Question 1

Creditors usually enter compositions in order to force the debtor into involuntary bankruptcy.

Accepted Answer

A) True 
 B)False

Question 2

Jake had grown tired of working on the family farm and was considering moving away. However, his parents told him, "If you'll stay and help us, we'll leave you the farm when we die." As a result, Jake decided to stay on the farm and worked there for the next twenty years. However, when his parents finally died, Jake learned that they had left the farm to his brother, Nathan. Jake filed suit against his parents' estate to enforce their promise of leaving him the farm. Which of the following would be true of this scenario?

Accepted Answer

A)  Nathan and the parents' estate should be allowed to defeat Jake's claim to the farm by arguing that the parents' promise was enforceable because Jake gave consideration for the promise. 
B)  The work that Jake did on the farm before his parents made their promise is sufficient consideration to make their promise enforceable. 
C)  Jake's parents' promise is not enforceable because it was illusory. 
D)  Jake's parents' promise would be enforceable under the doctrine of promissory estoppel. 
A)  Nathan and the parents' estate should be allowed to defeat Jake's claim to the farm by arguing that the parents' promise was enforceable because Jake gave consideration for the promise. 
B)  The work that Jake did on the farm before his parents made their promise is sufficient consideration to make their promise enforceable. 
C)  Jake's parents' promise is not enforceable because it was illusory. 
D)  Jake's parents' promise would be enforceable under the doctrine of promissory estoppel.

Question 3

An honest dispute about the existence or amount of a debt makes the debt a(n) _____ one.

Accepted Answer

A)  unliquidated 
B)  illusory 
C)  liquidated 
D)  nominal 
A)  unliquidated 
B)  illusory 
C)  liquidated 
D)  nominal

Question 4

Lou enters into an agreement with LaFancy Inc., an event management company, to coordinate her wedding in June for the sum of $10,000. In March, Lou calls LaFancy to tell the company the deal is off, because she thinks she can do a better job herself. LaFancy sues Lou, and Lou argues lack of consideration as a defense. Which of the following statements holds true of this scenario?

Accepted Answer

A)  LaFancy has given consideration. 
B)  LaFancy had a legal duty to plan Lou's wedding even before the agreement was signed. 
C)  Lou can enforce LaFancy's promise to her. 
D)  Lou was the only promisor in this contract. 
A)  LaFancy has given consideration. 
B)  LaFancy had a legal duty to plan Lou's wedding even before the agreement was signed. 
C)  Lou can enforce LaFancy's promise to her. 
D)  Lou was the only promisor in this contract.

Question 5

Under section 2-209 of the Uniform Commercial Code, agreements to modify existing contracts for the sale of goods:

Accepted Answer

A)  need new consideration to be binding. 
B)  need no new consideration to be binding. 
C)  require parties to formally terminate their original agreement and start over. 
D)  need new consideration to be binding and require parties to formally terminate their original agreement. 
A)  need new consideration to be binding. 
B)  need no new consideration to be binding. 
C)  require parties to formally terminate their original agreement and start over. 
D)  need new consideration to be binding and require parties to formally terminate their original agreement.

Question 6

Explain what an illusory promise is and provide an example.

Accepted Answer

Illusory promises are worded in a way th

Question 7

Past consideration is sometimes accepted for _____.

Accepted Answer

A)  official duties 
B)  legal obligations 
C)  moral obligations 
D)  charitable donations 
A)  official duties 
B)  legal obligations 
C)  moral obligations 
D)  charitable donations

Question 8

Identify the correct statement regarding consideration.

Accepted Answer

A)  A promise by public officials to perform their official duties is always a consideration. 
B)  A promisor's promise not to commit a crime or a tort can never be consideration. 
C)  As a general rule, performing or agreeing to perform a preexisting duty is consideration. 
D)  When new consideration is provided to support a modification, it is unenforceable. 
A)  A promise by public officials to perform their official duties is always a consideration. 
B)  A promisor's promise not to commit a crime or a tort can never be consideration. 
C)  As a general rule, performing or agreeing to perform a preexisting duty is consideration. 
D)  When new consideration is provided to support a modification, it is unenforceable.

Question 9

Once a binding accord and satisfaction has been entered into, parties give up their right to have a court decide their liability.

Accepted Answer

A) True 
 B)False

Question 10

Stintson Corp. had agreed to create employee identity cards for McLaughlin Inc. for $60,000. Some of the cards delivered by Stintson Corp. had damages made during the lamination process. McLaughlin Inc. promised Stintson Corp. an additional $20,000 to replace the damaged identity cards, and Stintson Corp. did so. Then McLaughlin Inc. refused to pay Stintson Corp. more than $60,000 for the work. Which of the following statements is true of this situation?

Accepted Answer

A)  Stintson Corp. is not entitled to any more than $60,000 for its work. 
B)  McLaughlin Inc. owes Stintson Corp. the additional $20,000. 
C)  Stintson Corp. would still be entitled only to $60,000 because such an act is new consideration that was provided to support the modification. 
D)  Stintson Corp. is entitled to the additional $20,000 as legal value has nothing to do with adequacy of consideration. 
A)  Stintson Corp. is not entitled to any more than $60,000 for its work. 
B)  McLaughlin Inc. owes Stintson Corp. the additional $20,000. 
C)  Stintson Corp. would still be entitled only to $60,000 because such an act is new consideration that was provided to support the modification. 
D)  Stintson Corp. is entitled to the additional $20,000 as legal value has nothing to do with adequacy of consideration.

Question 11

A liquidated debt is one that is due and certain, which means that there is no dispute about the existence or the amount of the debt.

Accepted Answer

A) True 
 B)False

Question 12

If the promisee agrees not to do something he or she has a legal right to do in exchange for the promisor's promise, that does not provide legal value.

Accepted Answer

A) True 
 B)False

Question 13

When a contracting party runs into unforeseeable difficulties that make his or her performance impossible, courts will:

Accepted Answer

A)  not enforce a modification that is not supported by new consideration. 
B)  prosecute the contracting party on criminal charges. 
C)  enforce a modification in the interest of fairness. 
D)  will make the contracting party pay up in full. 
A)  not enforce a modification that is not supported by new consideration. 
B)  prosecute the contracting party on criminal charges. 
C)  enforce a modification in the interest of fairness. 
D)  will make the contracting party pay up in full.

Question 14

A promise to make a gift for a charitable or educational purpose is unenforceable unless and until the institution to which to promise was made incurs obligations by relying on the promise. This exception is usually justified on the basis of either _____ or _____.

Accepted Answer

A)  the Statute of Frauds; the applicable statute of limitations 
B)  criminal law; civil law 
C)  estoppel; public policy 
D)  substantial performance; forbearance 
A)  the Statute of Frauds; the applicable statute of limitations 
B)  criminal law; civil law 
C)  estoppel; public policy 
D)  substantial performance; forbearance

Question 15

According to the rule of _____, if a promisee's performance was rendered before the promisor's promise was made, then it can never serve as consideration, even though it may meet the "legal value" part of the test.

Accepted Answer

A)  past consideration 
B)  preexisting duty 
C)  forbearance 
D)  promissory estoppel 
A)  past consideration 
B)  preexisting duty 
C)  forbearance 
D)  promissory estoppel

Question 16

All courts hold that cashing a "payment in full" check discharges the obligation of debt under the Uniform Commercial Code.

Accepted Answer

A) True 
 B)False

Question 17

Consideration can have legal value if the promisee:

Accepted Answer

A)  does not perform an act in the case of unilateral contracts. 
B)  does something he or she had no prior legal duty to do in exchange for the promisor's promise. 
C)  agrees to do something he or she has a legal right to do in exchange for the promisor's promise. 
D)  does not give up something in exchange for the promise made by the promisor. 
A)  does not perform an act in the case of unilateral contracts. 
B)  does something he or she had no prior legal duty to do in exchange for the promisor's promise. 
C)  agrees to do something he or she has a legal right to do in exchange for the promisor's promise. 
D)  does not give up something in exchange for the promise made by the promisor.

Question 18

Requisitions are agreements between a debtor and two or more creditors who agree to accept a stated percentage of their liquidated claims against the debtor at or after the due date, in full satisfaction of their claims.

Accepted Answer

A) True 
 B)False

Question 19

Composition agreements are:

Accepted Answer

A)  made in a way that allows the promisor to decide whether or not to perform the promise. 
B)  agreements between a debtor and two or more creditors who agree to accept a stated percentage of their liquidated claims against the debtor at or after the due date. 
C)  agreements entered into when someone promises not to file a legal suit in exchange for a promise to pay a certain sum of money or some other consideration. 
D)  generally treated as non-binding on the parties to the agreement because of the fact that doing so appears to be contrary to the general rule on liquidated debts. 
A)  made in a way that allows the promisor to decide whether or not to perform the promise. 
B)  agreements between a debtor and two or more creditors who agree to accept a stated percentage of their liquidated claims against the debtor at or after the due date. 
C)  agreements entered into when someone promises not to file a legal suit in exchange for a promise to pay a certain sum of money or some other consideration. 
D)  generally treated as non-binding on the parties to the agreement because of the fact that doing so appears to be contrary to the general rule on liquidated debts.

Question 20

In effect, the requirement of consideration requires a promisee to pay the "price" the promisor asked for in order to gain the right to enforce the promisor's promise.

Accepted Answer

A) True 
 B)False

Exam 12: Consideration

Creditors usually enter compositions in order to force the debtor into involuntary bankruptcy.

An honest dispute about the existence or amount of a debt makes the debt a(n) _____ one.

Under section 2-209 of the Uniform Commercial Code, agreements to modify existing contracts for the sale of goods:

Explain what an illusory promise is and provide an example.

Past consideration is sometimes accepted for _____.

Identify the correct statement regarding consideration.

Once a binding accord and satisfaction has been entered into, parties give up their right to have a court decide their liability.

A liquidated debt is one that is due and certain, which means that there is no dispute about the existence or the amount of the debt.

If the promisee agrees not to do something he or she has a legal right to do in exchange for the promisor's promise, that does not provide legal value.

When a contracting party runs into unforeseeable difficulties that make his or her performance impossible, courts will:

A promise to make a gift for a charitable or educational purpose is unenforceable unless and until the institution to which to promise was made incurs obligations by relying on the promise. This exception is usually justified on the basis of either _____ or _____.

According to the rule of _____, if a promisee's performance was rendered before the promisor's promise was made, then it can never serve as consideration, even though it may meet the "legal value" part of the test.

All courts hold that cashing a "payment in full" check discharges the obligation of debt under the Uniform Commercial Code.

Consideration can have legal value if the promisee:

Requisitions are agreements between a debtor and two or more creditors who agree to accept a stated percentage of their liquidated claims against the debtor at or after the due date, in full satisfaction of their claims.

Composition agreements are:

In effect, the requirement of consideration requires a promisee to pay the "price" the promisor asked for in order to gain the right to enforce the promisor's promise.

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Property

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remedies

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

The Agency Relationship-Creation, Duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws

Which Form of Business Organization

Partnerships

Formation and Termination of Corporations

Management of the Corporate Business

Financing the Corporation and the Role of the Shareholders

Securities Regulation

Legal Liability of Accountants

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers

Introduction to Security

Security Interests in Personal Property

Bankruptcy

The Antitrust Laws

Consumer Protection Laws

Environmental Regulation

Filters

A promise to make a gift for a charitable or educational purpose is unenforceable unless and until the institution to which to promise was made incurs obligations by relying on the promise. This exception is usually justified on the basis of either _ or _.