Business Law (MGMT 260)

Spring 2021
Ali Sultan
MID TERM EXAM
Questions: 30 MCQs worth 1 point each
Total Points: 30
Time: 60 minutes
Instructions: Be attentive and read each question carefully before answering it.
Good Luck!

THE HONOR CODE

“I have not sought, received or given help during this examination.”

Roll No: Signature:

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Question 1
Aerial Advertisers signed a contract with Zenith Film Productions to advertise Zenith’s new film,
Battle Zone, by flying over Central City towing a giant streamer belonging to Zenith which read
“See the Blood and Guts of War in Battle Zone.” This contract specified that the flight was to be
conducted on the first Saturday in June at noon (when the film was showing locally) and Zenith
was to pay Aerial $ 500 for the flight.
On the designated Saturday, Aerial was unable to fly because of a defective fuel pump. The
defective condition was entirely unforeseeable and did not occur through any negligence or fault
of Aerial. Zenith did not pay Aerial, and each of the parties has sued the other for damages.
Which of the following best states the rights and liabilities of the parties?
A. Zenith is entitled to recover damages from Aerial on account of Aerial’s failure to fly.
B. Aerial is entitled to recover from Zenith the $ 500 contract price, as the incapacity of the
airplane was not Aerial’s fault.
C. Neither party is entitled to recover against the other, because Aerial’s duty to fly was
discharged by impossibility, and Zenith’s duty to pay was contingent on Aerial’s flight.
D. Neither party is entitled to recover against the other, because Zenith’s offer to pay $ 500 for
the flight was in effect an offer for an act, and since the act was not performed, there was no
valid acceptance.
Question 2
Alpha and Beta made a written contract pursuant to which Alpha promised to convey a specified
apartment house to Beta in return for Beta's promise (1) to convey a 100-acre farm to Alpha and
(2) to pay Alpha $1,000 in cash six months after the exchange of the apartment house and the
farm. The contract contained the following provision: “it is understood and agreed that Beta's
obligation to pay $1,000 six months after the exchange of the apartment house and the farm shall
be voided if Alpha has not, within three months after the aforesaid exchange, removed the
existing shed in the parking area in the rear of the said apartment house.”
Which of the following statements concerning the order of performances is LEAST accurate?
A. Alpha's tendering of good title to the apartment house is a condition precedent to Beta's duty
to convey good title to the farm.
B. Beta's tendering of good title to the farm is a condition precedent to Alpha’s duty to convey
good title to the apartment house.
C. Beta's tendering of good title to the farm is a condition subsequent to Alpha’s duty to convey
good title to the apartment house.
D. Alpha's tendering of good title to the apartment house 90 and Beta’s tendering of good title to
the farm are concurrent conditions.
Question 3
On November 3, Bunker sent a fax message to Sachs, a dealer in precious metals: “Please quote
your best price on 800 troy ounces platinum bars for immediate delivery at my bank.” At 10 a.m.
the next morning (November 4) Sachs replied by fax: “My best price is $ 475 per ounce.”
Bunker received Sachs’s message later on that same day.
The communications between Bunker and Sachs are best characterized as:
A. An offer and an acceptance.
B. A request for an offer and an offer.
C. An offer and a price quotation.
D. A request for an offer and a price quotation.
Question 4
Marvin, a stockboy at a local hardware store, was dating Linda, who was very much in love with
him, but reluctant to marry him because of his meagre income and his job potential. Marvin told
his father, Tony, about his desire to marry Linda and about her reservations. Tony, who was
anxious to see his son married, told Linda that if she married Marvin, Tony would support them
for six months and send Marvin to a six-month computer technology training school. This was
sufficient to dispel Linda’s reservations, and Marvin and Linda married the very next day. When
Marvin and Linda returned from their honeymoon, Tony refused to go through with his offer.
If Linda sues Tony for damages and Tony prevails, it will be because:
A. Linda’s promise was not supported by valid consideration.
B. The contract is against public policy.
C. The contract was oral.
D. Linda is happy and therefore has incurred no detriment.
Question 5
Which of the four following fact situations best describes a case where a court would be likely to
determine that an implied-in-fact contract existed?
A. Norm, who has just taken a CPR course, is dining at a restaurant with his friend, Ford, Ford,
who has a tendency to talk while eating, begins to choke on a bit of food trapped in his
windpipe. Norm promptly performs the Heimlich maneuver on Ford, causing the food to be
expelled and Ford to resume normal breathing.
B. Hugh is a wealthy attorney who normally charges $ 200 per hour for his services. Deborah is
an old friend of Hugh’s family who often sent him checks when he was an impoverished law
student. Deborah, now 75 years old, needs a paper notarized to apply for a medicare benefit.
Deborah takes the bus to Hugh’s office. Hugh, who is also a notary public, witnesses
Deborah’s signature and puts his notary seal on the paper. State law allows a maximum
charge of $ 5 per signature for notarization.
C. There has been a three year drought in the area. The water table has dropped substantially,
and many homeowners and farmers need to have their water wells deepened. Charlotte, a
contractor, has a contract to deepen the well on Pattie’s property. Charlotte mistakenly enters
the neighboring property of Mike. Charlotte proceeds to deepen Mike’s well. Mike watches
Charlotte at work and says nothing until after the job is completed.
D. John Babbington received his monthly credit card bill from Golden Fleece Department Store.
He promptly paid the bill. Due to a computer error, a week later Babbington received the bill
for John Barrington from Golden Fleece. Thinking that he must owe the money, Babbington
paid Barrington’s credit card bill.
Question 6

A paper manufacturing company contracted with a construction company for the building of a
new warehouse. The contract provided that the construction company would be paid upon
completion of the warehouse. The contractor finished the warehouse but it had some minor
deviations from the plans due to substitution for certain building materials that were not available
in the market. The construction company finished working and demanded payment. The paper
company refused to pay based on deviations from the specifications. Will the construction
company likely prevail in a breach of contract action against the paper company?

A. Yes, a company that performs construction work can always collect for what it has done on a
job.
B. Yes, the construction company has substantially performed the contract.
C. No, the construction company cannot change the specifications and hope to get paid.
D. No, the construction company is guilty of fraud and misrepresentation.
Question 7
Claw died, leaving his nephew Scratch as his sole heir. Among the items inherited by Scratch
were some old oil paintings that had been stored in Claw's attic for a number of years. Scratch
knew nothing about art and had no place to put them in his home. He placed an ad in the paper
offering to sell the paintings 'at a price to be mutually agreed upon.' Fang, a buyer for an art
gallery, responded to the ad and examined the paintings. From the signature and the style, Fang
recognized that the artist was William Hamilton, a renowned 19th century American portrait
artist. Scratch and Fang agreed upon a price and executed a contract.
Which of the following facts, if true, would give Scratch the best basis for rescinding the contract
with Fang?
A. Scratch told Fang that Claw had dabbled in painting when he was younger and had
undoubtedly painted them himself.
B. Scratch did not know that Fang was a buyer for an art gallery and was very familiar with 19 th
century American art.
C. Scratch told Fang that he wanted to get rid of the paintings as soon as possible because he
was angry at his uncle for giving away most of his possessions to a TV evangelist just before
he died.
D. Fang falsely told Scratch that the paintings were going to be used to furnish Fang’s country
estate.

Question 8

Sam was a famous auto racer and builder of racing cars. He and Bob signed a contract for sale of
one of Sam’s hand-built race cars for $ 25,000, the price to be paid and the car to be delivered
one week later.

The day after the contract was signed, Sam called Bob and told him that Sam’s wife, Winnie,
was not happy with him for selling the car at $ 25,000. She would be happy if he sold it for $
40,000.

Bob fails to tender $ 25,000 to Sam on the date set for delivery and Sam does not deliver the car.
On these facts:

A. Sam can recover from Bob for breach of contract.

B. Bob can recover from Sam for breach of contract.
C. Neither can recover until one of the parties tenders performance.
D. The contract is terminated.

Question 9
Loomis, the owner and operator of a small business, encourages "wellness" on the part of his
employees and supports various physical-fitness programs to that end. Learning that one of his
employees, Graceful, was a dedicated jogger, Loomis promised to pay her a special award of
$100 if she could and would run one mile in less than six minutes on the following Saturday.
Graceful thanked him, and did in fact run a mile in less than six minutes on the day specified.
Shortly thereafter, however, Loomis discovered that for more than a year Graceful had been
running at least one mile in less than six minutes every day as a part of her personal fitness
program. He refused to pay the $100.
In an action by Graceful against Loomis for breach of contract, which of the following best
summarizes the probable decision of the court?
A. Loomis wins, because it is a compelling inference that Loomis's promise did not induce
Graceful to run the specified mile.
B. Loomis wins, because Graceful's running of the specified mile was beneficial, not
detrimental, to her in any event.
C. Graceful wins, because she ran the specified mile as requested, and her motives for doing so
are irrelevant.
D. Graceful wins, because running a mile in less than six minutes is a significantly demanding
enterprise.
Question 10

On January 15, Carpenter agreed to repair Householder’s house according to certain

specifications and to have the work completed by April 1. On March 1, Householder’s property
was inundated by flood waters which did not abate until March 15. Householder could not get
the house in a condition which would permit Carpenter to begin the repairs until March 31. On
that date Carpenter notified Householder that he would not repair the house.

Which one of the following facts, if it was the only one true and known to both parties on
January 15, would best serve Carpenter as the basis for a defense in an action brought against
him by Householder for breach of contract?

A. Carpenter’s busy schedule permitted him to work on Householder’s house only during the
month of March.
B. Any delay in making the repairs would not seriously affect Householder’s use of the
property.
C. The cost of making repairs was increasing at the rate of 3% a month.
D. The area around Householder’s property was frequently flooded during the month of March.

Question 11

Alex wanted to have his driveway resurfaced. He called a number of commercial establishments
that do such work and received bids ranging from $ 4,500 to $ 5,000. Bart submitted a bid to do
the work for $ 4,000, and Alex entered into a contract with him to have the driveway resurfaced.
Shortly before Bart was scheduled to begin work, he called Alex and said, “I just found out that I
couldn’t do the work for less than $ 4,600 or I’d lose money.”

Alex responded to Bart’s statement by saying, “OK, I’ll pay you the extra $ 600 but I think you
are being unfair.” After Bart finished the driveway, he asked Alex for his money. Alex handed
Bart $ 4,000 in cash and said, “This is all I am going to pay you because you had no right to up
the price on me.” If Bart sues Alex for the additional $ 600, who will prevail?

A. Alex, because Bart was already under a preexisting duty to resurface the driveway for $
4,000.
B. Alex, because the promise to pay the additional money was not in writing.
C. Bart, because he relied on Alex’s promise to pay the additional money to his detriment.
D. Bart, because the promise to pay the additional money was the settlement of a good faith
dispute.

Questions 12 – 14
At the start of the academic year, September 1, Professor announced to his class that he would
pay the tuition of the bar review course of the student’s choice for the student who receives the
highest grade in Professor’s Constitutional Law class. Professor reduced his offer to writing and
posted it on the student bulletin board the next day, stating the same essential terms.
Stilwell, a student in Professor’s class, told Professor prior to the September 8 class that: “I’m
really going to give my best effort to get the highest grade in your class and win that prize. I
started studying three days ago and yesterday I purchased every substantive constitutional law
outline on the market just so I can win the prize.”
Shortly thereafter, the Dean of the law school told Professor that she had been receiving
complaints from many of the other law professors about the lack of study on the part of the
students because the students were concentrating their efforts on constitutional law only. The
Dean also stated that she felt that Professor’s offer could be interpreted as improper school
policy. Professor stated that although he still wished to perform on his agreement, he would post
a notice announcing withdrawal of his offer. Professor posted the withdrawal notice on October
1 and stated the reasons why he was forced to withdraw his offer to his class. He apologized, but
said that in the interest of the school, he had no choice.
Later that day, Stilwell told Professor that the offer could not be withdrawn after he had started
to perform by purchasing the outlines and devoting his studying exclusively to Constitutional
Law for the past month. Professor again stated that he had no choice. Stilwell received the
highest grade in Professor’s class and now requests performance by Professor.
Question 12
Professor’s offer to his class on September 1 and the announcement posted on the bulletin board
the next day would be interpreted as:
A. Preliminary negotiations.
B. A promise to make a conditional gift.
C. A contractual offer, creating a power of acceptance.
D. A mere statement designed to induce the students to study harder and achieve higher grades.
Question 13
If Professor’s announcement to his class was held to be an offer, it would be an offer for:
A. A bilateral contract.
B. A unilateral contract.
C. A bilateral contract or a unilateral contract, according to the offeree’s intentions.
D. A unilateral contract that became a bilateral contract when Stilwell began to perform.
Question 14
Professor’s announcement of withdrawal of the offer to his class and the posting of the
withdrawal notice on the bulletin board would most likely be interpreted as:
A. Having no legal effect, because no offer had been made.
B. An effective revocation of the offer.
C. An ineffective revocation as to any student who failed to hear Professor’s announcement or
read the notice on the bulletin board.
D. An ineffective revocation as to Stilwell because Stilwell relied on the promise.
Question 15

An elderly man employed an attorney to make up his will. The man had no immediate relatives
in his locality and no friends he could trust to enforce the will. The attorney induced the man to
appoint the attorney to administer the will for a separate fee. He also promised the man that
everything would be enforced exactly as he wished but only if he provided a special gift of
$25,000 in the will to the attorney, which would be in addition to legal fees and administration
fees. When the man dies, his surviving heirs challenged the foregoing provisions added by the
lawyer. What legal theory most closely represents their challenge?

A. Fraud
B. Undue influence.
C. Duress.
D. Mistake.

Questions 16 – 18
Mary, 17 years old, was an unemployed disappointment to her parents. To teach Mary to be
more self-sufficient, Mary’s parents took a one-month trip to Europe, leaving Mary at home to
take care of the house. They left Mary $ 400, which she promptly spent on her first weekend
party. By the end of the next week, Mary ran out of food and became hungry. She walked to the
latest grocery store (the family car was out of gas) and explained her predicament to the
manager. He told Mary that if she agreed to work at the store for 20 hours a week for three
weeks, she could have $ 75 worth of groceries. Although it seemed like a lot of work for $ 75
worth of groceries, Mary needed to eat, and so she accepted, picked up her groceries, promised
to report for work the next day, and left.
While on the way home, Mary decided that the idea of credit was not so bad – for a mere
promise she obtained $ 75 worth of groceries. Just then, she passed Buddy’s Budget Autos and
decided that she would really impress her parents if she had her own car when they returned. She
negotiated with Buddy, the owner of Buddy’s, to obtain an $ 800 car in exchange for her promise
to work for Buddy 20 hours a week for eight weeks. When Buddy agreed, they drew up a written
contract.
While driving home from Buddy’s, Mary lost control of the car and crashed into a tree. Both the
car and the groceries were completely destroyed. Mary suffered minor injuries. Mary’s parents
immediately flew home to care for their injured daughter.
Question 16
If the grocery store sues Mary for the cost of the groceries and wins, it will be because:
A. Mary promised to pay for them.
B. Mary cannot return the groceries so she cannot return the store to the status quo ante.
C. Mary needed the food.
D. The contract was not within the Statute of Frauds.
Question 17
If the grocery store sues Mary for the cost of the groceries and loses, it will be because:
A. Mary was a minor.
B. The groceries were destroyed and thus there was a failure of consideration.
C. The contract was unconscionable.
D. It was impossible for Mary to perform.
Question 18
If Buddy sues Mary for the price of the car and loses, it will be because:
A. The contract was unconscionable.
B. Mary did not need the car.
C. Since the car was destroyed, there is no consideration to support the bargain.
D. The purpose of the contract has been frustrated.
Question 19

A female tenant repeatedly asked her landlord to make repairs necessary for her security, but the
landlord ignored her. The tenant was later robbed and beaten by an intruder. She sued the
landlord for negligence in causing her injuries. The landlord relied on an exculpatory clause in
the lease. The clause, set in fine print on the reverse side of the multi-paged, mass-printed, form
lease, was a comprehensive, legalistic waiver in which the tenant gave up virtually all of her
rights and remedies against the landlord. She responded that the clause was unconscionable and
should not be enforced. What will the court most likely rule with respect to the exculpatory
clause?

A. This is not a contract for the sale of goods, hence unconscionability is not available.
B. The exculpatory clause must be enforced because the tenant voluntarily signed the lease and
agreed to its terms instead of choosing another place to live.
C. The clause is unenforceable because the tenant was burdened by a lack of bargaining power
and the provision was obscure and oppressive.
D. The clause is unenforceable because it discriminates against women who are unable to
provide their own security.

Question 20
Upon graduation from high school, Nephew could not decide whether he wanted to go on to
college or start working for a living. Uncle told Nephew that if Nephew would attend college,
Uncle would pay his tuition and expenses for the full year, and that Uncle would pay him a
$1,000 bonus for each 'A' Nephew earned as a final grade in a class. Nephew told Uncle that he
would attend college. The next day, Grandfather called Nephew and told him that he had learned
of the offer that Uncle had made him and that if Uncle failed to pay Nephew as promised he
(Grandfather) would. Nephew attended college and earned 'A's as final grades in three classes.
Shortly thereafter, Uncle died, and the executor of Uncle's estate refused to pay Nephew the
bonus for each of the three 'A's.
If Nephew brings suit against Uncle’s estate for failure to pay $ 1,000 for each “A” as a bonus,
will Nephew succeed?
A. Yes, because there was a bargained-for-exchange between Nephew and Uncle.
B. Yes, because Uncle, had he been alive, clearly would have paid the bonus to Nephew.
C. No, because Uncle’s promise was personal, and the obligation was extinguished at Uncle’s
death.
D. No, because the agreement between Uncle and Nephew was oral, and it would be impossible
for Nephew to prove its terms after Uncle’s death.

Question 21

Producer hired Fiddler to play in an orchestra that was to leave on a 10-week tour of the United
States. Fiddler, a musician, turned down another job opportunity in order to accept Producer's job
offer. One week after the start of the tour, Fiddler was hospitalized with a bad back and was
unable to perform. Producer hired Player to take Fiddler's part in the orchestra. Four days later,
Fiddler recovered but Producer refused to allow Fiddler to rejoin the orchestra or to complete the
tour. Fiddler then sued Producer for breach of contract.

Which of the following offers Fiddler the best chance of prevailing in this suit?
A. His reliance on the job offered by Producer by declining another job opportunity created an
estoppel against Producer.

B. His failure to perform with the orchestra for four days was not a material failure or breach so
as to discharge Producer's duty to perform.

C. His performance with the orchestra for the four-day period was physically impossible.

D. Fiddler was never told that an injury might jeopardize his continued employment with the
orchestra.

Question 22
Bernaise, the sole proprietor of Bernaise Distributors, a food service and food brokerage concern,
entered into oral negotiations with Hollandaise, president and CEO of Holsauce, a corporation
that manufactured gourmet food products for restaurants and select retail outlets. Bernaise
wished to secure an exclusive distributorship for Holsauce products in the six New England
states. At the end of the first stage of oral negotiations between Bernaise and Hollandaise, both
parties agreed on the major points of their arrangement, but a few points of disagreement
remained. Both however were anxious to begin distribution of Holsauce products in New
England and so Hollandaise assured Bernaise, “Don’t worry about it; we’ll work these things
out.” Assuming from this that he would be the New England distributor for Holsauce, Bernaise
went out and leased larger facilities, bought a number of trucks, hired 30 new workers, and
expanded his management staff by hiring, among others, an experienced distribution manager
who was given a two-year contract with a high salary. Shortly after Bernaise had done these
things, Hollandaise informed him that Bechamel Distributors, and not Bernaise, would receive
the New England distributorship.
If Bernaise prevails in a suit against Holsauce and Hollandaise, it will most likely be because the
court applies which of the following theories?
A. Implied-in-fact contract.
B. Promissory estoppel.
C. Unjust enrichment.
D. Quasi-contract.
Question 23
Which of the following will not discharge contractual obligations by operation of law?
A. Accord and satisfaction.
B. Statute of limitations.
C. Destruction of the subject matter of contract.
D. Supervening illegality.
Question 24
An obese woman signed up for a weight loss program that promised weight loss down to her
medically-recommended range. The promotional material claimed patented methods and
nutritional supplements that were a “miraculous discovery” that would work for anyone within
24 months. The cost was $1,000 per month; the woman paid a total of $24,000 for two years but
she lost only 6 pounds and remained excessively obese. A former program employee told her
that there was no patent, no miraculous discovery, and the supplements were the same as a
common vitamin brand. She sued the program for misrepresentation. Will she likely prevail?

A. No, because statements that are mere “puffing” or opinions cannot be the basis for
misrepresentation.
B. Yes, because the program knowingly made false factual representations that the customer
relied on.
C. Yes, because the program had a fiduciary duty to make full disclosure to her of all of the
facts.
D. No, because she did not justifiably rely on the incredible representations that were made.

Question 25
A roofer offers to completely refurbish a homeowner’s roof for $1,000. The next day the roofer
realizes he’s not going to make much, and he sends a revocation of the offer in the mail to
customer. On the third day the homeowner puts a letter in the mailbox accepting the offer. On
the fourth day the homeowner receives the roofer’s revocation letter. Was a contract formed
between the homeowner and the roofer or was the revocation effective?
A. The revocation letter was posted prior to the acceptance so that no contract was formed.
B. No, there was no contract because there was no mutual meeting of the minds at any time.
C. Yes, there was a contract because the revocation letter was invalid due to being based on
reasons that violate public policy.
D. The acceptance was effective on posting but the revocation does not become effective until
received; thus, a contract was formed when the acceptance was placed in the mailbox.
Question 26
Thanos owned a small jewelry store specializing in rare gemstones called “Thanos Infinity
Stones.” Thanos contacted the local paper and published an advertisement that said “SALE! 1
Infinity Stone Ring Worth $750, selling for $75.” Loki saw the advertisement and was the first to
arrive at the store the very next morning, asking to purchase the necklace. Thanos refused,
stating that the sale on the Infinity Stone Ring was available to females only.
Loki wishes to bring an action against Thanos for not selling him the ring. Will he win?
A. No, because Loki did not write to Thanos stating his intent to accept the offer to sell the
Infinity Stone Ring at a discount.
B. No, because the advertisement in the local paper was only an invitation to the public to make
an offer.
C. Yes, because Thanos is not allowed to add gender conditions to his invitation to the public to
make an offer.
D. Yes, because the advertisement placed in the local paper will be considered a binding offer.
Question 27
In a telephone call on March 1, Adams, an unemployed, retired person, said to Dawes, “I will
sell my automobile for $3,000 cash. I will hold this offer open through March 14.” On March 12,
Adams called Dawes and told her that he had sold the automobile to Clark. Adams in fact had
not sold the automobile to anyone. On March 14, Dawes learned that Adams still owned the
automobile, and on that date called Adams and said, "I'm coming over to your place with
$3,000." Adams replied, “Don't bother, I won't deliver the automobile to you under any
circumstances.” Dawes protested, but made no further attempt to pay for or take delivery of the
automobile. In an action by Dawes against Adams for breach of contract, Dawes probably will:
A. succeed, because Adams had assured her that the offer would remain open through March 14.
B. succeed, because Adams had not in fact sold the automobile to Clark.
C. not succeed, because on March 12 Adams had told Dawes that he had sold the automobile to
Clark.
D. not succeed, because Dawes had not tendered the $3,000 to Adams on or before March 14.
Question 28
Which ONE of the following statements is false?
A. Under some circumstances, silence or inaction may constitute acceptance.
B. A contract may be voidable due to mistake of law.
C. A request for further information about the offer is not deemed to be a counter-offer.
D. Under the plain meaning rule, if a contract’s words appear to be clear and unambiguous, a
court cannot consider any evidence not contained in the document itself.
Question 29
Which of the following may render an agreement void?
A. Economic duress.
B. Agreement in restraint of trade.
C. Negligent misrepresentation.
D. Mental incompetence.
Question 30
The owner of a 50-acre farm was sharing drinks with a land developer friend. The developer
offered $30,000 for the farm. The owner insisted that the developer couldn't raise that much
money. After more arguing about the amount, the developer said, "I'll give you $50,000 cash if
you sign right now." The owner wrote on a paper that "I hereby agree to sell to developer my 50-
acre farm for $50,000, and to deliver good title." The next day, the developer tendered $50,000
and demanded the deed. The owner refused to sell. The developer sued for specific performance
to enforce the asserted agreement. The owner defended that he wrote the paper in jest to call the
developer's bluff, as he did not believe that developer had the money. Will the court rule that
there is a binding contract?
A. No, there was no meeting of the minds.
B. No, there was a unilateral mistake.
C. Yes, because when the purchase price is put in writing, the agreement becomes enforceable.
D. Yes, mutual assent to an agreement is determined by the objective manifestations of the
parties.
*END OF THE EXAM*