Contracts Practice Exam Questions

1. 1.Offer analysis: Baker's letter is an offer for a requirements/output contract under UCC Article 2 (goods). Discuss whether 'all you produce' is sufficiently definite under UCC 2-306.
2. 2.Revocation: Under the mailbox rule, acceptance is effective upon dispatch (March 16), while revocation is effective upon receipt (March 17). Farmer's acceptance was effective before revocation was received.
3. 3.Promissory estoppel / detrimental reliance: Even if no contract formed, Farmer's $40,000 expenditure in reliance on Baker's offer may make the offer irrevocable under Restatement Section 87(2) or UCC 2-205 (firm offer if Baker is a merchant and the writing is signed).
4. 4.UCC Firm Offer Rule (2-205): Baker is a merchant, the offer was in a signed writing, and it contained assurance it would be held open. Arguably irrevocable for a reasonable time (up to 3 months).
5. 5.Breach: Baker's April phone call is an anticipatory repudiation. Farmer may treat the contract as breached and pursue remedies immediately under UCC 2-610.
6. 6.Remedies: Cover damages under UCC 2-712, or market-price differential under 2-713. Incidental and consequential damages under 2-715. Reliance damages for the $40,000 field conversion.

1. 1.Offer analysis: The advertisement is likely an offer for a unilateral contract (performance is the acceptance), not merely an invitation to deal, because it specifies a definite act and a definite price.
2. 2.Acceptance by performance: In a unilateral contract, the offeree accepts by completing performance. Painter began performance by purchasing paint and starting work.
3. 3.Revocation and the Restatement approach: Under Restatement Section 45, once an offeree begins performance of a unilateral contract, the offer becomes irrevocable (an option contract is created). Painter's 75% completion clearly constitutes beginning of performance.
4. 4.Distinction between preparation and performance: Purchasing paint may be mere preparation, but actually beginning to paint the house is commencement of performance under Section 45.
5. 5.Homeowner's attempted revocation is ineffective because the offer became irrevocable once Painter began painting.
6. 6.Remedies: Painter is entitled to complete performance and collect the full $5,000. Alternatively, if prevented from completing, Painter may recover expectation damages (the $5,000 minus cost of completion) or restitution for the value of work already performed.

1. 1.Parol evidence rule: The merger/integration clause suggests the writing is a complete integration. Under the parol evidence rule, extrinsic evidence of prior or contemporaneous oral agreements that contradict or supplement a fully integrated writing is inadmissible.
2. 2.Partial vs. complete integration: If the court finds the agreement is only partially integrated (despite the merger clause), supplementary consistent terms may be admissible. Some courts treat merger clauses as conclusive; others treat them as one factor.
3. 3.Exceptions to the parol evidence rule: (1) Fraud in the inducement -- if the oral promise was made to induce DataCo to enter the contract with no intent to perform, the parol evidence rule does not bar evidence of fraud. (2) Mistake. (3) The agreement is ambiguous.
4. 4.UCC considerations: If the software is a 'good' under UCC Article 2 (movable at time of identification), UCC 2-202 applies. Usage of trade, course of dealing, and course of performance may supplement even a complete integration.
5. 5.Predominant purpose test: A mixed goods-and-services contract. If services predominate, common law applies; if goods predominate, UCC applies. Custom software development may be treated as services.
6. 6.Remedies: If the oral promise is admissible and enforceable, DataCo may recover for breach. If not, Software Corp. performed under the written terms and DataCo owes the balance. Possible unjust enrichment analysis.

Correct Answer: B

Under UCC 2-205, a signed written offer by a merchant to buy or sell goods that gives assurances it will be held open is irrevocable for the stated period (up to 3 months) without consideration. The wholesaler is a merchant, and the signed writing stated the offer would remain open for 30 days. The attempted revocation was therefore ineffective.

Correct Answer: C

The homeowner's request for an additional room goes beyond the scope of the original contract. The contractor's agreement to do additional work that was not part of the original bargain constitutes new consideration for the homeowner's promise to pay an additional $15,000. This is distinguishable from the pre-existing duty rule, which would apply if the contractor merely demanded more money for the same work.

Correct Answer: D

Under UCC 2-206(1)(b), shipment of non-conforming goods normally constitutes both acceptance and breach. However, when the seller seasonably notifies the buyer that the shipment is offered as an accommodation, the shipment is treated as a counteroffer rather than an acceptance. The buyer was free to accept or reject the counteroffer. Since the buyer rejected, no contract was formed and there is no breach.

Correct Answer: A

In a majority of jurisdictions, when a minor disaffirms a contract, the minor is entitled to a full refund of the purchase price upon return of the property, regardless of depreciation or use. The minor need only return what remains of the consideration. Some jurisdictions apply a benefit rule reducing recovery, but the majority rule provides full restitution.

Correct Answer: B

Under UCC 2-713, when the buyer does not cover, damages for non-delivery or repudiation are measured by the difference between the market price at the time the buyer learned of the breach (or at the time for tender) and the contract price. Under the majority approach for anticipatory repudiation, damages are measured at the time for performance (September 1), yielding $30 - $20 = $10 per bushel x 100 = $1,000.