CPCM Certified Professional Contract Manager: Contract Law and Legal Frameworks 4 — Questions and Answers
Question 1: Under the parol evidence rule, extrinsic evidence is generally inadmissible to vary a fully integrated written contract, EXCEPT to:
- Show a higher price was agreed upon verbally
- Establish fraud, duress, or mistake in contract formation (Correct answer)
- Add additional payment terms not in the writing
- Prove the parties intended a longer performance period
Correct answer: Establish fraud, duress, or mistake in contract formation
The parol evidence rule bars prior or contemporaneous oral evidence that contradicts a fully integrated writing, but evidence of fraud, duress, illegality, or mistake is always admissible to challenge formation.
Question 2: A government contractor submits a claim that includes unallowable costs. Under FAR cost principles, what is the potential consequence?
- The entire claim is automatically denied
- The contractor may face penalties equal to twice the unallowable cost amount (Correct answer)
- The contractor forfeits the right to appeal to the Board of Contract Appeals
- The contracting officer must terminate the contract for default
Correct answer: The contractor may face penalties equal to twice the unallowable cost amount
FAR 42.709 provides that knowingly submitting unallowable costs may result in penalties of two times the amount of the unallowable costs submitted.
Question 3: In the context of contract interpretation, the 'contra proferentem' rule provides that ambiguities are construed against:
- The party that will benefit most from the ambiguous term
- The party that drafted the ambiguous language (Correct answer)
- The government in all federal contracts
- The party with superior bargaining power
Correct answer: The party that drafted the ambiguous language
Contra proferentem ('against the one who proffers') is a default rule requiring that ambiguous contract language be interpreted against the drafter who had control over the wording.
Question 4: Which type of contract breach entitles the non-breaching party to treat the contract as terminated and immediately sue for total breach damages?
- Minor breach
- Partial breach
- Material breach (Correct answer)
- Anticipatory breach
Correct answer: Material breach
A material breach defeats the purpose of the contract, entitling the innocent party to suspend performance, terminate the contract, and recover all expectation damages.
Question 5: A contract clause providing that time is 'of the essence' has what legal effect?
- It eliminates the need for a completion schedule
- It makes deadline failures automatic material breaches (Correct answer)
- It limits delay damages to 10% of contract value
- It requires disputes to be resolved within 30 days
Correct answer: It makes deadline failures automatic material breaches
A time is of the essence clause converts deadline failures into material breaches, allowing the non-breaching party to terminate and seek damages without granting additional cure time.
Question 6: What legal doctrine may excuse a party from performing when an unexpected supervening event makes performance commercially impracticable?
- Force majeure only
- Impossibility of performance or commercial impracticability (Correct answer)
- Anticipatory repudiation
- Mutual rescission
Correct answer: Impossibility of performance or commercial impracticability
UCC §2-615 and common law recognize commercial impracticability (evolved from impossibility) as an excuse when an unforeseen event beyond a party's control makes performance unreasonably burdensome.
Question 7: In a fixed-price contract, a contractor discovers site conditions materially different from those indicated in contract documents. Which clause typically provides a contractual remedy?
- Changes clause
- Differing site conditions clause (Correct answer)
- Termination for convenience clause
- Disputes clause
Correct answer: Differing site conditions clause
The differing site conditions clause (FAR 52.236-2) provides equitable adjustment when actual conditions differ materially from those indicated or from conditions normally encountered.
CPCM Certified Professional Contract Manager: Contract Law and Legal Frameworks 4
Under the parol evidence rule, extrinsic evidence is generally inadmissible to vary a fully integrated written contract, EXCEPT to: