FYLSX Contract Formation Principles 4 — Questions and Answers
Question 1: Wanda contracts to buy 500 widgets from Xavier's Widget Co. at $2 each. This is a contract for goods. Under the UCC, which statement about the consideration requirement is correct?
- The UCC eliminates any consideration requirement for sale-of-goods contracts.
- The UCC still requires consideration but allows contract modification without new consideration. (Correct answer)
- The UCC requires consideration for the original contract but not for written modifications.
- The UCC requires consideration for modifications only if the contract exceeds $500.
Correct answer: The UCC still requires consideration but allows contract modification without new consideration.
Under UCC § 2-209, modifications to a sale-of-goods contract need no consideration to be binding, unlike the common law rule.
Question 2: Yolanda is negotiating a business deal with Zachary. They reach what both believe is an agreement, but Zachary is joking and never intends to be bound. Yolanda, believing it genuine, begins performance. Under contract law:
- No contract exists because Zachary lacked subjective intent.
- A contract exists if Zachary's outward expressions would lead a reasonable person to believe he intended to be bound. (Correct answer)
- No contract exists because intent is required on both sides.
- A contract exists only if Zachary later ratifies the agreement.
Correct answer: A contract exists if Zachary's outward expressions would lead a reasonable person to believe he intended to be bound.
The objective theory of contracts binds Zachary because his outward expressions created a reasonable belief of assent, regardless of his secret intent.
Question 3: Amy offers to sell her bicycle to Bob for $300. Bob says, 'Deal, but can you throw in the helmet?' Amy says no, and Bob says, 'Fine, I'll take just the bike for $300.' Is there a contract for the bicycle?
- No, because Bob's inquiry about the helmet was a counteroffer that terminated the original offer.
- Yes, because Bob's inquiry was merely a request for additional terms, not a counteroffer. (Correct answer)
- No, because Amy rejected Bob's modified terms.
- Yes, but only if Amy's refusal was communicated in writing.
Correct answer: Yes, because Bob's inquiry was merely a request for additional terms, not a counteroffer.
A mere inquiry about additional terms is not a counteroffer and does not terminate the original offer, so Bob's final acceptance creates a valid contract.
Question 4: Carol enters a contract with Dan under duress — Dan threatened to destroy Carol's car unless she signed. The contract is:
- Void because duress negates all contractual elements.
- Voidable at Carol's option because her assent was not genuine. (Correct answer)
- Valid because Carol signed voluntarily by choosing to sign rather than lose her car.
- Unenforceable only if the threat was carried out.
Correct answer: Voidable at Carol's option because her assent was not genuine.
Economic or physical duress makes a contract voidable by the victim because it negates genuine assent.
Question 5: Eve, a skilled art dealer, tells Frank (a layperson) that a painting is worth $50,000, knowing it is only worth $5,000. Frank buys it for $50,000. This contract may be voided based on:
- Unilateral mistake by Frank.
- Fraudulent misrepresentation by Eve. (Correct answer)
- Mutual mistake about value.
- Unconscionability due to the price disparity.
Correct answer: Fraudulent misrepresentation by Eve.
Eve's knowing false statement of a material fact to induce Frank's reliance constitutes fraudulent misrepresentation, making the contract voidable.
Question 6: George offers Hannah a job in writing, promising the position is permanent. Hannah quits her current job and moves across the country. George then fires her after two months. In a suit for breach, Hannah's strongest theory is:
- Breach of written contract because the offer was in writing.
- Promissory estoppel because she detrimentally relied on George's promise. (Correct answer)
- Breach of implied warranty of continued employment.
- Fraud because George knew employment was uncertain.
Correct answer: Promissory estoppel because she detrimentally relied on George's promise.
Promissory estoppel is Hannah's strongest theory given her foreseeable and substantial detrimental reliance on George's promise.
Question 7: Ivan and Joan form a contract where Ivan agrees to 'sell as many apples as I feel like growing' to Joan. This contract is most likely:
- Valid as an output contract.
- Illusory and therefore unenforceable because Ivan's obligation is not real. (Correct answer)
- Valid as a requirements contract.
- Enforceable because the parties intended to be bound.
Correct answer: Illusory and therefore unenforceable because Ivan's obligation is not real.
Ivan's promise to sell 'as many as I feel like' creates no real obligation, making it an illusory promise and the contract unenforceable for lack of consideration.
FYLSX Contract Formation Principles 4
Wanda contracts to buy 500 widgets from Xavier's Widget Co. at $2 each.
This is a contract for goods.
Under the UCC, which statement about the consideration requirement is correct?