This is a course on Law of Contracts.

1.

Mary slipped and fell while shopping in Giant Department Store. Giant's liability carrier defended on the basis of a $1,000 release taken by its adjuster, Sam. Mary claimed that she only signed the release because Sam had convinced her that she had little chance of winning a lawsuit against Giant in court, since she herself had been negligent in causing the fall. Mary argued that since Sam fraudulently induced her to sign the release, it can be avoided at her option. Who will prevail?

A.

Mary, because Sam misrepresented a material fact when he told her she had little chance of winning a lawsuit.

B.

Mary, because Sam misrepresented the nature of the document she signed by telling her she had little chance of winning in court.

C.

The insurer, because Mary had the means of ascertaining the true nature of the document she signed.

D.

The insurer, because giving an opinion about the outcome of a case does not constitute a misrepresentation of a material fact.

Select one

A

B

C

D

2.

Big Plow Co.'s business manager, Rick, mailed a letter to Huge Gas Station in which Big offered to plow Huge's service area and parking lot the entire winter season for $10,000. The offer did not specify the manner of acceptance. Tom, Huge's manager, received the letter on Wednesday afternoon. The next morning, Tom faxed a letter to Rick stating that Huge accepted Big's offer. When Rick showed Huge's acceptance letter to Bubba, Big's owner, Bubba told Rick to revoke the offer because Big was too busy to take on new clients. Rick called Huge and left a message on Tom's voice mail revoking the offer. Is there a contract between Big and Huge?

A.

No, because Huge did not respond to the initial offer by return mail.

B.

No, because Big Plow revoked the offer when Rick called Tom.

C.

Yes, because a contract was formed when Huge faxed the acceptance to Big Plow.

D.

Yes, because a contract was formed when Big Plow received Huge's fax.

Select one

A

B

C

D

3.

Mort hired Fred to sandblast and repaint his pool. Under the contract, Fred was to complete the sandblasting by May 8 and the painting by May 15. By May 10 it was clear to Mort that Fred would not be done on time, since he hadn't yet finished the sandblasting, but Mort said nothing. Fred finished painting the pool on May 22 and gave his bill to Mort. Mort refused to pay because Fred had not completed the job within the time stated in the contract. Fred sued Mort. Mort argues that he owes nothing because Fred breached the contract by finishing late. Who should prevail?

A.

Fred, because Mort impliedly waived Fred's breach of the contract by saying nothing.

B.

Fred, because Mort expressly waived Fred's breach of the contract by saying nothing.

C.

Mort, because Fred breached the contract by failing to complete the sandblasting by May 8.

D.

Mort, because Fred breached the contract by not finishing painting the pool until May 22.

Select one

A

B

C

D

4.

Molly's summer beach house sustained storm damage on August 20, 2016 and she filed a claim with Privileged Indemnity, her property insurer, on August 22, 2016. Privileged denied the claim on September 29, 2016, stating that the damage was from storm surge, which was not covered by the policy. Molly filed suit against Privileged on October 2, 2017, alleging breach of contract. The conditions in her policy require, as allowed by law, that any suit under the policy had to be filed within one year of the date of loss. The statute of limitations for breach of contract claims in this state is ten years. Privileged argued that the suit was time barred and moved to dismiss Molly's lawsuit. Privileged's argument is:

A.

Not valid, because the insured filed suit within ten years of the loss.

B.

Not valid, because the insured filed suit within ten years of the denial of the claim.

C.

Valid, because the insured filed suit more than one year after the loss.

D.

Valid, because the insured filed suit more than one year after the denial of her claim.

Select one

A

B

C

D

5.

Sam, a 17-year-old, wanted to make money cutting lawns during the summer. Sam purchased a used push mower for $200 from Jessica, his 30-year-old neighbor. After using the mower all summer Sam returned it to Jessica and demanded a refund of his $200. Jessica refused and believes Sam cannot disaffirm the contract. Is she correct?

A.

No, because the minor can disaffirm the contract, return the mower, and recover the full amount of the consideration he paid.

B.

No, because the minor can disaffirm the contract and recover the consideration he paid less the value of his use and depreciation.

C.

Yes, because contracts with minors are voidable by the adult, not the minor.

D.

Yes, because Sam ratified the contract by using the mower all summer.

Select one

A

B

C

D

6.

Myra brought her mink coat to Lenny's Dry Cleaning for summer storage. Myra paid $30 for three months storage. Lenny provided Myra with a receipt, which stated that Lenny's was not responsible for loss or damage to the coat regardless of cause. When Myra returned in the fall to pick up her coat she discovered a long tear in its lining. Myra demanded that Lenny's pay for the repair to the coat, but it refused on the basis of the language of the receipt. Myra filed suit against Lenny's. In most courts, who should prevail?

A.

Myra because exculpatory agreements involving professional bailees are usually invalid based on public policy.

B.

Myra because exculpatory agreements are invalid where the parties do not have equal bargaining power.

C.

Lenny's because exculpatory agreements are generally given validity.

D.

Lenny's because the exculpatory agreement does not involve a sensitive public matter.

Select one

A

B

C

D

7.

Laura's pet poodle jumped into her lap while she was driving and caused her to broadside Stacey's sports car. Stacey suffered broken ribs and a collapsed lung. Ken was the adjuster for Laura's insurer and he offered to settle Stacey's claim for $90,000, which she accepted. Ken had Stacey sign a release that included the following Language "Claimant has been advised and understands that the injuries sustained in this incident and giving rise to this claim are such that the full extent and type of injuries are not known as of the date of this agreement. Claimant specifically agrees, as additional consideration for this settlement, that this agreement applies to all unknown or unanticipated injuries as well as to those that are now known." Not long after the release was executed Stacey experienced ankle pain and it was discovered that she had a fracture that was caused by the auto accident. Stacey seeks to avoid the release on the basis of mutual mistake. Is Stacey likely to succeed?

A.

No, because both parties knew that the claimant had suffered injuries when the release was signed.

B.

No, because the signed release expressly mentioned additional consideration for unknown injuries.

C.

Yes, because neither party was aware of the ankle injury when the release was signed.

D.

Yes, because the claimant's injuries were more serious than contemplated by the parties when the release was signed.

Select one

A

B

C

D

8.

Nick runs a liquor store in Small Town. Every summer, Nick enters into a contract to supply liquor to a nightclub owned by Silvio in a neighboring town. Because of drunk driving accidents, the Small Town Council considered enacting a law banning the sale of liquor and operation of liquor stores within Small Town. Meanwhile, Nick emailed Silvio, offering to supply liquor for the upcoming summer season. The Small Town council passed the law. Unaware of the new law, Silvio emailed his acceptance the next day. Nick called Silvio and explained that he could not fulfill the order and Silvio filed a breach of contract lawsuit against Nick. Silvio's lawsuit will be:

A.

Successful, because Silvio accepted Nick's offer.

B.

Successful, because the offer and acceptance were in writing.

C.

Unsuccessful, because an offer can be revoked even after acceptance.

D.

Unsuccessful, because the subject matter of Nick's offer became illegal.

Select one

A

B

C

D

9.

Max was injured when he slipped and fell on ice on Big Auto Dealer's lot. Max filed suit against Big and made a $50,000 settlement demand. Max was contacted by an adjuster from Big's insurer who claimed that "there was no way the insurer would pay more than $35,000." Max said he would accept $35,000 if that was the best offer. Seven days later the adjuster called and said that $20,000 was the insurer's final offer. Max argued that there was already a settlement for $35,000 but the insurer disagreed. Max's suit to enforce a contract for $35,000 will:

A.

Succeed, because a contract was formed when Max accepted the offer to settle for $35,000.

B.

Succeed, because an offer cannot be revoked after it has been accepted.

C.

Fail, because the agreement to settle was not in writing.

D.

Fail, because the adjuster's statement was not an offer.

Select one

A

B

C

D

10.

When Corinne joined Huge Gym she signed a contract with an exculpatory clause that provided in bold print on the first page: "THE MEMBER KNOWINGLY AND VOLUNTARILY USES THE GYM AND ITS EQUIPMENT AT HIS OWN RISK, THE MEMBER ASSUMES ALL RISK OF INJURY TO HIS PERSON OR PROPERTY, AND THE MEMBER SPECIFICALLY RELEASES AND DISCHARGES IN ADVANCE THE GYM AND ITS EMPLOYEES FROM ANY AND ALL LEGAL LIABILITY FOR INJURIES OR DAMAGE EVEN IF IT ARISES OUT OF THE NEGLIGENCE OF THE GYM OR ITS EMPLOYEES." Corinne sued Huge after she was injured when a rowing machine malfunctioned. Huge argued that the exculpatory clause protects it from liability to Corinne. Huge is:

A.

Correct, because the exculpatory clause is part of the binding contract Corinne signed.

B.

Correct, because the exculpatory clause is specific enough to advise Corinne that she waived her right to sue the gym for its negligence.

C.

Incorrect, because enforcement of exculpatory clauses in health club contracts is contrary to public policy.

D.

Incorrect, because the exculpatory clause did not specifically mention this type of incident.

Select one

A

B

C

D

11.

Brad suffered brain damage in an accident and was legally placed under the guardianship of his daughter, Beth. Dick, a developer, was aware that Beth was Brad's guardian. Dick waited until Beth went to the dentist and left Brad alone. Dick knocked on Brad's door and offered to purchase a vacant lot that Brad owned for $75,000, which Dick knew was $150,000 less than the lot's true value. Brad agreed and signed a written contract. When Beth learned of the contract, she told Dick that it was void and unenforceable. Dick filed suit against Brad to enforce the contract. Dick's suit will be:

A.

Successful, because the contract is voidable only at Brad's option.

B.

Successful, because the agreement between Brad and Dick satisfied all of the elements of a contract.

C.

Unsuccessful, because Brad was under Beth's legal guardianship at the time the contract was made.

D.

Unsuccessful, because Brad accepted an unfair offer that was $150,000 less than the lot's true value.

Select one

A

B

C

D

12.

Tina's house caught fire and sustained significant water damage as a result of the fire department's efforts to extinguish the flames. Tina notified her homeowners insurer, Smokey Casualty, and entered into a contract with Proficient Restorations Inc. to repair her house and perform water remediation. Proficient agreed to perform its services in exchange for an assignment of Tina's rights under Smokey's policy. After restoring Tina's house, Proficient submitted its invoice to Smokey as Tina's assignee. Smokey Casualty, however, argued that it owed no money to Proficient. Smokey is:

A.

Correct, because post-loss assignments are not valid.

B.

Correct, because Smokey did not agree to the assignment.

C.

Incorrect, because the insurance policy can be assigned to a third party.

D.

Incorrect, because a post-loss assignment of a property loss claim is valid.

Select one

A

B

C

D

13.

Bert was injured as a result of faulty deck railing at Michele's beach house. Bert filed suit against Michele and she defended based on a release that Bert had executed. At the time Bert signed the release, he claimed that he suffered a lumbar strain and that his disability period would be approximately four months. Michele accepted Bert's claims and settled on that basis. As time progressed, however, Bert's orthopedist reevaluated him and determined that his recovery would be at least eight months. Based on this, Bert believes that he can avoid the release. Bert is:

A.

Correct, because both parties were unaware of the claimant's increased disability when the release was signed.

B.

Correct, because the claimant actually believed that his disability would only be four months when the release was signed.

C.

Incorrect, because a mistake about the nature or severity of a known injury is not grounds to avoid a release.

D.

Incorrect, because the release was signed by the claimant.

Select one

A

B

C

D

14.

Moon Insurance was negotiating a settlement with Carla, an attorney, for two weeks. Moon's last offer was $15,000 and Carla's last demand was $17,000. Moon then sent Carla a letter stating, "We will settle the claim for $18,000. This is our final offer." Carla immediately accepted the offer. As soon as Moon received the acceptance it realized that a clerical error had been made and the offer should only have been $16,000. Moon refused to recognize the settlement. Carla's motion to enforce the settlement will be:

A.

Unsuccessful, because there was a clerical error and Moon never intended to settle the claim for this amount.

B.

Unsuccessful, because the circumstances put Carla on notice of the error.

C.

Successful, because the offeror is bound by the mistake of its agent.

D.

Successful, because there was a unilateral mistake on Moon's part.

Select one

A

B

C

D

15.

13-year-old Manuel was bullied by fellow classmate Vlad. The harassment included throwing food at Manuel, shoving him against lockers, and sucker punching him. Manuel told his father, Raoul, about the bullying and Raoul notified the principal. The principal responded by convening a meeting with the school social worker and both families. The meeting was unproductive and the bullying continued. Realizing that the school would not help his son, Raoul emailed Vlad and offered him $500 to stop physically harassing Manuel for the remainder of the school year. Vlad agreed to Raoul's terms and the bullying stopped. When Vlad tried to collect the $500 Raul refused to pay. If Vlad sued Raoul for breach of contract, who would prevail?

A.

Raoul, because forbearance is not legal consideration and cannot result in a valid contract.

B.

Raoul, because the forbearance must be something to which the offeree was legally entitled.

C.

Vlad, because there was a promise in return for forbearance.

D.

Vlad, because the act of ending the harassment was sufficient consideration for the offeror's promise to pay.

Select one

A

B

C

D

16.

Libby was injured in an accident with Val and made a claim with Val's insurer, Central Casualty. At a meeting with Libby, Central's adjuster offered a $35,500 settlement if Libby would sign a release of her claim. Libby accepted the offer and signed a release. The adjuster mailed the check but immediately changed his mind. The adjuster called Libby before the check arrived and said Central had reconsidered and was going to contest the claim. Libby sued Central for breach of contract. Central argues that there is no legally enforceable settlement agreement because the element of consideration is missing. Central's position is:

A.

Invalid, because the adjuster mailed the check.

B.

Invalid, because Libby released her claim in exchange for the adjuster's promise to pay $35,500.

C.

Valid, because the adjuster merely promised to pay while Libby actually signed the release.

D.

Valid, because the adjuster called before Libby received the check.

Select one

A

B

C

D

17.

Greta tripped and fell over bunched up carpeting in the lobby of the Pharaoh hotel. Greta sustained soft tissue injuries and contacted Pharaoh's insurer, Pyramid Indemnity, to submit a claim. Pyramid's adjuster faxed Greta an offer of $2,000 to settle her claim. Greta agreed to the offer and faxed back a written acceptance the following day. One week later Pyramid called Greta and withdrew its offer. Pyramid stated that Pharaoh's manager testified at an EUO that he had no notice of the bunched up carpeting and, therefore, Pyramid was denying liability for Greta's accident. Will Greta recover in a breach of contract action against Pyramid?

A.

Yes, because Pyramid breached its settlement contract with Greta.

B.

Yes, because Pyramid's offer and Greta's acceptance were in writing.

C.

No, because Pharaoh caused her injuries and Greta must sue the hotel for breach of contract.

D.

No, because Pharaoh caused her injuries and Greta must bring a tort action against the hotel.

Select one

A

B

C

D

18.

Ed saw an ad on the internet for an antique Lionel train set. Envisioning a valuable first edition, Ed emailed the seller, Sy, and agreed to purchase the train set without inspecting it or asking in what year it was made. Ed paid Sy via an online service. When the train set was delivered, Ed discovered that, while it was an antique and worth what he paid, it was not a first edition. Ed asked for his money back, arguing that the contract of sale can be avoided based on mistake. Sy refused to refund the money. If Ed sues Sy, who will prevail?

A.

Ed, because Ed made a mistake of fact and it would be unconscionable to enforce the contract.

B.

Ed, because Ed was mistaken about the true nature of the train set.

C.

Sy, because a unilateral mistake occurred when Ed bought the train set thinking it was a first edition.

D.

Sy, because Ed's mistake did not involve a material fact.

Select one

A

B

C

D

19.

14-year-old Rathika died while participating in a rafting trip that was led by Rough Water Tours, a privately owned commercial entity. During the trip the raft in which Rathika was riding flipped over, and Rathika was pinned against a rock beneath the water and drowned. Before the white water trip commenced Rathika's father, Sanjay, signed a document labeled "Waiver and Release of Liability." The document stated: THE PARTICIPANT KNOWINGLY AND VOLUNTARILY ACCEPTS THE RISKS ASSOCIATED WITH WHITE WATER RAFTING AND PARTICIPATES AT HER OWN RISK. THE PARTICIPANT ASSUMES ALL RISK OF INJURY TO HER PERSON OR PROPERTY, AND SPECIFICALLY RELEASES AND DISCHARGES ROUGH WATER TOURS AND ITS EMPLOYEES FROM ANY AND ALL LEGAL LIABILITY FOR INJURIES OR DAMAGE EVEN IF THEY ARISE OUT OF THE NEGLIGENCE OF ROUGH WATER TOURS OR ITS EMPLOYEES. Sanjay sued Rough Water Tours for wrongful death. Who will prevail?

A.

Rough Water Tours, because Sanjay had a parental right to sign the exculpatory agreement on behalf of his minor child.

B.

Rough Water Tours, because the exculpatory agreement specifically relieved it of liability for its negligence.

C.

Sanjay, because a commercial enterprise cannot exculpate itself from liability for a minor's injuries.

D.

Sanjay, because the minor child did not sign the exculpatory agreement.

Select one

A

B

C

D

20.

Ellen was seriously injured when she lost control of her car and crashed into a median. An investigation revealed that there was a defect in the car's steering column. After her release from the hospital Ellen retained an attorney, McLear, to help her pursue a claim against the car's manufacturer, Hayasa Co. McLear submitted an engineer's report to Hayasa's insurer, Northfork Casualty, to confirm the manufacturing defect. Northfork's expert agreed that there was a defect in the steering column. McLear forwarded copies of Ellen's medical records to Northfork. With Ellen's authorization, McLear offered Northfork $150,000 to settle the claim to avoid a lawsuit. Northfork agreed to the offer and mailed out a release for Ellen to sign. Before Ellen signed the release, McLear contacted Northfork and demanded an additional $10,000 to cover Ellen's car repair expenses. Northfork denied McLear's request for the additional money. Northfork's argument that the original settlement is final and binding is:

A.

Invalid, because the claimant had not yet signed the release.

B.

Invalid, because the settlement had not yet been reduced to writing.

C.

Valid, because there was an offer, acceptance, and valid consideration.

D.

Valid, because the attorney made an offer within his client's authorization.

Select one

A

B

C

D