Bar Exam Rules

Question 1

Consideration

Answer 1

To form an enforceable contract, the contract must be supported by consideration; that is, each party must bargain for a change in the legal position of the other party. Under common law, consideration that is provided before the bargain is not adequate to support a contract, as the promisor must both seek and receive something of value at the the time the contract is executed.

Question 2

Promissory Estoppel

Answer 2

Promises that lack consideration may still be enforced under the doctrine of promissory estoppel. Courts will invoke the doctrine to treat a promise as binding if: (1) the promisor should reasonably expect it to induce action of forbearance on the part of the promisee or third person; (2) the promise does induce such action or forbearance; and (3) injustice can be avoided only by enforcement of the promise.

Question 3

Quasi-Contract

Answer 3

Contracts that lack consideration may be enforced to avoid unfair results if: (1) P confers a measurable benefit on D; (2) P reasonably expects to be paid; and (3) it would be unfair to let D keep the benefit without paying. Under the quasi-contract theory, P’s recovery is limited to restitution (i.e., the economic benefit that P conferred on D).

Question 4

Moral Obligation

Answer 4

While no exceptions to the past consideration rule are recognized under common law, there is a modern trend to recognize the existence of consideration when a promise is made after a party confers a significant benefit.

Question 5

Substantial Performance

Answer 5

The doctrine of substantial performance provides that a party who substantially performs can recover on the contract even though full performance has not been tendered. However, there is no substantial performance if the incomplete performance was a material breach of contract. Under common law, a material breach of contract (i.e, when the non-breaching party fails to receive the substantial benefit of the bargain) allows the non-breaching party to withhold any promised performance and to pursue remedies for breach, including damages.

Question 6

Divisible / Installment Contract

Answer 6

A divisible or installment contract is one in which the parties’ obligations are divisible into distinct units of performance. Recovery is limited to the amount promised for the unit of the contract performed.

Question 7

Condition Precedent

Answer 7

When parties expressly agree to a condition precedent, they are generally held strictly to that condition, and a party must fully comply with that condition before the other party’s performance is due.

Question 8

Restitution

Answer 8

Money damages equal to the fair value of the benefit less the damages for the breach.