CPA Quiz: Identify Defenses To Contract Enforcement
20 questions · exam conditions
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Identify Defenses To Contract EnforcementQuestion 1 of 20

Seller's lie about goods induces signature. Best defense?

Fraud in the inducement
Fraud in the factum
Mistake of material fact
Unconscionable conduct
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CPA Quiz: Identify Defenses To Contract Enforcement

Practice Identify Defenses To Contract Enforcement in CPA with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

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This quiz focuses on Identify Defenses To Contract Enforcement, giving you a quick way to practice the rules, question types, and explanations that matter most for CPA.

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Question 1

Seller's lie about goods induces signature. Best defense?

  1. Fraud in the inducement (correct answer)
  2. Fraud in the factum
  3. Mistake of material fact
  4. Unconscionable conduct
Explanation: 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.

Question 2

Fiduciary exploits trust; no threats. Best defense?

  1. Economic duress claim
  2. Undue influence claim (correct answer)
  3. Fraudulent promise claim
  4. Unilateral mistake claim
Explanation: 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.

Question 3

Fine-print one-sided clause; no bargaining. Best defense?

  1. Mutual mistake doctrine
  2. Fraudulent concealment rule
  3. Unconscionability doctrine (correct answer)
  4. Economic duress doctrine
Explanation: 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.

Question 4

Oral 3-year services deal; partial performance. Best defense?

  1. Quantum meruit recovery
  2. Part performance exception
  3. Promissory estoppel claim
  4. Statute of Frauds defense (correct answer)
Explanation: An oral services contract lasting longer than one year falls within the Statute of Frauds, so the 3-year deal is unenforceable unless an exception applies. Part performance is the tempting answer, but that exception mainly covers land-sale contracts and does not make a multi-year services deal enforceable; partial work may support quantum meruit recovery for value of services, not the promised contract.

Question 5

A threat of baseless prosecution induces assent. Best defense?

  1. Duress from threats (correct answer)
  2. Lack of consideration
  3. Mutual mistake of fact
  4. Illegality of purpose
Explanation: 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.

Question 6

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?

  1. Oral promises made during negotiations that contradict the final written agreement.
  2. Prior written agreements that were superseded by the final written contract.
  3. Contemporaneous oral side agreements that modify the written contract's payment terms.
  4. 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. (correct answer)
Explanation: 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.

Question 7

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?

  1. Promissory estoppel
  2. 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. (correct answer)
  3. Ratification
  4. The doctrine of substantial performance
Explanation: 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.

Question 8

Which of the following scenarios illustrates the defense of duress in contract law?

  1. A party enters a contract after receiving an unfavorable financial forecast.
  2. A party signs a contract under time pressure to complete a business transaction.
  3. A party signs a contract after being threatened by the other party that unless they sign, their family will be harmed. (correct answer)
  4. A party signs a contract that turns out to be less profitable than expected.
Explanation: 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.

Question 9

Undue influence as a defense to contract enforcement involves which of the following?

  1. A party making an offer that is financially very attractive to the other party.
  2. 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. (correct answer)
  3. A party making a fair offer to someone who is in a desperate financial situation.
  4. A party using normal sales persuasion techniques to encourage the other party to buy.
Explanation: 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.

Question 10

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?

  1. Both parties clearly understood and agreed to the same contract terms.
  2. 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. (correct answer)
  3. One party accepted the offer with slight modifications.
  4. An offer was communicated by email and accepted by fax.
Explanation: 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.

Question 11

A contract includes a non-compete clause that prohibits an employee from working in any business in the United States for 20 years after employment ends. A court evaluates whether this clause is enforceable. Which of the following most likely applies?

  1. The clause is enforceable because the parties freely agreed to it.
  2. The clause is likely unenforceable as an unreasonable restraint of trade, violating public policy, because the geographic scope and duration are unreasonably broad. (correct answer)
  3. The clause is enforceable as long as the employer paid the employee a signing bonus.
  4. The clause is enforceable only if the employee is a senior executive.
Explanation: Non-compete agreements are disfavored by courts as restraints of trade. To be enforceable, they must be reasonable in scope: protecting a legitimate business interest, not imposing undue hardship on the employee, and not unreasonably restricting competition. A 20-year, nationwide ban is almost certainly unreasonably broad in both duration and geography. Courts often either void such clauses entirely or apply the 'blue pencil' doctrine to narrow them to a reasonable scope. Answer A is incorrect because freedom of contract does not override public policy against unreasonable restraints. Answer C is incorrect because consideration alone does not make an unreasonable restriction enforceable. Answer D is incorrect because the employee's seniority does not determine reasonableness.

Question 12

Under what circumstances may a contract be voided on the basis of unilateral mistake?

  1. A contract may be voided for unilateral mistake only when: the non-mistaken party knew or should have known of the mistake, or when enforcement would be unconscionable, and the mistake concerns a material fact (not merely a judgment or prediction). (correct answer)
  2. A contract may always be voided if one party made any mistake in entering the contract.
  3. Unilateral mistake is never a defense to contract enforcement under common law.
  4. Unilateral mistake is a defense only when the mistake involved more than $10,000.
Explanation: Unilateral mistake (where only one party is mistaken) is generally not a basis to void a contract because it would undermine certainty in commercial transactions. However, courts may allow rescission for unilateral mistake when: (1) the other party knew or should have known of the mistake (making enforcement inequitable), or (2) enforcement would be unconscionable. The mistake must be about a material fact. Answer B is incorrect because not all unilateral mistakes allow voiding. Answer C is too absolute; courts do recognize certain unilateral mistake defenses. Answer D imposes a dollar threshold not found in contract law.

Question 13

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?

  1. Mutual mistake
  2. Impossibility (or impracticability) of performance, because a supervening event beyond both parties' control destroyed the subject matter of the contract. (correct answer)
  3. Fraud in the inducement
  4. Failure of consideration
Explanation: 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.

Question 14

Which of the following illustrates the defense of unconscionability in contract law?

  1. A party refuses to pay for services already rendered.
  2. A contract where both parties received equivalent value in exchange.
  3. A contract that includes a reasonable limitation of liability clause.
  4. A consumer loan agreement with a 250% annual interest rate, signed by an unsophisticated borrower under economic pressure, containing hidden terms that the borrower could not meaningfully negotiate. (correct answer)
Explanation: Unconscionability arises when a contract is so one-sided and oppressive that it shocks the conscience of the court. Courts look for both procedural unconscionability (unfairness in the bargaining process - lack of meaningful choice, oppressive terms, fine print) and substantive unconscionability (unreasonably harsh or one-sided terms). A 250% interest rate consumer loan with hidden terms forced on an unsophisticated borrower illustrates both types. Answer A describes breach. Answer B describes a fair exchange (no unconscionability). Answer C describes a reasonable, enforceable limitation clause.

Question 15

Under the Statute of Frauds, which of the following contracts must be in writing to be enforceable?

  1. A contract for the sale of real property. (correct answer)
  2. A contract for the delivery of groceries worth $200.
  3. An oral employment agreement for one year beginning immediately.
  4. A contract for the sale of goods worth $400.
Explanation: The Statute of Frauds requires certain contracts to be in writing, including: contracts for the sale of interests in real property, contracts that cannot be performed within one year from the date of formation, contracts for the sale of goods for $500 or more (UCC), promises to answer for the debts of another (suretyship), and promises made in consideration of marriage. A contract for the sale of real property falls squarely within the Statute of Frauds and must be evidenced by a writing. Answer B (groceries for $200) is below the UCC $500 threshold. Answer C (one-year employment beginning immediately) can be completed within one year of formation. Answer D (goods for $400) is below the UCC $500 threshold.

Question 16

Which of the following correctly describes the defense of illegality in contract law?

  1. Any contract involving a business subject to government regulation is illegal.
  2. A contract that requires the performance of an illegal act or that violates public policy is unenforceable; the law will not help either party enforce such a contract. (correct answer)
  3. A contract is illegal only if a party is arrested for the underlying conduct.
  4. Illegality is a defense only if the illegality was known to both parties at the time of contracting.
Explanation: When a contract requires the performance of an act that is illegal under applicable law or violates public policy (such as a contract to commit a crime, defraud others, or restrain trade unreasonably), the contract is generally unenforceable as illegal. Courts will typically leave both parties in the position they are in and provide no remedy to either party. Answer A is too broad; regulated businesses may enter many legitimate contracts. Answer C is incorrect because criminal arrest is not required for a contract to be illegal. Answer D is incorrect because illegality may render a contract void regardless of whether both parties knew of it.

Question 17

Which of the following correctly describes the defense of incapacity based on minority (infancy)?

  1. 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. (correct answer)
  2. Contracts with minors are void and have no legal effect whatsoever.
  3. A minor may not disaffirm a contract once they have received any benefit from it.
  4. Contracts with minors are fully enforceable against the minor if the contract is in writing.
Explanation: 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.

Question 18

Under the doctrine of frustration of purpose, which of the following correctly describes when performance may be excused?

  1. Performance is excused whenever a contract becomes more expensive than the party anticipated.
  2. Performance is excused only when the subject matter of the contract is destroyed.
  3. 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. (correct answer)
  4. Performance is excused whenever either party experiences financial hardship after contracting.
Explanation: 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.

Question 19

Which of the following contracts is NOT required to be in writing under the Statute of Frauds?

  1. A promise to be responsible for the debt of another person (suretyship).
  2. A contract for the sale of goods for $600.
  3. A contract for the performance of services that is fully capable of being completed within one year. (correct answer)
  4. A contract for the lease of real property for more than one year.
Explanation: 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)mustbeinwritingunderUCC(600) must be in writing under UCC (500 threshold). Answer D (real property lease over one year) must be in writing.

Question 20

A party challenges a contract's enforceability claiming the other party lacked mental capacity. Under what standard is mental incapacity determined in contract law?

  1. A person lacks mental capacity if, at the time of contracting, they could not understand the nature and consequences of the transaction, or could not act in a reasonable manner in relation to the transaction due to a mental illness or defect. (correct answer)
  2. Mental incapacity is established only if the person has been adjudicated incompetent by a court before contracting.
  3. A person lacks mental capacity if they were intoxicated at any point before signing the contract.
  4. Mental incapacity is always a void (rather than voidable) condition, making all contracts of a person with any mental illness void.
Explanation: Mental incapacity in contract law is determined by a cognitive test: at the time of contracting, the party must have been unable to understand the nature and consequences of the transaction, or (under the modern test) unable to act in a reasonable manner due to a mental illness or defect, and the other party had reason to know of the condition. The contract is voidable (not void) by the incapacitated party. Answer B is incorrect because formal adjudication is not required; capacity is evaluated at the moment of contracting. Answer C is incorrect because temporary intoxication must be severe enough to prevent understanding and the other party must know of it. Answer D is incorrect because contracts with mentally incapacitated persons are generally voidable, not void.