Contract Law Fundamentals Flashcards

An architect discovers that a subcontractor's bid was based on a clerical error that significantly understated the cost. Under contract law, the subcontractor may seek relief under the doctrine of:

Answer: Unilateral mistake

Unilateral mistake allows a party to void a contract when a clerical or computational error was made and the other party knew or should have known of the error.

A construction contract includes a 'time is of the essence' clause. The contractor finishes 10 days late due to unforeseen labor shortages. The owner may:

Answer: Terminate the contract and sue for all consequential losses

When a 'time is of the essence' clause is present, timely performance is a material condition, and breach allows the non-breaching party to terminate and claim damages.

Which legal doctrine allows a court to rewrite an ambiguous contract term to reflect the parties' original intent?

Answer: Rectification

Rectification is an equitable remedy that allows a court to correct a written contract that does not accurately reflect the parties' true agreement.

Under the parol evidence rule, which of the following evidence is generally ADMISSIBLE to interpret a fully integrated written contract?

Answer: Evidence of a trade custom relevant to an ambiguous term

Trade usage and custom are admissible to explain or supplement ambiguous terms in an integrated contract even under the parol evidence rule.

A professional services contract is frustrated when the client's building, the sole purpose of the engagement, burns down before work begins. The most likely outcome is:

Answer: Both parties are discharged from future obligations

Under the doctrine of frustration, when an unforeseen event destroys the contract's essential purpose, both parties are excused from future performance.

An engineer signs a contract containing an exculpatory clause that purports to limit liability to zero for any negligence. In most US jurisdictions, this clause is likely:

Answer: Void as against public policy when applied to professional negligence

Courts in most jurisdictions void exculpatory clauses that eliminate all liability for professional negligence because they violate public policy.

When a party anticipatorily repudiates a contract, the non-breaching party's options include all of the following EXCEPT:

Answer: Compel the repudiating party to perform through specific performance as a first remedy

Specific performance is an extraordinary remedy and is not available as a first-choice remedy; the non-breaching party must typically pursue damages first unless damages are inadequate.