CLA/CP Exam Contract Formation and Enforcement 4 — Questions and Answers
Question 1: Under the UCC 'battle of the forms' (§ 2-207), when both parties are merchants, additional terms in an acceptance:
- Become part of the contract unless they materially alter it or the offer limits acceptance to its terms (Correct answer)
- Are always rejected and the offeror's terms govern
- Require a separate signed agreement to be incorporated
- Automatically void the contract requiring renegotiation
Correct answer: Become part of the contract unless they materially alter it or the offer limits acceptance to its terms
UCC § 2-207 provides that between merchants, additional (not different) terms become part of the contract unless they materially alter it, the offer expressly limits acceptance, or objection is made.
Question 2: What distinguishes a void contract from a voidable contract?
- A void contract has no legal effect from the start; a voidable contract is valid until a party elects to rescind (Correct answer)
- A void contract requires court action to nullify; a voidable contract is automatically unenforceable
- A void contract involves illegal subject matter only; a voidable contract involves fraud only
- A void contract can be ratified; a voidable contract cannot
Correct answer: A void contract has no legal effect from the start; a voidable contract is valid until a party elects to rescind
A void contract is treated as if it never existed and cannot be enforced by either party, whereas a voidable contract is binding unless the aggrieved party chooses to avoid it.
Question 3: An agreement to pay a real estate broker a commission is most likely to be enforceable only if:
- It is in writing and signed by the party to be charged (Correct answer)
- The broker successfully closes the transaction
- The agreement specifies the exact commission percentage
- The property owner has listed the property publicly
Correct answer: It is in writing and signed by the party to be charged
Most states include real estate broker commission agreements within their Statute of Frauds, requiring a signed writing for enforceability.
Question 4: A 19-year-old employee signs a noncompete agreement with her employer. Three years later she claims the agreement is unenforceable because she was a minor when she signed. The court will likely rule:
- She ratified the contract by continuing employment as an adult after reaching majority (Correct answer)
- The noncompete is void because she was a minor when she signed
- The employer must prove she had independent legal counsel
- She may disaffirm at any time because minority is a permanent defense
Correct answer: She ratified the contract by continuing employment as an adult after reaching majority
A minor who continues to perform a contract after reaching the age of majority may ratify it, making it fully enforceable as if they had always been an adult.
Question 5: Which of the following is an example of past consideration, which is generally insufficient to support a contract?
- A man promises to pay his neighbor $200 after the neighbor had already repaired his fence without being asked (Correct answer)
- A company promises to pay an employee a bonus if she completes a project by year-end
- Two parties agree to exchange services at a future date
- A buyer deposits earnest money to hold an offer open
Correct answer: A man promises to pay his neighbor $200 after the neighbor had already repaired his fence without being asked
Past consideration—something already done before the promise was made—does not count as valid consideration because it was not bargained for in exchange for the promise.
Question 6: A contract clause stating that neither party may assign their rights under the agreement is:
- Generally enforceable to prohibit assignment (Correct answer)
- Void because assignment rights cannot be waived
- Unenforceable against third-party assignees who lack notice
- Effective only for delegation of duties, not assignment of rights
Correct answer: Generally enforceable to prohibit assignment
Anti-assignment clauses are generally enforceable and prevent parties from transferring contractual rights without the other party's consent.
Question 7: Which element is evaluated to determine whether an agreement is an enforceable contract versus a non-binding 'agreement to agree'?
- Whether the material terms are sufficiently definite (Correct answer)
- Whether the agreement is in writing
- Whether both parties are represented by counsel
- Whether a deposit or down payment was made
Correct answer: Whether the material terms are sufficiently definite
Courts require that the material terms—price, subject matter, quantity, and time of performance—be sufficiently definite for a contract to be enforceable rather than a mere agreement to agree.
CLA/CP Exam Contract Formation and Enforcement 4
Under the UCC 'battle of the forms' (§ 2-207), when both parties are merchants, additional terms in an acceptance: