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TBCh07RF - CHAPTER 7 Contracts TRUE-FALSE QUESTIONS 1 Most...

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C H A P T E R 7 Contracts T RUE -F ALSE Q UESTIONS 1. Most advertisements are treated not as offers but as invitations to negotiate. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 2. An objective standard is used in determining whether an offer has been made. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 3. An offer terminates at the end of a reasonable period if the offeror did not specify a time. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 4. An offeror may not revoke an offer before the offeree has had a reasonable time in which to consider it. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 5. A counteroffer does not terminate the original offer. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 6. An option contract holds an offer open for a certain amount of time in exchange for some consideration. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 7. In a requirements contract, the buyer agrees to purchase all of the seller’s output of a particular product. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 8. The statute of frauds requires that all contracts be in writing to be enforceable. 92
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93 MANAGERS AND THE LEGAL ENVIRONMENT ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 9. Consideration can be either a promise to do a certain act or the performance of the act itself. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 10. A novation occurs when a new party is substituted for one of the original parties to a contract. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 11. Unconscionability has both a procedural and a substantive element. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 12. In a unilateral contract, a promise is given in exchange for another promise. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 13. Void means the same thing as voidable in contract law. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 14. Only an attorney can hold a power of attorney. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 15. Any breach of a contract discharges the nonbreaching party from its obligations and provides grounds to sue for damages. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 16. Consequential damages are compensation for losses that occur as a foreseeable result of the breach. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal
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CHAPTER 7 CONTRACTS 94 17. Reliance damages are awarded in addition to expectation damages. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 18. Courts enforce liquidated damages as a form of a penalty. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 19. Expectation damages give the plaintiff the benefit of its bargain, putting the plaintiff in the cash position it would have been in if the contract had been fulfilled.
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