R5--Missed Questions

Question 1

Which of the following will release all original parties to a contract but will maintain a contractual relationship between the original parties?

Novation; Substituted contract

a. No; No
b. No; Yes
c. Yes; No
d. Yes; Yes

Answer 1

B. I chose A.

Novation: is a substitute for a new party

Substituted contract: Substitute for new terms of a contract, not new people. The original parties are both released from the original agreement but are both bound by a new agreement.

Question 2

Which of the following types of conditions affecting performance may validly be present in contracts?
Conditions precedent; Conditions subsequent; Concurrent conditions
a. Yes;Yes; No
b. Yes; No; Yes
c. Yes; Yes; Yes
d. No; Yes; Yes

Answer 2

C. I chose D.
-The nonoccurence of these conditions could possibly end a party’s duty to perform. Different names depend on WHEN they occur.

Conditions precedent: A condition that must occur before the other party must perform.

Concurrent condition: Occur simultaneously

Condition subsequent: Condition that will occur after a party’s duty to perform has arisen and will cut off that duty.

Question 3

When determining if a contract could be performed in one year or less when do you start counting the date?

Answer 3

One year from the date of the contract

Question 4

Which of the following actions will result in the discharge of a party to a contract?
Prevention of performance; Accord and
satisfaction
	a.	Yes; No
	b.	No; No
	c.	Yes; Yes
	d.	No; Yes

Answer 4

C. I chose A. It’s important to note that when you see accord and satisfaction, the satisfaction part says that the new contract is satisfied. If the new contract is satisfied, then the party is discharged.

Question 5

The statute of limitations for breach of contract usually begins to run…

Answer 5

on the occurrence of the breach.

Question 6

On February 1, Burns contracted in writing with Nagel to sell Nagel a used car. The contract provided that Burns was to deliver the car on February 15 and Nagel was to pay the $800 purchase price not later than March 15. On February 21, Burns assigned the contract to Ross for $600. Nagel was not notified of the assignment. Which of the following statements is correct?

a. By making the assignment, Burns impliedly warranted Nagel would pay the full purchase price.
b. By making the assignment, Burns impliedly warranted a lack of knowledge of any fact impairing the value of the assignment.
c. Ross will not be subject to any contract defenses Nagel could have raised against Burns.
d. The assignment to Ross is invalid because Nagel was not notified.

Answer 6

B. I chose D. It’s important to realize that just because Nagel wasn’t notified, that doesn’t make the assignment invalid, it just means that Nagel doesn’t have a liability to pay Ross because he doesn’t even know about it.

Question 7

On September 10, Harris, Inc., a new car dealer, placed a newspaper advertisement stating that Harris would sell 10 cars at its showroom for a special discount only on September 12, 13, and 14. On September 12, King called Harris and expressed an interest in buying one of the advertised cars. King was told that five of the cars had been sold and to come to the showroom as soon as possible. On September 13, Harris made a televised announcement that the sale would end at 10:00 PM that night. King went to Harris’ showroom on September 14 and demanded the right to buy a car at the special discount. Harris had sold the 10 cars and refused King’s demand. King sued Harris for breach of contract. Harris’ best defense to King’s suit would be that Harris’:

a. Television announcement revoked the offer.
b. Offer had not been accepted.
c. Advertisement was not an offer.
d. Offer was unenforceable.

Answer 7

C. I chose A. It’s important to realize that advertisements are generally not offers but invitations of offers. The exception to this rule is if they are specifcally limiting the people that can accept in the offer. Here, the phone call happened after the advertisement was published, so there is no offer.

Also, generally speaking, revocations need to be administered in the same way the offer was given.

Question 8

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

a. A police officer's promise to catch a thief for a victim's promise to pay a reward.
b. A builder's promise to complete a contract for a purchaser's promise to extend the time for completion.
c. A debtor's promise to pay $500 for a creditor's promise to forgive the balance of a $600 liquidated debt.
d. A debtor's promise to pay $500 for a creditor's promise to forgive the balance of a $600 disputed debt.

Answer 8

D. I chose B. It’s important to realize that the builder in B already had an obligation to complete the project. A promise to do something one is already obligated to do has no value and is not valid consideration under the preexisting legal duty rule. Here, the builder already owed a duty to complete the contract, and so his second promise to do so is not valid consideration.

D is an example of the parties given up the right to litigate the dispute. The creditor is essentailly promising to compromise on the price instead of taking it to court.

C. Liquidated means not in dispute.

Question 9

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

a. Lack of contractual capacity.
b. Failure of a condition precedent.
c. A contemporaneous oral agreement relating to a term in the contract.
d. A modification made several days after the contract was executed.

Answer 9

C. I chose B. It’s important to realize the terms in this question. If they are showing evidence of a FAILURE TO PERFORM a condition, this is allowed bc it’s not bringing “oral or written statements made prior to the written contract or oral statements made at the same time as the written contract”

Precedent: Before

-Contemporaneous: At the same time
C is right bc this is essentially bringing NEW EVIDENCE that was related to a term in the agreement made PRIOR.

Question 10

Kram sent Fargo, a real estate broker, a signed offer to sell a specified parcel of land to Fargo for $250,000. Kram, an engineer, had inherited the land. On the same day that Kram’s letter was received, Fargo telephoned Kram and accepted the offer. Which of the following statements is correct under the common law statute of frauds?

a. A contract was formed but would be enforceable only against Kram.
b. No contract could be formed because Kram's letter was signed only by Kram.
c. A contract was formed and would be enforceable against both Kram and Fargo.
d. No contract could be formed because Fargo's acceptance was oral.

Answer 10

A. I chose C. It’s important to realize that this question has two parts to it. The contract was formed because it had consideration and an offer and acceptance. However, in regards to enforceability, a written contract only needs to be signed by the DEFENDANT.

-Contracts involving interests in real property are enforceable only if their material terms are set forth in a writing signed by the party sought to be held liable.

Question 11

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

a. Not justified, because Fresno is not bound by the contract unless Bronson specifically ratifies the contract after reaching the age of majority.
b. Justified, because Fresno must perform under the contract regardless of Bronson's minority.
c. Justified, because Bronson and Fresno are bound by the contract as of the date Bronson reached the age of majority.
d. Not justified, because Fresno does not have to perform under the contract if Bronson has a right to disaffirm the contract.

Answer 11

B. I chose C. It’s important to ratify because the seller doesn’t have the right to disaffirm, only the minor.

Question 12

What is the risk of loss? What does it refer to and what are the rules regarding it?

Answer 12

-Allocation of loss between the seller and buyer where the gods have been damaged, destroyed, or lost without the fault of either party.

• Relates to sales contracts under the UCC.
• IF goods are damaged or destroyed after the risk of loss has been passed to the buyer, the buyer is not discharged from the contract—They must still pay the contract price.

-IF the loss was placed on the seller, he has no right to recover the purchase price from the buyer and is usually liable to the buyer for damages for nondelivery unless he tenders a performance in replacement of the loss or destroyed goods.

Question 13

What is Free Along Side: (F.A.S) and what does it relate to?

Answer 13

A price term that requires the seller to deliver the goods along side of a specified vessel. The risk of loss passes to the buyer when the seller gets the goods along side the vessel.
-Shipment contract

Question 14

What is C.I.F (Cost, insurance and freight)? What does it relate to and what are the rules regarding it?

Answer 14

• Shipment of goods under UCC contracts.
• The contract price includes these costs and the seller agrees to pay them. A shipment contract, so the buyer carries the risk of loss when the goods are in transit.
• The seller agrees to pay all costs of transportation, insurance, and freight to the truck.

Question 15

What is the F.O.B (Free on Board)

Answer 15

Free on Board Seller’s place of business: Shipment contract

Free on Board Buyer’s place of business: Destination contract

Question 16

What does disclaim mean?

Answer 16

Arguing that you didn’t realize something.

-Ex: Express warranties are hard to disclaim compared to implied warranties.

Question 17

What is replevin?

Answer 17

Recover from a defendant’s possession specific goods that are being unlawfully withheld from the plaintiff.
Ex: When a seller doesn’t give the buyer a specific item that they have identified, the buyer is able to replevin the good.

Question 18

Camp orally guaranteed payment of a loan Camp’s cousin Wilcox had obtained from Camp’s friend Main. The loan was to be repaid in 10 monthly payments. After making six payments, Wilcox defaulted on the loan and Main demanded that Camp honor the guaranty. Regarding Camp’s liability to Main, Camp is:

a. Not liable under the oral guaranty because Camp's guaranty must be in writing to be enforceable.
b. Liable under the oral guaranty because the loan would be paid within one year.
c. Liable under the oral guaranty because Camp benefitted by maintaining a personal relationship with Main.
d. Not liable under the oral guaranty because of failure of consideration.

Answer 18

A. I chose B. It’s important to realize that the contract didn’t have to be in writing bc it was less than one year, BUT it does because Camp is essentially the surety for Wilcox.

-A promise to pay the debt of another must be evidenced by some type of writing to be enforceable. Camp’s oral promise to pay the debt of Wilcox is not enforceable without some type of writing.

Question 19

Wren purchased a factory from First Federal Realty. Wren paid 20% at the closing and gave a note for the balance secured by a 20-year mortgage. Five years later, Wren found it increasingly difficult to make payments on the note and defaulted. First Federal threatened to accelerate the loan and foreclose if Wren continued in default. First Federal told Wren to make payment or obtain an acceptable third party to assume the obligation. Wren offered the land to Moss, Inc. for $10,000 less than the equity Wren had in the property. This was acceptable to First Federal and at the closing Moss paid the arrearage, assumed the mortgage and note, and had title transferred to its name. First Federal released Wren. The transaction in question is a (an):

a. Third party beneficiary contract.
b. Novation.
c. Purchase of land subject to a mortgage.
d. Assignment and delegation.

Answer 19

B. I chose C.

• It’s important to note that the purchase of land “subject to a mortgage” means that the new party does not agree to be personally liable on the mortgage. Here, Moss agreed to be personally liable, making this an assumption of a mortgage rather than taking subject to a mortgage. Even if it were an assumed mortgage, Wren would still be liable if the bank came after him.
• Novation is a change of parties when all parties involved accept the terms and the change.
• A delegation doesn’t release the original party from the contract unless there is a novation. Therefore B is correct.

Question 20

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

a. If the price of the goods is less than $500, the goods need not be identified to the contract for title to pass to the buyer.
b. The seller may be excused from performance if the goods are accidentally destroyed before the risk of loss passes to the buyer.
c. Unless both the seller and the buyer are merchants, neither party is obligated to perform the contract in good faith.
d. The contract will not be enforceable if it fails to expressly specify a time and a place for delivery of the goods.

Answer 20

B. I chose C It’s important to note that the seller has already had a loss (from the goods being destroyed) so he doesn’t have to perform under the contract.

All parties are obligated to perform with good faith.

Question 21

On day 1, Jackson, a merchant, mailed Sands a signed letter that contained an offer to sell Sands 500 electric fans at $10 per fan. The letter was received by Sands on day 3. The letter contained a promise not to revoke the offer but no expiration date. On day 4, Jackson mailed Sands a revocation of the offer to sell the fans. Sands received the revocation on day 6. On day 7, Sands mailed Jackson an acceptance of the offer. Jackson received the acceptance on day 9. Under the Sales Article of the UCC, was a contract formed?

a. A contract was formed on the day Sands mailed the acceptance to Jackson.
b. No contract was formed because the offer failed to state an expiration date.
c. A contract was formed on the day Jackson received Sands' acceptance.
d. No contract was formed because Sands received the revocation of the offer before Sands accepted the offer.

Answer 21

A. I chose D. It’s important to realize that there are 3 instances when an offer cannot be revoked. Involving a merchant, there was a merchant’s firm offer.

Merchant firm offer is an offer made by a merchant in writing giving assurances that it will be kept open. Such offers are irrevocable for the time stated, or if no time is stated for a reasonable time, but in no event longer than three months. The only things needed to be a merchant firm offer is it must be made by a merchant, must be in writing and signed by the merchant and the offer must give assurances it will be kept open for a certain time

Thus, Jackson’s offer was irrevocable for a reasonable time. It was accepted within a reasonable time (a few days after the offer was received). Moreover, the contract was accepted when Sands mailed the acceptance because of the mailbox rule―an acceptance is effective upon being dispatched.

Question 22

An appliance seller promised a restaurant owner that a home dishwasher would fulfill the dishwashing requirements of a large restaurant. The dishwasher was purchased but it was not powerful enough for the restaurant. Under the Sales Article of the UCC, what warranty was violated?

a. The express warranty that the goods conform to the seller's promise.
b. The express warranty against infringement.
c. The implied warranty of merchantability.
d. The implied warranty of marketability.

Answer 22

A. I chose C. It’s important to realize that there was nothing that would make the dishwasher unfit for its ordinary purpose of washing dishes.

Further, an express warranty can be either oral or written, but it needs to conform to the promise that was part of the basis of the bargain. It had an effect on the restaurant buying the dishwasher in the first place.

Question 23

Under the Sales Article of the UCC, which of the following statements regarding liquidated damages is (are) correct?
I.The injured party may collect any amount of liquidated damages provided for in the contract.
II.The seller may retain a deposit of up to $500 when a buyer defaults even if there is no liquidated damages provision in the contract.
a. Both I and II.
b. I only.
c. Neither I nor II.
d. II only.

Answer 23

D. I chose A. It’s important to realize that there are stipulations regarding liquidated damages (even in a contract). One cannot collect any type of damages…they must BE REASONABLE IN AMOUNT and NOT A PENALTY. If there isn’t a contract regarding the amount to pay in a liquidation event, then the seller can get up to $500 if there was a deposit paid.

Question 24

On May 2, Handy Hardware sent Ram Industries a signed purchase order that stated, in part, as follows:
“Ship for May 8 delivery 300 Model A-X socket sets at current dealer price. Terms 2/10/net 30.”
Ram received Handy’s purchase order on May 4. On May 5, Ram discovered that it had only 200 Model A-X socket sets and 100 Model W-Z socket sets in stock. Ram shipped the Model A-X and Model W-Z sets to Handy without any explanation concerning the shipment. The socket sets were received by Handy on May 8.
Which of the following statements concerning the shipment is correct?
a. Handy’s order must be accepted by Ram in writing before Ram ships the socket sets.
b. Ram’s shipment is an acceptance of Handy’s offer.
c. Handy’s order can only be accepted by Ram shipping conforming goods.
d. Ram’s shipment is a counteroffer.

Answer 24

B. I chose D. It’s important to realize that it just wants to know if it has formed a contract or not. With goods under the UCC, an acceptance to an offer can be accepted by a promise to ship or by prompt shipment. Shipment of nonconforming goods constitutes both an acceptance and a breach unless a notice is sent prior to shipping that the goods are only an accommodation.

Here, there wasn’t an accommodation, so the shipment of nonconforming goods is both an acceptance and a breach.

When there is a specific notice of accomodation, then the shipment is not an acceptance, it is a counteroffer.

Question 25

On May 2, Handy Hardware sent Ram Industries a signed purchase order that stated, in part, as follows:
“Ship for May 8 delivery 300 Model A-X socket sets at current dealer price. Terms 2/10/net 30.”
Ram received Handy’s purchase order on May 4. On May 5, Ram discovered that it had only 200 Model A-X socket sets and 100 Model W-Z socket sets in stock. Ram shipped the Model A-X and Model W-Z sets to Handy without any explanation concerning the shipment. The socket sets were received by Handy on May 8.
Assuming a contract exists between Handy and Ram, which of the following implied warranties would result?
I. Implied warranty of merchantability.
II. Implied warranty of fitness for a particular purpose.
III. Implied warranty of title.
a. I, II, and III.
b. I only.
c. I and III only.
d. III only.

Answer 25

C. I chose A. It’s important to realize that Ram is a merchant. Also, it’s important to realize that since Handy didn’t rely on the seller to choose goods suitable for the buyer’s purposes, and here Handy was not relying on Ram to choose suitable goods but instead specified the goods it wanted. Thus, the warranty of fitness will not arise here.

Question 26

On May 2, Mason orally contracted with Acme Appliances to buy for $480 a washer and dryer for household use. Mason and the Acme salesperson agreed that delivery would be made on July 2. On May 5, Mason telephoned Acme and requested that the delivery date be moved to June 2. The Acme salesperson agreed with this request. On June 2, Acme failed to deliver the washer and dryer to Mason because of an inventory shortage. Acme advised Mason that it would deliver the appliances on July 2 as originally agreed. Mason believes that Acme has breached its agreement with Mason. Acme contends that its agreement to deliver on June 2 was not binding. Acme’s contention is:

a. Correct, because Mason is not a merchant and was buying the appliances for household use.
b. Incorrect, because the agreement to change the delivery date was binding.
c. Correct, because the agreement to change the delivery date was not in writing.
d. Incorrect, because Acme's agreement to change the delivery date is a firm offer that cannot be withdrawn by Acme.

Answer 26

B. I chose A. It’s important to realize that any modifications can be made AFTER the contract is formed in a UCC sale, as long as the MODIFICATION OF AN EXISTING CONTRACT is in good faith.

However, when a contract is orignially being formed and the offeree hasn’t accepted, they may make minor changes to the terms or add new ones and it will STILL BE CONSIDERED AN ACCEPTANCE. They will normally still follow the offerors terms unless the contract is between merchants, then the terms of the acceptance will be of the offeree’s new terms.

Question 27

Under the Sales Article of the UCC, which of the following requirements must be met for a writing to be an enforceable contract for the sale of goods?

a. The writing must contain a term specifying the quantity of the goods.
b. The writing must contain a term specifying the price of the goods.
c. The writing must contain the signature of the party seeking to enforce the writing.
d. The writing must contain the signatures of all parties to the writing.

Answer 27

A. I chose C. it’s important to realize that the only signature required is the person being sued, not the party bringing suit.