Business Law FINAL
Business Law FINAL ACCT 2700 - 001
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This 13 page Study Guide was uploaded by Caspian Roberts on Sunday May 1, 2016. The Study Guide belongs to ACCT 2700 - 001 at Auburn University taught by Robert Hollis Cochran in Fall 2015. Since its upload, it has received 1308 views. For similar materials see Business Law in Accounting at Auburn University.
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Date Created: 05/01/16
Dr. Cochran Important Notes: A bilateral contract is an exchange of a promise for a promise Mailbox rule: acceptance is effective when offeree places the acceptance in the mailbox (default rule) o Any communication required in contracts has to be received by the other party to be valid EXCEPT by the mailbox rule o Revocation of the Offer by the Offeror: Offer can be withdrawn anytime before Offeree accepts the offer Effective when the Offeree or Offeree’s agent receives it If the offer has been accepted, it can’t be revoked o Rejection of the Offer by the Offeree: Rejection by the Offeree (expressed or implied) terminates the offer Effective only when it is received by the Offeror or Offeror’s agent Once a rejection of an offer is made, the offer is finished unless the Offeror brings it back. o Counteroffer by the Offeree Rejection of original offer and the simultaneous making of a new offer Mirror Image Rule: At common law, any change in terms automatically terminates the offer and substitutes the counteroffer. Consideration Definitions: o It’s something of value that is promised, given, or done that has the effect of making an agreement a legally enforceable contract o Past consideration is Consideration = False o Past Consideration is Not Consideration = True Review Questions: True/False 1. The ascent of parties to a contract must be voluntary a. True 2. Jim bob bought what he thought was the prettiest brass ring out of a box of pretty brass rings at Ida Mays yard sale for $.50 Jim Bob thought this would look nice on the left ring finger of his 13 year old cousin Lillie. Turns out the ring was worn by Kathryn the Great, was made of gold, and was worth $300,000. Ida May can claim this was a mutual mistake of value and get the ring back from Jim Bob. a. False 3. Raffles agreed to purchase a shipload of cotton on the ship Pureless from Wickle House. Raffles thought the agreement was for the ship Pureless arriving in December. Wickle House thought the agreement was for the ship Pureless arriving in March. Neither party may get out of this agreement. a. False 4. If one part makes a mistake in a contract that party can generally get out of the contract a. False 5. Fraud on the part of one party allows the other party to resend the contract a. True 6. Ritchey's Roofers, Inc does not want to perform their contracts with you because they can get twice the money from someone else to work for them. You agreed with Ritchey's Roofers, Inc to meet the other parties price cause you are desperate to get Ritchey's Roofers, Inc work for your project. The new contract is enforceable as an accord and satisfaction. a. False 7. Past consideration is not consideration a. True 8. Hand written terms on the contract usually take precedent over conflicting typed terms a. True 9. The Parole evidence rule generally prevents Leroy from introducing evidence in court of oral agreements which conflict with the terms in the valid written contract he has with Tater a. True 10. A gift promise is unenforceable by the courts because there is not adequate consideration a. False 11. Bam Bam may not assign the rights and obligations of her life insurance policy to her father Fred if the assignment would materially alter the risks and duties of the insurance company a. True 12. An assignment of all rights under a contract means an assignment of the rights and delegation of the duties under a contract a. True 13. Robin Thicke cannot assign his contract to perform a concert at AU to Lady Ga Ga a. True 14.Courts generally consider the adequacy of consideration in a contract a. False 15.A breach of contract usually calls for monetary remedy since a contract is an economic transaction a. True 16.Shimmy Shammy, Inc. offers you a job for $100,000 a year as a cotton broker in Atlanta upon your graduation and you accept. When you graduate the tell you the job in Atlanta has been eliminated but that the exact same job and pay are available in Buffalo, New York. You have a duty to take this job to mitigate Shimmy Shammy's damages to you. a. False 17.You may not delegate duties to someone who is not as experienced, capable, and qualified as you are to perform your obligations under a contract a. True 18.You buy Pop Rays beverage shack on the Tuskgee turnpike in Auburn. As part of the sales agreement you have a covenant not to compete, which prevents Pop Rays from opening another beverage shack in Auburn for one year. The courts will enforce this covenant not to compete. a. True 19.There is a federal law that allows you to register domain names. You find out that Booty Time stage name for Wilma Williams has not registered her stage name as a trademark or a copyright. Therefore you may legally register her domain name and charge her a service fee if she decides to register it. a. False 20.An acceptance of an offer is valid when placed in a mailbox even if the Offeror never receives it a. True 21.Some promises are not legally binding a. True 22.If a contractual promise is not fulfilled, the person who made it may be required to perform the promised act. a. True 23.The intention to enter into a contract is judged by outward, objective facts as interpreted by a reasonable person a. True 24.The only requirement for a valid contract is that the parties voluntarily entered into it a. False 25.The term consideration refers to the voluntary consent of all of the parties to a contract a. False 26.A unilateral contract is formed when the party receiving the offer completes the requested act or performance a. True 27.An offer may not be revoked before it is accepted a. False 28.An executed contract is one that has been fully performed a. True 29.An invitation to negotiate – “will you sell this” – is an offer a. False 30.Under federal law, an electronic signature is as valid as a signature on paper a. True 31.Most states have laws governing e-signatures and other aspects of electronic transactions, and these laws are uniform a. False 32.In contract law, “consideration” is defined as the courtesy that one party shows the other in negotiating a deal a. False 33.For consideration to have “legally sufficient value,” it must consist of goods or money a. False 34.A promise by 1 party to pay the other for refraining from an action that the person has a legal right to undertake is enforceable a. False 35.A transaction that lacks a bargained-for exchange lacks an element of consideration a. True 36.In general, a court will question the adequacy of the consideration based solely on the comparative value of the thing exchanged a. False 37.A transfer of contractual rights to a third party is an assignment a. True 38.In an employment contract, a covenant not to compete can be enforceable a. True 39.All contracts between adults and minors are void a. False 40.A unilateral contract is formed when the party receiving the offer completes the requested act or performance a. True 41.Courts may imply conditions from the purpose of a contract or from the intent of the parties a. True 42.Tender is an unconditional offer to perform a. True 43.In the context of contractual law, damages are designed to punish a breaching part and deter others from similar conduct a. False 44.A contract involving property of any kind must be in writing to be enforceable a. False 45.Under the Statute of Frauds, any contract that isn’t in writing is void a. False 46.A contract that by its own terms can’t be performed within one year must be in writing to be enforceable a. True 47.Any contract to commit a crime is in violation of a statute and thus is unenforceable a. True 48.Parents are always liable for the contracts made by their minor children a. False 49.A breach on contract entitles the nonbreaching party to sue for monetary damages a. True 50.The term consideration refers to the voluntary consent of all parties to a contract a. False 51.A contract comes to an end when both parties fulfill their respective duties by performing the acts they have promised a. True 52.When rights under a contract are assigned unconditionally, the rights of the assignor are extinguished. a. True 53.A contract is substantially performed when performance creates substantially the same benefits as those promised in the contract. a. True 54.When both parties to a contract are mistaken about the same material fact, the contract can't be rescinded. a. False 55.The only requirement for a valid contract is that the parties voluntarily entered into it a. False 56.A contract may not be enforceable if one party is aware that the other party made a mistake of fact a. True 57.If a party against whom enforcement of an oral contract is sought admits under oath that a contract for sale was made, the contract will be enforceable. a. True 58.In contract law, "consideration" is defined as the courtesy that one party shows another in negotiating a deal. a. False 59.If a mistake concerns the future value of the object of the contract, a court will normally provide relief. a. False 60.An innocent party can enforce a fraudulent contract and seek damages for any harm resulting from the fraud. a. True 61.Contract duties are not assigned—they are delegated. a. True 62.Most parties settle their lawsuits for damages or other remedies prior to trial. a. True 63.The intention to enter into a contract is judged by outward, objective facts as interpreted by a reasonable person. a. True 64.A transaction that lacks a bargained-for exchange lacks an element of consideration. a. True 65.When the parties to a contract agree that its performance should directly benefit a third person, the third person becomes an intended third party beneficiary. a. True 66.A compromise that arises out of a dispute over the obligations under a contract may be substituted for the original contract. a. True 67.Contractual capacity includes the financial ability to pay for the benefits of a contract. a. False 68.Intent to deceive is an element of fraud. a. True 69.The most common remedies available to a nonbreaching party include damages, rescission and restitution, specific performance, and reformation. a. True 70.An offer may not be revoked before it is accepted. a. False 71.Some promises are not legally binding. a. True 72.In general, a court will question the adequacy of consideration based solely on the comparative value of the things exchanged. a. False 73.Any collateral promise must be in writing to be enforceable. a. False 74.Expenses that are caused directly by a breach of a contract are known as primary damages. a. False 75.Most contracts need to be performed only to the satisfaction of a reasonable person unless they expressly state otherwise. a. True Multiple Choice: 1. Randy promises to give Stewart her iPod in exchange for Stewart's promise to pay Randy $50. This bilateral contract was created when: a. A. Randy offered to sell her iPod to Stewart. b. B. Stewart promised to pay Randy $50. c. C. Steward became aware that Randy was willing to sell her iPod. d. D. Randy decided to sell her iPod. 2. Bo signs a lease with Capri Apartments to lease a studio apartment for the next year for $650 per month. Daisy signs on Capri's behalf. Bo and Capri have: a. A. an implied contract b. B. a simple contract c. C. an express contract d. D. no contract 3. Rachel tells Stan that she will sign a contract to retain his services as tech support for one year if the contract includes a clause to extend the term at the same price. Rachel's intent to sign the contract is determined by reference to her: a. A. words and action b. B. subjective intentions c. C. beliefs d. D. assumptions 4. Iggy tells Jade, "I might sell the snowboard that I bought this winter since I haven't used it and the season is almost over." This is: a. A. an acceptance of an offer b. B. a preliminary negotiation c. C. a statement of future intent d. D. an offer 5. An ad on the NewsNow Web site asks viewers to "send us your story and we might share it with the world." Onyx submits a manuscript, adding, "I accept your offer." Between NewsNow and Onyx, there is: a. A. a contract to consider Onyx's story before any others b. B. no contract c. C. a contract to negotiate for the publication of Onyx's story d. D. a contract for the publication of Onyx's story 6. Dewey asks Ember, "Do you want to buy my bike?" This is: a. A. a valid offer b. B. no a valid offer because Dewey did not state an intent c. C. not a valid offer because the terms are not definite d. D. not a valid offer because Ember didn't respond 7. Isla's Morsels offers to cater Jimmy's Jars & Packaging, Inc.'s business meetings. Jimmy's rejects the offer. The offer is: a. A. valid for the period of time prescribed by a state statute b. B. terminated c. C. valid until Isla's revokes the offer d. D. valid for a reasonable time to give Jimmy's a "second chance" 8. Fabien offers to sell his Graphic Signs, LLC, business to Hana for $100,000. Hana replies, "The price is too high. I will buy it for $75,000." Hana has: a. A. made a counteroffer without rejecting the offer b. B. accepted the offer c. C. rejected the offer without making a counteroffer d. D. rejected the offer and made a counteroffer 9. Deluxe Awnings, Inc., offers Elbert a job as an installer. No time for acceptance is specified in the offer. The offer will terminate: a. A. never b. B. after a typical workweek c. C. after a usual month d. D. after a reasonable period of time 10.Bret buys a subscription to the catalog of music provided by Concerto, an online music vendor. Before accessing the catalog, Bret must agree to a provision stating that she will not make and sell copies of the music. This provision is: a. A. a shrink-wrap agreement b. B. a browse-wrap term c. C. a partnering agreement d. D. a click-on agreement 11.Under a contract with Valley Vineyard, Walsh begins grading a terraced hillside for the planting of grapes. Halfway through the project, Walsh asks for $5,000 over the contract price, claiming an increase in the "cost of doing business." Valley agrees but later refuses to pay. Their agreement is: a. A. unenforceable because Valley's promise is illusory b. B. enforceable c. C. unenforceable because Walsh's performance was a preexisting duty d. D. unenforceable because Walsh's request modified the contract 12.Digital Enterprise, Inc., promises to pay its employees a year-end bonus "if profits continue to be high and management agrees at the time." This is: a. A. an illusory promise b. B. an output contract c. C. an enforceable contract d. D. an option-to-cancel clause 13.D'Alemberte contracts with Ella to render pesonal nursing services for the benefit of Federica. This is: a. A. an assignment b. B. a third party beneficiary contract c. C. an alienation d. D. a delegation 14.Bea takes out a life insurance policy with Vida Insurance Corporation that names her spouse Wendell as the beneficiary. This is: a. A. a third party intended beneficiary contract b. B. a third party incidental beneficiary contract c. C. a delegation d. D. an assignment 15.Claudia pledges to donate $10,000 to Disaster Relief & Recovery Inc. (DR&R). On the basis of the pledge, DR&R orders additional supplies. If Claudia does not fulfill the pledge, a court may enforce it: a. A. as a requirement contract b. B. under the preexisting duty rule c. C. on the basis of unforeseen difficulties d. D. under the doctrine of promissory estoppel 16.Bailey is an accountant who is not licensed to practice her profession in Connecticut. Despite this lack of a license, Bailey enters into a contract with Douglas in Connecticut. This contract is most likely: a. A. unenforceable b. B. enforceable by Douglas but not by Bailey c. C. enforceable by Bailey and Douglas d. D. enforceable only by a third who is not aware that Bailey isn't licensed in Connecticut 17.Forrest makes and sells furniture. Forrest and Glenda enter into a contract for the delivery of Forrest 's products to Glenda's Gear retail locations for which she agrees to pay the invoiced price. Forrest transfers the right to payment under the contract to Haulers Trucks & Trailers. This transfer is: a. A. prohibited b. B. an assignment c. C. a third party beneficiary contract d. D. a delegation 18.Chet, a minor, signs a contract with Porsha, an adult. The contract is: a. A. voidable at the option of Porsha b. B. void as a matter of law c. C. voidable at the option of Chet d. D. neither void or voidable 19.Winona enters into a contract with Peyton to buy Peyton's land based on Peyton's assertion that the land is legally open to development. After the sale, Winona learns what Peyton knew previously—only a small section of the land can be built on. A local law prohibits construction on the rest of the property. Winona can: a. A. not avoid the contract because persons are assumed to know the law b. B. avoid the contract due to a mistake in value c. C. avoid the contract due to a mutual mistake d. D. avoid the contract due to fraud 20.Fortuna enters into a contract to buy fifty acres from Garrison to expand Fortuna's farm. Garrison breaches the contract. Fortuna's normal remedy is: a. A. reformation b. B. rescission c. C. damages d. D. specific performance 21.Rachel tells Stan that she will sign a contract to retain his services as tech support for one year if the contract includes a clause to extend the term at the same price. Rachel's intent to sign the contract is determined by reference to her: a. A. words and action b. B. subjective intentions c. C. beliefs d. D. assumptions 22.Bo signs a lease with Capri Apartments to lease a studio apartment for the next year for $650 per month. Daisy signs on Capri's behalf. Bo and Capri have: a. A. an implied contract b. B. a simple contract c. C. an express contract d. D. no contract 23.Gilly agrees to buy Howard's Bakery on the express condition that the bakery's suppliers extend the same credit terms to Gilly that the suppliers currently extend to Howard. This approval is: a. A. complete b. B. conditional c. C. substantial d. D. absolute 24.Fabien offers to sell his Graphic Signs, LLC, business to Hana for $100,000. Hana replies, "The price is too high. I will buy it for $75,000." Hana has: a. A. made a counteroffer without rejecting the offer b. B. accepted the offer c. C. rejected the offer without making a counteroffer d. D. rejected the offer and made a counteroffer 25.Appliance Repair Service enters into a contract to repair washers and dryers in BeClean Company's coin-operated laundries. If Appliance Repair breaches the contract, BeClean can: a. A. do nothing but temporarily suspend operations and wait b. B. sue Appliance Repair for damages c. C. do nothing but make a deal with a different service provider d. D. file a criminal complaint against Appliance Repair 26.Donald and Etta orally agree on the sale of Donald's Electrical Supplies Company to Etta and jot down the terms on the back of one of Donald's blank invoices, which they both sign. A written memorandum evidencing an oral contract that would otherwise be unenforceable must contain: a. A. the preliminary terms b. B. the qualitative terms c. C. the essential terms d. D. every term 27.Lin and Mercedes want Ngo to replace Mercedes as a party to their contract. They can best accomplish this by: a. A. an accord and satisfaction b. B. anticipatory repudiation c. C. a novation d. D. a mutual agreement to rescind 28.Dumont threatens physical harm to force Eddie to sell his business, Citywide Vending, Inc., to Dumont for a below-market price. This is: a. A. fraud b. B. unconscionability c. C. duress d. D. undue influence 29.Deluxe Awnings, Inc., offers Elbert a job as an installer. No time for acceptance is specified in the offer. The offer will terminate: a. A. never b. B. after a typical workweek c. C. after a usual month d. D. after a reasonable period of time 30.Opportunity Market Company (OMC) and Pierce enter into a contract for Pierce to cut and trim the landscaping around OMC's building before a meeting of the company's sales staff. When Pierce's schedule conflicts, he asks Rachel to do the cutting and trimming. This transfer of duties is: a. A. prohibited b. B. an assignment c. C. a delegation d. D. a third party beneficiary contract 31.Resourced Minerals Inc. agrees to deliver ten tons of coal to Static Energy Corporation. The agreement states that delivery is to be within "9" days, although the parties intend "90" days. Resourced Minerals cannot convince Static Energy to amend the contract. Resourced Minerals should seek: a. A. damages b. B. specific performance c. C. rescission d. D. reformation 32.In selling a 300-acre farm to Rural Land Investments, Inc., Simone tells Rural's that the land "will be worth twice as much by next year." This is: a. A. mistake b. B. opinion c. C. fraud d. D. adhesion 33.Emil enters into a contract to buy Foley's cultivated bottomland and hill and bench acreage if County AgriCredit will lend Emil the funds to pay for the land. Emil's duty to perform is: a. A. conditional b. B. absolute c. C. irresolute d. D. manifest 34.Dwight believes that a new phone to be sold by Ear Candy Corporation will become the most widely bought and used phone in the global market. Dwight enters into a contract to buy 500 shares of Ear Candy stock, anticipating an increase in its value. If the price of the stock does not rise, Dwight can recover: a. A. the amount of the purchase price b. B. nothing c. C. the amount of the purchase price plus the expected increase d. D. the amount of the purchase price plus the unexpected decrease 35.from a Pads & Pods store. On Tuesday, he returns to the store and buys a GPS device for $200. On Wednesday, he downloads $100 worth of tunes from singsong.com. To be enforceable, the contract must be in writing for the purchase of: a. A. the tablet only b. B. the tunes only c. C. the tunes, the GPS device, and the tablet d. D. the GPS device and the tablet only 36.Grant and Hester enter into a contract for a sale of Hester's Pastoral Valley Orchard. This contract: a. A. is prohibited b. B. must be in writing to be enforceable c. C. must be oral to be enforceable d. D. must be oral and in writing to be enforceable 37.Marketing Solutions Inc. promises to employ Niki as a software engineer. In reliance on the promise, Niki quits her job with Online Ad Company, but Marketing Solutions does not hire her. Most likely, Marketing Solutions is: a. A. not liable to Niki b. B. liable to Niki under the doctrine of promissory estoppel c. C. liable to Niki under the preexisting duty rule d. D. liable to Niki under the concept of accord and satisfaction 38.Maya's motorcycle is damaged in an accident caused by Luc's negligence. Luc agrees to pay Maya $25,000 if she agrees to release him from further liability. Maya agrees. If her damages ultimately exceed $25,000, she can: a. A. recover the balance due to unforeseen events b. B. not recover the balance c. C. recover the balance because the "debt" was unliquidated d. D. recover the balance for lack of consideration 39.Fletcher signs a contract to buy a new electric guitar and amplifier just before reaching the age of majority. After reaching the age of majority, Fletcher does not take possession or make payments. With respect to the contract, most courts would hold that this is: a. A. disaffirmance b. B. rescission c. C. emancipation d. D. ratification 40.Bonita and Chad enter into a contract for Chad to plant trees on Bonita's property for which she agrees to pay $500. When Chad's schedule conflicts, he contacts Dirk, to whom he "assigns all rights under the contract." Chad is: a. A. liable to Dirk for inducing a prohibited contract b. B. liable to Bonita if Dirk doesn't perform c. C. absolved of any liability under the contract d. D. in breach of the contract with Bonita 41.Rough Hewn Lumber Company orally contracts with Joe for the purchase of five acres of Joe's timberland. Joe makes the transfer but Rough Hewn does not pay the price. The lack of a written contract could bar enforcement of this deal. If so, Joe could most likely recover on a theory of: a. A. restitution b. B. reformation c. C. quasi contract d. D. liquidated damages 42.Alexis, a minor acting on her own, signs a contract to buy motorcycle and accessories from Bad Bikes dealership. Later, after taking possession, Alexis disaffirms the deal. She: a. A. can keep the motorcycle and accessories b. B. must return both motorcycle and accessories c. C. can keep the accessories but not he motorcycle d. D. can keep the motorcycle but not the accessories 43.Phoebe enters into a contract with Everest for a guided tour of Whitewater Canyon. Everest acts as though he is an experienced, knowledgeable guide, when in reality he has never been in the canyon. Phoebe is most likely a victim of: a. A. mistake b. B. nothing c. C. fraud d. D. undue influence 44.Nelson, a minor, misrepresents his age when agreeing to a contract to buy a restored, antique soda vending machine from Old Is New Again, Inc. Ordinarily, Nelson can disaffirm the contract: a. A. under no circumstances b. B. under any circumstances c. C. only if he can prove that the seller didn't know his true age d. D. only if he can prove that the seller knew his true age 45.Francine buys a new business-law textbook for $125 and a used car for $6,000. She also signs a one-year lease for an apartment for $700 monthly rent to start at the beginning of the next month. The Statute of Frauds covers: a. A. the apartment lease, and the textbook and car purchases b. B. the apartment lease and the car purchase only c. C. the apartment lease only d. D. the textbook and car purchases
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