Acct 3130 M50 Fall 2015 ONLINE Exam 2 (Ch 15,16,19,24,26-29) - 94456

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Question 1. Sam promises his uncle, Bob, that he will lose 10 pounds and exercise every day during the spring semester in exchange for having his tuition paid for the fall semester. The uncle agrees; but after Sam has lost 10 pounds and exercised all semester, Bob refuses to pay saying that no contract existed. Which of the following is true? Consideration was present, there was an enforceable contract, and Bob has wrongfully refused to pay. There was no consideration present, and Bob has no obligation to pay. There was no consideration present, but Bob must pay under principles of promissory estoppels. There was consideration present, but Bob is not required to pay because the contract was illusory. There was consideration present, but Bob is not required to pay because Bob did not receive a benefit personally. 2. In a bilateral contract, the consideration for each promise is ______. A completed act The beginning of action in acceptance, even if it is not complete An acknowledgement A return promise An agreement 3. What did the court rule in the case in the text, Labriola v. Pollard Group, Inc., regarding whether the noncompete agreement at issue in the case was enforceable? The court ruled that the noncompete agreement was enforceable because the employee received independent consideration for it in the form of increased wages. The court ruled that the noncompete agreement was enforceable because the employee received independent consideration for it in the form of a fixed term of employment. The court ruled that the noncompete agreement was enforceable because the employee received independent consideration for it in the form of a promotion. The court ruled that the noncompete agreement was not enforceable because the employee did not receive the consideration agreed upon. The court ruled that the noncompete agreement was not enforceable because of lack of consideration. 4. Which of the following is false under the law in England? England has requirements for consideration. England does not recognize the exception of promissory estoppel. In England, specialty contracts or deeds are an additional exception to the requirement for consideration. In England, deeds are used to create enforceable promises of gifts to charity. In England, a deed is a document that creates a binding obligation between parties without consideration when certain formalities are honored. 5. Sam offers Betty his bicycle for $75. Which of the following is an example of an illusory promise on the part of Betty? “I’ll take it.” “I’ll take it if I decide to do so.” “I won’t pay $75, but I will pay $50.” “I’ll take it if you will let me try it out first and the brakes work well.” “I’ll take it if you will buy new tires.” 6. Which of the following was the result in the Case Opener in which the attorney sued to recover the value of 3 percent of the defendant’s stock based on the fact that he provided a loan to the defending company, and the directors later promised the stock to him? The court ruled that the attorney was not entitled to the value of the stock because it was offered as a gift. The court ruled that the attorney was entitled to the value of the stock because it was offered as a gift. The court ruled that the attorney was entitled to the value of the stock because it was consideration provided by the company. The court ruled that the attorney was entitled to the value of the stock based on promissory estoppels. The court ruled that the attorney was entitled to the value of the stock both because it was consideration provided by the company and also based on promissory estoppels. 7. Sally goes to have her hair trimmed and agrees to pay $40 to the stylist. While there, Sally decides that she would also like highlights. The stylist informs her that highlights will cost an additional $30. Sally agrees to the price, gets the highlights, but refuses to pay the extra amount. What is the likely result in a dispute between Sally and the stylist and why? The stylist will win because she did additional work in exchange for the extra payment; and, therefore, Sally’s promise was supported by valid consideration. The stylist will win because she did additional work in exchange for the extra payment; and, therefore, a valid unilateral contract existed. The stylist will win unless Sally can show that she had previously received both a trim and highlights for $40. If she can prove that she previously received both for $40, then the past expectations rule applies. Sally will win because the stylist had a preexisting duty to have Sally’s hair look as good as possible. Sally will win because there was no valid consideration in exchange for the highlighting. 8. A(n) ______contract is an agreement whereby the buyer agrees to purchase all goods from one seller. Supply Use Requirement Output Arranged 9. Which of the following is true of a requirement contract under the UCC? It is valid so long as the requirement is made in good faith. It is valid so long as there is a writing setting forth the terms signed by the offeree. It is valid so long as there is a writing setting forth the terms signed by the offeror and the offeree. It is valid so long as more than nominal consideration is provided. It is not valid because of the lack of consideration. 10. When an accord and satisfaction is at issue, the ______ is the new agreement to pay less than the creditor claims is owed. Satisfaction Accord Both satisfaction and accord Written compromise Written acknowledgement 11. Which of the following was the result in the case Mast Long Term Care v. Forest Hills Rest Home, covered in the Case Nugget, in which the defendant's rest home claimed it was not bound by an agreement to buy all its drugs not commonly stocked from the plaintiff? The agreement was not enforceable because no price schedule was agreed upon. The agreement was not enforceable because it was an output contract. The agreement was not enforceable because it was a requirement contract. The agreement was enforceable based on promissory estoppel although consideration was lacking for a binding contract. The agreement contained sufficient consideration on the part of the plaintiff and defendant. 12. Which of the following is an element of a legally binding contract? Inquiry Acknowledgement Capacity Knowledge Affirmance 13. In most states, a person is given full legal capacity to enter into contracts when he or she becomes ______ before reaching the age of majority. Emancipated Freed Released Employed Either released or employed 14. When must a disaffirmance of a contract based on minority occur? Before or within a reasonable time of the minor reaching the age of majority. Within 30 days of the minor reaching the age of majority. Within 60 days of the minor reaching the age of majority. Within 90 days of the minor reaching the age of majority. Within one year of the minor reaching the age of majority. 15. Which of the following is the majority rule regarding a minor’s misrepresentation of his or her age? That if a competent party relies on a misrepresentation in good faith, the minor gives up the right to disaffirm the agreement. That the minor must restore the competent party to that party’s precontract position before obtaining the disaffirmance. That the minor may disaffirm but that the competent party has the right to sue the minor in tort and recover damages for fraud. That misrepresentation does not affect the minor’s right to disaffirm the contract. That misrepresentation results in the minor receiving a return of only half the consideration he or she supplied. 16. Which of the following is true regarding the ability of persons suffering from a mental illness to enter into a binding contract? Persons suffering from a mental illness never have capacity to enter into a binding contract. Persons suffering from a mental illness have full capacity to enter into a binding contract so long as they do not present a danger to themselves or others. Persons suffering from a mental illness have full capacity to enter into a binding contract so long as they inform the other party that they are in treatment. Persons suffering from a mental illness may have full, limited, or no legal capacity to enter into a binding contract depending on the nature and extent of their mental deficiency. Persons who suffer from a mental illness always have full capacity to enter into a binding contract. 17. Which of the following is true regarding an agreement to commit a crime or a tort? An agreement to commit a crime is enforceable, but an agreement to commit a tort is unenforceable. An agreement to commit a tort is enforceable, but an agreement to commit a crime is unenforceable. An agreement to commit a crime is unenforceable, and an agreement to commit a tort is unenforceable unless a business tort is involved in which case the agreement is enforceable. An agreement to commit a crime is unenforceable except an agreement to commit white collar crime in which case the agreement is enforceable; and an agreement to commit a tort is unenforceable unless a business tort is involved in which case the agreement is enforceable. An agreement to commit a crime is unenforceable, and an agreement to commit a tort is unenforceable. 18. If a licensing statute is intended to protect the public’s health, safety, and welfare, an agreement with an unlicensed professional is typically deemed _____. Executed Enforceable without a fine Illegal and unenforceable Enforceable but with a fine Usury 19. The term ______ refers to the fact that an agreement is so unfair that it is void of conscience. Unreasonable Outrageous Unconscionable Unrealistic Unbelievable 20. A statement releasing one of the parties to an agreement from all liability, regardless of who is at fault or what the injury suffered is, would be referred to as a[n] ______ agreement. Substantive agreement Adhesion agreement In pari delicto agreement Exculpatory Res Ipsa 21.Reference: “Irresponsible Teen.” Reference: “Irresponsible Teen.” At age 17, in a state in which the age of majority is 18, Sally purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted to return it to the store claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Sally claimed was from grape juice. Additionally, a few days before she turned 18, Sally purchased a used car from Dings and Dents used cars. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for six months after she turned 18. Dings and Dents claimed the car was a necessity. Sally and her parents disagreed claiming that the parents were ready and willing to provide a car to Sally, and that she only purchased the car from Dings and Dents because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Sally was under the age of 18. In the dispute between Sally and the owner of Dings and Dents, which of the following is true regarding the claim of Sally and her parents that the car was necessary? The claim will have no effect because the law does not recognize the concept of necessaries when minors are involved. Social status is always irrelevant in addressing a claim that an item was necessary. Whether or not parents would buy the item at issue is irrelevant in addressing a claim that an item was necessary. A minor may not disaffirm a contract for a necessity. Even if a minor disaffirms a contract for a necessity, the minor will still be held liable for the reasonable value of the necessity. 22. Which of the following is a contractual party who agrees to do something for the other party? Obligor Obligee Assignor Assignee Boundee 23. What is the term for the third party who receives an assignment of contract rights? Transferor Transferee Relator Assignor Assignee 24. Which of the following is an exception to the general rule that rights to a contract cannot be assigned when a contract is personal in nature? When the only part of a contract left to be fulfilled is the payment. When nothing has been done on the contract at all. When no more than half the contractual duties have been performed. When no more than three-fourths of the contractual duties have been performed. There is no exception because rights to a contract that is personal in nature may generally be assigned. 25. Which of the following was the result in the case in the text Wesley Locke v. Ozark City Board of Education, in which an umpire was injured by an angry parent and sued claiming that he was an intended third-party beneficiary under a contract the defending board of education had with the Alabama High School Athletic Association requiring police protection which was not provided? The umpire won as a matter of law because of inadequate police protection. The umpire won as a matter of law because he was a third party beneficiary to the contract. The defending school board won as a matter of law because although the umpire was a third party beneficiary to the contract, it had provided adequate protection. The defending school board won as a matter of law because the umpire was not a third party beneficiary to the contract. The case was remanded for trial on the issue of whether adequate police protection was provided. 26. A party to a contract who transfers his or her duty to perform to a third party who is not part of the original contract is called a[n] ______. Delegatee Delegator Assignor Assignee Transferor 27. Which of the following is true regarding assignment of rights in China? Free assignment of rights is permitted. Free assignment of rights is permitted only when a contract with a state authority is involved. Free assignment of rights is permitted only when a contract with a private party is involved unless the contract is one considered “for the good of the people.” Assignment of rights is illegal. When a private party is involved, the assignor must first get the obligor’s approval before an assignment is made. 28. The ______ in a third-party beneficiary contract is the party to the contract who owes something to the promisor in exchange for the promise made to the third-party beneficiary. Promisee Promisor Obligor Obligee None of the above. There are no third-party beneficiary contracts, only second-party beneficiary contracts. 29. Which of the following references the maturing of rights such that a party can legally act on the rights? Absoluting Gelling Forming Vesting Finishing 30. A[n] ______ beneficiary is one who unintentionally gains a benefit from a contract between other parties. Incidental Creditor Donee Vested Accidental 31. What was the ruling of the court in the Case Opener involving a lawsuit by fans seeking a refund based upon the events of the Tyson and Holyfield fight? The fans were not allowed to recover because they were incidental beneficiaries. The fans were not allowed to recover because they were donee beneficiaries. The fans were not allowed to recover because they were assigned donees. The fans were allowed to recover because they were creditor beneficiaries. The fans were allowed to recover because they were third-party beneficiaries. 32. What is the basic premise of contract law? To effectuate the expectations of the parties to an agreement To promote commerce To promote economic growth To promote interstate commerce To encourage a free-market society and greater financial security for the parties 33. Which of the following damages may a seller receive who sells goods to another buyer when the original buyer is in breach? The difference between the resale price and the contract price, plus incidental damages, and minus expenses saved. The difference between the resale price and the contract price only. The difference between the resale price and the contract price, minus expenses without any allowance for incidental damages. The difference between the resale price and the contract price, plus incidental damages, with no deduction for expenses saved. Nominal damages only. 34. Which of the following was the result in Almetals, Inc. v. Wickeder Westfalenstahl, GMBH, the case in the text involving the sale of clad metal in which the plaintiff sued the defendant for breach of contract seeking specific performance? That specific performance was unavailable because real estate was not involved. That specific performance was unavailable because a foreign defendant was involved and jurisdiction for specific performance was, therefore, lacking. That specific performance was unavailable because the goods at issue were scarce. That specific performance was unavailable because a requirements contract was involved. That specific performance was the appropriate remedy. 35. Under UCC 2A-525(2), when may a lessor reclaim goods when a lessee in possession of the goods is in breach? When the lessor discovers the lessee is insolvent When the lessee fails to make payments according to the lease terms When the lessee has received at least 10 days prior notification of reclamation All of the above When the lessor discovers that the lessee is insolvent and when the lessee has received at least 10 days prior notification of reclamation, but not when the lessee has failed to make payments according to the lease terms 36. Which of the following usually requires that the seller or lessor deliver the particular goods identified in the contract? Absolute order Absolute performance Specific performance Specific order None of the above 37. Which of the following is true regarding revocation of accepted nonconforming goods? A buyer may revoke acceptance of nonconforming goods under some circumstances, but a lessee may not. A lessee may revoke acceptance of nonconforming goods under some circumstances, but a buyer may not. Neither a buyer nor a lessee may revoke acceptance of nonconforming goods. Neither a buyer nor a lessee may revoke acceptance of nonconforming goods after the goods have remained accepted for a period of 24 hours. A buyer or lessee may revoke acceptance of nonconforming goods if, for example, the buyer/lessee made a reasonable assumption that the nonconformity would be cured, but then the nonconformity was not cured within a reasonable time. 38. Regarding the “Case Opener,” what did the court rule regarding the liability of Abbott Industries following its supply of 1.2 million tubes of bad eye medication to Altana, a customer, for resale? That Abbott industries was liable for the cost of the recall and destruction of the defective medication, for the costs of employee overtime, and for lost future sales because Altana was unable to meet its contractual obligations. That Abbott industries was liable for the cost of the recall and destruction of the defective medication, for the costs of employee overtime, and for lost future sales even though Altana was able to meet its contractual obligations. That Abbott industries was liable for the cost of the recall and destruction of the defective medication and for the costs of employee overtime, but not for lost future sales because Altana was able to meet its contractual obligations. That Altana was only entitled to receive cover, meaning substitution for the defective medication. That Altana was unable to recover anything because business people take a risk that some shipments will be bad. 39. Sam contracted with Sharon, his cousin, to build a building to house Sam’s new restaurant. Sam wanted the building completed by October 15th so that he could advertise and get holiday business. Sam and Sharon entered into an agreement by which Sharon would pay Sam $300 per day for every day she was late. Which of the following is true regarding their agreement? It is known as a liquidated damages provision which will be enforced by a court so long as it is not so far out of reasonable range as to be punitive in nature. It is known as a penalty provision which will be enforced by a court so long as the plaintiff can establish proof of compensatory damages in at least the amount of recovery requested. It is known as a punitive damages provision which will be enforced by a court only if wrongdoing or fraud on the part of the defendant can be established. It is known as a consequential damages provision which will be enforced by a court only if incidental damages can be established. It is known as an invalid provision which will not be enforced. 40. What does the UCC say regarding a limitation of consequential damages for commercial losses? A limitation of consequential damages for commercial losses is acceptable so long as both parties are represented by an attorney. A limitation of consequential damages for commercial losses is acceptable so long as any consumer was represented by an attorney. A limitation of consequential damages for commercial losses is prima facie unconscionable. A limitation of consequential damages for commercial losses is analyzed in the same way as a limitation of consequential damages for personal injury. A limitation of consequential damages for commercial losses is not prima facie unconscionable. 41. Reference: “Missed Payments.” Robin purchased a hot tub on an installment plan and was to pay the seller monthly. Her last payment was made on January 2, 2002. The seller brought a lawsuit against her for sums remaining on the account on January 3, 2007. Robin defended on the basis that the statute of limitations had run. The seller claimed, however, that appropriate time remained because a state law six-year statute of limitations to collect money on account applied. Robin also arranged to purchase a personal watercraft but failed to pay the deposit to the seller, and the seller refused to deliver the watercraft. Robin claimed that the seller was required to deliver the watercraft and allow her the opportunity to cover. Under the UCC, how long does a plaintiff have to bring an action for breach of contract for the sale of goods once the cause of action accrues? One year Two years Three years Four years Five years 42. Which of the following is known as a substitute for cash? A negotiable instrument A nonnegotiable instrument A payable document A nonpayable document An endorsed payable document 43. Which of the following is an example of a negotiable instrument? Checks Drafts Promissory notes Check, drafts, and promissory notes Checks and drafts, but not promissory notes 44. Documents used as payments to facilitate commercial transactions were originally generically called ______. Negotiable instruments Commercial paper Promissory paper Commerce notes Payment notes Top of Form 45. Which of the following was the result in New Wave Technologies, Inc. v. Legacy Bank of Texas, the case in the text involving whether checks were made payable jointly or alternatively? That no ambiguity was involved and that the use of a dash (or virgule) meant that the checks were payable alternatively. That no ambiguity was involved and that the statement on the back of the checks that each payee was required to endorse the instrument meant that it was payable jointly. That no ambiguity was involved and that the use of a dash (or virgule) meant that the checks were payable jointly. That there was ambiguity resulting in negotiability being destroyed. That there was an ambiguity resulting in the instrument being construed as being paid alternatively. 46. What does the term "float" in banking reference? The time it takes for a check to go through the traditional check-clearing process and be paid. The time it takes for a bank authority to report a bad check to the issuing bank. The time it takes to convert a nonnegotiable instrument to a negotiable instrument. The time it takes to convert a time instrument to a demand instrument. The time it takes to convert a demand instrument to a time instrument. 47. Which of the following is a promise made by a bank to pay a payee a certain amount of money at a future time? A note A draft A novation A check A certificate of deposit 48. A certificate of deposit is a ______ of the bank. Note Draft Novation Check Promissory contract 49. A ______ is a specific draft, drawn by the owner of a checking account, ordering the bank to pay the payee from that drawer’s account. Promissory contracts Certificates of deposits Note Check Time instrument 50. Which of the following is true regarding the UCC’s signature requirement for a negotiable instrument? The signature must be the actual name of a person, and an "X" will suffice if the party intended that the mark be placed on the instrument and uses that mark to identify himself. A signature may be made by means of a device or machine. A signature may be made manually. The signature of an agent on behalf of the principal binds the principal and satisfies the signature requirement. All of the above. 51. When is a demand instrument, such as checks, payable? As soon as it is issued. Twenty-four hours after it is issued. Two days after it is issued. At midnight the day it is issued. One hour after it is issued. 52. In the process of negotiation, what is meant by the term "delivery"? The physical handing of an instrument from someone entitled to it to the person intended to receive it. The physical handing of an instrument from someone entitled to it to the person intended to receive it along with a warranty that the instrument is collectible. The physical handing of an instrument from someone entitled to it to the person intended to receive it along with a warranty that the instrument is collectible and that it qualifies as a negotiable instrument. The physical handing of an instrument from someone entitled to it to the person intended to receive it along with a warranty that it qualifies as a negotiable instrument. None of the above. 53. For negotiation, which of the following types of paper require only a delivery of the instrument to the holder by the payee? Bearer Delivery Order Transfer Acknowledgement 54. Which of the following is the payee’s or last endorsee’s signature and nothing else? A special endorsement. An allonge. A blank endorsement. A qualified endorsement. A restricted endorsement. 55. A(n) ______ endorsement is the endorser’s signature along with a named endorsee. Blank Allonge Qualified Special Specific 56. Which of the following types of endorsements attempt to either limit the transferability of the instrument or control the manner of payment under the instrument? Blank qualified. Special qualified. Restrictive. Conditional. Trust. 57. Which of the following may endorse an instrument made payable to a legal entity, such as a partnership? The managing partner only. The financial officer only. The bookkeeper only. The treasurer only. Any authorized representative. 58. Which of the following is a party who is in possession of an instrument that is payable to the party or to the bearer of the instrument? A holder. A bearer. A payee. An issuer. A transferee. 59. Which of the following is true regarding the concept of negotiable instruments in Japan? The law governing securities in Japan is technical with little ambiguity or arbitrary application. The Japanese recognize the legal concept of yuka shoken, which means “valuable securities.” The Japanese have a single definition governing securities. All of the above. None of the above. The Japanese Commercial Code recognizes the term “negotiable instrument” and applies it in much the same way as is done in the U.S. 60. Susan purchased a refrigerator from ABC Appliance store for $800. She takes the refrigerator home and discovers that it is defective. She calls ABC Appliance store and tells them that she would like to return the refrigerator. ABC Appliance store tells her that they have assigned the promissory note she provided the store in order to purchase the refrigerator to a finance company and that the finance company is a holder in due course. Which of the following is true regarding the rights of parties? The finance company is subject to the defenses of Susan because of the Federal Trade Commission rule created to protect consumers. ABC Appliance store is correct in that Susan cannot assert her defenses against the finance company. Susan can assert her defenses against the finance company only if she can prove that the finance company had knowledge that ABC Appliance store sold defective equipment from time to time. Susan can assert her defenses against the finance company only because she gave notice of the problem within 5 days of the sale. Susan can assert her defenses against the finance company only if she agrees to arbitrate the dispute. 61. Reference: “Lost Check.” Susan Jones teaches business law at Learn-A-Lot University. Learn-A-Lot requested that all of the teachers ask the students to wear T-shirts with “Learn-A-Lot University Football” printed on the front on the day of the first football game. All of the teachers are asked to sell the shirts in class. A student, Bobby, wrote a check to Susan for $10 for payment for one of the shirts. Bobby, however, put Susan Jones as the payee. Susan wanted to turn the check over to the school, so on the back of the check, she wrote, “Susan Jones, without recourse.” She then gave the check to the treasurer for Learn-A-Lot University. Unfortunately, the treasurer for Learn-A-Lot dropped the check on the ground as she was going to the bank. A student, Shifty, found the check and promptly took it to the bank and cashed it. The treasurer, Bernice, did not want to get into trouble, so she asked Susan to personally cover the check because she said that Susan had endorsed the check on the back guaranteeing payment. Would the school be able to require that Susan cover the amount of the check based on the law of negotiable instruments? Yes, because she signed on the back with a blank unqualified endorsement. Yes, because she signed on the back with a special qualified endorsement. Yes, because she signed on the back regardless of the type of endorsement. No, because she signed on the back using the words, “without recourse.” No, because the check was not properly delivered to Shifty. 62. Which of the following is a type of liability arising on an instrument when the transfer of the instrument breaches a warranty associated with the instrument? Warranty liability Payee liability Signature liability Primary liability Secondary liability 63. Which of the following party must pay, without regard to any other party, the stated amount of an instrument when it is presented for payment? A party who is secondarily liable. A party who is a drawer and a party who is secondarily liable. A party who is an endorser. A party who is a drawer or an endorser. A party who is primarily liable. Top of Form 64. Which of the following party (drawee) accepts and signs the draft to agree to pay the draft when it is presented? Maker Acceptor Drawer Endorser Promisor 65. Which of the following is a personal identifier that can be broken into an electronic code? A screen name A digital signature A code signature An identified signature A maker signature 66. When a holder presents an instrument in a timely and proper manner, but acceptance or payment is refused, the instrument has been ______. Destroyed Dishonored Converted Rejected Refused 67. Which of the following is true regarding the liability of an accommodation party? As a maker, an accommodation party has primary liability; but, as an endorser, the party has secondary liability. An accommodation party has primary liability both as a maker and as an endorser. An accommodation party has secondary liability both as a maker and as an endorser. An accommodation party has primary liability as either a maker or endorser only if all other parties to the instrument have filed bankruptcy. An accommodation party has primary liability as a maker only if all other parties have filed bankruptcy, and secondary liability in any other case regardless of whether the accommodation party is the maker or endorser. 68. Which of the following is the most likely result if an agent admits to the principal that a check for the principal was forged by the agent and placed into the agent’s bank account, but the principal does nothing until two months later after the agent leaves town with the funds? Because the checks were forged, the principal can receive reimbursement of the funds from any maker involved or any bank that cashed the checks. The principal can receive reimbursement from makers of the checks only. The principal can receive reimbursement from any bank that cashed the checks only. It is likely that it will be determined that the principal ratified the signatures and that the principal cannot recover from either makers or banks that cashed the checks. The principal can recover from either the makers or any banks who cashed the checks only if it can be shown that the agent cannot be located for criminal prosecution. 69. Real defenses apply to ______, whereas personal defenses do not apply to ______. All parties, holders in due course. Holders, holders in due course. Holders, holders. All parties, holders. All parties, endorsers. 70. Which of the following was the result on appeal in the Case Opener, in which the plaintiff, who practiced optometry, sued the defending bank for cashing over 500 checks written fraudulently by his receptionist? Both the plaintiff and the bank were negligent and that, therefore, the plaintiff would be denied recovery. The plaintiff was negligent but the bank was not and therefore, the plaintiff would be denied recovery. Both the plaintiff and the bank were negligent and that, therefore, the plaintiff would receive a recovery amounting to only 50% of his losses. The plaintiff was not negligent and that the bank was negligent and, therefore, the plaintiff was entitled to recover the value of the checks. The plaintiff was not negligent and that the bank was negligent but, based on public policy, no recovery would be allowed to the plaintiff. 71. Which of the following occurs when a former holder of an instrument has the instrument transferred back to him or her by negotiation or other means? Cancellation Renunciation Reacquisition Recourse Release 72. Which of the following parties are related to an order? A drawer. A payee. A drawee. All of the above. A drawer and a payee, but not a drawee. 73. Which of the following is the party receiving the money from the draft? The drawer. The drawee. The payee. The draftor. The draftee. 74. A ______ check is a check that is accepted at the bank at which it is drawn. Cashier’s Certified Acknowledged Transferred Drawee 75. Which of the following is a bank, other than a payor bank, handling the check at any point from the time the check is deposited to the time it reaches the payor bank? Depositary. Acknowledging. Collecting. Intermediary. Transferring. Bottom of Form Bottom of Form Top of Form 76. When the depositary bank is the same bank as the payor bank, the check is referred to as a[n] ______. On-us item Combined item Condensed item Unitary item Uniform item 77. Under the ______, a bank has a duty to pay checks from a customer’s account so long as the check is properly payable. Account rule Properly payable rule Payability in fact regulation Check pay rule There is no such rule 78. Assuming the bank is not negligent, in the case of multiple forgeries by the same wrongdoer, if a customer examines a bank statement and does not notify the bank of the first forgery within the time required by the UCC, what is the effect on subsequent forgeries? There is no effect because each forgery stands on its own. The customer is barred from recovering on the subsequent forgeries. The customer may recover on the subsequent forgeries if they are reported to the bank within 5 days after the statement showing the forgery is received by the customer. The customer may recover on the subsequent forgeries if they are reported to the bank within 10 days after the statement showing the forgery is received by the customer. The customer may recover on the subsequent forgeries if they are reported to the bank within 15 days after the statement showing the forgery is received by the customer. 79. When money is transferred by an electronic terminal, telephone, or computer, this transfer is a called a[n] ______. Automatic fund transfer Electronic fund transfer Computer generated transfer Wire transfer Consumer electronic transfer 80. Which of the following is a deposit that is preauthorized and performed on a customer’s account through an electronic terminal? A point-of-sale. An authorized deposit. A transferred deposit. A direct deposit. An approved deposit.
Solution Description

Question

1. Sam promises his uncle, Bob, that he will lose 10 pounds and exercise every day during the spring semester in exchange for having his tuition paid for the fall semester. The uncle agrees; but after Sam has lost 10 pounds and exercised all semester, Bob refuses to pay saying that no contract existed. Which of the following is true?

Consideration was present, there was an enforceable contract, and Bob has wrongfully refused to pay.

There was no consideration present, and Bob has no obligation to pay.

There was no consideration present, but Bob must pay under principles of promissory estoppels.

There was consideration present, but Bob is not required to pay because the contract was illusory.

There was consideration present, but Bob is not required to pay because Bob did not receive a benefit personally.

2. In a bilateral contract, the consideration for each promise is ______.

A completed act

The beginning of action in acceptance, even if it is not complete

An acknowledgement

A return promise

An agreement

3. What did the court rule in the case in the text, Labriola v. Pollard Group, Inc., regarding whether the noncompete agreement at issue in the case was enforceable?

The court ruled that the noncompete agreement was enforceable because the employee received independent consideration for it in the form of increased wages.

The court ruled that the noncompete agreement was enforceable because the employee received independent consideration for it in the form of a fixed term of employment.

The court ruled that the noncompete agreement was enforceable because the employee received independent consideration for it in the form of a promotion.

The court ruled that the noncompete agreement was not enforceable because the employee did not receive the consideration agreed upon.

The court ruled that the noncompete agreement was not enforceable because of lack of consideration.

4. Which of the following is false under the law in England?

England has requirements for consideration.

England does not recognize the exception of promissory estoppel.

In England, specialty contracts or deeds are an additional exception to the requirement for consideration.

In England, deeds are used to create enforceable promises of gifts to charity.

In England, a deed is a document that creates a binding obligation between parties without consideration when certain formalities are honored.

5. Sam offers Betty his bicycle for $75. Which of the following is an example of an illusory promise on the part of Betty?

“I’ll take it.”

“I’ll take it if I decide to do so.”

“I won’t pay $75, but I will pay $50.”

“I’ll take it if you will let me try it out first and the brakes work well.”

“I’ll take it if you will buy new tires.”

6. Which of the following was the result in the Case Opener in which the attorney sued to recover the value of 3 percent of the defendant’s stock based on the fact that he provided a loan to the defending company, and the directors later promised the stock to him?

The court ruled that the attorney was not entitled to the value of the stock because it was offered as a gift.

The court ruled that the attorney was entitled to the value of the stock because it was offered as a gift.

The court ruled that the attorney was entitled to the value of the stock because it was consideration provided by the company.

The court ruled that the attorney was entitled to the value of the stock based on promissory estoppels.

The court ruled that the attorney was entitled to the value of the stock both because it was consideration provided by the company and also based on promissory estoppels.

7. Sally goes to have her hair trimmed and agrees to pay $40 to the stylist. While there, Sally decides that she would also like highlights. The stylist informs her that highlights will cost an additional $30. Sally agrees to the price, gets the highlights, but refuses to pay the extra amount. What is the likely result in a dispute between Sally and the stylist and why?

The stylist will win because she did additional work in exchange for the extra payment; and, therefore, Sally’s promise was supported by valid consideration.

The stylist will win because she did additional work in exchange for the extra payment; and, therefore, a valid unilateral contract existed.

The stylist will win unless Sally can show that she had previously received both a trim and highlights for $40. If she can prove that she previously received both for $40, then the past expectations rule applies.

Sally will win because the stylist had a preexisting duty to have Sally’s hair look as good as possible.

Sally will win because there was no valid consideration in exchange for the highlighting.

8. A(n) ______contract is an agreement whereby the buyer agrees to purchase all goods from one seller.

Supply

Use

Requirement

Output

Arranged

9. Which of the following is true of a requirement contract under the UCC?

It is valid so long as the requirement is made in good faith.

It is valid so long as there is a writing setting forth the terms signed by the offeree.

It is valid so long as there is a writing setting forth the terms signed by the offeror and the offeree.

It is valid so long as more than nominal consideration is provided.

It is not valid because of the lack of consideration.

10. When an accord and satisfaction is at issue, the ______ is the new agreement to pay less than the creditor claims is owed.

Satisfaction

Accord

Both satisfaction and accord

Written compromise

Written acknowledgement

11. Which of the following was the result in the case Mast Long Term Care v. Forest Hills Rest Home, covered in the Case Nugget, in which the defendant's rest home claimed it was not bound by an agreement to buy all its drugs not commonly stocked from the plaintiff?

The agreement was not enforceable because no price schedule was agreed upon.

The agreement was not enforceable because it was an output contract.

The agreement was not enforceable because it was a requirement contract.

The agreement was enforceable based on promissory estoppel although consideration was lacking for a binding contract.

The agreement contained sufficient consideration on the part of the plaintiff and defendant.

12. Which of the following is an element of a legally binding contract?

Inquiry

Acknowledgement

Capacity

Knowledge

Affirmance

13. In most states, a person is given full legal capacity to enter into contracts when he or she becomes ______ before reaching the age of majority.

Emancipated

Freed

Released

Employed

Either released or employed

14. When must a disaffirmance of a contract based on minority occur?

Before or within a reasonable time of the minor reaching the age of majority.

Within 30 days of the minor reaching the age of majority.

Within 60 days of the minor reaching the age of majority.

Within 90 days of the minor reaching the age of majority.

Within one year of the minor reaching the age of majority.

15. Which of the following is the majority rule regarding a minor’s misrepresentation of his or her age?

That if a competent party relies on a misrepresentation in good faith, the minor gives up the right to disaffirm the agreement.

That the minor must restore the competent party to that party’s precontract position before obtaining the disaffirmance.

That the minor may disaffirm but that the

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