National American University

BUSINESS L 3100

Chapter 17-WRITING, ELECTRONIC FORMS, AND INTERPRETATION OF CONTRACTS

TRUE/FALSE

1)In the absence of a statute requiring a writing, a contract may be oral or written.

 

                                          

 

2. Because many oral contracts are legally enforceable, it is a good business practice in the preliminary stages of discussions to stipulate that no binding agreement is intended to be formed until a written contract is prepared and signed by the parties.

 

                                          

 

3. Under the statute of frauds, an oral contract must be completed within one year after performance be- gins.

 

                                          

 

4. An oral agreement to supply a line of credit for two (2) years cannot be enforced because of the statute of frauds.

 

                                          

 

5. A promise to grant a mortgage on real property does not require written proof because it is not a trans- fer of land.

 

                                          

 

6. No writing is required for a service contract that can be performed within one year after the date of the agreement.

 

                                          

 

7. The statute of frauds applies to promises to answer for another party's debt, but does not apply to a promise to answer for another party's default.

 

                                          

 

8. A promise to pay an attorney a fee owed by a third person can be enforced without a writing.

 

                                          

 

9. When the main purpose of the promisor’s promise to pay the debt of another is to benefit the promisor, the statute of frauds is not applicable, and the oral promise to pay the debt is binding.

 

                                          

 

10. A father's oral promise to his daughter and her fiancée made in consideration of their contemplated marriage is binding when made in the course of a serious discussion.

                                          

 

11. A contract for the sale of goods with a price of $500 or more requires written proof to be enforceable.

 

                                          

 

12. A writing required by the statute of frauds may be a signed note or memorandum.

 

                                          

 

13. A note or memorandum does not have to contain all the essential terms of the contract to be valid.

 

                                          

 

14. When a contract falls within the statute of frauds, the signatures of both parties must be shown to the court.

 

                                          

 

15. An insurance company cannot refuse to pay the fire loss of the buyer of a house on the grounds that the sales contract for the house was not binding because it was not properly signed.

 

                                          

 

16. Under the majority view, a contract that does not satisfy the statute of frauds is not enforceable.

 

                                          

 

17. A person who is prevented from enforcing a contract because of the statute of frauds also is prevented from recovering the value of services, property, or money furnished the other party to the oral contract.

 

                                          

 

18. The parol evidence rule generally excludes words spoken before or at the time a written contract was executed from contradicting the terms of the contract.

 

                                          

 

19. The parol evidence rule generally precludes testimony that would contradict a complete written con- tract.

 

                                          

 

20. Parol evidence is not admissible to show fraud, duress or mistake.

 

                                          

 

21. The parol evidence rule is based on the theory that any oral agreement was abandoned when the con- tact was written.

 

                                          

 

22. The parol evidence rule does not apply to changes made after the signing of the contract.

                                          

 

23. When persons enter into an agreement, it is presumed that they intent the agreement to have some ef- fect.

 

                                          

 

24. Through incorporation by deference, a contract can consist of both the original document and the de- tailed statement that is incorporated in it.

 

                                          

 

25. Provisions of a contract will be considered separately and not as a whole.

 

                                          

 

26. If words and numbers contradict each other in a contract, the rule of construction favors the words.

 

                                          

 

27. If a contract is unclear, it will be interpreted against the party who drafted it.

 

                                          

 

28. Details of performance of a contract not expressly stated in a contract will often be implied by the court.

 

                                          

 

29. The past performance of the parties under a continuing contract is important in determining what the contract means.

 

                                          

 

30. Customs and trade usage can override the express provisions of a contract.

 

                                          

 

MULTIPLE CHOICE

 

1. An oral contract to sell a house is binding if:
   1. the agreement is witnessed by a member of the clergy.
   2. there is a tape recording of the agreement.
   3. the buyer paid the price and received the deed of conveyance.
   4. the seller is a merchant.

                                          

 

2. An oral understanding is not binding if:
   1. the services performed were not to the satisfaction of the other party.
   2. the amount agreed to be paid for services rendered was not a fair and reasonable amount.
   3. the parties intended to formalize their understanding with a written agreement.
   4. the understanding may be terminated at will by either party.

 

3. An oral contract can be enforced when it relates to:
   1. the purchase of a television set for $200.
   2. the sale of an interest in land for $400.
   3. managing a factory for five years.
   4. a promise to answer for the debt of another.        
4. The one-year performance requirement for an oral contract begins:
   1. on the day of the agreement.
   2. on the first day of performance.
   3. on the day following the agreement.
   4. the day on which the agreement was placed in writing.         
5. The standard statute of frauds:
   1. requires full disclosure in the case of consumer sales on credit.
   2. requires a seller of real estate to obtain a broker's license.
   3. specifies the punishment of perjury.
   4. requires that a contract for the sale of land be evidenced by a writing.        
6. The statute of frauds applies to:
   1. the lease of an apartment on a month-to-month basis.
   2. the cancellation of a written agreement for the sale and purchase of land.
   3. an employment agreement.
   4. the sale of goods priced at less than $500.   
7. A promise to pay a debt must be in writing if:
   1. the debt is for more than $500.
   2. the debt is now due and payable.
   3. the promise is to pay the debt of another.
   4. the debt owed is the promisor's.

                                          

 

8. An oral contract containing a promise by an executor to pay estate debts from estate funds is:
   1. binding.
   2. voidable by the executor or administrator.
   3. enforceable against the executor only if the executor signs written proof of the agreement.
   4. enforceable against the other contracting party only if that party signs a written agreement.        
9. When there is full disclosure and representation, promises made in consideration of marriage:
   1. can be written or oral.
   2. generally cannot be set aside unless they are unconscionable.
   3. are only valid if they are signed after the marriage actually takes place..
   4. all of the above.

 

10. The Uniform Commercial Code contains a statute of frauds rule relating to sales of personal property, specifically:
    1. goods.
    2. chattel paper.
    3. real property.
    4. none of the above.

                                          

 

11. A writing that satisfies the requirement of a writing under the statute of frauds could be evidenced by:
    1. a note.
    2. a memorandum.
    3. a contract.
    4. all of the above.

                                          

 

12. The writing required by the statute of frauds in the case of a contract for the sale of land must:
    1. be addressed to the other party to the contract.
    2. be made with the intent to create a writing to satisfy the statute of frauds.
    3. be signed at the end of the writing.
    4. describe the land to be sol

                                          

 

13. When the statute of frauds applies and there is no written proof of the contract, the contract is:
    1. void.
    2. enforceable if there are two credible witnesses.
    3. voidable by a party who has not signed.
    4. illegal.

                                          

 

14. When a person has performed services under an oral contract that cannot be enforced because of the statute of frauds, such person:
    1. can recover the agreed payment for the services because a refusal to make payment would be a breach of the contract.
    2. can recover the reasonable value of the services because there is a quasi-contractual duty to pay for the benefit received from such services.
    3. cannot recover the value of the services because they were rendered under a unilateral mistake of law.
    4. can have the party receiving the services arrested for obtaining property by false pretenses.        
15. The defense of noncompliance may be raised:
    1. by the parties to the oral contract.
    2. by third parties such as an insurance company or the IRS.
    3. both a. and b.
    4. neither a. nor b.

                                          

16. The parol evidence rule:
    1. applies to complete written contracts.
    2. prevents proof of fraud.
    3. applies to incomplete contracts.
    4. is not designed to preserve the integrity of written contracts.        
17. The parol evidence rule does not prohibit proof that:
    1. the contract was thereafter modified.
    2. conduct exists that violates the law.
    3. the written contract is not a binding agreement.
    4. all of the above.

                                          

 

18. Parol evidence generally is admissible to explain:
    1. ambiguous terms.
    2. why signatures are missing.
    3. why a contract was not performed.
    4. implied terms.

                                          

 

19. Parol evidence may be admitted to show that a provision was omitted as the result of:
    1. fraud.
    2. accident.
    3. mistake.
    4. all of the above.

                                          

 

20. Parol evidence may be admissible to:
    1. contradict a complete written contract.
    2. prove the modification or termination of a contract.
    3. replace the statute of frauds.
    4. create a contract.

                                          

 

21. The parol evidence rule may not apply if:
    1. the contract is materially incomplete.
    2. the parties disagree on the meaning of the contract.
    3. there is no ambiguity regarding the terms of the contract.
    4. one party is unable to perform the contractual obligations.  
22. A contract is interpreted to give effect to:
    1. the intent of the parties.
    2. what the court believes is a fair contract.
    3. what the defendant thought the contract meant.
    4. what will be best for the economic life of the community.    

23. In interpreting an ambiguous contract, one part of the contract:
    1. must be viewed in isolation.
    2. must be viewed as a condition.
    3. must be viewed in connection with the rest of the contract.
    4. must be viewed as indicating joint and several liability.          
24. A contract is created by which the terms are stated to be for consideration in the amount of $3,000. If typewritten in the contract is the term "four thousand dollars," while the amount of $3,000 is printed within the form:
    1. the contract will be interpreted to be for $3,000.
    2. the contract will be interpreted to be for $4,000.
    3. there is a contract but the courts will not specify the dollar amount, as a conflict exists.
    4. a compromise settlement amount of $3,500 will be use     
25. When an insurance policy is ambiguous, the policy is interpreted:
    1. against the insurer.
    2. in favor of the insurer.
    3. according to the dictionary meaning of the words.
    4. according to the meaning of the words in the insurance industry.     
26. When a contract proves to be a bad bargain:
    1. the injured party is never bound by the terms of the contract.
    2. courts will always imply terms that are necessary to avoid hardship.
    3. parties are generally still bound by the terms of the contract.
    4. the contract must be rewritten.

                                          

 

CASE

 

1. Bart was a self-made millionaire who had earned his fortune by dedicated hard work. Bart had worked so hard that he never had developed much of a social life. Bart met Linda and fell in love with her. When Bart proposed to Linda, she told him that she needed time before making such an important de- cision. Pressing her for a favorable response, Bart telephoned Linda and promised her $100,000 if she would marry him. Linda then accepted the proposal.

 

Bart contracted with Quick Builders for the construction of a home Bart intended to move into with Linda after their marriage. Construction by Quick was not very quick because Quick was not paying subcontractors the sums that they were owed. They, in turn, were not completing their work. To expe- dite matters, Bart called the subcontractors and assured them that Bart would pay any sums that Quick Builders did not pay if they would complete the construction.

 

Bart and Linda married and the subcontractors completed the work. Quick Builders did not pay the subcontractors in full. Bart failed to pay Linda the $100,000. Both Linda and the subcontractors sued Bart. Discuss the probable outcome of the lawsuits.

 

 

 

 

2. Suzy Anders enters into an oral contract to purchase a tract of land from Bill Hermes. The land is con- sidered worthless, but Anders feels that she has discovered a possible usage that would drastically in- crease the value of the land. To assure herself of the potential value of the land, Anders orally hires an attorney to investigate the title and records associated with the land in question. Before gaining any in- formation from her attorney, Anders orally contracts with a builder to construct a huge building on the site. Because of the size of the project, a completion time is difficult to predict. Anders now discovers that the land is indeed useless, a fact that she obtains through information from her attorney.

 

Anders now refuses to honor her contracts with Hermes, her attorney, and the builder. Must Anders honor her contractual agreements?

 

 

 

 

3. Jones and Clark entered into a written contract for the purchase of an apartment building by Clark. The contract was carefully drafted to set forth the agreement of the parties. It was signed by both parties. Clark subsequently claimed that the contract did not cover all the terms included in the written and oral agreements that the parties had made during their prior negotiations.

 

Jones claimed that the parol evidence rule barred proof of all of their prior agreements. Which claim would be upheld in court?