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Marks: 5 List and briefly describe the basic elements of a contract. Answer: Question 2 Marks: 5 Preferred Contractors was a general contractor and owner of a condominium complex which was under construction. Barrett, a subcontractor, had been hired by Henderson Plumbing, another subcontractor, to help it complete the plumbing work on the project. When Henderson began using shoddy installation procedures and subsequently fell behind the scheduled completion time for the project, Preferred Contractors urged Barrett to correct Henderson's mistakes and to finish the job. Barrett refused to continue until he knew who would pay him, since he feared Henderson's financial position was shaky. Nonetheless, Preferred Contractors’ job superintendent told Barrett to go ahead even if Barrett and Preferred Contractors had no contract because "he would use his influence to try to help Barrett get his money." Barrett finished the work and sent a $7,500 bill to Henderson, which was never paid. When Barrett later sent the bill to Preferred Contractors, these facts emerged: Preferred Contractors told him that due to Barrett's failure to notify Preferred Contractors promptly of Henderson's non-payment, Preferred Contractors had already paid Henderson in full and therefore would not pay twice for the work. Discuss possible theories of recovery Barrett may argue. Answer: Question 3 Marks: 5 Describe Agreement, including the offer, termination of an offer and explain how UCC and the battle of the forms changes the concept of Agreement in the development of a contract. Answer: Question 4 Marks: 5 Explain the concept of Consideration and list the three items that can be; "the thing bargained for". Answer: Question 5 Marks: 5 In 1970, Continental Airlines agreed to buy a number of DC-10 airplanes from McDonnell Douglas Corporation (MDC). Their contract included a limited warranty in which MDC undertook certain servicing obligations and an exculpatory clause in which Continental waived "all other remedies" against MDC. On March 1, 1978, one of these DC-10s was nearing takeoff at Los Angeles International Airport when the two front tires of its left-side landing gear blew out. The pilot aborted the takeoff, but the uncushioned landing gear tore through the tarmac and broke away from the plane. This ruptured the left wing fuel tank, which burst into flames. The emergency escape slides failed, apparently due to the heat of the fire. Some passengers evacuated through the copilot's window, others jumped from the exits. Four passengers died, and over 70 suffered injuries. The plane was destroyed. It should be noted that the exculpatory clause did not prevent the passengers from suing Continental and/ or MDC. Continental sued MDC and MDC defended based on the exculpatory clause. Is this type of clause enforceable? Discuss exculpatory clauses, particularly the one involved here. Answer: Question 6
Marks: 5 Discuss the concept of a "material fact" in fraud situations. Answer: Question 7 Marks: 5 Herb was interviewed for a job on Wednesday. The employer orally offered Herb a job right on the spot. Herb orally agreed to start working the following Monday, to be employed from that day, Monday, for one year thereafter. Three weeks after starting the job Herb was fired without cause and replaced by the employer's friend. Will Herb be successful in an action brought against the employer for breach of contract? Answer: Question 8 Marks: 5 Briefly discuss the enforceability of contracts by third parties. Answer: Question 9 Marks: 5 Shirley is an actress under contract with Twentieth Century. Shirley agreed to perform the lead role in a musical to be filmed in Hollywood by Twentieth Century. At the last minute, Twentieth Century decided to scrap the musical and assigned its rights in Shirley to MGM. MGM was planning to film a western in Australia requiring Shirley to spend six months filming in Australia. Can Shirley successfully prevent this assignment? Answer: Question 10 Marks: 5 Larry wanted to buy a 1957 Cadillac once owned by Reggie Jackson. Larry entered into a contract with the owner agreeing to pay $102,000. The owner subsequently changed his mind. If Larry sues, what remedies are potentially available? Answer: Question 11 Marks: 2 Jerry offers to shovel the snow from Ben's driveway for $35. Ben replies "OK." This is an example of: Choose one answer. a. an implied, unilateral contract. b. an express, unilateral contract. c. an implied, bilateral contract. d. an express, bilateral contract.
Marks: 2 Shelly offers to sell Jane goods both parties know are stolen. Jane accepts the offer, and agrees to pay for the goods. Later, Jane refuses to accept or pay for the goods. If Shelly sues Jane for breach of contract, what is the probable result? Choose one answer. a. Shelly would win as this is a valid, enforceable contract. b. Jane would win as this is a voidable contract. c. Shelly would win as this is a unilateral contract. d. The law would not enforce Jane's promise, as it does not have a lawful purpose. Question 16 Marks: 2 The courts will find an implied contract when: Choose one answer. a. justice demands it. b. conduct of the parties indicates they intended an agreement. c. there is promissory estoppel. d. there is undue influence. Question 17 Marks: 2 Dick offered to sell Jane his 1955 Thunderbird convertible. Before Jane can accept the offer, lightning strikes the car and it is totally destroyed. Which of the following is true? Choose one answer. a. Jane can still accept the offer and John must find a 1955 Thunderbird to sell. b. The offer is terminated. c. Dick can still revoke his offer so long as he does so before Jane accepts. d. Jane can still accept the offer. She will be entitled to the insurance proceeds.
Marks: 2 "I'll sell you my car if I decide to sell it" is an example of: Choose one answer. a. a conditional offer. b. an unliquidated offer. c. an unilateral contract. d. an illusory promise, which is not consideration. Question 19 Marks: 2 Which of the following exculpatory clauses will most likely be enforceable? Choose one answer. a. An exculpatory clause that relieves a riding stable of negligence. b. An exculpatory clause that relieves a riding stable of gross negligence. c. An exculpatory clause that relieves a riding stable from intentional torts. d. A riding stable’s exculpatory clause that is hidden in an eight-page document that all riders are required to sign. Question 20 Marks: 2 E-mation entered into a contract with a consumer, Ezra. Ezra was a recent immigrant to the United States, spoke very little English, and had no formal education. The contract provided for Ezra to pay $2500 for a computer system. The system was worth $400. If E-mation sued Ezra under the contract, what is the most likely result? Choose one answer. a. The contract is enforceable because of the statute of frauds. b. The contract is enforceable because of the parol evidence rule. c. The contract is enforceable because of the underlying reference rule. d. The contract is unenforceable because it is unconscionable.
Marks: 2 When Mohammed was hired by Pomico, Inc., he signed the following agreement, "Upon termination of my employment with Pomico, I agree not to work for a competing company within 30 miles of Pomico's headquarters for one year." This agreement, important to protecting secret information developed in the employer's business, is: Choose one answer. a. an unenforceable exculpatory agreement. b. an unenforceable usurious agreement. c. an enforceable bailment agreement. d. an enforceable agreement not to compete. Question 25 Marks: 2 AAA and XXX companies are both major international conglomerates. They are negotiating a contract whereby AAA will install a computer system for XXX. One clause in the contract states that AAA will not be liable for damages caused by the negligent installation of the computer system, except that AAA warrants the system and will fix any problem for a period of two years following installation. AAA completes the installation of the computer system. XXX loads extensive amounts of information on the system, but all of it is destroyed because AAA negligently installed the memory chips. AAA fixes the memory, but XXX incurred significant expenses in recreating the lost information. XXX sues for these expenses. AAA defends with the noted clause in the contract. Choose one answer. a. XXX wins; these types of clauses are never enforceable. b. XXX wins; exculpatory clauses are usually valid, but this one would not be valid since it attempts to relieve AAA of liability for negligent behavior. c. XXX wins; this exculpatory clause is not valid because it is unconscionable. d. AAA wins; this exculpatory clause is enforceable. Question 26 Marks: 2 To be valid, a noncompete clause must be: Choose one answer. a. ancillary to a legitimate bargain. b. reasonable in time, geographical area, and scope of activity when ancillary to the sale of a business. c. necessary to protect trade secrets, confidential information, or customer lists developed over an extended time when ancillary to an employment contract. d. All of the above.
Marks: 2 Marty, a 16-year-old, contracts with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle. Marty agrees to make monthly payments until the purchase price plus interest are paid in full. Which of the following is correct? Choose one answer. a. The contract is voidable by Marty. b. The contract is void as soon as it is made. c. The contract is voidable by Cream-of-the-Crop Cycles. d. The contract is voidable by either Marty or Cream-of-the-Crop Cycles. Question 28 Marks: 2 Robert hired James, a CPA, to prepare his tax returns. James was too busy and delegated the work to Sara, also a CPA. This delegation is: Choose one answer. a. enforceable, as Sara is also a CPA. b. enforceable, as there was no expectation James would do the work. c. not enforceable, as Robert hired James to perform personal services. d. not enforceable, as this violates public policy. Question 29 Marks: 2 The status of a third party is determined by: Choose one answer. a. the type of contract. b. whether the third party gave consideration. c. the reasonable expectations of the third party. d. the intent of the contracting parties.
Marks: 2 Costs to rent a vehicle for a short period of time after an auto dealer fails to deliver a purchased vehicle would be: Choose one answer. a. compensatory damages. b. incidental damages. c. consequential damages. d. punitive damages. Question 34 Marks: 2 Farmer Elvin is holding 200 pounds of potatoes in storage for Chef Noble but Chef Noble has breached the contract by failing to pay for the potatoes. The potatoes are beginning to rot. If Farmer Elvin sells the potatoes to a local diner to make potato soup and salad, then this action would be considered: Choose one answer. a. a reasonable mitigation of damages. b. an attempt to maximize damages. c. an attempt to realize an unwarranted profit. d. conversion. Question 35 Marks: 2 Compensatory damages are typically assessed against the breaching party: Choose one answer. a. as a penalty for breaching the contract. b. only under the UCC when the sale of goods is the subject of the contract. c. to put the non-breaching party in the position it would have been in had the contract never been formed. d. to put the non-breaching party in the position it would have been in if the contract hadn't been breached.
Marks: 1 One purpose of contract law is to make business matters more predictable. Answer: true false Question 37 Marks: 1 Robert offers to buy a car from Jane for $400. Jane must accept this offer in order to form an enforceable contract. Answer: true false Question 38 Marks: 1 When promissory estoppel is used by the courts, it is because there is NOT an enforceable contract present. Answer: true false Question 39 Marks: 1 Travis had too many beers at the baseball game. Ed realized Travis was so intoxicated he wouldn’t know what he was doing, so he got Travis to sign a promise to sell his motorcycle to Ed for $50. When Travis gets sober, he may void the contract. Answer: true false Question 40 Marks: 1 If Valley Bridge contracts with Rainbow Painters to paint a bridge and the contract requires that only Sherwin Williams paint be used, then Sherwin Williams will be able to enforce the contract against either Valley Bridge or Rainbow Painters. Answer: true false
