PSI Contracts and Business Law 2

Question 1

Which doctrine allows a court to refuse enforcement of a contract that is grossly unfair or oppressive to one party?

Accepted Answer

Unconscionability

Answer

Unconscionability allows courts to refuse to enforce contracts that are shockingly unfair or oppressive, typically where there was unequal bargaining power.

Question 2

A contractor promises to complete work by a specific date and the owner relies on this promise by scheduling a grand opening. The contractor fails to perform. Under what theory may the owner recover?

Accepted Answer

Promissory estoppel

Answer

Promissory estoppel allows recovery when a party reasonably relies on a promise to their detriment, even without a formal contract.

Question 3

Under the Uniform Commercial Code (UCC), what is the 'battle of the forms' rule regarding additional terms in acceptances between merchants?

Accepted Answer

Additional terms become part of the contract unless they materially alter it or the offer expressly limits acceptance

Answer

UCC §2-207 provides that between merchants, additional terms in an acceptance become part of the contract unless they materially alter the deal, the offer limits acceptance to its terms, or the offeror objects within a reasonable time.

Question 4

What is the legal effect of a 'time is of the essence' clause in a real estate contract?

Accepted Answer

Missing the deadline is a material breach

Answer

A 'time is of the essence' clause makes strict compliance with deadlines a material term, so missing the deadline constitutes a material breach allowing the other party to terminate.

Question 5

Which of the following is an example of a valid liquidated damages clause?

Accepted Answer

A clause setting damages at $500/day for delay where actual damages are difficult to estimate

Answer

A valid liquidated damages clause must be a reasonable pre-estimate of damages that would be difficult to calculate, not a penalty.

PSI - Exams Practice Test

PSI - Exams Practice Test

PSI Contracts and Business Law 2