CLA/CP Exam Contract Law and Formation 4 — Questions and Answers
Question 1: A contract signed by a person who was so intoxicated they did not understand the nature of the transaction is:
- Void because capacity is a prerequisite to any contract
- Voidable at the option of the intoxicated party upon sobering (Correct answer)
- Valid because intoxication is self-induced
- Unenforceable only if the other party knew of the intoxication
Correct answer: Voidable at the option of the intoxicated party upon sobering
Contracts made by a person lacking mental capacity due to intoxication are voidable, allowing that party to disaffirm after regaining sobriety.
Question 2: The parol evidence rule bars introduction of prior or contemporaneous oral agreements that:
- Are consistent with the written contract
- Contradict or vary the terms of a fully integrated written contract (Correct answer)
- Relate to a condition precedent to formation
- Allege fraud in the inducement of the contract
Correct answer: Contradict or vary the terms of a fully integrated written contract
The parol evidence rule prohibits extrinsic evidence that contradicts or modifies the terms of a fully integrated written agreement.
Question 3: Under the UCC 'battle of the forms,' when two merchants exchange forms with differing terms, the additional terms in the acceptance:
- Always become part of the contract
- Become part of the contract unless they materially alter it or the offeror objects (Correct answer)
- Are automatically rejected and the offeror's terms control
- Create no contract because there is no mirror-image acceptance
Correct answer: Become part of the contract unless they materially alter it or the offeror objects
UCC § 2-207 provides that between merchants, additional terms in an acceptance become part of the contract unless they materially alter it, the offer expressly limits acceptance, or the offeror seasonably objects.
Question 4: Which of the following contracts must be in writing to be enforceable under the common law statute of frauds?
- A contract for services worth $100
- A contract for the sale of real property (Correct answer)
- An oral contract for goods under $500
- A one-month lease of an apartment
Correct answer: A contract for the sale of real property
Contracts for the sale of an interest in real property are within the statute of frauds and must be evidenced by a signed writing.
Question 5: An option contract differs from a standard offer because it:
- Can be revoked at any time before acceptance
- Is supported by consideration and irrevocable for the agreed period (Correct answer)
- Requires no consideration because the parties have agreed
- Automatically expires after 30 days regardless of its terms
Correct answer: Is supported by consideration and irrevocable for the agreed period
An option contract is formed when the offeree gives consideration to keep the offer open, making it irrevocable for the specified period.
Question 6: The doctrine of unconscionability allows a court to refuse enforcement of a contract clause that is:
- Merely unfavorable to one party
- Oppressively one-sided and the result of unfair bargaining process (Correct answer)
- Written in complex legal language
- Not reviewed by an attorney prior to signing
Correct answer: Oppressively one-sided and the result of unfair bargaining process
Unconscionability requires both procedural unconscionability (unfair bargaining process) and substantive unconscionability (oppressively one-sided terms).
Question 7: When a minor disaffirms a contract for a non-necessity, the minor must generally:
- Pay the full contract price as a condition of disaffirmance
- Return any consideration received that remains in their possession (Correct answer)
- Wait until they turn 21 to exercise the right to disaffirm
- Obtain court approval before disaffirming
Correct answer: Return any consideration received that remains in their possession
Upon disaffirmance, a minor must restore any consideration still in their possession, but is not required to pay for what they can no longer return.
CLA/CP Exam Contract Law and Formation 4
A contract signed by a person who was so intoxicated they did not understand the nature of the transaction is: