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Quiz on Contract Defenses, Contract Remedies, and Sales Laws
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1. A contract may be discharged by: 2. A debtor or borrower who creates a mortgage on real estate is called the: 3. A party to a contract may transfer her or his right to receive the contract’s benefit to another individual. That individual is called an assignee. True or False. 4. A(n) _________ is a contract entered into by the parties whereby one party is substituted for another party. 5. According to Garcia v. Texas Cable Partners, a contract between parties to “lend” property is a rental agreement and the late fees associated with the lease were not construed as “interst” under the usury law. True or False. 6. An unconscionable contract is: 7. Becky gets into a car accident with Enrique. Becky is responsible for causing substantial damage to Enrique’s car. Becky offers to pay for all of the damage so long as Enrique promises to not take Becky to court for the property damage done to his car. Enrique accepts this offer. These parties have entered into which type of contract: 8. Blue Sky laws prohibit liquor stores and certain other businesses from being open on Sundays. True or False. 9. Certain valid contracts, by statute, must be in writing to be legally enforceable by a court; this statute is called the statute of frauds. True or False. 10. Chris borrowed $120,000 from County Federal Bank to purchase a home. The loan was secured by the home, meaning that if Chris doesn’t make his monthly mortgage payments to the bank, then the bank is allowed to sell Chris’s house. County Federal Bank is the: 11. Chris defaulted on a mortgage note. At the time, he owed the bank $130,000. The bank foreclosed on the property, and sold it for $100,000. The bank then sought to recover that extra $30,000 by getting a: 12. Contract clauses limiting liability from negligent acts that will be enforceable if both parties to the contract are of equal bargaining strength. 13. Disaffirmation of a contract is the act of accepting and giving legal force to a contract. True or False. 14. Duties that are personal cannot be delegated. True or False. 15. Fill in the blank. A ________ occurs when a debtor fails to pay a note, which can result in the creditor declaring the laon due immediately. 16. Fill in the blank. ________________ licenses govern the qualifications of the person or business to conduct specific types of operations. 17. Fill in the blank. _______ licenses establish licensing requirements solely to raise money. If a business fails to obtain this type of license, the state can take action against the business, but generally the lack of license has no effect on contracts into which the business may enter. Answer: Revenue-raising 18. Fill in the blank. ________ damages are designed to repay an injured party for economic injuries incured. 19. Fill in the blank. ____________ is the lawsuit whereby the creditor seeks to ha vethe loan repaid by seizing and selling property that was given as collateral. 20. Fill in the blank. A __________ contract is a promise to pay the debt of someone else, if that person doesn’t pay his or her own debt. collateral 21. Fill in the blank. Fill in the blank. Johnny purchases a new house for $160,000. He arranges with Wells Fargo that he will pay the seller $10,000, and Wells Fargo will pay the seller $150,000. Johnny will then repay the $150,000 to Wells Fargo over the next 30 years, at 7% interest, in monthly installments. The note is secured by a lien on the house. Wells Fargo is called a _____________. 22. Fill in the blank. Fill in the blank. Fill in the blank. Johnny purchases a new house for $160,000. He arranges with Wells Fargo that he will pay the seller $10,000, and Wells Fargo will pay the seller $150,000. Johnny will then repay the $150,000 to Wells Fargo over the next 30 years, at 7% interest, in monthly installments. The note is secured by a lien on the house. Johnny is called a _____________. 23. Fill in the blank. Fill in the blank. Fill in the blank. Fill in the blank. Johnny purchases a new house for $160,000. He arranges with Wells Fargo that he will pay the seller $10,000, and Wells Fargo will pay the seller $150,000. Johnny will then repay the $150,000 to Wells Fargo over the next 30 years, at 7% interest, in monthly installments. The note is secured by a lien on the house. If Johnny fails to pay the note, that is called a _____________ by Johnny. 24. Fill in the blank. Fill in the blank. Fill in the blank. Fill in the blank. Fill in the blank. Johnny purchases a new house for $160,000. He arranges with Wells Fargo that he will pay the seller $10,000, and Wells Fargo will pay the seller $150,000. Johnny will then repay the $150,000 to Wells Fargo over the next 30 years, at 7% interest, in monthly installments. The note is secured by a lien on the house. If Johnny fails to pay the note, Wells Fargo can recoup its loan by selling the property in a lawsuit called a _____________ action. 25. Fill in the blank. If the procedes from a foreclosure sale are not sufficient to recover the foreclosure costs and tee repay the laon, the creditor can seek to recover the difference by obtaining a ______________________________________. 26. Fill in the blank. Johnny purchases a new house for $160,000. He arranges with Wells Fargo that he will pay the seller $10,000, and Wells Fargo will pay the seller $150,000. Johnny will then repay the $150,000 to Wells Fargo over the next 30 years, at 7% interest, in monthly installments. The note is secured by a lien on the house. This arrangement is called a _____________. Answer: mortgage. 27. Fill in the blank. The courts will generally enforce ________ damages clauses if the actual damages are difficult to determine, and the amount is reasonable. 28. Fill in the blank. The statute of _________ is the term for a law requiring certain types of contracts to be in writing in order to be enforceable. 29. Fill in the blank. _____________ damages are predetermined in a contract before there is a breach. 30. Fill in the blank. If a person lacks a _______________ license, normally any business contract that he or she enteres into is declaured null and void. 31. Generally, the age of majority for contract purposes is: 32. If a contract benefits a third party beneficiary incidentally, the third party will have the power to enforce the contract. True or False. 33. If one party to a contract dies or becomes mentally incompetent and that person’s performance is essential to the contract’s completion, the contract may be discharged by: 34. If the contract has not been fully perfomed, the parties may not agree to discharge the contract; the contract amy only be discharged by the operation of law. True or False. 35. Jamie, after graduating from business school at State University, opens a construction company. She has several employees, including three office staff. The Jamie Construction Company specializes in building custom homes. What type of license will Jamie’s company need to obtain? 36. Jennifer Jones and Harold Smith enter into an agreement for the sale of Jennifer’s 50-acre ranch. Jennifer and Harold negotiated with each other for weeks before the actualy came to an agreement. Both parties felt they received most of what they wanted. In order to be legally enforceable, their agreement must be in writing. 37. Jerod has been saving his paychecks for six months to purchase a new rare coin to add to his collection. Jerod takes $500 in cash to Carl’s Coin Shop and offers to buy a rare vintage quarter. It is one of a kind. The salesperson agrees to sell is to Carl for $500. This contract between Jerod and Carl’s Coin Shop is: 38. Legal capacity includes both mental capacity and age. True or False. 39. Liz buys a computer on credit for $1,500. She agrees to pay Best Buy $150 per month. Best Buy then turns over Liz’s debt to Western States Financial Co. Nancy now must pay Western States $150 per month until she has finished paying off the debt for her computer. Nancy takes the new computer home, plugs it in, and discovers that it doesn’t work, and won’t even turn on. Western States continues to send Nancy bills, claiming that it’s not Western States’ fault if the Best Buy computer was faulty. Does Nancy have to pay Western States? 40. Minors can enter into contracts for necessaries wherein they have the right to disaffirm the contract. True or False. 41. Nancy, after graduating from ASU with a degree in retail management, opens up a gift shop at Park Central Mall. What type of license will Nancy’s shop need to obtain? 42. Nika buys a new Mazda Miata for $18,000 in 2004, and takes out a five-year note on the car. In 2006, after making two years of payments, Nika still owes $12,000 on the note. Nika puts the car up for sale in the newspaper classifieds. Jenny agrees to buy the Miata for $13,000. Jenny pays Nika $1,000 in cash, and agrees to make the remaining payments on the note. Jenny has good credit history. Nika and Jenny put their agreement in writing. If Jenny skips town and fails to make payments on the note, is Nika still responsible to the auto-finance company to repay the $12,000? 43. One requirement to have a valid contract is that it must entail the performance of a legal act. 44. Revenue licensing statutes are designed to raise revenues for the state or federal government and to regulate professional conduct. True or False. 45. Rick purchased a used refrigerator from Ron’s Appliance Store on credit. Rick agreed to make 12 equal monthly payments. The contract charged Rick 22% interest on the unpaid balance. State law set the maximum interest rate at 18% on consumer items. The contract between Ron’s Appliance Store and Rick is: 46. Rodney purchased furniture for his new home from ABC Furniture Store. Rodney bought the furniture on credit, agreeing to pay $300 per month for sixteen months. ABC transfers the right to receive the $300 per month to Western Financial Institution. The arrangement between ABC and Western Financial is: 47. Rodney purchased furniture for his new home from ABC Furniture Store. Rodney bought the furniture on credit, agreeing to pay $300 per month for sixteen months. After three months of making payments and having the furniture in his house, Rodney learns he has to move to France because his employer is transferring his job there. Rodney then sells the furniture to his cousin, Rachel. Rachel agrees to make the remaining 13 payments to Western Financial. Rodney and Rachel fill out paperwork with Western Financial which discharges Rodney from the original contract. The arrangement substituting Rachel for Rodney is: 48. Ryan Construction Company entered into a contract with the City of New Orleans to build a new park. Claire owns a pool hall next to the debris-strewn land that will serve as the site for the new park. Claire: 49. Sara and Chris entered into a contract by which Chris agreed to pay Sara $100 for a new watch. Chris transferred his right to receive payment for the new watch to Steve. This is known as: 50. Sara sold her restaurant to Chris. Sara agreed not to compete with Chris for two years. The court will uphold this agreement if it is reasonable as to time and area. True or False. 51. Sara, a world renowed musician and composer, agreed to give ten violin lessons to Chris in exchange for $1,000. Sara delegated her duties under the contract to Steve, an inexperienced but enthusiastic violinist. This delegation would be: 52. The contractual duty to make payments to somebody can be delegated to somebody else. True or False. 53. The general effect of an illegal agreement is that it is void. True or False. 54. The laws prohibiting the charging of a higher interest rate than the law allows for a loan of money are known as: 55. The lender or bank who grants a mortgage to a debtor is called a: 56. The parol evidence rule is also known as the best evidence rule because the courts will not allow into evidence any oral statements made prior to or at the time of a written contract’s signing. 57. The transfer of contractual duties to another person is called an assignment. True or False. 58. The transfer of the rights of a party to a contract to a third party is known as a delegation. True or False. 59. The writing requirement of contract law is also known as the: 60. These contracts are express written contracts made by a third person (the guarantor) in addition to the original contract. The third person makes the same promise to pay a debt or to perform a duty to one party (the creditor) on the original contract if the debotr is unable to do so. 61. These laws were passed by states to prevent fraud in investments sales; they apply to the sale of securities within a state. 62. This contract must be in writing to be enforced under the statute of frauds: A contract for Bob’s Carpet Depot to install 2,000 yards of carpet in Mr. Smith’s house. True or False. 63. This contract must be in writing to be enforced under the statute of frauds: An actor’s contract with a movie studio to star in a action-adventure film. True or False. 64. This is a contract between the parties to a contract who have agreed to substitute an outside party for one of the party’s to the original contract. 65. This type of contract must be in writing to be enforced under the statute of frauds: Mr. Smith’s contract with Mr. Jones, to buy Mr. Jone’s 1,500 square-foot house. True or False. 66. Under this rule, a court will not allow into evidence any oral statements made prior to or at the time of a written contract’s signing. 67. Usury is the charging of a higher interest rate than the law allows for a loan of money. In some states usury is a crime. True or False.
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