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D

1. 
In deciding whether a valid contract was formed, the courts will not look at
a.
the statements by the parties when they entered into the contract.
b.
the ways the parties acted when they entered into the contract.
c.
the circumstances surrounding the transaction.
d.
the subjective beliefs of the contractual parties.
 
C

2. 
Defenses to the formation or enforcement of a contract include
a.
improper form.
b.
the lack of the genuineness of assent of all of the parties.
c.
both a and b.
d.
none of the above.
 
A

3. 
Alpha Assets Corporation and Beta Buys, Inc., contract for a sale of Alpha's assets to Beta. The contract may not be enforceable if it was formed as a result of
a.
a mistake.
b.
Alpha's intent to make a profit.
c.
Beta's intent to make a profit.
d.
either party's intent to make a joke.
 
A

4. 
A bilateral contract is created when
a.
one party gives a promise in exchange for the other party's promise.
b.
one party gives a promise in exchange for the other party's performance of a particular act.
c.
both a and b.
d.
none of the above.
 
D

5. 
Jim offers to buy Karen's car for $1,000. Jim is an offeror and
a.
an obligato.
b.
an offeree.
c.
a promisee.
d.
a promisor.
 
B

6. 
International Sales Corporation and National Distribution, Inc., enter into a contract without an agreement concerning payment. This is
a.
an express contract.
b.
an implied-in-fact contract.
c.
an implied-in-law contract.
d.
not a contract.
 
C

7. 
What sort of contracts do not arise from a mutual agreement but are imposed by a court to avoid unjust enrichment?
a.
Express contracts
b.
Implied contracts
c.
Quasi contracts
d.
Unilateral contracts
 
C

8. 
The primary purpose of the common law rules of contract interpretation is to
a.
give effect to the contracts clause of Article I, Section 10, of the U.S. Constitution.
b.
give practical effect to the theory of freedom of contract.
c.
determine the parties' intent from the language of their agreement and give effect to that intent.
d.
both a and b.
 
D

9. 
Adams Accounting Services and Best Products, Inc., enter into a contract. Individual clauses in the contract that were the subject of separate negotiation will be considered subordinate to
a.
standardized terms.
b.
terms that can be understood only by lawyers and judges.
c.
terms that were not negotiated separately.
d.
none of the above.
 
D

10. 
When ambiguities appear in a contract, they will be construed against
a.
the party with the greater bargaining power.
b.
the promisor.
c.
the promisee.
d.
the party who drafted the contract.
 
D

11. 
Janet tries to start her car with no success. She yells in desperation that she would sell the car to anyone for $100. Bill, a passerby, hands Janet $100. Bill's act
a.
constitutes a valid acceptance.
b.
constitutes a valid acceptance only if Janet and Bill already know each other.
c.
does not constitute a valid acceptance, because $100 is not be a fair price for the car.
d.
does not constitute a valid acceptance, because Janet does not seriously intend to sell the car.
 
C

12. 
Ron announces that he plans to sell his stock in Porcine Aviation at a price below the current market value. Andrew hands Ron a check for the amount. Ron
a.
must accept the check and give Andrew the stock.
b.
may refuse to accept the check, unless it is certified by a bank.
c.
may refuse to accept the check, because he merely expressed his intention to enter into a future contract to sell the stock.
d.
none of the above.
 
C

13. 
The Hardys decide to sell their farm and send out a flyer describing the location, the acreage, and the price. Laurel responds with a letter of "acceptance." Laurel and the Hardys have
a.
no contract, because the letter was an invitation to negotiate.
b.
no contract, because the Hardys sent the letter to more than one party.
c.
a contract if the circumstances surrounding the mailing are such that a reasonable person would believe that the Hardys were making an offer to sell the farm.
d.
none of the above.
 
C

14. 
Tom and Leo sign a lease that includes a clause permitting Tom to extend the lease at an amount of rent to be agreed on when the lease is extended. The clause is
a.
not enforceable, because it is too vague.
b.
not enforceable, because it does not include a price term.
c.
enforceable, because the parties intend that the amount of future rent will be reasonable.
d.
enforceable, because it is part of a lease agreement.
 
D

15. 
An offer exists when
a.
Carl's catalogue advertises a certain piece of equipment for sale.
b.
Donna's sales staff distributes a price list to potential customers.
c.
both a and b.
d.
none of the above.
 
A

16. 
Ellen decides to sell her classic cars in an auction "with reserve." Ellen can withdraw the cars
a.
any time before the auctioneer announces that the cars have been sold.
b.
any time before the cars are delivered to the buyers.
c.
only if the bids are extremely low.
d.
only before the auction begins.
 
D

17. 
Edwin advertises a reward for the return of his lost cat. Fritz, who does not know of the reward, finds and returns the cat. Fritz cannot recover the reward, because
a.
he conferred a benefit on Edwin by returning the cat.
b.
Edwin has not been unjustly enriched.
c.
Fritz and Edwin are not related.
d.
Fritz did not know of the reward when he returned the cat.
 
B

18. 
Jones offers to sell Flint his bicycle. Before accepting the offer, Flint learns that the bicycle has been sold to Bond. Jones is
a.
liable to Flint for breach of contract.
b.
not liable, because the sale of the bicycle revokes the offer made to Flint.
c.
not liable, only if he provides an acceptable substitute to Flint.
d.
liable to Bond and Flint for breach of contract.
 
D

19. 
First National Bank takes out full-page advertisements in three local newspapers and runs thirty-second television commercials, offering a reward to anyone giving information leading to the apprehension of a certain criminal. The bank would normally be able to terminate the offer by
a.
posting a notice of termination on its front door.
b.
running a quarter-page notice in each newspaper.
c.
running one full-page ad in one newspaper and running one thirty-second television commercial one time.
d.
taking out full-page ads in the three newspapers and running thirty-second television commercials.
 
A

20. 
Ned contracts to sell his boat to Larry. Larry builds a dock behind his house in which to keep the boat. Ned's subsequent attempt to cancel the contract will
a.
not be effective because Larry has detrimentally relied on Ned's offer.
b.
not be effective because Larry may not be able to obtain a similar boat for a similar price elsewhere.
c.
be effective because Ned did nothing to encourage Larry to build a dock.
d.
be effective because Ned could not have foreseen that Larry would build a dock.
 
A

21. 
In a letter, Smith offers to sell Grant his computer but conditions the sale on Grant accepting the offer by October 1. Smith may revoke the offer
a.
before Grant mails a letter of acceptance.
b.
before receiving a letter from Grant accepting the offer.
c.
because it is in writing.
d.
none of the above.
 
D

22. 
Which of the following is irrevocable?
a.
Option contract
b.
Merchant's firm offer for a sale of goods
c.
Offer on which the offeree has relied to his or her detriment
d.
All of the above
 
A

23. 
Tom offers to sell Stan fifty bags of coffee beans. Stan rejects the offer. The offer is
a.
terminated.
b.
valid for a reasonable period of time to give Stan a chance to change his mind.
c.
valid for the period of time prescribed by the relevant state statute.
d.
none of the above.
 
C

24. 
If no time for acceptance is specified in an offer, then the offer will
a.
be a nullity.
b.
terminate within thirty days.
c.
terminate at the end of a reasonable period of time.
d.
none of the above.
 
D

25. 
Bo offers to sell a laser printer to Ike, but it is lost in a fire before Ike accepts. Bo
a.
must obtain a similar printer for Ike, if he notifies Bo that he accepts the offer.
b.
must obtain a similar printer for Ike, if Ike offers to pay Bo before delivery.
c.
is not required to obtain a similar printer for Ike, because it could take an unreasonable period of time to obtain a replacement.
d.
is not required to obtain a similar printer for Ike, because the destruction of the original printer automatically terminated the offer.
 
D

26. 
First State Bank offers to lend money to Todd at 15 percent interest. Before Todd accepts, a statute is enacted prohibiting loans at interest rates greater than 12 percent. Todd and the bank have
a.
a contract for a loan at 15 percent interest.
b.
a contract for a loan at 12 percent interest.
c.
a contract for a loan at 0 percent interest.
d.
no contract for a loan.
 
D

27. 
Sam offers to sell a high-speed modem to Randy, but Sam receives a letter of acceptance from Ford. A valid contract exists between
a.
Sam and Randy.
b.
Sam and Ford.
c.
Sam, Randy, and Ford.
d.
none of the above.
 
B

28. 
Bill offers to sell Wendy seven tons of steel. Wendy sends an acceptance letter, but without the proper postage. Wendy's acceptance is effective
a.
on dispatch.
b.
on receipt.
c.
when it is midway between the parties.
d.
none of the above.
 
B

29. 
Fred promises to pay Bill $50 for painting the house. Bill proceeds to paint the house. The act of painting the house
a.
imposes a moral obligation on Fred to pay Bill.
b.
is the consideration that creates Fred's contractual obligation to pay Bill.
c.
imposes no payment obligation unless Fred is completely satisfied with the job.
d.
none of the above.
 
C

30. 
Hubert promises to give Jane $500 because she does not have as much money as other people do. Hubert's promise is
a.
enforceable because society wishes to encourage people to keep their promises.
b.
enforceable because the redistribution of wealth is a valid social objective.
c.
not enforceable because Jane has not given any consideration in return.
d.
not enforceable because Hubert could have given her more money.
 
C

31. 
Tom promises to perform, for a price, Web site design services for United Telecommunications, Inc. To support a contract, the consideration exchanged by the parties must be
a.
equally valuable.
b.
fairly reasonable.
c.
legally sufficient.
d.
reasonably fair.
 
B

32. 
American Engineering, Inc., defends against a breach-of-contract suit by Beta Corporation by claiming that the consideration for their contract was inadequate. A court will not normally evaluate the adequacy of consideration unless it is
a.
a service.
b.
grossly inadequate.
c.
in the form of a forbearance.
d.
not yet paid.
 
D

33. 
Baker agrees to supply Howard with goods from a foreign country. When the government in that country is overthrown in a violent revolution, it becomes impossible to obtain the goods except at a much higher price. This outcome will
a.
constitute a breach of the agreement because Baker can no longer supply Howard with the goods at the agreed price.
b.
not constitute a breach of the agreement since the possibility of violent revolution is not the type of risk ordinarily assumed in business.
c.
not constitute a breach of the agreement because a violent revolution would probably be characterized as an unforeseen difficulty.
d.
both b and c.
 
 
Fact Pattern 12-2

Ethan contracts with Ethel to buy a ring from her. When both parties change their minds, they inform each other that they would like to cancel the contract.
 
D

34. 
Refer to Fact Pattern 12-2. Ethan and Ethel
a.
must perform their contract.
b.
must perform the part of their contract that is still executory.
c.
may rescind their contract altogether.
d.
may rescind their contract to the extent that it is executory.
 
C

35. 
National Sales Corporation and Regional Distribution, Inc., agree to simultaneously rescind their initial agreement and enter into a new agreement. National later sues Regional to enforce the new agreement. The court
a.
must apply the preexisting duty rule to bar enforcement of the new agreement.
b.
must let the new contract stand.
c.
may apply the preexisting rule or let the new contract stand.
d.
none of the above.
 
D

36. 
Best Goods Company promises to pay its employee a bonus for work that they did the previous year. If Best fails to pay the bonus and the employees sue, the court will likely hold that the promise
a.
is enforceable because an employer has a moral obligation to do right by its employees.
b.
is enforceable because it is supported by an event that has already taken place.
c.
is enforceable because the promisor received no subsequent material benefit and the promisee rendered no subsequent services.
d.
none of the above.
 
A

37. 
Crosby and Hope disagree as to the exact amount one owes the other. They form a new agreement that, on fulfillment, will discharge the prior obligation. This arrangement is called
a.
an accord and satisfaction.
b.
promissory estoppel.
c.
a release.
d.
a covenant not to sue.
 
C

38. 
Arnold is in an automobile accident caused by Roberta's negligence. He accepts her offer to pay him $1,000 and agrees to release her from any further liability. Later, he discovers that his injuries are worse than he had suspected. Arnold's acceptance of Roberta's offer will
a.
enable him to sue Roberta to recover for the other injuries.
b.
enable him to sue Roberta to recover for the other injuries only if Roberta carries adequate insurance.
c.
not allow him to sue Roberta.
d.
none of the above.
 
 
Fact Pattern 12-3

Russ pledges to donate $1,000 to the Center for AIDS Research (CARE). On the basis of the pledge, CARE orders additional lab equipment. Russ later reneges on the pledge. CARE sues Russ to honor the pledge.
 
B

39. 
Refer to Fact Pattern 12-3. If the court enforces the pledge, it will be
a.
on a theory of accord and satisfaction.
b.
under the doctrine of promissory estoppel.
c.
both a and b.
d.
none of the above.
 
D

40. 
Ken, an unmarried seventeen-year-old, signs a contract to sell his car to the Regal Used Car Company. Ken receives a better offer the next day from another car dealer and accepts the new offer. Ken is
a.
liable on the contract with Regal and must sell it a car of comparable value.
b.
liable on the contract with Regal and must sell it his car.
c.
not liable to Regal because he is a minor.
d.
not liable to Regal because the sale of the car disaffirmed their contract.
 
C

41. 
Tony, a minor, attempts to return to its former owner, a car that he recently purchased and subsequently wrecked, in a state in which a duty of restitution is imposed. Tony
a.
can return the car in its present condition and avoid any further liability.
b.
is not required to return the car due to his or her minority.
c.
must return the car and pay for the damage.
d.
will not be able to return the car unless it can be fully restored to its original condition.
 
B

42. 
Max purchases a motorcycle while still a minor and continues to maintain it and operate it after reaching the age of majority. Most courts would hold that he had
a.
disaffirmed the contract.
b.
ratified the contract.
c.
rescinded the contract.
d.
none of the above.
 
B

43. 
Mary signs a contract with an unlicensed plastic surgeon to have several medical procedures performed on her. Mary later changes her mind and cancels the contract. This will
a.
not protect her from being sued for breach of contract.
b.
be acceptable because the contract is unenforceable anyway.
c.
make no difference because only the doctor has the right to cancel the contract.
d.
none of the above.
 
C

44. 
First National Bank signs an agreement not to compete with City Bank that will bar City Bank from continuing to operate in the state in which both banks do almost all of their business. The agreement is likely
a.
an unreasonable restraint of trade.
b.
enforceable.
c.
enforceable if it is ancillary to an agreement by the First National Bank to purchase all of the assets of the City Bank.
d.
none of the above.
 
B

45. 
Bruce signs a covenant not to compete with his employer, Midwest Products, Inc. The covenant will be enforced if it
a.
is supported by consideration.
b.
is reasonable with respect to duration and geographical scope.
c.
does not require either party to obtain a business license.
d.
none of the above.
 
A

46. 
Nora signs a covenant not to compete with her employer, National Sales Corporation. The covenant will be struck down
a.
if it is greater than necessary to protect a legitimate business interest.
b.
if it is not ancillary to the sale of a business.
c.
if Nora elects to avoid the covenant within a reasonable period of time.
d.
under no circumstances.
 
D

47. 
Which of the following businesses would not be able to enforce an exculpatory clause under almost any circumstances?
a.
Airlines
b.
Banks
c.
Public utilities
d.
All of the above
 
 
Fact Pattern 14-1

Ben offers to sell his typewriter to Candy but mistakenly transposes some of the digits in the price so that the $420 price appears in the contract as $240. Candy accepts the written offer.
 
D

48. 
Refer to Fact Pattern 14-1. Candy's acceptance will
a.
not be enforceable.
b.
not be enforceable because it was a scrivener's error.
c.
be enforceable because Ben should have read the copy of the offer more closely before sending it out.
d.
be enforceable because Ben must bear the responsibility for his mistake.
 
A

49. 
Due to statements by Lynn, a stockbroker, Mike believes that the price of American Goods, Inc. (AGI), a widely traded stock, is going to increase substantially. Mike buys 500 shares of AGI at $10 per share, but the stock almost immediately drops to $2 a share. Mike can successfully
a.
not recover anything because he was mistaken as to the value of the stock.
b.
recover from Lynn the amount of the purchase price.
c.
recover from Lynn the amount of the purchase price only if he would not have bought the stock but for Lynn's statements.
d.
none of the above.
 
C

50. 
James is convicted of arson for burning down his apartment building to collect the insurance. James's failure to reveal this fact on his application for insurance on a new building, in answer to a question about prior convictions, will result in the contract being declared
a.
void.
b.
binding due to the failure of the insurance company to investigate James.
c.
voidable at the option of the insurance company because the statement is material to the decision of the company whether to issue coverage.
d.
binding in any event.
 
C

51. 
Tom uses undue influence to induce Monica to enter into a contract. Monica may choose
a.
only to carry out the contract.
b.
only to avoid the entire transaction.
c.
to carry out the contract or to avoid the entire transaction.
d.
none of the above.
 
C

52. 
Mark induces Claude to sign a contract by placing a gun to Claude's head. The contract is void
a.
only if it is unfair to Claude.
b.
only if the contract is made to accomplish an illegal purpose.
c.
under any circumstances.
d.
none of the above.
 
A

53. 
Greg uses threats of physical harm to force Kim to enter into a contract. This is
a.
duress.
b.
fraud.
c.
puffery.
d.
undue influence.
 
 
Fact Pattern 14-3

Marie enters into a contract to sell fruit to Doug. Later, Marie refuses to perform, and Doug sues to enforce the contract.
 
D

54. 
Refer to Fact Pattern 14-3. Imagine that Marie and Doug are in a state that does not recognize the doctrine of unconscionability. To defend successfully against enforcement of the contract on similar grounds, Marie can rely on traditional notions of
a.
duress.
b.
fraud.
c.
undue influence.
d.
all of the above.
 
D

55. 
ABC Realty Company and Fine Investments, Inc., enter into a contract for a sale of land. To be enforceable, the contract must be in writing if the land is valued at
a.
$50.
b.
$500.
c.
$5,000.
d.
any of the above.
 
D

56. 
City Transport Corporation and Midwest Warehouses, Inc., enter into a lease for a warehouse. To be enforceable, the lease must be in writing if the warehouse is valued at
a.
$50.
b.
$500.
c.
$5,000.
d.
any of the above.
 
C

57. 
Tom and Sally enter into an oral contract under which Tom agrees to provide delivery service for Sally for six months. This contract is
a.
enforceable by Tom only.
b.
enforceable by Sally only.
c.
enforceable by either party.
d.
not enforceable.
 
D

58. 
Mike and National Computer Service (NCS) enter into an oral contract under which Mike agrees to program computers for NCS for two years. This contract is
a.
enforceable by Tom only.
b.
enforceable by Sally only.
c.
enforceable by either party.
d.
not enforceable.
 
D

59. 
Rita agrees to assume a debt of Sam to City Credit Company. This promise is not for the benefit of Rita. To be enforceable, the promise must be in writing if the debt is for
a.
$50.
b.
$500.
c.
$5,000.
d.
any of the above.
 
D

60. 
International Business, Inc. (IBI), agrees to assume a debt of Southern Export Company to First National Bank. This promise is for the benefit of IBI. To be enforceable, the promise must be in writing if the debt is for
a.
$50.
b.
$500.
c.
$5,000.
d.
none of the above.
 
A

61. 
Representatives of American Manufacturing Company and National Sales Corporation orally agree to several different contracts. The Statute of Frauds will not bar enforcement of an oral contract for
a.
a sale of goods for $300.
b.
a sale of land.
c.
a task that cannot be performed within a year.
d.
none of the above.
 
C

62. 
Jack, an accountant, files a suit against Software Associates, Inc., asking the court to enforce a contract between the parties under the doctrine of promissory estoppel. According to this doctrine, the court can enforce the contract only if it is one that, under the Statute of Frauds, would otherwise be
a.
enforceable only.
b.
unenforceable only.
c.
enforceable or unenforceable.
d.
none of the above.
 
B

63. 
Ken, an architect, files a suit against American Design Center (ADC), a development company, asking the court to enforce a contract between the parties. The only written evidence of the contract is a memo on ADC letterhead in ADC's files. The court can enforce the contract if, besides the letterhead, the memo includes
a.
ADC's official seal.
b.
the essential terms.
c.
the heading "Contract."
d.
none of the above.
 
C

64. 
Barb and Dale enter into an oral contract for a sale of Barb's $100 bicycle. Before Dale takes possession, under the Statute of Frauds this contract is
a.
enforceable by Barb only.
b.
enforceable by Dale only.
c.
enforceable by either party.
d.
not enforceable.
 
C

65. 
Carol and Dan enter into an oral contract for Carol's sale to Dan of a computer monitor for $400. Before Dan takes possession of the monitor, this contract is
a.
enforceable by Carol only.
b.
enforceable by Dan only.
c.
enforceable by either party.
d.
not enforceable.
 
A

66. 
National Vehicle Company and Southern Transport, Inc., sign a written contract for a sale of goods. To enforce terms that are not specifically required, those terms must
a.
adequately reflect the parties' intentions.
b.
be stated exactly.
c.
adequately reflect the parties' intentions and be stated exactly.
d.
none of the above.
 
A

67. 
National Manufacturing, Inc., files a suit against General Contractors Corporation to enforce a written contract between the parties. Parol evidence will be admitted if
a.
the contract requires extrinsic evidence to be understood.
b.
the court wants to consider additional evidence.
c.
the parties engaged in prior negotiations that vary the terms.
d.
any of the above.
 
C

68. 
Doug files a suit against Universal Products, Inc., to enforce a written contract for a sale of goods between the parties. Parol evidence will be admitted to prove
a.
contemporaneous oral agreements that vary the written contract.
b.
prior agreements that vary the terms of the written contract.
c.
the course of performance.
d.
any of the above.
 
A

69. 
Erin is the agent of Franco, an actor. Erin makes a deal for Franco to act in a new movie for Great Productions, Inc. The contract is binding on Franco if it is signed on his behalf by
a.
Erin.
b.
Great Productions.
c.
the Screen Actors Guild.
d.
none of the above.
 
A

70. 
Carol is an agent for Dirk, a recording artist. Carol makes a deal for Dirk to record exclusively for six years for Excel Music, Inc. For the contract to be binding on Dirk, it must be signed by
a.
Carol only.
b.
Carol and Dirk.
c.
Excel Music only.
d.
none of the above.
 
 
Fact Pattern 31-1

Janet and Julie work at ABC Interiors. Janet is a designer who works with clients of ABC on interior design projects. ABC closely supervises all of its designers, and dictates their work schedules. Julie works part-time in the evenings cleaning the offices.
 
B

71. 
Refer to Fact Pattern 31-1. Janet is ABC's
a.
employee but not agent.
b.
employee and agent.
c.
independent contractor.
d.
employee, agent, and independent contractor.
 
A

72. 
Warren hires Sam and Toby to paint his barn one time only. Sam decides it would be easier to paint the top of the barn by climbing up a nearby tree and jumping onto the roof. Sam falls out of the tree and breaks his leg. Warren is liable for
a.
nothing, because Sam is an independent contractor.
b.
Sam's medical costs, because Sam is an agent.
c.
Sam's lost income and medical costs, because Sam is an employee.
d.
none of the above.
 
A

73. 
Helen retains Jack to act as her authorized business agent. Helen does not know that Jack is a minor. Jack enters into a contract on Helen's behalf. The contract is
a.
binding on Helen.
b.
binding on Jack.
c.
void.
d.
voidable.
 
D

74. 
Phil is an executive acting as an agent for National Development Corporation (NDC). In an ordinary business situation, Phil
a.
must obtain written authority from NDC to enter into contracts on NDC's behalf.
b.
must obtain written ratification from NDC of any contracts entered into on NDC's behalf.
c.
is estopped from denying that he is acting on NDC's behalf.
d.
none of the above.
 
A

75. 
Fred is legally incompetent. Fred can be
a.
an agent only.
b.
a principal only.
c.
an agent or a principal.
d.
none of the above.
 
 
Fact Pattern 31-3

Maurice employs Stuart as his authorized business agent. Maurice's daughter Jane petitions a court to declare Maurice mentally incompetent. The court grants Jane's request on June 1.
 
A

76. 
Refer to Fact Pattern 31-3. Stuart enters into a contract on Maurice's behalf on June 8, before Stuart knows of the court's action. The contract is
a.
void.
b.
voidable.
c.
binding on Jane.
d.
binding on Maurice.
 
A

77. 
Oscar introduces Vinny to his business suppliers as "my associate." Although Oscar has not given Vinny authority, Vinny purports to act as his agent in several deals with the suppliers. An agency relationship may be found to exist between Oscar and Vinny according to
a.
the doctrine of estoppel.
b.
the mirror image rule.
c.
the Statute of Frauds.
d.
the parol evidence rule.
 
C

78. 
Fred is appointed as a sales agent for Treasure Island, Inc. The agency agreement is silent as to the level of sales that Fred is expected to achieve. Fred is required to
a.
sell nothing.
b.
achieve the level of sales that was attained by the company before he agreed to work as its agent.
c.
use reasonable diligence and skill in selling.
d.
none of the above.
 
A

79. 
Donna holds herself out as possessing special engineering skills. As an agent, she must exercise the degree of skill or care expected of
a.
a person having those skills.
b.
a reasonable person.
c.
a reasonable person under similar circumstances.
d.
none of the above.
 
A

80. 
Ellen, a salesperson at Top Tile Company, tells a customer, "Buy your tile here, and I'll install it myself for half of what Top would charge you." The customer makes the purchase based on Ellen's representation. Ellen installs the tile, charges the customer $500, and keeps the money. Ellen has breached the duty of
a.
loyalty.
b.
notification.
c.
obedience.
d.
none of the above.
 
C

81. 
Rick trains with, and works as an agent for, Computer Design Associates. Which of the following acquired during the relationship could Rick use for his personal gain after termination of the relationship?
a.
Information
b.
Knowledge
c.
Skills
d.
None of the above
 
D

82. 
Burger Queen, Inc., grants its agent Phil an exclusive territory in which to sell Burger Queen products. Burger Queen cannot compete with Phil in that territory under the principal's duty of
a.
compensation.
b.
reimbursement.
c.
indemnification.
d.
cooperation.
 
B

83. 
Nora hires Vicky to act as her agent. Nora's right to avoid any contract entered into by Vicky, if Vicky breaches their agency agreement, is the right of
a.
nullification.
b.
avoidance.
c.
termination.
d.
indemnification.
 
B

84. 
Paul employs Executive Personnel Agency as an agent. They sign a written agreement that describes the rights and duties of both parties. This is an example of
a.
apparent authority.
b.
express authority.
c.
implied authority.
d.
none of the above.
 
A

85. 
Paula holds a power of attorney for Quinn. Paula is
a.
an attorney-in-fact.
b.
an attorney-in-law.
c.
a durable attorney.
d.
a notary public.
 
A

86. 
Phil is an agent for Quality Products Corporation. Whether it is reasonable for Reserve Supply Company to believe that Phil has the authority to enter a particular contract on Quality's behalf, when Phil does not actually have that authority, is a question of
a.
apparent authority.
b.
general authority.
c.
power of authority.
d.
special authority.
 
B

87. 
Tad, an agent for Umbrella Financial Corporation, executes an unauthorized contract with Variety Sales, Inc., that is highly advantageous to Umbrella. Variety withdraws from the deal before Umbrella ratifies the contract. The contract is
a.
valid.
b.
void.
c.
voidable.
d.
none of the above.
 
 
Fact Pattern 32-1

Al indicates that he is acting as an agent on behalf of an unidentified client when he enters into a contract with Stacey.
 
B

88. 
Refer to Fact Pattern 32-1. The principal is
a.
disclosed.
b.
partially disclosed.
c.
undisclosed.
d.
none of the above.
 
C

89. 
Refer to Fact Pattern 32-1. Who is liable to the third party for nonperformance of the contract?
a.
Al
b.
Al's principal
c.
Both a and b
d.
None of the above
 
C

90. 
Brenda is a salesperson for Scot's Home Supply. She advises a customer that certain lumber will last for twenty years without treatment to prevent water damage. In reliance on this advice, the customer purchases the wood. Brenda's statement is in error, and the lumber deteriorates within three years. Scot's Home Supply is
a.
not liable—only Brenda is liable.
b.
not liable, nor is Brenda, because the customer should have known that the wood could not last for twenty years.
c.
liable, because the misrepresentation occurred within the scope of Brenda's employment.
d.
liable, with Brenda, under the rule of shared liability.
 
B

91. 
Lyle is an agent for Marketing International, Inc. Lyle innocently makes a misrepresentation when entering into a contract on behalf of Marketing with Nationwide Sales Corporation. Nationwide
a.
may rescind the contract.
b.
may rescind the contract and sue for damages.
c.
must perform the contract.
d.
none of the above.
 
C

92. 
Tri-State Trucking Company employs Warren as a delivery agent. While making a delivery within the scope of employment, Warren causes an accident in which Yvonne is injured. Yvonne can recover from
a.
Tri-State Trucking only.
b.
Warren only.
c.
Tri-State Trucking or Warren.
d.
none of the above.
 
A

93. 
Gil is a purchasing agent for H&H Ranch with the authority to buy cattle at a certain auction. After the cattle have been bought, the agency relationship terminates
a.
automatically.
b.
following notice to all actual cattle sellers.
c.
following notice to all potential cattle sellers.
d.
following published notice in a local newspaper.
 
C

94. 
On May 1, Aaron retains Betty to act as his authorized business agent. On June 1, a court declares Aaron mentally incompetent. Before Betty knows of the court's declaration, she enters into a contract on Aaron's behalf. The contract is
a.
binding on Aaron.
b.
binding on Betty.
c.
void.
d.
voidable.