- Innocent misrepresentation differs from fraudulent misrepresentation in what key way?
Answer: Innocent misrepresentation is a false statement made without knowledge of its falsity or intent to deceive; the remedy is rescission of the contract, not damages.
Innocent misrepresentation is a false statement made without knowledge of its falsity and without intent to deceive. Because the speaker was not at fault, the remedy is typically only rescission (cancellation of the contract) rather than damages for fraud. In contrast, fraudulent misrepresentation (made with knowledge of falsity or reckless disregard) allows the defrauded party to choose between rescission and damages for the fraud. Answer B is incorrect because innocent misrepresentation generally does not support a fraud damages claim. Answer C is incorrect because innocent misrepresentation does allow rescission. Answer D is incorrect because misrepresentation requires a false statement of fact, not opinion.
- Fine-print one-sided clause; no bargaining. Best defense?
Answer: Unconscionability doctrine
Because the clause is hidden in fine print, one-sided, and never subject to bargaining, you lack meaningful choice, so unconscionability lets a court refuse to enforce it. The tempting answer is fraudulent concealment, but that rule targets hiding a material fact, not a lopsided term. Mutual mistake and duress don't fit.
- The parol evidence rule bars evidence of prior or contemporaneous oral agreements that would vary a fully integrated written contract. Which of the following is NOT excluded by the parol evidence rule?
Answer: Evidence of fraud, duress, or mistake that would show the written contract is not a valid agreement, or evidence of subsequent oral modifications, or evidence explaining ambiguous terms.
The parol evidence rule excludes extrinsic evidence of prior or contemporaneous agreements that contradict or vary the terms of a fully integrated written contract. However, the rule has important exceptions: (1) evidence of fraud, duress, mistake, or lack of consideration is admissible to challenge the validity of the contract; (2) evidence of subsequent oral modifications (made after the contract was signed) is admissible; (3) evidence to explain ambiguous terms is admissible; and (4) evidence of conditions precedent. Answer A is excluded by the rule. Answer B is excluded because it was superseded. Answer C is excluded because it modifies the terms contemporaneously.
- Fiduciary exploits trust; no threats. Best defense?
Answer: Undue influence claim
Because a fiduciary relationship involves one party relying on another's advice and good faith, exploiting that trust through manipulation or unfair persuasion is undue influence even without threats. Economic duress is the tempting alternative, but it requires a wrongful threat or coercion, which isn't present here. Fraudulent promise needs a false promise about the future, and unilateral mistake needs an erroneous belief, neither matches.
- Under the Statute of Frauds, which of the following writings satisfies the writing requirement for a contract for the sale of goods under the UCC?
Answer: The writing must indicate that a contract has been made, state the quantity of goods, and be signed by the party against whom enforcement is sought; other terms may be supplied by course of dealing or the UCC gap-filler rules.
Under UCC Section 2-201, a writing sufficient to satisfy the Statute of Frauds for a sale of goods must: (1) indicate that a contract has been made; (2) state the quantity of goods; and (3) be signed by the party against whom enforcement is sought. Missing terms other than quantity may be supplied by the UCC's gap-filler provisions. The writing is only enforceable up to the quantity stated. Answer A is incorrect because the UCC does not require all essential terms in the writing. Answer B is incorrect because formal company letterhead is not required. Answer D is incorrect because only the signature of the party to be charged is required (not both parties).
- Under the Statute of Frauds, an oral contract for the sale of land worth $50,000 is made. The buyer fully performs by paying the purchase price, and the seller allows the buyer to take possession and make substantial improvements. The seller now seeks to void the contract under the Statute of Frauds. Which doctrine prevents the seller from using the Statute of Frauds as a defense?
Answer: Part performance (equitable estoppel), which prevents a party from asserting the Statute of Frauds when the other party has partially or fully performed in reliance on the oral agreement.
The doctrine of part performance (also called equitable estoppel in this context) prevents a party from using the Statute of Frauds to void a contract for the sale of land when the other party has performed acts that are clearly referable to the oral contract - particularly when the buyer has paid the price, taken possession, and made substantial improvements. Allowing the seller to use the Statute of Frauds in this situation would be inequitable. Answer A (promissory estoppel) applies to gratuitous promises and detrimental reliance, a related but somewhat different concept. Answer C (ratification) applies to agency law. Answer D (substantial performance) applies to excuse minor defects in contract performance.
- Under the doctrine of frustration of purpose, which of the following correctly describes when performance may be excused?
Answer: Performance may be excused when an unforeseen supervening event substantially frustrates the principal purpose of the contract, making the value of the other party's performance virtually worthless, even if performance is technically still possible.
The frustration of purpose doctrine excuses performance when: (1) the principal purpose of the contract is substantially frustrated; (2) the frustrating event was not foreseeable at the time of contracting; and (3) the non-occurrence of the frustrating event was a basic assumption of the contract. Unlike impossibility, performance may still be technically possible, but the purpose for which the contract was made has been destroyed. The classic example is Krell v. Henry, where a hotel room was rented to view a coronation procession that was subsequently cancelled. Answer A is incorrect because increased cost is generally not frustration. Answer B describes impossibility, not frustration. Answer D is incorrect because financial hardship alone is not frustration.
- Which of the following correctly identifies the 'main purpose doctrine' (also called the 'leading object rule') as an exception to the Statute of Frauds suretyship provision?
Answer: Under the main purpose doctrine, a promise to pay another's debt need not be in writing if the main purpose of the promisor's promise is to benefit themselves rather than the original debtor, such as when a stockholder promises to pay a corporate debt to prevent the corporation from closing and protecting their investment.
The main purpose (or leading object) rule provides an exception to the Statute of Frauds for suretyship promises. If the primary purpose of a promise to pay another's debt is to benefit the promisor (rather than the principal debtor), the promise need not be in writing. For example, a shareholder who orally promises to pay their corporation's debt to prevent the corporation from being shut down is primarily acting to protect their own investment - the main purpose is personal benefit. Answer B is incorrect because the main purpose doctrine requires a finding of personal benefit, not mere intent. Answer C is too broad. Answer D incorrectly limits the rule to merchants.
- Economic duress (also called business compulsion) may be a defense to contract enforcement. Which of the following elements are generally required to establish economic duress?
Answer: The defendant made an improper threat that left the plaintiff with no reasonable alternative but to agree to the contract; the threat must be wrongful and the plaintiff's distress must be economic.
Economic duress (business compulsion) requires: (1) an improper threat by the defendant (such as breach of an existing contract, or an unlawful act); (2) the threat caused the plaintiff to have no reasonable alternative but to comply; and (3) the plaintiff's free will was overcome. Simply offering unattractive terms is not duress. Answer A describes a bad bargain (not duress). Answer B describes a poor outcome (not duress). Answer C describes competitive pricing (not a wrongful threat). Only Answer D incorporates the wrongful threat and no-reasonable-alternative elements required for economic duress.
- Which of the following correctly describes the defense of incapacity based on minority (infancy)?
Answer: A contract entered into by a minor (person under 18) is voidable at the minor's option; the minor may disaffirm the contract either during minority or within a reasonable time after reaching majority.
Contracts entered into by minors are generally voidable at the minor's option. The minor may disaffirm (void) the contract during minority or within a reasonable time after reaching the age of majority (18). Upon disaffirmance, the minor must return any goods still in their possession. Exceptions exist for necessities (minors are liable for the reasonable value of necessities). Answer B is incorrect because minor's contracts are voidable (the minor can enforce or disaffirm), not void (with no legal effect). Answer C is incorrect because receiving a benefit does not prevent disaffirmance (though the minor must return what they still have). Answer D is incorrect because a writing does not make minors' contracts fully enforceable.
- Which of the following scenarios illustrates the defense of duress in contract law?
Answer: A party signs a contract after being threatened by the other party that unless they sign, their family will be harmed.
Duress involves a wrongful act or threat by one party that overcomes the free will of the other party, inducing them to enter the contract. A threat of physical harm to the party or their family is a classic example of duress sufficient to void the contract. The threat must be improper and must leave the victim with no reasonable alternative. Answer A (financial forecast) represents economic pressure from external circumstances, not duress by the other party. Answer B (time pressure) is a commercial reality, not duress. Answer D (less profitable outcome) describes a bad bargain, not duress.
- The defense of lack of consideration may be raised to contest contract enforcement. Which of the following correctly describes a valid consideration?
Answer: A bargained-for exchange where each party gives or promises something of legal value that induces the other's promise.
Valid consideration requires: (1) a bargained-for exchange between the parties; (2) something of legal value given by each party (including a promise, an act, forbearance, or creation of a legal relationship); and (3) the exchange must be mutually inducing. Answer A (moral obligation) is generally insufficient as consideration under the pre-existing legal duty rule variations. Answer B (doing something already legally required - pre-existing duty rule) is generally not new consideration. Answer C (a promise to make a gift without requesting anything in return) is a gratuitous promise lacking consideration.
- Which of the following correctly states the difference between a void contract and a voidable contract?
Answer: A void contract has no legal effect from the beginning and neither party may enforce it; a voidable contract is valid and enforceable unless and until the injured party elects to rescind it.
A void contract is one that has no legal effect whatsoever - it is treated as if it never existed. Neither party can enforce it, and no rights arise from it. Examples include contracts for illegal acts or contracts that are facially impossible. A voidable contract is valid and enforceable, but one or both parties have the right to elect to rescind it (e.g., contracts induced by fraud, duress, or minor's contracts). Until the right to rescind is exercised, the contract is binding. Answer A reverses the relationship between ratification and voiding. Answer B is incorrect because void contracts cannot be enforced. Answer C reverses the concepts.
- Undue influence as a defense to contract enforcement involves which of the following?
Answer: A party in a position of trust or confidence uses that relationship to overcome the other party's free will, substituting their own will for the other party's, inducing them to enter a contract they would not otherwise have agreed to.
Undue influence requires: (1) a special relationship of trust, confidence, or authority (such as attorney-client, doctor-patient, parent-child, or fiduciary relationships); and (2) the dominant party uses that relationship to overcome the weaker party's free will, substituting the dominant party's will for the other's. It is more subtle than duress but similarly overcomes genuine consent. Answer A describes an attractive offer (not undue influence). Answer C describes taking advantage of economic circumstances without the relationship element. Answer D describes permissible persuasion.
- Seller's lie about goods induces signature. Best defense?
Answer: Fraud in the inducement
A seller's lie about the goods misleads you into agreeing to the contract, so the fraud goes to the deal itself, making it fraud in the inducement. The tempting trap is fraud in the factum, but that applies only when you are tricked into signing a document whose very nature is different from what you believe, not when lies about the subject matter induce your signature.
- Which of the following contracts is NOT required to be in writing under the Statute of Frauds?
Answer: A contract for the performance of services that is fully capable of being completed within one year.
The Statute of Frauds applies to contracts that cannot by their terms be performed within one year of formation. A service contract that is fully capable of being completed within one year does not need to be in writing, even if it is not yet completed. The test is whether performance within one year is possible, not whether it is likely. Answer A (suretyship) must be in writing. Answer B (sale of goods $600) must be in writing under UCC ($500 threshold). Answer D (real property lease over one year) must be in writing.
- A contract is enforceable only if there is a valid offer and a valid acceptance forming a meeting of the minds. Which of the following illustrates a failure of mutual assent that could be raised as a defense?
Answer: The parties used the same term but each meant something materially different, and neither party knew or should have known of the other's different meaning.
Mutual assent requires a meeting of the minds - the parties must intend to contract on the same terms. When the parties use the same language but each means something materially different, and neither party should have known of the other's meaning (the Raffles v. Wichelhaus 'Peerless' ship problem), no contract is formed because there is no meeting of the minds. This is a fundamental failure of assent. Answer A describes a valid contract with mutual assent. Answer C describes a counteroffer under common law's mirror-image rule, which may create a different contract. Answer D is a valid acceptance via a reasonable medium.
- A contract requires one party to purchase goods that are destroyed before performance without fault of either party. Which defense would most likely excuse performance?
Answer: Impossibility (or impracticability) of performance, because a supervening event beyond both parties' control destroyed the subject matter of the contract.
The defense of impossibility (or commercial impracticability) excuses a party's performance when an unforeseen event after contract formation makes performance objectively impossible. Destruction of the specific subject matter of the contract (such as the goods to be sold) through no fault of either party is a classic case of impossibility that excuses the seller's obligation to deliver and the buyer's obligation to pay. Answer A (mutual mistake) addresses errors about existing facts at the time of contract formation, not supervening events. Answer C (fraud) is inapplicable. Answer D (failure of consideration) relates to the other party's non-performance, not destruction of the subject matter.
- Which of the following contracts violates public policy and is therefore unenforceable?
Answer: A contract where an employer requires employees to sign an agreement releasing the employer from all liability for the employer's own future intentional torts against employees.
Contracts that attempt to release a party from liability for their own future intentional torts (or gross negligence in some jurisdictions) are against public policy and are unenforceable. Allowing parties to contract away liability for future intentional misconduct would undermine the deterrent effect of tort law and encourage harmful conduct. Answer A is not against public policy; prior disputes are common. Answer B is not against public policy because courts do not inquire into adequacy of consideration. Answer D is normal commercial conduct and not against public policy.
- A threat of baseless prosecution induces assent. Best defense?
Answer: Duress from threats
A wrongful threat to bring criminal prosecution to force assent leaves you with no real choice, so the contract is voidable for duress from threats. The tempting answer is lack of consideration, but the problem isn't a missing bargain; it's coerced agreement, not a failed exchange.
