Contract Law and Formation Flashcards

A contract that violates a licensing statute designed primarily to protect the public is generally held to be:

Answer: Void and unenforceable as against public policy

When a licensing requirement is designed to protect the public (not merely raise revenue), a contract by an unlicensed party is void as against public policy.

Which statement best describes the difference between a void contract and a voidable contract?

Answer: A void contract has no legal effect from inception; a voidable contract is valid until a party elects to rescind it

A void contract is a legal nullity and cannot be ratified or enforced by anyone, while a voidable contract is effective unless the aggrieved party chooses to avoid it.

Under contract law, 'adequacy of consideration' means courts will:

Answer: Generally not inquire into whether consideration was of equal value

Courts do not examine whether consideration was economically equivalent; even nominal consideration (e.g., $1) is sufficient if it was actually bargained for.

An agreement to pay a debt already barred by the statute of limitations is generally:

Answer: Enforceable as a new promise without requiring new consideration in most jurisdictions

Most jurisdictions hold that a new promise to pay a time-barred debt is enforceable without new consideration because the moral obligation serves as a substitute.

Which of the following scenarios best illustrates the concept of 'promissory estoppel'?

Answer: A contractor moves across the country and quits a job in reliance on an employer's oral promise of employment

Promissory estoppel applies when a party makes a clear promise that foreseeably induces detrimental reliance by another, and injustice can only be avoided by enforcement.

Under the objective theory of contracts, a party's 'outward manifestation of assent' is evaluated from the perspective of:

Answer: A reasonable person in the position of the other contracting party

The objective theory asks what a reasonable person in the offeree's or offeror's position would have understood the conduct or words to mean.

Which of the following is a recognized exception to the rule that an offer may be revoked at any time before acceptance?

Answer: The offeree has begun substantial performance of a unilateral contract

Once the offeree begins substantial performance of a unilateral contract, the offeror's power to revoke is suspended to allow completion of the requested act.