesn’t plant any flowers, shrubs, or grasses.

d. Russell isn’t satisfied with Marty’s design.

Answer 96

c. Marty doesn’t plant any flowers, shrubs, or grasses.

Question 97

Fred contracts to sell a certain tract of land to Maria for $20,000, but the contract is silent as to the time of delivery of the deed and payment of the price.

a. The payment of the $20,000 and the delivery of the deed are independent of each other.

b. The delivery of the deed is a condition subsequent to the payment of the $20,000.

c. The payment of the $20,000 and the delivery of the deed are mutually dependent and, in the absence of an agreement to the contrary, are concurrent conditions.

d. The payment of the $20,000 is a condition precedent to the delivery of the deed.

Answer 97

c. The payment of the $20,000 and the delivery of the deed are mutually dependent and, in the absence of an
agreement to the contrary, are concurrent conditions.

Question 98

Phil, the tax accountant, promises to do Marge’s individual federal, state, local, and gift taxes for the year. He completes all but the gift taxes. Under the substantial performance doctrine:

a. Marge will not have to pay Phil.

b. Marge will not have to accept the work.

c. Marge will have to pay Phil for all but the gift taxes.

d. Marge will have to pay Phil the contract price.

Answer 98

c. Marge will have to pay Phil for all but the gift taxes.

Question 99

Henry hires Ace Roofing to put a new roof on his house. When Ace comes, Henry refuses to let them on the roof, saying that he has a headache and doesn’t want to listen to pounding. The next day, Henry still has a headache and he refuses to allow them on the roof. The day after, the baby is sleeping and Henry refuses to allow them to work. After four weeks of this, Ace:

a. May be discharged, but Henry is not.

b. May be discharged, and so would Henry.

c. Can sue for damages, but must perform when Henry is ready.

d. Has no choice but to keep coming back each day until Henry is ready.

Answer 99

a. May be discharged, but Henry is not.

Question 100

Anita, who is a tailor, agrees to sew a suit for Bryan, who promises in return to pay Anita $500 for the suit if he is satisfied with it. Anita completes the suit, which fits Bryan perfectly. Nevertheless, he says that he is not satisfied and refuses to accept or pay for it. Bryan is honest in his dissatisfaction, but he is unreasonable.

a. Bryan must pay for the suit even if he is dissatisfied.

b. This is an illusory contract, because only Anita is bound.

c. Bryan’s approval is an objective standard.

d. Anita has no recourse against Bryan, because she agreed to the subjective standard.

Answer 100

d. Anita has no recourse against Bryan, because she agreed to the subjective standard.

Question 101

Lynn, who is a tailor, agrees to sew a pair of drapes for Zach’s living room. Zach promises to pay Lynn $300. Lynn completes the drapes using material selected by Zach, but Zach is not satisfied and refuses to pay for them.

a. Whether Zach will have to pay for the drapes depends upon whether as a reasonable man he ought to be satisfied.

b. The standard applied here is a subjective standard of satisfaction.

c. The condition of satisfaction is an implied-in-law condition.

d. The condition of satisfaction is an express condition.

Answer 101

a. Whether Zach will have to pay for the drapes depends upon whether as a reasonable man he ought to be satisfied.

Question 102

Jim contracted with Kevin to serve as a guide for Kevin on his three-week fishing trip to Canada. The contract was made on April 1 with the trip to begin on June 1. On May 1, Kevin notified Jim that he had changed his mind and would be unable to make the trip. He also refused to pay Jim any compensation.

a. Because the contract is executory, Jim has suffered no damages, and Kevin has no obligation to pay any compensation.

b. Kevin has anticipatorily repudiated the contract and is liable to Jim for damages.

c. Jim is discharged from his duty to serve as guide, and he may bring suit immediately against Kevin.

d. Both (b) and (c) above are correct.

Answer 102

d. Both (b) and (c) above are correct.

Question 103

Miller has a contract to sell 1,000 bushels of wheat to a bakery. The wheat is stored in a grain elevator and has become infested with insects. What is the consequence?

a. Miller is discharged from performance because of impossibility.

b. Miller is discharged because of frustration.

c. Miller is not discharged, but must substitute wheat or pay damages to the bakery for breach of contract.

d. Miller is discharged if he can prove that he did not cause the damages to his wheat.

Answer 103

c. Miller is not discharged, but must substitute wheat or pay damages to the bakery for breach of contract.

Question 104

Arnold and Doug make a contract for Arnold to manufacture five leather chairs of a specified design. Prior to their manufacture, the factory is destroyed in an accidental fire that is no one’s fault. The chairs are available from other sources.

a. Arnold must supply the chairs, even if he must buy them elsewhere.

b. Arnold’s duty to deliver the chairs is discharged by the destruction of the factory.

c. Arnold has materially breached the contract if he fails to deliver the chairs.

d. Both (a) and (c).

Answer 104

b. Arnold’s duty to deliver the chairs is discharged by the destruction of the factory.

Question 105

Louis agreed to provide all the apples that Cindy’s Cider Mill will need at $3 per bushel unless weather conditions require additional labor to be hired. The rate would then be $3.50 per bushel. A freeze warning required Louis to hire 100 additional overtime workers, raising the cost per bushel to $4.75. Louis wants to get out of his contract. Can he?

a. No, the parties expected the hardship and provided for it in their contract

b. No, there is no hardship

c. Yes, the contract is impracticable

d. Yes, the freeze is a supervening event

Answer 105

a. No, the parties expected the hardship and provided for it in their contract

Question 106

Janice contracts to sell a certain tract of land to Anthony for $5,000, but the contract does not state a time for delivery of the deed and payment of the price. In this situation:

a. The contract will be considered void for lack of essential terms.

b. The law will imply that the respective performances are independent of each other and may occur whenever “reasonable under the circumstances.”

c. Courts will treat the promises to deliver the deed and to pay the $5,000 as mutually dependent. Anthony’s duty to pay is conditioned upon Janice’s delivery of the deed and Janice’s duty to deliver the deed is conditioned upon Anthony’s payment or tender of $5,000 to Janice.

d. Janice’s duty to deliver the deed and Anthony’s duty to pay the $5,000 are “implied-in-fact” conditions.

Answer 106

c. Courts will treat the promises to deliver the deed and to pay the $5,000 as mutually dependent. Anthony’s duty to pay is conditioned upon Janice’s delivery of the deed and Janice’s duty to deliver the deed is conditioned upon Anthony’s payment or tender of $5,000 to Janice.

Question 107

Which of the following generally is not grounds for discharge of a contract by operation of law?

a. Objective impossibility

b. Subsequent illegality

c. Running of the statute of limitations

d. Bankruptcy

Answer 107

c. Running of the statute of limitations

Question 108

The usual remedy for breach of contract is:

a. Injunction.
b. Specific performance.
c. Punitive damages.
d. Money damages.

Answer 108

d. Money damages.

Question 109

If Jana, a minor, transfers property to Scott and Scott sells the property to a good faith purchaser for value before Jana avoids the transfer:

a. Jana loses the right to recover the property if the transfer involved goods.

b. Jana can recover the property as long as the property was a sale of goods.

c. Jana can recover the property whether it was real or personal property.

d. The good faith purchaser of goods for value receives a voidable title.

Answer 109

a. Jana loses the right to recover the property if the transfer involved goods.

Question 110

Miller made a contract to sell his condominium to Jefferson for $80,000. Two days later Miller changed his mind after discovering that he could have sold the property to another buyer for an additional $20,000. Jefferson sues and
asks the court to have the property conveyed to him at the price of $80,000. Jefferson is seeking:

a. Restitution.
b. Punitive damages.
c. Specific performance.
d. Valid tender.

Answer 110

c. Specific performance.

Question 111

A contractor and Buckingham, Inc. have a contract, which calls for the contractor to build a building with the completion of it by June 15. If the building is not completed by that date, the contract calls for the contractor to pay $100 per day in damages. The $100 per day is:

a. Punitive damages.
b. Nominal damages.
c. Liquidated damages.
d. An illegal penalty.

Answer 111

c. Liquidated damages.

Question 112

Garrett ordered 100 pieces of 2 × 6 lumber from his supplier and paid upon delivery. Later, when he unpacked the lumber, he discovered that the supplier had delivered 2 × 4 lumber. After being notified, the supplier picked up the lumber, apologized, and gave Garrett his money back. The response the supplier made to rectify the breach is:

a. An injunction.
b. Mitigation.
c. Liquidation of damages.
d. None of the above

Answer 112

d. None of the above

Question 113

When an injured party is required to elect remedies, which of the following would be mutually exclusive?

a. Restitution and liquidated damages

b. Specific performance and compensation for incidental damages

c. Specific performance and restitution

d. Incidental and consequential damages

Answer 113

c. Specific performance and restitution

Question 114

The return to the aggrieved party of the consideration, or its value, which he gave to the other party is:

a. Injunction.
b. Restitution.
c. Specific performance.
d. Reformation.

Answer 114

b. Restitution.

Question 115

The process whereby a court “rewrites” or “corrects” a written contract to make it conform to the true intentions of the parties is:

a. Injunction.
b. Reformation.
c. Specific performance.
d. Rescission.

Answer 115

b. Reformation.

Question 116

The majority of states follow the ____ rule in awarding damages for fraud.

a. Benefit-of-the-bargain
b. Out-of-pocket
c. Liquidated
d. Restitution

Answer 116

a. Benefit-of-the-bargain

Question 117

Equitable remedies will not be granted where:

a. The terms of the contract are fair.

b. The consideration is adequate.

c. The terms of the contract are sufficiently certain.

d. The contract is tainted with fraud, duress, undue influence, mistake, or unfair practices.

Answer 117

d. The contract is tainted with fraud, duress, undue influence, mistake, or unfair practices.

Question 118

David enters into a contract to give Edward the right of first refusal to purchase a tract of land owned by David. David subsequently offers the land to Fred without first offering it to Edward. An appropriate remedy for Edward to seek would be:

a. Injunction.
b. Liquidated damages.
c. Reformation.
d. Punitive damages.

Answer 118

a. Injunction.

Question 119

A power of avoidance held by a party may be lost if:

a. The contract is affirmed.

b. There are unreasonable delays in exercising the power.

c. The rights of third parties intervene.

d. All of the above

Answer 119

d. All of the above

Question 120

In which of the following situations is restitution available as a remedy?

a. As an alternative remedy for a party injured by breach

b. For a party in default

c. For a party who may not enforce the contract because of the statute of frauds

d. All of the above are situations where restitution is available.

Answer 120

d. All of the above are situations where restitution is available.

Question 121

Damages for reliance include expenses for:

a. Lost profits.
b. Injury to the person.
c. Preparing to perform.
d. Punishment of the breaching party.

Answer 121

c. Preparing to perform.

Question 122

In the case of Hadley v. Baxendale, the plaintiff was seeking damages for:

a. Restitution.
b. Lost profits.
c. Failure to convey land.
d. Failure to specifically perform a contract.

Answer 122

b. Lost profits.

Question 123

Which of the following is correct with respect to election of remedies?

a. The Code rejects any doctrine of election of remedies; its remedies are cumulative.

b. The remedy of specific performance is inconsistent with that of restitution.

c. A person who seeks an injunction may also seek incidental damages for the breach.

d. All of the above are correct.

Answer 123

d. All of the above are correct.

Question 124

In which of the following situations will a court grant specific performance?

a. In a case involving breach of contract for the sale of real property.

b. In contracts for personal services.

c. Where goods are unique or rare.

d. Both (a) and (c).

Answer 124

d. Both (a) and (c).

Question 125

Restitution is available when:

a. Elizabeth agrees to sell an acre of land to Vanessa, and after Vanessa makes a partial payment Elizabeth wrongfully refuses to transfer title.

b. Lawrence makes an oral contract to provide physical training for Lee for fourteen months and Lee discharges Lawrence after six months.

c. Gilbert uses undue influence to induce Cynthia to sell him an antique chair for $10.

d. Restitution is available in all of the above cases.

Answer 125

d. Restitution is available in all of the above cases.

Question 126

Contract damages that put the injured party in as good a position as if the other party had performed are:

a. Compensatory damages.
b. Incidental damages.
c. Consequential damages.
d. Liquidated damages.

Answer 126

a. Compensatory damages.

Question 127

Barbara, an antique dealer, intentionally represents the value of an antique chest of drawers, as $6,000 when she has reason to know the value is considerably less. Margaret agrees to buy it for $5,500. It is worth $2,500. In a state that uses the “benefit-of-the-bargain” rule, Margaret’s damage award would be:

a. $3,500.
b. $3,000.
c. $500.
d. $2,500.

Answer 127

a. $3,500.

Question 128

A small damage amount fixed without regard to the amount of loss is known as:

a. Reliance damages.
b. Out-of-pocket damages.
c. Nominal damages.
d. Incidental damages.

Answer 128

c. Nominal damages.

Question 129

Carolyn agrees to sell Marianne an antique handmade lace tablecloth for $1,500. When Carolyn discovers that her cousin wants it too, she breaks the contract with Marianne. Marianne can ask the court to order:

a. Nominal damages.
b. Specific performance.
c. Restitution.
d. Equitable rescission.

Answer 129

b. Specific performance.

Question 130

Bartow signed a contract to coach baseball for Washington High for a period of three years. After two years he is offered and accepts an assistant coach position at State University. Contract law will not allow Washington High to ask for:

a. Specific performance.
b. Payment of compensatory damages.
c. An injunction.
d. Liquidated damages.

Answer 130

a. Specific performance.

Question 131

Vladimir entered into a contract to buy Daniel’s collection of rare stamps. Vladimir mailed payment of $10,000 for the stamps to Daniel, but now Daniel tells Vladimir, “I’ll never part with these stamps.” Are the following remedies available to Vladimir?

a. Restitution: Yes; Specific Performance: Yes

b. Restitution: Yes; Specific Performance: No

c. Restitution: No; Specific Performance: Yes

d. Restitution: No; Specific Performance: No

Answer 131

a. Restitution: Yes; Specific Performance: Yes

Question 132

Lynne agrees to buy Harriette’s farm for $100,000 and puts $20,000 down. Then Lynne learns she is allergic to hay and repudiates the contract. If Harriette can sell the farm one month later for $90,000, she may:

a. Keep Lynne’s $20,000.

b. Keep $10,000 of Lynne’s down payment.

c. Not keep any of the down payment money.

d. Sue for specific performance.

Answer 132

b. Keep $10,000 of Lynne’s down payment.

Question 133

Howard needs a truck to pull a 2,000-pound trailer. Gordon tells Howard, “My truck will pull a 2,000-pound trailer with ease.” Relying on Gordon’s statement, Howard buys the truck, but it will not pull a 2,000-pound trailer. If Gordon did not intend to deceive and Howard sues for non-fraudulent misrepresentation, he can recover:

a. Punitive damages, but not out-of-pocket damages.

b. Out-of-pocket and consequential damages, but not punitive damages.

c. Out-of-pocket damages plus punitive damages.

d. Nominal damages, because Howard should have known the capacity of the truck.

Answer 133

b. Out-of-pocket and consequential damages, but not punitive damages.

Question 134

Harry said to Marge, “I have a ring once owned by Marilyn Monroe. Would you like to buy it for $500?” Marge pays for the ring, but the next day a friend tells her that Harry had recently purchased the ring at a local department store. Marge enjoys wearing the ring and wears it constantly for twelve months. Finally, she goes to Harry and says, “Here is the ring you lied about. Give me my $500.” Most likely:

a. Marge will get her money back since Harry’s representation was fraudulent.

b. Marge will not get her money back since she should have investigated the facts about the ring more carefully.

c. Marge will get her money back since she is a good faith purchaser of merchandise.

d. Marge will not get her money back since she has affirmed the contract by taking an unduly long time to disaffirm.

Answer 134

d. Marge will not get her money back since she has affirmed the contract by taking an unduly long time to disaffirm.

Question 135

Busby contracts to build a house for Connell. Busby finishes approximately half of the house and quits. Connell files suit against Busby. Which remedy is not available to her?

a. Compensatory damages
b. Specific performance
c. Special damages
d. Incidental damages

Answer 135

b. Specific performance

Question 136

What Article of the UCC governs sales of goods?

a. 1
b. 2
c. 3
d. None of the above.

Answer 136

b. 2

Question 137

BONUS: A contract of which of the following is void?

Answer 137

Contract where there is a court-ordered guardian

Question 138

BONUS: A 17-year old ordered a pair of skis, then turned 18. She tries to sell them and disaffirm. What happens?

Answer 138

Selling the skis is a ratification.

Question 139

BONUS: When can ratification occur?

Answer 139

All of the above.

Question 140

BONUS: A minor lies about their age to make a contract. What happens?

Answer 140

The minor can disaffirm and get their money back.

Question 141

BONUS: 16-year old Laura tries to disaffirm land. Only effective when?

Answer 141

Never; ratify at 18 years old.

Question 142

BONUS: A minor buys a truck then wrecks it. He wants to disaffirm the contract. Can he?

Answer 142

Minor can simply return the truck and get their money back.

Question 143

BONUS: Power to avoid a contract is known as:

Answer 143

Disaffirmance

Question 144

BONUS: Violet, adult, makes a contract with a minor. What happens?

Answer 144

Violet cannot disaffirm.

Question 145

BONUS: Which is NOT true regarding slightly intoxicated persons?

Answer 145

A slightly intoxicated person can lose all contractual capacity.

Question 146

BONUS: Which would be a valid ratification two days after an 18th birthday?

Answer 146

All of the above