Contracts Kaplan Foundation Course MBE Questions

Question 1

Under Restatement of Contracts 2d, Section 24, “an offer

Answer 1

is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.”

Question 2

An offer must evidence

Answer 2

a commitment by the offeror that he reasonably intends to be bound upon acceptance by the offeree, rather than a mere statement of present intention or preliminary negotiations. This determination is often difficult to make. Generally, such equivocal language as “I am asking…” or “I quote you…” is construed as inviting an offer.

Question 3

As a general rule, advertisements for the sale of goods, circular letters, price lists, and articles displayed on a shelf with a price tag are construed

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as preliminary proposals inviting offers.

Question 4

However, in certain situations, an advertisement for the sale of goods may constitute an offer when

Answer 4

that an advertisement in a newspaper proposing the sale of a coat “first come, first served“ did, in fact, constitute an offer because the language in the ad indicated a promise to sell. Therefore, make sure that the advertisement includes under th facts specific promise to sell a specified item or enumerated list of items.

Question 5

The duration of an offer that states no time limit for acceptance is

Answer 5

a reasonable time.

Question 6

The factors determining a reasonable time are:

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(1) the subject matter of the offer; (2) its rate of price fluctuation; (3) the period within which the offeror’s known purpose in inducing the contract can be effectuated; and, of lesser importance, (4) the mode of communication of the offer.

Question 7

Undoubtedly, certain offers have a short life expectancy due to

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ever-changing market fluctuations (such as those involving stock purchases)

Question 8

Under the “face-to-face” conversation rule,

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an offer expires at the conclusion of a face-to-face conversation (unless there is an acceptance).

Question 9

There are no magic words required to extend an offer, but all offers contain three elements:

Answer 9

(1) an expression of intent to enter a present contract; (2) a sufficient articulation of the essential terms of the proposed bargain; and (3) communication of that intent and those terms to another person (the offeree) who has the capacity to form a contract by a timely and conforming acceptance.

Question 10

Contract questions that deal with the revival of an offer may include such language as

Answer 10

“Why don’t you think it over until tomorrow?”

Question 11

According to UCC 2-206, “an offer to make a contract shall be construed as

Answer 11

inviting acceptance in any manner and by any medium that is reasonable under the circumstances.”

Question 12

According to Restatement Section 39, “A counter-offer

Answer 12

is an offer relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.” Be advised that an offeree’s power of acceptance is terminated by his making of a counter-offer.

Question 13

An order or other offer to buy goods for “prompt or current shipment” normally

Answer 13

invites acceptance either by a prompt promise to ship or by prompt or current shipment

Question 14

According to UCC Section 2-206(1)(b), if non-conforming goods are shipped,

Answer 14

the shipment is an acceptance and at the same time a breach.

Question 15

On the contrary, if non-conforming goods are shipped, there is NO acceptance

Answer 15

if the offeror has reason to know that none is intended, where the offeree promptly notifies him that non-conforming goods are being shipped and are offered only as an “accommodation” to him

Since the manufacturer did not indicate that the shipment was being offered for accommodation purposes, it will be regarded as an acceptance (and a simultaneous breach).

Question 16

By the Majority rule, an offer that invites performance (unilateral offer) of an act as acceptance, rather than a return promise, becomes irrevocable

Answer 16

as soon as the offeree has started to perform the act

This rule is deemed essential to prevent hardship to the offeree where his part performance does not benefit the offeror and so would give him no recovery in quasi-contract

Question 17

Unilateral offers are considered irrevocable when

Answer 17

ONLY Mere preparation for performance, no matter how detrimental to the offeree, will not affect the offeror’s power and privilege to revoke a unilateral offer.

Question 18

Revocation of a bilateral and unilateral contract offer my be revoked

Answer 18

As a general rule, the offeror may at any time before acceptance, terminate her offer by revoking it

Question 19

When does revocation take place in a contract?

Answer 19

Revocation takes effect only when communicated to the offeree. This is true even when the offeree learns through a third party that the offeror is no longer willing to enter into the proposed contract.

By the same token, Restatement of Contracts 2d, Section 43, states, “An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect.”

Question 20

The court stated that consideration may consist in either some

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right, interest, profit, or benefit to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.

Question 21

Consideration is not measured

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as a benefit to the promisor. It is immaterial whether the consideration does in fact benefit the promisee or a third party or is of substantial value to anyone

Question 22

The mere abstention from a permissible legal conduct is

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sufficient consideration to make a promise based on that forbearance a valid contract. Refraining from something that one is entitled to do is a sufficient detriment to create an enforceable contract.

Question 23

A doctor who gives medical treatment (outside of his office or hospital), while off-duty will recover for services under a

Answer 23

The doctor will recover under quasi-contract, if the person treated was unconscious because there is no actual mutual assent to create a contract. Therefore, the doctor must proceed in quasi-contract if he is to recover.

Question 24

Merchant Modifications made under the UCC must meet

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the test of good faith. If the manufacturer acted in bad faith, then the modification would be ineffective and unenforceable.

Question 25

When you have Contracts fact pattern dealing with a personal services contract you apply

Answer 25

Common law principles, not UCC rules, will therefore apply

Question 26

In order to have a valid oral modification to a contract, the contract must not include

Answer 26

An express provision against oral modification, or circumstances where the statute of frauds applies, any contract can be modified or rescinded by the oral agreement of the parties, even if the original contract is in writing.

Question 27

Modifying agreements that change the duties only on one side, leaving the duty on the other the same as under the former contract

Answer 27

Are unenforceable being themselves contracts must be supported by consideration.

Question 28

A promise for a new or different performance (such as by altering the time, character, or nature of the duties) of an existing contract

Answer 28

will overcome the “pre-existing duty” rule and serve as valid consideration.

Question 29

This issue dealing with the pre-existing duty rule is often tested on the MBE, and a contract modification that does not

Answer 29

constitute a legal detriment when a party performs an act that she is legally obligated to do and had a pre-existing duty to perform this service, any additional promise is not supported by consideration and therefore unenforceable

Question 30

It is generally accepted that mutual mistake as to the existence of the subject matter is

Answer 30

always ground for avoidance of a contract

Question 31

If the only mistake was as to the value of the object, not as to its existence, than

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However mutual mistake to the true value may not rescind the contract or and recover the chattel

Question 32

On the other hand, not the object, but its rare quality, may be the subject matter, and therefore

Answer 32

as where A sells to B a stone for $2,000, both of them thinking it to be a diamond, and it turns out to be a zircon, worth about $5. In that case B may rescind and recover the price paid, on the grounds of mutual mistake.

Question 33

As a general rule, assignability

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all contracts are assignable and delegable except personal service contracts and long-term requirement contracts

Question 34

Even though there may be an anti-assignment provision in a contract,

Answer 34

It does not prevent the assignor from assigning his rights. When an assignor makes an assignment in violation of an anti-assignment clause, the assignment is valid. However, the obligor does have a cause of action against the assignor for breach of contract (but ordinarily, damages will be nominal

Question 35

Although contracts are generally assignable and delegable, those involving

Answer 35

personal services are not. A an example of a non-delegable contract because the socialite hired the artist because of the artist’s specific talents; An express contractual agreement is not needed in this situation. It is not so much the words, but the parties that are important

Question 36

True contracts

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are those in which the parties’ obligation(s) arise from actual agreement and intent. It is clear from their conduct that an “implied in fact” contract was created.

Question 37

If the agreement or mutual assent is manifested in words (oral or written)

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the contract is said to be “express.”

Question 38

On the other hand, where the mutual undertaking of the parties is inferred from their conduct alone, without spoken or written words,

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the contract is said to be “implied in fact.”

Question 39

It is universally agreed that the employer may not force an employee to work by means of specific performance. The rationale behind this rule is twofold:

Answer 39

(1) money damages are generally available and (2) it is impossible for courts to properly supervise employment contracts.

Question 40

specific performance is available to enforce a contract

Answer 40

for the sale of a unique item of personal property. Here, the subject matter of the contract is a chattel

Question 41

Dealing with liability of a minor for necessaries

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It is well established that a minor is liable for necessaries furnished her, and it is generally recognized that this liability is quasi-contractual rather than contractual, and responsibility of her parents

As a consequence of the quasi-contractual nature of the action, the girl may disaffirm an executory contract for necessaries. Moreover, the girl is not liable for the contract price, but for the reasonable value of the necessaries furnished

Question 42

On the MBE, an oral agreement between a buyer and seller for real property will be enforceable

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if certain elements have been satisfied by the Buyer under the doctrine part performance will be sufficient to enforce their oral agreement.

Question 43

The statute of frauds requires a contract for the sale of land be in

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a signed writing

Question 44

The doctrine of part performance may be used to enforce what is an otherwise invalid oral contract for the sale of land when

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In an overwhelming majority of states, equity will decree specific performance of an oral land agreement, despite the statute of frauds, only where the buyer has taken possession of the property and paid part of the purchase price. Moreover, the taking of possession together with other acts normally to be performed by a buyer (i.e., taking possession of the property and paying part of the purchase price) have been held to justify specific performance. However, payment of the price alone is not sufficient part performance, unless possession has been delivered and taken.

Question 45

The statute of frauds oral promise to answer for the debt of another

Answer 45

prohibits an an oral promise to satisfy the SOF’s requirement, “secondary,” or collateral, promises are within the rule and are voidable unless in writing.

Question 46

According to Restatement of Contracts 2d, Section 116, “a contract that all or part of a duty of a third person to the promisee shall be satisfied is not within the statute of frauds as a promise to answer for the duty of another if

Answer 46

If the consideration for the promise is in fact or apparently desired by the promisor mainly for his own economic advantage, rather than in order to benefit the third person.” And can be done orally, and does not have to be in writing according to the statute of frauds

Question 47

What is the so-called “main-purpose” rule,

Answer 47

A 3rd party promisor sought to act as surety for a promisee’s primary loan for the 3rd party promisor’s own economic advantage then the 3rd party promisor’s oral promise to guarantee the loan is enforceable

Question 48

The parol evidence rule,

Answer 48

a rule of substantive contract law, states that “when the parties to a contract have put in writing the full and final expression of their agreement, evidence of any other prior or contemporaneous oral or written agreements are inadmissible to vary or contradict the terms of the writing.

Question 49

The issue of integration

Answer 49

is a question of fact to be decided by the judge.

Question 50

To determine integration under the prevailing Williston test,

Answer 50

if reasonable parties would have included the extrinsic matter (i.e., the substance of the oral agreement) in the writing, and these parties did not, then evidence of the extrinsic matter may not be admitted, unless used to explain an ambiguity. In this instance, the extrinsic evidence contradicted, rather than explained, the integrated writing.

Question 51

Frequently, on the MBE parol evidence questions will involve the admissibility of an oral condition, and the oral conditions are valid if

Answer 51

Where the parties agree that a condition precedent must occur before the contract is effective, it is generally agreed that the failure of the condition to occur may be shown despite what otherwise would be deemed a total integration. Thus, even if there is a merger clause, it may be shown that the instrument was handed over to another with an oral condition attached to delivery. The theory is that the agreement is not to take effect until the condition occurs and thus there is no contract to be added to or contradicted until that time.

Question 52

An order or other offer to buy goods for prompt or current shipment normally

Answer 52

invites acceptance either by a prompt promise to ship or by prompt or current shipment.

Question 53

In accordance with UCC Section 2-205, the “firm offer” rule provides:

Answer 53

“An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, 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.” No consideration was necessary to make the plant owner’s offer irrevocable

Question 54

Contracts example dealing with the enforceability of a “requirements” contract. Such contracts are valid

Answer 54

because the quantity to be delivered can be objectively determined. So a contract by a buyer to buy all the goods of a stated kind required by the buyer in his business for the period is held not invalid for uncertainty as to quantity

Question 55

UCC Section 2-306, which deals with Output and Requirement Contracts, specifically states,

Answer 55

A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate may be tendered or demanded

Question 56

According to the UCC Article 2-712

Answer 56

the buyer may recover from the seller as damages the difference between the cover price and the contract price plus any incidental and consequential damages.

Question 57

Impossibility of performance

Answer 57

excuses the promisor’s duty where that which was promised has become objectively impossible of fulfillment without fault of the promisor after the time of contracting, provided the promisor has not assumed the risk of its now happening

Question 58

When impossibility or impracticability is not a valid defense

Answer 58

“The mere personal inability of a promisor to perform is no excuse. It is only where because of the supervening event the performance cannot be rendered by anyone that the duty is discharged.”

Question 59

If the promisee intends the promised performance as a gift to the third party, the third party is a

Answer 59

donee beneficiary. Such intention is clear where performance of the promise will result solely in benefit to the third party and not to the promisee

Question 60

The vesting of a donee beneficiary’s rights are

Answer 60

Under the majority common law view, the rights of a donee beneficiary, as well as those of a creditor beneficiary, vest when the third party with knowledge assents to the promise. Before the time such rights are vested, a beneficiary cannot prevent modification or rescission of the contract by the promisee and the promisor.

Question 61

Once a donee’s rights have vested,

Answer 61

The donee can bring a valid action against the promisor. Even though the promisor can assert against the beneficiary any defense he could assert against the promisee, however, the builder will not be excused from performance if there is no valid defense against the promisee

Question 62

Generally, for a beneficiary to be “intended,” the third party must

Answer 62

1) receive performance directly from the promisor; (2) be expressly designated in the contract; (3) have decisional rights regarding the performance (such as time and location of performance); or (4) stand in such a relationship with the promisee that it can be inferred that the promisee wished to benefit the third party.

Question 63

Divisible contracts are

Answer 63

a divisible contract is one in which the parties have divided their respective performances into separate units. So that performance of a given installment on one side is a constructive condition to the duty of performance on the other.

Question 64

When a merchant ships goods to a retailer, or a seller to a buyer, when the goods are tendered, but not 100%, what is the legal term

Answer 64

tendering “non-conforming” goods

Question 65

To recover lost profits, the defendant could only be held liable for losses

Answer 65

That were generally foreseeable. The court held that: “the loss of profits cannot reasonably be considered such a consequence of the breach of contract as could have been fairly and reasonably contemplated by both the parties when they made this contract.”

Question 66

The mere fact that a party is sending something to be repaired does not indicate

Answer 66

That the shipper knew any delay would cause a loss in profits if it was not delivered on time, UNLESS it is written into the contract.

Question 67

UCC 2-609(1) which states, “When reasonable grounds for insecurity arise with respect to the performance of either party, the other party may

Answer 67

In writing, demand adequate assurance of due performance.” The UCC further provides that after a reasonable time not exceeding 30 days has passed, the party seeking the assurances can treat the contract as repudiated

Question 68

Under the UCC 2-609, if the proper assurances are not given,

Answer 68

the buyer or seller may suspend his own performance.