PSI Contracts and Business Law 4 — Questions and Answers
Question 1: Which of the following contracts falls within the Statute of Frauds and must be in writing to be enforceable?
- A one-month lease for an apartment
- A contract for the sale of goods worth $400
- A contract for the sale of real property (Correct answer)
- A service contract completable within six months
Correct answer: A contract for the sale of real property
Contracts for the sale of real property are within the Statute of Frauds and must be evidenced by a writing signed by the party to be charged.
Question 2: What is 'anticipatory repudiation' in contract law?
- Refusing to perform after the other party has already breached
- Clearly communicating an intent not to perform before performance is due (Correct answer)
- Seeking a court order to prevent performance
- Demanding assurances of future performance
Correct answer: Clearly communicating an intent not to perform before performance is due
Anticipatory repudiation occurs when a party clearly and unequivocally indicates before the due date that it will not perform its contractual obligations.
Question 3: Under agency law, which of the following best describes 'apparent authority'?
- Authority expressly granted to an agent in writing
- Authority an agent reasonably believes they have based on prior conduct
- Authority a third party reasonably believes the agent has based on the principal's conduct (Correct answer)
- Authority granted by a court in the absence of an express agreement
Correct answer: Authority a third party reasonably believes the agent has based on the principal's conduct
Apparent authority arises when the principal's words or conduct lead a third party to reasonably believe the agent has authority to act on the principal's behalf.
Question 4: A homeowner hires a plumber who negligently floods the house. Which doctrine would make the hiring company liable if the plumber is its employee, but not if the plumber is an independent contractor?
- Respondeat superior (Correct answer)
- Contributory negligence
- Strict liability
- Negligence per se
Correct answer: Respondeat superior
Respondeat superior makes employers vicariously liable for torts committed by employees within the scope of their employment, but generally does not apply to independent contractors.
Question 5: What is the primary remedy for breach of contract?
- Punitive damages to punish the breaching party
- Compensatory damages to put the non-breaching party in the position they would have been in had the contract been performed (Correct answer)
- Rescission in all cases
- Specific performance in all cases
Correct answer: Compensatory damages to put the non-breaching party in the position they would have been in had the contract been performed
The primary remedy for breach of contract is compensatory damages, designed to give the non-breaching party the benefit of the bargain they expected.
Question 6: Which of the following is NOT a required element for a valid contract?
- Offer
- Acceptance
- Consideration
- Written documentation (Correct answer)
Correct answer: Written documentation
A valid contract requires offer, acceptance, and consideration (plus capacity and legality), but most contracts do not need to be in writing to be enforceable.
Question 7: What is 'accord and satisfaction'?
- A court order requiring a party to perform its contractual obligations
- An agreement to accept a different performance in satisfaction of an existing obligation (Correct answer)
- A damages award that satisfies a judgment
- A type of liquidated damages clause
Correct answer: An agreement to accept a different performance in satisfaction of an existing obligation
An accord is an agreement to accept a substituted performance; satisfaction occurs when that performance is completed, discharging the original obligation.
PSI Contracts and Business Law 4
Which of the following contracts falls within the Statute of Frauds and must be in writing to be enforceable?