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Question 1
Ben and Jerry promise to provide Moo Juice with free advertising on its packaging if Moo Juice delivers ten thousand gallons of milk to Ben and Jerry's ice cream factory in Vermont by April 1st. Moo Juice makes the delivery on time but Ben and Jerry refuse to put Moo Juice's logo on their ice cream containers. Moo Juice sues Ben and Jerry to enforce their contract. Ben and Jerry argue that the contract was unenforceable in that there was no mutuality because Moo Juice did not have to deliver the milk if they didn't want to. Ben and Jerry will probably:
Correct
Incorrect!
Correct
Incorrect!
Correct
Incorrect!
Correct Mutuality of obligation is required only in bilateral contracts, that is, contracts in which a promise is exchanged for another promise. A unilateral contract, where a promise is exchanged for an act, does not require mutuality. Here, Ben and Jerry exchanged a promise for an act. Therefore, this is a unilateral contract which is enforceable even without mutuality of obligation. That being the case, Ben and Jerry will lose this case and D is the correct answer.
Incorrect! Mutuality of obligation is required only in bilateral contracts, that is, contracts in which a promise is exchanged for another promise. A unilateral contract, where a promise is exchanged for an act, does not require mutuality. Here, Ben and Jerry exchanged a promise for an act. Therefore, this is a unilateral contract which is enforceable even without mutuality of obligation. That being the case, Ben and Jerry will lose this case and D is the correct answer.
Question 2
Ben and Jerry have opened a successful chain of ice cream stores throughout the United States. Hearing that Ben and Jerry are looking for a new milk supplier and knowing that being a supplier for Ben and Jerry would give them valuable exposure, Moo Juice approaches Ben and Jerry with an offer to become their new milk supplier. Moo Juice and Ben and Jerry enter into a contract under which Moo Juice promises to supply Ben and Jerry with all of the milk they need for $1 per gallon for a period of seven years and Ben and Jerry promise to buy all of the milk they need from Moo Juice at $1 per gallon for the same period of seven years. However, the contract also states that Ben and Jerry can terminate the contract at any time and for any reason, so long as they give Moo Juice one week notice. One week after the parties enter the contract, an epidemic of Mad Cow Disease breaks out, wiping out a large portion of the dairy industry. The price of milk spikes to $4 per gallon. Because of the increase in price, Moo Juice refuses to sell milk to Ben and Jerry at their agreed price. Ben and Jerry sue Moo Juice, and Moo Juice argues that there is no mutuality because they are bound for seven years while Ben and Jerry can get out of the contract after a week. Ben and Jerry will probably win:
Correct Moo Juice and Ben and Jerry have a real enforceable promise here. The fact that Ben and Jerry can get out of the contract after a week makes this a limited promise but, so long as both parties are bound, the promise is real. If a real promise is made, no matter how limited the promise is, lack of mutuality is not a defense to breach of the contract. Therefore, Ben and Jerry will be able to successfully sue to enforce the contract and TRUE is the correct answer.
Incorrect! Moo Juice and Ben and Jerry have a real enforceable promise here. The fact that Ben and Jerry can get out of the contract after a week makes this a limited promise but, so long as both parties are bound, the promise is real. If a real promise is made, no matter how limited the promise is, lack of mutuality is not a defense to breach of the contract. Therefore, Ben and Jerry will be able to successfully sue to enforce the contract and TRUE is the correct answer.
Correct
Incorrect!
Question 3
Simon, a record producer, signs Kelly, a seventeen-year-old lounge singer, to a deal in which he will pay her $5 million and she will record three albums for his label. After the first album fails to sell, Simon tries to terminate the contract. Simon argues that there was no mutuality because, since Kelly is a minor, the contract is voidable. Simon will probably:
Correct
Incorrect!
Correct
Incorrect!
Correct A voidable contract is a contract in which one party is bound but the other party can render the contract void at any time. There are several grounds for a contract being voidable, one of which is infancy of one of the parties. Where one party is an infant, that party can void the contract at any time. However, the other party is bound. In this case, Kelly is seventeen years old. This means that while Simon is bound by the contract, Kelly can void it at any time. While this might mean that there is no mutuality, the general rule is that, even though there is no mutuality, the contract is valid so long as Kelly wants it to be. Thus, Simon must abide by the contract and C is the correct answer.
Incorrect! A voidable contract is a contract in which one party is bound but the other party can render the contract void at any time. There are several grounds for a contract being voidable, one of which is infancy of one of the parties. Where one party is an infant, that party can void the contract at any time. However, the other party is bound. In this case, Kelly is seventeen years old. This means that while Simon is bound by the contract, Kelly can void it at any time. While this might mean that there is no mutuality, the general rule is that, even though there is no mutuality, the contract is valid so long as Kelly wants it to be. Thus, Simon must abide by the contract and C is the correct answer.
Correct
Incorrect!
Question 4
Simon promises Kelly, a lounge singer, that he will sign her to a record deal if he ever starts his own record label. One year later, Simon starts his own label but refuses to sign Kelly. Kelly sues Simon. Simon argues that there was no mutuality in their agreement because Kelly never gave Simon a promise or an act in return for his promise. Simon will probably Win the case:
Correct
Incorrect!
Correct A conditional promise is a promise that the promisor has to perform only if a specified condition occurs. This is considered a real promise, and not illusory, because if the condition does occur, the promisor must perform his promise and has thus limited his future options. Conditional promises are valid even if the fulfillment or frustration of the specified condition is within the promisor's control. Here, Simon made a conditional promise. Therefore, even though Kelly never gave Simon any consideration for his promise, the promise is enforceable and FALSE is the correct answer.
Incorrect! A conditional promise is a promise that the promisor has to perform only if a specified condition occurs. This is considered a real promise, and not illusory, because if the condition does occur, the promisor must perform his promise and has thus limited his future options. Conditional promises are valid even if the fulfillment or frustration of the specified condition is within the promisor's control. Here, Simon made a conditional promise. Therefore, even though Kelly never gave Simon any consideration for his promise, the promise is enforceable and FALSE is the correct answer.
Question 5
Ben and Jerry, the owners of an ice cream factory, promise Dell Woods, the owner of the Moo Juice Dairy farm, that if Dell provides Ben and Jerry with ten thousand gallons of milk per year, Ben and Jerry will either give Dell free advertising space on their packaging, give Dell all the free ice cream he wants or provide Dell with twenty pounds of the finest marijuana from their "special" farm in Vermont. The agreement states that Ben and Jerry can choose which of the three payment options they will make. Ben and Jerry and Moo Juice have an enforceable contract:
Correct
Incorrect!
Correct An alternative promise is a promise in which the promisor can fulfill the promise by choosing between two or more alternatives. Because Ben and Jerry can choose one of three options in how to pay Moo Juice for the milk, this is an alternative promise. However, the general rule concerning alternative promises is that they will only be considered valid if each alternative that the promisor can choose from would have been adequate consideration had it been the only option the promisor could have used to fulfill his promise. That is not the case here. Because distributing marijuana is illegal, giving Dell the twenty pounds of marijuana would not have been adequate consideration for the milk if it had been the only option. Therefore, by virtue of the general rule, the whole contract is unenforceable and FALSE is the correct answer.
Incorrect! An alternative promise is a promise in which the promisor can fulfill the promise by choosing between two or more alternatives. Because Ben and Jerry can choose one of three options in how to pay Moo Juice for the milk, this is an alternative promise. However, the general rule concerning alternative promises is that they will only be considered valid if each alternative that the promisor can choose from would have been adequate consideration had it been the only option the promisor could have used to fulfill his promise. That is not the case here. Because distributing marijuana is illegal, giving Dell the twenty pounds of marijuana would not have been adequate consideration for the milk if it had been the only option. Therefore, by virtue of the general rule, the whole contract is unenforceable and FALSE is the correct answer.
Question 6
Ben and Jerry, the owners of an ice cream factory promise Dell Woods, the owner of the Moo Juice Dairy farm that if Dell provides Ben and Jerry with ten thousand gallons of milk per year, Ben and Jerry will either give Dell free advertising space on their packaging, give Dell all the free ice cream he wants or provide Dell with twenty pounds of the finest marijuana from their "special" farm in Vermont. The agreement states that Moo Juice can choose which of the three payment options they will accept. Ben and Jerry and Moo Juice have an enforceable contract:
Correct An alternative promise is a promise in which the promisor can fulfill the promise by choosing between two or more alternatives. Because Moo Juice can choose one of three options in how to pay Ben and Jerry are to pay for the milk, this is an alternative promise. The general rule concerning alternative promises is that, where the promisee has the option of choosing how he will be repaid, an alternative contract will be considered valid as long as at least one of the options is valid consideration. Here, two of the three potential repayment options are valid. Therefore, the contract will also be considered enforceable and TRUE is the correct answer.
Incorrect! An alternative promise is a promise in which the promisor can fulfill the promise by choosing between two or more alternatives. Because Moo Juice can choose one of three options in how to pay Ben and Jerry are to pay for the milk, this is an alternative promise. The general rule concerning alternative promises is that, where the promisee has the option of choosing how he will be repaid, an alternative contract will be considered valid as long as at least one of the options is valid consideration. Here, two of the three potential repayment options are valid. Therefore, the contract will also be considered enforceable and TRUE is the correct answer.
Correct
Incorrect!
Question 7
Ben and Jerry have opened a successful chain of ice cream stores throughout the United States. Hearing that Ben and Jerry are looking for a new milk supplier and knowing that being a supplier for Ben and Jerry would give them valuable exposure, Moo Juice approaches Ben and Jerry with an offer to become their new milk supplier. Moo Juice and Ben and Jerry enter into a contract under which Moo Juice promises to sell Ben and Jerry milk for $1 per gallon for a period of seven years and Ben and Jerry promise to buy all of the milk they need from Moo Juice for the same period of seven years. One week after the parties enter the contract, an epidemic of Mad Cow Disease breaks out, wiping out a large portion of the dairy industry. The price of milk spikes to $4 per gallon. Because of the increase in price, Moo Juice refuses to sell milk to Ben and Jerry at their agreed price. Ben and Jerry sue Moo Juice, and Moo Juice argues that there is no mutuality because, if Ben and Jerry do not need any milk, they are not required to buy anything from Moo Juice. Ben and Jerry will probably win:
Correct Here, Ben and Jerry and Moo Juice have entered into a requirements contract under which Ben and Jerry agree to buy all of what they need from Moo Juice. Both requirements and output contracts are enforceable because the parties to the contracts do, in fact, limit their options. Here, Ben and Jerry's options are limited because, while they do not have to buy any milk from Moo Juice if they do not need it, any milk they do need must be bought from Moo Juice. Therefore, although there is technically no mutuality in requirements or output contracts, this contract will be enforceable and TRUE is the correct answer.
Incorrect! Here, Ben and Jerry and Moo Juice have entered into a requirements contract under which Ben and Jerry agree to buy all of what they need from Moo Juice. Both requirements and output contracts are enforceable because the parties to the contracts do, in fact, limit their options. Here, Ben and Jerry's options are limited because, while they do not have to buy any milk from Moo Juice if they do not need it, any milk they do need must be bought from Moo Juice. Therefore, although there is technically no mutuality in requirements or output contracts, this contract will be enforceable and TRUE is the correct answer.
Correct
Incorrect!
Question 8
Ben and Jerry have opened a successful chain of ice cream stores throughout the United States. Hearing that Ben and Jerry are looking for a new milk supplier, Moo Juice approaches Ben and Jerry with an offer to become their new milk supplier. Moo Juice and Ben and Jerry enter into a contract under which Moo Juice promises to sell Ben and Jerry milk for $1 per gallon and Ben and Jerry promise to buy all the milk they need from Moo Juice. Although no specific quantity is set in the contract, Ben and Jerry estimate that they will need one thousand gallons of milk per week. However, when they fill in the quantity of the contract, they state that they will need two thousand gallons of milk per week. Moo Juice refuses to fill the order and Ben and Jerry sue Moo Juice. Ben and Jerry will probably:
Correct
Incorrect!
Correct
Incorrect!
Correct
Incorrect!
Correct According to the U.C.C., where one party has the right to set the quantity in a requirements or output contract, the quantity offered under the contract cannot be unreasonably disproportionate to any estimate that has been made. Here, Ben and Jerry had the right to set the quantity in the contract. However, the quantity they set is double their original estimate. This is unreasonable and will make the contract void. Therefore, Ben and Jerry will lose this case and D is the correct answer.
Incorrect! According to the U.C.C., where one party has the right to set the quantity in a requirements or output contract, the quantity offered under the contract cannot be unreasonably disproportionate to any estimate that has been made. Here, Ben and Jerry had the right to set the quantity in the contract. However, the quantity they set is double their original estimate. This is unreasonable and will make the contract void. Therefore, Ben and Jerry will lose this case and D is the correct answer.
Question 9
Ben and Jerry have opened a successful chain of ice cream stores throughout the United States. Hearing that Ben and Jerry are looking for a new milk supplier, Moo Juice approaches Ben and Jerry with an offer to become their new milk supplier. Moo Juice and Ben and Jerry enter into a contract under which Moo Juice promises to sell Ben and Jerry milk for $1 per gallon for a period of seven years and Ben and Jerry promise to buy all of the milk they need from Moo Juice for the same period of seven years. One week after the parties enter the contract, an epidemic of Mad Cow Disease breaks out, wiping out a large portion of the dairy industry. Moo Juice's farms are hit by the epidemic particularly hard and almost 75% of their cows are infected. As a result, Moo Juice is no longer able to meet its customers' orders and decides to go out of business and salvage whatever assets they can. As a result, Moo Juice cannot honor their contract with Ben and Jerry. Ben and Jerry sue Moo Juice for breach of contract. Ben and Jerry will probably:
Correct
Incorrect!
Correct
Incorrect!
Correct The U.C.C. establishes that, where parties enter an output or requirements contract, there is an implied promise that the party who is bound by the contract will remain in business. That being the case, if a party to the contract goes out of business specifically to avoid their requirements under the contract they are in breach of the contract. However, if the party goes out of business for reasons that have nothing to do with the particular contract they made, they are not in breach. Here, Moo Juice's decision to go out of business had nothing to do with their obligations to Ben and Jerry. Therefore, they are not in breach and C is the correct answer.
Incorrect! The U.C.C. establishes that, where parties enter an output or requirements contract, there is an implied promise that the party who is bound by the contract will remain in business. That being the case, if a party to the contract goes out of business specifically to avoid their requirements under the contract they are in breach of the contract. However, if the party goes out of business for reasons that have nothing to do with the particular contract they made, they are not in breach. Here, Moo Juice's decision to go out of business had nothing to do with their obligations to Ben and Jerry. Therefore, they are not in breach and C is the correct answer.