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Interactive Quiz for Modern-1e, Chapter 10
Chapter 10 – Consideration, Capacity, and Legality
1. Often, consideration is broken down into two parts, something of legal value and:
a. some kind of income redistribution.
b. some kind of coercive behavior.
c. a clear moral hazard.
d. a bargained-for exchange.
Answers:
a. Incorrect. This is not the second part of consideration (although a promise might involve a voluntary redistribution of income).
b. Incorrect. Consideration is a necessary component of a contract, and contracts are only valid if they are entered into voluntarily.
c. Incorrect. Moral hazards are not the second part of consideration.
d. Correct. The second part of consideration is a bargained-for exchange.
2. Rescission may be defined as:
a. the substitution of one contract party for another.
b. the revision of a contract’s terms to reflect trade usage.
c. the full performance of a contract.
d. the unmaking of a contract to return the contract parties to the positions they were in before the contract was formed.
Answers:
a. Incorrect. This describes a novation.
b. Incorrect. This describes a kind of contract reformation.
c. Incorrect. Performance is not the same thing as rescission.
d. Correct. This is a definition of rescission.
3. Which of the following is required for an accord and satisfaction to take place?
a. The amount of the debt must be in dispute.
b. The amount of the debt must be agreed on and settled.
c. The debt must be liquidated.
d. The accord must be sealed.
Answers:
a. Correct. The amount of the debt must be in dispute for an accord and satisfaction to take place.
b. Incorrect. If the amount of the debt is agreed upon, there can be no accord and satisfaction.
c. Incorrect. The debt must be unliquidated for an accord and satisfaction to take place.
d. Incorrect. The accord does not need to be sealed.
4. A covenant not to sue is:
a. an agreement to substitute a contractual obligation for some other type of legal action based on a valid claim.
b. used only by medical doctors in malpractice cases.
c. against public policy.
d. permitted only if the party involved is represented by an attorney.
Answers:
a. Correct. This is the definition of a covenant not to sue.
b. Incorrect. These covenants are used by many types of people and businesses.
c. Incorrect. These covenants are not against public policy.
d. Incorrect. These covenants may be used even if one party is not represented by an attorney.
5. Which of the following types of promises normally DOES NOT lack consideration?
a. A promise to do what one already has a legal duty to do.
b. A promise to do what one does not already have a legal duty to do.
c. A promise made in return for an action or event that has already taken place.
d. A promise of uncertain performance.
Answers:
a. Incorrect. This type of promise normally is deemed to lack consideration.
b. Correct. This type of promise normally constitutes valid consideration.
c. Incorrect. Normally, such a promise does lack consideration in what what is being promised is “past consideration”—or no consideration at all.
d. Incorrect. Normally, promises of uncertain performance (often called “illusory promises”) do lack consideration.
6. Lara, who is sixteen years old but looks like she’s twenty-two, enters a jewelry store. She buys a beautiful diamond bracelet with the money that she has been saving for college. If she decides, eighteen months later, that it was unwise to spend the money on the bracelet, what can she do?
a. Lara can return the bracelet and get her money back.
b. Lara can return the bracelet, but she will only get 50 percent of what she paid for it.
c. Lara cannot return the bracelet because she has kept it too long.
d. Lara can only disaffirm this contract after she turns twenty-one.
Answers:
a. Correct. Because she was a minor when she entered into the contract, Lara can disaffirm the contract and get her money back, but she will be responsible for returning the bracelet.
b. Incorrect. Lara will get the full price of bracelet back.
c. Incorrect. Because she is still a minor, Lara may disaffirm the purchase contract.
d. Incorrect. Lara may disaffirm the contract while she is still a minor.
7. A usurious contract is one that involves:
a. hazardous chemical materials.
b. an illegally high rate of interest.
c. prostitution.
d. surrogate motherhood contracts.
Answers:
a. Incorrect. Usury does not involve dangerous chemicals.
b. Correct. Usury means charging an illegally high rate of interest.
c. Incorrect. Prostitutes may charge high rates, but this is not usury.
d. Incorrect. Surrogate motherhood contracts are not the same as usury.
8. Which of the following IS NOT among the types of contracts and clauses that may be held to be contrary to public policy?
a. A contract for the sale of live farm animals.
b. An exculpatory clause.
c. An adhesion contract.
d. A contract in restraint of trade.
Answers:
a. Correct. There is no public policy against selling farm animals.
b. Incorrect. Exculpatory clauses may be deemed unenforceable on the grounds that they are contrary to public policy.
c. Incorrect. Adhesion contracts may be deemed unenforceable on the grounds that they are contrary to public policy.
d. Incorrect. Contracts that restrain trade and limit competition are often held to be contrary to public policy.
9. In an exculpatory clause:
a. one party agrees that the other party is not mentally incompetent.
b. one party releases the other party from liability in the event of monetary or physical injury, no matter who is at fault.
c. one party is able to sue the other party based on the clear fault of the other party.
d. both parties agree to use arbitration, not adjudication, to settle any disputes arising under the contract containing the clause.
Answers:
a. Incorrect. An exculpatory clause is not concerned with mental incompetence.
b. Correct. An exculpatory clause involves one party releasing the other party from future liability in the event of monetary or physical injury, no matter who is at fault.
c. Incorrect. In an exculpatory clause, fault is not an issue.
d. Incorrect. An exculpatory clause does not involve arbitration.
10. A contract that is severable:
a. is indivisible.
b. consists of distinct parts that can be performed separately.
c. always contains illegal portions that cannot be performed.
d. violates public policy.
Answers:
a. Incorrect. A severable contract may be divided into different parts that can be performed separately.
b. Correct. A severable contract has distinct parts that can be performed separately.
c. Incorrect. Severable contracts do not necessarily contain illegal portions.
d. Incorrect. Severable contracts do not necessarily violate public policy.