MPOETC Contract Law & Commercial Transactions 4 — Questions and Answers
Question 1: A police officer is called to a scene where a car dealer refuses to return a customer's trade-in after the financing fell through. Under contract law, this scenario most likely involves:
- A completed bilateral contract
- A failed condition precedent making the contract unenforceable (Correct answer)
- A novation between the dealer and bank
- An assignment of contractual rights
Correct answer: A failed condition precedent making the contract unenforceable
When financing approval is a condition precedent to a sale, failure to obtain financing prevents the condition from being satisfied, potentially voiding the obligation.
Question 2: Under common law, which modification of an existing contract requires new consideration to be enforceable?
- All contract modifications
- Modifications to contracts for services, not goods (Correct answer)
- Only modifications made orally
- Modifications to government contracts only
Correct answer: Modifications to contracts for services, not goods
Under common law (applicable to service contracts), any modification requires new consideration; the UCC relaxes this rule for goods contracts.
Question 3: When a seller's non-conforming goods cause the buyer to sue for breach of contract, the buyer's duty to mitigate damages means:
- The buyer must accept whatever the seller offers as replacement
- The buyer must take reasonable steps to reduce their own losses (Correct answer)
- The seller pays no damages if the buyer could have avoided all harm
- The buyer must negotiate before filing suit
Correct answer: The buyer must take reasonable steps to reduce their own losses
The duty to mitigate requires the non-breaching party to take reasonable actions to minimize their losses; failure to mitigate reduces any recovery.
Question 4: A 'novation' in contract law occurs when:
- A contract is renewed with the same parties
- A new party replaces an original party and the original party is fully released (Correct answer)
- Both parties agree to add new contract terms
- A court rewrites unfair contract terms
Correct answer: A new party replaces an original party and the original party is fully released
Novation substitutes a new party for an original one, with all parties' consent, and fully releases the replaced party from their original obligations.
Question 5: A written contract contains a clause that is unconscionable. A court faced with such a clause may:
- Only enforce the contract as written or void it entirely
- Refuse to enforce the unconscionable clause while enforcing the rest of the contract (Correct answer)
- Require both parties to renegotiate all terms
- Automatically award double damages to the injured party
Correct answer: Refuse to enforce the unconscionable clause while enforcing the rest of the contract
Courts have discretion to refuse enforcement of unconscionable clauses while keeping the remainder of the contract intact, or void the contract entirely.
Question 6: An officer responds to a complaint about a pyramid scheme recruitment pitch. Which contract law concept is most relevant to prosecution?
- Promissory estoppel
- Illegality of subject matter (Correct answer)
- Lack of offer
- Undue influence
Correct answer: Illegality of subject matter
Contracts with an illegal purpose or subject matter are void and unenforceable; pyramid schemes violate law, making related agreements unenforceable.
Question 7: Under the UCC, when a buyer and seller dispute whether a contract was formed but both act as if one exists, the court will:
- Find no contract because no formal acceptance was made
- Recognize a contract based on the parties' conduct and fill gaps with UCC default rules (Correct answer)
- Require the parties to execute a formal written agreement before ruling
- Apply the last document sent by either party as the full contract
Correct answer: Recognize a contract based on the parties' conduct and fill gaps with UCC default rules
UCC §2-207 and related provisions recognize that contracts can be formed by conduct, with courts filling in missing terms using UCC gap-filler rules.
MPOETC Contract Law & Commercial Transactions 4
A police officer is called to a scene where a car dealer refuses to return a customer's trade-in after the financing fell through.
Under contract law, this scenario most likely involves: