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Chapter 11: Nature and Terminology

True / False

1. Some promises are not legally binding.

a. True
b. False
ANSWER: True

2. The person who makes a promise is the promisee.

a. True
b. False
ANSWER: False

3. A promise is a declaration that something will or will not happen in the future.
a. True
b. False
ANSWER: True

4. A contract is an agreement that can be enforced in court.

a. True
b. False
ANSWER: True

5. If a contractual promise is not fulfilled, the person who made it may be required to perform the promised act.
a. True
b. False
ANSWER: True

6. Contract law assures the parties to private agreements that the promises they make will be enforceable.
a. True
b. False
ANSWER: True

7. The element of intent is of prime importance in determining whether a contract has been formed.
a. True
b. False
ANSWER: False

8. In contract law, intent is determined by the subjective theory of contracts.

a. True
b. False
ANSWER: False

9. In contract law, intent is determined by the secret, subjective intent, or belief, of a party.
a. True
b. False
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Chapter 11: Nature and Terminology

ANSWER: False

10. A contract is valid only if both of the parties entering into it have the capacity to do so.
a. True
b. False
ANSWER: True

11. One of the requirements of a valid contract is an adequate price.

a. True
b. False
ANSWER: False

12. The term consideration refers to the regard that contracting parties hold for each other.
a. True
b. False
ANSWER: False

13. The only requirement of a valid contract is that it be voluntarily entered into.
a. True
b. False
ANSWER: False

14. All contracts must be in writing to be enforceable.

a. True
b. False
ANSWER: False

15. A bilateral contract comes into existence at the moment promises are exchanged.
a. True
b. False
ANSWER: True

16. An offeree is a person who makes an offer.

a. True
b. False
ANSWER: False

17. Every contract involves at least three parties.

a. True
b. False
ANSWER: False

18. A unilateral contract is formed at the moment when the contract is performed.
a. True
b. False
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Chapter 11: Nature and Terminology

ANSWER: True

19. An offer may not be revoked until it is accepted.

a. True
b. False
ANSWER: False

20. Informal contracts are usually based on their substance rather than their form.
a. True
b. False
ANSWER: True

21. Informal contracts include all contracts other than formal contracts.
a. True
b. False
ANSWER: True

22. A check is a formal contract.

a. True
b. False
ANSWER: True

23. An express contract must be in writing.

a. True
b. False
ANSWER: True

24. In an express contract, the terms are fully and explicitly stated in words.
a. True
b. False
ANSWER: True

25. An implied contract is not an actual contract.

a. True
b. False
ANSWER: False

26. All contracts include an implied covenant of good faith and fair dealing.
a. True
b. False
ANSWER: True

27. An executed contract is one that has been fully performed.

a. True
b. False
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Chapter 11: Nature and Terminology

ANSWER: True

28. A contract that has been fully performed by the parties is an executory contract.
a. True
b. False
ANSWER: False

29. An unenforceable contract is one that cannot be enforced because of certain legal defenses against it.
a. True
b. False
ANSWER: True

30. If a voidable contract is ratified, the parties must fully perform their respective legal obligations.
a. True
b. False
ANSWER: True

31. A quasi contract is not enforceable by a court.

a. True
b. False
ANSWER: False

32. A quasi contract is a fictional contract.

a. True
b. False
ANSWER: True

33. When a contract’s writing is not clear, a court will not consider evidence outside the contract to interpret its terms.
a. True
b. False
ANSWER: False

34. If a contract term is ambiguous, a court can consider outside evidence.

a. True
b. False
ANSWER: True

35. A court will normally interpret the language of a contract according to what the parties claim their intent was when
they made it.
a. True
b. False
ANSWER: False

Multiple Choice

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Chapter 11: Nature and Terminology

36. Lark promises to buy Mac’s used textbook for $60. Lark is
a. an executor.
b. an offeree.
c. a promisee.
d. a promisor.
ANSWER: d

37. Smith & Jones, Accountants, agrees to perform an audit for Brick & Mortar Stores, Inc. Whether or not this agreement
meets all of the requirements of a contract, the parties are likely to follow the rules of contract law because they
a. want to avoid potential disputes.
b. are conscious of those rules.
c. are not conscious of those rules.
d. have a moral obligation to do so.
ANSWER: a

38. Jim tells Dana that he will take her out to lunch on Thursday. Jim has made Dana
a. a prediction.
b. a promise.
c. a bilateral contract.
d. a void contract.
ANSWER: b

39. In a divorce proceeding, Jonas promises to pay a certain amount of child support to Kelly every month until their
daughter Lois is eighteen years old. Jonas’s obligation with respect to this promise is
a. moral, not legal.
b. legal, not moral.
c. legal and moral.
d. neither legal nor moral.
ANSWER: c

40. Movers LLC promises to deliver a certain couch to Nora, who promises to pay for the service. If Movers does not
perform, it may be required to
a. cease business.
b. make another promise.
c. pay money damages.
d. perform a different service.
ANSWER: c

41. Bob claims that Carla breached their contract for tutoring. Carla responds that she never intended to enter into a
contract with Bob. The intent to enter into a contract is determined with reference to
a. the intentional theory of contracts.
b. the objective theory of contracts.
c. the personal theory of contracts.
d. the subjective theory of contracts.

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ANSWER: b

42. Foster promises to buy Gideon’s trumpet for $75. Gideon is

a. an offeree.
b. an offeror.
c. a promisee.
d. a promisor.
ANSWER: c

43. Evie agrees to work for Far East Shipping, Ltd., as a translator. In determining whether a contract has been formed, an
element of prime importance is
a. the parties’ intent.
b. Far East’s base.
c. the work’s duration.
d. Evie’s capabilities.
ANSWER: a

44. Pavers, Inc., contracts with a QuikStop store to repave the store’s parking lot for a certain price. The requirements of
this, and any other, contract include
a. consideration.
b. acceptability.
c. achievability.
d. practicality.
ANSWER: a

45. K’Nect, Inc., makes an offer to Lori to enter into a contract to work as a salesperson for a certain salary plus
commission for ninety days subject to a one-year renewal based on her performance. Lori accepts the offer. A valid
contract requires
a. a price and a subject.
b. a duration and a termination.
c. an offer and an acceptance.
d. specific quality standards.
ANSWER: c

46. Field Construction, Inc., contracts with Mesa Ranch to build a new horse barn on Mesa’s property for which Mesa
agrees to pay. The elements of this, and any other, contract include
a. capability.
b. legality.
c. necessity.
d. marketability.
ANSWER: b

47. Moe asserts that a deal he entered into with Nina to sponsor and host a motivational conference for independent sales
representatives is an unenforceable contract. Defenses to the enforcement of a contract include
a. a desire not to perform.
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Chapter 11: Nature and Terminology

b. insufficient capital.
c. preliminary indications of unsatisfactory results.
d. the lack of a party’s voluntary consent.
ANSWER: d

48. Jan tells Lee she will give him her old car if he babysits her son Mark weekday evenings for six months. Lee agrees.
Jan and Lee have formed
a. a bilateral contract.
b. a unilateral contract.
c. a void contract.
d. an unenforceable contract.
ANSWER: a

49. Ray promises to give Steve his iPod in exchange for Steve’s promise to pay Ray $50. Later, they exchange the device
for the funds. A contract was created when
a. Ray offered to sell his iPod.
b. Ray exchanged his iPod for $50.
c. Steve promised to pay Ray for the iPod.
d. Steve paid Ray $50 for the iPod.
ANSWER: c

50. On Monday, Neil tells Outdoor Landscaping, Inc., that he will pay Outdoor $500 if a variety of tasks are completed by
Friday. On Wednesday, when Outdoor is more than half done with the work, Neil says that he has changed his mind.
These parties had
a. an expired contract when Neil said that he had changed his mind.
b. a quasi contract when Neil said that he would pay for certain work.
c. a unilateral contract as soon as Outdoor began to perform.
d. no contract.
ANSWER: c

51. Wilson buys a lottery ticket. Wilson has accepted an offer for
a. a bilateral contract.
b. a unilateral contract.
c. a void contract.
d. an unenforceable contract.
ANSWER: b

52. Ren offers to pay Sara to pick up and deliver certain business documents within thirty minutes. Sara can accept the
offer only by completing the task within the deadline. If she does, Ren and Sara will have
a. a bilateral contract.
b. a unilateral contract.
c. a void contract.
d. an executive contract.
ANSWER: b

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Chapter 11: Nature and Terminology

53. Clay offers to pay Dian $50 for a golf lesson for Ewan. They agree to meet on Friday to exchange the cash for the
lesson. These parties have
a. a bilateral contract.
b. a unilateral contract.
c. a void contract.
d. an executive contract.
ANSWER: a

54. Lane applies for a firefighter’s job with Metro City, which responds with a letter setting an appointment for a medical
exam. The letter also states that it is “an employment offer conditioned on the applicant passing the exam.” This is
a. a bilateral contract that Lane accepted by applying for the job.
b. a quasi contract on which Lane can rely for employment.
c. a unilateral contract that Lane can accept by passing the exam.
d. no contract.
ANSWER: c

55. 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. no contract.
b. an express contract.
c. an implied contract.
d. a simple contract.
ANSWER: b

56. On behalf of the jazz group Fusion, their manager Greg agrees to a performance in Hillside Amphitheatre on July 4.
Hillside sends a written copy of the agreement to Greg to be signed. If Greg signs the copy, the parties will have
a. an express contract.
b. an implied contract.
c. an implied-in-law contract.
d. no contract.
ANSWER: a

57. Vicky asks Walt, a cobbler, to repair a pair of boots. There is no discussion of a price, and Vicky and Walt do not sign
any documents. After the repair, Walt hands Vicky a bill. With respect to Vicky’s obligation to pay the bill, this is
a. an express contract.
b. an implied contract.
c. a quasi contract.
d. no contract.
ANSWER: b

58. When a rainstorm erupts outside Rita’s Gift Shop, Rita and Shaw enter into an implied contract to split the revenue
from Shaw’s sale of umbrellas to Rita’s customers. The terms of this contract are defined by
a. the conduct of the parties.
b. the words of the parties.
c. the unforeseeable storm that gave rise to the deal.
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Chapter 11: Nature and Terminology

d. the unexpressed subjective intent of the parties.

ANSWER: a

59. Flo tells Ginger during a phone call that she will buy her textbook from last semester for $65. Ginger agrees. These
parties have
a. no contract.
b. an express contract.
c. an implied contract.
d. a quasi contract.
ANSWER: b

60. Marketing Inc. offers to create a campaign to increase N’Ice Creamery, Inc.’s online business. N’Ice agrees to pay for
the service. These parties have
a. no contract.
b. an express contract.
c. an implied contract.
d. a quasi contract.
ANSWER: b

61. Oceans Inc., a seafood distributor, agrees to buy from Paul, a commercial fisherman, any “overstock” of fish that Paul
catches in excess of his legal limit. This agreement is most likely
a. enforceable.
b. quasi.
c. void.
d. voidable.
ANSWER: c

62. Sales Corporation and Real Properties, Inc., agree to the payment of a commission for the sale of certain property. If
this deal has all of the elements necessary for one of the parties to enforce it in court, it is
a. a valid contract.
b. a voidable contract.
c. a voidable contract.
d. an unenforceable contract.
ANSWER: a

63. A letter-of-credit agreement between Rural Feed Corporation and Soy Farms, Inc., requires Rural’s bank to pay Soy
on receipt of invoices. This is
a. a formal contract.
b. an informal contract.
c. an implied contract.
d. a quasi contract.
ANSWER: a

64. Rough Water, LLC, and Schafer enter into a contract for the delivery of a used kayak. Until the kayak is delivered and
paid for, these parties have
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Chapter 11: Nature and Terminology

a. an executory contract.
b. no contract.
c. a quasi contract.
d. an executed contract.
ANSWER: a

65. Francie drives into Gage’s Auto Service and asks Gage to replace a tire on her car. After Gage replaces the tire, but
before Francie pays for it, any contract between them is
a. executed.
b. executory.
c. void.
d. unenforceable.
ANSWER: b

66. Robin claims that her contract with Stroud for tennis lessons is voidable. If their contract is avoided
a. both parties are released from it.
b. both parties must fully perform their obligations under it.
c. a wholly different contract is agreed to.
d. a wholly different contract is imposed “as if” the parties had agreed.
ANSWER: a

67. Jess, a nurse practitioner, renders aid to Kurt, who is injured and unconscious. Jess can recover the cost of the aid from
Kurt
a. as if the parties had entered into an actual contract.
b. only if Kurt recovers because of the aid.
c. only if Kurt was aware of the aid.
d. under no circumstances.
ANSWER: a

68. Leila enters into a contract with Metro Taxi Company to work as a cabdriver. Under the plain meaning rule, if the
contract’s writing is clear and unequivocal, the meaning of the terms must be determined from
a. only evidence not contained in the document.
b. any relevant extrinsic evidence.
c. only the face of the instrument.
d. the later testimony of the parties.
ANSWER: c

69. Susan enters into a contract with Troy to act as his personal sports trainer. If a dispute later arises and the contract
contains unclear terms, the rules of contract interpretation will give effect to
a. the parties’ intent as expressed in their contract.
b. what the promisor claims was the parties’ intent.
c. what the promisee claims was the parties’ intent.
d. what the parties now agree they intended.
ANSWER: a
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70. Francisca and Garden Estate, Inc., enter into a contract for the use of a Victorian mansion and its grounds for a
wedding and reception. If ambiguities appear in the contract, they will be construed against the party who
a. drafted the contract.
b. has the greater bargaining power.
c. made the offer to contract.
d. offers the most confusing explanation of the terms.
ANSWER: a

Essay

71. On May 1, Ramona and Santonio orally agree that Santonio will guide a party from the base of Mount McKinley to its
summit and from the summit to a return to the base. Under the agreement, Ramona will pay for the service after the
completion of the climb on June 1. On May 1, is this contract express or implied? On May 31, after the climb has been
made but before payment is paid, is the contract executed or executory?
ANSWER: An express contract is one in which the terms are fully expressed, either in writing or orally. An implied
contract is defined by the conduct of the parties, not their words. The contract between Ramona and Santonio
is an oral contract, in which the terms are fully expressed. That means their contract is an express contract.
The contract between Ramona and Santonio is an executory contract on May 31. An executed contract is a
contract that has been fully performed on both sides. An executory contract is a contract that has not been fully
performed. If, as in this problem, one party (Santonio) has fully performed but the other (Ramona) has not—
because she has not yet made the payment promised on a certain date—the contract, executed on one side and
executory on the other, is classified as executory.

72. Philo, a businessperson, is a friend of Quiana, the owner of Rise n’ Shine, a coffee stand. Every day, Philo spends a
few minutes at the stand, watching the brewing, considering the options, and usually buying a cup of coffee and
something extra—a bagel, a muffin, a cookie, or a sandwich. One afternoon, Philo comes to the stand and picks up a
bottle of iced coffee and a sandwich priced at $5 each. Philo waves the items at Quiana without saying a word and walks
out. Is there a contract? If so, how would it be classified in terms of formation, performance, and enforceability?
ANSWER: The facts presented here indicate the presence of all the elements necessary for a valid contract. A serious
offer and acceptance are made, consideration is exchanged (a bottle of iced coffee and a sandwich for $5
apiece), both parties have capacity, the selling of the items is legal, and no particular form is required for this
type of contract. Thus, a contract exists.
For the reasons given here, this contract is classified as valid, enforceable, and informal. In addition, this is a
classic case of an implied contract. There is no explicit agreement between the parties. Rather, an agreement is
implied by Philo’s action of waving the items and by his past conduct. By his conduct Philo is telling Quiana
that he will pay for the items later. The contract is also bilateral (as opposed to unilateral) because Quiana
impliedly promises to sell the items to Philo in exchange for Philo’s implied promise to pay. The contract is
partially executory, as Philo has engaged to pay for the items in the future. Because the contract is for a legal
purpose, both parties have capacity, and voluntariness of consent is not an issue, the contract is neither
voidable nor void.

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