FYLSX Contracts Formation & Enforcement 5 — Questions and Answers
Question 1: A modification of an existing contract requires new consideration under common law. Which of the following situations is an exception to this rule?
- A modification agreed upon before performance begins
- A modification under the UCC for the sale of goods (Correct answer)
- A modification that benefits only one party
- A modification agreed to by attorneys
Correct answer: A modification under the UCC for the sale of goods
Under UCC § 2-209, a modification of a contract for the sale of goods needs no consideration to be binding, unlike under common law.
Question 2: Sue is 17 when she signs a contract to buy a car. Two months after turning 18, she continues driving the car and makes two payments. Sue has most likely:
- Avoided the contract because she was a minor when she signed.
- Ratified the contract through her conduct after reaching majority. (Correct answer)
- Created a new contract that replaces the original.
- Received a voidable title that the seller can reclaim.
Correct answer: Ratified the contract through her conduct after reaching majority.
A minor may disaffirm a contract upon or shortly after reaching majority, but retaining and using the subject matter and making payments constitutes ratification.
Question 3: Which of the following best illustrates promissory estoppel?
- A written contract signed by both parties for adequate consideration.
- An employer promises a pension but the employee retires in reliance on the promise, and the employer reneges. (Correct answer)
- A seller keeps an offer open for 30 days in exchange for $50.
- A party who performs a service expecting payment later.
Correct answer: An employer promises a pension but the employee retires in reliance on the promise, and the employer reneges.
Promissory estoppel enforces a promise when the promisee reasonably relies on it to their detriment, even without traditional consideration.
Question 4: Under the parol evidence rule, extrinsic evidence of prior or contemporaneous agreements is generally inadmissible to:
- Show that the contract was the product of fraud.
- Contradict or vary the terms of a fully integrated written agreement. (Correct answer)
- Explain an ambiguous term in the contract.
- Prove that a condition precedent was not fulfilled.
Correct answer: Contradict or vary the terms of a fully integrated written agreement.
The parol evidence rule bars extrinsic evidence offered to contradict or vary the terms of a final, completely integrated written contract.
Question 5: Kevin contracts to buy Blackacre from Linda for $200,000, contingent on Kevin obtaining financing within 30 days. Kevin makes no effort to secure a loan. Linda sues. Who prevails?
- Kevin, because the condition precedent never occurred.
- Linda, because Kevin had an implied duty of good faith to attempt to satisfy the condition. (Correct answer)
- Kevin, because Linda bears the risk of the condition failing.
- Linda, because financing conditions are unenforceable under the Statute of Frauds.
Correct answer: Linda, because Kevin had an implied duty of good faith to attempt to satisfy the condition.
A party who prevents satisfaction of a condition through bad faith or lack of effort is treated as if the condition occurred, and Linda can enforce the contract.
Question 6: Ron verbally agrees to sell his house to Ed for $150,000. Ed gives Ron a $1,000 deposit. Ron later backs out. Ed sues for specific performance. The best argument in Ed's favor is:
- The Statute of Frauds bars enforcement anyway so Ed is limited to the deposit.
- Part performance: the deposit plus any other acts of reliance may remove the oral contract from the Statute of Frauds. (Correct answer)
- The contract is enforceable because the deposit constitutes written confirmation.
- Ed is entitled to specific performance automatically because real estate is unique.
Correct answer: Part performance: the deposit plus any other acts of reliance may remove the oral contract from the Statute of Frauds.
Part performance (payment of deposit combined with other acts of reliance such as inspections or moving expenses) can take an oral land contract outside the Statute of Frauds.
Question 7: An offeree begins performance on a unilateral contract offer. Under the modern view, the offeror:
- May freely revoke the offer because acceptance is not complete until full performance.
- May not revoke the offer once the offeree has begun performance. (Correct answer)
- Must notify the offeree in writing before revoking.
- Has no obligation to the offeree until full performance is complete.
Correct answer: May not revoke the offer once the offeree has begun performance.
Under the modern/Restatement view (§ 45), commencement of performance on a unilateral contract creates an option, making the offer irrevocable until the offeree has a reasonable time to complete performance.
FYLSX Contracts Formation & Enforcement 5
A modification of an existing contract requires new consideration under common law.
Which of the following situations is an exception to this rule?