CAS Bar CAS Bar Contracts and Commercial Law 2 — Questions and Answers
Question 1: Under California contract law, anticipatory repudiation occurs when a party:
- Fails to perform on the due date
- Clearly indicates before the performance date that it will not perform (Correct answer)
- Requests a modification to the contract
- Partially performs and then stops
Correct answer: Clearly indicates before the performance date that it will not perform
Anticipatory repudiation is an unequivocal statement or action before the performance date indicating the party will not perform.
Question 2: Which remedy allows a non-breaching party to recover the benefit conferred on the breaching party to avoid unjust enrichment?
- Expectation damages
- Reliance damages
- Restitution (Correct answer)
- Nominal damages
Correct answer: Restitution
Restitution restores the value conferred on the breaching party, preventing unjust enrichment rather than compensating lost profits.
Question 3: Under the UCC, a contract for the sale of goods may be modified without:
- Written consent of both parties
- New consideration (Correct answer)
- Notice to the other party
- A written modification clause
Correct answer: New consideration
UCC §2-209 allows modification of a sale-of-goods contract without new consideration, unlike common law which requires it.
Question 4: A building contractor is excused from performance because the structure was destroyed by an earthquake before completion. This defense is called:
- Frustration of purpose
- Mutual mistake
- Impossibility of performance (Correct answer)
- Commercial impracticability
Correct answer: Impossibility of performance
Impossibility of performance excuses a party when an unforeseen event makes performance objectively impossible, such as destruction of the subject matter.
Question 5: Under California law, a third-party beneficiary's rights vest when the beneficiary:
- Is named in the contract
- Learns of and assents to the contract
- Detrimentally relies on the contract
- All of the above (Correct answer)
Correct answer: All of the above
California courts recognize that a third-party beneficiary's rights vest upon learning of and assenting to, or detrimentally relying on, the contract.
Question 6: Which of the following is a characteristic of a valid accord and satisfaction under California law?
- A new agreement to settle a disputed or unliquidated debt followed by performance (Correct answer)
- A unilateral waiver of a liquidated debt
- A court-approved settlement of a judgment
- The same as a novation
Correct answer: A new agreement to settle a disputed or unliquidated debt followed by performance
An accord and satisfaction requires a new agreement to resolve a bona fide dispute or unliquidated claim, followed by actual performance of that new agreement.
CAS Bar CAS Bar Contracts and Commercial Law 2
Under California contract law, anticipatory repudiation occurs when a party: