Contracts (Foundational) Question Pack - Questions and Answers

1. A customer hired a contractor to renovate a kitchen, promising to pay $10,000 upon completion. The contractor began work but later discovered that prices for building materials had unexpectedly doubled, making the job unprofitable. The contractor demanded more money to finish, and the customer agreed in writing to pay an additional $3,000.

Is the promise to pay more enforceable?

  1. No, because there was no consideration for the modification.
  2. Yes, because parties may renegotiate contracts at any time.
  3. No, because the original contract was voidable due to impracticability.
  4. Yes, because the modification was made in good faith and fair dealing.

Correct Answer: D

Explanation: Under UCC and common law principles, modifications made in good faith are enforceable, even without new consideration, especially where unforeseen circumstances affect performance.

Why the other options are incorrect
A reflects the old rule; modern approach allows good faith modifications.
B is overly broad, renegotiation must meet legal standards.
C impracticability excuses performance, not modification validity.

2. A seller offered to sell a car to a buyer for $12,000, stating, "Let me know by Friday." On Thursday, the seller sold the car to someone else and called the buyer to revoke the offer. The buyer sued.

How should the court rule?

  1. For the buyer, because the offer was irrevocable.
  2. For the seller, because the offer had not been accepted.
  3. For the buyer, because the seller breached a unilateral contract.
  4. For the seller, because selling to a third party is an implied revocation.

Correct Answer: B

Explanation: An offer not supported by consideration can be revoked at any time prior to acceptance, even if a deadline was stated.

Why the other options are incorrect
A applies only to option contracts with consideration.
C mischaracterizes the arrangement.
D correctly describes revocation but doesn’t address enforceability.

3. A teenager entered into a written contract to buy a motorcycle from a dealership. After riding it for two months, he crashed and sought to rescind the contract.

What is the dealership's best defense?

  1. The contract is enforceable because it was in writing.
  2. The teenager is liable for damages due to partial performance.
  3. The teenager ratified the contract by using the motorcycle.
  4. The dealership offered a fair market price.

Correct Answer: C

Explanation: Minors may disaffirm contracts, but continued use after a reasonable time may constitute ratification, making the contract enforceable.

Why the other options are incorrect
A writing does not cure incapacity.
B use may imply ratification, but damages require enforceability.
D fairness of price does not overcome minority status.

4. Two businesses negotiated the sale of industrial equipment. The buyer sent a purchase order with terms on warranty and delivery. The seller replied with an invoice containing differing warranty provisions.

Under UCC Article 2, what is the legal effect?

  1. The invoice creates a counteroffer.
  2. The differing terms are automatically rejected.
  3. The contract is formed, and the differing terms may be incorporated if not objected to.
  4. No contract is formed without express agreement on all terms.

Correct Answer: C

Explanation: A contract is formed through exchange of forms, and differing terms may become part of the contract unless materially altering or rejected.

Why the other options are incorrect
A is true under mirror-image rule, not UCC.
B ignores opportunity for silent incorporation.
D overstates the need for express agreement.

5. A homeowner contracted with a painter to paint the exterior by June 15. The painter began work but stopped halfway due to illness. The homeowner hired another painter and sued for breach.

What is the painter’s strongest defense?

  1. The homeowner failed to mitigate damages.
  2. The painter substantially performed.
  3. The contract was discharged by impossibility.
  4. The second painter caused the breach.

Correct Answer: C

Explanation: Serious illness that prevents performance can excuse contractual duties under the doctrine of impossibility.

Why the other options are incorrect
A shifts focus from breach, not underlying excuse.
B half-painted work is not substantial in this context.
D performance failure preceded hiring the second painter.

6. A manufacturer agreed to supply parts to a retailer every month for a year. After two months, the manufacturer stopped deliveries, claiming market instability. The retailer sued.

What is the likely result?

  1. The manufacturer is excused due to frustration of purpose.
  2. The manufacturer materially breached the contract.
  3. The retailer failed to protect against risk by contract terms.
  4. The contract was void due to market unpredictability.

Correct Answer: B

Explanation: A party’s voluntary decision to cease performance due to market conditions is not protected. This constitutes material breach unless excused by extreme circumstances.

Why the other options are incorrect
A applies when both parties’ objectives are frustrated.
C doesn’t negate breach.
D misstates contract enforceability standards.

7. A buyer refused delivery of goods, claiming nonconformity. The seller immediately notified intent to cure and offered replacement goods within contract time.

Under the UCC, must the buyer accept?

  1. No, because breach already occurred.
  2. Yes, because cure was offered within contract time.
  3. No, unless the replacement goods are perfect.
  4. Yes, if the buyer waived objection by failing to inspect.

Correct Answer: B

Explanation: UCC permits sellers to cure nonconforming goods if done within the original delivery period, preserving the right to perform.

Why the other options are incorrect
A denies the seller’s right to cure.
C sets an unfair standard.
D is irrelevant, buyer already objected.

8. A homeowner agreed to sell her house to a buyer. After signing, she received a higher offer and tried to cancel. The buyer sued for specific performance.

What is the best basis for granting relief?

  1. Damages are insufficient because each home is unique.
  2. Buyer is entitled to expectation damages only.
  3. Seller acted in bad faith, triggering punitive damages.
  4. Specific performance is not available for real property contracts.

Correct Answer: A

Explanation: Courts commonly grant specific performance for land contracts, as monetary damages may not compensate for unique value.

Why the other options are incorrect
B provides partial remedy but doesn’t bar equitable relief.
C punitive damages aren’t typical in breach.
D misstates availability, real property is a prime area for specific performance.

9. An injured cyclist hired a lawyer on contingency. After settlement was reached, the cyclist refused to pay fees, claiming no written contract existed. The lawyer sued.

What is the most likely legal theory?

  1. Parol evidence supports the contract terms.
  2. Restitution allows recovery for benefit conferred.
  3. The Statute of Frauds bars enforcement.
  4. The agreement failed for lack of consideration.

Correct Answer: B

Explanation: In absence of enforceable contract, restitution may allow recovery for services that conferred a benefit unjustly retained.

Why the other options are incorrect
A requires a valid written contract.
C legal services are not covered by Statute of Frauds.
D consideration existed in performance of services.

10. A furniture dealer mistakenly priced a $5,000 sofa online for $500. A customer ordered two. The dealer claimed pricing error and refused delivery.

What is the customer’s strongest argument?

  1. A valid contract was formed through offer and acceptance.
  2. The dealer is estopped from denying the offer.
  3. The error constitutes fraud.
  4. The price is enforceable under UCC gap-filling provisions.

Correct Answer: A

Explanation: If the dealer's pricing error was unilateral and not obvious to the buyer, a valid contract may be formed upon acceptance.

Why the other options are incorrect
B applies to reliance, not price mistakes.
C requires intent to deceive.
D gap-filling applies when terms are missing, not erroneous.

11. A buyer entered into a written contract to purchase farm equipment from a dealer. Before delivery, the buyer learned the dealer had misrepresented the equipment’s age. The buyer refused delivery and was sued.

What is the buyer’s best defense?

  1. Lack of consideration.
  2. Fraud in the inducement.
  3. Illegality of the contract.
  4. Unilateral mistake.

Correct Answer: B

Explanation: Fraud in the inducement occurs when one party enters into a contract based on a material misrepresentation. The buyer may rescind.

Why the other options are incorrect
A misstates contract formation, the agreement was supported.
C does not apply, selling farm equipment is legal.
D only applies if the mistake was not induced.

12. Two business owners orally agreed to sell one’s commercial building for $1 million. After verbal agreement, one refused to perform. The other sued.

What is the likely result?

  1. Judgment for the plaintiff because of detrimental reliance.
  2. Judgment for the plaintiff due to partial performance.
  3. Judgment for the defendant because of the Statute of Frauds.
  4. Judgment for the plaintiff because real property contracts don’t require writing.

Correct Answer: C

Explanation: A contract for the sale of real property must be in writing to be enforceable under the Statute of Frauds.

Why the other options are incorrect
A and B require specific acts that weren’t described.
D misstates the rule, real property agreements require writing.

13. A contractor promised to build a deck for a homeowner but failed to complete the work. The homeowner hired someone else and sued for damages. The contract contained no clause on remedies.

What damages may the homeowner recover?

  1. Punitive damages for breach of trust.
  2. Nominal damages only.
  3. Cost of substitute performance.
  4. Damages limited to profits lost.

Correct Answer: C

Explanation: When a party breaches, the non-breaching party may recover costs for completing performance or hiring a substitute.

Why the other options are incorrect
A is rare in contract law.
B applies when no actual harm is shown.
D suits sellers more than buyers in service contracts.

14. An inventor offered a $5,000 prize to anyone who could deliver a drone prototype within two weeks. An engineer learned of the offer and immediately began designing a model. Before delivery, the inventor withdrew the offer.

Can the engineer enforce the promise?

  1. Yes, because the offer was accepted upon beginning performance.
  2. No, because the inventor never signed a contract.
  3. Yes, because it was a bilateral contract.
  4. No, because unilateral contracts may be revoked at any time.

Correct Answer: A

Explanation: Beginning performance in a unilateral contract creates an option, making the offer irrevocable during the performance period.

Why the other options are incorrect
B is irrelevant, contracts need not be signed.
C incorrectly classifies the agreement.
D misstates the rule, revocation is limited once performance starts.

15. A seller delivered goods to a buyer, but the contract required payment on delivery. The buyer refused to pay and claimed the goods were defective. The seller sued for breach.

What principle most favors the seller?

  1. Perfect tender rule.
  2. Substantial performance.
  3. Concurrent conditions.
  4. Parol evidence rule.

Correct Answer: C

Explanation: Under concurrent conditions, both parties must be ready to perform—if buyer doesn’t pay on delivery, seller isn’t obliged to act.

Why the other options are incorrect
A favors buyer's right to reject.
B applies more to service contracts.
D doesn’t address payment duties.

16. A landscaper and homeowner agreed orally to monthly maintenance. After one year, the homeowner refused further payments, saying there was no written agreement.

Which legal theory best supports the landscaper?

  1. Breach of contract under UCC Article 2.
  2. Quasi-contract recovery under restitution.
  3. Specific performance.
  4. Promissory estoppel.

Correct Answer: B

Explanation: Where a contract is unenforceable or not written, restitution allows recovery for the benefit conferred to avoid unjust enrichment.

Why the other options are incorrect
A applies to goods, not services.
C is unavailable for service contracts.
D requires a promise relied upon, not shown here.

17. A buyer contracted to buy 500 units of a product, with delivery and payment split over five months. The seller delivered 100 units the first month; the buyer paid. Before the next shipment, the buyer demanded a full warranty not included in the original deal.

What should the seller do?

  1. Ignore the demand and continue delivery.
  2. Treat the demand as anticipatory repudiation.
  3. Seek modification and suspend delivery.
  4. Cancel the contract due to material breach.

Correct Answer: A

Explanation: A unilateral demand for additional terms doesn’t change the contract. The seller should perform as agreed absent mutual modification.

Why the other options are incorrect
B exaggerates the buyer’s behavior.
C requires mutual agreement.
D isn’t justified, no breach occurred.

18. A homeowner hired a plumber to fix a pipe for $300. After completion, the homeowner promised to pay $500 instead, praising the quality. Later, he paid only $300. The plumber sued for the rest.

What is the likely result?

  1. Judgment for the plumber, because the second promise modified the agreement.
  2. Judgment for the homeowner, because the additional promise lacked consideration.
  3. Judgment for the plumber, because the work was exceptionally valuable.
  4. Judgment for the homeowner, because services are presumed gifts.

Correct Answer: B

Explanation: A promise made after performance, without additional consideration, is not enforceable, gratitude isn’t binding.

Why the other options are incorrect
A misapplies modification standards.
C does not change the agreed price.
D misstates service contract principles.

19. A woman entered into a life insurance contract, naming her nephew as beneficiary. Years later, she attempted to change the beneficiary, but the policy restricted changes without the nephew’s consent.

Is the change valid?

  1. Yes, because the contract was revocable.
  2. No, because the nephew is a vested third-party beneficiary.
  3. Yes, because the nephew did not pay consideration.
  4. No, because the woman breached a condition.

Correct Answer: B

Explanation: If a third-party beneficiary’s rights have vested—through reliance, notice, or contract terms, the promisor cannot revoke without consent.

Why the other options are incorrect
A contradicts vesting.
C is incorrect, beneficiaries need not give consideration.
D is irrelevant unless terms specify it.

20. A contractor agreed to install windows by July 1. On June 15, he called the homeowner and said he couldn’t finish until August. The homeowner immediately hired someone else. The contractor sued.

What is the best legal defense for the homeowner?

  1. Failure of consideration.
  2. Breach by non-performance.
  3. Anticipatory repudiation.
  4. Impossibility.

Correct Answer: C

Explanation: Clear statements of non-performance before the due date allow the other party to treat the contract as breached and seek alternatives.

Why the other options are incorrect
A misapplies consideration doctrine.
B would apply after July 1.
D requires external, unforeseeable conditions.

21. A supplier contracted to deliver 10,000 widgets to a manufacturer for $1 each. After delivering 5,000 widgets, the supplier claimed the market had changed and refused to deliver the remainder. The manufacturer purchased replacements at $1.40 per unit and sued.

What damages can the manufacturer recover?

  1. $1.40 per unit for all 10,000 widgets.
  2. $0.40 per unit for the 5,000 widgets not delivered.
  3. $0.40 per unit for the full contract amount.
  4. $1 per unit, because that was the contract price.

Correct Answer: B

Explanation: Expectation damages include the difference between the contract price and cover price for undelivered goods. The manufacturer can recover $0.40 per unit for the 5,000 units the supplier failed to deliver.

Why the other options are incorrect
A seeks damages for goods already delivered.
C incorrectly applies damages to the full contract.
D fails to account for actual loss.

22. A bakery agreed to purchase flour from a mill every week for six months. After two deliveries, the bakery refused further shipments, citing a new supplier offering lower prices. The mill sued.

What legal principle best supports the mill?

  1. Duty of good faith in ongoing contracts.
  2. Statute of Frauds.
  3. Specific performance.
  4. Parol evidence rule.

Correct Answer: A

Explanation: Parties to ongoing commercial relationships governed by the UCC are bound by the obligation of good faith. Arbitrarily breaking off performance violates this duty.

Why the other options are incorrect
B governs enforceability, not breach.
C is rarely granted for goods.
D applies to interpreting written agreements.

23. An aunt promised her niece $10,000 as a graduation gift. The niece used the promise to book a vacation, relying on the funds. The aunt refused to pay.

What legal theory most supports the niece?

  1. Misrepresentation.
  2. Promissory estoppel.
  3. Breach of warranty.
  4. Restitution.

Correct Answer: B

Explanation: Promissory estoppel applies when a clear promise induces reasonable reliance, and injustice can be avoided only by enforcement.

Why the other options are incorrect
A requires false statements of fact.
C relates to sale-of-goods.
D applies where benefits are unjustly retained.

24. A buyer contracted to purchase a vintage car after inspecting it and agreeing to a price. Two days later, the seller claimed he had changed his mind and refused to go through with the sale. The buyer sued.

What remedy is most appropriate?

  1. Expectation damages based on market value.
  2. Liquidated damages if specified.
  3. Specific performance due to uniqueness of the item.
  4. Restitution for any deposits paid.

Correct Answer: C

Explanation: Specific performance is typically available for unique items like rare collectibles, where monetary damages may be inadequate.

Why the other options are incorrect
A offers compensation but not the item.
B requires prior agreement.
D recovers payment, not possession.

25. A contractor was hired to build a patio for $8,000. He completed the work but used slightly different tiles than specified, which looked nearly identical. The homeowner refused to pay.

What is the appropriate result?

  1. The contractor materially breached.
  2. The contractor substantially performed.
  3. The contract was void for indefiniteness.
  4. The contractor waived the tile requirement.

Correct Answer: B

Explanation: Minor deviations that do not defeat the purpose of the contract support substantial performance, entitling the contractor to payment minus any damages.

Why the other options are incorrect
A is incorrect—breach wasn’t material.
C misstates the issue—terms were specific.
D waiver requires mutual agreement or intentional relinquishment.

26. A business assigned its rights under a service contract to a related company. The original service provider refused to work with the assignee, claiming lack of consent.

Is the assignment valid?

  1. Yes, because service contracts are freely assignable.
  2. No, if the assignment materially changes the duty of the obligor.
  3. Yes, because consideration wasn’t required for assignment.
  4. No, because delegation requires written notice.

Correct Answer: B

Explanation: While rights can generally be assigned, an assignment that materially increases burden or risk for the other party may be invalid without consent.

Why the other options are incorrect
A overstates assignability.
C applies to validity but not enforceability against obligor.
D misstates the rules about delegation.

27. A retailer received a shipment of 500 shirts from a manufacturer. Upon inspection, 200 were the wrong size. The retailer immediately notified the manufacturer and returned the shirts.

Under the UCC, what is the retailer’s most justified action?

  1. Cancel the entire contract.
  2. Keep the nonconforming shirts and withhold payment.
  3. Accept conforming goods and reject the rest.
  4. Demand replacement and sue for damages.

Correct Answer: C

Explanation: A buyer may accept conforming goods and reject the remainder if they do not meet the contract's specifications.

Why the other options are incorrect
A is excessive unless breach is total.
B doesn’t require keeping rejected goods.
D may follow, but rejection is the primary right.

28. A purchaser of a used boat signed a contract containing the clause: “Seller makes no warranties of any kind, express or implied.” After purchase, the engine failed.

What is the purchaser’s strongest argument?

  1. The disclaimer is unenforceable for used goods.
  2. The warranty of merchantability applies.
  3. The disclaimer was not conspicuous.
  4. The seller acted in bad faith.

Correct Answer: C

Explanation: Under the UCC, disclaimers must be conspicuous to be effective. If the clause wasn’t prominent or clear, it may be invalid.

Why the other options are incorrect
A misstates UCC rules.
B may apply only if disclaimer fails.
D needs evidence beyond the clause itself.

29. A singer agreed to perform at an event on July 1. On June 25, the organizer learned the singer had double-booked and was planning to attend another engagement. The organizer sued.

What is the best argument?

  1. Breach by anticipatory repudiation.
  2. Breach by failure of consideration.
  3. Frustration of purpose.
  4. Substantial performance.

Correct Answer: A

Explanation: A clear indication of nonperformance before the due date allows the non-breaching party to sue for anticipatory breach.

Why the other options are incorrect
B applies to formation, not performance.
C applies when both parties’ interests are defeated.
D applies when performance has begun.

30. A contractor entered a settlement agreement after a dispute with a client. The agreement stated the contractor would perform minor repairs “in full satisfaction of all claims.”

What legal doctrine applies?

  1. Novation.
  2. Accord and satisfaction.
  3. Anticipatory repudiation.
  4. Parol evidence.

Correct Answer: B

Explanation: When parties substitute a new agreement and performance that settles existing claims, it is accord and satisfaction.

Why the other options are incorrect
A replaces one party or contract entirely.
C applies to future breach.
D governs interpretation of prior written agreements.

31. A retail store signed a contract to receive 200 units of seasonal merchandise. The seller delivered only 150 units and explained that supply issues prevented full delivery. The store had time to resell the inventory but refused the shipment.

What remedy is the store most likely entitled to?

  1. Specific performance for the remaining 50 units.
  2. Expectation damages for profits lost on the missing units.
  3. Rejection of all goods for partial breach.
  4. Restitution for advance payments on the contract.

Correct Answer: B

Explanation: The buyer may recover damages for the loss resulting from the seller’s failure to deliver. These typically include expected profits on undelivered goods.

Why the other options are incorrect
A is not typically available for fungible merchandise.
C rejects conforming goods unnecessarily.
D applies only if payment was made prior to performance.

32. A painter subcontracted the trim work to another professional, but the original homeowner objected. The contract between the homeowner and painter was silent about delegation.

Can the painter delegate the work?

  1. Yes, because contracts are freely delegable unless they involve special skill.
  2. No, because delegation is never allowed without consent.
  3. Yes, because the contract was silent and trim painting is routine.
  4. No, because homeowners may refuse all third-party performance.

Correct Answer: C

Explanation: Delegation is permitted unless the contract prohibits it or the task involves special personal skill. Routine work may be delegated without breaching the agreement.

Why the other options are incorrect
A omits the skill exception.
B misstates delegation doctrine.
D overstates party rights, some delegation is allowed.

33. A commercial tenant terminated a five-year lease after two years, citing declining revenues. The landlord left the unit vacant for nine months and then sued for full remaining rent.

What is the tenant’s strongest defense?

  1. Anticipatory repudiation.
  2. Mitigation of damages.
  3. Frustration of purpose.
  4. Unilateral mistake.

Correct Answer: B

Explanation: The landlord must attempt to mitigate losses by seeking a substitute tenant. Failure to do so limits recovery.

Why the other options are incorrect
A involves future refusal, but breach already occurred.
C applies when the contract’s entire purpose is defeated.
D is irrelevant, no claim of error in contract formation.

34. A seller entered into a written agreement to sell coffee beans, stating, “No express or implied warranties are made.” After delivery, the buyer discovered mold.

What is the buyer’s best claim?

  1. Breach of express warranty.
  2. Breach of the implied warranty of merchantability.
  3. Unconscionability of contract terms.
  4. Invalid disclaimer due to lack of conspicuousness.

Correct Answer: D

Explanation: Warranty disclaimers must be conspicuous and clearly communicated to the buyer. If buried in fine print or unclear, they may be unenforceable.

Why the other options are incorrect
A isn’t present, no affirmations were made.
B may apply only if disclaimer is ineffective.
C is too broad, no suggestion of unfair bargaining power.

35. A bakery entered a contract to purchase 1,000 pounds of flour from a supplier. The contract stated “delivery to occur on June 1.” The supplier shipped on June 5 due to mechanical delays.

What are the bakery’s options?

  1. Reject the entire shipment for untimeliness.
  2. Accept delivery and sue for incidental damages.
  3. Reject only if time was expressly stated as “of the essence.”
  4. Accept and seek restitution.

Correct Answer: C

Explanation: Under the UCC, late delivery is not grounds for rejection unless time was made essential. Absent such language, minor delays do not justify rejection.

Why the other options are incorrect
A ignores flexibility unless contract demands punctuality.
B allows damages but may not fit absent actual loss.
D applies when enrichment occurs without valid contract.

36. A tech consultant signed a fixed-fee contract with a client. Halfway through, the client requested additional training services at no extra charge. The consultant completed the extra work but later demanded compensation.

What is the consultant’s best argument?

  1. Unjust enrichment.
  2. Modification of the original agreement.
  3. Promissory estoppel.
  4. Recission and reformation.

Correct Answer: A

Explanation: Even absent a formal agreement, a party who provides extra services requested by another may recover under unjust enrichment.

Why the other options are incorrect
B lacks mutual assent and consideration.
C requires reliance on a promise.
D applies to contract revision, not new services.

37. A manufacturer contracted with a distributor to deliver custom equipment. The contract specified that any disputes would be resolved via arbitration. The distributor later sued in court over delayed delivery.

What is the manufacturer’s strongest defense?

  1. Statute of Frauds.
  2. Parol evidence rule.
  3. Accord and satisfaction.
  4. Enforceability of arbitration clause.

Correct Answer: D

Explanation: If the contract includes an enforceable arbitration clause, parties must resolve disputes via arbitration, not litigation.

Why the other options are incorrect
A applies to enforceability, not disputes.
B governs contract interpretation, not forum.
C addresses settlement, not adjudication method.

38. An engineer promised to consult on a project “as long as needed.” After six months, she quit without notice. The client sued for breach.

How should the court interpret the agreement?

  1. As an enforceable perpetual contract.
  2. As an agreement terminable at will.
  3. As requiring notice before withdrawal.
  4. As a fixed-term agreement.

Correct Answer: B

Explanation: Indefinite contracts without duration are usually treated as terminable at will by either party, unless otherwise specified.

Why the other options are incorrect
A is rarely upheld unless duration is clearly stated.
C requires contractual notice clause.
D mischaracterizes the open-ended language.

39. An artist agreed to create a mural for a company, with payment due “upon satisfactory completion.” After finishing, the company refused payment, saying it wasn't satisfied.

What is the artist's best legal claim?

  1. Lack of consideration.
  2. Breach due to unreasonable refusal to accept.
  3. Failure of condition precedent.
  4. Accord and satisfaction.

Correct Answer: B

Explanation: Courts apply an objective standard for “satisfaction” clauses in commercial settings. A party cannot refuse payment based on subjective dislike if the work meets reasonable standards.

Why the other options are incorrect
A is incorrect, performance is valid consideration.
C is displaced by objective standards.
D applies only to settled claims.

40. A catering company contracted to serve 100 guests at a wedding. The client canceled the event a week before due to cold feet and refused to pay.

Which legal principle best protects the caterer?

  1. Mitigation of damages.
  2. Specific performance.
  3. Reliance interest.
  4. Unconscionability.

Correct Answer: C

Explanation: When a party incurs expenses in reliance on a contract that’s later breached, it may recover those costs, even if profits are uncertain.

Why the other options are incorrect
A limits recovery, but doesn’t grant it.
B is inapplicable to services.
D involves unfair terms, not cancellation.

41. A general contractor hired a plumbing subcontractor and promised that payment would be made upon completion of all work. The plumbing subcontractor completed its portion, but the general contractor refused to pay, stating the overall project was still unfinished.

What is the subcontractor’s strongest argument?

  1. The payment term was unconscionable.
  2. The contract created an independent obligation to pay.
  3. The subcontractor is a third-party beneficiary.
  4. The subcontractor substantially performed.

Correct Answer: B

Explanation: Unless performance of the overall project is a true condition precedent, courts interpret subcontractor agreements as creating independent obligations, triggering payment once the subcontractor performs.

Why the other options are incorrect
A is not supported by unfair terms or bargaining.
C misapplies status, the subcontractor is a party, not a third-party beneficiary.
D applies to imperfect performance, not timing of payment.

42. A seller offered to sell 50 custom units to a buyer and included the term “price subject to market fluctuation.” The buyer accepted and requested immediate delivery. The seller then demanded a 20% price increase.

What is the buyer’s best response?

  1. Demand specific performance under the original contract.
  2. Argue that the price term made the offer invalid.
  3. Accept the new price to preserve the deal.
  4. Reject the goods as nonconforming due to late delivery.

Correct Answer: A

Explanation: Once accepted, the contract is formed. Vague language about price fluctuation may not justify unilateral changes, and specific performance may be available for custom goods.

Why the other options are incorrect
B conflicts with the buyer's prior acceptance.
C surrenders a valid defense.
D misfocuses on delivery, not price.

43. A chef signed a contract to consult for a hotel chain. The contract stated that the chef “may not delegate services without written approval.” The chef assigned his duties to a colleague and departed.

What is the hotel’s most likely remedy?

  1. Sue for anticipatory repudiation.
  2. Accept performance and reduce payment.
  3. Treat the delegation as breach and sue for damages.
  4. Rescind the contract entirely.

Correct Answer: C

Explanation: Unauthorized delegation of personal service contracts breaches the agreement. The hotel may seek damages for substitute performance or breach of trust.

Why the other options are incorrect
A applies to early refusal, not substitution.
B lacks legal foundation, no obligation to accept.
D is a remedy of last resort, not automatic.

44. A buyer contracted to purchase 10 computers from a seller. Upon delivery, eight met specifications and two had outdated software. The buyer refused to pay for any units.

What is the seller’s best legal claim?

  1. The buyer breached under the perfect tender rule.
  2. The buyer breached by failing to accept conforming goods.
  3. The buyer waived the defect by inspecting the goods.
  4. The buyer must accept all goods or none.

Correct Answer: B

Explanation: Under the UCC, a buyer must accept conforming goods and may reject nonconforming ones. Refusing all breaches the duty to accept and pay for conforming units.

Why the other options are incorrect
A is used by buyers to reject delivery.
C may apply if inspection was silent or insufficient.
D misstates partial acceptance rights.

45. A construction company promised to complete a building by September 1. The owner agreed to pay more midway through after discovering delays unrelated to the builder’s conduct.

Is the promise to increase payment enforceable?

  1. No, because the original contract is controlling.
  2. Yes, because unforeseen circumstances justified the modification.
  3. No, because consideration was lacking.
  4. Yes, because delay excuses performance entirely.

Correct Answer: B

Explanation: If modification is made due to circumstances neither party anticipated and in good faith, it is generally enforceable even without additional consideration.

Why the other options are incorrect
A overlooks modification doctrines.
C follows outdated consideration rules under modern approaches.
D overstates the legal impact of delays.

46. A professional athlete entered a contract with a sports agency. The contract stated that disputes “shall be resolved only in California courts.” A breach suit was filed in New York.

How should the New York court respond?

  1. Dismiss the case for improper venue.
  2. Transfer the case to California automatically.
  3. Ignore the clause if the claim is under federal law.
  4. Retain the case if the athlete lives in New York.

Correct Answer: A

Explanation: Courts generally enforce reasonable and negotiated forum-selection clauses. Filing suit in a non-designated state violates venue terms.

Why the other options are incorrect
B depends on the parties and jurisdiction.
C misstates contract enforcement doctrine.
D doesn’t override a valid forum-selection clause.

47. A fashion designer signed a licensing contract with a brand that included a clause limiting damages for breach to $5,000. The brand breached, causing $25,000 in losses.

What is the designer's strongest argument?

  1. The limitation is unconscionable because damages were foreseeable.
  2. The clause is valid because parties agreed in advance.
  3. The clause is unenforceable under the Statute of Frauds.
  4. The designer accepted the risk by entering the contract.

Correct Answer: A

Explanation: Courts may refuse to enforce a limitation of damages clause if it's unconscionable or grossly inadequate in light of foreseeable losses.

Why the other options are incorrect
B is rebuttable if clause is unfair.
C does not govern damages clauses.
D doesn’t eliminate the right to challenge unfair terms.

48. A company promised to donate $50,000 to a nonprofit. Based on the promise, the nonprofit signed a lease for new space. The company later withdrew the pledge.

Can the nonprofit recover?

  1. Yes, under promissory estoppel due to reasonable reliance.
  2. No, because charitable pledges are not contracts.
  3. Yes, because leases automatically create enforceable rights.
  4. No, because the nonprofit gave no consideration.

Correct Answer: A

Explanation: Promissory estoppel allows recovery when a promise induces foreseeable, detrimental reliance, even without traditional consideration.

Why the other options are incorrect
B misstates charitable pledge law.
C doesn’t affect enforceability against the promisor.
D is negated by estoppel doctrine.

49. A dealership ordered 100 tires from a supplier. The supplier delivered 90 but included a note promising the rest “as soon as possible.” The dealership rejected the shipment entirely.

Was the rejection proper?

  1. Yes, because the UCC allows rejection of any imperfect tender.
  2. No, because partial delivery does not justify rejection of all goods.
  3. Yes, because the seller failed to offer cure.
  4. No, because the note made it a complete delivery.

Correct Answer: B

Explanation: Under the UCC, buyers may reject only nonconforming goods unless the breach is material. Accepting 90 conforming tires and rejecting the rest is appropriate.

Why the other options are incorrect
A applies if breach is material.
C ignores seller’s attempt to cure.
D misstates the nature of partial delivery.

50. A retired architect sold software to a small firm and promised to provide technical updates for a year. After three months, he stopped responding. The firm sued.

What is the best theory of recovery?

  1. Breach of an implied warranty of merchantability.
  2. Material breach of a divisible contract.
  3. Failure of condition precedent.
  4. Anticipatory repudiation.

Correct Answer: B

Explanation: When ongoing obligations are severable and a party stops performing, the breach is material as to that divisible portion, allowing recovery.

Why the other options are incorrect
A applies to goods, not services.
C requires unfulfilled conditions before duty arises.
D applies to early refusal, not midstream abandonment.