Essentials of Business Law 9th Edition Anthony Liuzzo Test Bank 1

Chapter 008 Offer and Acceptance
Essentials of Business Law 9th Edition

Anthony Liuzzo
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True / False Questions
1. Offer and acceptance are essential elements of a contract.

Answer: True
LO: 08-01 Identify the first step in reaching agreement and forming a valid contract.
Topic: Reaching Agreement
Blooms: Remember
Difficulty: 1 Easy
AACSB: Reflective Thinking
Feedback: The first of the six essential elements of a contract is offer and acceptance.
2. When an offer specifies all the terms and conditions of a contract, it is not considered as
definite and certain.
Answer: False
LO: 08-02 Explain and provide examples of the three requirements for a valid offer.
Topic: Requirements for a Valid Offer
Blooms: Remember
Difficulty: 1 Easy
Feedback: To be definite and certain, an offer should specify all the terms and conditions of
the contract.
3. As a general rule, if an offer is to be definite and certain, it should cover the same points as
a good newspaper story: who, what, when, where, and how much.
Answer: True
LO: 08-02 Explain and provide examples of the three requirements or a valid offer.
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Blooms: Remember
Difficulty: 1 Easy
Feedback: As a general rule, if an offer is to be definite and certain, it should cover the same
points as a good newspaper story: who, what, when, where, and how much.
4. An offer made in anger or jest is not made with the intent of entering into a valid
enforceable agreement.
Answer: True
Blooms: Remember
Difficulty: 1 Easy
Feedback: Offers made in anger or jest, or those made under severe emotional strain, are
obviously not made with the intent of entering into a valid enforceable agreement.
5. If goods are advertised in a newspaper at an incorrect price, and the fault is that of the
newspaper, the merchant may be able recoup his or her losses from the publication.
Answer: True
LO: 08-03 Distinguish between bids, advertisements, and public offers, and describe how
each relates to offer and acceptance.
Topic: Bids, Advertising, and Public Offers
Blooms: Remember
Difficulty: 1 Easy
Feedback: Sometimes goods are advertised in a newspaper at an incorrect price. If the error is
the fault of the merchant, he or she will be required to honor the lower price. If the error is the
fault of the newspaper, the merchant may be able to recoup his or her losses from the
publication.
6. Acceptance of a public offer by anyone, as indicated by the performance of the act, does
not result in an enforceable contract.
Answer: False
Blooms: Remember
Difficulty: 1 Easy
Feedback: Acceptance of a public offer by anyone, as indicated by the performance of the act,
results in an enforceable contract.
7. Silence does not indicate assent to an offer, even if both parties agree beforehand that this is
to be the means of acceptance.
Answer: False
LO: 08-04 Explain and provide examples of the two requirements for a valid acceptance.
Topic: Requirements for a Valid Acceptance
Blooms: Remember
Difficulty: 1 Easy
Feedback: Silence may indicate assent to an offer when both parties agree beforehand that this
is to be the means of acceptance.
8. Under the mailbox rule, an acceptance sent via the postal system or by courier is effective
when sent.
Answer: True
Blooms: Remember
Difficulty: 1 Easy
Feedback: The mailbox rule states that an acceptance sent via the postal system or by courier
is effective when sent.
9. The general rule of contract law provides that the acceptance of an offer must be the same
as the offer.
Answer: True
Blooms: Remember
Difficulty: 1 Easy
Feedback: The general rule of contract law provides that the acceptance of an offer must be
the same as the offer.
10. A counteroffer, that is, a conditional, or qualified, acceptance of an offer, is generally

interpreted as an acceptance and is not binding on the parties.
Answer: False
Blooms: Remember
Difficulty: 1 Easy
Feedback: A counteroffer—that is, a conditional, or qualified, acceptance of an offer—is
generally interpreted as a rejection and is not binding on the parties.
11. The Uniform Commercial Code (UCC) provides that additional (or different) terms are to
be construed as proposals for addition to the contract, and between merchants, become part of
the contract.
Answer: True
Blooms: Remember
Difficulty: 1 Easy
Feedback: The UCC provides that “additional (or different) terms are to be construed as
proposals for addition to the contract, and between merchants, become part of the contract.”
12. An offer may be terminated by a lapse of time.

Answer: True
LO: 08-05 Identify the five ways in which an offer may be terminated.
Topic: Termination of an Offer
Blooms: Remember
Difficulty: 1 Easy
Feedback: When the offeree fails to accept an offer within the time specified, the opportunity
to form a contract ends because of a termination by lapse of time.
13. An offer can be terminated by an offeror's revocation before acceptance.

Answer: True
Blooms: Remember
Difficulty: 1 Easy
Feedback: An offer that has been neither accepted nor rejected by the offeree can be revoked,
or withdrawn, by the offeror.
14. Even after an offer is rejected by the offeree, it can be revived or made into a counteroffer
once the communication of the rejection has been received by the offeror.
Answer: False
Blooms: Remember
Difficulty: 1 Easy
Feedback: A direct, unqualified rejection, or a refusal to accept, terminates an offer. The
offer, once rejected by the offeree, cannot be revived or made into a counteroffer once the
communication of the rejection has been received by the offeror.
15. An offer is terminated as a result of the death or legal incapacity of either the offeror or
the offeree under an option contract.
Answer: False
Blooms: Remember
Difficulty: 1 Easy
Feedback: An offer is immediately terminated as a result of the death or legal incapacity of
either the offeror or the offeree. However, if either the offeror or the offeree is bound by an
option contract, the surviving party may still be obligated under the contract.
Multiple Choice Questions
16. A proposal that is both offered by the offeror and accepted by the offeree is a
_____contract.
A. void
B. invalid
C. valid
D. voidable
Answer: C
LO: 08-01 Identify the first step in reaching agreement and forming a valid contract.
Topic: Reaching Agreement
Blooms: Remember
Difficulty: 1 Easy
Feedback: For a contract to be valid, there must be a proposal that is both offered by the
offeror and accepted by the offeree.
17. A valid offer must be all of the following EXCEPT:

A. definite and certain.
B. communicated to the offeree.
C. made with serious intent.
D. stated in writing.
Answer: D
Blooms: Remember
Difficulty: 1 Easy
Feedback: For an offer to be valid, it must be (1) definite and certain, (2) communicated to the
offeree, and (3) made with a serious intention that the offeror will be bound by it.
18. The omission of one or more essential terms does not necessarily make the offer:
A. voidable.
B. valid.
C. invalid.
D. void.
Answer: C
Blooms: Remember
Difficulty: 1 Easy
Feedback: Under the UCC, the omission of one or more essential terms does not necessarily
make the offer invalid as long as the contract contains sufficient information to suggest that
the parties intended to enter into a contract.
19. When communicating an offer, the communication may be implied by:

A. custom and tradition.
B. the actions of the parties.
C. the actions of third parties in similar situations.
D. the Uniform Commercial Code.
Answer: B
Blooms: Remember
Difficulty: 1 Easy
Feedback: An offeror can make the offer known to the offeree in various ways. The usual
means of communication are generally used, including oral communication (in person or by
telephone, television, or radio) and written communication (letters, fax, e-mail, or other
written forms). Making an offer and having it accepted are such common events in today’s
business world that people in business frequently use a printed or electronic purchase order
upon which the terms of the offer are shown. Purchase orders are usually considered to be
offers to buy. In these cases, the buyer of the goods is the offeror and the seller is the offeree.
Communication also may be implied by the actions of the parties.
20. All of the following are considered to be forms of oral communications in making an offer
EXCEPT:
A. telephone.
B. television.
C. e-mail.
D. in person.
Answer: C
Blooms: Remember
Difficulty: 1 Easy
Feedback: The usual means of oral communication are in person or by telephone, television,
or radio. E-mail is considered a written form of communication.
21. A purchase order issued by one firm to another is generally considered a(n):
A. offer.
B. acceptance.
C. first step in negotiations.
D. request for a proposal.
Answer: A
Blooms: Remember
Difficulty: 1 Easy
Feedback: Purchase orders are usually considered offers to buy.
22. In the case of purchase orders:

A. the seller of the goods is the offeror and there is no offeree.
B. the buyer of the goods is the offeror and there is no offeree.
C. the seller of the goods is the offeror and the buyer is the offeree.
D. the buyer of the goods is the offeror and the seller is the offeree.
Answer: D
Blooms: Remember
Difficulty: 1 Easy
Feedback: In the cases of purchase orders, the buyer of the goods is the offeror and the seller
is the offeree.
23. When an offer of sale does not specify a price, it is assumed that the parties intended:
A. an implied contract.
B. not to enter a contract
C. a reasonable price.
D. a minimal price.
Answer: C
Blooms: Remember
Difficulty: 1 Easy
Feedback: When an offer of sale does not specify a price, it is assumed that the parties
intended a reasonable price at the time set for delivery.
24. All of the following communications are offers that are obviously not made with the intent
of entering into a valid enforceable agreement EXCEPT those made:
A. under severe emotional strain.
B. in anger.
C. through electronic means.

D. in jest.
Answer: C
Blooms: Remember
Difficulty: 1 Easy
Feedback: Offers made in anger, jest, or those made under emotional strain are obviously not
made with the intent of entering into a valid enforceable agreement.
25. The offer and acceptance issue gets complicated when there is little or no direct contact
between the parties, as in the case of all of the following EXCEPT:
A. bidding.
B. advertising.
C. public offers.
D. agreement.
Answer: D
Blooms: Remember
Difficulty: 1 Easy
Feedback: The requirement of offer and acceptance gets complicated when there is little or no
direct contact between the parties, as in the case of bidding, advertising, and public offers.
26. A call for a bid or estimate for materials to be furnished or work to be done is not
considered a(n):
A. offer.
B. acceptance.
C. request for proposal.
D. invitation to acceptance.
Answer: A
Blooms: Remember
Difficulty: 1 Easy
Feedback: A call for a bid or estimate for materials to be furnished or work to be done is not
considered an offer, but rather is a request for an offer or an invitation to negotiate that can be
accepted or rejected by the person calling for the bid.
27. Advertising is generally regarded as a(n):

A. invitation to trade.
B. firm offer.
C. commitment to sell.
D. executory contract.
Answer: A
Blooms: Remember
Difficulty: 1 Easy
Feedback: An advertisement, such as one that appears every day on television or radio, in a
newspaper or a magazine, or on a website, is generally regarded as an invitation to trade, or an
invitation to make an offer, rather than a valid offer because it does not contain sufficient
words of commitment to sell.
28. The words, "first come, first served" in advertisements create a language of:
A. promise.
B. offer.
C. acceptance.
D. request.
Answer: A
Blooms: Remember
Difficulty: 1 Easy
Feedback: “First come, first served” creates a language of promise that is ordinarily lacking in
advertisements.
29. If an advertisement contains a positive promise and a positive statement of what the
advertiser expects in return, the court will usually hold that the advertisement is a(n):
A. proposal.
B. offer.
C. request.
D. informal invitation.
Answer: B
Blooms: Remember
Difficulty: 1 Easy
Feedback: If an advertisement contains a positive promise and a positive statement of what
the advertiser expects in return, the courts will usually hold that the advertisement is an offer.
30. If an advertisement offers a reward for information that might lead to the arrest of a
criminal or to the return of a lost article, it is regarded as a:
A. request for an offer.
B. reward offer.
C. public offer.
D. call for a bid.
Answer: C
Blooms: Remember
Difficulty: 1 Easy
Feedback: When an advertisement offers a reward for information that might lead to the arrest
of a criminal or for the return of a lost article, it is regarded as a general offer to the public at
large. Acceptance of a public offer by anyone, as indicated by the performance of the act,
results in an enforceable contract.
31. The general rule regarding the effective date and time an acceptance becomes binding is:
A. when the parties intend.
B. three days after receipt of the acceptance.
C. three days after acceptance is sent.
D. upon receipt by the offeree.
Answer: A
Blooms: Remember
Difficulty: 1 Easy
Feedback: The general rule is that an acceptance becomes effective when the parties so
intend.
32. The ____________ states that an acceptance sent via the postal system or by courier is
effective when sent.
A. mirror image rule
B. mailbox rule
C. acceptance rule
D. good faith rule
Answer: B
Blooms: Remember
Difficulty: 1 Easy
Feedback: If the offer is silent as to the time the acceptance is effective, the mailbox rule
states that an acceptance sent via the postal system or by courier is effective when sent.
33. A person cannot be compelled to speak or to write in order to avoid a(n):

A. void agreement.
B. voidable agreement.
C. binding agreement.
D. illegal agreement.
Answer: C
Blooms: Remember
Difficulty: 1 Easy
Feedback: In general, a person cannot be compelled to speak or to write in order to avoid a
binding agreement and is under no obligation to reply to an offer.
34. Offers are terminated for all of the following reasons EXCEPT:
A. lapse of time.
B. revocation.
C. rejection.
D. silence.
Answer: D
LO: 08-05 Identify the fives ways in which an offer may be terminated.
Blooms: Remember
Difficulty: 1 Easy
Feedback: Offers are terminated by (1) lapse of time, (2) revocation, (3) rejection, (4) death or
incapacity, and (5) destruction or illegality.
35. Under the UCC, any written offer by a merchant to buy or sell goods that states that the
offer will be held open for a specified time period:
A. can be revoked during that time period, but only in writing.
B. cannot be revoked during that time period.
C. cannot be revoked by spoken word.
D. can always be revoked.
Answer: B
Blooms: Remember
Difficulty: 1 Easy
Feedback: The UCC provides that any written offer by a merchant to buy or sell goods that
states that the offer will be held open for a specified time period cannot be revoked during this
time period. If no time period is specified, the offer is held open until a reasonable time has
elapsed.
36. When no definite time for acceptance is stated in an offer, the offer terminates after the
passing of:
A. a reasonable time.
B. 18 months.
C. two months.
D. two years.
Answer: A
Blooms: Remember
Difficulty: 1 Easy
Feedback: If no time period is specified, an offer will be held open until a reasonable time has
elapsed.
37. The determination of what is considered a reasonable time in the case of termination of a
contract by lapse of time can vary according to the:
A. assessment of a court-appointed judge.
B. circumstances.
C. opinion of the parties.
D. opinion of the witnesses.
Answer: B
Blooms: Remember
Difficulty: 1 Easy
Feedback: When no definite time for acceptance is stated in an offer, it terminates after a
reasonable time has passed. When there is a termination due to lapse of time, what is
considered to be a reasonable time can vary according to the circumstances.
38. The offer, once rejected by the offeree, cannot be revived or made into a counteroffer once
the communication of the rejection has been received by the:
A. offeror.
B. offeree.
C. courier authority.
D. offeree’s agent.
Answer: A
Blooms: Remember
Difficulty: 1 Easy
Feedback: The offer, once rejected by the offeree, cannot be revived or made into a
counteroffer once the communication of the rejection has been received by the offeror.
39. If the offeror acknowledges the rejection but restates the offer, the offeree:
A. loses the opportunity to accept but retains the authority to make a counteroffer.
B. does not have any opportunity to accept, reject, or make a counteroffer.
C. still has the opportunity to accept, reject, or make a counteroffer.
D. cannot revive the offer or make a counteroffer.
Answer: C
Blooms: Remember
Difficulty: 1 Easy
Feedback: If the offeror acknowledges the rejection but restates the offer, the offeree still has
the opportunity to accept, reject, or make a counteroffer.
Short Answer Questions
40. What are the criteria for a valid offer?

Answer: There are three criteria for a valid offer. The offer must be:
(i). definite and certain;
(ii). communicated to the offeree; and
(iii). made with a serious intention that the offeror will be bound by it.
Blooms: Understand
Difficulty: 2 Medium
Feedback: There are three criteria for a valid offer. The offer must be:
(i). definite and certain;
(ii). communicated to the offeree; and
(iii). made with a serious intention that the offeror will be bound by it.
41. What are the usual means of communication of an offer?

Answer: To form a valid contract, the offer must be communicated to the offeree. The usual
means of communication of an offer that are generally used include: oral communication (in
person or by telephone, television, or radio) and written communication (letters, fax, e-mail,
or other written forms).
Blooms: Understand
Feedback: To form a valid contract, the offer must be communicated to the offeree. The usual
means of communication of an offer that are generally used include: oral communication (in
person or by telephone, television, or radio) and written communication (letters, fax, e-mail,
or other written forms).
42. What is an invitation to trade?

Answer: An invitation to trade is generally an advertisement on television, on radio, in a
newspaper, in a magazine, or on a website. This can also be called as an invitation to make an
offer, rather than a valid offer, because it does not contain sufficient words of commitment to
sell.
Blooms: Understand

Feedback: An invitation to trade is generally an advertisement on television, on radio, in a
newspaper, in a magazine, or on a website. This can also be called as an invitation to make an
offer, rather than a valid offer, because it does not contain sufficient words of commitment to
sell. Sometimes goods are advertised in a newspaper at an incorrect price.
43. What are the two conditions that must be met for an acceptance to be valid?
Answer: The two conditions that must be met for an acceptance to be valid are:
(1) the acceptance must be communicated to the offeror and
(2) the acceptance must be unconditional.
Blooms: Understand
Feedback: The two conditions that must be met for an acceptance to be valid are:
(1) the acceptance must be communicated to the offeror and
(2) the acceptance must be unconditional.
44. Is an acceptance valid if it states terms additional to or different from those offered or
agreed upon? Please explain.
Answer: The acceptance of an offer must be the same as the offer. The Uniform Commercial
Code provides an exception to this rule and states that, between merchants, "a definite and
reasonable expression of acceptance or a written confirmation which is sent within a
reasonable time operates as an acceptance even though it states terms additional to or different
from those offered or agreed upon, unless acceptance is expressly made conditional on assent
to the additional or different terms (UCC 2-207)."
LO: 08-04 Explain and provide examples of the two requirements for a valid acceptance
Blooms: Understand
Feedback: The acceptance of an offer must be the same as the offer. The Uniform
Commercial Code provides an exception to this rule and states that, between merchants, "a
definite and reasonable expression of acceptance or a written confirmation which is sent
within a reasonable time operates as an acceptance even though it states terms additional to or
different from those offered or agreed upon, unless acceptance is expressly made conditional
on assent to the additional or different terms (UCC 2-207)."

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Chapter 008 Offer and Acceptance

Essentials of Business Law 9th Edition

Test bank: https://testbankpack.com/p/test-bank-for-essentials-of-

Solution manual: https://testbankpack.com/p/test-bank-for-

True / False Questions

1. Offer and acceptance are essential elements of a contract.

Topic: Requirements for a Valid Offer

10. A counteroffer, that is, a conditional, or qualified, acceptance of an offer, is generally

12. An offer may be terminated by a lapse of time.

13. An offer can be terminated by an offeror's revocation before acceptance.

Multiple Choice Questions

17. A valid offer must be all of the following EXCEPT:

19. When communicating an offer, the communication may be implied by:

22. In the case of purchase orders:

C. through electronic means.

27. Advertising is generally regarded as a(n):

33. A person cannot be compelled to speak or to write in order to avoid a(n):

Short Answer Questions

40. What are the criteria for a valid offer?

41. What are the usual means of communication of an offer?

42. What is an invitation to trade?

AACSB: Reflective Thinking

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