ACCT120 MState Business Law MCQ Answers Help

Multiple choice

When both parties are mistaken about a current or past material fact, ____________________.

  • no one can choose to rescind the contract
  • only the injured party can rescind the contract
  • either can choose to rescind the contract
  • only the courts can rescind the contract
  • only the non-injured party can rescind the contract

On rare occasions, rescission is permitted for unilateral mistakes. Which of the following scenarios is an example of when rescission might be available for a unilateral mistake?

  • Both parties’ actions had a material effect on the agreement.
  • All of these factors are required to show unilateral mistake.
  • There is an adverse effect on one party in a contract.
  • One party made a basic assumption about the subject matter of the contract.
  • One party made a mistake about a material fact, and the other party had reason to know about the mistake.

In contract law, a(n) _____________ is an erroneous belief about the facts of the contract at the time the contract is concluded.

  • act of concealment
  • mutual mistake
  • misrepresentation
  • mistake of fact
  • unilateral mistake

Which of the following is not an element necessary to show a mutual mistake in a contract?

  • The mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous.
  • A material effect on the agreement.
  • A basic assumption about the subject matter of the contract.
  • An adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement.
  • All of these factors are required to show mutual mistake.

A(n) ___________ is the result of an error by one party about a material fact. If both parties to a contract are mistaken about a material fact, either can opt to rescind it. This is known as a(n) ___________.

  • misrepresentation; mutual mistake
  • mutual mistake; unilateral mistake
  • concealment; mutual mistake
  • unilateral mistake; misrepresentation
  • unilateral mistake; mutual mistake

Suppose you entered into a contract to clean someone’s pool. Then, both you and the pool owner discovered that the pool water has produced toxic levels of chlorine over time. As a result, you cannot clean the pool without first decontaminating it. This change in knowledge about the toxicity levels of the pool is considered a material fact in the agreement. Can you rescind the contract?

  • No, no mistake has occurred.
  • Yes, this seems like a mutual mistake.
  • No, this seems like a unilateral mistake.
  • Yes, this seems like a unilateral mistake.
  • No, this seems like a mutual mistake.

Another name for ______________ is intentional misrepresentation.

  • concealment
  • fraudulent misrepresentation
  • innocent misrepresentation
  • mistake of fact
  • negligent misrepresentation

Which of the following is not an element of fraudulent misrepresentation?

  • Justifiable reliance on the false statement by the innocent party.
  • A false statement about a material fact of the contract.
  • Intent to deceive.
  • All of these are elements required to prove fraudulent misrepresentation.
  • None of these are elements of fraudulent misrepresentation.

On the streets of New York, a man sells you a pocket watch for $20. He says all the watch needs is a new battery and it will be just like new and work perfectly. You buy a new battery for the watch, but the watch still does not work. The man selling the watch knew that the watch would not work, even with a new battery, but he told you it would anyway.

The above scenario is an example of what?

  • Fraudulent misrepresentation
  • Innocent misrepresentation
  • Lack of scienter
  • Negligent misrepresentation
  • Nondisclosure

__________ is present when the party making the fraudulent assertion believed it was false or had no regard for whether it was true or false.

  • Nondisclosure
  • Concealment
  • Scienter
  • Intent to deceive
  • Justifiable reliance on a false assertion

The effect of both _____________ and ____________ is that the victim can either rescind the contract or keep the contract and sue for damages.

  • innocent misrepresentation; fraudulent misrepresentation
  • negligent misrepresentation; innocent misrepresentation
  • innocent misrepresentation; intentional misrepresentation
  • intentional misrepresentation; concealment
  • negligent misrepresentation; fraudulent misrepresentation

Suppose an operator of a weight scale certifies the weight of a good that is for sale. However, the accuracy of the scale used to weigh the good has not been checked in more than four years, even though the weight scale operator could have easily checked the accuracy of the scale. The scale gave an improper weight measurement that resulted in many problems with the shipping and sale of the product.

The above scenario is an example of what?

  • Negligent misrepresentation
  • Innocent misrepresentation
  • Intentional misrepresentation
  • Fraudulent misrepresentation
  • Nondisclosure

If a seller actively hides an important fact about the product he or she is selling, then the contract for the sale could be rescinded on which of the following grounds?

Multiple Choice

  • Nondisclosure
  • Fraudulent misrepresentation
  • Unilateral mistake of fact
  • Mutual mistake of fact
  • Undue influence

Part 2

The test for compliance with the one-year rule considers which of the following?

  • The one-year rule does not apply to the statute of frauds.
  • Whether the contract was indeed completed in one year.
  • The likelihood of completing the contract within one year.
  • The possibility of completing the contract within one year.
  • The probability of completing the contract within one year.

Paul appoints Kofi to act as his agent. Kofi enters into an agreement for Paul with John that cannot be completed within one year according to the contractual terms. Had Paul contracted directly with John, would the agreement be within the statute of frauds and require a writing? Does the agreement between Kofi and John also require a writing?

  • No, pursuant to the Uniform Commercial Code.
  • No, pursuant to the statute of frauds.
  • Yes, pursuant to the Uniform Commercial Code.
  • Yes, pursuant to the equal dignity rule.
  • No, pursuant to the equal dignity rule.

In which scenario is parol evidence permitted in court?

  • When contracts have been subsequently modified.
  • When contracts are conditioned on orally agreed-on terms.
  • When contracts are incomplete.
  • When there are voidable or void contracts.
  • All of these.

_______________ seeks to blend other agreements either into the final agreement or into something explicitly identified as being outside the final agreement.

  • Condition precedent
  • Parol evidence
  • An admission
  • Promissory estoppel
  • A merger clause

When the courts deem a contract integrated, parol evidence is generally _________________.

  • void
  • enforceable
  • valid
  • admissible
  • inadmissible

Which one of the contractual agreements would not fall under an exception to the parol evidence rule?

Multiple Choice

A written agreement based on an orally agreed-on condition.

A contract that is partly written and partly oral.

A contract that contains ambiguous terms that significantly affect its interpretation.

A contract that is incomplete in that it is missing critical information.

A written agreement that contains no obvious typographical errors.

Valerie is an incidental beneficiary to a contract. One of the parties to the contract breaches the contract. Valerie wishes to sue. Whom can she sue to enforce the contract?

  • Either of the two parties to the contract.
  • Any other third-party beneficiary to the contract.
  • The party who did not breach the contract.
  • The party who breached the contract.
  • Neither of the two parties.

A creditor beneficiary is a third party that benefits from a contract in which the ________ agrees to pay the _________ debt.

  • incidental beneficiary; intended beneficiary’s
  • promisee; promisor’s
  • donee; donor’s
  • promisor; promisee’s
  • donor; donee’s

Suppose you hired the band Journey to perform at your event. Could Journey arbitrarily transfer their performing duties to Britney Spears to perform instead?

  • No, this situation is prohibited by law and/or public policy.
  • No, this transferring of a duty is specifically banned in the contract.
  • No, this duty is personal in nature and the performances would vary significantly.
  • Yes, this is an example of a valid assignment.
  • Yes, this is an example of a valid delegation.

A party transferring their duties under a contract to another individual is the

Multiple Choice

obligor.

delegator.

obligee.

obligee assignee.

delegatee.

Becca assigns her right to a payment to Fredrick, one of her friends. However, before the payment is made, Becca assigns the same right to another friend, Tom, whom Becca finds out is having serious financial issues. Tom gives notice of assignment to the obligor before Fredrick. According to which of the following is Tom entitled to the assignment as opposed to Fredrick?

Multiple Choice

The first-assignment-in-time rule.

The rights of intentional beneficiaries.

The rights of incidental beneficiaries.

The English rule.

The parole evidence rule.

Required information

Contracts Falling Within the Statute of Frauds

Introduction

Read the overview below and complete the activities that follow.

Only specific types of contracts are within the scope of the statute of frauds and thus required to be evidenced in writing. In this activity, we look at a fictional scenario between customers and their local Honda dealership, specifically whether their agreement falls within the statute of frauds and how this affects their future actions.

CONCEPT REVIEW:

Written contracts provide certain advantages that oral contracts lack. Disputes about the specifics of the terms in an oral contract are easier to settle when the terms are solidified in writing. The moment of writing also allows both parties to reconsider their terms and ensure that they are advocating what they desire in the contract. In general, written contracts smooth the conduct of business transactions. Some contracts thus require a writing.

Mini-Case:

Read the mini case and answer the questions that follow.

Suppose the local Honda dealership is offering a special lease deal on the 2017 Honda Accord LX Coupe. With a 36-month lease, the monthly price is $219, not including tax. The lease also requires a down payment of approximately $2,380, plus the first month’s payment and sales tax on the down payment. Nigel decides he wants to lease the Accord, and he enters into a contract with the Honda dealership. He makes his lease payment every month for 36 months and subsequently drives the vehicle for 36 months. (Assume that the terms of his contract mean the contract cannot possibly be performed within a year.)

Based on the terms of this contract, how long would the performance of the contract take? Would this contract fall within the statute of frauds?

Multiple Choice

  • It would take one year, and it would not fall within the statute of frauds.
  • It would take 36 months, and it would fall within the statute of frauds.
  • It would take one year, and it would fall within the statute of frauds.
  • It would take 219 months, and it would not fall within the statute of frauds.
  • It would take 36 months, and it would not fall within the statute of frauds.

Suppose that the terms of Nigel’s contract changed. Suppose that instead of a 36-month car lease, Nigel enters into a lease for the Accord for 6 months. The 6-month lease is set to begin on the day he creates the contract at the Honda dealer and end 6 months later. Does this contract need to be in writing to be enforceable?

Multiple Choice

Yes, because the contract can be performed within a year.

No, because the contract can be performed within a year.

No, pursuant to Uniform Commercial Code Section 2-201.

Yes, because the contract is for the sale of goods more than $500.

No, because the contract is for the sale of goods totaling more than $500.

Suppose that instead of leasing the Accord, Nigel decides to buy the Honda Accord for $22,180. Would this contract need to be in writing to be enforceable?

Multiple Choice

Yes, pursuant to the statute of frauds.

No, pursuant to the statute of frauds.

No, pursuant to UCC, Section 2-201.

Yes, pursuant to UCC, Section 2-201.

Suppose that Nigel enters into the sales contract from the previous question (he buys the Accord for $22,180). The Honda dealership wrote the agreement, and Nigel was the only party to sign. Based on this information, who could sue about the agreed-upon terms of the contract if there was a problem?

Multiple Choice

Neither party.

The Honda dealership only.

None of these are correct.

Nigel only.

The Honda dealership and Nigel.

Part3

Equitable remedies are ______________.

  • monetary damages
  • court-ordered actions
  • compensatory damages
  • legal damages
  • legal remedies

Suppose that Jeremy agrees to pay Shelly $50 a month for 4 months to tutor him for his legal studies class. However, Jeremy breaches the contract and terminates Shelly for no reason other than the fact he wanted a more attractive tutor. Shelley had two months left on the contract and could not find another tutoring job for those two months. How much in compensatory damages would Shelley be entitled to?

  • $500
  • $200
  • $100
  • $0
  • $50

Suppose a construction company enters into a contract to build a warehouse for the hypothetical Vincent Corporation with a contract price of $700,000, and the cost of raw materials and labor is $400,000. How much could the construction company recover in lost profits if the Vincent Corporation were to breach the contract before performance had begun?

  • $400,000
  • $0
  • $300,000
  • $300,000 plus interest
  • $700,000

Which of the following is not a way to discharge a contract by mutual agreement?

  • Novation
  • Accord and satisfaction
  • Substituted contract
  • Anticipatory repudiation
  • Mutual rescission

Which of the following is not a means of discharging a contract by operation of law?

  • Tolling of the statute of limitations.
  • Commercial impracticability.
  • Mutual rescission.
  • Bankruptcy.
  • Impossibility of performance.

A(n) ____________ occurs when a party unjustifiably fails to substantially perform his or their obligations under the contract.

  • objective impossibility
  • accord and satisfaction
  • novation
  • substituted contract
  • material breach

A(n) ______________ arises when the party’s duty to perform arises after a particular event occurs; if the event never occurs, the party’s duty to perform never arises and the parties are thus discharged from the contract.

  • condition precedent
  • condition subsequent
  • implied condition
  • condition concurrent
  • express condition

Suppose Don enters into an agreement for a one-year gym membership, conditioned on his not moving out of the state for a new job. If he finds a new job out of the state, his obligation to be bound by the gym contract is discharged. Why?

  • This contract contains a condition precedent.
  • This contract contains a condition subsequent.
  • Don’s actions constitute a material breach of the contract.
  • Don offered tender.
  • Carrying out the contract would be objectively impractical for Don.

Bruce agrees to lease Tim’s commercial property until Bruce is offered a job from his dream company, Google. The condition to which Bruce and Tim are agreeing to is called:

Multiple Choice

a condition precedent.

a condition subsequent.

a condition concurrent.

a novation.

an implied condition.

Each of the following is an example of a discharge by mutual agreement except

Multiple Choice

novation.

mutual rescission.

accord and satisfaction.

alteration of the contract.

substituted contract.

Which of the following are foreseeable damages resulting from circumstances arising outside the contract itself?

Multiple Choice

Compensatory damages

Punitive damages

Liquidated damages

Nominal damages

Consequential damages

Which of the following are foreseeable damages resulting from circumstances arising outside the contract itself?

Multiple Choice

Compensatory damages

Punitive damages

Liquidated damages

Nominal damages

Consequential damages

Required information

Legal Remedies for Breach of Contract

Introduction

Read the overview below and complete the activities that follow.

Before beginning this activity, make sure to review LO 14-2. Pay attention to the distinctions among the different types of legal remedies, including compensatory damages, consequential damages, punitive damages, nominal damages, and liquidated damages.

CONCEPT REVIEW:

The fact that one party has breached a contract does not necessarily mean that the nonbreaching party will sue. A number of factors go into the decision of whether or not it makes sense to file suit. However, if a plaintiff does decide to sue, the remedies the plaintiff will be thinking about can generally be classified as either legal remedies (also known as monetary damages) or equitable remedies, some form of court-ordered action.

Mini-Case:

First, read the case below. Then, answer the accompanying questions.

Suppose Nigel sells Blair a watch for $200. Nigel tells Blair it is an antique Rolex he inherited from his dead grandfather, but in fact, it is a fake; he bought on the streets of New York City. The fake watch is worth $50, but if it had been a genuine antique Rolex, it would be worth $600. In this scenario, Nigel is in breach of contract and could be sued.

What are the most frequently awarded legal damages?

Multiple Choice

  • Nominal damages
  • Compensatory damages
  • Liquidated damages
  • Punitive damages
  • Equitable damages

The Rolex case involves a contract for the sale of goods, and thus the contract is governed by the Uniform Commercial Code. How does the UCC calculate compensatory damages for the sale of a good?

Multiple Choice

How much Blair is going to have to pay to obtain the goods from another seller.

The difference between the contract price and the price Blair paid for the item.

The difference between the contract price and the market price.

How much Blair paid for the watch.

However much Blair demands.

Under the UCC, how much would Nigel owe Blair in compensatory damages?

Multiple Choice

$600

$550

$150

$200

How often are punitive damages awarded in breach of contract cases?

Multiple Choice

  • In 90% of cases.
  • More than in tort law cases.
  • Never.
  • Always.
  • Rarely.
 
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