MPOETC Contract Law & Commercial Transactions 3 — Questions and Answers
Question 1: A store displays a jacket with a $50 price tag. Under contract law, this display is best characterized as:
- A binding offer to sell
- An invitation to make an offer (Correct answer)
- A unilateral contract
- An express warranty
Correct answer: An invitation to make an offer
Price tags and advertisements are generally invitations to make an offer, not binding offers, so the store is not legally obligated to sell at that price.
Question 2: When police investigate a complaint about a contractor abandoning a job, the legal doctrine of 'substantial performance' means:
- The contractor must complete 100% of the work
- Near-complete performance may entitle the contractor to payment minus damages for deviations (Correct answer)
- Any partial performance voids the entire contract
- Performance is only required if the other party pays first
Correct answer: Near-complete performance may entitle the contractor to payment minus damages for deviations
Substantial performance allows a party who has mostly completed contractual duties to recover the contract price minus any damages caused by minor deviations.
Question 3: A contract is entered into under economic duress when one party:
- Drives a hard bargain in negotiations
- Is a more experienced business person than the other
- Wrongfully threatens to cause economic harm unless the other party agrees (Correct answer)
- Offers an unusually low price to induce agreement
Correct answer: Wrongfully threatens to cause economic harm unless the other party agrees
Economic duress requires a wrongful threat that leaves the victim no reasonable alternative but to agree, making the contract voidable.
Question 4: Under the UCC, which of the following is NOT required for a valid contract for the sale of goods over $500?
- A written record signed by the party to be charged
- The quantity of goods
- The price of goods
- That the agreement involves a merchant (Correct answer)
Correct answer: That the agreement involves a merchant
UCC §2-201 (Statute of Frauds) requires a writing, a signature, and quantity, but does not require that either party be a merchant.
Question 5: A teenager (age 16) signs a contract to buy a car. Later, they want to cancel it. This is an example of:
- Void contract due to illegal subject matter
- Voidable contract due to lack of capacity (Correct answer)
- Valid contract if parents approved
- Unenforceable contract due to Statute of Frauds
Correct answer: Voidable contract due to lack of capacity
Contracts with minors are generally voidable at the minor's option because minors lack the legal capacity to enter binding contracts.
Question 6: In a contract dispute, 'anticipatory repudiation' occurs when:
- A party refuses to pay after the other has performed
- A party clearly indicates before the due date that it will not perform (Correct answer)
- Both parties mutually agree to end the contract
- A court voids the contract due to illegality
Correct answer: A party clearly indicates before the due date that it will not perform
Anticipatory repudiation is a clear statement or action by a party before the performance date indicating they will not fulfill their contractual obligations.
Question 7: Which of the following best describes 'liquidated damages' in a contract?
- Damages paid in cash only, not property
- A pre-agreed sum payable upon breach, representing a reasonable estimate of actual harm (Correct answer)
- Damages that are reduced by court order
- Payment for damages already paid to a third party
Correct answer: A pre-agreed sum payable upon breach, representing a reasonable estimate of actual harm
Liquidated damages clauses specify in advance an agreed amount of damages if a breach occurs, enforceable when actual damages are difficult to calculate and the amount is reasonable.
MPOETC Contract Law & Commercial Transactions 3
A store displays a jacket with a $50 price tag.
Under contract law, this display is best characterized as: