Contracts (Multiple Choice)

True or False: To establish that promissory estoppel exists, a party must prove that the promisee was unreasonable in taking action based on the promise.

False. The opposite is true. The action taken should be reasonable given the circumstances such that the promisor would have reasonably foreseen that the promisee would take such action.

True or False: The mirror image rule allows the offeree to form a common law contract even though the offeree's acceptance has varying terms.

False. The mirror image rule prevents an offeree from forming a contract with an acceptance of varying terms. The mirror image rule is an absolute requirement that the acceptance mirror (i.e., match) each and every term in the offer.

True or False: Courts will always enforce promises under the doctrine of promissory estoppel even if there is no detriment to the promisee because of the moral principle that promises — once made — should be kept.

False. Injustice is a key component of promissory estoppel. Courts enforce promises through the doctrine of promissory estoppel "if injustice can be avoided only by enforcement of the promise." When applying promissory estoppel, courts measure injustice by the degree to which the promisee has suffered a detriment in taking a reasonable action or forbearance that was foreseeable to the promisor.

True or False: Promissory estoppel is a legal principle rooted in the theory of freedom of contract.

False. Promissory estoppel is an equitable doctrine meant to support the principles of equity and fairness.

True or False: Quasi-contracts are enforceable legal contracts with consideration.

False. Quasi-contracts are not legal contracts at all. Instead, courts imply a contract by law in order to achieve justice.

True or False: In determining whether a party has manifested intent to make a promise, a court will start by considering the ordinary meaning of the words.

True. Determining a party's intention is key concept used throughout our study of contracts. One of the principal ways that courts ascertain the intent of the parties is to consider the ordinary meaning of the language used.

An executed gift: A. is the same as a gratuitous promise. B. is the same as an executory gift. C. is normally the result of a bargain. D. cannot be taken back since the promise to give a gift has been fulfilled.

The best answer here is (d). If the gift has already been given, then it is no longer executory, and the promise has been fulfilled. Even though there was no consideration for the promise, the promisor may not take the gift back since title has passed.

To be partially integrated, the writing must be: a. final but not complete. B. complete, but not final. C. both final and complete. D. final and complete but only in classic jurisdiction.

The correct answer is (a). A partial integration means that the parties intended that document to reflect only part of their agreement. Similar to a total integration, the document must still be a final expression of the parties' agreement. However, unlike a total integration, the writing for a partially integrated document is not a complete expression of their agreement. Some of the terms are missing from the document but can be explained through parol evidence. See Section B.2.

Services rendered by family members are: A. always gratuitous — i.e., gifts. B. presumed to be gratuitous.

Answer (b) is correct. A presumption exists (in many courts) that services rendered by family members are meant to be gratuitous - i.e., a gift. Courts differ on the method needed to overcome the presumption. However, typically, there needs to be a strong set of facts showing that restitution is appropriate - e.g., a higher standard of proof." This presumption was first introduced in Chapter 2.

Which of the following defenses that you previously studied also used a sliding scale for applying its elements? A. Duress B. Material Misrepresentation C. Undue Influence D. Fraudulent Misrepresentation

The correct answer is (c). Undue influence uses a sliding scale approach in applying the elements of unfair persuasion and undue susceptibility.

Specific restitution allows: A. restoration of real property. B. restoration of personal property. C. neither (a) and (b). D. both (a) nor (b).

The correct answer is (d). Specific restitution normally refers to the restoration of the actual benefit that the non-breaching party conferred — i.e., the thing that was transferred. The "thing" could be a piece of real property or personal property.

If a party incurs costs in an attempt to mitigate, these costs: A. are recoverable as incidental damages if the costs are reasonable. B. are recoverable as consequential damages if reasonably foreseeable. C. are not recoverable if the mitigating party did not give the breaching party advance notice of the costs. D. are not recoverable if the party is seeking expectation damages.

Answer (a) is correct. Any reasonable costs expended by an injured party in mitigating damages may be recovered as incidental damages.

An on-duty police officer has a duty to serve and protect the public at large. What type of duty is this? A. public duty of a private person B. public duty of a public official C. preexisting contractual duty

Answer (b) is correct. If a public official has an existing duty to serve the public, then the official may not demand additional compensation or receive a reward for performing a task that is part of their public duties.

In a mitigation issue, who has the burden of proof: A. the party who failed to mitigate. B. the who wants to prove a failure to mitigate.

Answer (b) is correct. One who claims a failure to mitigate damages must prove not only lack of diligence by the injured party, but also the amount by which damages were increased by such failure to mitigate.

True or False: Undue influence only requires that a party be induced into entering a contract by unfair persuasion and undue susceptibility.

False. To assert the defense of undue influence, the party must also show that there was an inequitable result.

True or False: If promissory estoppel is the cause of action, the only type of damages available would be the reliance damage

False. While a preference for reliance damages is often stated in opinions concerning promissory estoppel claims, in practice many courts end up awarding the expectation interest for such claims. Consequently, do not assume that a cause of action based on promissory estoppel is limited to the reliance measure.

Whether a contract contains an express condition depends upon: A. the clear and unambiguous intent of the parties at the time of contract formation. B. the clear and unambiguous intent of the parties at the time the condition occurs.

The correct answer is (a). Conditions - like any other term in a contract - are created at contract formation.

Substantive unconscionability requires either: A. overly harsh allocation of risks or great price disparity B. inequality in bargaining power or unfair surprise.

The correct answer is (a). This question requires you to distinguish between procedural and substantive unconscionability by recognizing which of the sub-rule elements match up to the element.

True or False: An adhesion contract is always unconscionable.

False. The Higgins court wrote: "Adhesion contracts are routine in modern day commerce, and at least one commentator has suggested they are worthy of neither praise nor condemnation, only analysis." If a court finds a contract to be adhesive, it must then determine whether " 'other factors are present which, under established legal rules—legislative or judicial—operate to render it' unenforceable."

True or False: In a "conditional acceptance," the offeree states that he agrees to enter into the agreement, but only if the offeror agrees to varying or additional terms.

True. However, note that a conditional acceptance is also accurately described as a counteroffer.

True or False: The reasonable expectation element principally refers to whether the promisor could foresee that the promisee would take an action or forbearance.

True. The reasonable expectation element principally refers to whether the promisor could foresee that the promisee would take the action or forbearance in reliance on the promise. Other ways to frame the question would be to ask: Should the promisor have expected the promisee to take the action given the context in which the promise was made? Alternatively, was the action/forbearance of the promisee foreseeable to the promisor given the relationship between the parties?

The UCC's merchant's firm offer rule (UCC §2-205) provides for some circumstances under which an offer can be made irrevocable for a period of time. Which of the following is a correct statement about the UCC's merchant's firm offer rule? A. Both parties must be merchants. B. Under the rule, a firm offer need not be in writing in order to be irrevocable. C. Although the rule requires that the offer be in writing, such writing need not be signed. D. There does not need to be consideration for a firm offer to exist under the rule.

Answer (d) is correct. The UCC differs from the common law in this respect. UCC § 2-205 also does not require that both parties be merchants. Only the offeror needs to be a merchant. Therefore, answer (a) is incorrect. A signed writing is a requirement for a firm answers, so that makes answers (b) and (c) incorrect.

In a case where a party is claiming the mental incapacity defense, the law presumes that: A. the party asserting the defense is incompetent until proven otherwise by the defendant. B. the party asserting the defense is competent until that party proves incompetency.

The correct answer is (b). The law presumes every adult is fully competent until satisfactory proof to the contrary is presented. The burden of proof is on the person seeking to avoid the contract.

Unconscionability normally requires: A. either procedural or substantive unconscionability. B. both procedural and substantive unconscionability.

The correct answer is (b). The law requires that unconscionability apply to two aspects of a contract: (1) the substantive terms and (2) the procedures used in forming the contract.

The primary policy behind the adequacy of consideration rule is: A. freedom of contract. B. equity and fairness.

Answer (a) is correct. The primary policy behind the adequacy of consideration rule is freedom of contract. The adequacy of consideration doctrine stands for the principle that parties should determine the value of their exchange - not the courts. Equity and fairness is implicated when the consideration is grossly inadequate or nominal.

The principal purpose of the contract may be substantially frustrated if: A. a supervening event causes the performance of one party to be extremely and unreasonably more difficult or expensive. B. a supervening event makes the performance of one party worthless to the other party. C. a supervening event makes it is literally impossible for one of the parties to perform. D. the parties made a mistake at contract formation that affected the worth of the performance of one party to the other in a material way.

Answer (b) is the standard for frustration of purpose. "Substantially frustrated" differs from "impracticability" in that it is neither impossible; nor difficult to perform. It is just meaningless for a party to continue.

Intentional concealment of a fact will void an agreement if: A. the concealment has a material effect on the transaction. B. the non-disclosed facts were not readily observable to the other party. C. Both a and b. D. Neither a nor b.

Answer (c) is correct. In order for nondisclosure to be a defense, the nondisclosure has to: (1) materially affect the value of the transaction for the non-disclosed party and (2) the facts that are non-disclosed must not be readily observable and not known to the non-disclosed party.

Market value restitution is measured by: A. the cost to the party who conferred the benefit plus a reasonable profit. B. the market price of a substitute transaction. C. the increase in value. D. Either (b) or (c)

Answer (d) is correct since it reflects the two alternatives of Restatement (Second) of Contracts § 371. Answer (a) is incorrect because the valuation for restitution looks not at the cost to the injured party but to the more objective measure of what it would cost the breaching party to go out into the market and purchase similar things or services.

Incidental reliance damages are: A. costs incurred in preparation for or in performance of the contract that was breached. B. costs incurred that are related to collateral contracts entered into in reasonable reliance on the contract that was breached. C. costs incurred in a reasonable attempt to mitigate damages. D. any one of the above.

The correct answer is (b). Answer (c) describes incidental damages - not incidental reliance. See Templin, Chapter 34, Section B.2 Types of Reliance.

To assert a changed circumstances defense, the disruptive event must occur: A. before contract formation. B. at contract formation. C. after contract formation. D. Any one of the above

Answer (c) is correct. Changed circumstances must arise after the contract formed. If the conditions existed at contract formation, then the changed circumstances doctrine does not apply. However, a plaintiff might be able to assert another defense, such as mistake.

The repudiating party has a right to retract the repudiation up until the non-repudiating party: A. gives notice that the contract is terminated B. treats the anticipatory repudiation as a breach by bringing suit C. materially changes its position in reliance on the repudiation D. All of the above.

Answer (d) is correct. See Templin, Chapter 26, Section B.3. Retraction of Repudiation.

In assessing whether a party bears the risk of the mistake, courts may determine a party should bear the risk because: A. the terms of the contract allocate risk to one of the parties. B. one party was consciously ignorant of the mistake. C. it is reasonable under the facts and circumstances for a court to do so. D. Any of the above

The correct answer is (d). Restatement (Second) of Contracts § 154 provides that a party "bears the risk" of a mistake when: (1) the risk is allocated by agreement among the parties, (2) at contract formation the party was aware he only had limited knowledge of the facts but believed his knowledge to be sufficient to go forth, or (3) the risk is allocated by the court because it is reasonable to do so.

True or False: An ambiguity exists if the term is reasonably susceptible to more than one interpretation.

True. Neither the classic nor the modern jurisdictions allow evidence of an absurd nature in order to prove whether an ambiguity exists. One key test courts use to determine whether a contract is ambiguous is to ask whether the contract language is "reasonably susceptible" to the interpretation being asserted. See Templin, Chapter 22, Section B.2, Is the term ambiguous?

True or False: An illusory promise is not a promise at all since the purported promisor is not committing to an action or forbearance.

True. This description of an illusory promise uses part of the definition of a promise to serve as a contrast for the idea of an illusion of a promise where the purported promisor attempts to reserve a choice not to act.

True or False: Under UCC §2-207(2), if one party is a merchant, then the different or additional terms become part of the contract unless one of the exceptions applies.

False. Both parties must be merchants for this result.

For the mental incapacity defense, incompetency must be determined: A. at contract formation. B. when performance is due. C. at the time of the trial. D. Any of the above

The correct answer is (a). Competency is determined on date of contract formation. With some mental illnesses, such as schizophrenia or depression, an individual may be afflicted to a greater degree at different times. Additionally, medication helps control the disorders. Consequently, although a party may appear to be healthy on the date of the trial, the inquiry for mental incapacity concerns itself with their degree of capacity on the date of contract of formation.

True or False: A guaranty agreement is within the statute unless the guarantor stands to benefit from the agreement.

True. An agreement to provide for the debt of another must be in writing. The rationale for the writing requirement is that the promisor has received no direct benefit from the transaction. Therefore, the suretyship arrangement or guaranty is not within the statute if the guarantor benefits as a result of the guaranty.

True or False: One key distinction between promissory restitution and quasi-contract is the existence of a promise made because of an action done in the past.

True. Promissory Restitution is a special type of restitution where a party has made a promise based on past consideration. As you will recall, past consideration and moral obligation will not support the enforcement of a promise. However, in some circumstances, courts have held that a promise based on past consideration will be enforced if there is a moral obligation to do so. This is the doctrine of promissory restitution

True or False: A contract modification is enforceable if the performance of the preexisting legal duty includes an additional or a different type of consideration provided that the change reflects more than a pretense of a bargain.

True. Since new consideration is required, all of the various consideration rules that applied to the original contract apply to the modified contract - including the adequacy of consideration rule. By using the phrase "more than a pretense of a bargain," the Restatement authors are reminding us that parties cannot make a nominal change to a preexisting legal duty and expect it to be consideration for a new promise.

True or False: A partially integrated agreement allows the introduction of consistent additional terms but not contradictory terms.

True. This question just checks your understanding of the rule regarding admissibility of evidence if the agreement is partially integrated.

Which statement is correct? A. Any nonperformance when performance is due is a breach. B. A party has not breached if he has substantially performed.

Answer (a) is correct and reflects Restatement (Second) of Contracts § 235(2). Substantial performance, by definition, means that the party has not fully performed and therefore has breached the agreement.

Impossibility is judged: A. objectively. B. subjectively.

Answer (a) is correct. Impossibility is judged objectively. Performance must be literally impossible. If performance is merely more difficult, then the impossibility defense does not apply though impracticability might apply.

If the injured party makes reasonable but unsuccessful efforts to avoid loss then the party: A. is not precluded from recovery. B. is precluded from recovery.

Answer (a) is correct. Restatement (Second) of Contracts §350(1) provides "The injured party is not precluded from recovery...to the extent that he has made reasonable but unsuccessful efforts to avoid loss."

Which of the following would likely satisfy the basic assumption element in a changed circumstances defense? A. That a party in a personal services contract would be alive to perform the service. B. That market conditions will remain stable.

Answer (a) is correct. The comment to Restatement (Second) of Contracts § 261 provides that stability in market conditions or the financial ability of a party to perform is not the type of basic assumption that could lead to a discharge of a party's duties if the situation changes. However, if the performance of the contract requires the personal services of one of the parties then a basic assumption of the contract would be that such party would be alive to perform the services.

If enforced by the court, what is the typical effect of a "time is of the essence" clause? A. A partially breaching party who is late in performing is given time to cure the breach. B. The clause negates the right of the breaching party to cure if he is late in performance

Answer (b) is correct. A "time is of the essence" clause typically states that a party will be in total breach of the contract if the performance does not occur by a certain date at a certain time. Such a clause typically negates the right of the breaching party to cure.

In which of the following scenarios will a court never order specific performance? A. The sale of a unique good. B. Personal service contracts. C. The sale of a commodity when there is a shortage. D. The sale of real estate.

Answer (b) is correct. Courts never order specific performance on a personal services contract for a number of reasons. First, imposing an obligation to work for another party is thought to be similar to "involuntary servitude," which is prohibited by the Thirteenth Amendment of the U.S. Constitution. Additionally, supervising a specific performance order would be difficult if there is no longer trust and loyalty between the parties because of a dispute.

Laches is an equitable defense based on: A. the bad faith of the plaintiff. B. an unreasonable delay that creates a prejudice against the defendant.

Answer (b) is correct. Laches is an affirmative defense that prevents an equitable remedy if the party seeking the remedy has waited too long to assert his claim. The related maxim of equity states, "Equity aids the vigilant, not those who slumber on their rights." A party asserting the laches defense must prove that (1) there was an unreasonable delay, and (2) there is prejudice to the adverse party if equitable relief is allowed. Answer (a) refers to another affirmative defense - i.e., whether or not the party seeking specific performance has "clean hands."

The implied obligation of good faith and fair dealing applies to: A. Both the formation and performance of a contract. B. Only the formation of a contract. C. Only the performance of a contract. D. The performance of a contract but only the formation if a merchant is involved.

Answer (c) is correct. See Templin, Chapter 23, Section C, Implied Obligation of Good Faith and Fair Dealing. Restatement (Second) of Contracts § 205 (1981) comment c. states, "Bad faith in negotiation, although not within the scope of this Section, may be subject to sanctions. Particular forms of bad faith in bargaining are the subjects of rules as to capacity to contract, mutual assent and consideration and of rules as to invalidating causes such as fraud and duress.

The certainty requirement for specific performance refers to: A. certainty that an offer existed. B. certainty as to the amount of damages owed. C. certainty as to what a court should order. D. all of the above.

Answer (c) is correct. An even greater degree of certainty is needed to order specific performance than is needed in order to establish that a contractual obligation exists. The court must be able to determine what it must order a party to do. Although a contract could be sufficiently certain and definite to determine money damages, there may not be enough detail to allow the court to draft an order. In such case, the plaintiff may be limited to money damages.

The additional elements in Restatement (Second) of Contracts § 153 for unilateral mistake not found in the mutual mistake rule for Restatement (Second) of Contracts § 152 require a party to prove: A. the effect of the mistake is such that enforcement of the contract would be unconscionable. B. the other party had reason to know of the mistake or the other party's fault caused the mistake. C. Either (a) or (b). D. Both (a) and (b).

Answer (c) is correct. Note that the call of the question asks what a party has to prove. Therefore, either (a) or (b) is correct since the rule is disjunctive rather than conjunctive. Restatement (Second) of Contracts § 153 provides that in addition to the common elements for mutual mistake a party must show "(a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or (b) the other party had reason to know of the mistake or his fault caused the mistake." The party seeking to assert the defense of mistake therefore only has to prove one of the two items listed. That would make answer (c) correct.

The type of mistakes that are subject to the excuse of mistake include: A. mistakes in performance. B. mistakes in judgment at contract formation. C. mistakes of fact existing at contract formation. D. All of the above

Answer (c) is correct. Restatement (Second) of Contracts § 151 states, "A mistake is a belief that is not in accord with the facts." This definition precludes mistakes in performance and mistakes in judgment.

The obligation of good faith and fair dealing is implied: A. in every common law contract. B. in every UCC contract. C. in both common law and UCC contracts. D. in both common law and UCC contracts except for those involving merchants.

Answer (c) is correct. See Templin, Chapter 23, Section C, Implied Obligation of Good Faith and Fair Dealing. Restatement (Second) of Contracts §205 provides, "Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." UCC §1-304, Obligation of Good Faith is nearly identical to the Restatement

If one party makes a fraudulent oral statement that contradicts a fully integrated writing, then the other party may introduce evidence of the fraudulent oral statement: A. only in a classic jurisdiction. B. only in a modern jurisdiction. C. in either a modern or classic jurisdiction. D. in neither a modern nor classic jurisdiction.

Answer (c) is correct. The exception for fraud applies in both a classic and modern jurisdiction. One common mistake is to assume that the exceptions only apply in a modern jurisdiction. This is incorrect. Each of the exceptions is equally relevant in either a modern or classic jurisdiction.

A party is deemed a lost volume seller if: A. the person who bought the resold entity would have been solicited by the plaintiff had there been no breach or resale. B. the second solicitation would have been successful. C. the plaintiff could have performed that additional contract. D. All of the above are present.

Answer (d) is correct. Restatement (Second) of Contracts §347 (1981), Comment (f) provides, "If the injured party could and would have entered into the subsequent contract, even if the contract had not been broken, and could have had the benefit of both, he can be said to have "lost volume" and the subsequent transaction is not a substitute for the broken contract. The injured party's damages are then based on the net profit that he has lost as a result of the broken contract."

A party does not have to mitigate if it results in: A. undue risk B. undue burden on the non-breaching party C. humiliation D. Any of the above.

Answer (d) is correct. Restatement (Second) of Contracts §350(1) provides that "damages are not recoverable for loss that the injured party could have avoided without undue risk, burden, or humiliation."

In which of the following scenarios will courts most often order specific performance? A. The sale of a good. B. an employment contract where the employee's services are unique. C. Construction contracts. D. The sale of real estate.

Answer (d) is correct. Specific performance is most commonly granted in cases involving the sale of an interest in real property. Historically, damages are presumed inadequate for the buyer since every piece of property is deemed to be unique and the value of a piece of property is often viewed as speculative.

If a court determines that a party has substantially performed, then the other party: A. has the right to terminate the contract. B. has the right to suspend performance. C. has no rights. D. may seek damages for any loss caused by the breach

Answer (d) is correct. Substantial performance is a form of breach when the non-breaching party cannot withhold or suspend performance but can seek damages for any loss caused by the breach.

Which of the following circumstances suggest that money damages are inadequate? A. Money damages are difficult to prove with reasonable certainty. B. Although damages might be proven with certainty, it is difficult to procure a suitable substitute with money. C. It is unlikely that damages can be collected from the defendant. D. All of the above.

Answer (d) is correct. The Restatement (Second) of Contracts §360 lists the following circumstances that suggest that money damages are inadequate: (a) Money damages are difficult to prove with reasonable certainty. (b) Although damages might be proven with certainty, it is difficult to procure a suitable substitute with money. (c) It is unlikely that damages can be collected from the defendant.

If seller tenders non-conforming goods, then buyer must give seller a chance to cure if: A. the time of performance has not passed. B. the seller is operating in good faith. C. the seller gives notice to the buyer of his intent to cure. D. all of the above.

Answer (d) is correct. This question tests the perfect tender rule of UCC § 2-508(1) Cure by Seller of Improper Tender or Delivery; Replacement. (See Chapter 24, Section E.2.d. Seller's Right to Cure.) To effect the cure, seller must meet all of the requirements in answer choices a-c.

Buyer and Seller enter into an agreement for the sale of one ton of dirt with delivery to be at noon on Friday. Seller delivers a half-ton of dirt at noon on Friday. Buyer may: A. reject the entire delivery of dirt. B. accept the entire delivery of dirt. C. reject some of the dirt and accept the rest. D. any of the above.

Answer (d) is correct. This question tests the perfect tender rule of UCC § 2-601. The rule allows that "if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may (a) reject the whole; or (b) accept the whole; or (c) accept any commercial unit or units and reject the rest."

True or False: A threat is improper only if what is threatened is a crime or a tort.

False. A threat is improper if any one of the following is true: (a) what is threatened is a crime or a tort..., (b) what is threatened is a criminal prosecution, (c) .. the threat of the use of civil process and the threat is made in bad faith, (d) the threat is a breach of the duty of good faith and fair dealing under a contract with the recipient.

True or False: Courts will typically imply a reasonable term even if an express term covering the matter is contained in the agreement.

False. Although courts may imply a term when a term is missing, the court will typically not imply a term if the contract already covers the matter with an express term. You may recall from Chapter 22 Interpretation that an express term will control. See Chapter 22, Section C.1. Language of the Express Terms.

True or False: The excuse of unilateral mistake does not require the basic assumption and material effect elements that are present in the mutual mistake excuse.

False. Both mutual mistake and unilateral mistake share the common elements of (1) the definition of a mistake, (2) basic assumption, (3) material effect and (4) no risk bearing. In addition, unilateral mistake adds other criteria. The mistake must either result in unconscionability or the non-mistaken party must either have caused the mistake or had knowledge of the mistake.

True or False: For duress, a legal remedy, such as bringing a lawsuit, will always be considered a reasonable alternative.

False. Just because a party has the right to litigation does not mean that bringing a lawsuit is a reasonable alternative. If the alternative of litigation "would cause immediate and irreparable loss to one's economic or business interest," then a court may find that the party had no reasonable alternative.

True or False: Reliance damages are usually awarded in addition to lost profits on collateral contracts.

False. Reliance damages are typically awarded when expectation damages are too uncertain or speculative. Lost profits on collateral contracts are a type of consequential damage for the expectation interest. Typically, if a party were seeking consequential damages then they would also be seeking general damages as well - i.e., the expectation interest and not the reliance interest.

The purpose of contracts remedies is to: A. reward good behavior and punish bad behavior. B. compensate for losses. C. compensate for and punish bad behavior. D. sanction the breaching party.

The correct answer is (b). Contracts remedies are structured to compensate for the loss and not to punish the breaching party. To compensate for a loss, courts try to determine the economic position the non-breaching party would have been in had he received the full benefit of the bargain. The court then awards an amount of money damages that puts him in the same economic position as if the contract had been performed.

The meaning of a party's manifestation of assent is judged: A. by the objective reasonable interpretation of his outward expression of consent and not by his subjective intent. B. by the party's subjective meaning regardless of his outward expression of consent.

The correct answer is (a). As the text notes, language can be ambiguous and interpreted in different ways. Additionally, a party might state clearly that they want to enter into a contract but inwardly have some doubt about the terms. Consequently, a party's subjective intent might not match what they said outwardly. In order to resolve this problem of claiming a subjective intent, courts adopted the objective theory of mutual assent to interpret a party's intent.

If a breach results in a gain to the non-breaching party — i.e., they are put in a better position than they would have been had the contract not been breached — then what will a court likely do? A. allow the non-breaching party to keep the gain since they are the innocent party B. split the gain between the breaching and non-breaching parties in the interest of equity and justice C. offset the gain against the damages owed to avoid overcompensation D. do not offset the gain as a policy incentive to discourage breach

The best answer is (c). Adjustments may be made to a damage award if the circumstances result in the injured party somehow being put in a better position than normal under a breach. Answer (a) is not the best answer since it suggests that the non-breaching party will get to keep the gain plus receive damages. That would result in overcompensation.

A course of dealing is established: A. by consistent conduct between the parties in relation to previous contracts of a similar nature between the parties. B. based on repeated occasions for performance under the present contract.

The correct answer is (a). Restatement (Second) of Contracts §202(4), provides that parties have established a "course of dealing" when they have engaged in a "sequence of previous conduct between the parties to an agreement which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct." See Templin, Chapter 22, Section C.3.

A classic jurisdiction allows interpretative evidence for: A. for patent ambiguities. B. for latent ambiguities. C. for both patent and latent ambiguities. D. only if the writing is partially integrated.

The correct answer is (a). The classic jurisdiction only considers the plain meaning of a term to resolve whether a term is ambiguous. To determine plain meaning, courts use dictionaries and common sense. If the term is used in a technical sense (i.e., in an industry where the term has a specialized meaning) then the court adopts the plain meaning of the technical term. If a term does not have more than one ordinary meaning, then the classic jurisdiction does not consider the dispute. You will recall that the classic jurisdiction does not consider a latent ambiguity since that would require introducing outside evidence other than the ordinary meaning of the term. Consequently, answers (b) and (c) are incorrect. Answer (d) is too limited. A classic jurisdiction might allow interpretative evidence a totally integrated document with a merger clause if there was a patent ambiguity.

In interpreting the intent of the parties, a court would consider language as: A. the most important factor. B. of equal importance with course of dealing, trade usage, and course of performance. C. more important than trade usage but not as important as course of performance. D. the least important factor.

The correct answer is (a). See the discussion of the hierarchy of importance in Templin, Chapter 22, Section C.

In proving the defense of undue influence, the elements of unfair persuasion and undue susceptibility: A. must be present in roughly equal amounts. B. can be measured on a sliding scale to allow for a greater degree of one element and a lesser degree of another.

The correct answer is (b). In proving unfair persuasion and undue susceptibility, courts apply a sliding scale as to the weight between the two elements. Undue influence may be proven even if there is a small amount of unfair persuasion so long as there is a great deal of undue susceptibility and the result is inequitable. The opposite is also true.

Substantive and procedural unconscionability: A. must be equal in terms of degree. B. can be evaluated on a sliding scale.

The correct answer is (b). Like undue influence, the elements of unconscionability can be applied on a sliding scale. The elements do not have to be equal in degree. You can have less of one element provided that there is more of the other.

A course of performance is: A. by consistent conduct between the parties in relation to previous contracts of a similar nature between the parties. B. based on repeated occasions for performance under the present contract.

The correct answer is (b). Restatement (Second) of Contracts §202(4), provides "Where an agreement involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection is given great weight in the interpretation of the agreement." See Templin, Chapter 22, Section C.2.

The expectation interest puts: A. the non-breaching party in the same position as if the contract had never formed. B. the non-breaching party in the same position as if the contract had been performed.

The correct answer is (b). The expectation interest is the most common basis for relief and typically yields the best recovery for a plaintiff. Restatement (Second) of Contracts §344 provides that the expectation interest attempts to give the benefit of the bargain by putting plaintiff "in as good a position as he would have been in had the contract been performed." While this recovery acts to maximize the damage award in order to give the party the economic gain they expected, it also acts to limit the award so that a party is not overcompensated.

The term "ejusdem generis" refers to a secondary rule of interpretation that results in which of the following: A. The contract is interpreted against the party who was responsible for the ambiguity. B. The generic meaning of a term (i.e., the common, well-accepted meaning) is preferred to a secondary definition. C. A general term that follows specific terms in a list will be interpreted as being of the same class or kind as the specific terms. D. An illegal contract cannot be made legal through interpretation.

The correct answer is (c). Ejusdem generis (Latin for "of the same kind") stands for the following principle: "Where specific terms describing persons or things are followed by general terms, then the general words should be interpreted as 'applying only to persons or things of the same kind or class as those expressly mentioned.' See the discussion of the hierarchy of importance in Templin, Chapter 22, Section C.

In what ways is restitution limited when the remedy sought is for a total breach of contract or repudiation? A. Restitution is not available if the breaching party's only duty is to pay a fixed sum of money. B. Restitution is not available if the non-breaching party has fully performed. C. Both (a) and (b) D. Neither (a) nor (b)

The correct answer is (c). Restatement (Second) of Contracts §373 provides "(1)...[F]or a total breach or upon a repudiation, the injured party is entitled to restitution for any benefit that he has conferred by way of part performance or reliance. (2) The injured party has no right to restitution if he has performed all of his duties under the contract and no performance by the other party remains due other than payment of a definite sum of money for that performance."

To be totally integrated, the writing must be: A. final but does not have to be complete. B. complete, but does not have to be final. C. both final and complete. D. in writing but does not have to be final.

The correct answer is (c). The writing must be final in order to exclude preliminary drafts of an agreement that were used in the negotiation process. To be complete merely means that no other terms were agreed upon other than those in the writing. If the writing is totally integrated, then any evidence of previous or contemporaneous agreements—oral or written—is not considered by the court for purposes of determining the duties of the parties. See Section B.2.

If a party proves economic duress, then the contract is: A. voidable by either party. B. void as a matter of public policy. C. voidable by the party asserting the defense. D. void, provided that a jury determines that public policy demands it be so.

The correct answer is (c). Unlike physical duress, a defense of economic duress only makes the contract voidable by the party who successfully asserts the defense. It is not void as a matter of public policy. Consequently, a party coerced into a contract by economic duress, could decide to let the contract stand.

Which of the following is the most accurate statement regarding the parol evidence rule? A. The parol evidence rule excludes all oral evidence to explain the meaning of a contract. B. A partially integrated agreement will exclude supplementary terms. C. Interpretative evidence is never allowed in a classic jurisdiction. D. A totally integrated agreement excludes both contradictory and supplemental evidence but might allow interpretative evidence and other exceptions.

The correct answer is (d). Answer (a) is too broadly stated since some oral evidence will be admitted in certain circumstances. Answer (b) states the rule incorrectly since supplementary terms might be admissible in a partially integrated agreement. Answer (c) is incorrect since interpretive evidence is allowed if there is an ambiguity in the written agreement even in a classic jurisdiction.

Under the common law, the last shot doctrine provides that a contract is formed: A. when the offeree sends the conditional acceptance to the offeror. B. when the original offeror performs under the contract.

Answer (b) is correct. The last shot rule applies to the following circumstances: In response to an offer, an offeree sends an acceptance that contains additional or different terms. The other party does not accept the new terms but performs as if the original offer was accepted. In such a scenario, the offeree is deemed to have sent a conditional acceptance, which the original offeror has accepted through performance. If a contract is formed in this fashion, then the offeree's additional or different terms are incorporated into the contract.

Which of the following is subject to the statute of frauds writing requirement? A. J. J. and Dee Dee exchange mutual promises to marry each other. B. Uncle promises to give Dee Dee and J. J. a three-week vacation in Hawaii if they get married.

Answer (b) is correct. The marriage provision covers promises to transfer property in return for a promise to marry someone or the actual act of marrying someone. The statute of frauds does not apply to mutual promises to marry. Answer (a) illustrates mutual promises to marry; while answer (b) transfers property to a couple in return for the act of getting married.

If the parties have not agreed on a price term but otherwise intend to be bound by the agreement, the court is likely to imply a price under: A. the common law. B. the UCC Article 2. C. both the common law and the UCC Article 2. D. neither the common law nor the UCC Article 2.

Answer (b) is correct. UCC§ 2-305. Open Price Term provides for a way that a court might imply a reasonable price. However, under the common law it is unlikely that a court would imply a price. See Restatement (Second) of Contracts § 33 Comment (e). Instead, a common law court would likely conclude that the parties never formed an agreement since the terms were too indefinite.

In a unilateral contract the consideration for a promise is: A. a reciprocal promise. B. actual performance.

Answer (b) is correct. In a unilateral contract, the consideration for the promise is not a return promise to perform, but the actual performance of the promisee.

On September 1, Painter and Owner enter into an agreement where Painter will paint Owner's home for $5,000 by November 1. The contract is silent on when Owner must pay Painter. Using constructive conditions, when would a court likely determine that Owner's duty to Painter arises? A. September 1 B. November 1 C. Owner should pay for the supplies upfront and then the balance on completion because it is the equitable thing to do. D. When Painter completes performance

Answer (d) is correct. Although Painter must complete the job by November 1, the contract does not state that payment is due on that date. If Painter finishes earlier, then payment is due when Painter has completed performance. See Templin, Chapter 25, Section D. Constructive Conditions.

If a court is considering a parol evidence issue and determines that the document is not integrated, what evidence may be admitted? A. Only oral testimony B. Only written testimony C. Any relevant oral or written testimony D. Neither oral nor written testimony

Answer (c) is correct. This question checks your understanding of the rule regarding admissibility of evidence if the agreement is not integrated.

Reliance damages are reduced: A. if it is speculative on whether the plaintiff would have made a profit. B. if there is uncertainty as to whether the plaintiff would have had either a profit or a loss. C. if the defendant can prove with reasonable certainty that the plaintiff would have lost money if the contract were fully performed. D. any of the above.

Answer (c) is the best answer. The Restatement (Second) of Contracts §349 limits reliance damages if the breaching party can prove with reasonable certainty that the plaintiff would have lost money if the breached contract were fully performed. This limit exists so that the non-breaching party is not put in a better position by the breach. The defendant has the burden to prove that the plaintiff would have lost money.

An anticipatory repudiation occurs: A. at the time of contract formation. B. before performance is due. C. when performance is due. D. after performance is due.

Answer (b) is correct. An anticipatory repudiation occurs when, before performance is due, one party makes an unequivocal and definite statement that they will not perform.

When will a court not enforce a promise because the consideration is inadequate? A. When the consideration is gross and unfair. B. When the consideration is unreasonable. C. When the consideration is $1. D. When the consideration suggests the pretense of a bargain.

Answer (d) is correct. Courts do not inquire into the adequacy of consideration unless it is nominal. Nominal consideration exists when there is such a disparity in value that it suggests the pretense of a bargain. Gross and unfair consideration is evidence that fraud, unconscionability or another defense is present, but the disparity itself will not lead to rescission.

Courts may order that a breaching party specifically perform the promises of a contract if: A. money damages are inadequate. B. the terms of the contract are certain and definite. C. it is feasible for the court to supervise the performance. D. All of the above.

Answer (d) is correct. The rule states: Courts may order that a breaching party specifically perform the promises of a contract if: (1) money damages are inadequate, (2) the terms of the contract are certain and definite, and (3) it is feasible for the court to supervise the performance.

A reciprocal promise exists when: A. at least one party's motive for making the promise is to induce the other party to make a promise. B. each party's motive for making the promise is to induce the other party to make a promise.

Answer (b) is correct. Consideration has to be on both sides of the deal. Each party's motive is to induce the other to make a promise in return.

Generally, does an implied in law contract differ from a quasi-contract? A. Yes, because, by definition, a quasi-contract has consideration and an implied in law contract does not. B. No, the terms are generally treated as synonymous.

Answer (b) is the better answer. Both terms refer to situations where there is no consideration. The terms are used interchangeably.

The primary policy function of consideration is to: A. provide evidence that the parties intended to enter an enforceable bargain. B. caution the parties so that they are not making thoughtless promises. C. help the courts efficiently channel promises into legally enforceable and non-legally enforceable categories. D. All of the above are true.

The correct answer is (d). The policies behind the consideration requirement are explained in Templin, Section A.3. Policy: Functions of Consideration.

True or False: In applying the factor of good faith in the materiality test, courts automatically consider any bad faith breach to be a material breach.

False. A bad faith breach that has only a negligible effect as to the other factors would not necessarily transform a partial breach into a material one.

True or False: A breaching party may seek restitution, but only if the breach was not willful.

False. A breaching party may recover in restitution for any benefit received which is greater than the damages caused by their breach. This is so even if a party intentionally breaches. To not allow recovery would result in an unjust enrichment on the injured party and a penalty against the breaching party.

True or False: If an option is granted but the optionee never pays the consideration, then the optionee never has the power of acceptance.

False. Although there may be no consideration for the option, this just means that the offer is revocable. If the offeror does not revoke the offer (or the power of acceptance is not destroyed in some other way), then the offer is still open for the time stated in the option. If the offeree/optionee exercises such an option before their power of acceptance is terminated then the underlying contract is formed.

True or False: An interpretation issue exists if the parties have a factual dispute over whether a term should be included in an agreement.

False. An interpretation issue exists of the parties have a dispute over the meaning of a term. See Templin, Chapter 22, Section B.1, Do the Parties have a dispute over meaning?

True or False: A typical example of something that will satisfy the basic assumption element of the mistake excuse includes an assumption that market conditions will remain stable.

False. Restatement (Second) of Contracts § 152, Comment (b) explicitly provides that "[M]arket conditions and the financial situation of the parties are ordinarily not such assumptions, and, ... do not justify avoidance under the rules governing mistake."

True or False: In applying the first factor of the materiality test (amount of benefit not received), a 90% completion rate always constitutes substantial performance.

False. There is no set ratio where a percentage of the work completed is considered substantial. Courts consider the quality as well as the quantity of the performance. To help resolve the issue, courts consider the purpose of the contract.

To prove that a party's performance was impracticable, the party must show that the supervening event caused a party to incur: A. any change that makes performance more difficult or expensive. B. any change that transforms a profitable contract into an unprofitable one. C. an extreme and unreasonable difficulty, expense, injury, or loss. D. an extreme and unreasonable disaster involving either extreme physical harm or destruction of real or personal property.

Answer (c) is correct. The generally accepted meaning of impracticability is "extreme and unreasonable difficulty, expense, injury or loss." Merely losing money is not enough. Answer (d) is too narrow of a definition since it limits the loss to either physical harm or harm to real or personal property. A loss that is only monetary in nature could be impracticable so long as it meets the "extreme" standard.

A party may repudiate a contract: A. by words only. B. only in writing. C. by either words or conduct. D. either in writing or by conduct.

Answer (c) is correct. The rule is stated as follows: "A party has anticipatorily repudiated a contract when, before performance is due, a party (1) makes an unequivocal and definite statement that he will not perform a contract when his performance is due, or (2) engages in any conduct that renders that party unable to perform its duties." In the answer choices, a distinction is made between "words" and "writing." Since it is not limited, the term "words" could include both spoken and written words. There is no requirement that the repudiation be in writing; therefore, the broader and more inclusive answer would be (c).

Buyer and Seller enter into a contract for the sale of a house. Buyer's duty to purchase the house is conditioned on a bank giving Buyer a loan to purchase the house. Buyer changes his mind about purchasing the property and never applies for a loan. Which of the following is the most accurate statement of the law? A. The condition never occurred; therefore, Buyer's duty to purchase the house never manifested. B. The condition was excused because of promissory estoppel. C. The condition was excused because Buyer never tried to apply for a loan. D. The condition was excused by disproportionate forfeiture.

Answer (c) is correct. This is an example of the excuse, wrongful hindrance by the party with the conditional duty to perform.

Upon repudiation, the non-repudiating party has the right to: A. suspend performance. B. terminate the contract. C. sue for breach. D. All of the above.

Answer (d) is correct. The rule stated is: After repudiation, the non-repudiating party may: (1) suspend performance, (2) terminate the contract and (3) sue for breach.

Which of the following is the most accurate statement concerning the doctrine of adequate assurance of performance? A. A party does not need reasonable grounds for insecurity in order to suspend performance and request adequate assurance of performance. B. If a party has reasonable grounds for insecurity, he may demand a contract modification even if the other party has not breached the agreement. C. An obligee must have a good faith basis for his reasonable grounds for insecurity before demanding adequate assurance of performance and suspending performance. D. If reasonable grounds arise to believe that a party will commit a breach, then the obligee may terminate the contract and sue for damages.

The best answer is (c). Answer (a) is incorrect, since the basis of the right under either the UCC or the Restatements is that a party has "reasonable grounds" for insecurity as to the other party's performance. Answers (b) and (d) are too broad of statements. The right allows a party to demand assurances of performance. As to answer (b), in some limited instances a contract modification might be the resolution of the issue; however, it is not embodied as part of the right. This leaves answer (c) as the best answer since it speaks to a good faith belief that reasonable grounds for insecurity exists.

Which of the following is the best statement of the law regarding the three interests: expectation, reliance, and restitution? A. Courts only award one of the interests in a specific case. To do otherwise would overcompensate. B. Courts always award each of the interests in a specific case. To do otherwise would undercompensate. C. Courts normally award only one of the interests, but in some situations two or three are blended together to form a remedy. D. Courts normally award two or three of the interests, but in some situations, only one interest is relevant.

The best answer is (c). Even though a court normally bases a plaintiff's recovery on only one of the three interests, the categories are not inflexible. There are cases where the three concepts are blended to fashion a remedy. It is important to not only see the differences between the interests on a conceptual level but also to maintain flexibility in applying the rules governing each according to the facts and circumstances of a case.

If a damage award appears to be overcompensating a plaintiff, how might a court limit the award? A. by characterizing some part of the damage award as unforeseeable at contract formation B. by characterizing the damage award as not being reasonably certain at contract formation C. by characterizing the damage award as not being caused by the breach at contract formation D. any of the above depending on the facts and circumstances of the case

The best answer is (d). One challenge courts face is how to calculate money damages in a way that compensates but does not overcompensate the non-breaching party. To do so, courts may limit damages through the four principles of certainty, causation, foreseeability, and mitigation. Although answer (d) encompasses only three of the four limitations, it remains the best answer.

Mitigation requires which party to take reasonable efforts to avoid loss? A. The party suffering damages and seeking recovery B. The party whose breach or repudiation caused the damages

The correct answer is (a). Courts impose a limit on damages if the injured party could have reasonably limited the damage by trying to prevent an ongoing harm. Mitigation is also referred to as the avoidable consequences doctrine.

Unconscionability is supported by the policy of: A. Equity and fairness B. Freedom of contract

The correct answer is (a). Unconscionability interrupts the private bargaining process in the interest of justice and therefore is a matter of equity and fairness.

Unconscionability must be determined: A. at the time of contract formation. B. at the time when performance is due. C. at the time of the trial. D. Any of the above provided that both procedural and substantive unconscionability are both established at the relevant time.

The correct answer is (a). Unconscionability is determined on date of contract formation.

Which of the following is the standard that the Restatement provides to measure whether a mistake is material? A. The resulting imbalance in the exchange must, at minimum, result in a loss of profit for the adversely affected party. B. The resulting imbalance in the exchange must be so severe that the adversely affected party cannot fairly be required to perform. C. The resulting imbalance in the exchange must result in the imminent bankruptcy of the adversely affected party. D. The resulting imbalance in the exchange would be the equivalent of receiving nominal consideration.

The correct answer is (b) which reflects Restatement (Second) of Contracts § 152, Comment (c). Answer (a) sets the bar too low. A mistake is not necessarily material enough to justify rescission just because a party is not going to make a profit. Answer (c) sets the bar too high. Court will find that a mistake is material even if the party is not on the verge of bankruptcy.

Buyer enters a contract with Seller to purchase Seller's home provided that Seller hires a termite inspector to inspect the home and the termite inspector certifies that the home is free from termites. The certification by the termite inspector that the home is free from termites is: A. A promise not subject to a condition B. a condition precedent. C. a condition subsequent. D. substantial performance.

The correct answer is (b). A condition precedent creates a duty or a right, whereas a condition subsequent discharges a duty or terminates a right. The duty of Buyer to purchase the home is conditioned on the certification of the termite inspector. This makes the condition a condition precedent.

An adhesion contract: A. allows the parties to negotiate at least a few terms. B. is a take-or-leave-it contract where only one party sets the terms.

The correct answer is (b). A contract of adhesion is a standardized contract that is imposed and drafted by the party of superior bargaining strength and relegates to the other party " 'only the opportunity to adhere to the contract or reject it.'"

A latent ambiguity is one where: A. the plain meaning of the term is uncertain on its face. B. to determine the ambiguity, additional evidence is needed other than the plain meaning of the term.

The correct answer is (b). A latent ambiguity requires additional outside evidence other than the plain meaning of the term in order to understand that the term is susceptible to more than one meaning. This is in contrast to a patent ambiguity. A patent ambiguity consists of language where the plain meaning of the language is either uncertain or reasonably susceptible to more than one meaning. See Templin, Chapter 22, Section B.2.b. Patent vs. Latent Ambiguities.

Which of the following duties, if any, contains a condition? A. At noon on Friday, Restaurant shall deliver Lunch (defined elsewhere) to Company. B. If Restaurant receives oral or written notice by 11 a.m. on Friday, then Restaurant shall deliver Lunch (defined elsewhere) to Company at noon on Friday. C. Neither a. nor b. D. Both a. and b.

The correct answer is (b). Answer (a) represents an unconditional promise. Restaurant's duty is to deliver Lunch at the assigned time and place. However, in answer (b) the same duty has a condition - i.e., an event - that acts as a trigger. The duty to deliver Lunch only manifests if Restaurant receives notice by a certain time.

The reliance interest puts: A. the breaching party in the same position as if the contract had never formed. B. the non-breaching party in the same position as if the contract had never formed. C. both a and b D. neither a nor b.

The correct answer is (b). The reliance interest attempts to reimburse the plaintiff "for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made." Whereas the expectation interest looks to the future and tries to value what might have happened, the reliance interest looks to the past and tries to correct the economic damage done. Rather than giving the plaintiff the benefit of the bargain, the reliance interest attempts to compensate any foreseeable out-of-pocket costs that the plaintiff incurred related to the contract.

For duress, the element of inducement is tested by the: A. objective standard B. subjective standard.

The correct answer is (b). The subjective standard is the correct answer. Courts merely ask whether that particular person's will was actually overcome by the threat. To test for inducement, use a "but-for" test. Ask yourself if the following statement is true: But-for the improper threat, the victim would not have entered the contract. If the statement is true, then the inducement element is satisfied.

For purposes of the parol evidence rule, "parol evidence" refers to: A. oral evidence only. B. written evidence only. C. both written and oral evidence. D. neither written nor oral evidence.

The correct answer is (c). Although "parol" historically referred to oral evidence, it has come to mean any extrinsic evidence - oral or written.

Which of the following is the most accurate statement? A. A condition precedent is an event that precedes contract formation and a condition subsequent occurs after contract formation. B. A condition precedent creates a duty to perform if the event that is the condition does not occur. C. A condition subsequent creates a duty to perform if the event that is the condition does occur. D. The condition must have occurred before the duty to perform manifests (for a condition precedent) or is terminated (for a condition subsequent).

The correct answer is (d). This question tests whether you know the difference between a condition precedent and a condition subsequent.

What is incorrect about the statement below?Evidence offered to interpret an ambiguous term is not barred by the parole evidence rule. A. In the classic jurisdiction, evidence to interpret an ambiguous term is barred. B. In the modern jurisdiction, evidence to interpret an ambiguous term is barred. C. In both the classic and modern jurisdictions, evidence to interpret an ambiguous term is barred. D. The parol evidence rule relates to contracts, and the statement references a criminal law concept.

This is a question about spelling legal terms correctly. Misspelling the word "parol" is common because of the reasons stated below; however, you want to avoid that embarrassment in your professional life. The correct answer is (d). The statement spells the word as "parole," which is a term used in criminal law. The correct spelling for the contracts term is "parol." It is a common mistake for students to write the rule as "parole evidence rule." The reason for this is that often spell checkers in word processors autocorrect and change "parol" to "parole." If this happens to you, then be sure to add the word "parol" to your computer's dictionary. Answers (a), (b), and (c) all have incorrect statements of the law.

In granting restitution, the key concept that courts focus on is: A. the harm that a party suffered by not being compensated. B. the degree to which a party has been enriched and whether it would be unjust for that party to keep the benefit without paying for it.

Answer (b) is correct. The key concept in restitution is unjust enrichment. Simply put, restitution is granted if a party has been enriched by receiving a benefit and it would be unjust for that party to keep the benefit without paying for it.

Which of the following is a correct statement of when UCC § 2-201(1) applies? A. A contract for the sale of goods of over $500 is subject to the statute of frauds. B. A contract for the sale of goods of $500 or over is within the statute of frauds

Answer (b) is correct. The relevant part of UCC § 2-201(1) states, "A sale of goods of $500 or over is not enforceable unless there is a signed writing sufficient to indicate a contract was made that is signed by the party against whom enforcement is sought."

Which of the following represents a correct usage of the verb "estop"? A. The defendant should be estopped from asserting that the contract was without consideration. B. The court should order that the defendant be estopped from selling the house to anyone but the plaintiff.

Answer (a) is correct. As a legal principle, an estoppel prevents a defendant from asserting a legal theory because the defendant's actions are inconsistent with the legal theory. In verb form, an attorney arguing in favor of applying promissory estoppel might say, "the defendant should be estopped from asserting the defense that there is no consideration for the promise." The sentence in answer (b) should use the word "enjoined" - i.e., that the court should issue an injunction to prevent a party from doing something. Estoppel refers to preventing a party from asserting a legal theory rather than preventing a party from taking some sort of action, such as selling a house. The end result of an estoppel might be that the court rules that a party must take a certain action. However, the estoppel itself just refers to preventing a party from asserting a certain theory in court.

In an option contract, the optionee: A. has the right but not the duty to enter into the underlying contract. B. has a duty to enter into the underlying contract by the end of the option period.

Answer (a) is correct. In essence, an option contract represents a bargain for time—time for the offeree to decide whether to accept the offer. The offeror promises to hold an offer open for a specified time in return for a consideration. Although the option gives the offeree/optionee the right to accept the offer within the time period, the offeree could always choose to let the option expire—i.e., not exercise it and therefore not accept the offer of the underlying contract.

Generally speaking, parties to an agreement: A. do not have a duty to disclose facts that might inhibit a party from entering an agreement unless an exception exists. B. always have a duty to disclose facts that might inhibit a party from entering the agreement.

Answer (a) is correct. In the traditional common law, there is no duty to disclose. This is akin to the doctrine of caveat emptor (Latin for "let buyer beware"). The modern trend, however, is to carve out numerous exceptions.

A person is deemed to be an officious intermeddler: A. if the interference in the affairs of others is not justified by the circumstances. B. if the interference in the affairs of others is justified by the circumstances.

Answer (a) is correct. The Restatement of Restitution states "[a] person who officiously confers a benefit upon another is not entitled to restitution. Under this rule, recovery is denied so that one will not have to pay for a benefit forced upon one against one's will, or for which one did not request or knowingly accept."

A misrepresentation would occur if a person: A. honestly expresses an opinion that is inaccurate. B. knowingly gives an opinion that is false.

Answer (b) is correct. A misrepresentation is a false statement about a fact. There is a thin line between a statement about a fact and stating an opinion (without certainty) about the existence of a fact. If a party truthfully states an opinion (even though it is inaccurate) then that statement will not be a misrepresentation. However, if the party knowingly gives an opinion that is false, then that will be considered a misrepresentation.

A buyer and seller enter into a contract for the sale of a privately owned island with the closing on August 1. Seller has a duty to transfer title to the island at closing. What type of duty is this? A. a gratuitous promise B. preexisting contractual duty C. public duty of a private person D. public duty of a public official

Answer (b) is correct. A party may not enforce a new promise if the consideration for the new promise is based solely on an existing contractual obligation.

The part performance exception to the statute of frauds for land sale contracts is satisfied if the buyer reasonably relied on the contract by: A. paying the full purchase price. B. taking possession and making valuable improvements.

Answer (b) is correct. Courts will typically grant specific enforcement on an oral contract for the transfer of land, if the buyer: 1. reasonably relied on the contract, and 2. furnishes evidence that performance unequivocally refers to the alleged oral agreement. Such evidence is provided if the buyer: a) takes possession of the property, and b) makes valuable improvements. It is not enough if the buyer merely pays the purchase price for the land, though full or partial payment of the purchase price helps bolster the evidence that a contract existed.

Hotel and Contractor enter into an oral agreement where Contractor would build a new wing for Hotel in return for $1 million. The construction was of the nature that a builder working at a reasonable pace would take 18 months to build the wing. However, the project could be done in a year if the builder paid his workers overtime. Contractor is unlikely to pay his workers overtime, since that would cut into his profits. Is the contract within the statute? A. Yes, because it would reasonably take over one year to complete the new wing. B. No, because it is possible to complete the contract within a year, even if it is not probable.

Answer (b) is correct. If a time is not stated, but it is possible to perform the contract within one year (even if not probable) then the contract is outside the statute.

As an exception to the statute of frauds, promissory estoppel: A. is applied using the same rule as is used when examining promissory estoppel as an alternative to consideration - i.e., Restatement (Second) of Contracts § 90. B. requires assessment of specific criteria not stated in Restatement (Second) of Contracts § 90.

Answer (b) is correct. Restatement (Second) of Contracts § 139 provides the basis for a promissory estoppel claim in the context of the statute of frauds. Five criteria are listed. See Section D.1., Templin, Chapter 13, Promissory Estoppel.

The UCC gap fillers: A. seek to find a middle ground between the offeror's terms and the offeree's varying terms. B. imply reasonable terms when terms are missing from an agreement.

Answer (b) is correct. See Templin, Chapter 12, Section E.2.

Which of the following is a correct statement of the law? A. A contract for one year is within the statute of frauds. B. Contracts that cannot be performed within one year are within the statute of frauds.

Answer (b) is correct. See Templin, Chapter 13, Section B.2. Over One Year Provision.

To be an offer there: A. must be only one identified offeree. B. may be an identified offeree or offerees.

Answer (b) is correct. The requirement of a communication to an identified person or persons is derived from both Restatement (Second) of Contracts §§24 and 29. Courts do not require that an individual be named; rather, the offer need only specify a method for identifying a person or group of people. See Section B.3. Communicated to an Identified Person or Persons.

An "executory promise" is: A. a promise that has been executed. B. a promise that has not yet been performed.

Answer (b) is correct. This review question checks your understanding of a word first introduced in Chapter 2. "Executory" means something that has not been done or completed - i.e., unexecuted." The term "executory" is also often used to refer to an "executory contract," which is a contract where the duties have not been performed.

UCC §2-207(3) applies when: A. the original offeror assents to the conditional acceptance. B. the writings do not establish the existence of a contract but the parties act in a manner that recognizes the existence of a contract.

Answer (b) is correct. UCC §2-207(3) provides that a contract forms if the parties' conduct (e.g., actual performance of their duties) suggests that they are treating one another as if they had formed the agreement. Thus, the contract is formed by conduct in the same way that a contract forms under the common law battle of the forms scenario. However, while the contract might form in the same way as the common law, the last shot doctrine does not apply in §UCC 2-207(3).

How does UCC §2-207 differ from the common law? A. The mirror image still applies, but the last shot rule does not. B. An acceptance with varying or different terms may form a contract.

Answer (b) is correct. Under the UCC, a contract might form with an acceptance even though the acceptance contains varying terms. Under the common law, a varying acceptance is a counteroffer and does not form the contract. Thus, under the UCC, the mirror image rule is changed. Additionally, the last shot rule does not apply since the varying terms are not necessarily incorporated in the contract. There are different outcomes depending in part on whether one of the parties is a merchant. Even if both parties are merchants, the terms might not be incorporated if one of the three limitations in UCC §2-207(2)(a-c) applies.

Landlord rented an apartment to Tenant. With Landlord's knowledge and consent, Tenant enters into a contract with Contractor to make improvements to the apartment at Tenant's own expense. However, Tenant does not pay Contractor and then leaves the apartment before the lease expires. Landlord is able to lease the apartment at a higher rent because of the improvements. If a court finds that Landlord owes Contractor for his services, what is the most likely theory of recovery? A. implied in fact contract B. quasi-contract

Answer (b) is the better answer. Although Landlord consented to Tenant's contract with Contractor, there are no other actions suggesting that Landlord intended to enter into an agreement with Contractor; therefore, an implied in fact contract is not the strongest theory of liability. However, Contractor should be able to easily prove the elements of a quasi-contract. Contractor conferred a benefit on Landlord. This is proven by the fact that Landlord could charge higher rent. The Landlord had knowledge of and retained the benefit. Because Landlord is reaping the benefit of Contractor's labor and Contractor has not been paid, it would be unjust for Landlord to not pay Contractor for the services rendered under these facts.

Two parties enter a contract but they have different interpretations of an important term of the contract. Both interpretations are reasonable. Neither party knows of the other party's interpretation. If the parties end up in litigation over the contract and a court applies Restatement (Second) of Contracts §201, which of the following statements best reflects a likely outcome? A. The court would decide which interpretation would be most objectively reasonable without regard to the intent of the parties. B. The court may conclude that a contract never formed since there was no "meeting of the minds."

Answer (b) is the better answer. Restatement (Second) of Contracts § 201(3) states: "Except as stated in this Section, neither party is bound by the meaning attached by the other, even though the result may be a failure of mutual assent." If the parties disagree on how to interpret a particular term and each interpretation is equally reasonable, then the objective standard does not apply. In such circumstances, the court may conclude that a contract never formed since there was no "meeting of the minds." If there was never an agreement on a term and there is a material effect on the performance of one party, then the court will not enforce the agreement. This principle is illustrated by the case Raffles v. Wichelhaus, also known as the Peerless ship case.

A requirements contract is a type of contract where the buyer agrees to purchase: A. all of a particular good that a supplier is able and willing to produce. B. all of a particular good the buyer needs from one particular supplier.

Answer (b) is the correct answer. Answer (a) describes an output contract. See Section C.4. of this chapter for the definitions of output and requirements contracts.

A contract modification under the UCC requires: A. no additional consideration regardless of whether the parties are operating in good faith. B. additional consideration made in good faith. C. no additional consideration provided that the modification be made in good faith. D. additional consideration regardless of whether the parties are operating in good faith.

Answer (c) correctly states the rule for UCC §2-209(1). (See pp 97-98.) The UCC differs significantly from the common law in that no consideration is required for a modification of a contract. The UCC authors recognized that business people regularly modify contracts without offering new consideration. While modifications without new consideration may appear one-sided, the enforcement of such agreements under the UCC recognizes the reality of business transactions.

The power of acceptance is: A. an element of an offer. B. the right of the offeror to manifest intent to form the bargain. C. the right of the offeree to form the contract. D. a bargained for exchange right as consideration for the offer.

Answer (c) is correct. Although the offeror proposes the terms, the offeree has the power of acceptance - i.e., the right to form the contract merely by agreeing to every term of the proposed offer.

A witness at a trial has a duty to tell the truth. What type of duty is this? A. a newly formed contractual duty B. preexisting contractual duty C. public duty of a private person D. public duty of a public official

Answer (c) is correct. Note that preexisting public duties also extends to private citizens to obey the laws that govern our society. The preexisting legal duty rule would prevent the enforcement of a contract where one party promised to obey the laws in return for consideration, since the party already has a duty to obey these laws.

If UCC §2-207(3) applies, then the terms are those that the writings agree upon and: A. the varying terms of the offeree's acceptance. B. the terms of the original offeror's offer. C. any supplementary terms that can be incorporated under the UCC. D. None of the above.

Answer (c) is correct. See Templin, Chapter 12, Section E.2.

A misrepresentation is material if: A. a reasonable person would likely be induced by the misrepresentation to enter the contract. B. the maker knows that this specific recipient would likely be induced even though a reasonable person might not be so induced. C. Both (a) and (b) D. Neither (a) nor (b)

Answer (c) is correct. Under Restatement (Second) of Contracts § 162(2) there are two ways in which a misrepresentation can be material: 1. A reasonable person would likely be induced. 2. Knowledge by maker that the individual recipient would likely be induced. The first criterion sets the objective standard as the primary standard. However, the second criterion allows for more individual conceptions of what is material provided that the maker has knowledge of that individual's preference.

Choose the statement below that best reflects the rule. In a conditional contract, the contract is formed: A. on part performance of the offeree. B. on payment of consideration. C. when the condition occurs. D. on full performance of the offeree.

Answer (c) is the best formulation of the rule. Answers (a) and (d) suggest a unilateral contract - not a conditional contract. Answer (b) suggests an option contract.

The predominant purpose test relates to: A. contracts for the sale of land. B. contracts for the sale of goods. C. contracts for the sale of services. D. mixed goods and services contracts.

Answer (d) is correct. If the contract is for mixed goods and services cases, courts have developed the predominant purpose test (also known as the predominant factor test) to determine whether to apply UCC Article 2. The predominant purpose test states, "To determine if the UCC Article 2 applies to a mixed services and sale of goods contract, courts should determine whether the predominant purpose of the transaction is, reasonably stated, either the rendition of service, with goods incidentally involved, or a sale of goods, with labor incidentally involved."

Buyer wants to purchase a house owned by Seller. Seller makes an offer to Buyer to sell the house for $500,000 on a specified date. However, Buyer needs financing from his Bank if he is going to make the purchase, and he is not ready to accept Seller's offer. Seller says to Buyer, "I promise to keep this offer open until November 1. I will not sell it to anyone else." Buyer agrees. Which of the following is the most accurate statement of the legal relationship? A. Buyer has an implied option contract where getting financing is the consideration for the option. B. Buyer and Seller have formed a conditional contract where the condition is getting financing. C. Once Buyer begins the process of getting financing, the offer is made irrevocable through part performance of a unilateral contract. D. The offer is revocable before acceptance.

Answer (d) is correct. In this question you need to identify whether the offer is irrevocable and, if so, the legal theory. The facts do not suggest an option contract, a conditional contract or promissory estoppel; therefore, the correct answer is that Seller may revoke.

Painter offers to paint Owner's house by November 1 for $5,000. Owner makes a counteroffer to pay $4,000 for the painting of both Owner's house and barn by November 1. Painter rejects Owner's counteroffer. Owner then says that he accepts Painter's offer to paint his house by November 1 for $5,000. Which of the following best describes the legal relationship between the parties? A. There is no offer present. The parties are in preliminary negotiations. B. A contract has formed for the painting of Owner's house by November 1 for $5,000. C. Painter has the power of acceptance as to Owner's counteroffer to pay $4,000 for the painting of both the house and barn by November 1. D. Painter has the power of acceptance as to Owner's offer to pay $5,000 for the painting of Owner's house by November 1.

Answer (d) is correct. Painter made an offer, but Owner made a counter-offer thereby terminating the offer. Painter rejects Owner counteroffer thereby terminating that proposal. Although Owner now attempts to accept the original offer from Painter, he cannot since the power of acceptance has been terminated. However, Owner's communication shows that he has manifested intent to enter a bargain on certain and definite terms. Even though Owner uses the word "accept," it is clear that Owner wants to enter into the contract. Therefore, Painter has the power of acceptance making Answer (d) the best answer.

The doctrine of part performance is an exception to the statute of frauds for: A. land sale contracts. B. contracts for the sale of goods. C. any type of contract. D. both a and b.

Answer (d) is correct. See Templin, Chapter 13, Section D. 4 Part Performance (Land Sale Contracts) and Part Performance Exception—§2-201(3)(c) in Section E.3.c.

Why is past consideration usually unenforceable? A. Because the detriment induced the promise. B. Because the detriment did not induce the promise. C. Because the promise induced the detriment. D. Because the promise did not induce the detriment.

Answer (d) is correct. The reason that past consideration is unenforceable is that it was not bargained for. This problem requires that you understand the sub-rule for consideration regarding a bargained for exchange. As you may recall, a bargained for exchange requires that the promise induces the detriment and the detriment induces the promise. In the past consideration context, the detriment occurs before the promise is made. That is the very nature of past consideration. The promise is made because of some past action (i.e., the detriment) of the promisee. Therefore, the promise cannot induce the detriment since the detriment has already occurred - i.e., it is in the past.

Seller is a food distributor. On January 1, Seller sends a signed email to Buyer, a grocery store chain, stating that Seller will sell up to 300 bushels of apples a month to Buyer at $75 a bushel. Seller states that this offer will remain open until May 1. After what date may Seller revoke his offer? A. January 1, because offers are generally revocable before acceptance. B. February 15, because in a dispute, a reasonable time is the mid-date of the three-month time period. C. May 1, because that was the date stated. D. April 1.

Answer (d) is correct. This problem checks to see if you understand the time period rules for Merchant's Firm Offer. Under UCC § 2-205, the period of irrevocability will last "during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months." Since Seller stated four months into the future, the period will only last until the end of the three-month limit, which is April 1.

Painter and Madame enter into a contract governed by the common law where Painter will paint a "life-like" painting of Madame for $2,000. Painter's skill is questionable, and Madame is honestly and justifiably not satisfied because she says the finished painting is not "life-like." Painter and Madame enter into a contract modification where Madame only has to pay Painter $1,200. The modification is: A. valid because this transaction is governed by the UCC and the UCC does not require consideration for a modification made in good faith. B. invalid because of the past consideration rule. C. invalid because of the illusory promise rule. D. a valid contract modification under common law principles.

Answer (d) is correct. This problem illustrates the settlement of an honest dispute. Another way in which contract modification may be valid is if the party with the preexisting legal duty is in an honest dispute over the performance of the other party. If the two parties settle the dispute, then the settlement is consideration for the modification. Note: This contract would likely be governed by the common law since the painting of a portrait is traditionally considered a service and not the sale of a good.

An executory gift is: A. a gift already given. B. a gift that has been executed. C. any bequest made by virtue of a will that the executor has distributed to those who inherited. D. a gift that has not been given.

Answer (d) is correct. Executory means something that has not yet been done or completed - i.e., unexecuted. Consequently, an executory gift means a promise of a gift. If a gift is executory, that means the gift has not yet been given. Likewise, an executory contract is one which some performance or obligation under the contract has not yet been completed.

Sofia says to Rafael, "I assure you that I will not go to the dance with David." Rafael replies, "In that case, I might go to the dance with you." Which of the following best identifies the nature of these two statements? A. Both Sofia's and Rafael's statements are promises. B. Neither Sofia's nor Rafael's statements are promises. C. Sofia's statement is a promise and Rafael's reply is a not a promise. D. Sofia's statement did not make a promise, but Rafael's reply is a promise.

Answer C is correct. This problem centers on how courts use the plain meaning of language to determine a party's intent. As with the examples in the reading, a court would likely see Sofia's use of the word "assure" to indicate a commitment not to act, and Rafael's use of the word "might" as showing a statement of present intention - i.e., an unwillingness to commit to act.

Fill in the blank with the answer that best reflects the promise rule: A promise occurs when a party manifests an intention _______ so made as to justify a promisee in understanding that a commitment has been made. A. to perform a specific action B. to not perform a specific action C. to either perform or not perform a specific action D. none of the above

Answer C is correct. See the rule statement for promise where the promisor commits either to "act" or to "refrain from acting." You should have noted that this question restates the rule in a slightly different way. A useful exercise for law students is to try to restate the rule, but make sure that you do not change the underlying meaning. The full rule from the Restatement is: "(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made." The rewritten rule replaces the archaic phrase "refrain from acting" with "not perform." This will be clearer for modern audiences. The phrase "act in a specified way" has been changed to "perform a specific action." Here, the rewrite is not necessarily better, it just restates the rule in another way while still retaining the original meaning.

Which of the following does not fit the legal definition of a promise? A. Employer says to Employee, "I promise to give you a year-end bonus of $1,000." B. Frank says to Francis, "I promise to marry you." C. One roommate says to the other, "I promise to wash the dishes." D. Television meteorologist says to audience, "I promise that it will not rain this weekend."

Answer D is correct. Restatement (Second) of Contracts §2(1) defines a promise as "a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made." In answers (a)-(c), each promisor is stating that they will commit to some action - e.g., giving a bonus or washing the dishes. However, in answer (d), the meteorologist is stating an opinion - not committing to an action.

True or False: A gratuitous promise always creates a contractual duty, the breach of which results in a remedy.

False. This sentence misstates the definition of a contract. A gratuitous promise might create a moral duty but usually not a contractual duty. The correct statement from Restatement (Second) of Contracts § 1 is "A contract is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty."

True or False: The duty to disclose only arises when the parties are in a relationship of trust and confidence.

False. While parties in a relationship of trust and confidence have a heightened duty to disclose, the duty might arise in other situations as well, such as intentional concealment of a material fact not readily observable.

True or False: A court may not limit the remedy under the promissory estoppel theory and must award the full value of the promise that was made.

False. The last sentence of Restatement (Second) of Contracts § 90 states "The remedy granted for breach may be limited as justice requires." The Restatement provides courts with an opportunity to limit the remedy by not enforcing the full value of the promise but only to the extent that a party has suffered a detriment by relying on the promise.

The primary focus of the consideration rule is to establish whether or not there was: A. a promise between the parties. B. a gratuitous promise between the parties. C. a bargain between the parties. D. legal value.

The best answer here is (c) since it speaks to the bargain principle, which is the most important element of the consideration rule. While consideration tests whether or not a promise is gratuitous, answer (b) is not the best answer because it does not speak to the bargain principle. Answers (a) and (d) speak to elements of consideration - not to the broader concept and purpose.

Which of the following would likely not be considered a "necessity" under the incapacity doctrine? A. Food for a minor whose parent or guardian refuses to provide it B. A wedding dress for a minor whose parents have agreed to let her get married but who refuse to pay for the wedding expenses C. Medical services for a minor who is seriously injured and whose parent cannot be reached at the time of injury D. An apartment lease for a minor whose parents have kicked him out of the house

The best answer is (b). Necessities of life are traditionally defined as food, clothing, shelter and medical services that the minor cannot otherwise procure from their parent or guardian. Although a wedding dress is clothing, it would likely not be considered a necessity since it is not a basic need. "Whatever the minor's status, the goods must be suitable to his actual requirements-if he already has enough fancy waistcoats, more cannot be necessary." Nash v. Inman [1908] 2 KB 1, CA.

For the intoxication defense, a party would be considered incapacitated and able to void a contract: A. when they become too drunk to legally drive. B. when they stumble and fall. C. when they are unable to reasonably understand what they are doing. D. All of the above.

The best answer is (c). Answer C is the closest answer to the actual standard (the cognitive test) used to assess the intoxication incapacity defense. The party asserting the defense must be unable to understand in a reasonable manner the nature and consequences of the transaction. Answers A and B do not necessarily encompass the standard stated in Answer C. Consequently, A, B, and D are incorrect.

Cindy is a classical singer who performs at summer music festivals throughout the country. Adam is a promoter who books acts for such festivals. Adam proposes that Cindy perform at a series of five festivals on specific dates during the summer but that Cindy's fee will be discussed later. Which of the following best describes the Adam's proposal? A. an offer, because the UCC will imply a reasonable price if one is missing B. an enforceable agreement to agree C. an attempted offer that fails for lack of certainty D. an attempted offer that fails for lack of an identified offeree

The best answer is (c). Here, the parties agreed on many of the essential terms but failed to agree on the price. In order to form a contract, the terms must be reasonably certain. Restatement (Second) of Contracts §33(2) provides "The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy." Here, Cindy's fee is left open; therefore, this is just an agreement to agree and not enforceable. Answer (a) is wrong since the UCC does not apply. Answer (b) is not the best answer since most agreements to agree are unenforceable. Answer (d) is wrong because there is an identified offeree, Cindy.

According to the Restatement, a fraudulent misrepresentation requires that the party knows or should have known the statement was false and: A. he made the statement with the intent to induce the recipient to enter into an agreement. B. the statement has a materially adverse effect on the outcome of the agreement.

The correct answer is (a). A fraudulent misrepresentation must not only be consciously false but also must be made with the intent to deceive the other party. (See Restatement (Second) of Contracts § 162). A non-fraudulent misrepresentation must also include materiality whereas a fraudulent misrepresentation need not be material. Some misrepresentations are intentional and therefore fall in the category of fraudulent misrepresentations while others are innocent misrepresentations and thus fall into the category of material misrepresentations.

In a contract between a minor and an adult, who may void out the contract? A. The minor B. The adult C. Both D. Neither

The correct answer is (a). It is the minor's choice to decide whether to rescind the contract. The other party may not use this defense.

For the mental incapacity defense, the traditional rule for testing for incompetence is: A. the cognitive test. B. the volitional test.

The correct answer is (a). The majority rule is the cognitive test, which is whether the person involved had sufficient mental ability to understand in a reasonable manner the nature and consequences of the transaction.

A party is induced by a misrepresentation if the decision to enter into an agreement was: A. substantially based on the misrepresentation. B. primarily based on the misrepresentation. C. reasonably based on the misrepresentation. D. partially based on the misrepresentation.

The correct answer is (a). The rule states "If the party is basing its decision to enter into the contract substantially on the misrepresentation then the party is induced by the misrepresentation." In the law, the word "substantial" as a measure word allows for the weight of something that is less than half. Consequently, even though a party based the decision primarily on other criteria, so long as the misrepresentation substantially influenced the decision, the party can claimed inducement.

A price quote is normally construed as: A. an offer. B. an invitation to deal. C. preliminary negotiations. D. a prospective acceptance conditioned on the buyer making an offer.

The correct answer is (b).

Does a contract form if the offeree does not subjectively intend to accept an offer but by his words and actions objectively assents to all of the proposed terms? A. No. A fundamental principle of contracts is that a party must intend both by an outward manifestation and subjectively to enter into a contract. B. Yes. Assent is determined by the objective meaning of a party's outward manifestation and not by subjective means.

The correct answer is (b). Answer (a) is incorrect. The fundamental principle of contracts that we studied in Chapter 8 is that the outward manifestation of intent matters. As we saw in Chapter 8, a party could have a different subjective intent but we judge their communication by the outward manifestation of their words and actions.

A contract induced by physical duress is: A. voidable at the option of the party asserting the defense. B. void as a matter of public policy.

The correct answer is (b). As a matter of public policy, contracts entered into through physical duress are automatically void. However, contracts formed through economic duress are only voidable at the option of the victim.

Juan sent a signed email message to Mary stating, "I offer you a one-year contract to work as a secretary in my architecture firm starting August 1 for a salary of $40,000 a year." Mary is: A. the offeror. B. the offeree.

The correct answer is (b). Juan has made an offer to Mary; therefore, Mary is the offeree.

A moral obligation: A. always creates a legal obligation. B. does not normally create a legal obligation but may be relevant as an independent basis to prevent unfairness or unjust enrichment.

The correct answer is (b). Moral obligation will not serve as consideration for the enforcement of a promise; however, it may be relevant as an independent basis to prevent unfairness or unjust enrichment.

Which of the following is the best statement of the Restatement (Second) of Contracts regarding when a unilateral contract is formed? A. A unilateral contract is formed when the offeree promises to perform the requested act. B. A unilateral contract is formed when the offeree completes performance of the requested act. C. A unilateral contract is formed when the offeree substantially performs the requested act. D. A unilateral contract is formed at any time deemed reasonable by the objective standard.

The correct answer is (b). Note that the only contract formed by part performance is a theoretical option contract - not the unilateral contract. Answer (a) describes how a bilateral contract is formed. Answers (c) and (d) misstate the law.

Alvin and Beatrice are contemplating entering into a contract. Alvin knows that Beatrice has a certain interpretation of a provision of that contract. Alvin has a different interpretation, and Beatrice is unaware of Alvin's interpretation. Both interpretations are reasonable. Alvin and Beatrice enter the contract, but there is a dispute later over the interpretation of the provision mentioned above. If a court is applying Restatement (Second) of Contracts §201, whose interpretation will the court most likely follow? A. Alvin's B. Beatrice's

The correct answer is (b). Restatement (Second) of Contracts §201(2)(a) provides that "Where the parties have attached different meanings to a promise or agreement or a term thereof, it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made (a) that party did not know of any different meaning attached by the other, and the other knew the meaning attached by the first party." Alvin knew that Beatrice had a different interpretation and Beatrice is unaware of Alvin's interpretation. Therefore, the Restatement favors the innocent party - Beatrice - thereby creating an incentive for the party with superior knowledge - in this case, Alvin - to clear up the mistake.

Requirements contracts are not illusory because: A. the seller must sell all that he makes. B. if the buyer purchases anything, it must be from the seller who is a party to the requirements contract.

The correct answer is (b). Such contracts are not considered illusory because the buy has a contractual obligation. If the buyer purchases anything, it must be from the seller. Answer (a) suggests an output contract and the question is asking about a requirements contract.

Charlie wants to play a prank on his friend Jeremy. He knows that Jeremy wanted to purchase Charlie's vintage 1963 Ford Thunderbird; however, Charlie refused to sell it. Additionally, Charlie was sure that Jeremy did not have the money to purchase the car. One night while drinking, Charlie taunts Jeremy and says that he is willing to sell Jeremy the car for $30,000 — a price that is 25% above the fair market value. Jeremy agrees, and Charlie puts their agreement in writing. After sobering up the next day, Charlie was surprised to find Jeremy on his doorstep with a certified check for $30,000 demanding possession of the car. Charlie refuses, and Jeremy sues for breach of contract. Which of the following best states the legal relationship? A. There is no contract since Charlie was honestly playing a prank on his friend, and Charlie never intended to enter the agreement. B. A contract exists and Charlie is liable for breach.

The correct answer is (b). This hypothetical replicates the issue in Lucy v. Zehmer but with different facts. A party's language is judged by the objective meaning and not by their inward subjective intent.

Parties are in preliminary negotiations if: A. both the offeror and the offeree have manifested the intent to enter a contract. B. the purported offeree knows that the purported offeror is not willing to enter into a bargain.

The correct answer is (b). Restatement (Second) of Contracts §26 provides that if a potential offeree "knows or has reason to know that the other party making a statement does not intend to conclude a bargain until he has made a further manifestation of assent" then no offer was made and the parties are in preliminary negotiations. Given that definition, Answer (b) is the best answer since it specifically says that at least one of the parties has not yet manifested intent to enter a contract.

One standard that courts consider in deciding whether an offer has been made is "whether the court can determine what a breach of contract is and what would be the appropriate remedy." Which element of the offer rule does this standard relate to? A. intent to enter a bargain B. certain and definite terms C. identified person or persons D. reasonable understanding by offeree that an acceptance forms a contract

The correct answer is (b). This question tests understanding of the elements. Being able to work backwards like this demonstrates that you know how all of the pieces of a complex rule fit together.

Between family members a promise to render services: A. is always considered a gratuitous promise. B. creates a rebuttable presumption that the services are gratuitous. C. is presumptively a contract if between spouses. D. cannot be rescinded.

The correct answer is (b). Among family members, there is a rebuttable presumption that services rendered among family members are gratuitous. However, that presumption can be overcome by "clear and convincing evidence" that the parties intended for there to be a contract.

What standard does a court use to determine whether a party has manifested assent to the terms of an offer? A. by performance in a bilateral contract and a promise in a unilateral contract B. by written evidence submitted to show the truth of the matter asserted C. by the objective standard D. by the subjective standard

The correct answer is (c). As we learned in Chapter 8, one of the themes in mutual assent - and all of contracts - is that we judge intent by the objective standard - not the subjective standard. Answer (a) is not the best answer because it is not a "standard" but different methods that can be used to accept. Answer (b) is phrase from the law of evidence and pertains to procedural rules in court rather than the substantive law of contracts.

The legal value element of consideration requires: A. a detriment to either the promisor or promisee plus a benefit to either the promisor or promisee. B. a benefit to the promisee or a detriment to the promisor. C. a detriment to the promisee and a benefit to the promisor. D. a detriment to the promisee or a benefit to the promisor.

This question tests you on whether you know the correct sub-rule for the legal value element of consideration. The correct answer here is (d). Answers (a) and (b) mismatch the promisee and promisor to the correct elements. Answer (c) is incorrect because of the "and" conjunction. This is a disjunctive rule using "or" instead of "and". Both elements are not needed - only one. Therefore, the only correct answer here is (d).

Buyer sent Seller an email offering to purchase Seller's yacht for $1 million. Seller immediately accepts the offer by replying to the email. Seller is extremely excited because the yacht is actually worth only $500,000. Excited, Seller jumps up from his desk. He slips, hits his head on the floor, and dies instantly. Buyer later learns the true value of the yacht and attempts to revoke his acceptance given the death of the offeree. Which of the following is a correct statement? A. Buyer's power of acceptance was terminated by the death of the offeree. B. The contract is void because under the adequacy of consideration rule the consideration would be considered nominal. C. The parties have entered into an enforceable contract. D. The estate would be unjustly enriched if Buyer were forced to purchase the yacht.

The correct answer is (c). Death or incapacity only terminates an offer before acceptance. Since Seller accepted Buyer's offer before he died, the Seller's estate may enforce the contract against the Buyer. Answers (b) and (d) suggest that because the fair market value of the yacht is half of the contract price, the deal should be rescinded. However, as we know from Chapter 4, the adequacy of consideration rule only voids an agreement when there is nominal consideration. Here, the consideration is $500,000 and is not considered nominal. Although this is a bad deal for the Buyer, it is not the pretense of a bargain

After using the incapacity defense to void a contract, the minor must return the consideration (i.e., the property conveyed) and pay for any depreciation or for the "use value." Which of the following is the correct assessment of the previous statement? A. Always correct B. Never correct C. Correct if the minor willfully or negligently harmed the property D. Correct, but not if the minor engaged in a tort

The correct answer is (c). If the consideration has diminished in value since it was exchanged the minor does not have to pay the difference unless the minor engaged in a tort, such as misrepresenting his age or willful or negligent destruction of property.

Why do most advertisements fail to be offers? A. They lack certain and definite terms. B. They lack intent to enter a bargain. C. There is no identified offeree. D. It is not reasonable for an offeree to conclude that an offer has been made.

The correct answer is (c). Often, advertisements satisfy the first two elements of an offer (manifesting intent to enter into a bargain and certain and definite terms). However, most advertisements are not directed to an identified person or persons since they are directed to the public at large.

Which of the following is the best statement of the law? A. The offer must be directed at a single individual identified by the offeror. B. The offer could be directed at an individual or a group, but the offeror must specify the offeree(s) by name. C. The offer does not have to be directed at the offeree by name provided there is some way to identify the individual or group. D. The offer is open to any reasonable person who is the first to see it.

The correct answer is (c). See Section B.3. Communicated to an Identified Person or Persons. None of the constraints of answers (a) or (b) apply. Answer (d) misstates the law.

Choose the answer that correctly completes the rule. A minor may disaffirm a contract under the minor incapacity defense: A. before performance by the adult. B. before acceptance of the offer. C. up until the minor becomes 18 years old. D. before reaching or within a reasonable time after reaching the age of majority.

The correct answer is (d). A minor may disaffirm a contract at any time before reaching the age of majority and may also disaffirm within a reasonable time after reaching the age of majority. Answer (c) is incorrect because the minor may disaffirm within a reasonable time after reaching the age of majority. Additionally, the age of majority is 18 years old only a majority of the states - not all states.

Which of the following is an exception to a minor's incapacity defense? A. The minor misrepresents his age. B. The minor intentionally destroys goods that he purchased. C. The minor purchases food because he was hungry. D. All of the above

The correct answer is (d). Contracts which are not subject to a minor's incapacity defense include: (1) contracts that provide for the necessities of life; (2) Where a minor misrepresents his age; (3) Where the minor willfully or negligently harms the property that is the subject of the contract; and (4) statutory exceptions. Necessities are traditionally defined as food, clothing, shelter and medical services. Since the minor is hungry, purchasing the food is a necessity. Intentionally destroying goods that were the subject matter of the contract amounts to a tort and thus is an exception to the incapacity defense.

Which of the following statements is correct? A. Either the offeror or offeree may reject an offer. B. An offeree may revoke an offer so long as it is done before acceptance. C. An offeror loses the power of acceptance after the offer has been rejected. D. It is the offeree who might reject the offer and the offeror who might revoke.

The correct answer is (d). Students sometime mix up which party can revoke an offer and which party might reject an offer. This question tests whether you understand the actions that the offeror and offeree may take. Here, the only correct statement is that the offeree is the one who might reject the offer and the offeror is the one who revokes. For answer (a), only the offeree rejects an offer. For answer (b), it is the offeror - not the offeree - who revokes an offer. For answer (c), the offeree - not the offeror - has the power of acceptance.

Hilda promises Gertrude to sew Gertrude's wedding dress. Which legal label correctly identifies Gertrude? A. Gertrude is the promisor because she is the person to whom the promise is made. B. Gertrude is the promisee because she is the person to whom the promise is made.

The correct answer is B. The promisor is the person making the promise. The promisee is the person to whom the promise is made. Since Gertrude is the person to whom the promise is made, she is the promisee.