Question 1

Chica,a women's clothing store,held a "prize drawing" for a $500 shopping spree on Saturday that it advertised throughout the week.Participation in the drawing required being at the store by noon and completing an application form that included personal information.The information would then be put into a database for marketing purposes.Fashion consultants offering merchandise for sale greeted customers arriving at the store on Saturday morning.Joy was the winner of the drawing.Has she given consideration for the prize?

Accepted Answer

A)  No,she gave no legal value to Chica.
B)  No,unless she purchased an item from one of the fashion consultants.
C)  Yes,she came to the store and gave information that was for the store's use.
D)  Yes,unless the store was conveniently located. C

Question 2

Ron was employed by Mass Co.in 1970.At that time,he was given an employee handbook that described the particular steps that had to be taken before an employee could be fired.Later,in 2000,Mass published a new handbook by which all workers' statuses were changed to at-will employees.Mass then fired Ron.Ron claimed he was terminated without cause and was not afforded procedures described in the 1970 handbook,such as an appeal or review of the decision.He sued Mass under breach of contract based upon the 1970 employee handbook.Will he succeed?

Accepted Answer

A)  Yes,because the modifications in 2000 were not by mutual consent and for consideration.
B)  No,because the employee handbook contains terms and conditions of the employment contract.
C)  Yes,because Mass Co.has arbitrarily terminated Ron.
D)  No,because Ron had acquiesced to the modification by not raising any objection. A

Question 3

John promises to pay Robert $100 per week,in exchange for Robert's promise not to beat John up.There is no consideration for John's promise.

Accepted Answer

A) True 
 B)False  True

Question 4

Mr.Blue gave Mr.Green $1,000 to help his family out.Later,Mr.Blue entered into a sales contract with Mr.Green and wanted the consideration to be,in part,the $1,000.Which of the following describes the $1,000?

Accepted Answer

A)  Past consideration
B)  Future consideration
C)  Equitable exchange
D)  Present intent

Question 5

Which of the following terms in an agreement would not render it illusory?

Accepted Answer

A)  A right to cancel a contract after the first 30 days.
B)  A party to an agreement has a right to cancel or terminate at any time,for any reason,and without any notice.
C)  A promisee promises to buy "all the tools I want."
D)  A promise to perform under the contract "if I feel like it."

Question 6

In return for services Charles performed for Richard in the past,Richard promises to pay Charles $1,000.There is no consideration for Richard's promise.

Accepted Answer

A) True 
 B)False

Question 7

Mr.White contracts with his wife Ms.White to watch their kids,Joe and Jimmy,one night for $50.What is the status of the contract between Mr.White and Ms.White?

Accepted Answer

A)  There is no contract because there is inadequate consideration.
B)  There is a contract as long as Mr.White registers the contract with the Secretary of State.
C)  There is a contract as long as $50 is a reasonable profit for watching the kids.
D)  There is a contract as long as a court reviews the terms within 30 days.

Question 8

In general,settlements of liquidated debts are not binding due to the absence of consideration,while settlements of unliquidated debts are a binding accord and satisfaction.As a matter of technical consideration law,what justifies this distinction?

Accepted Answer

The answer of In general,settlements of liquidated debts are not...

Question 9

Consideration can be a(n)________ in the case of a bilateral contract.

Accepted Answer

A)  act
B)  promise
C)  exchange
D)  gift

Question 10

The settlement of an unliquidated debt is called a(n):

Accepted Answer

A)  forbearance to sue.
B)  accord and satisfaction.
C)  past consideration.
D)  moral obligation.

Question 11

An agreement in which a party promises to supply all the other party's needs for a particular commodity is called a(n):

Accepted Answer

A)  requirements contract.
B)  composition agreement.
C)  output contract.
D)  nominal consideration.

Question 12

Able borrowed $10,000 from Baker,promising to return it with $1,000 interest on January 1,2006.There is no dispute that Able owes Baker $11,000 due on January 1,2006.On that day,Able gave Baker a valid check in the amount of $10,500 marked "payment in full for loan due January 1,2006." Baker accepted that check and deposited it into his account.If Baker then sues Able for the unpaid $500,what would the result be?

Accepted Answer

A)  Able wins,because Baker accepted the lesser payment.
B)  Able wins,because Baker made an implied promise to accept $10,500 as full payment,thereby forgiving $500 of the loan.
C)  Baker wins,because Able gave no consideration in exchange for Baker's promise to forgive $500 of the loan.
D)  Baker wins,because marking "payment in full" can never relieve a party of its original obligations under a contract.

Question 13

In Day v.Fortune Hi-Tech Marketing,Inc. ,the case in the text,the court held that:

Accepted Answer

A)  the agreement had adequate consideration because there was no modification of the arbitration clause at any point during the relevant time period.
B)  the agreement had adequate consideration because both parties were bound by the agreement.
C)  the promise was illusory because it did not have legal value.
D)  the promise was illusory because the defendant had the option to modify the contract at its discretion.

Question 14

Gift promises are not generally enforceable because they lack:

Accepted Answer

A)  legality.
B)  capacity.
C)  consideration.
D)  agreement.

Question 15

Why are "disguised gift" promises involving nominal consideration nonbinding because of the absence of consideration? Explain with one example.

Accepted Answer

The answer of Why are "disguised gift" promises involving nominal...

Question 16

Nancy's car collides with Randy's truck at an intersection.Randy believes the accident is his fault and asks Nancy if she will agree to a settlement of $5,000 for the damage to her vehicle and her promise not to sue him.Nancy believes the accident is her fault,but agrees to Randy's proposal anyway.Which of the following statements is true?

Accepted Answer

A)  Nancy's forbearance does not amount to consideration because Randy's promise is illusory.
B)  Nancy's forbearance does not amount to consideration because she does not have a good faith belief in the validity of her claim against Randy.
C)  Nancy's forbearance amounts to consideration because she has a good faith belief in the validity of her claim against Randy.
D)  Nancy's forbearance amounts to consideration because Randy has a moral obligation.

Question 17

Helen worked for ABC Motors for 25 years.The president of ABC said to her: "In consideration of your past service for 25 years,I promise to give you a new car next week." However,he did not give the car.Is this promise legally enforceable?

Accepted Answer

A)  Yes,a contract was formed.
B)  Yes,promissory estoppel requires enforcement of the promise.
C)  No,legal consideration is absent.
D)  No,legal capacity is absent.

Question 18

Can a local businessman pay a police officer $50 a week to watch his business more closely?

Accepted Answer

A)  Yes,as long as the contract is registered with the Secretary of State.
B)  No,public officials cannot give consideration on duties they are already supposed to perform.
C)  Yes,as long as $50 is reasonable amount to watch the business.
D)  Yes,as long as a court reviews the contract within 30 days.

Question 19

Jack went to the ABC Casino to gamble.ABC offers its customers one free spin of the Million Dollar Wheel if they fill out an application form.Jack filled out the form,spun the Million Dollar Wheel,and won.However,now ABC refuses to pay,claiming that because Jack did not purchase his chance at the Million Dollar Wheel,Jack gave no consideration and therefore,no contract was formed.Identify the accurate statement.

Accepted Answer

A)  No contract was formed because Jack paid no money for his chance at the Million Dollar Wheel.
B)  No contract was formed because ABC did not sign any written contract as an obligation to do so.
C)  A contract was formed because filling out an application can constitute legal consideration.
D)  A contract was formed because no consideration is needed when a customer takes advantage of a "free" offer.

Question 20

Owen once owed Carl a $1,000 debt,but the statute of limitations ran on that obligation,discharging Owen.Later,Owen promises in writing to pay Carl the debt.Why is there no consideration for this promise? Why is it binding anyway? What additional requirement do some states impose to make the promise binding?

Accepted Answer

The answer of Owen once owed Carl a $1,000 debt,but...

Exam 12: Consideration