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BLT&E-7e: Practice Quiz
Chapter 10:
Consideration
1.
Consideration may be defined as:
a. a socially approved way to provide for the poor.
b. something of value given in exchange for a promise.
c. an arrangement for transferring and allocating risk.
d. a way to promote healthy living.
Answers:
a. Incorrect. This is not a definition of consideration.
b. Correct. Consideration is something valuable that a person gives in
exchange for a promise of some sort.
c. Incorrect. This is a definition of insurance.
d. Incorrect. This is not a definition of consideration.
2.
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.
3.
Liz contracts with Brian. Liz agrees to cook twenty dinners for Brian, in
exchange for which Brian will repair all of the plumbing in Liz’s house. In
this consideration legally sufficient?
a. No, because it is clear that one dinner is not worth as much as
repairing all of the plumbing in Liz’s house.
b. No, because this kind of bargain violates public policy.
c. Yes, based on the clear lack of any bargain.
d. Yes, because Liz has promised something of value.
Answers:
a. Incorrect. We are not able to say that this is legally insufficient
consideration because Liz may be a superb cook, whose services are
worth a great deal..
b. Incorrect. This bargain does not violate public policy in any way.
c. Incorrect. There is a bargain in this case—an exchange of plumbing
services for a free dinner. For all we know, Liz’s dinner could be
incredibly wonderful, perhaps a once-in-a-lifetime dining experience.
d. Correct. Liz has promised something of legal value; she must obtain
the food, pay for it, and prepare the dinner for Brian. Also, realize that
Liz may be a superb chef whose efforts in creating one exquisite meal
may well be equal (in Brian’s mind) to Brian’s efforts in repairing Liz’s
plumbing.
4.
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.
b.
c.
d.
5.
Incorrect. This describes a novation.
Incorrect. This describes a kind of contract reformation.
Incorrect. Performance is not the same thing as rescission.
Correct. This is a definition of rescission.
Sean is the manager of Twinkle Toy Store. His best employee is Denise.
Sean says to Denise, “You’ve been doing a great job lately. If I like what
you do over the next two months, I’ll give you a $1,000 bonus.” What is
Sean’s statement called?
a. Valid consideration.
b. An illusory promise.
c. An accord and satisfaction.
d. A requirements contract.
Answers:
a. Incorrect. Sean’s statement does not constitute valid consideration.
b. Correct. Sean’s statement is an illusory promise because its
performance depends solely on Sean—he may act or he may not act
to give the bonus.
c. Incorrect. This promise is not an accord and satisfaction.
d. Incorrect. This is not a requirements contract.
6.
Assume that Binta has been harmed seriously while walking down an aisle
in Mckenzie’s store. Binta claims that her injuries have resulted in
$12,000 worth of medical expenses, plus another $12,000 for emotional
distress. Mckenzie offers to pay Binta $16,000 if Binta promises, in return,
not to bring a lawsuit against him. Binta accepts Mckenzie’s offer. What
is this agreement called?
a. A covenant not to sue.
b. A reformation.
c. A release.
d. A covenant not to compete.
Answers:
a. Correct. This is a covenant not to sue.
b. Incorrect. This is not a reformation—there is no contract to reform.
c. Incorrect. This agreement does not meet the requirements for a
release, which bars any further recovery.
d. Incorrect. This is not a covenant not to compete.
7.
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.
8.
In order for a court to apply the doctrine of promissory estoppel, which of
the following elements IS NOT required?
a. Justice must not be served by enforcing the promise.
b. There must be a clear and definite promise.
c. Just must be served by enforcing the promise.
d. The promisee must have relied on the promise.
Answers:
a.
b.
c.
d.
9.
Correct. This element is not required—the opposite is required.
Incorrect. This element is required.
Incorrect. This element is required for promissory estoppel.
Incorrect. This is a required element.
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.
10.
In the interests of fairness and equity, the courts may allow an exception
to the preexisting duty rule:
a. when the consideration given for a contract is past consideration.
b. when the promise is illusory.
c. when the consideration is defined as inadequate.
d. when contract performance involves unforeseen difficulties.
Answers:
a. Incorrect. The courts would not allow an exception to the preexisting
duty rule in this situation.
b. Incorrect. The courts would not allow an exception to the preexisting
duty rule in this situation.
c. Incorrect. The courts would not allow an exception to the preexisting
duty rule in this situation.
d. Correct. The courts may allow an exception to the preexisting duty
rule in this situation.