PACO 501 EXAM 3 COMPREHENSIVE TEST
2026 STUDY GUIDE SOLVED QUESTIONS
◉ Novation of party. Answer: A new party is substituted in the place
of an existing party
◉ Accord (offer) and Satisfaction. Answer: Must be a dispute as to
the amount owed
- Cannot have a liquidated debt
- A loan is a liquidated debt
◉ Release. Answer: Needs:
- Good faith
- Writing
- Consideration
(Car loan)
◉ Contractual Capacity. Answer: A contract requires the parties
bound by it have contractual capacity
- Requires a person understand the consequences of entering into
contract
,◉ Ratification. Answer: The act of accepting and giving force to an
obligation that previously was not enforceable
◉ Minors. Answer: (Voidable)
- Can disaffirm a contract by just expressing intent to do so
- Can disaffirm until they reach age of majority or a reasonable
amount of time after
- Most states require that merchandise be returned
- Can't disaffirm if emancipated
- Can disaffirm contract for necessities
- Still liable for goods used
- Two part test: 1) Item must be necessary to sustain a minors
existence 2) minor must not have guardian who is willing to provide
the necessary
◉ Shields v. Gross. Answer: - Actress/model Brooke Shields was
photographed a child
- Photographs were of her in a bathtub
- Photographs were embarrassing
- Shields tried to prevent the republication of these photos
- New York law allowed her mother to consent on her behalf
- Contract for the photos was not voidable at the option of Shields
under New York state law
, ◉ The intoxicated. Answer: General Rule: If a person is sufficiently
intoxicated then the contract is voidable
- If intoxicated but still able to understand consequences of actions
contract is not voidable
◉ First State Bank of Sinai v. Hyland. Answer: - First State Bank sued
defendant Hyland for payment on a promissory note
- Hyland had signed a promissory note, the proceeds of which, had
been released to his son who did not make the required payments
- Defendant claims he was intoxicated at the time he signed the
promissory note. Court agrees that the contract was voidable at his
option because of intoxication
- Court finds the defendant ratified the contract by making payment
of interest
- Court states disaffirmance must be prompt after regaining one's
faculties
◉ Mentally Incompetent. Answer: - Void-If person is adjudicated
mentally incompetent
- Voidable-If its proven that the person is mentally incompetent at
time of contracting but now is lucid
- Not voidable if person had a lucid moment and have not been
adjudged as being mentally insane by a court
2026 STUDY GUIDE SOLVED QUESTIONS
◉ Novation of party. Answer: A new party is substituted in the place
of an existing party
◉ Accord (offer) and Satisfaction. Answer: Must be a dispute as to
the amount owed
- Cannot have a liquidated debt
- A loan is a liquidated debt
◉ Release. Answer: Needs:
- Good faith
- Writing
- Consideration
(Car loan)
◉ Contractual Capacity. Answer: A contract requires the parties
bound by it have contractual capacity
- Requires a person understand the consequences of entering into
contract
,◉ Ratification. Answer: The act of accepting and giving force to an
obligation that previously was not enforceable
◉ Minors. Answer: (Voidable)
- Can disaffirm a contract by just expressing intent to do so
- Can disaffirm until they reach age of majority or a reasonable
amount of time after
- Most states require that merchandise be returned
- Can't disaffirm if emancipated
- Can disaffirm contract for necessities
- Still liable for goods used
- Two part test: 1) Item must be necessary to sustain a minors
existence 2) minor must not have guardian who is willing to provide
the necessary
◉ Shields v. Gross. Answer: - Actress/model Brooke Shields was
photographed a child
- Photographs were of her in a bathtub
- Photographs were embarrassing
- Shields tried to prevent the republication of these photos
- New York law allowed her mother to consent on her behalf
- Contract for the photos was not voidable at the option of Shields
under New York state law
, ◉ The intoxicated. Answer: General Rule: If a person is sufficiently
intoxicated then the contract is voidable
- If intoxicated but still able to understand consequences of actions
contract is not voidable
◉ First State Bank of Sinai v. Hyland. Answer: - First State Bank sued
defendant Hyland for payment on a promissory note
- Hyland had signed a promissory note, the proceeds of which, had
been released to his son who did not make the required payments
- Defendant claims he was intoxicated at the time he signed the
promissory note. Court agrees that the contract was voidable at his
option because of intoxication
- Court finds the defendant ratified the contract by making payment
of interest
- Court states disaffirmance must be prompt after regaining one's
faculties
◉ Mentally Incompetent. Answer: - Void-If person is adjudicated
mentally incompetent
- Voidable-If its proven that the person is mentally incompetent at
time of contracting but now is lucid
- Not voidable if person had a lucid moment and have not been
adjudged as being mentally insane by a court
