CLA/CP Exam Contract Formation and Enforcement 2 — Questions and Answers
Question 1: Which doctrine allows a court to enforce a promise even without consideration when one party has reasonably relied on the promise to their detriment?
- Promissory estoppel (Correct answer)
- Quasi-contract
- Implied-in-fact contract
- Unjust enrichment
Correct answer: Promissory estoppel
Promissory estoppel (detrimental reliance) allows enforcement of a promise when the promisor should have expected reliance and injustice can only be avoided by enforcement.
Question 2: A contractor submits a bid for a construction project. Before the owner accepts, the contractor realizes there was a clerical error that understated costs by 40%. Which defense is most likely to allow rescission?
- Unilateral mistake known to the other party (Correct answer)
- Mutual mistake of fact
- Fraudulent misrepresentation
- Failure of consideration
Correct answer: Unilateral mistake known to the other party
A unilateral mistake may permit rescission when the non-mistaken party knew or should have known of the error, making enforcement unconscionable.
Question 3: What is the legal effect of a counteroffer under common law?
- It terminates the original offer and creates a new offer (Correct answer)
- It extends the time for acceptance of the original offer
- It is treated as a rejection only if expressly stated
- It binds both parties to negotiate in good faith
Correct answer: It terminates the original offer and creates a new offer
Under the mirror image rule, a counteroffer simultaneously rejects the original offer and creates a new offer that the original offeror may accept or reject.
Question 4: Seller and Buyer sign a written contract for the sale of equipment. Buyer later claims the parties had an oral agreement to include maintenance services. The parol evidence rule would most likely:
- Exclude the oral agreement if the written contract is fully integrated (Correct answer)
- Admit the oral agreement as a consistent additional term
- Require the court to consider all prior negotiations
- Allow the oral agreement only if it contradicts the written terms
Correct answer: Exclude the oral agreement if the written contract is fully integrated
The parol evidence rule bars extrinsic evidence of prior or contemporaneous agreements that would contradict or vary the terms of a fully integrated written contract.
Question 5: Under the UCC, a contract for the sale of goods worth $500 or more is unenforceable unless:
- There is a sufficient writing signed by the party to be charged (Correct answer)
- The parties have dealt with each other before
- Consideration exceeds the statutory minimum
- The offer was made in writing
Correct answer: There is a sufficient writing signed by the party to be charged
UCC § 2-201 requires a writing signed by the party against whom enforcement is sought for contracts involving goods priced at $500 or more.
Question 6: An agreement where both parties have obligations yet to be performed is called:
- Executory contract (Correct answer)
- Executed contract
- Voidable contract
- Implied contract
Correct answer: Executory contract
An executory contract is one in which performance remains due from one or both parties, as opposed to an executed contract where performance is complete.
Question 7: Which of the following is NOT a required element for a valid contract?
- Written documentation (Correct answer)
- Offer
- Acceptance
- Consideration
Correct answer: Written documentation
Most contracts do not need to be in writing to be enforceable; offer, acceptance, and consideration are the core requirements, with writing required only by the Statute of Frauds.
CLA/CP Exam Contract Formation and Enforcement 2
Which doctrine allows a court to enforce a promise even without consideration when one party has reasonably relied on the promise to their detriment?