MS Bar MS Bar Contracts 2 — Questions and Answers
Question 1: The doctrine of mutual mistake allows contract rescission when:
- One party was mistaken about the market value of the goods
- Both parties shared an erroneous belief about a material existing fact at contracting (Correct answer)
- A party failed to read the contract before signing
- Inflation made the contract significantly more costly than anticipated
Correct answer: Both parties shared an erroneous belief about a material existing fact at contracting
Mutual mistake requires that both parties share the same erroneous belief about a basic assumption of material fact that existed at the time of contracting.
Question 2: Anticipatory repudiation occurs when:
- A party fails to perform on the exact due date
- A party clearly and unequivocally states before performance is due that they will not perform (Correct answer)
- A party requests a short extension of the performance deadline
- A party delivers nonconforming goods but offers to cure
Correct answer: A party clearly and unequivocally states before performance is due that they will not perform
Anticipatory repudiation is a clear, unequivocal statement or conduct made before performance is due indicating that the promisor will not perform.
Question 3: Under UCC Article 2's perfect tender rule, a buyer may reject delivered goods if:
- The nonconformity substantially impairs the value of the goods
- The seller fails to provide an invoice with the goods
- The goods fail to conform to the contract in any respect (Correct answer)
- The market price has dropped since the contract was formed
Correct answer: The goods fail to conform to the contract in any respect
Under UCC §2-601, a buyer may reject goods that fail to conform to the contract in any respect, even if the deviation is minor — this is stricter than common law substantial performance.
Question 4: The frustration of purpose doctrine excuses performance when:
- Performance becomes more expensive than originally anticipated
- An unforeseen event destroys the principal purpose of the contract (Correct answer)
- One party discovers a more profitable alternative after contracting
- The contract terms turn out to be ambiguous
Correct answer: An unforeseen event destroys the principal purpose of the contract
Frustration of purpose excuses a party's performance when an unforeseen supervening event substantially destroys the purpose for which the contract was made, even though performance remains physically possible.
Question 5: For the common law doctrine of substantial performance to excuse full performance, the performing party must show:
- Complete and perfect performance in every detail
- A good faith attempt to perform with only minor, unintentional deviations (Correct answer)
- That the other party orally waived strict compliance
- That curing the defect would cause economic hardship
Correct answer: A good faith attempt to perform with only minor, unintentional deviations
Substantial performance requires a good faith effort to fulfill the material terms of the contract with only minor, non-willful deficiencies that do not defeat the purpose of the contract.
Question 6: A material breach by one party to a contract:
- Requires the non-breaching party to continue performing until formal notice is given
- Entitles the non-breaching party to suspend or terminate their own performance (Correct answer)
- Only allows the non-breaching party to seek nominal damages
- Is excused if the breaching party offers to cure within a reasonable time
Correct answer: Entitles the non-breaching party to suspend or terminate their own performance
A material breach goes to the essence of the contract and entitles the non-breaching party to treat the contract as terminated and suspend their own performance obligations.
Question 7: Under the doctrine of impossibility of performance, a party is excused when:
- Performance would cost significantly more than expected
- The subject matter of the contract is destroyed without fault of either party (Correct answer)
- A party's business becomes unprofitable due to market changes
- The contract requires skills the party did not realize they lacked
Correct answer: The subject matter of the contract is destroyed without fault of either party
Impossibility of performance excuses a party when the subject matter is destroyed or performance becomes objectively impossible due to events not caused by the party seeking excuse.
MS Bar MS Bar Contracts 2
The doctrine of mutual mistake allows contract rescission when: