Question 1: Sam orally agreed to sell Jamie some land for $500,000. Jamie paid Sam the $500,000; Sam gave Jamie the deed to the land. Jamie took possession of the land and began building a cabin on it. One month later, Sam tried to retake possession of the land by arguing that the contract for the sale was invalid because it was oral, not written. Sam sued Jamie to invalidate the contract and retake the land. The court will likely conclude that Sam will:
a) Win; the sale exceeded $500 so the contract must be written to be valid under the Statute of Frauds.
b) Win; all land sales contracts must be written.
c) Lose; because the contract was fully executed Sam cannot rescind the contract.
d) Lose; because Jamie had begun building a cabin on the property, Sam cannot rescind the contract.
Question 2: On Tuesday, Jon offered to sell his CD collection to Sandy for $100. Sandy replied, “I’m interested. I’ll think it over and let you know Thursday whether I want to buy the CDs.” On Wednesday, Jon agreed to sell the CDs to Jason, and Jason immediately gave Jon a letter that stated: “Jon, I will buy your CD collection for $100. As we agreed, I will pay you on Friday when I pick up the CDs. Yours truly, Jason.” Upon Jon’s receipt of this letter on Wednesday, what best describes Jon’s contract agreement(s)?
a) By forming an agreement with Jason, Jon breached his contract with Sandy because he did not effectively revoke his offer to Sandy.
b) Jon has formed contracts with both Jason and Sandy because Jon did not effectively revoke his offer to Sandy and created an enforceable written agreement with Jason.
c) Jon and Jason have formed a valid, enforceable contract; Jon’s offer to Sandy was properly revoked.
d) Jon effectively revoked his offer to Sandy, but has not formed an enforceable contract with Jason because Jason has not yet paid for the CD collection.
Question 3: Assume a salesperson intentionally made one of the following statements – knowing that the statement was false – to a customer considering a purchase. Which statement could create liability for fraudulent misrepresentation if the customer made the purchase?
a) “In my opinion, this car is in flawless mechanical condition.”
b) “This crane will probably lift about 10,000 pounds.”
c) “This car is a real gem.”
d) “This is an original painting by the artist, Pablo Picasso.”
Question 4: Don promised to buy his girlfriend, Sophie, a new car so Sophie sold her old car. Don now refuses to buy Sophie the car. Sophie has a job that requires her to have a car to get to work. If Sophie sues Don to enforce the promise, the likely result is that the promise will:
a) Be enforced under promissory estoppel because Sophie reasonably relied on Don’s promise, to her detriment.
b) Not be enforced because Sophie received money from the sale of her old car; if she also received the new car from Don, she would be unjustly enriched.
c) Be enforced because the car is a necessity for Sophie and all contracts for necessities are binding and enforceable for all parties even if contract formation is flawed.
d) Not be enforced as Don’s promise was a gift to Sophie; Sophie gave consideration, but Don did not.
Question 5: X and Y agreed that X would sell Y his small business, including the land on which the business was situated, for $500,000. Both X and Y knew at the time the contract was formed that the business was actually worth $800,000. Is this a valid, enforceable contract?
a) Yes, provided the contract was in writing, in accordance with the Statute of Frauds and the parties freely consented.
b) Yes, provided the contract was in accordance with state statutory law that permits real estate sales for 40% or more below market value.
c) No, because $500,000 is not valid consideration for a business worth $800,000.
d) No, because X has no pre-existing legal duty to sell his business.
Question 6: Fine Art Corp. sent a written offer to buy 10,000 pencils for a total of $10,000 from Faber Pencil Co. Both parties are merchants. Faber can accept the offer by:
a) Promising to ship the pencils.
b) Promptly shipping the pencils.
c) Accepting the offer on Faber’s own written standard form contract.
d) All of the above could be valid acceptance.
Question 7: Ralph, a 16-year old minor, is manager for the high school football team. Ralph signed a contract to purchase alcoholic beverages from Liquormart, Inc. for the team party. This contract is:
a) Void as a matter of law because it is illegal to sell alcohol to minors by state law.
b) Void only if Ralph misrepresented his age and told Liquormart he was an adult.
c) Valid and enforceable, but Ralph has the right to disaffirm because he is a minor.
d) Valid and enforceable, if Liquormart knew that Ralph was a minor.
Question 8: Kisha operates River Valley Soccer, an athletic equipment shop, as a sole proprietorship. Taxes on the business’s income are paid by
a) No one; since it is a sole proprietorship there are no business taxes.
b) Kisha as the sole owner.
c) The state or federal government if Kisha holds a Small Business Administration loan acquired to start her business.
d) The business entity of River Valley Soccer, not Kisha personally.
Question 9: Assume that Virginia enacted a law prohibiting, until further notice, all grocery stores in Virginia from selling all powdered spices manufactured in, or shipped from, Maryland. This law was enacted because it was discovered that the spices recently manufactured in Maryland were infected with bacteria. Determine the constitutionality of the Maryland statute. The statute is:
a) Unconstitutional; it violates grocery store owners’ substantive and procedural due process rights under the 5th and 14th Amendments because they are private businesses.
b) Unconstitutional; the statute imposes an undue burden on interstate commerce.
c) Constitutional; it is a valid exercise of Maryland’s police power.
d) Constitutional; the statute involves the sale of goods which is valid under UCC rules, thus, the state constitution does not apply.
Question 10: Ed hired Frankie, who is 13 years old, to buy a computer on Ed’s behalf. Which of the following identifies the legal relationship between Ed and Frankie?
a) This is a valid agency relationship even though Frankie is a minor, and Ed would be bound by authorized contracts Frankie enters into on Ed’s behalf.
b) This is a valid agency relationship even though Frankie is a minor, but Ed would have the option of disaffirming any contracts Frankie enters into on Ed’s behalf.
c) This is a valid agency relationship even though Frankie is a minor, but Frankie would not be entitled to any payment under the terms of the agency because he is a minor.
d) This is an invalid agency relationship because Frankie is a minor.
Question 11: Scenario: Jones, a resident of Arizona, booked reservations for a vacation at World Hotels, Inc. in Cabo Mar, Mexico. World Hotels is an international hotel chain incorporated in Delaware with hotels in North and South America; World Hotels has no hotels in Arizona but does advertise and book reservations for all its hotels over the internet, in any state. World Hotels has booked reservations in the past with residents of Arizona.
While a guest in the hotel in Cabo Mar, Jones was walking across the hotel lobby, and slipped and fell on the wet marble floor that had been just washed by the maintenance staff. The staff had placed a “wet floor” sign on the lobby floor on the side wall of the lobby.
Jones was taken to the nearest Mexican hospital where surgery was necessary to place a pin in his broken leg. Anxious to return home and see his regular doctor, Jones flew out of Mexico shortly after the surgery. He required two plane seats and an ambulance to meet him at various airports. His health insurance would not cover his hospital stay in Mexico as it was located outside the U.S. When back in Arizona, Jones was unable to work for 8 weeks and required another surgery to remove the pin. He also required several weeks of physical therapy.
Jones wants to sue World Hotels, Inc. for negligence for $450,000 to recover all his medical expenses in Mexico and the US; for $50,000 for the cost of the plane trip from Mexico to Arizona, the 2 plane seats and ambulance costs in various airports; $10,000 for 8 weeks of lost wages; and $50,000 for pain and suffering resulting from the injury. Can he sue in federal court?
a) Yes, because federal court always has jurisdiction over citizens of different states.
b) No, because federal court does not have jurisdiction in cases that do not involve federal laws.
c) Yes, because the federal court may have jurisdiction over citizens of different states and the lawsuit involves damages greater than $75,000.
d) No, because the federal court has no jurisdiction over an accident that occurred in Mexico.
Question 12: Under the UCC, Section 2-207 (the “battle of the forms” provision), it is provided that, when both parties to a contract are merchants, any additional terms added in the acceptance of a standard form contract can properly, validly become part of the contractual agreement UNLESS:
a) The original offer expressly limits any acceptance only to the terms in the original standard form offer.
b) The additional terms in the acceptance materially alter the terms of the original standard form offer.
c) The offeror notified the offeree, within a reasonable period of time, that the additional terms were not acceptable.
d) All of the above could be true.
Question 13: If Earl, a nonmerchant, offered to sell a chair to Isaac, a nonmerchant. Earl’s house caught fire and destroyed the chair before Isaac accepted Earl’s offer to buy the chair. Consequently,
a) The destruction of the chair constitutes an automatic valid revocation of the offer.
b) The fire does not automatically revoke the offer, but because neither Earl nor Isaac is a merchant, the offer is revocable at any time at Earl’s option.
c) Earl did not validly communicate a revocation to Isaac, so Isaac still has the option of accepting Earl’s offer; if Isaac accepts the offer, Earl must obtain a similar chair for Isaac or pay Isaac the equivalent value of the chair.
d) Earl’s offer is automatically revoked by the fire, unless the offer was a firm offer.
Question 14: Reg offered to sell his motorcycle to Thelma for $8,000. Thelma replied, “Your price is too high. I will purchase your motorcycle for $7,000”. Reg agreed and they committed their agreement to writing. This transaction can be characterized as:
a) An enforceable contract because Reg’s acceptance of Thelma’s offer was a clearly communicated acceptance.
b) An enforceable contract because Thelma’s counteroffer was less than Reg’s original offer
c) An unenforceable contract because Thelma’s offer was not the mirror image of Reg’s original offer as is required under common law contract rules.
d) An unenforceable contract unless either Reg or Thelma is a merchant, as defined by the UCC, because sale of personal property contracts are valid only if one of the parties to the contract is a merchant.
Question 15: A ordered 100 19-inch color TV sets from B, and requested prompt shipment of the goods. B promptly shipped to A 100 21-inch color TV sets. Prior to shipment, B did not notify A that he was shipping nonconforming TVs as an accommodation. Assuming both A and B are merchants, under UCC rules, in this case:
a) There is no valid acceptance by B; shipping nonconforming goods acts as a counteroffer, and thus, cannot constitute an acceptance or create a valid, enforceable contract.
b) Although B shipped nonconforming TVs, A is bound to pay the reasonable value of the 21-inch nonconforming TV sets because B’s shipment constituted a valid acceptance, and a binding contract was formed at the time the goods were shipped.
c) Although B shipped nonconforming TVs, if A accepts and later sells the 21-inch TVs, A has validly accepted the nonconforming goods and is bound to pay B reasonable value for the 21-inch TVs.
d) There is no contract because B’s acceptance (by shipping the goods) is not a mirror image of A’s offer.
Question 16: B & B Tape Co. orally agreed to sell 2,000 boxes of tape to Office Supply, Inc. (Office) at a rate of $1.00 per box, for a total of $2,000. Office orally agreed to the deal. B & B delivered 1,000 boxes, totaling $1,000. Office accepted the delivery and used and sold the tape, but refused to pay for the goods, citing the Statute of Frauds. Under these circumstances, Office is obligated to pay:
a) Nothing, and may keep the tape because the agreement is unenforceable because it was not written.
b) $1,000 for the 1,000 boxes that Office accepted, but is not obligated to accept, or pay for, any more tapes.
c) $2,000 as Office is bound to buy the entire 2,000 boxes of tape.
d) $1,000 for the 1,000 boxes that Office already accepted, plus $500 for one-half of the remaining 1,000 boxes.
Question 17: Someone who recovers damages for breach of contract typically can recover:
a) Only those compensatory damages/losses that can be proven with reasonable certainty.
b) For all consequences of the breach, e.g., pain and suffering, whether or not the damages are foreseeable.
c) Only for foreseeable damages.
d) Punitive damages.
Question 18: A orally offered to sell B 100 premium-grade blue ink ballpoint pens, but neglected to state the price. B accepted via letter. A received the acceptance letter, but immediately thereafter, A tried to get out of the deal. Assume that A and B are both merchants, as defined under the UCC. At this point which of the following is most likely to be true about this agreement between A and B?
a) There is no valid contract because the offer is too indefinite.
b) There is no valid contract because any offer for the sale of goods must be in writing and signed by both parties.
c) There is a valid, enforceable contract.
d) There is a valid, enforceable contract only if either A or B are engaged in international business which makes the agreement subject to CISG (Contract for International Sale of Goods) rules.
Question 19: Supermarket offered to buy 1000 boxes of yogurt from Foods Co. The offer did not state a specific delivery date. 9 weeks later, Supermarket still had not heard from Foods, nor had Foods shipped the goods. At this point, Supermarket:
a) Can do nothing but wait to hear an acceptance or rejection from Foods before Supermarket can revoke the offer.
b) Can assume that Foods does not intend to accept the contract and is free to buy to yogurt from another supplier.
c) Must accept the goods when they arrive, unless Supermarket has relocated.
d) Must accept the goods when they arrive unless Foods has clearly rejected the offer.
Question 20: Ed and Nora signed a contract that included a statement, “No evidence of oral negotiations may be used to change the terms of this contractual writing.” Later Ed sued Nora for a breach of contract. In court, Nora testified that she did not breach their agreement because, after signing the written contract, she and Ed orally agreed to change the contract terms. Nora’s testimony will:
a) Be admitted by the court as evidence that Nora did not breach the contract.
b) Be admitted as a valid exception under the Parol Evidence Rule.
c) Be admitted if Nora is a minor because the Parol Evidence Rule does not apply to contracts with minors.
d) Not be admitted under the Parol Evidence Rule.
Question 21: Charlie Customer bought an airline ticket on BartAir through Tina Travel Agent. Identify the legal relationship of Charlie, BartAir and Tina regarding this transaction.
a) Charlie is the principal; Tina is his agent representing him with BartAir.
b) BartAir is the principal; Tina is its agent in the sale of the airline ticket to Charlie.
c) Tina is not the agent of BartAir or Charlie, but Tina’s employer, the travel agency, is the agent for Charlie.
d) Tina is the agent for both BartAir and Charlie.
Question 22: Fran, Joe, and Mike formed a general partnership to operate a flower shop called Fresher Flowers. One of Fran’s jobs is to make deliveries using the partnership truck. In one such delivery, Fran negligently ran a stop sign, striking a car driven by Peggy, causing damage to the car and injury to Peggy.
Analyze and describe (1) the personal liability of Fran, Joe, and Mike, (2) the liability of the partnership, Fresher Flowers.
Question 23: Clarkson and Lee did not have a contract, but Clarkson completed extensive landscaping in Lee’s yard by mistake while Lee was away on vacation. Clarkson sent Lee a bill for the landscaping service but Lee refused to pay.
Determine the likely result if Clark sues Lee to recover the costs of the landscaping.
Question 24: Scenario: Sam’s Beauty School is a privately owned beauty school that trains cosmetologists to earn their cosmetology license to become hair stylists and colorists. Sam’s is open to the public for all hair services; students perform hair services for clients under the supervision of licensed cosmetologists that work at Sam’s.
Jan went the Sam’s to have her hair colored dark brown as she had done many times, although this was Jan’s first time as a client at Sam’s. Tom, a student trainee at Sam’s, colored her hair. Jan’s hair turned green and fell out within 24 hours. Jan had never had any problems with hair color previously.
Jan sued Sam’s for negligence. Who wins and why?