Contracts: Formation, Types, Remedies - Business Law and Ethics

Question 1

What are the essential elements that make a contract legally binding?

Accepted Answer

Offer, acceptance, consideration, capacity, and legality

Answer

Offer, acceptance, and consideration

Answer

Offer, acceptance, consideration, intention, and capacity

Answer

Offer, acceptance, consideration, subject matter, and formality

Question 2

What is the main remedy for breach of contract?

Accepted Answer

Damages

Answer

Injunction

Answer

Rescission

Question 3

What is the purpose of a written contract?

Accepted Answer

To provide evidence of the terms of the agreement and reduce the risk of disputes.

Answer

To simplify the process of forming a contract.

Answer

To make the contract legally binding.

Question 4

Which of the following is NOT a characteristic of a valid contract?

Accepted Answer

Minority

Answer

Consideration

Answer

Consent

Answer

Legality

Question 5

What is the purpose of the Statute of Frauds?

Accepted Answer

To prevent fraud by requiring certain types of contracts to be in writing.

Answer

To make it easier to enforce contracts.

Answer

To protect consumers from unfair contracts.

Question 6

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

Accepted Answer

Express term

Answer

Term implied by custom

Answer

Term implied by usage of trade

Answer

Term implied by law

Question 7

A clause in a contract that limits the liability of one party is known as:

Accepted Answer

Exclusion clause

Answer

Arbitration clause

Answer

Force majeure clause

Answer

Penalty clause

Question 8

Which of the following statements about oral contracts is true?

Accepted Answer

They can generally be legally binding

Answer

They require a written agreement to be valid

Answer

They are always void

Question 9

Which type of misrepresentation can make a contract void?

Accepted Answer

Fraudulent misrepresentation

Answer

Warranty

Answer

Innocent misrepresentation

Answer

Negligent misrepresentation

Question 10

An obligation that arises automatically by operation of law in a contract is known as:

Accepted Answer

Implied duty

Answer

Express duty

Answer

Collateral duty

Question 11

Which of the following is NOT considered an essential element for a valid contract?

Accepted Answer

Witness signature

Answer

Acceptance

Answer

Offer

Answer

Consideration

Question 12

A contract is considered void if it:

Accepted Answer

It is illegal or impossible to perform.

Answer

It is made verbally instead of in writing.

Answer

One of the parties involved is a minor.

Answer

It favors one party significantly more than the other.

Question 13

Which of the following is a type of express contract?

Accepted Answer

Written contract

Answer

Quasi contract

Answer

Executed contract

Answer

Implied contract

Question 14

The Statute of Frauds requires specific types of contracts to be in writing. Which of the following is NOT included in this requirement?

Accepted Answer

Contracts for the sale of goods under £20.

Answer

Contracts for the sale of land.

Answer

Contracts for the provision of services over £500.

Answer

Contracts for the transfer of shares.

Question 15

Which principle is central to contract law?

Accepted Answer

Pacta sunt servanda

Answer

Caveat emptor

Answer

Res ipsa loquitur

Question 16

Which of the following is NOT an essential element of a valid contract?

Accepted Answer

Absence of consideration

Answer

Offer and acceptance

Answer

Capacity

Answer

Intention to create legal relations

Question 17

A contract is considered voidable when:

Accepted Answer

One party lacks the legal capacity to enter into a binding agreement

Answer

Both parties have breached the contract

Answer

The contract violates the law

Question 18

Which type of contract is commonly used for the sale of tangible goods?

Accepted Answer

Sale of Goods Contract

Answer

Employment Contract

Answer

Service Contract

Question 19

Rescission is a legal remedy for breach of contract that allows the non-breaching party to:

Accepted Answer

Cancel the contract and seek compensation for damages

Answer

Receive damages only

Answer

Enforce the contract as originally agreed

Answer

Obtain an injunction prohibiting further breach

Question 20

Which implied term in a contract for the sale of goods ensures that the items sold are of satisfactory quality?

Accepted Answer

Merchantable quality

Answer

Title

Answer

Quiet enjoyment

Answer

Fitness for a particular purpose

Question 21

A contract under seal differs from a simple contract primarily because it:

Accepted Answer

Requires a formal written document called a deed

Answer

Is more challenging to prove its existence

Answer

Must be in writing to be enforceable

Answer

Has a longer statute of limitations

Question 22

The statutory obligation imposed on all parties to a contract to act in good faith is known as:

Accepted Answer

Duty of good faith

Answer

Duty to mitigate losses

Answer

Duty to disclose material facts

Answer

Duty of care

Question 23

A novation occurs when:

Accepted Answer

A new contract replaces an existing contract, effectively canceling the original agreement

Answer

A contract is transferred to a third party

Answer

A contract is violated

Answer

A contract is terminated by mutual consent

Question 24

Which essential element of a valid contract signifies the meeting of the minds between the parties?

Accepted Answer

Agreement

Answer

Capacity

Answer

Consideration

Answer

Intention

Question 25

A contract lacking the intention to create legal relations is categorized as a:

Accepted Answer

Social agreement

Answer

Quasi-contract

Answer

Express contract

Answer

Implied contract

Question 26

Which term is automatically incorporated into every contract, imposing a basic level of care?

Accepted Answer

Duty of care

Answer

Disclaimer of liability

Answer

Warranty of merchantability

Answer

Warranty of fitness for purpose

Question 27

A contract entered into under the influence of undue pressure or coercion is considered:

Accepted Answer

Voidable

Answer

Unenforceable

Answer

Void

Answer

Valid

Question 28

The fundamental principle of contract law that allows parties to freely enter into agreements is known as:

Accepted Answer

Freedom of contract

Answer

Good faith

Answer

Equity

Answer

Privity of contract

Question 29

In a unilateral contract, the offer is made when the:

Accepted Answer

Offeree performs the act requested in the offer

Answer

Offeror accepts the performance

Answer

Offeror communicates the offer to the offeree

Answer

Offeror communicates acceptance of the performance

Question 30

Which of the following is NOT a valid consideration in a contract?

Accepted Answer

Past consideration

Answer

Forbearance or detriment

Answer

Money or property

Answer

Present or future benefit

Question 31

The rule of privity of contract means that:

Accepted Answer

Only parties to a contract are legally bound by its terms.

Answer

Contracts must be in writing to be valid.

Answer

Contracts can be assigned to third parties only with the consent of all parties

Question 32

Which remedy for breach of contract compensates the innocent party for their losses?

Accepted Answer

Damages

Answer

Specific performance

Answer

Injunction

Answer

Rescission

Question 33

A misrepresentation in a contract is a false statement:

Accepted Answer

That induces the other party to enter into the contract

Answer

That is immaterial to the contract

Answer

That is made after the contract formation

Question 34

The parol evidence rule prohibits the use of:

Accepted Answer

External evidence to contradict or vary the terms of a written contract

Answer

Internal evidence to contradict the terms of a written contract

Answer

External evidence to interpret the terms of a written contract

Question 35

An express contract is an agreement that is:

Accepted Answer

Specifically stated in words, either written or spoken.

Answer

Void if it is not supported by consideration.

Answer

Implied from the conduct of the parties.

Answer

Only enforceable if it is in writing.

Question 36

A breach of contract occurs when:

Accepted Answer

A party fails to perform their contractual obligations without a valid excuse.

Answer

A contract is terminated by mutual agreement.

Answer

A contract is declared void by a court.

Question 37

Which of the following is a potential remedy for breach of contract?

Accepted Answer

Damages

Answer

Banishment from society

Answer

Confiscation of property

Answer

Imprisonment

Question 38

Consideration in a contract refers to:

Accepted Answer

Something of value exchanged between the parties.

Answer

The legal document that outlines the terms of the contract.

Answer

The promise made by one party to the other.

Answer

The reason for entering into the contract.

Question 39

A bilateral contract is one in which:

Accepted Answer

Both parties make legally enforceable promises to each other.

Answer

The contract is for the sale of goods.

Answer

Only one party makes a legally enforceable promise.

Answer

The contract is in writing.

Question 40

Which of the following is NOT an essential element of a valid contract?

Accepted Answer

Consideration is sufficient

Answer

Intention to create legal relations

Answer

Offer and acceptance

Answer

Legal purpose

Question 41

What is the primary distinction between an express and an implied contract?

Accepted Answer

Express terms are explicitly stated, while implied terms arise from the parties' conduct or the nature of the transaction

Answer

Express contracts are written, while implied contracts are oral

Answer

Express contracts require consideration, while implied contracts do not

Question 42

What is the purpose of the Statute of Frauds?

Accepted Answer

To mandate written form for certain types of contracts to ensure enforceability

Answer

To give minors the right to avoid certain types of contracts

Answer

To set limits on the amount of damages that can be awarded for breach of contract

Question 43

What is the key difference between a void and a voidable contract?

Accepted Answer

A void contract is legally invalid from the outset, while a voidable contract is valid until it is legally revoked

Answer

A void contract is created by fraud, while a voidable contract is created by mistake

Answer

A void contract cannot be enforced, while a voidable contract can

Question 44

What is the principle of privity of contract?

Accepted Answer

Only parties to a contract can enforce it or be bound by its terms

Answer

Third parties can benefit from contracts even if they are not parties to them

Answer

Contracts can be assigned to third parties without their consent

Answer

Contracts are binding on the whole world

Question 45

What is the difference between a unilateral and a bilateral contract?

Accepted Answer

A unilateral contract is formed by one party making a promise, while a bilateral contract is formed by the exchange of promises between two parties

Answer

A unilateral contract requires consideration, while a bilateral contract does not

Answer

A unilateral contract is binding once the promise is made, while a bilateral contract is not binding until both parties have accepted

Question 46

What is the fundamental principle underlying the doctrine of consideration?

Accepted Answer

Something of value must be exchanged for a promise to be legally enforceable

Answer

Consideration can be anything of value, no matter how small

Answer

Consideration must be in the form of money

Question 47

What is the distinction between an invitation to treat and an offer?

Accepted Answer

An invitation to treat invites further negotiation, while an offer is a firm proposal to enter into a contract

Answer

An invitation to treat is legally binding, while an offer is not

Answer

An invitation to treat can be revoked at any time, while an offer cannot

Question 48

What are potential legal consequences of breaching a contract?

Accepted Answer

The innocent party may be entitled to remedies such as damages or specific performance

Answer

The contract is automatically terminated

Answer

The guilty party is automatically criminally liable

Question 49

Which of the following is NOT an essential element of a valid contract in the UK?

Accepted Answer

A written agreement

Answer

Consideration

Answer

Offer and acceptance

Answer

Intention to create legal relations

Question 50

A company offers to sell 1000 widgets to a customer at £10 per widget. The customer responds by saying they will buy 500 widgets at £9 per widget. This is an example of:

Accepted Answer

Counter-offer

Answer

Invitation to treat

Answer

Acceptance

Answer

Agreement

Question 51

A promise to pay for past services is generally considered to be:

Accepted Answer

Past consideration

Answer

Good consideration

Answer

Valuable consideration

Answer

Sufficient consideration

Question 52

Which type of contract is formed when the parties agree to its terms through their actions rather than express words?

Accepted Answer

Implied contract

Answer

Unilateral contract

Answer

Bilateral contract

Answer

Express contract

Question 53

A contract where one party makes a promise in exchange for an act by the other party is called a:

Accepted Answer

Unilateral contract

Answer

Executory contract

Answer

Bilateral contract

Answer

Implied contract

Question 54

A contract that is legally enforceable but can be avoided by one party is called a:

Accepted Answer

Voidable contract

Answer

Unenforceable contract

Answer

Illegal contract

Answer

Void contract

Question 55

A clause in a contract that limits the liability of one party for certain types of damages is known as:

Accepted Answer

Exclusion clause

Answer

Force majeure clause

Answer

Indemnity clause

Answer

Warranty clause

Question 56

A company enters into a contract to supply 1000 widgets to a customer by a specific date. However, due to an unforeseen factory fire, the company is unable to fulfil the order. This is an example of:

Accepted Answer

Frustration

Answer

Termination by agreement

Answer

Breach of contract

Answer

Repudiation

Question 57

Which of the following is NOT a factor considered when assessing whether a party's actions amount to a breach of contract?

Accepted Answer

The financial status of the breaching party

Answer

The terms of the contract

Answer

The consequences of the breach

Answer

The actions of the breaching party