Contract Terms: Master the Building Blocks of Legally Binding Agreements

Question 1

Which of the following is NOT a recognized type of contractual term?

Accepted Answer

Ambiguous terms

Answer

Express terms

Answer

Implied terms

Answer

Incorporated terms

Question 2

Which type of term is automatically included in a contract based on its nature or the surrounding circumstances?

Accepted Answer

Implied term

Answer

Express term

Answer

Incorporated term

Answer

Collateral term

Question 3

Which of the following is an example of a collateral term?

Accepted Answer

A term that is not essential to the performance of the contract

Answer

A term that is essential to the performance of the contract

Answer

A term that is implied by law

Answer

A term that is incorporated into the contract from another document

Question 4

In which situation would a party NOT be considered to have breached a contract?

Accepted Answer

When a party meets their contractual responsibilities, but in a different way than agreed

Answer

When a party fails to meet their contractual responsibilities

Answer

When a party partially fulfills a contractual obligation

Question 5

Which of the following is NOT considered an express term in a contract?

Accepted Answer

Implied terms

Answer

Written terms

Answer

Verbal terms

Answer

Incorporated terms

Question 6

What is the legal consequence of an implied term in a contract?

Accepted Answer

It is legally binding only if it is deemed reasonable and necessary.

Answer

It holds the same legal weight as an express term.

Answer

It is not legally binding unless explicitly agreed upon by both parties.

Answer

It is legally binding only if it is documented in writing.

Question 7

Explain the distinction between an exemption clause and a limitation clause in a contract.

Accepted Answer

An exemption clause completely eliminates liability, whereas a limitation clause restricts liability to a specific amount.

Answer

A limitation clause completely eliminates liability, whereas an exemption clause restricts liability to a specific amount.

Answer

There is no distinction between an exemption clause and a limitation clause.

Answer

An exemption clause is legally valid only if it is in writing, while a limitation clause is valid even if not in writing.

Question 8

What is the primary purpose of the parol evidence rule?

Accepted Answer

To prevent parties from introducing verbal evidence that contradicts or alters the terms of a written contract.

Answer

To require parties to include all agreements in a written contract.

Answer

To simplify the process of proving the terms of a contract.

Answer

To prevent parties from entering into contracts that are not in writing.

Question 9

Explain the difference between a unilateral and a bilateral contract.

Accepted Answer

In a unilateral contract, only one party makes a promise, while in a bilateral contract, both parties make promises.

Answer

In a unilateral contract, both parties make promises, while in a bilateral contract, only one party makes a promise.

Answer

There is no distinction between a unilateral and a bilateral contract.

Answer

A unilateral contract is legally valid only if it is in writing, while a bilateral contract is valid even if not in writing.

Question 10

Which of the following is not fundamental to a legally binding contract?

Accepted Answer

Absence of duress

Answer

Mutual agreement

Answer

Valuable consideration

Answer

Legal capacity

Question 11

An 'express' contractual term is one that:

Accepted Answer

Is explicitly agreed upon by the parties

Answer

Is implied by the courts to protect a party

Answer

Is incorporated from another document

Answer

Is created by a third party

Question 12

Which of the following is an example of an implied term?

Accepted Answer

A requirement that goods be of satisfactory quality

Answer

An agreement to pay the purchase price

Answer

A choice of governing law

Answer

An exclusion of liability for defects

Question 13

True or False: A breach of contract occurs when a party meets their obligations as agreed.

Accepted Answer

False

Answer

True

Question 14

True or False: Mutual agreement between the parties can end a contract.

Accepted Answer

True

Answer

False

Question 15

Describe the crucial legal distinction between a void and a voidable contract.

Accepted Answer

A void contract arises from a mistake, whereas a voidable contract results from duress or undue influence.

Answer

A void contract is legally binding, while a voidable contract can be terminated by either party.

Answer

A void contract is unlawful, while a voidable contract is unethical.

Question 16

Which type of consideration involves a promise to do something in exchange for a promise to do something else?

Accepted Answer

Executory consideration

Answer

Executed consideration

Answer

Past consideration

Question 17

Which of the following is NOT a type of express term in a contract?

Accepted Answer

Implied term

Answer

Customary term

Answer

Oral term

Answer

Written term

Question 18

An implied term is a term that:

Accepted Answer

Is not expressly stated in the contract but is implied by law or custom and has the same legal effect as an express term.

Answer

Is always written down in the contract.

Answer

Can only be implied if the parties have a prior relationship.

Question 19

An incorporated term is a term that:

Accepted Answer

Is included in the contract by reference to another document and has the same legal effect as if it had been written into the contract itself.

Answer

Is always expressly stated in the contract.

Answer

Can only be incorporated if the parties have a prior relationship.

Question 20

Which of the following is NOT a requirement for a term to be incorporated into a contract?

Accepted Answer

The term must be in writing.

Answer

The parties must have actual or constructive knowledge of the term.

Answer

The term must be sufficiently clear and certain.

Question 21

What is the difference between a condition and a warranty in a contract?

Accepted Answer

A condition is a fundamental term of the contract, the breach of which gives the innocent party the right to terminate the contract, while a warranty is a less important term, the breach of which only gives the innocent party the right to claim damages.

Answer

A condition is a promise, while a warranty is a guarantee.

Answer

A condition is always written down in the contract, while a warranty is not.

Question 22

Which of the following is NOT a type of exclusion clause?

Accepted Answer

Incorporation clause

Answer

Disclaimer clause

Answer

Limitation clause

Answer

Exemption clause

Question 23

What is the legal effect of an exclusion clause?

Accepted Answer

It can exclude or limit liability for breach of contract, but only to the extent that it is reasonable and fair to do so.

Answer

It is always binding on the parties.

Answer

It can only be used to exclude liability for negligence.