CLA/CP Contract Law and Formation Questions and Answers — Questions and Answers
Question 1: An oral agreement is made between a vineyard owner and a restaurant to supply a specific quantity of grapes each month for the next two years. Six months into the agreement, the vineyard owner refuses to deliver any more grapes. Which legal principle will most likely prevent the restaurant from successfully suing for breach of contract?
- Parol Evidence Rule
- Statute of Frauds (Correct answer)
- Doctrine of Promissory Estoppel
- Unconscionability
Correct answer: Statute of Frauds
The Statute of Frauds requires certain types of contracts to be in writing to be enforceable. A key category is contracts that, by their terms, cannot be performed within one year from their making. [8, 10, 11] Since this agreement is for a two-year period, it falls under the Statute of Frauds and must be in writing to be enforceable by the court.
Question 2: Which of the following lists the essential elements required for the formation of a legally enforceable contract?
- A written document, a notary seal, and legal capacity
- A formal offer, a counteroffer, and a signature
- Offer, acceptance, consideration, and legal purpose (Correct answer)
- A public declaration, mutual assent, and a witness
Correct answer: Offer, acceptance, consideration, and legal purpose
For a contract to be valid and enforceable, there must be a clear offer from one party and an acceptance of that offer by another. [1, 2, 3] Additionally, there must be consideration (something of value exchanged), all parties must have the capacity to contract, and the purpose of the contract must be legal. [12]
Question 3: On May 1st, a seller sends a letter to a buyer offering to sell a rare book for $5,000. On May 3rd, the buyer mails a letter accepting the offer. On May 4th, before receiving the buyer's acceptance, the seller calls the buyer and revokes the offer. Under the 'mailbox rule,' is there a valid contract?
- Yes, because the acceptance was effective when it was mailed on May 3rd. (Correct answer)
- No, because the revocation was communicated before the acceptance was received.
- No, because a phone call is a faster method of communication than mail.
- Yes, but only if the buyer's letter was sent via certified mail.
Correct answer: Yes, because the acceptance was effective when it was mailed on May 3rd.
The mailbox rule, a default rule in contract law, states that an acceptance is effective upon dispatch (e.g., when it is placed in the mail), not upon receipt. [6, 14, 19] The revocation of an offer is only effective upon receipt by the offeree. [18, 25] Therefore, a contract was formed on May 3rd when the buyer mailed the acceptance, making the seller's subsequent revocation on May 4th ineffective.
Question 4: In which of the following scenarios is the element of consideration most likely lacking, making the promise unenforceable?
- A homeowner promises a roofer $5,000 to replace a roof, and the roofer agrees.
- A student pays a tutor $50 in exchange for one hour of instruction.
- A person agrees to sell their car for a price significantly below its market value.
- A business owner promises an employee a bonus 'for all the great work you did last year.' (Correct answer)
Correct answer: A business owner promises an employee a bonus 'for all the great work you did last year.'
This is an example of past consideration. For consideration to be valid, it must be bargained for in the present or future. [15, 22, 24] Actions or services that have already been performed cannot serve as consideration for a new promise. The employee's 'great work last year' is in the past and was not done in exchange for the promise of a bonus. [17, 26]
Question 5: A pet owner posts flyers in a neighborhood offering a $200 reward for the return of their lost cat. A neighbor finds the cat and returns it to the owner. What type of contract has been formed?
- A unilateral contract, because the offer could only be accepted by performance. (Correct answer)
- A bilateral contract, because two parties were involved.
- An executed contract, because the act is complete.
- A voidable contract, because the offer was made to the public at large.
Correct answer: A unilateral contract, because the offer could only be accepted by performance.
A unilateral contract is formed when an offeror makes a promise in exchange for an act. [5, 20, 23] The offer can only be accepted by the offeree's performance of the requested act. In this case, the pet owner (offeror) promised $200 in exchange for the act of returning the cat. The contract was formed and accepted simultaneously when the neighbor performed the act. A bilateral contract involves an exchange of promises. [29, 30]
Question 6: A company offers to buy 1,000 widgets from a supplier for $10 per widget. The supplier responds, 'We accept your offer, but the price is $12 per widget.' Which of the following statements is legally correct under common law?
- A contract is formed for $12 per widget.
- The supplier's response is a counteroffer that terminates the original offer. (Correct answer)
- The original offer is still open, and the supplier can accept it later.
- A contract is formed for $10 per widget under the 'last shot' rule.
Correct answer: The supplier's response is a counteroffer that terminates the original offer.
Under the common law 'mirror image rule,' an acceptance must be the exact mirror image of the offer. [13, 21, 27] By changing a material term (the price), the supplier's response is not an acceptance but a counteroffer. A counteroffer simultaneously rejects the original offer, thereby terminating it, and creates a new offer that the original offeror (the company) can now accept or reject. [16, 28]
CLA/CP Contract Law and Formation Questions and Answers
An oral agreement is made between a vineyard owner and a restaurant to supply a specific quantity of grapes each month for the next two years.
Six months into the agreement, the vineyard owner refuses to deliver any more grapes.
Which legal principle will most likely prevent the restaurant from successfully suing for breach of contract?