Most Commonly Tested Contracts Issues

Look at any released Contracts exam and the same skeleton appears: is there a contract, is it enforceable, what does it mean, who breached, and what does the breach cost. Professors vary in emphasis — a professor who spent six weeks on promissory estoppel will test it — but the structural issues are stable because they are the only way to get from a fact pattern to a dollar figure.

By rough frequency, the recurring clusters are: (1) governing law; (2) offer, acceptance, and revocation; (3) consideration and reliance substitutes; (4) Statute of Frauds and parol evidence; (5) interpretation and implied terms; (6) conditions, substantial performance, and anticipatory repudiation; (7) mistake, unconscionability, impracticability, and frustration; and (8) damages. Third-party beneficiaries and assignment appear less often but are heavily weighted when they do, because they are easy to miss entirely.

Your professor's own scholarship and the cases assigned in the last two weeks of the semester are the best predictors of which of these gets the long essay. Check past exams on file before you build your outline's priority order.

Article 2 governs transactions in goods — movable things identified at the time of contracting. Common law governs services, real estate, employment, and intangibles. Say which applies in your first sentence, because the acceptance rules, the modification rules, the Statute of Frauds threshold, and the damage formulas all change.

Hybrid contracts are a deliberate trap. Most courts apply the predominant purpose test from Bonebrake v. Cox, 499 F.2d 951 (8th Cir. 1974), looking at the language of the deal, the nature of the supplier's business, and the relative value of the goods versus the labor. A contract to install a furnace the seller supplies is usually goods; a contract to remodel a kitchen using purchased materials is usually services. Argue both, pick one, and note that the outcome flips if you are wrong — that hedge is worth points.

Where the CISG has been covered, add it: it applies to sales between parties with places of business in different Contracting States, and it has no Statute of Frauds and no mirror-image or parol evidence rule.

Offer versus preliminary negotiation turns on objective manifestation, not secret intent — Lucy v. Zehmer, 84 S.E.2d 516 (Va. 1954), is the standard cite. Advertisements are usually invitations unless they are definite and limited. Revocation is effective on receipt, which sets up the classic option-contract fights: Restatement (Second) of Contracts § 45 (beginning performance in a unilateral contract creates an option), § 87(2) and Drennan v. Star Paving Co., 333 P.2d 757 (Cal. 1958) (reliance on a subcontractor's bid), and UCC § 2-205 (signed merchant firm offer, irrevocable up to three months). Petterson v. Pattberg, 161 N.E. 428 (N.Y. 1928), is the counterexample where revocation beat performance.

UCC § 2-207 is the most heavily tested single code section. Work it in order: (1) is the response a definite and seasonable expression of acceptance, or is it expressly conditional on assent to new terms; (2) if both parties are merchants, additional terms enter the contract unless the offer limits acceptance to its terms, the terms materially alter the deal, or the offeror objects; (3) if the writings do not form a contract but the parties perform, § 2-207(3) builds the contract from the agreed terms plus gap fillers. For differing (not merely additional) terms, note the split between the knockout rule and treating them as additional terms; say which your professor prefers.

Consideration is bargained-for exchange, not benefit or adequacy — Hamer v. Sidway, 27 N.E. 256 (N.Y. 1891). Flag illusory promises and rescue them with implied good faith, Wood v. Lucy, Lady Duff-Gordon, 118 N.E. 214 (N.Y. 1917), or UCC § 2-306 for requirements and output deals. Modification triggers the pre-existing duty rule at common law, softened by unanticipated circumstances in Angel v. Murray, 322 A.2d 630 (R.I. 1974); under UCC § 2-209 no consideration is needed, but the modification must be sought in good faith. Where consideration fails, run Restatement § 90 reliance.

A missing or partial writing signals the Statute of Frauds. Identify the category (suretyship, one year, land, marriage, or goods of $500 or more under UCC § 2-201), then run exceptions: the merchant confirmatory memo, specially manufactured goods, judicial admission, part payment or acceptance, part performance in land contracts, and reliance under Restatement § 139. Remember the writing need only be signed by the party to be charged.

A written agreement plus an earlier oral promise signals parol evidence. Ask whether the writing is integrated and, if so, whether completely or partially; a merger clause is strong but not conclusive. Prior and contemporaneous oral terms that contradict a partial integration are out; consistent additional terms may come in. Exceptions for fraud, duress, condition precedent to effectiveness, and subsequent modification always survive. Under UCC § 2-202, course of performance, course of dealing, and usage of trade come in regardless of integration.

Ambiguity signals interpretation: Frigaliment Importing Co. v. B.N.S. International Sales Corp., 190 F. Supp. 116 (S.D.N.Y. 1960), for trade usage; Raffles v. Wichelhaus, 159 Eng. Rep. 375 (Ex. 1864), for material misunderstanding with no contract. Shared false assumptions about a basic assumption signal mutual mistake under Restatement § 152 and Sherwood v. Walker, 33 N.W. 919 (Mich. 1887); watch for allocation of risk, which usually defeats the defense. Adhesion contracts, fine print, and desperate consumers signal unconscionability under § 2-302 and Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965) — separate procedural from substantive.

Distinguish express conditions, which demand strict compliance, from constructive conditions of exchange, which are satisfied by substantial performance — Jacob & Youngs, Inc. v. Kent, 129 N.E. 889 (N.Y. 1921). If forfeiture would be disproportionate, argue for excusing the condition or for waiver by the party it protects. Then ask whether the breach is material, using the Restatement § 241 factors, and whether time has cured or aggravated it into total breach.

Under Article 2 the perfect tender rule of § 2-601 replaces materiality for single-delivery contracts, subject to the seller's right to cure under § 2-508 and the different materiality standard for installment contracts in § 2-612. A party with reasonable grounds for insecurity may demand adequate assurance under § 2-609 and suspend performance. A clear statement that a party will not perform is anticipatory repudiation, which lets the aggrieved party sue immediately; retraction is possible until the other side materially changes position.

Excuse comes in three flavors. Impossibility and impracticability require that a basic assumption fail without the promisor's fault — Taylor v. Caldwell, 122 Eng. Rep. 309 (K.B. 1863); Restatement § 261; UCC § 2-615. Frustration of purpose leaves performance possible but pointless (§ 265). Increased cost alone almost never excuses; say so and explain why the market-risk allocation cuts against the party seeking out.

Because every fact pattern ends there, and because most students run out of time before they get there. Start with expectation: loss in value plus other loss, minus cost avoided and loss avoided (Restatement § 347). Hawkins v. McGee, 146 A. 641 (N.H. 1929), is the canonical illustration. Then apply the three limits in order — foreseeability under Hadley v. Baxendale, 156 Eng. Rep. 145 (Ex. 1854), reasonable certainty (fatal to new-business lost profits), and mitigation under § 350.

For construction and land defects, discuss cost of completion versus diminution in value, citing Jacob & Youngs and Peevyhouse v. Garland Coal & Mining Co., 382 P.2d 109 (Okla. 1962); the tiebreaker is economic waste and whether the owner will actually repair. If expectation fails on certainty, fall back to reliance, then restitution — including restitution for a breaching party who conferred a net benefit, and quasi-contract where no contract exists.

Under Article 2, name the section. Buyer: cover under § 2-712, market damages under § 2-713, breach of warranty under § 2-714, plus incidental and consequential damages under § 2-715. Seller: resale under § 2-706, market under § 2-708(1), lost volume under § 2-708(2), and the price action under § 2-709. Close with liquidated damages (reasonable forecast of anticipated or actual harm, and not a penalty) and specific performance for unique goods or land under § 2-716.

Not spotting more issues — resolving the close ones. Graders award points for the argument on each side of a genuinely contested element and for a stated conclusion. Writing 'this may be a material breach' earns less than 'the delay was two weeks on a six-month contract and the buyer suffered no lost sales, so under § 241 it is partial, meaning the buyer must perform and sue for damages.'

Budget time backward from remedies. If the call of the question asks what a party can recover, a formation discussion that consumes forty minutes and leaves three for damages will not pass the median. Note briefly that formation is satisfied, then spend your time where the points are.

Finally, do not litigate issues the facts do not raise. Capacity, duress, and illegality get one sentence each unless a fact triggers them. Manufactured issues cost time and signal that you cannot tell strong claims from weak ones.