NPPE Contract Law Fundamentals 5 — Questions and Answers
Question 1: A design firm completes 80% of its contracted services before the client wrongfully terminates the agreement. The firm's best contractual remedy is to claim:
- Only the value of work completed under quantum meruit
- Expectation damages including anticipated profit on the unperformed portion (Correct answer)
- Reliance damages limited to out-of-pocket costs incurred
- Restitution of all fees paid by the client
Correct answer: Expectation damages including anticipated profit on the unperformed portion
When a contract is wrongfully terminated, the non-breaching party is entitled to expectation damages, including the profit they would have earned on the remaining work.
Question 2: Which of the following best describes a 'conditions precedent' in a professional services contract?
- A clause that limits the engineer's liability for design errors
- An event that must occur before a party's duty to perform arises (Correct answer)
- A provision requiring the owner to pay before work commences
- A clause specifying the order of dispute resolution steps
Correct answer: An event that must occur before a party's duty to perform arises
A condition precedent is an event or act that must occur before a contractual obligation of one or both parties becomes due.
Question 3: An owner and contractor enter into a contract where the contractor agrees to accept payment of $50,000 in full settlement of a $70,000 disputed debt. This arrangement is called:
- Novation
- Assignment
- Accord and satisfaction (Correct answer)
- Promissory estoppel
Correct answer: Accord and satisfaction
Accord and satisfaction occurs when parties agree to accept a different performance than originally required to settle a disputed or unliquidated claim.
Question 4: Under the Uniform Commercial Code (UCC), when a contract for goods does not specify a delivery date, delivery must occur:
- Within 30 days as a statutory default
- Within a reasonable time (Correct answer)
- Immediately upon contract formation
- Only after the buyer provides written notice requesting delivery
Correct answer: Within a reasonable time
Under UCC §2-309, when no time for delivery is specified, the obligation arises within a reasonable time based on the circumstances.
Question 5: A licensed engineer assigns her rights under a professional services contract to a colleague without the client's consent. The most likely legal consequence is:
- The assignment is void because professional contracts are personal in nature (Correct answer)
- The assignment is valid and the colleague assumes all obligations
- The client must accept the assignment if the colleague is equally qualified
- The original engineer is released from all liability upon assignment
Correct answer: The assignment is void because professional contracts are personal in nature
Professional services contracts are generally non-assignable without consent because they are based on personal skill, trust, and licensure of a specific individual.
Question 6: A contractor submits a bid that is accepted by the owner. Before the formal contract is signed, the contractor attempts to withdraw. In most US jurisdictions, the owner can enforce the bid based on:
- Statute of Frauds
- Promissory estoppel (Correct answer)
- Quasi-contract
- The mirror image rule
Correct answer: Promissory estoppel
Promissory estoppel can bind a contractor to a bid when the owner foreseeably and reasonably relied on the bid to its detriment, such as by using it in a prime bid.
Question 7: A contract clause states that any dispute must be resolved by arbitration and that arbitration awards are 'final and binding.' Under the Federal Arbitration Act, grounds to vacate an arbitration award include:
- The arbitrator reached a legal conclusion the court disagrees with
- The award was procured by fraud or corruption (Correct answer)
- The losing party believes the award is unjust or excessive
- The arbitrator failed to hold a hearing longer than two hours
Correct answer: The award was procured by fraud or corruption
Under the FAA, an arbitration award may be vacated if it was procured by fraud, corruption, or evident partiality, but courts give very limited review to the merits of the decision.
NPPE Contract Law Fundamentals 5
A design firm completes 80% of its contracted services before the client wrongfully terminates the agreement.
The firm's best contractual remedy is to claim: