NM Bar Contracts & Commercial Law 2 — Questions and Answers
Question 1: Under UCC Article 2, the perfect tender rule requires that:
- Substantial performance satisfies the seller's obligation
- The seller must tender goods that conform in every respect to the contract (Correct answer)
- Minor defects are excused if the price is reduced
- The buyer must accept conforming goods within 30 days
Correct answer: The seller must tender goods that conform in every respect to the contract
Under UCC § 2-601, if goods or tender fail in any respect to conform to the contract, the buyer may reject them (the perfect tender rule).
Question 2: A contract entered into under mutual mistake of a material fact is:
- Void ab initio
- Voidable at the option of the adversely affected party (Correct answer)
- Enforceable because both parties were mistaken
- Unenforceable only if the mistake was about value
Correct answer: Voidable at the option of the adversely affected party
A mutual mistake as to a material fact makes the contract voidable at the option of the adversely affected party, not automatically void.
Question 3: Which remedy allows a non-breaching party to recover the value of the benefit conferred on the breaching party?
- Expectation damages
- Reliance damages
- Restitution (Correct answer)
- Nominal damages
Correct answer: Restitution
Restitution prevents unjust enrichment by restoring to the non-breaching party the value of any benefit it conferred on the breaching party.
Question 4: Under UCC Article 2, a buyer's right to 'cure' a defective tender is governed by:
- UCC § 2-508, allowing cure if time for performance has not yet expired or if seller had reasonable grounds to believe tender was acceptable (Correct answer)
- UCC § 2-601, the perfect tender rule
- UCC § 2-207, the battle of the forms
- UCC § 2-314, the implied warranty of merchantability
Correct answer: UCC § 2-508, allowing cure if time for performance has not yet expired or if seller had reasonable grounds to believe tender was acceptable
UCC § 2-508 gives the seller a right to cure a nonconforming tender either before the performance deadline or, in some cases, within a further reasonable time after rejection.
Question 5: The parol evidence rule generally prohibits introduction of extrinsic evidence to:
- Explain an ambiguous contract term
- Establish a condition precedent
- Contradict or vary the terms of a fully integrated written contract (Correct answer)
- Show fraud in the inducement
Correct answer: Contradict or vary the terms of a fully integrated written contract
The parol evidence rule bars extrinsic evidence that contradicts or varies the terms of a final, fully integrated written contract.
Question 6: Under New Mexico common law, an agreement to modify a contract generally requires:
- New consideration (Correct answer)
- A writing regardless of the contract's subject matter
- The agreement of all affected third-party beneficiaries
- Notice to the court
Correct answer: New consideration
Under common law, a contract modification requires new consideration; under the UCC, modifications need only be made in good faith without new consideration.
Question 7: Which of the following best describes the expectation interest in contract damages?
- Restoring the non-breaching party to pre-contract status quo
- Putting the non-breaching party in the position they would have been in had the contract been performed (Correct answer)
- Recovering only out-of-pocket expenses incurred in reliance on the contract
- Disgorgement of the breaching party's profits
Correct answer: Putting the non-breaching party in the position they would have been in had the contract been performed
Expectation damages aim to give the non-breaching party the 'benefit of the bargain' — the position they would have occupied if the contract had been fully performed.
NM Bar Contracts & Commercial Law 2
Under UCC Article 2, the perfect tender rule requires that: