Business Law 265

Spring 2008

Practice Exam

 

1.   On October 1, Tom contracts with Jerry to sell Tom’s sailboat for $600.  Delivery of the boat and payment are to be made on October 10. Which set of legal rules will probably govern this transaction?

a.  Contract rules of the Common Law

b.  Contract rules of the Uniform Commercial Code

c.  Equity rules that ensure fairness in transactions

d.  Maritime Law of Sales of Vessels

 

2.  Offers, revocations, rejections, and counter-offers are all effective when

a.  Sent

b.  Received

c.  Sent or received, depending on the circumstances

 

3.  Sarah, an accountant, sent an offer to Dona on October 1 offering to sell Sarah’s 1999 BMW automobile for $15,000.  The offer did not contain a provision stating when it would terminate.  Under these circumstances, when will that offer terminate?

a.  After 5 days, as per the “5 day rule”

b.  After 10 days, as per the “10 day rule”

c.  After a “reasonable” period of time, depending on the circumstances

d.  The offer will not terminate until either Sarah or Dona communicate that their willingness to enter that transaction has ended.

 

4. 

Joe sent Sam a letter offering to sell his mountain bike for $300. After thinking about this for a few days, Sam sent Joe a letter accepting his offer and asking if he intended to leave the book basket attached to the bike. The next day, before Sam’s letter arrived, Joe phoned Sam and told him that he had decided to sell his bike to Jake, who had offered him $400. Under these circumstances.: 

 

a.  

Sam used an implied authorized means of acceptance.

 

b.  

Sam’s acceptance was effective when Sam’ letter was mailed.

 

c.  

Joe’s attempted revocation is ineffective.

 

d.  

all of the above are correct.

 

5.  Contract offers become effective when they are:

            a.        sent, always

            b.        received, always

            c.        sent, but only if the method of communication is reasonable

            d.        received, but only if the “mailbox rule” applies.

 

6.  Jose sent a letter containing an offer to sell his Volant Powercarve skiis to Bill for $300.  This letter was sent on Oct. 1 and it was received on Oct. 4.  On Oct. 5 Bill sent a letter to Jose accepting the offer.  But on Oct 6 Bill changed his mind when he learned that here had been delamination problems with the Powercarve.  On Oct 6 Bill sent a message by personal messenger to Jose, rejecting Jose’s offer.  The messenger delivered the rejection and it was received by Jose on Oct. 7.  The letter containing Bill’s acceptance was received on Oct. 8.  Based on the above, has a contract been formed for the sale of the skiis?

a.  Yes, because under the “mailbox rule” a contract was formed on Oct. 5

b.  Yes, because  under the “mailbox rule” a contract was formed on Oct. 8

c.   No, because the rejection was sent before the acceptance was received

d.  No, because the rejection was received before the acceptance was received

 

7.  Jim saw an advertisement in the Daily News stating the Wolf Sporting Goods Store was “offering to sell Browning shotguns, model 100, for $400.”  Jim went next day to Wolf’s store and said “here is $400, I accept your offer to sell me a Browning model 100 for $400”.  Has an enforceable contract been formed?

a.  Yes, because the ad was an offer

b.  Yes, because the price was less than $500

c.   No, because the ad was not a contract offer

d.   No, because the acceptance was oral

 

8.  Under the conflicting response rule, if the offeree sends conflicting responses to the offeror, then:

           a.         no contract will result.

           b.         the first response sent will control.

           c.         the first response received will control.

           d.         the result will be the same as where the offeror had used a stipulation in

                        her offer. 

 

9.  Adam sent Ben an offer by letter on June 1 to sell his Atomic Metron skis for $200.  Adam’s letter was received on June 3.  On June 4 Ben sent his acceptance by letter to Adam.  This acceptance letter was received on June 6.  However, on June 2 Adam changed his mind about selling his Atomic skis, so he sent a revocation that day to Ben by letter; this letter was received on June 5.  Based on these facts:

a.         Adam’s revocation is effective because it was received before Ben’s

            acceptance was  received.    

 b.         Ben’s acceptance is not effective because Adam sent a revocation before

             Ben sent his acceptance.

 c.         No contract was formed because Adams revoked his offer before Ben

             could accept

 d.         None of the above are correct

 

10.  On June 1 Stone contracted to buy Mason's automobile.  They agreed to meet on June 5, when Stone would deliver a cashier's check for $5,000 and Mason would deliver possession and title to the car.   On June 2 this contract may best be described as 

a.  executory

b.  executed

c.  unilateral

d.  illusory

 

11.  Under the “mailbox rule”, acceptance is effective

a.  When received by the oferor

b.  When sent by the oferor

c.  When received by the offeree

d.  When sent by the offeree

 

 12.  The Uniform Commercial Code governs which kind of transactions?

a.  All commercial transactions

b.  All transactions for property of any kind

c.  All transactions for the sale of goods

d.  All transactions where the contract price is $500 or more

 

13.  An offer is defined as a

a.  Communication of a willingness to enter into a transaction

b.  Communication of a willingness to enter into negotiations, with the aim of entering into a transaction

c.  Communication of a willingness to consider an acceptance

d.  The same thing as a contract, only in preliminary form

 

14.  The “big 4” elements that must be present in any contract are:

a.  Legality, capacity, consideration, agreement

b.  Legality, capacity, consideration, fairness

c.  Legality, capacity, fairness, voluntariness

d.  Legality, fairness, voluntariness, agreement

 

15.  A contract provision that is “implied” means that it has been

a.  Communicated by words, either written or oral

b.  Communicated by written words only

c.  Communicated by oral words only

d.  Not communicated by words

 

16.  Which communication between the offeror and offeree is sometimes effective when sent?

a.  Offer

b.  Acceptance

c.  Counter-offer

d.  Rejection

 

Business Law 265

Spring 2008

Practice Exam

Answer Key

            An explanation and discussion of question #6 follows the ans. key

 

1. b

2. b

3. c

4. d

5. b

6. d

7. c

8. c

9. d

10. a

11. d

12. c

13. a

14. a

15. d

16. b

 

Question # 6:  This question involves the “conflicting response rule” (see lecture/discussion outline for Class 3, also text page 187).  The rule states that if the offeree  responds to the offer with conflicting responses, such as an acceptance and also a rejection, then the first response to be received by the offeror will control.  The conflicting response rule overrides the mailbox rule and also all other rules.

 

So in this question, a contract would have been formed (under the mailbox rule) on Oct. 5, when Bill sent his acceptance by mail to Jose.  However, Bill sent Jose two conflicting responses, an acceptance and a rejection.  The rejection was received by Jose first.  Therefore under the conflicting response rule no contract was formed.

 

Note that both answer choices “c” and “d” have the same conclusion:  that no contract was formed.  But only answer “d” has the correct reason – because the rejection response was received before the acceptance was received.