Contract Law Quiz
Question 1
After 25 years of employment, an employee announced his decision to retire, effective in six months, and the company he worked for accepted his decision. One week before his actual date of retirement, the employee met with the president of the company, who promised him that the company “would pay him a pension upon retirement.” After he retired, the company refused to pay the pension because of financial conditions and a change of ownership.
Ignoring any relevant statutes, is the employee likely to prevail in a claim against the company?
a. Yes, because the company’s promise to pay him a pension was supported by bargained-for consideration.
b. Yes, because he detrimentally relied on the company’s promise to pay him a pension.
c. No, because there was no contract and no detrimental reliance.
d. No, because it was reasonably implied that the company could stop paying if circumstances changed.
Correct Answer;
The correct answer is “No, because there was no contract and no detrimental reliance.”
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Question 2
A contractor agreed to weatherproof Mary’s house in return for $5,000 if the contractor’s work was “to her satisfaction.” The contractor then became concerned that Mary would use the satisfaction clause as an excuse to avoid paying him, and comes to you for advice.
What would you advise him?
a. Because of the satisfaction clause, Mary’s promise is illusory; due to the lack of consideration, neither party has an obligation.
b. Pursuant to the satisfaction clause, Mary must exercise her judgment in good faith; there is consideration for each party’s promise.
c. Because of the satisfaction clause, Mary must exercise the judgment of a reasonable person; there is consideration for each party’s promise.
d. Because the satisfaction clause is contrary to public policy, the contract will be enforceable without it.
Correct Answer
The best advice to give the contractor is that pursuant to the satisfaction clause, Mary must exercise her judgment in good faith; there is consideration for each party’s promise
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Question 3
Quality Construction solicited bids from subcontractors for the plumbing work in a building that Quality Construction was hoping to construct and on which it was preparing its own bid for the entire project. Quality received a bid for the plumbing work from Garden City. Quality then used Garden City’s bid in its successful bid to get the construction contract. Before Quality could inform Garden City that it accepted the bid, Garden City revoked its offer.
Is Garden City’s revocation effective?
a. Yes, because it revoked before acceptance.
b. Yes, because there was no reasonable reliance by Quality.
c. No, because Quality accepted by performance when it used the bid to get the contract.
d. No, because Quality’s reliance kept the offer open for a reasonable time.
Question 4
A law professor offered the members of her Contracts class $1,000 for doing specified research, and stated that the offer could be accepted either by promising to do the research or by beginning the research. Brenda began the research and notified the professor that she had done so.
What is the legal consequence of her actions?
a. No contract is formed and neither party is bound until the requested performance is complete, at which point both parties are bound.
b. Both the professor and Brenda are bound in a contract for the entire undertaking.
c. The professor is bound not to revoke, but Brenda is free to withdraw at any time. Brenda may not recover the promised amount until she completes performance.
d. The professor is free to revoke and Brenda is free to withdraw.
Question 5
Jim was interested in buying a summer home that was owned by his friend, Mary Smith. He emailed Mary, “How much would you sell your summer home for?” Mary, not intending to make an offer, responded by email, “I would like to get $150,000 for it.” Jim, believing that Mary had made an offer, emailed back, “I accept your offer.”
Is there a contract for the sale of the summer home?
a. Yes, because Jim thought that Mary had made an offer.
b. Yes, because a reasonable person would think that Mary had made an offer.
c. No, because Mary did not intend to make an offer.
d. No, because a reasonable person would think that Mary had not made an offer.
Question 6
An elderly man had one daughter and two sons. His will, which is legal, states that after paying his debts, all his assets are to be divided among the sons, with nothing to the daughter. In the last year of his life, the man entered into a written contract with his daughter in which he promised to pay his daughter $10 for each hour she provided care for him. When he died, she presented a bill to the estate for $20,000, representing 2,000 hours that she reasonably spent caring for him. This $20,000 is all the money in the estate.
Should the executor of the estate pay the bill?
a. No, because it is presumed that services from a child to a parent are gratuitous.
b. No, because the will provides that the boys will get his assets.
c. Yes, because there is an enforceable contract.
d. Yes, because she is entitled to restitution for the reasonable value of services rendered.
Question 7
In a jurisdiction in which insurance is regulated by law, an insurance company sold Mary an insurance contract that did not contain terms required by the regulations. The regulations provide that a penalty is imposed on the insurance company for not following the regulations. After Mary made a claim under the contract, the insurance company said that it did not have to pay because the contract was illegal.
Is Mary likely to prevail in her claim under the contract?
a. No, because she is suing on an illegal contract.
b. No, she cannot recover under the contract, but she can get restitution.
c. Yes, because refusal to enforce the contract would not further the public policy underlying the regulations.
d. Yes, because if the law imposes a penalty for committing an illegal act, then that penalty is to be the only consequence of the illegal act.
Question 8
A buyer and a seller agreed that the buyer would buy goods to arrive on the ship “Peerless.” It turns out that there are two ships Peerless; the buyer was thinking of the Peerless that would arrive in October, and the seller was thinking of the Peerless that would arrive in December. The court finds that the seller had reason to know that the buyer was referring to the Peerless that would arrive in October and that the buyer knew that the seller was referring to the Peerless that would arrive in December.
Under these facts, what should a court decide?
a. There is no contract because there was no meeting of the minds.
b. There is no contract because there is no single objective meaning of “Peerless.”
c. There is a contract for goods to arrive on the October Peerless because the seller had reason to know what the buyer meant.
d. There is a contract for goods to arrive on the December Peerless because the buyer knew what the seller meant.
Question 9
A bar installed a mechanical bucking horse. In order to ride the horse, the rider has to sign a standard form contract stating that he or she will not make any claim for ordinary negligence against the bar in the event of injury. A patron who signed the form was injured when he was thrown from the horse, allegedly because of the negligence of the bar. At trial, the bar relied on the signed form.
How should the court rule?
a. The contract is not enforceable because the patron lacked bargaining power.
b. The contract is not enforceable as a matter of public policy.
c. The contract is not enforceable because it is unconscionable.
d. The contract is enforceable.
Question 10
During their lunch together, Sadie admired Abigail’s new leather coat, saying she always wanted a leather coat but could never afford one. Feeling particularly generous, Abigail told Sadie that if she drove to her house after work, she would give her the leather coat. Unfortunately, Abigail’s feelings of generosity were transient, and when Abigail got home, she told Sadie she had decided to keep the coat.
Does Sadie have a claim against Abigail for breach of contract?
a. No, because Abigail’s promise to Sadie was a promise of a gift.
b. No, because Abigail was joking.
c. Yes, because Sadie bargained for Abigail to drive to her house, making Abigail’s promise to give her the coat an enforceable contract.
d. Yes, because Sadie’s reasonable reliance on Abigail’s promise makes the promise of the coat enforceable.
Question 11
Hiking Club posted a sign at the base of Lookout Mountain offering a $200 prize to the first person to climb to the top of the mountain on the first day of spring. Because Sally desperately needed that $200, she called Hiking Club and said, “I accept your offer.” She then bought new hiking boots, found someone to take care of her kids, and drove to the trailhead early in the morning on the first day of spring. When she arrived, she saw a sign posted at the base that said the offer was revoked. Sally nevertheless climbed to the top and was the first person to do so that day.
Does Sally have a good claim to recover the $200?
a. No, because the offer invited acceptance by performance and Hiking Club revoked the offer before she had begun to perform.
b. No, because an offeror can revoke an offer at any time prior to acceptance.
c. Yes, because by buying hiking boots and making other arrangements for the hike she began performance, which prevented Hiking Club from revoking its offer.
d. Yes, because she gave notice to Hiking Club that she accepted the offer.
Question 12
John had a flood in the basement of his house in New York State. He whitewashed the walls so that there was no evidence of the water damage. John then sold his house to Mary without disclosing the water damage.
Can Mary avoid the contract?
a. Yes, because the seller of a house may not engage in conduct that constitutes active concealment of defects.
b. Yes, because John had a duty to disclose all problems with the house.
c. No, because John did not make an affirmative misrepresentation.
d. No, because the water damage was not a condition created by the seller.
Question 13
Bill comes to Sandra’s garage sale, where he sees an oak desk that he likes. He offers Sandra $300 for it and she counters that she’ll sell it for $600. After some dickering, they agree on a price of $450. As Bill was about to reach for his wallet, he sees Sandra’s pickup truck in her driveway and says, “Can you deliver the desk to my place after you close up for the day?” Sandra responds, “I am sorry, no. My son is taking the truck on a camping trip.” Bill replies, “Well, then forget it.”
If Sandra is unable to sell the desk to anyone else, and she sues Bill for breach of contract, Bill’s argument is that:
a. Because he is not a merchant, delivery to his place was required.
b. A contract modification requires no consideration.
c. No agreement was ever reached.
d. He did not sign anything.
Question 14
Merchant, as part of a sales promotion, embeds a sword into a stone and advertises that whoever first pulls the sword from the stone will receive a free, king-size bed. Arthur, who has not seen or heard the advertising, notices the sword and pulls it from the stone. Merchant refuses to provide Arthur with a bed.
In an action by Arthur against Merchant, what is the most likely result?
a. Merchant will win because a valid offer must be directed at a specific individual or group.
b. Merchant will win because Arthur was unaware of the promotion until after he pulled the sword from the stone.
c. Merchant will win because Arthur never made a promise to Merchant.
d. Arthur will win because he completed the requested action necessary to accept Merchant’s offer.
Question 16
Two years ago, Bank made a $100,000 loan to Corporation. Last month, when that loan was still outstanding, Corporation asked to borrow an additional $50,000 from Bank. Bank agreed provided that Shareholder guaranteed the entire $150,000 debt. Shareholder signed a guaranty agreement covering the entire indebtedness and Bank made the $50,000 loan to Corporation.
Is Shareholder’s agreement to guaranty Corporation’s debt to Bank supported by consideration?
a. Yes, because Bank agreed to loan the additional $50,000.
b. Yes, but only with respect to the new $50,000 loan, not with respect to the earlier $100,000 loan.
c. Yes, because Shareholder has an ownership interest in Corporation and therefore benefitted from the loan.
d. No, because Shareholder received no direct benefit from the loan.
Question 18
During a phone call, Carpenter and Homeowner discussed Homeowner hiring Carpenter to build a deck on the back of Homeowner’s house. They agreed on a price of $3,000, a start date of two days later, and a completion date of two weeks. At the end of the call, Homeowner said, “I’ll send you an e-mail message confirming the deal.” Homeowner sent such a message but mis-typed Carpenter’s address. As a result, Carpenter never received the message. Thinking that Homeowner had a change of heart, Carpenter took other work. When Carpenter failed to begin work on time, Homeowner hired someone else to build the deck for $4,000.
In an action for breach of contract by Homeowner against Carpenter, which one of the following is the most likely result?
a. Carpenter will win because Homeowner failed to properly accept Carpenter’s offer by sending the e-mail message to the wrong address.
b. Carpenter will win because Homeowner breached the agreement before Carpenter was to begin work.
c. Carpenter will win because there was no signed, written agreement.
d. Homeowner will win because a contract was formed during the phone call.
Question 19
A bar installed a mechanical bucking horse. In order to ride the horse, the rider has to sign a standard form contract stating that he or she will not make any claim for ordinary negligence against the bar in the event of injury. A patron who signed the form was injured when he was thrown from the horse, allegedly because of the negligence of the bar. At trial, the bar relied on the signed form.
How should the court rule?
a. The contract is not enforceable because the patron lacked bargaining power.
b. The contract is not enforceable as a matter of public policy.
c. The contract is not enforceable because it is unconscionable.
d. The contract is enforceable.
Question 20
In which one of the following is consideration most likely to exist for the promise made?
a. Physician provided emergency care to Child, the adult offspring of Parent. Parent subsequently promised to pay Physician $100, the cost of the medicine that Physician used in treating Child.
b. Owner’s home was severely injured in a storm while Owner was out of town. Neighbor made emergency repairs to the home to prevent further damage. Owner subsequently promised to pay Neighbor $500, which represents the reasonable value of Neighbor’s services.
c. To induce Lender to loan $5,000 to Borrower, Guarantor orally promised to guaranty the debt. This promise was unenforceable under the applicable Statute of Frauds. Borrower defaulted on the loan. Subsequently, Guarantor signed a written promise to pay the debt.
d. Friend found a pretty rock and gave it to Collector as a gift. Upon inspecting the rock some days later, Collector determined that it was a valuable emerald. Collector sold the emerald for $10,000 and then to pay Friend $5,000.
Question 21
Farmer enters into an agreement to sell corn to Merchant. In which one of the following situations is consideration least likely to exist for the promise made?
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