Contract Law for Everyone

• A. A written document signed by both parties
• B. An offer, acceptance, and consideration ✓
• C. Notarization by a government official
• D. Registration with a court clerk

Why: A basic contract generally requires an offer, an acceptance of that offer, and consideration (something of value exchanged between the parties). Writing and notarization are not required for most everyday contracts.

• A. A party's polite request for more time to respond
• B. Something of value exchanged between the parties, such as money, goods, services, or a promise ✓
• C. A feeling of goodwill between the parties
• D. The legal advice a party receives before signing

Why: Consideration is the bargained-for exchange that makes a promise enforceable. Each party typically gives up something of value or takes on an obligation in return for what they receive.

• A. A casual comment about a possible future deal
• B. A clear proposal showing willingness to enter a bargain on specific terms ✓
• C. A reply that changes the terms of a previous proposal
• D. A general invitation to browse a store's products

Why: An offer is a definite proposal communicating a willingness to be bound on specific terms once accepted. Casual remarks and general invitations to deal, such as store displays, are usually not offers.

• A. One party is a minor ✓
• B. The contract is written in pencil
• C. The contract lacks a title
• D. One party forgot to date the signature

Why: Minors generally lack full contractual capacity, so contracts they enter are typically voidable at their option. Formalities like writing style, titles, or dates do not affect the basic validity of a contract.

• A. It is fully enforceable because the party signed it
• B. It is voidable by the party who was threatened ✓
• C. It becomes valid after thirty days
• D. It is automatically converted into a gift

Why: A contract signed under duress lacks genuine assent, so the party who was coerced can typically elect to void it. Signing alone does not cure the defect caused by an improper threat.

• A. A casual conversation about possibly doing business in the future
• B. A clear expression of willingness to be bound by specific terms, communicated to another party ✓
• C. A request for information about a product's price
• D. A statement of intent to negotiate at a later date

Why: An offer is a definite proposal communicated to the offeree, showing the offeror's willingness to be bound if the offeree accepts on the stated terms. Vague conversations or requests for information are generally not offers.

• A. Yes, because it states a specific price and item
• B. No, it is generally an invitation to treat, not an offer ✓
• C. Yes, because anyone who sees it can bind Sam to the sale
• D. No, because only written advertisements can be offers

Why: Displays and advertisements are usually invitations to treat, meaning they invite customers to make offers. The customer's offer is then accepted or rejected by the seller, which keeps the seller from being bound to unlimited sales.

• A. Saying you will think about the offer and get back later
• B. Making a counter-offer with different terms
• C. Clearly agreeing to the offer's terms and communicating that agreement to the offeror ✓
• D. Asking whether the price can be lowered

Why: Acceptance must be unconditional, match the terms of the offer (the mirror image rule), and be communicated to the offeror. Counter-offers, requests for changes, and delays are not valid acceptances.

• A. No, because she set a deadline for acceptance
• B. Yes, because offers can generally be revoked before they are accepted, even if a deadline was stated, unless an option contract exists ✓
• C. No, because the offer became binding once made
• D. Yes, but only if she pays Tom a penalty

Why: Generally, an offeror may revoke an offer any time before acceptance. A stated deadline does not by itself prevent revocation. Only a separate option contract, supported by consideration, would keep the offer open.

• A. When the offeror reads the letter
• B. When the letter arrives at the offeror's address
• C. When Lisa posts the acceptance letter ✓
• D. Never, because acceptance by mail is not valid

Why: Under the postal rule, acceptance by post is effective when the letter is properly posted, not when it is received. This rule applies when post is a reasonable means of communication, though the offeror can specify otherwise.

• A. A written document that proves a contract exists
• B. Something of value exchanged between the parties, such as a promise, payment, or act, that induces the contract ✓
• C. The date on which a contract becomes legally binding
• D. A formal signature required to make any agreement enforceable

Why: Consideration is the bargained-for exchange of value between parties. Each side must give up something or promise to do something, and this exchange is what distinguishes an enforceable contract from a mere gift or promise.

• A. Yes, because the brother accepted the promise
• B. Yes, because Maria will feel happier after giving the money
• C. No, because the brother gives nothing in exchange and this is a gift rather than a bargained-for exchange ✓
• D. No, because contracts can only involve businesses

Why: A gift lacks consideration because the promisee does not provide anything of value in return. Acceptance alone is not consideration; there must be a bargained-for exchange where each party gives something in return for the other's promise.

• A. A promise to pay for goods already delivered last month, made without any new exchange ✓
• B. A promise to pay a fee in exchange for future services
• C. A promise to deliver goods in exchange for a payment made today
• D. A promise to share profits in return for ongoing partnership work

Why: Past consideration is an act or benefit that occurred before the promise was made and was not given in exchange for it. Because the act was already completed without the expectation of a return promise, it cannot support a new promise.

• A. A builder agrees to build a house for a fixed price, then demands extra money mid-project for the same work, and the homeowner agrees to pay ✓
• B. A store offers a discount to customers who buy three items
• C. A tenant agrees to pay rent in exchange for the right to occupy an apartment
• D. A student pays tuition in exchange for enrollment in a course

Why: Under the pre-existing duty rule, a party who is already bound to perform an obligation cannot use that same performance as consideration for a new promise. The builder was already obligated to complete the house, so the extra payment lacks new consideration.

• A. Consideration must be of equal economic value to what is promised in return, or the contract is void
• B. Courts generally do not examine whether consideration is fair or equal in value, provided it is real and has some value ✓
• C. Consideration must always be money and cannot be an act or forbearance
• D. Consideration must be recorded in writing before a court will recognize it

Why: Courts generally do not weigh whether the parties got a good bargain. As long as consideration has some legal value and was genuinely bargained for, it is typically sufficient, even if one side gets much more than the other.

• A. Every adult is presumed to have full capacity to enter a contract unless a court rules otherwise.
• B. Every person is presumed to have capacity to contract, and the burden of proving incapacity falls on the party claiming it. ✓
• C. Only people who have completed formal legal education can enter binding contracts.
• D. Capacity must be certified by a government official before any contract is valid.

Why: The starting presumption in contract law is that people have capacity. A party who wants to avoid a contract on the basis of incapacity must prove that the incapacity existed at the time of contracting.

• A. Void, meaning it never had any legal effect.
• B. Voidable at the minor's option, meaning the minor may choose to affirm or disaffirm it. ✓
• C. Automatically binding on the minor in all circumstances.
• D. Enforceable only if a parent signed the contract as well.

Why: A minor's contract is typically voidable at the minor's election. The minor can disaffirm the contract, usually within a reasonable time after reaching adulthood, though some exceptions such as contracts for necessaries may apply.

• A. A luxury sports car purchased on credit.
• B. Lottery tickets bought with borrowed money.
• C. Food, clothing, shelter, or medical care suited to the minor's station in life. ✓
• D. Shares of stock bought for speculative trading.

Why: Necessaries are goods and services essential to the minor's survival and everyday needs, such as food, lodging, clothing, and medical care. Even in these cases, the minor is generally liable only for a reasonable price, not necessarily the contract price.

• A. Full capacity, because intoxication never affects contracts.
• B. Voidable contract, if the other party knew or should have known of the intoxication and the person did not ratify the contract after sobering up. ✓
• C. Void contract in every case, with no possibility of ratification.
• D. Enforceable only if the intoxicated person repeats the promise when sober.

Why: Where intoxication deprives a person of understanding and the other party knew or had reason to know of it, the contract is generally voidable. The intoxicated person can avoid it, but may ratify it once sober by acting in a way that affirms it.

• A. Contracts with mentally incapacitated persons are always void, regardless of whether the other party was aware of the condition.
• B. A contract made by a person who lacks the mental ability to understand the transaction may be voidable, particularly where the other party knew or should have known of the incapacity. ✓
• C. Mental incapacity has no effect on contracts once the person has signed the document.
• D. Only a court-appointed guardian can ever make a contract on behalf of a mentally impaired person.

Why: Mental incapacity can make a contract voidable when the person could not understand the nature and consequences of the agreement and the other party knew or had reason to know. Signing a document does not by itself cure incapacity, and guardianship is not the only route to validity.

• A. A condition is a minor promise, while a warranty is a major term that goes to the root of the contract.
• B. A condition is a fundamental term whose breach may allow the innocent party to terminate the contract, while a warranty is a less important term whose breach typically only allows damages. ✓
• C. A condition must always be in writing, while a warranty can be oral.
• D. A condition applies only to goods, while a warranty applies only to services.

Why: Conditions are essential terms central to the contract; breaching one can entitle the innocent party to end the contract and claim damages. Warranties are subsidiary terms; breaching one generally only gives a right to damages, not termination.

• A. A term implied by custom in the particular trade.
• B. A term implied by statute, such as the implied term of quality in goods.
• C. A price of $500 for a laptop that the seller and buyer explicitly agreed upon during negotiations. ✓
• D. A term the court adds because it seems fair to both parties.

Why: Express terms are those the parties explicitly agree to, whether orally or in writing. An agreed price stated during negotiations is a clear example. The other options describe implied terms, which arise from custom, statute, or the court's reasoning.

• A. A term that has been written in the contract but never discussed by the parties.
• B. A term whose classification as a condition or warranty depends on the seriousness of the breach and its consequences. ✓
• C. A term that is always classified as a warranty by the courts.
• D. A term that appears only in oral agreements.

Why: Innominate terms (also called intermediate terms) are neither clearly conditions nor clearly warranties. Courts decide the remedy by looking at how serious the breach was and what consequences followed, as established in Hong Kong Fir Shipping v Kawasaki.

• A. Nothing, because the buyer must accept any goods delivered.
• B. The right to reject the goods and treat the contract as repudiated, because the description is a condition of the contract. ✓
• C. Only a small discount, because descriptions are always treated as minor warranties.
• D. The right to demand a different seller at the seller's expense.

Why: Under the Sale of Goods Act (in the UK and similar systems), a description of goods is generally treated as a condition. A breach of condition allows the buyer to reject the goods and treat the contract as at an end, not merely to claim damages.

• A. Exclusion clauses always prevent a party from being liable for any breach of contract.
• B. Exclusion clauses are never enforceable in any circumstances.
• C. Exclusion clauses must be clearly drafted and brought to the other party's attention, and they may be struck down if they are unreasonable or unfair under relevant legislation. ✓
• D. Exclusion clauses only apply if both parties sign a separate document.

Why: Exclusion clauses that limit or remove liability for breaches can be enforced only if they were incorporated into the contract properly (for example, by reasonable notice) and, in consumer contexts, meet fairness requirements under legislation such as the Unfair Contract Terms Act or Consumer Rights Act.

• A. Any disagreement between the parties before a contract is signed
• B. A failure by one party to perform its obligations under a valid contract without lawful excuse ✓
• C. A court order requiring a party to pay damages
• D. A mutual decision to cancel a contract early

Why: A breach occurs when a party fails, without legal excuse, to perform a duty promised in a valid contract. Disagreements before signing or mutual cancellations are not breaches.

• A. Minor breach
• B. Material breach
• C. Anticipatory breach ✓
• D. Nominal breach

Why: An anticipatory breach happens when one party clearly indicates before the due date that it will not perform. A minor breach is a small failure that does not defeat the contract's purpose, and a nominal breach is a technical violation causing no real loss.

• A. To punish the breaching party
• B. To put the injured party in the position it would have been in had the contract been performed ✓
• C. To force the breaching party to complete the contract
• D. To reward the party that filed the lawsuit

Why: Contract damages aim to compensate the non-breaching party for its loss, placing it where performance would have left it. Contract law generally does not aim to punish the breaching party.

• A. A court order requiring the breaching party to actually carry out its contractual obligation ✓
• B. A payment of money for the value of goods lost
• C. A penalty clause written into the contract
• D. A requirement that both parties apologize

Why: Specific performance is an equitable remedy where a court orders the party to perform the exact promise. It is usually granted only when money damages are inadequate, such as for unique goods or land.

• A. The breach must have been intentional
• B. The party must have reasonably tried to reduce its losses, known as mitigation ✓
• C. The party must have signed a written contract
• D. The breach must have occurred in a criminal court

Why: The duty to mitigate requires the injured party to take reasonable steps to limit its losses. Damages are not available for losses that could have been reasonably avoided. Intent is not required for a breach, and written form is not always necessary.

• A. One party changes their mind after signing
• B. Both parties mutually agree to end the contract ✓
• C. One party finds a cheaper supplier elsewhere
• D. The contract was signed on a weekend

Why: Mutual agreement (also called mutual rescission) allows both parties to agree to end their obligations. A unilateral change of mind does not, by itself, end a binding contract.

• A. Breach
• B. Frustration
• C. Performance ✓
• D. Novation

Why: Discharge by performance occurs when each party does what the contract requires, which ends the contract naturally.

• A. Anticipatory breach ✓
• B. Mutual rescission
• C. Accord and satisfaction
• D. Undue influence

Why: Anticipatory breach occurs when one party clearly indicates before the due date that they will not perform. The other party may then treat the contract as ended and sue for damages.

• A. Consideration
• B. Frustration of contract ✓
• C. Misrepresentation
• D. Estoppel

Why: Frustration discharges a contract when an unforeseen event, not caused by either party, makes performance impossible or radically different from what was agreed.

• A. Replacing an existing contract with a new party or new terms, with all parties agreeing ✓
• B. Cancelling a contract because one party was a minor
• C. Paying a penalty for ending a contract early
• D. Extending a contract's deadline without consent

Why: Novation replaces an original contract with a new one, usually by substituting a new party for an old one with the consent of everyone involved, thereby discharging the original obligations.