Section 1: Basics of Contracts and Contract Preparation

Question 1

The essential elements of a contract, known as CLAP, are:
a. Competency, Legal act, Agree mutually, Parties competent
b. Consideration, Legal act, Agree mutually, Parties competent
c. Competency, Legal act, Agree mutually, Promise
d. Consideration, Legal act, Agree mutually, Promise

Answer 1

B. Consideration, Legal act, Agree mutually, Parties competent

Question 2

All parties in a valid contract must be competent. Which of the following is not considered a competent party:
a. A legally mentally troubled adult who wants to sell his home
b. A foreign buyer who does not speak English
c. An elderly couple buying a vacation home
d. A minor inheriting his parents’ estate

Answer 2

a. A legally mentally troubled adult who wants to sell his home

Question 3

To prevent perjury and fraud that happens with oral agreements is the primary goal of:
a. NC Statute of Cons
b. NC Statute of Deceptions
c. NC Statute of Scams
d. NC Statute of Frauds

Answer 3

d. NC Statute of Frauds

Question 4

Implied contracts are described as contracts where:
a. Only one party is bound to perform some act
b. Both parties are bound to perform some act
c. Intentions are inferred from conduct or actions
d. Intentions are stated, either orally or written

Answer 4

c. Intentions are inferred from conduct or actions

Question 5

What is the difference between a void contract and a voidable contract:
a. A voidable contract is usually based on a lack of capacity
b. A voidable contract is a contract that lacks a necessary element
c. A void contract is voided by the party that lacked competency
d. A void contract is usually based on a lack of capacity

Answer 5

a. A voidable contract is usually based on a lack of capacity

If at least one party in a contract is deemed legally incompetent, then the contract becomes voidable; void contracts on the other hand are because the contract lacks an essential element. (LO: Understand the major components of a contract, who can legally enter into a contract, and what happens when a contract is void or voidable)

Question 6

Bilateral contracts are described as contracts where:
a. one party is bound to perform some act
b. Both parties are bound to perform some act
c. Intentions are inferred from conduct or actions
d. Intentions are stated, either orally or written

Answer 6

b. Both parties are bound to perform some act