Reference no: EM132264852
1. Eddie wanted to buy a car. During negotiations, Best Dealership informed Eddie that it could give him a lower interest rate on the loan if he used a co-signer. So, Eddie took the loan agreement back to his house, got his dad, Mervin, to co-sign, and returned the loan agreement to Best Dealership. Two months later, Eddie defaulted on the loan agreement and Best notified Mervin that he was responsible for the payments. A week after Eddie’s default, Eddie showed up at Best Dealership with a check signed by Mervin to cover the interest owed on the loan. At that time, Eddie asked for a new loan agreement with more manageable terms. Best agreed, but only on the condition that Mervin again co-sign. This time, Mervin refused. The following month, Eddie again did not pay and subsequently declared bankruptcy. Best Dealership sued Mervin for the balance of the loan agreement he co-signed. “The hell you say,” said Mervin, “I was drunk was I signed that.”
Which of the following is the BEST answer?
a. If Mervin can show he was intoxicated at the time he co-signed the agreement and that Best Dealership had reason to know he was unable to understand the nature and consequences of his actions or to act in a reasonable manner, he may declare the contract void.
b. If Mervin can show he was intoxicated at the time he co-signed the agreement and that Best Dealership had reason to know he was unable to understand the nature and consequences of his actions or to act in a reasonable manner, he may declare the contract voidable.
c. (a), but only if Mervin promptly disaffirmed the contract upon notice of the cosigned loan agreement.
d. (b) but only if Mervin promptly disaffirmed the contract upon notice of the cosigned loan agreement.
e. (b) and (d), but only if Mervin did not ratify the contract prior to disaffirmance.
2. A year after Fail Corp. was formed, the company held an operational meeting. At that meeting, a group of employees confronted the CEO regarding the company’s continuing viability. The employees were concerned that the company might be sold or merge with another company, and they would be at risk for losing their employment without much (or any) notice. The CEO of the company, in an effort to quell the employees’ concerns and induce them to stay, promised that “in the event of sale or merger of Fail Corp., any original employees still remaining with Fail Corp. would get 10% of the value of any sale or merger.” Fail Corp was acquired by a competitor 6 months later. At the time of acquisition, Fail Corp. refused to honor the CEO’s promise and the employees’ brought an action against Fail Corp. (and the acquiring company) for breach of contract.
Which of the following is correct?
a. The CEO’s offer became binding once the employees’ began performance; the employees accepted the offer by beginning performance.
b. The CEO’s offer became binding at the time Fail Corp. was acquired; the employees accepted the offer by remaining with the company until it was sold.
c. The CEO’s offer became binding once the employees’ began performance; the employees accepted the offer by promissory estoppel.
d. The CEO’s offer became binding once the employee’s began performance; the employees accepted the offer by remaining with the company until it was sold.
e. None of the above.
3. A year after Fail Corp. was formed, the company held an operational meeting. At that meeting, a group of employees confronted the CEO regarding the company’s continuing viability. The employees were concerned that the company might be sold or merge with another company, and they would be at risk for losing their employment without much (or any) notice. The CEO of the company, in an effort to quell the employees’ concerns and induce them to stay, promised that “in the event of sale or merger of Fail Corp., any original employees still remaining with Fail Corp. would get 10% of the value of any sale or merger.” Fail Corp was acquired by a competitor 6 months later. At the time of acquisition, Fail Corp. refused to honor the CEO’s promise and the employees’ brought an action against Fail Corp. (and the acquiring company) for breach of contract. 17. Which of the following is the BEST answer?
a. The employees’ will be able to establish a claim for breach of bilateral contract.
b. The employees’ will not be able to establish a claim for breach of unilateral contract.
c. The employees’ will be able to establish a claim for breach of unilateral contract.
d. Both (a) and (c)
e. None of the above.