Cengage Advantage Books Law for Business 18th Edition by John D. Ashcroft - Test Bank

Cengage Advantage Books Law for Business 18th Edition by John D. Ashcroft – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

CHAPTER 5—NATURE AND CLASSES OF CONTRACTS

 

MULTIPLE CHOICE

 

1. The failure of a party to perform the obligations assumed under a contract is known as a(n):

a.	intrinsic fraud.
b.	misrepresentation.
c.	negative pledge.
d.	breach of contract.

 

 

ANS:  D                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-1          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

2. Which of the following is true of unenforceable contracts?

a.	They are not valid contracts.
b.	They are the same as voidable contracts.
c.	They can be made enforceable by making a few changes to them.
d.	They are contracts made for an unlawful purpose and the parties can be imprisoned.

 

 

ANS:  C                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Comprehension

 

3. An enforceable contract is made by an adult with a minor. Which of the following is most likely to hold true in this case?

a.	The contract is enforceable against the adult but not against the minor.
b.	The contract is enforceable against the minor but not against the adult.
c.	The contract is not enforceable against either of the parties until the minor attains a majority.
d.	The contract is enforceable against the adult only if the minor ratifies the contract.

 

 

ANS:  A                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

4. Which of the following best describes the term “recognizance”?

a.	It refers to the conditions of a formal or simple contract that an adult signs with a minor.
b.	It refers to the obligations that people enter into before a court to do an act required by law.
c.	It refers to the penalties that a party faces if the party fails to honor the obligations of a contract.
d.	It refers to negotiable instruments such as checks, notes, drafts, and certificates of deposit.

 

 

ANS:  B                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

5. Informal contracts are also known as _____ contracts.

a.	express
b.	implied
c.	sealed
d.	simple

 

 

ANS:  D                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

6. An executory contract is defined as:

a.	a contract that may be set aside or avoided by one of the parties.
b.	a contract where the terms of the agreement are specified in words.
c.	a contract that is required to be created in a special form or manner of creation.
d.	a contract in which the terms have not been fully carried out by all parties.

 

 

ANS:  D                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

7. Ashley offers to pay $50 to Judy in return for babysitting Ashley’s children over the weekend. Judy tells Ashley that she will think about it and convey her decision the next day.Which of the following is true in this case?

a.	A bilateral contract has been made between Ashley and Judy.
b.	Judy has been unjustly enriched in this situation.
c.	Only Ashley is under an enforceable obligation.
d.	Judy has a duty to baby-sit the children.

 

 

ANS:  C                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Comprehension

 

8. Which of the following is not a true contract and has been imposed by law in order to prevent one party benefiting unfairly at another’s expense?

a.	A voidable contract
b.	An informal contract
c.	A quasicontract
d.	A unilateral contract

 

 

ANS:  C                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-3          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

9. Which of the following is true of quasi-contracts?

a.	It is an unenforceable contract.
b.	It generally offends ethical principles.
c.	It is always formed by an adult with a minor.
d.	It prevents the unjust enrichment of a party.

 

 

ANS:  D                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-3          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Comprehension

 

TRUE/FALSE

 

10. Only one party needs to give an agreement in order for a contract to be enforceable.

 

ANS:  F                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-1          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

11. All agreements are contracts.

 

ANS:  F                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

12. An agreement that does not meet all five of the requirements for a valid contract is known as an unenforceable contract.

 

ANS:  F                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

13. When a contract is required to be sealed, a substitute for an actual seal may be used.

 

ANS:  T                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

14. The Uniform Commercial Code makes no distinction between contracts under seal and other written contracts for the sale of goods.

 

ANS:  T                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

15. A certificate of deposit is a negotiable instrument.

 

ANS:  T                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

16. The law states that a unilateral contract can be formed when performance is started.

 

ANS:  F                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-2          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

17. One may have rights and obligations imposed by law even when no real contract exists.

 

ANS:  T                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-3          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

18. An agreement between two parties to perform an illegal act is a quasi-contract.

 

ANS:  F                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-3          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

19. The legal term for one party benefiting unfairly at the expense of another is unjust enrichment.

 

ANS:  T                    PTS:   1                    DIF:    Difficulty: Easy

OBJ:   LO: 5-3          NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Knowledge

 

ESSAY

 

20. What is a contract? What are the five definite requirements that every contract must fulfill?

 

ANS:

A contract can be defined as a legally enforceable agreement between two or more competent people.

A contract must fulfill the following definite requirements:

1. It must be based on a mutual agreement by the parties to do or not to do a specific thing.
2. It must be made by parties who are competent to enter into a contract that will be enforceable against both parties.
3. The promise or obligation of each party must be supported by consideration (such as the payment of money, the delivery of goods, or the promise to do or refrain from doing some lawful future act) given by each party to the contract.
4. It must be for a lawful purpose; that is, the purpose of the contract must not be illegal, such as the unauthorized buying and selling of narcotics.
5. In some cases, the contract must meet certain formal requirements, such as being in writing or under seal.

 

PTS:   1                    DIF:    Difficulty: Easy                               OBJ:   LO: 5-1

NAT:  BUSPROG: Ethics                          STA:   AICPA: BB-Legal

TOP:   A-head: Nature and Classes of Contracts                           KEY:  Bloom’s: Comprehension