CAS Bar CAS Bar Contracts and Commercial Law 5 — Questions and Answers
Question 1: A contract is voidable on grounds of duress when:
- One party was in financial distress at the time of signing
- One party made an improper threat that left the victim no reasonable alternative but to agree (Correct answer)
- The contract terms are grossly unfair to one party
- One party was unaware of industry custom at the time of contracting
Correct answer: One party made an improper threat that left the victim no reasonable alternative but to agree
Economic duress requires an improper threat coupled with no reasonable alternative, making the resulting assent involuntary.
Question 2: Under UCC Article 2, when both parties are merchants and a contract is formed despite a battle of forms, additional terms in the acceptance:
- Automatically become part of the contract
- Become part of the contract unless they materially alter it, were objected to, or the offer expressly limits acceptance (Correct answer)
- Are ignored and the offeror's terms control
- Require a separate written agreement to be incorporated
Correct answer: Become part of the contract unless they materially alter it, were objected to, or the offer expressly limits acceptance
UCC § 2-207(2) provides that between merchants, additional terms become part of the contract unless they materially alter the agreement, the offer expressly limits acceptance, or the offeror objects within a reasonable time.
Question 3: Which test is used by California courts to determine whether a contract term is unconscionable?
- Reasonable expectations test only
- Both procedural and substantive unconscionability, with both required in some measure (Correct answer)
- Substantive unconscionability alone is sufficient
- Procedural unconscionability alone is sufficient
Correct answer: Both procedural and substantive unconscionability, with both required in some measure
California courts apply a sliding scale: both procedural and substantive unconscionability must be present, but the more egregious one element, the less of the other is required.
Question 4: Under California law, the statute of frauds requires a writing for contracts that cannot be performed within one year. This one-year period is measured from:
- The date the contract is signed
- The date performance begins
- The date the contract is made (Correct answer)
- The date payment is due
Correct answer: The date the contract is made
The one-year period under the statute of frauds runs from the date the contract is formed (made), not from when performance commences.
Question 5: In a contract for the sale of goods, the risk of loss passes to a buyer who is not a merchant when:
- The seller ships the goods to a carrier
- The buyer receives actual physical possession of the goods (Correct answer)
- The buyer tenders payment for the goods
- The seller delivers the goods to the carrier's terminal
Correct answer: The buyer receives actual physical possession of the goods
Under UCC § 2-509(3), when neither a shipment nor destination contract is involved and the seller is not a merchant, risk of loss passes to the buyer upon tender of delivery, but for a non-merchant buyer receiving goods, the practical rule is actual receipt.
Question 6: The doctrine of anticipatory repudiation allows the non-breaching party to:
- Sue for damages immediately after the repudiation, without waiting for the performance date (Correct answer)
- Wait until the performance date and then sue, but cannot sue earlier
- Only seek specific performance as a remedy
- Rescind the contract only if the repudiation is in writing
Correct answer: Sue for damages immediately after the repudiation, without waiting for the performance date
When a party clearly repudiates before the time of performance, the non-breaching party may treat this as a total breach and immediately pursue remedies.
Question 7: Under California's version of the UCC, a security interest in personal property is perfected most commonly by:
- Recording a deed of trust with the county recorder
- Filing a UCC-1 financing statement with the Secretary of State (Correct answer)
- Obtaining a court judgment against the debtor
- Delivering written notice to all creditors of the debtor
Correct answer: Filing a UCC-1 financing statement with the Secretary of State
Under UCC Article 9 as adopted in California, perfection of a security interest in most personal property is accomplished by filing a UCC-1 financing statement with the California Secretary of State.
CAS Bar CAS Bar Contracts and Commercial Law 5
A contract is voidable on grounds of duress when: