1) In general, what is the effect of one party being mistaken about the subject matter of
a. The mistaken party can rescind the contract.
b. Either party can rescind the contract, and the mistaken party can recover damages.
c. Neither party can rescind the contract or recover damages.
d. Either party can rescind the contract and/or recover damages.
e. Either party can rescind the contract.
2) In Krysa v. Paine, where Paine’s Car Company was found to have committed fraud
in the sale of a truck to Krysa, what did the court rule regarding the punitive damages
a. Punitive damages are allowed at 9:1 in cases involving personal injury but in con-
tracts must adhere to a 3:1 ratio.
b. Punitive damages are limited to 9:1 in all cases.
c. Punitive damages should never have a cap or their function as a deterrent and punish-
ment would be lost.
d. Punitive damages are not available in a fraud action based on a contract.
e. Punitive damages of 27:1 are permitted in cases of extreme fraud.
3) The knowledge of a statement’s falsity, or the “guilty mind,” in a fraud in the induce-
ment case is also known as:
a. parol knowledge.
e. guilty intent.
4) Andre has made a statement that the average person would realize is puffery. Andre
is guilty of:
c. innocent misrepresentation.
d. undue influence.
5) In Wilson v. Western National Life Insurance Company, involving the party who lied
allegedly regarding prior drug abuse in order to obtain life insurance, what was
the holding of the court when the party later died from a drug overdose?
a. The life insurance company had to pay the proceeds because if the plaintiff’s medical
records had been consulted, the drug abuse would have been discovered.
b. The life insurance did not have to pay the proceeds only because the deceased’s wife
was unaware of the misrepresentation.
c. The life insurance had to pay the proceeds because the deceased’s wife actually paid
d. The life insurance company had to pay the proceeds because the plaintiff was not
using drugs during the time the application for insurance was made.
e. The life insurance company did not have to pay the proceeds because of the concealment of the drug abuse.
6) Undue influence is characterized by one party being put at a disadvantage in a con-
tract due to:
a. a party taking advantage of superior knowledge about the subject matter in a contract.
b. a party taking advantage of a fiduciary relationship.
c. a party taking advantage of the other party’s legal circumstances.
d. a party taking advantage of economic advantage in a transaction.
e. a party taking advantage of it being less urgent for that party to reach an agreement.
7) If a judge rules that a party has lost its case because of the Statute of Frauds, the
judge has essentially stated that:
a. the losing party was found by the court to have lied, and will therefore lose the case.
b. the losing party purposely deceived the other party about a material fact.
c. the losing party cannot enforce an oral contract that should have been in writing.
d. the winning party has proven criminally fraudulent conduct on the part of the losing
e. the losing party is not allowed to introduce evidence to contradict a written agreement.
8) Frank had a bicycle that he advertised for sale, honestly believing it to be a 1999
model even though it was actually a 1996 model. There were significant improvements in the frame material, not readily apparent, made between 1996 and 1999 to
this model bicycle. The buyer believed Frank’s statement that it was a 1999 model,
and was excited to be getting a model incorporating the improvements. After discovering that the
bike was actually a 1996 model, the buyer could avoid the contract on the basis of:
a. unilateral mistake.
c. mutual mistake.
d. B and C.
e. none of the above.
9) The owner of a gym tells Ruppert that if he joins the gym for a year and hires a per-
sonal trainer, his body will be more attractive to women and his life will change for-
ever. Ruppert joins and hires a personal trainer, but otherwise his life remains the
same. The statements of the gym owner could be described as:
a. statements of fact.
b. statements of opinions.
c. predictions about the future.
d. both B and C.
e. A, B and C.
10) Which of the following is the false statement?
a. A legal right arising from a breach of contract may be assigned.
b. The same right can be assigned more than once.
c. You must get everyone’s consent to make a novation.
d. Purely mechanical duties are not delegable.
e. There is a guarantor in a delegation.
11) When there has been an assignment of rights under a contract, who has a duty to
notify the obligor of the assignment?
a. The assignor.
b. The assignee.
c. Both the assignor and the assignee.
d. Neither the assignor nor the assignee.
e. Whichever party is nearer the obligor geographically.
12) When an obligor transfers her obligation to perform a contract duty to another, this is
known as a(n):
13) When there is an accord and satisfaction, when are the duties under the original con-
a. When the accord is formed.
b. When the duties of the original contract are fully performed by one of the parties.
c. When the original contract is breached.
d. When the duties under both the original contract and the accord are fully performed
by both parties.
e. When the duties under the accord are fully performed by both parties.
14) Which of the following is true?
a. If a contract can be performed, but doing so has become illegal, performance will be
discharged on the basis of impossibility.
b. A party can generally get out of a contract if it had entered into the contract without
all information relevant to the contract.
c. Death of a party will always result in discharge of that party’s duties.
d. A seller’s duty to sell goods is discharged due to impossibility if the seller is unable to
acquire the goods from its normal supplier.
e. Both A and B.
15) WorldRest Hotels has contracted with QuickBuild Construction to build a 650-bed
hotel in Downtown Dallas. Marty has entered into a lease agreement for retail space
in an adjacent building to open a gift shop catering to the hotel guests. QuickBuild
was aware of Marty’s lease agreement. QuickBuild breached its contract with WorldRest by not completing the hotel until seven months after the contractual due date.
Because the hotel was late opening and there were seven months when the hotel had
no guests, Marty lost considerable profits in the retail shop. Marty has sued Quick-
Build to recover these lost profits. Which of the following is true?
a. Marty is a donee beneficiary of QuickBuild’s contract to build the hotel.
b. Because QuickBuild is now in debt to Marty for the lost profits, Marty is a creditor
beneficiary of the hotel construction contract.
c. Marty can recover in the situation on the basis of an assignment of rights.
d. Marty cannot recover because Marty is an incidental beneficiary of the hotel construction contract.
e. The court would likely order QuickBuild to delegate its duties on future contracts so
that they are finished on time.
16) What is tender of performance in connection with a contract?
a. Performance whose terms have been ordered by the court.
b. One party’s completion of duties under the contract.
c. An unconditional offer by a contracting party to perform his or her obligations under a
d. A party’s offering substitute performance that is superior to the performance called for
in the contract.
e. A party’s offering to perform prior to full payment.
17) What kind of damages will be awarded when there is no actual financial loss?
a. Special damages.
b. Nominal damages.
c. Compensatory damages.
d. Consequential damages.
e. There are no damages that a court will award in the absence of an actual financial
18) What does the term “mitigation” refer to in connection with damages?
a. The calculation of lost profits in determining damages.
b. The combination of the different kinds of damages into a single dollar amount.
c. The duty of the breaching party to make a damages payment as soon as practical.
d. The requirement of the non-breaching party to allow the breaching party one final
chance to perform the contract before being entitled to collect damages.
e. The duty of a non-breaching party to make reasonable efforts to reduce damages.
19) What is the modern rule for who gets to keep an engagement ring given by the man to
the woman if the planned wedding does not occur?
a. It must be returned to the man regardless of who broke off the engagement.
b. It will be based on who was determined by the court to be more at fault in causing the
engagement to be broken off.
c. It will go to the party who has the least financial resources at the time the engagement is broken.
d. The party who did not break off the engagement gets to keep it.
e. The woman can keep it regardless of who breaks off the engagement.
20) What was the result in the Ethics Spotlight in the book in which “Kurupt” was allegedly
induced by Death Row Records to breach an exclusive recording agreement with
a. Death Row Records was held liable for the tort of intentional interference with a con-
tract but could not be held liable for punitive damages.
b. Death Row Records was held liable for the tort of intentional interference with a con-
tract but could not be held liable for compensatory damages.
c. Death Row Records was not held liable for anything because the plaintiff had been
prosecuted for fraudulent activities, and Death Row Records assisted the singer in
avoiding a bad deal.
d. Death Row Records was not held liable for the tort of intentional interference with a
e. Death Row Records was held liable for the tort of intentional interference with a con-
tract, and was held liable for compensatory and punitive damages.
21) In Reno, Attorney General of the United States v. American Civil Liberties Union,
involving a law restricting the sending of certain sexually oriented information over the
Internet, the U.S. Supreme Court ruled that:
a. the Telecommunications Act of 1996 violated the U.S. Constitution for its restrictions
on the transfer of indecent material over the Internet.
b. the Communications Decency Act violated the U.S. Constitution for its restrictions on
the transfer of indecent material over the Internet.
c. the Internet had grown to a point that it should be placed into private ownership that
could contract regarding sexual content with individual service providers.
d. the Communications Decency Act did not violate the U.S. Constitution in any manner.
e. individual states could decide whether the Telecommunications Act of 1996 violated
the U.S. Constitution.
22) In order to obtain a domain name, one must:
a. obtain clearance from the U.S. Patent and Trademark office that the name is XXXXX XXXXX similar to another name, and pay the appropriate fee.
b. verify that the name is XXXXX XXXXX taken, complete a registration form, and pay the
c. apply for the name with the appropriate county agency; state the purpose for which
the name will be used; and if the use is approved, pay the appropriate fee.
d. apply for the name and, if within the waiting period, there are no objections to the applicant
taking the name, pay the appropriate fee.
e. post notice at the Network Web office of the intent to use the name, directly notify
parties who might object to obtain their waiver of objection, and pay the appropriate
23) The Counterfeit Access Device and Computer Fraud and Abuse Act makes it illegal to do each of the following except:
a. access a computer to knowingly obtain financial records of financial institutions.
b. access a computer to knowingly obtain grades and personal information pertaining to
students at a college or university.
c. access a computer to knowingly obtain restricted governmental information.
d. access a computer to knowingly obtain consumer reports of consumer reporting agencies.
e. all of the above are illegal under the Counterfeit Access Device and Computer Fraud
and Abuse Act.
24) Under the Uniform Computer Information Transactions Act, the licensee can revoke
acceptance of the information if:
a. there is a material breach and discovery of the nonconformity was difficult at the time
of delivery but was later discovered.
b. there is a breach of any kind and discovery of the nonconformity was difficult at the
time of delivery but was later discovered.
c. there is a material breach and after discovering the nonconformity at the time of
delivery, the licensor agreed to cure the defect, but has not done so.
d. there is a breach of any kind, and after discovering the nonconformity at the time of
e. A or C will allow the licensee to revoke acceptance.
25) The Electronic Communications Privacy Act makes it a crime to do which of the following?
a. To intercept an electronic communication while in transit.
b. To intercept an electronic communication at the point of transmission.
c. To intercept an electronic transmission when stored by a router or server, or after
receipt by the intended recipient.
d. Both A and B.
e. A, B, and C.
Contemporary Business and Online Commerce Law
Sixth Edition, 2009
ISBN: 10: 0-13-601500-X
Henry R. Cheeseman
Pearson Prentice Hall