Ⅵ. Reading comprehension 10%

    Contracts are often classified as either contracts by specialty or simple contracts. Another class of obligations, sometimes referred to as contracts of record, are conclusive legal obligations created by the judgment or order of a court of record.

    Contracts by specialty depend for their validity on the formality of their execution. They are required to be written, sealed, and delivered by the party to be bound thereby. The usual form of specialty contract is a covenant. A bond, although in form an acknowledgment of indebtedness instead of a promise to pay, has always, been regarded and classified as a specialty contract. Contracts by specialty do not require consideration or surrender of a right, given in exchange for the promise, to give them validity. Courts of equity, however, will not enforce a specialty contract unless it is founded on a consideration.

    Simple contracts do not depend for their validity on any particular formality in their execution, but rather on the existence of a consideration. A simple contract may be written or verbal, or may even be implied from the acts and conduct of the parties manifesting their intentions. It usually comes into existence as the consequence of an offer and acceptance. In contracts entered into by letter, in most jurisdictions, the offer, unless it stipulates otherwise, is deemed to be accepted on the posting of acceptance. In a few states, however, it is held that no acceptance exists until the letter of acceptance is actually received by the person making the offer. Inasmuch as agreement must be in effect in order to create a contract, any mistake in setting forth the terms of the offer or acceptance that should be apparent to the other party negates the agreement, and no contract will arise. A mistake as to some collateral matter, however, will have no effect on the contract, unless induced by fraud, in which case the defrauded party may rescind the contract. Thus, if A, intending to sell property to B for $10,000, inadvertently writes $5,000, and B, who should know of the error, accepts, no contract arises; but if A offers $5,000 because he or she is in error as to the value of the property, a contract does arise.

    Simple contracts are frequently classified as express and implied. An express contract is one entered into terms expressed in spoken or written words. An implied contract is one that is inferred from the acts or conduct of the parties.

Questions:

52. ______ are referred to as contracts of record.(      )

A. Specialty contracts                                   B. Simple contracts

C. Conclusive legal obligations                       D. Export contracts

53. ______ are required to be written, sealed, and delivered by the party to be bound in accordance with the contracts.(      )

A. The formalities of their execution               B. Specialty contracts

C. The validity of the contracts                      D. Promises to pay

54. Simple contracts may be ______.(      )

A. oral and may not be executed by the parties to be bound

B. written or verbal and may be implied from the conduct of the parties

C. written and will no be supported by law

D. invalid though they are in a written form

55. For the contract induced by fraud, the defrauded party ______.(      )

A. may rescind it                                          B. has to execute it

C. must carry it out                                      D. may not reject it

56. Which of the following is NOT true according to the text ?(      )

A. Simple contracts may be implied.

B. Simple contracts may be inferred from the acts of the parties.

C. Specialty contracts may be classified as express.

D. Implied contracts are inferred from conduct of the parties.