Chapter 11 Formation of Traditional and E-Contracts

Contract law shows what excuses our society accepts for breaking certain types of promises.
The intention to enter into a con¬tract is judged by objective facts as interpreted by a reasonable person.
One of the requirements of a valid contract is its acceptance.
There are no exceptions to the rule that contracts voluntarily entered into will be enforced.
F, voluntary consent from both parties and form are exceptions
An offer to form a bilateral contract is accepted only by completing the contract performance.
F, that is a unilateral contract. a bilateral contract is a promise to perform “promise for a promise”
A unilateral contract is formed when the one receiving the offer com¬pletes the re¬quested act or performance.
An informal contract requires a special form to bind the parties to it
F, does not require a form to be valid. substance of contract is more important than the form of the contract
A letter of credit is a formal contract.
An implied contract is implied from the conduct of the parties
Parties can form a contract without putting the terms in writing.
An executory contract is one that has been fully performed.
F, a contract that has been fully performed by both sides is called an executed contract. a contract where performance has not been met by either side is called an executory contract
To be valid, a contract must be enforceable by all of the parties to it.
F, a valid contract may be enforceable, voidable, or unenforceable
If a voidable contract is avoided, the parties to it are released from it.
A void contract is enforceable if it is in writing.
An effective offer requires reasonably certain terms.
An offer must be practical to be effective.
F, must be serious intention by offerer, terms must be reasonably certain or definite, offer must be communicated to the offeree
An expression of opinion—”your customers will like this”—is an of¬fer.
F, it is not an expression of fact and does not offer any intent to do the offer
An invitation to negotiate—”can you afford this?”—is an offer.
F, an invitation to negotiate is not an offer but an expression of a willingness to discuss the possibility of entering into a contract
A person who does not know about a reward can still claim it.
F, there was no communication. an essential element of a reward contract is that the one who claims the reward must have known it was offered
An acceptance that materially changes a term in the offer will still be considered an acceptance.
F, it would then be considered a counter offer
In contract law, “consideration” refers to the courtesy that one party shows another in negotiating a deal.
F, consideration is the value given in return for a promise or a performance in a contractual agreement
Parties are not usually free to bargain as they wish.
F, under doctrine of freedom of contract parties can bargain as they wish
mailbox rule:
an acceptance of an offer becomes effective when it is sent in the mail, not upon receiving the acceptance
Inadequate consideration may reflect a lack of bargained-for exchange.
An obligation is enforceable only if it is supported by past consideration.
F, promises made in return for action or event that have already taken place are unenfroceable. past consideration is no consideration
Contractual capacity refers to the size or volume of a contract.
F, the legal ability to enter into a contractual relationship
promissory estoppel
doctrine used to enforce a promise then the promisee has relied on it and justice will be served by enforcing it
Legally, a minor may not contract with an adult.
F, can enter a contract as long as law within contract abides for that age. however it can be voidable at the option of the minor
A contract is void if one of the parties was intoxicated at the time of its formation.
F, voidable or enforceable. only voidable if the person is so intoxicated that they do not understand the legal consequences of the contract
A contract to do something that is prohibited by law is void
InTown Delivery Service promises to deliver a certain couch to Kurt, who promises to pay for the service. If InTown does not perform, the firm may be required to

a. do nothing.
b. make another promise.
c. pay damages.
b. perform a different service.

Bobbie claims that Carl breached their contract. Carl responds that he never intended to enter into a contract with Bobbie. The intent to enter into a contract is determined with reference to

a. the conscious theory of contracts.
b. the objective theory of contracts.
c. the personal theory of contracts.
d. the subjective theory of contracts.

On Monday, Neil tells Outdoor Landscaping, Inc., that he will pay Outdoor $500 if a variety of tasks are completed by Friday. On Wednesday, Outdoor is more than half done with the work. This is

a. an informal contract because a “variety of tasks” are required.
b. a bilateral contract when Neil says that he will pay for certain work.
c. a unilateral contract as soon as Outdoor begins to perform.
d. no contract.

On behalf of the rock group Uno, their manager Thalia agrees to a performance in Seaside Amphitheatre on July 4. Rex, acting for Seaside Productions, sends a written copy of the agreement to Thalia to be signed. Typically, businesspersons put their contracts in writing to

a. ensure proof of the contracts’ existence.
b. create substance from form.
c. obtain a check.
d. practice their “letters of credit.”

When Jeff’s car breaks down, he asks Kwik Tow, Inc., to tow it from its location to Loyal Repair Shop. There is no discussion of a price, and Jeff and Kwik do not sign any documents. After the tow, Kwik sends Jeff a bill. With respect to Jeff’s obligation to pay the bill, this is

a. an express contract.
b. an implied contract.
c. a formal contract.
d. no contract.

6. GR8 Marketing Company and Hot Tunes, Inc., sign a document that states GR8 agrees to create a marketing campaign for Hot and Hot agrees to pay GR8 for the service. GR8 and Hot have

a. an executed contract.
b. an express contract.
c. an implied contract.
d. no contract.

Lou claims that he and Myra entered into an implied contract. To establish this contract, it is not necessary to show that

a. a court imposed a promise in the interest of fairness.
b. Lou expected to be paid for providing services or prop¬erty.
c. Lou provided Myra with services or property.
d. Myra failed to reject services or property provided by Lou.

Scot and Tiffany enter into an implied contract. The parties’ conduct

a. defines the contract’s terms.
b. finds the contract’s facts.
c. terminates any unintended consequences.
d. undercuts any terms based on the facts.

Vernon claims that his contract with Ulani is voidable. If their contract is avoided

a. both parties are released from it.
b. both parties must fully perform their obligations under it.
c. a wholly different contract is agreed to.
d. a wholly different contract is imposed “as if” the parties had agreed.

Employment Sources, Inc., enters into a contract with Fred. If Fred is a mi-nor, this contract is most likely

a. enforceable.
b. unenforceable.
c. void.
d. voidable.

Demi promises to buy a house from Caleb, who promises to vacate the prop-erty on June 1. If these promises are in writing, they are most likely

a. enforceable.
b. unenforceable.
c. void.
d. voidable.

Greco promises to buy illegal copies of CDs and DVDs from Fava, who promises to deliver on April 15. These promises are most likely

a. enforceable.
b. valid.
c. void.
d. voidable.

Panini Vittles, Inc., contracts with Qino to deliver its sandwiches. Before Qino performs, these parties have

a. an executed contract.
b. an executory contract.
c. an unenforceable contract.
d. no contract.

Wanda tells Vito that she plans to buy his Chocolate Goodies store some day. Vito says, “I won’t sell,” but later changes his mind and sends to Wanda a letter of “acceptance.” Wanda and Vito have

a. a contract.
b. no contract, because Wanda merely expressed her intention to enter a future contract.
c. no contract, because Vito simply expressed his opinion that “I won’t sell.”
d. no contract, because Vito’s letter was only an invitation to negotiate.

Jane offers to sell Kyle three desks for his Lights & Lamps Company administrative office. Kyle sends a rejec¬tion first, then changes his mind and sends an acceptance. Whether they have a contract is determined by

a. Kyle’s rejection.
b. Kyle’s subjective intent.
c. whatever Jane decides.
d. whether Kyle’s rejection or acceptance is received first.

d, if offer is rejected and then accepted after..the new acceptance will serve as a new offer
Business Properties, Inc. (BPI), offers to sell a warehouse to Corporate Investments. Transport Storage Company is aware of the offer and is interested in buying the warehouse. This offer can be accepted by

a. only Corporate Investments.
b. only Corporate Investments or Transport Storage.
c. any party who is aware of it.
d. no one.

Lovett County Bank offers to lend money to Kino, the owner of Java Stop, at 15 percent interest. Before Kino accepts, a state statute is enacted prohibiting loans at rates greater than 12 percent. Kino and the bank have

a. a contract for a loan at 15 percent interest.
b. a contract for a loan at 12 percent interest.
c. a contract for a loan at 0 percent interest.
d. no contract.

Kim sends an offer to Leo to cut down and remove a tree for $200. Kim says, “If you say nothing, I will consider you to have accepted my offer.” If Leo does not respond, he will be deemed to

a. accept the offer.
b. make a counteroffer.
c. reject the offer.
d. none of the choices.

D, it is now a counter offer not an acceptance.
Shelby offers to make digital copies of Relay Company’s business conference videotapes, CDs, DVDs, and other media for $500. Under the mailbox rule, Relay’s acceptance by e-mail will be considered effective when

a. received.
b. sent.
c. followed up by a confirmation letter sent by regular mail.
d. composed on a Relay computer.

Mayfair Company offers to sell a certain mall to Galleria Stores, Inc., for a certain price if it accepts before 10 A.M. Monday. A contract is formed if Galleria’s acceptance is received

a. before 10 A.M. Monday.
b. before midnight Monday.
c. before twenty-four hours of 10 A.M. Monday.
d. within a reasonable time of 10 A.M. Monday.

Digital Architecture, Inc., enters into a contract to design robotic software for Chassis Assembly Corporation. Digital agrees to perform for a deeply discounted price. Under the doctrine of freedom of contract, these parties

a. are free to bargain as they wish.
b. must renegotiate the contract before either party performs.
c. must renegotiate the contract to avoid a frivolous suit.
d. entered into a bargain that lacks consideration.

Todos Ltd. agrees to supply United Steel, Inc., with minerals from Venezuela. When the gov¬ern¬ment is unexpectedly overthrown in a revolution, Todos can obtain the goods only at a much higher price. United agrees to pay but later files a suit to recover the difference. The court will most likely rule that

a. a change in government is a risk ordinarily assumed in business.
b. an unforeseen difficulty supported the contract modification.
c. Todos engaged in extortion or the so-called holdup game.
d. Todos had a preexisting duty to supply the goods at the initial price.

Rollo promises to perform, for a price, shoe repair services in affiliation with Togs ‘n Things, a clothing store. To support a contract, the consid¬eration ex-changed by the parties must be

a. adequately considerate.
b. equally valuable.
c. legally sufficient.
d. wisely priced.

Kingston promises to pay Melina $500 to install a sump pump in his warehouse. Melina com¬pletes the installation. The act of installing the pump

a. imposes a moral obligation on Kingston to pay Melina.
b. imposes no obligation on Kingston unless he is satisfied with the job.
c. is not sufficient consideration because it is not goods or money.
d. is the consideration that creates Kingston’s obligation to pay Melina.

Under a contract with Bucolic Farms, Agro Excavation, Inc., begins digging an agricultural pond. In mid-project, Agro asks for $15,000 over the contract price, claiming an increase in the “cost of doing business.” Bucolic agrees but later refuses to pay. Their agreement is

a. unenforceable because Agro’s performance was a preexisting duty.
b. unenforceable because Bucolic’s promise was illusory.
c. enforceable.
d. unenforceable because its performance is unforeseeably difficult.

Emma, a minor acting on her own, signs a contract to buy an off-road vehicle from Rec Buggies, Inc. Later, after taking possession of the vehicle, Emma decides to disaffirm the deal. She

a. cannot cancel the contract.
b. must wait until the age of majority to terminate the contract.
c. must petition a court for emancipation to avoid the contract.
d. must express her intent not to be bound to disaffirm the contract.

Jolie signs a contract with Keaton, an unlicensed physician, to perform plastic surgery—a medical procedure. The purpose of the licensing statute is to protect the public from unauthorized practitioners. This contract is enforceable by

a. Jolie.
b. Jolie’s medical insurance company.
c. Keaton.
d. no one.

Kylie signs a covenant not to compete as part of a sale of her ongoing medical equipment business to Lake Valley Medico, Inc., in exchange for a bonus payment. The covenant is most likely enforceable by

a. both parties.
b. Kylie, but not Lake Valley.
c. Lake Valley, but not Kylie.
d. no one.

Renee, a product designer for Supersize Cosmetics Company, agrees not to work for Supersize’s competitors or start a competing business for a specified period of time after termination of employment. This agreement is legal in most states

a. if the specified period of time is reasonable.
b. if the parties have relatively equal bargaining power.
c. if Renee is in middle- or upper-level management.
d. under no circumstances.