NPPE Contract Law Fundamentals 4 — Questions and Answers
Question 1: 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:
- Promissory estoppel
- Unilateral mistake (Correct answer)
- Mutual mistake
- Fraudulent misrepresentation
Correct 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.
Question 2: 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:
- Only claim damages if actual harm is proven
- Terminate the contract and sue for all consequential losses (Correct answer)
- Waive the clause automatically by accepting the work
- Extend the deadline automatically under force majeure
Correct 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.
Question 3: Which legal doctrine allows a court to rewrite an ambiguous contract term to reflect the parties' original intent?
- Novation
- Rectification (Correct answer)
- Rescission
- Accord and satisfaction
Correct 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.
Question 4: Under the parol evidence rule, which of the following evidence is generally ADMISSIBLE to interpret a fully integrated written contract?
- Prior oral agreements that contradict the written terms
- Contemporaneous written agreements on the same subject
- Evidence of a trade custom relevant to an ambiguous term (Correct answer)
- Earlier draft versions that differ from the final contract
Correct 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.
Question 5: 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:
- The professional is entitled to full contract value
- Both parties are discharged from future obligations (Correct answer)
- The client must pay a quantum meruit amount
- The contract converts to a month-to-month arrangement
Correct 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.
Question 6: 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:
- Fully enforceable as freedom of contract prevails
- Void as against public policy when applied to professional negligence (Correct answer)
- Enforceable only if the client is a sophisticated commercial party
- Valid only if the engineer carries no professional liability insurance
Correct 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.
Question 7: When a party anticipatorily repudiates a contract, the non-breaching party's options include all of the following EXCEPT:
- Treat the repudiation as an immediate breach and sue for damages
- Wait until the performance date to see if the party performs
- Suspend their own performance obligations immediately
- Compel the repudiating party to perform through specific performance as a first remedy (Correct answer)
Correct 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.
NPPE Contract Law Fundamentals 4
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: