Hi-Tech Industries is developing a new handheld personal computer system, allowing high-end computer gaming anywhere, any time. It negotiates with Lost Stars Pty Ltd, for the purchase of suitable electronic components. Before signing the contract, Hi-Tech Industries asks Lost Stars Pty Ltd whether the central processing unit selected can withstand high temperatures. (It expects that its customers will use the new gaming device in popular, and very hot, holiday destinations.) Lost Stars Pty Ltd assures Hi-Tech Industries that it can. Hi-Tech Industries tells Lost Stars Pty Ltd that this is the decisive factor in its conclusion of the contract, as Lost Stars Pty Ltd's competitors could not provide this assurance. Hi-Tech Industries signs the contract, but does not read it. The contract states that payment must be made in full, upon delivery of the electrical components (which are listed in the contract) in three months' time. The contract does not contain any heat guarantees regarding the central processing units. After the computer system is released into the market, Hi-Tech Industries receives many reports of central processing unit failures from customers using the device in very hot regions of the world. In determining if Hi-Tech Industries and Lost Stars Pty Ltd have formed a legally binding contract, which of the following is CORRECT? Select one: a. The contract will become legally binding when Lost Stars Pty Ltd delivers the electrical components, as this will be the time at which consideration is provided by both parties. b. The contract will only become legally binding when Hi-Tech Industries pays for the electronic components, as without payment being made there is no consideration. c. The contract is immediately legally binding, as the exchange of promises by the parties to each do things in the future is good consideration. d. The contract will not be legally binding if Hi-Tech Industries did not read the contract before signing it.

According to the parol evidence rule, which of the following statements is INCORRECT?

Select one:

a.

The parol evidence rule will not protect parties who have behaved badly, such as in the case of a fraud (ie. intentionally deceptive misrepresentations made by one party to another).

b.

Any evidence that the written contract is illegal will be allowed to be given as an exception to the parol evidence rule.

c.

Where a contract is in writing and appears to be the complete agreement between the parties, it is presumed that the written document is the entire agreement between them, and evidence that would add to, vary, or contradict the written agreement cannot be introduced by the parties. As a result, Lost Stars Pty Ltd's oral statement about the central processing units would be excluded from the written contract.

d.

The parol evidence rule allows parties to put forward evidence of oral promises given both before and after written contracts are signed. As a result, Lost Stars Pty Ltd's oral statement about the central processing units will be incorporated into the contract.

Hi-Tech Industries may be able to establish that Lost Stars Pty Ltd's oral statement amounts to a collateral contract. Which of the following is INCORRECT with respect to the collateral contract?

Select one:

a.

The statement made by Lost Stars Pty Ltd must be promissory in nature and must have been intended to have contractual effect for a collateral contract to exist.

b.

Hi-Tech Industries agreeing to enter into the main contract is the consideration for the collateral contract.

c.

Hi-Tech Industries may be entitled to damages for breach of the collateral contract.

d.

Lost Stars Pty Ltd's promise can be a term of the collateral contract even if it is found to contradict the terms of the main contract, if the circumstances are found to be exceptional.

Applying the reasonable person test to see whether Lost Stars Pty Ltd's oral statement was promissory, which of the following is INCORRECT?

Select one:

a.

If Lost Stars Pty Ltd is a mass reseller of a wide variety of goods and if it has little expertise in relation to any particular type of goods, its statement is less likely to be promissory.

b.

The statement was not important to Hi-Tech Industries in the overall context of the contract as Hi-Tech Industries needed to buy central processing units and this was its priority, so Lost Stars Pty Ltd's statement is less likely to be promissory.

c.

The statement may be classified as a promise due to the close proximity of when it was made relative to when the contract was formed.

d.

If Lost Stars Pty Ltd has a recognised expertise in the durability of the electrical components it sells, its statement is more likely to be promissory.