Ch 12

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Chapter 12—NATURE AND CLASSES OF CONTRACTS: CONTRACTING
ON THE INTERNET
TRUE/FALSE
1. Quasi contracts are contracts.
ANS: F

MSC: AACSB Analytic

2. A contract is essentially an agreement that creates an obligation. ANS: T

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3. Because transfer of value is essential to a valid contract, contracts cannot apply to the performance of personal services.
ANS: F

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4. Every contract has only two parties.
ANS: F

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5. A promisor makes a promise to a promisee.
ANS: T

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6. Only the parties who signed the original contract can have rights with respect to that contract. ANS: F

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7. A reward offered to the public for the return of lost property is not considered an offer. ANS: F

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8. An offer may be made only to a specific person.
ANS: F

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9. An offerer makes an offer to an offeree.
ANS: T

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10. Negotiable instruments are examples of formal contracts. ANS: T

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11. Contracts for amounts more than $1 million must be made under seal or they are not binding. ANS: F

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12. A contract is described as a contract of record when the accountant of one of the parties has made an entry of the contract in the business record of that party.

ANS: F

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13. A recognizance is an agreement by which one party admits or recognizes that a specified sum of money is owed to another party.
ANS: F

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14. An express contract is one in which the agreement is shown by acts and conduct of the parties. ANS: F

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15. Implied-in-fact contracts and implied-in-law contracts are essentially the same. ANS: F

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16. The effect of an implied contract is not the same as the effect of an express contract. ANS: F

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17. A voidable contract is one that is otherwise valid but may be rejected or set aside by one of the parties. ANS: F

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18. An agreement that contemplates the performance of an act prohibited by law usually is void. ANS: T

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19. An executory contract has been entered into but not yet fully performed. ANS: T

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20. An executed contract results from the complete performance by all parties of the contract. ANS: T

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21. When a contract is fully performed by one party, it is called a unilateral contract. ANS: F

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22. A bilateral contract is essentially an exchange of promises. ANS: T

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23. A unilateral contract may be described as a promise for an act. ANS: T

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24. A contract never can be both executory and unilateral.
ANS: F

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25. An option contract gives one of the parties an absolute right to enter into a second contract at a later date.
ANS: T

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26. The principle behind the quasi contract is to prevent unjust enrichment. ANS: T

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27. A quasi contract may arise in a situation in which no contract exists. ANS: T

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28. Whenever a person receives a benefit for which payment has not been made, there is an unjust enrich ment and the value of such benefit must be paid to the person conferring the benefit. ANS: F

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29. Quasi-contractual liability generally will be imposed when the cost of performing a contract is higher than had been expected.
ANS: F

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30. When a contract sets a price for services rendered, a plaintiff cannot sue for reasonable value. ANS: T

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MULTIPLE CHOICE
1. A contract is:
a. a binding agreement.
b. an agreement creating an obligation.
c. an agreement that creates enforceable duties and obligations. d. all of the above.
ANS: D

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