Multiple-Choice Questions
1. Daniel and Annie signed a contract providing that Annie would sell craft beers to Daniel's grocery stores at a price of $20 per case. During negotiations, Daniel and Annie agreed that the price would go up to $22 per case once he had bought 1,000 cases. This provision never made it into the contract. After the contract had been signed, Daniel agreed to a price of $23 per case once volume exceeded 1,000 cases. The contract had an integration provision but no modification clause. What price must Daniel pay for cases in excess of 1,000?
(a) $20
(b) $22
(c) $23
(d) The contract is void because the terms are unclear.
Because there is an integration clause, the agreement to pay $22 is unenforceable. Because there is no modification clause, the subsequent oral agreement is enforceable.
2. A contract states (1) that Buzz Co. legally exists and (2) will provide 2,000 lbs. of wild salmon each week.
(a) Clause 1 is a covenant and Clause 2 is a representation.
(b) Clause 1 is a representation and Clause 2 is a covenant.
(c) Both clauses are representations.
(d) Both clauses are covenants.
3. The following list provides reasons why a party would strongly consider putting a contract in writing. Which of these reasons is least important?
(a) The Statute of Frauds requires it.
(b) The deal is crucial to your life or the life of your business.
(c) The terms are complex.
(d) The parties do not have an ongoing relationship.
(e) The parties reside in different jurisdictions.
4. Michael and Scarlett cannot agree on the price he will pay her to manage his hotels in the third year of their contract. They agree to a provision stating that the price will be "reasonable." This provision is ¬________________. Parties should never include such a provision in a contract unless ¬-_____________________.
(a) Ambiguous/ they are sure they will be able to reach an agreement later.
(b) Vague/ they are sure they will be able to reach an agreement later.
(c) Ambiguous/ they would not mind if the other side's interpretation prevails in litigation
(d) Vague/they would not mind if the other side's interpretation prevails in litigation
5. Liesl purchased an insurance policy on her house. The policy stated that the insurance company was not liable for any damage to her house caused by vandalism or burglary. An arsonist burned down Liesl's house. Is the insurance company liable?
(a) No, because arson is a form of vandalism.
(b) Yes, because arson is not a form of vandalism.
(c) Yes, because the language is ambiguous and should be interpreted against the insurance company.
(d) No, because the language is vague and should be interpreted against Liesl.
6. A contract provided, "On January 5, Purchaser shall provide Seller with a certified check in the amount of $100,000. Seller shall transfer a deed for the Property to Purchaser." What is wrong with this provision?
(a) It is not clear who Purchaser and Seller are.
(b) The number $100,000 should be written in words.
(c) The promises are reciprocal.
(d) The promises are conditional.