Contracts MBE Practice Test 2026 — Questions and Answers

Question 1: An offeror offers to sell a parcel of land to an offeree for $10,000, stating that the offer shall remain open for 30 days. The offeree replies that she will keep the offeror’s offer under advisement but says, “We can wrap this up immediately if you’ll take $9,000.” The offeror does not reply, but within the 30-day period the offeree accepts the original offer. The offeror, however, replies that he now wants $12,500. Was a contract formed when the offeree accepted the $10,000 offer?

No, because once the offeree made a counter-offer she could not go back and later accept the original offer.
No, because when a counter-offer was made the offeror was then free to change the offer to $12,500 and the original offer became rescinded.
Yes, because the original offer must always legally remain in effect for the remainder of the specified 30 days, even after a counter-offer has been communicated.
Yes, because the offeree was able to keep the original offer with the 30-day window open by stating that he was keeping it under advisement. (Correct answer)

Correct answer: Yes, because the offeree was able to keep the original offer with the 30-day window open by stating that he was keeping it under advisement.

A counter-offer typically terminates the original offer, but an inquiry or negotiation does not. The offeree's statement, 'We can wrap this up immediately if you’ll take $9,000,' coupled with her intention to keep the original offer 'under advisement,' indicates an exploration of terms rather than a definitive rejection. Since the original offer explicitly stated it would remain open for 30 days, it created an option period, and the offeree's subsequent acceptance within that period was valid.

Question 2: A roofer offers to completely refurbish a homeowner’s roof for $1,000. The next day the roofer realizes he’s not going to make much, and he sends a revocation of the offer in the mail to customer. On the third day the homeowner puts a letter in the mailbox accepting the offer. On the fourth day the homeowner receives the roofer’s revocation letter. Was a contract formed between the homeowner and the roofer or was the revocation effective?

The revocation letter was posted prior to the acceptance so that no contract was formed.
The acceptance was effective on posting but the revocation does not become effective until received; thus, a contract was formed when the acceptance was placed in the mailbox. (Correct answer)
No, there was no contract because there was no mutual meeting of the minds at any time.
Yes, there was a contract because the revocation letter was invalid due to being based on reasons that violate public policy.

Correct answer: The acceptance was effective on posting but the revocation does not become effective until received; thus, a contract was formed when the acceptance was placed in the mailbox.

Under the mailbox rule, an acceptance is generally effective when dispatched (e.g., placed in the mailbox), provided the offer was made by mail or a similar non-instantaneous means. Conversely, a revocation of an offer is only effective when it is *received* by the offeree. In this case, the homeowner's acceptance was effective upon mailing on day three, forming a contract, before the roofer's revocation letter was received on day four.

Question 3: A 16-year-old minor went to a used car dealer with his aunt and grandmother. The minor purchased a used car in “as is” condition. The purchaser was listed as the minor; his relatives were not on the agreements. The boy discovered later that the drive shaft was bent and he returned the car with a demand for a refund of the $2,000 purchase price. The dealer refused to give a refund, citing the assistance and verbal assurances by the aunt and grandmother. They also gave him funds to make the purchase. Is the contract still voidable by the minor so that he can get a refund of the purchase price?

The aunt and grandmother actually own the vehicle because they were the real parties in interest, and the dealer must return the money to them based on restitution.
There is no refund and the contract was not voidable because the presence of the aunt and grandmother constituted an implied warranty of title.
The participation in this case by the adults did not change the rule that a contract entered into by a minor is voidable by that minor – he’s entitled to a refund. (Correct answer)
He’s entitled to a refund because the dealer committed fraud by not telling him about the defective drive shaft.

Correct answer: The participation in this case by the adults did not change the rule that a contract entered into by a minor is voidable by that minor – he’s entitled to a refund.

Contracts entered into by minors (typically individuals under 18) are generally voidable at the minor's option. The presence or assistance of adults who are not parties to the contract does not alter the minor's right to disaffirm. Since the contract was solely between the minor and the dealer, the minor retains the power to void the contract and is entitled to a refund of the purchase price.

Question 4: A retail store runs an advertisement in the local newspaper stating: “Only 3 cashmere sweaters remaining; highest quality; real Polo; one grey, one maroon and one beige; on closeout, starting 9 a.m. Saturday, $5.00 each, first-come, first-served.” A store customer was the first to arrive on Saturday morning. He located the three advertised sweaters, picked them up, handed $15.00 to the clerk, and demanded all three sweaters at $5 each. The clerk stated that the store’s price on each sweater was actually $50 each. The customer demanded the advertised price. Who has the superior legal position?

The customer, because the terms of the advertisement were definite enough to constitute an offer and the offer was duly accepted. (Correct answer)
The retail store, because the terms of the advertisement were merely an invitation to make an offer, and the offer made was duly rejected by the store.
The customer, because this was a contract of adhesion favoring one party only, and as such, the store could not enforce it.
The store, in that a contract was made at $50 each, which was the store’s actual intended price for the sweaters.

Correct answer: The customer, because the terms of the advertisement were definite enough to constitute an offer and the offer was duly accepted.

While advertisements are usually invitations to make an offer, this advertisement was sufficiently definite and specific to constitute a binding offer. It specified the exact items, quantity ('Only 3'), price ('$5.00 each'), and method of acceptance ('first-come, first-served'). By being the first to arrive and tendering the exact price for the specified items, the customer duly accepted the offer, forming a valid contract.

Question 5: An auto retailer started a marketing promotion on a new hybrid model sedan. It advertised that anyone who purchased the car in 2013 and did not get at least 50 miles per gallon average gas mileage during the first 60 days, would receive a payment of $10,000 cash from the company. Record-keeping and inspection procedures were required to assure accurate reporting by the vehicle owner. The promotion was widely publicized. A female customer purchased a hybrid model during the promotion period, followed all the rules, and recorded only 42 mpg in the first 60 days. She demanded the rebate but the company stalled for months and then stopped responding to her inquiries. Does she have a contractual right to collect the $10,000?

Yes, because this is a classic bilateral contract, making it necessary that the company live up to its set of promises made to her.
No, this was merely puffing, was not an offer to contract with any particular person and was without consideration.
Yes, this was a unilateral contract in which the offeree acted upon the offer by performing the terms of the offer, thus creating a binding contract. (Correct answer)
No, because she did not formally notify the company that she was accepting the offer before she started performing.

Correct answer: Yes, this was a unilateral contract in which the offeree acted upon the offer by performing the terms of the offer, thus creating a binding contract.

This scenario describes a unilateral contract, where an offer invites acceptance by performance rather than a promise. The auto retailer made a clear offer promising $10,000 for a specific performance: purchasing the car, following the rules, and achieving less than 50 mpg. The customer's actions of purchasing the car, adhering to the rules, and recording the mileage constituted the requested performance, thereby accepting the offer and creating a binding contract.

Question 6: A small business sued an insurance company in federal court for failing to pay certain claims made. After completion of discovery, the insurer filed a motion for summary judgment, requesting dismissal of the lawsuit. In the meantime, the parties went to a scheduled settlement conference with the federal magistrate judge and agreed to settle for $75,000. The district court judge had, however, granted the pending summary judgment motion and issued an order of dismissal a day earlier. The dismissal order, however, had not been docketed and no judgment was entered of record. When the district judge learned of the settlement, she rescinded the order of dismissal and instead ordered the settlement agreement to be docketed. The insurer’s attorney then moved to have the settlement rescinded on the basis of mutual mistake. What is the best and most likely decision of the United States Court of Appeals when it hears the case on appeal?

The settlement contract is binding because the insurer knew it had a pending motion when it agreed on a settlement, thus it assumed the risk of these developments and cannot now complain. (Correct answer)
The contract is binding because by accepting responsibility for at least $75,000, the insurance company admitted that its claims in the summary judgment motion were false and unsupportable.
There is no settlement because both parties were mutually mistaken in believing that a motion for summary judgment had not yet been decided.
The settlement contract is void because the district court did not have the authority to rescind the summary judgment order and enter instead the settlement agreement on the docket.

Correct answer: The settlement contract is binding because the insurer knew it had a pending motion when it agreed on a settlement, thus it assumed the risk of these developments and cannot now complain.

A contract will not be rescinded for mutual mistake if one party bears the risk of that mistake. Here, the insurer was aware of its pending summary judgment motion when it agreed to the settlement. By entering into the settlement, the insurer implicitly assumed the risk that the motion might be decided in its favor or against it, and therefore cannot now claim mutual mistake regarding the motion's status. The settlement agreement is binding.

Question 7: A man purchased a pickup truck from a used car dealer. He made it clear to the salesperson that he needed a vehicle powerful enough to be used in his timber hauling business. The agent represented that the truck would last for hauling timber, because the engine was totally rebuilt and like new. Based on such assurances, the man purchased the truck. The sales contract papers did not mention any warranties nor did it exclude any. After hauling timber for three months with the pickup, it stopped running one day while carrying a full load. The engine had cracked and was rendered useless. The purchaser sued the seller of the truck asking for damages, including what it cost to purchase and install a new engine. The purchaser claimed a breach of implied warranties. The court held a bench trial. Which of the following is the most likely and most applicable decision, considering applicable U.C.C. principles?

An implied warranty of merchantability cannot apply to a used vehicle because its intended use cannot be guaranteed.
There are no warranties if they are not specifically stated in the sales contract because oral statements are always excluded.
In this case, there was an implied warranty of merchantability and an implied warranty of fitness for a particular purpose. (Correct answer)
The seller breached an express warranty of merchantability by not living up to the express promises made.

Correct answer: In this case, there was an implied warranty of merchantability and an implied warranty of fitness for a particular purpose.

Under the UCC, two implied warranties apply here. An implied warranty of merchantability arises because the seller is a merchant, guaranteeing the truck is fit for its ordinary purpose. Additionally, an implied warranty of fitness for a particular purpose arises because the salesperson knew the buyer's specific purpose (hauling timber) and that the buyer was relying on the salesperson's representation that the engine was 'like new' and suitable for that use. Both warranties were breached when the engine failed.

Question 8: A drywall subcontractor submitted an offer to a general contractor for proposed drywall work on a small office building being constructed. The bid was for $20,000 for all drywall supplies and labor. The contractor factored the experienced subcontractor’s bid into its final bid and was awarded the contract. A few days later the subcontractor informed the contractor that it had worked on the figures and realized that it underestimated the cost of the project. The subcontractor refused to do the job for less than $35,000. The contractor hired another subcontractor to do the work for $30,000 and sued the first subcontractor for the $10,000 difference over the original bid of $20,000. Will the court likely award the $10,000 to the contractor and against the first subcontractor?

Yes, because the contractor had reasonably relied on the subcontractor’s offer when making its bid, and it suffered a detriment that can only be avoided by enforcement of that offer. (Correct answer)
No, because the contractor had no right to rely on an initial bid of a subcontractor in computing general contractor bid because it knew that such bids would be subject to change with time.
No, because in the law of contracts an offer can be revoked or modified at any time that substantial changes are required by circumstances and prior to the acceptance of the offer.
Yes, because the contractor accepted the offer of $20,000 before it was revoked, making the subcontractor legally bound to his offer.

Correct answer: Yes, because the contractor had reasonably relied on the subcontractor’s offer when making its bid, and it suffered a detriment that can only be avoided by enforcement of that offer.

This is a classic application of promissory estoppel in construction bidding. While a subcontractor's bid is generally revocable before acceptance, a general contractor's reasonable and foreseeable reliance on that bid when submitting its own prime bid can make the subcontractor's offer irrevocable. The contractor suffered a clear detriment by having to pay more to another subcontractor due to its reliance, and enforcing the original bid is necessary to prevent injustice.

Question 9: A candy manufacturer used pre-printed purchase order forms to purchase separate orders of baking sugar from a supplier. The supplier responded to each order by sending the shipment along with its own printed form confirming the shipment and the terms. According to the manufacturer, the last shipment contained spoiled sugar. The manufacturer filed a complaint in state court alleging breach of contract and damages. The supplier filed a motion to have the dispute transferred to arbitration. The manufacturer’s purchase order forms were silent as to the mode of settling disputes, but the supplier’s form contained a clause calling for “any controversy or claim” to be settled by arbitration. The manufacturer was silent as to the arbitration clause. What is the likely decision of the court?

The case must be transferred to arbitration because a clause in the acceptance form always becomes a part of the contract if the offeror does not reject it.
The case must be transferred to arbitration because the additional term did not materially alter the offer and therefore became incorporated into the contract.
The clause did not automatically become a part of the contract because it materially altered the offer, thus there is no transfer to arbitration. (Correct answer)
The clause did not become a part of the contract because the offer in this case expressly limited acceptance to the strict terms of the offer, and thus there is no transfer to arbitration.

Correct answer: The clause did not automatically become a part of the contract because it materially altered the offer, thus there is no transfer to arbitration.

Under UCC § 2-207, an additional term in an acceptance between merchants becomes part of the contract unless it materially alters the offer. An arbitration clause is generally considered a material alteration because it significantly impacts the parties' rights and remedies by changing the forum for dispute resolution. Therefore, the arbitration clause did not automatically become part of the contract without the manufacturer's express assent, and the case will not be transferred to arbitration.

Question 10: A professional hockey player was traded from one team to another, with his existing contract being assigned to the new team. The contract had an option to require the four-time all-star player to sign a new three-year contract at a newly negotiated amount. The new team exercised the option. After successful negotiations, they agreed on and signed a three-year contract. However, that team later discovered that the player also signed a one-year contract with another team. Despite demands, the player has failed to assure his new team that he is going to honor the three-year contract. For that reason, the team filed an action requesting injunctive relief. What will the court most likely decide?

The one-year document was an anticipatory repudiation of the valid three-year contract, but injunctive relief was denied because the team can sue for money damages.
There is an anticipatory repudiation of the valid three-year contract, and an injunction will issue because money damages are inadequate to replace the players highly unique and special services. (Correct answer)
Although there was an anticipatory repudiation of a valid contract, money damages will suffice because the court can never attempt to enforce a contract for personal services.
There was no valid contract because it’s illegal for two teams to trade and negotiate the freedom of choice and freedom of movement of a player.

Correct answer: There is an anticipatory repudiation of the valid three-year contract, and an injunction will issue because money damages are inadequate to replace the players highly unique and special services.

The player's action of signing a contract with another team constitutes an anticipatory repudiation of his valid three-year contract. Injunctive relief is appropriate because money damages are inadequate to compensate for the loss of a highly unique and special service, such as that of a professional athlete. Courts often grant injunctions to prevent such unique individuals from performing for a competitor when they have breached a valid contract.

Question 11: A married couple had a rocky relationship but remained together for many years. There was a prenuptial agreement protecting the husband’s substantial separate property from the wife’s potential claims. The husband got cancer and was fighting a battle for survival. He asked her to remain at home and take care of him, as he feared being sent to a nursing home or a hospice. She agreed, but only if he gave her several additional parcels of property. He died soon thereafter, without having made deeds or changes to his will regarding the promised properties. She later sued the decedent’s estate for the properties, claiming a contract. She asserted she would likely have left him if he hadn’t promised the additional properties. What is the most likely decision of the court?

There was no contract formed because a spouse has a duty to care for the other in times of illness, and allowing such agreements is contrary to public policy. (Correct answer)
This was a contract for necessities and, as such, it was enforceable by the wife.
The additional consideration promised by the wife, in return for the husband’s agreement to give additional property, collectively constituted an enforceable contract.
There was no contract because the husband cannot change or alter the provisions of a prenuptial agreement by later promising to convey covered property.

Correct answer: There was no contract formed because a spouse has a duty to care for the other in times of illness, and allowing such agreements is contrary to public policy.

Contracts between spouses for services that are already part of their marital duties, such as caregiving during illness, are generally unenforceable due to public policy. The law presumes that spouses owe each other support and care, and allowing such agreements could undermine the marital relationship. Therefore, the wife's promise to care for her husband was not valid consideration for the additional property, and no enforceable contract was formed.

Question 12: A man (offeror) sent an offer by letter to sell his 2010 Mercedes Benz to a prospective buyer (offeree), and stated, “I suggest that you mail me your response quickly and advise whether you accept this offer.” The offeree immediately accepted by leaving a message on the offeror’s answering machine, at the phone number the parties had previously used to communicate with each other in prior transactions. The offeree didn’t know that the offeror sometimes neglected to check his phone messages in a timely manner. Thinking that he received no response, the offeror signed three days later to sell to another party. On the fourth day the offeree came to the offeror’s house with the cash, demanding to take the car. He was turned away and sued the offeror for specific performance. Does the offeree have a superior contractual right to the car?

No, because the acceptance by phone was not the means designated by the offeror, this made the answering machine message in effect a counter-offer that was not accepted by the offeror.
Yes, because a reasonable interpretation of the offer does not indicate that return mail was the sole and exclusive method of acceptance, and timely acceptance by telephone formed a contract. (Correct answer)
Yes, because the offeree generally has the right to dictate the means of acceptance and here he chose the reasonable method of telephone.
No, because most people would not view a phone message on a landline to be a reasonable way of responding to an offer when most phones that are used today are cell phones.

Correct answer: Yes, because a reasonable interpretation of the offer does not indicate that return mail was the sole and exclusive method of acceptance, and timely acceptance by telephone formed a contract.

Unless an offer explicitly states that acceptance must be made by a specific, exclusive means, acceptance can be made by any reasonable method. The offeror's suggestion to 'mail me your response quickly' did not make mail the *sole* method of acceptance. Given the parties' prior use of the phone, leaving a message on the answering machine was a reasonable and timely method of acceptance, forming a contract before the offeror sold the car to another party.

Question 13: A husband applied for a life insurance policy for $50,000 on his life, listing his wife as the beneficiary. He paid the insurance company an initial amount of $100 at the time of submitting the application. The agent accepted the down payment, which represented two months of the premium payment. In exchange for this payment, the agent gave the husband a "conditional receipt." A few days later the husband died in an auto accident. The wife as beneficiary demanded payment despite the fact that the insurance company had not officially issued a policy and the husband had not taken a required medical examination required in the wording of the application. The company denied liability, asserting that certain conditions contained in the application and in the conditional receipt (namely the taking of the medical examination) had not been fulfilled by the applicant. The insurer claimed that the condition precedent (the medical examination) was never performed and the contract was not formed. What is the most likely decision of the court?

The conditional receipt stood as the temporary formation of a contract of insurance until the company made a final decision on whether to issue a policy. (Correct answer)
No contract of insurance exists until the insurer is satisfied as to an applicant's acceptability.
There is no such thing as a temporary insurance contract – nothing can exist until the condition precedent is performed.
A contract existed because public policy forbids the requirement of a medical examination for simple term insurance policies under the face amount of $100,000.

Correct answer: The conditional receipt stood as the temporary formation of a contract of insurance until the company made a final decision on whether to issue a policy.

A conditional receipt, issued upon payment of an initial premium, often creates a temporary contract of insurance, subject to certain conditions. This temporary coverage is intended to protect the applicant while the insurance company processes the application and determines final insurability. If the applicant dies during this period, and the conditions for temporary coverage were met (or could have been met), the insurer is typically liable, even if a formal policy was not yet issued or a medical exam not completed.

Question 14: A contractor agreed with a city government to build it a bridge. The contractor was guilty of undue delay in getting the construction finished. The contract specified liquidated damages of a deduction from the contract price for each day of delay based on how much traffic flow was turned away. The city tried to deduct the damages from the contract price. The contractor, however, pointed out that the city had not yet connected a road to the bridge so that there was no traffic flow and hence no damage to the city. Will the court uphold the liquidated damages clause in favor of the city?

No, because the purpose of the liquidated damages clause has been frustrated by the city’s own failure to perform, making liquidated damages in this case unnecessary. (Correct answer)
Yes, because the contract provision for liquidated damages has been breached and the city had no obligation to connect a road.
Yes, because the bridge delays caused the city to delay finishing the bridge, thereby creating the need to enforce the provision for liquidated damages.
No, because the city breached the contract by not connecting a road to the bridge.

Correct answer: No, because the purpose of the liquidated damages clause has been frustrated by the city’s own failure to perform, making liquidated damages in this case unnecessary.

Liquidated damages clauses are enforceable if they are a reasonable forecast of actual damages and not a penalty. However, if there are no actual damages whatsoever, or if the party seeking to enforce the clause contributed to the lack of damages, the clause may be unenforceable. Here, the city suffered no actual traffic-related damages from the delay because its own failure to connect a road rendered the bridge unusable, frustrating the purpose of the liquidated damages clause.

Question 15: The owner of an engineering design company recruited a young man to work as a design engineer in the business development section of the business for two years. The man agreed to relocate from another state. He started working as soon as he arrived, and due to the pressing volume of work the parties never put the agreement in writing. Three months later, the owner fired the young man. The young man sued for damages, claiming that he had a legal right to the job for two years, unless fired for just cause, which the owner did not have. The owner countered that the alleged agreement was in violation of the Statute of Frauds and was void. Which one of the following legal principles did the trial court most likely cite in support of its ruling that the agreement was excepted from the Statute of Frauds and would be enforced?

The principle of accord and satisfaction.
The principle of mutual mistake.
The principle of promissory estoppel. (Correct answer)
The principle of specific performance.

Correct answer: The principle of promissory estoppel.

The Statute of Frauds generally requires contracts that cannot be performed within one year to be in writing. However, promissory estoppel can serve as an exception. The owner's promise of a two-year job, the young man's reasonable and foreseeable reliance by relocating, and the resulting detriment (being fired) make it unjust not to enforce the promise. Promissory estoppel allows enforcement to prevent injustice despite the lack of a written agreement.

Question 16: A dealer ordered “one truckload of western regional first-grade widgets, usual terms and conditions” on a standard order form that he sent to his usual wholesale supplier. The dealer and the supplier had a practice that all shipments would contain standard-sized widgets unless otherwise stated. The truckload arrived and was unloaded but later discovered to contain “extra-large” size widgets, which the dealer could not use. The dealer refused to pay and the manufacturer sued for the ticket price of $223,000. The dealer soon learned that industry standards re-classified the extra-large widgets as “discontinued” and essentially obsolete. At trial, the dealer offered to testify to his standard practices in ordering so as to clarify what he intended to order. The manufacturer objected based on the parol evidence rule. What is the best and most likely decision of the court regarding the objection?

The dealer’s testimony will be disallowed because it is in direct violation of the parol evidence rule’s prohibition of testimony regarding subjects already integrated into the written contract.
The dealer’s testimony will be allowed because course-of-dealing testimony that attempts to explain and interpret what is meant by the writing is allowed. (Correct answer)
The testimony will not be allowed because it will serve to confuse the issues and simply cloud up the clear meaning already explained in the order form and shipping documents.
The testimony will be allowed because it is relevant and relevancy always trumps the parol evidence rule.

Correct answer: The dealer’s testimony will be allowed because course-of-dealing testimony that attempts to explain and interpret what is meant by the writing is allowed.

The parol evidence rule generally prevents the introduction of prior or contemporaneous oral agreements that contradict a fully integrated written contract. However, it does not bar evidence of course of dealing, usage of trade, or course of performance to *explain or supplement* the terms of a contract, especially under the UCC for contracts involving goods. The dealer's testimony about standard practices (course of dealing) is admissible to clarify the meaning of terms like 'western regional first-grade widgets' and 'usual terms and conditions.'

Question 17: An amateur golfer was playing in an amateur golf tournament. When she arrived at the ninth tee she found a new car with signs on it that said: "HOLE-IN-ONE Wins this 2014 luxury sedan.” The name of the a dealership appeared on the sign. Much to everyone’s amazement she inexplicably shot a hole-in-one. She attempted to claim her prize. The dealer refused, claiming that the car had been there from a charity tournament that was held two days earlier. The company admitted to neglecting to remove the car and posted no signs prior to the golfer’s hole-in-one. The golfer sued the dealership demanding delivery of the car. What is the likely decision of the court?

The promoter of a prize-winning contest is not bound to award the prize to an outside individual who was not registered according to the contest rules.
The golfer performed the act needed to win the prize, which in this case constituted an acceptance of the offer and the formation of an enforceable unilateral contract. (Correct answer)
There was a mistake of fact between the parties and thus no contract could have been formed.
The contract failed because there was no consideration for the offer to turn over a car and thus no right to expect performance of a gratuity.

Correct answer: The golfer performed the act needed to win the prize, which in this case constituted an acceptance of the offer and the formation of an enforceable unilateral contract.

The sign 'HOLE-IN-ONE Wins this 2014 luxury sedan' constituted a public offer for a unilateral contract, inviting acceptance by performance (shooting a hole-in-one). The golfer, seeing the sign, performed the requested act. The dealership's internal mistake about the car's purpose is irrelevant because the offer was publicly displayed and reasonably appeared to be a current offer. Upon performance, a binding contract was formed, obligating the dealership to deliver the prize.

Question 18: A contractor was performing re-modeling work for a nursing home. The written contract called for a 30-day project in which several common social areas would be refurbished, including dry wall, insulation, carpeting, and painted, along with minor plumbing and cosmetic improvements, for $50,000. About a week after work started, the nursing home director asked the foreman on the job to put in natural wood paneling over the dry wall, and to reduce the total area to be painted. The director also told the foreman to upgrade certain bathroom fixtures. At the end of the project, the final bill was $72,000. The nursing home’s board refused to pay that amount and tendered the $50,000 contract price, claiming that a contract could not be modified without another writing. At trial, the nursing home objected to testimony from the foreman and the nursing home director on the basis of the parol evidence rule. Do you think that the court would order the nursing home to pay the additional money?

Yes, because a written contract not for the sale of goods can be modified by subsequent oral modification and the parol evidence rule does not apply to modifications made after the written contract is finalized. (Correct answer)
No, because a written contract not for the sale of goods can only be modified by another writing.
No, because oral testimony regarding changes in a written contract not for the sale of goods are in violation of the parol evidence rule.
Yes, because the nursing home director committed fraud when he told the foreman to do work over which the director had no authority.

Correct answer: Yes, because a written contract not for the sale of goods can be modified by subsequent oral modification and the parol evidence rule does not apply to modifications made after the written contract is finalized.

For contracts not involving the sale of goods, a written agreement can generally be modified by a subsequent oral agreement, even if the original contract required modifications to be in writing. The parol evidence rule applies to *prior or contemporaneous* agreements, not to modifications made *after* the written contract is finalized. Therefore, the testimony about the oral modifications made after the initial contract was formed is admissible, and the nursing home will likely be ordered to pay the additional amount for the agreed-upon changes.

Question 19: A regular customer left his car at an auto mechanic’s shop with instructions to: check the engine and tune it up; make sure the brakes were all in good working order; examine the tires; and, to otherwise check and repair all major systems because the customer was going on a long driving tour through other states. No discussion of price or words of agreement were spoken between the parties. When the customer picked up the car, there was a bill for $5,000 left on the seat to his attention. All of the services and parts listed pertained to the areas stated in the customer’s instructions. He refused to pay, claiming that there was no agreement and that the mechanic didn’t get advance approval for all of the repairs. Can he be held responsible for contractual service performed?

Despite the instructions, it was implied-in-fact that the mechanic would have to get permission to make any actual repairs or perform any significant work.
There was an implied-in-law contract between the parties that required payment by the customer.
There was no agreement between the parties due to indefiniteness and absence of detailed terms.
There was an implied-in-fact contract that required the customer’s payment for the services and parts. (Correct answer)

Correct answer: There was an implied-in-fact contract that required the customer’s payment for the services and parts.

An implied-in-fact contract arises from the conduct of the parties, rather than express words. When the customer provided specific instructions to 'check and repair all major systems' for a long trip, and the mechanic performed those services, it created a mutual understanding that the mechanic would be paid for the work. The customer's actions implied a promise to pay for the reasonable value of the services and parts rendered, forming a binding contract.

Question 20: A woman asked a male friend to hold her valuable antique jewelry in safe storage for her while she traveled in a foreign country. He owned a jewelry store and graciously offered to store the collection for free. He also volunteered to get the jewelry insured at his own expense. She relied on the promises, and turned over the collection to him without the payment of monetary consideration. He forgot to get the jewelry insured, and the collection was stolen in an armed robbery of the jewelry store. When she returned, he refused to compensate her for the stolen collection. Which one of the following legal principles would be her strongest and most accurate claim for remuneration under these facts?

The principle of unilateral contract.
The principle of equitable trust.
The principle of natural consideration.
The principle of promissory estoppel. (Correct answer)

Correct answer: The principle of promissory estoppel.

While the friend's promise to insure the jewelry was a gratuitous promise lacking consideration, the woman reasonably and foreseeably relied on that promise to her detriment by entrusting him with her valuable collection and not seeking her own insurance. Promissory estoppel allows for the enforcement of such promises to prevent injustice when there has been clear detrimental reliance. The friend's failure to insure, leading to the loss, makes promissory estoppel the strongest claim for remuneration.

Question 21: A young woman incurred credit card and medical debts that were overwhelming. She filed bankruptcy and discharged the debts. After receiving her final discharge, she contacted her dentist who had been listed in the bankruptcy for a debt of $10,000. That debt was now discharged and not owed. She said to the dentist, “I know I owe you $10,000 and I’m going to pay it off in the future. Can the dentist successfully sue the young woman for the $10,000 after she fails to perform on her new promise?

Yes, because a promise to pay a debt discharged in bankruptcy can support a new contract based on moral obligation. (Correct answer)
Yes, because a promise to pay based on a prior debt that is now a moral obligation is always treated as new consideration sufficient to form a binding and enforceable contract.
No, because moral obligation in itself never rises to the level of establishing new consideration to form an enforceable contract.
No, because there can never be a new contract based on a prior obligation that is no longer owed under the law.

Correct answer: Yes, because a promise to pay a debt discharged in bankruptcy can support a new contract based on moral obligation.

A promise to pay a debt that has been discharged in bankruptcy is an exception to the general rule that past consideration is not sufficient to support a new contract. The moral obligation to pay the prior debt is considered sufficient consideration to make a new, express promise to pay that debt enforceable, even without new consideration from the creditor. This principle allows the dentist to successfully sue on the new promise.

Question 22: A bill collector came to the door of an elderly widow. The collector showed her a credit card bill for $20,000 owed by her recently deceased husband. He told the widow that she could be arrested and prosecuted if the bill, which was now her responsibility, was not paid. He left her a promissory note for $20,000 with interest and urged that she sign and send it back to him. After a few days, the widow signed the note, hoping in her mind to restore and maintain her husband’s good name. Six months later, the collection company sued on the note because the widow had made no payments. The widow’s attorney filed a motion to have the note declared void due to duress. What is the most likely decision of the court based on the principles of duress?

The note was signed under fear by the widow that she would be imminently sued and maybe end up in jail, and thus it is voidable by her.
The note put the widow in a state of utter fear, and she knew that she had no time to consult an attorney or to try and get a second opinion, hence the contract was voidable by her.
This was not duress because the threat was not imminent and did not deprive her of time to think, and to take the papers to a lawyer for help and advice, and thus the contract is enforceable. (Correct answer)
A threat of going to jail will never suffice to establish duress because it is not capable of being carried out and is not a true statement of the law, hence the contract is enforceable.

Correct answer: This was not duress because the threat was not imminent and did not deprive her of time to think, and to take the papers to a lawyer for help and advice, and thus the contract is enforceable.

For a contract to be voidable due to duress, the threat must be wrongful, induce the party to enter the contract, and leave the party with no reasonable alternative. While the bill collector's threat of arrest was wrongful, the widow had 'a few days' to consider the note and consult an attorney. The threat was not so imminent or overwhelming as to deprive her of her free will or reasonable alternatives, thus failing to meet the legal standard for duress.

Question 23: A manufacturer of widgets sent a letter to an international widget retailer offering to sell ten truckloads of construction-quality widgets for $1,000 per truck. The retailer emailed a note back saying “Please send 10 truckloads as promised.” No shipment was sent, but four months later when the market demand for widgets skyrocketed, the retailer sued the manufacturer for breach claiming that the retailer suffered damages by not having received the shipment of ten trucks as agreed. Does the retailer have a legal right to collect damages under these facts?

Yes, there is a specific and detailed enough offer, followed by an unequivocal acceptance, indicating an intent to form a contract. (Correct answer)
No, the parties do not set a date for delivery, which always invalidates a contract between merchants for the delivery of goods.
No, the retailer never called back and asked for the widgets, which means that the contract was not finally confirmed and legalized.
Yes, the retailer is entitled to collect damages because the manufacturer violated the doctrine of avoidable consequences.

Correct answer: Yes, there is a specific and detailed enough offer, followed by an unequivocal acceptance, indicating an intent to form a contract.

Under the UCC, a contract for the sale of goods can be formed if the parties intended to make a contract and there is a reasonably certain basis for giving a remedy, even if some terms are left open. Here, the manufacturer's letter was a clear and definite offer for 'ten truckloads of construction-quality widgets for $1,000 per truck.' The retailer's email 'Please send 10 truckloads as promised' was an unequivocal acceptance of these terms, indicating mutual assent and forming a binding contract.

Question 24: A woman contracted with a company to install central air in her home. The contract contained the details of performance and payment provisions. The agreement stated that it was to become binding upon approval of credit for financing the new system. The credit was approved 4 days later and notification was left on the woman’s voicemail. A crew went out the same day to get started but arrived only to find a competitor on the premises installing a new system. The company sued the woman for breach of contract damages. She claimed that the company delayed too long. An offer generally expires after a reasonable time. What is the best and most likely decision of the court regarding whether the woman and the company had a binding contract?

The offer here expired because of the inordinate delay in getting credit approval and starting work so that a reasonable time expired and there was no contract.
There was no unreasonable delay – the parties knew that the credit process had to be carried out and therefore the offer was duly accepted within a reasonable time and as specified by the offer. (Correct answer)
This was a case of mutual mistake where each of the parties understood the circumstances in a different way, thus no contract was ever formed.
She fraudulently represented that she was waiting for the credit approval process, when in fact she was contracting with someone else – she’ll be ordered to pay damages based on fraud.

Correct answer: There was no unreasonable delay – the parties knew that the credit process had to be carried out and therefore the offer was duly accepted within a reasonable time and as specified by the offer.

The contract explicitly stated that it would become binding upon credit approval, which serves as a condition precedent. The 4-day period for credit approval and notification was a reasonable time, especially given the nature of the condition. Since the offer was accepted as specified by its terms and within a reasonable timeframe, the woman's claim of unreasonable delay is unfounded, and a binding contract was formed.

Question 25: A publisher contracted to publish and market an author’s recent book. The publisher had the exclusive right to publish and distribute the book, including to decide the number of books published and the advertising budget. The author obtained a cash advance and royalty rights. However, the publisher’s internal post-contract review concluded that the book was polarizing and could offend some business and private interests. The publisher slashed the number of books to be printed and cut the advertising budget to the bare-bones. It simultaneously published and vigorously marketed a book written in-house which required no royalty and was directly contradictory to the factual foundations of the author’s book. The author sued the publisher for breach of contract for failing to deliver on its promise to use its “best efforts” to promote and distribute the book. Does the author have a likely right to collect breach of contract damages from the publisher?

No, the publisher had the discretion under the contract to decide both the budget and the number of books to print.
No, the contract was a standard publishing agreement – the author’s success would be mostly dependent on what the reviewers and book clubs had to say about the book.
Yes, the publisher is in breach of contract whenever it publishes a conflicting or competing book.
Yes, the publisher breached the implied duty of good faith and fair dealing by failing to fully market the book and risking a conflict of interest by publishing its own competitive product. (Correct answer)

Correct answer: Yes, the publisher breached the implied duty of good faith and fair dealing by failing to fully market the book and risking a conflict of interest by publishing its own competitive product.

In contracts granting exclusive rights, there is an implied duty of good faith and fair dealing, often requiring the party with discretion to use 'best efforts' or at least not to undermine the contract's purpose. The publisher's actions of slashing the author's marketing while promoting a directly contradictory in-house book demonstrate a clear breach of this implied duty. This conduct actively worked against the author's success and created a conflict of interest.

Question 26: A man and woman lived together unmarried for 19 years. He assured her that they would live together as husband and wife but without the restriction of an official marriage license. She relied on those promises when giving up plans for a career in business. She assisted him in many substantial ways over the years as he progressed to becoming a successful neurosurgeon. During the years they displayed all of the trappings of being a married couple. When they split up, he refused to give her anything, saying that it was a meretricious relationship. She sued in state court claiming an interest in his income, profits and property. She claimed an express contract or an implied-in-fact agreement to share the economic wealth that was accumulated. The trial court dismissed, saying there could be no claim if there was no marriage. What is the most likely decision of the appellate court?

The couple had an implied-in-fact contract, in which the woman had relied in good faith to her detriment, and she was entitled to damages. (Correct answer)
The rights and benefits claimed by the woman are based on a marital union under state law and there being no official marriage, her claims fail to have legal validity.
There was a right to collect damages based on the massive, lengthy fraudulent scheme that the man perpetrated to keep her within his consuming web but without any economic benefit.
This was a meretricious relationship in which the woman had been compensated for her services quite sufficiently over the years, but she had no residual legal claims that could be asserted.

Correct answer: The couple had an implied-in-fact contract, in which the woman had relied in good faith to her detriment, and she was entitled to damages.

Many jurisdictions recognize implied-in-fact contracts between unmarried cohabitants who pool resources and efforts with an understanding of shared economic benefit, especially when one party detrimentally relies on the other's promises. Here, the woman's long-term contributions and sacrifice of her career, based on the man's assurances, support the existence of such an agreement to share accumulated wealth. The trial court's dismissal based solely on the lack of a formal marriage is often overturned in modern jurisprudence.

Question 27: A farmer contracted to sell 100 tons of his home-grown cucumbers to a wholesaler. An invasion of cucumber-eating insects attacked the crop and made it a poor season. The farmer delivered only 60 tons. The wholesaler claimed a breach of contract due to his being shorted 40 tons. The farmer sued the wholesaler for payment on the 60 tons, and the wholesaler counterclaimed for damages caused by the loss of the additional 40 tons. What is the most likely decision of the court?

The farmer could have used insecticide to kill the insects; he breached the contract, and gets nothing.
There is an industry-wide implied condition that natural causes could limit the amount of an agricultural product -- the wholesaler must pay for the 60 tons and gets no credit on the rest. (Correct answer)
The farmer breached the contract but he’s entitled to be paid for the 60 tons, less the amount of damages suffered by the wholesaler in not getting the full value of the bargain.
The farmer is entitled to collect on the 60 tons and will be reimbursed for the 40 unproduced tons by the federal government.

Correct answer: There is an industry-wide implied condition that natural causes could limit the amount of an agricultural product -- the wholesaler must pay for the 60 tons and gets no credit on the rest.

When a contract involves the sale of specific goods, like a farmer's home-grown crop, and performance becomes impracticable due to unforeseen natural events (such as a pest invasion), the seller may be excused from full performance. Under the UCC, if a seller's performance is partially excused due to impracticability, they must allocate production and deliveries among their customers in a fair and reasonable manner. The buyer must then accept the reduced quantity and pay for what was delivered, with the seller excused from the remainder.

Question 28: A paving company contracted with a retail store to pave the parking lot for a new store being built. It was scheduled to open in 60 days, and the paving company agreed to finish by then. Time was stated to be of the essence. However, there were numerous rainy days and, although the store opened on time, the paving was only partially completed. Some customers were inconvenienced and had to walk from nearby parking areas to get to the new store. The retailer sued the paving company for breach of contract, which included a demand for consequential damages for three weeks of partial lost profits. The store proved lower than projected customers, sales and profits but presented no evidence regarding causation. What is the most likely decision of the court after a bench trial on the issues?

Damages for lost profits will be awarded because the parties could foresee that profits would be lost if the paving was not finished on time.
Damages for lost profits will be awarded because time was of the essence and all foreseeable damages must be paid when a mandatory time provision is breached.
The court will not award lost profits because the store had plenty of time to hire a new paving company when it saw how many days were being missed due to rain.
The court will not award lost profits because the fact of lower than projected figures is speculative, and it’s unclear that the paving company caused the losses. (Correct answer)

Correct answer: The court will not award lost profits because the fact of lower than projected figures is speculative, and it’s unclear that the paving company caused the losses.

To recover consequential damages like lost profits, the plaintiff must prove with reasonable certainty that the damages were caused by the breach and were foreseeable at the time of contracting. Here, the store failed to present evidence of causation, meaning it couldn't definitively link the partial paving to the lower profits. Without clear proof that the paving company's delay directly caused the specific amount of lost profits, the damages are considered speculative and will not be awarded.

Question 29: A building owner hired a painter to paint 20 office units that were vacant and being refurbished. They agreed to terms in writing, and the painter started on the work. After completing only two units, he received a written message from the owner repudiating their agreement and stating that his services were no longer needed. The painter ignored the message because he believed that his contract guaranteed him the full 20 units of work. He finished all units and sent a bill to the owner, who responded with a check for the first two units only. The painter sued the building owner for the full balance due. The building owner countered that he only owed up to the point that he repudiated the contract. Which of the following most closely states the probable decision of the court?

The painter had a duty to stop work and thus mitigate damages when he received a written repudiation of the contract. (Correct answer)
The painter had a right to complete performance because he had already started the work and had a right to perform his part of the valid and enforceable agreement.
The “avoidable consequences” doctrine is applicable to support the right of the painter to finish the job and be paid.
The painter could not receive the full contract price because he would be unjustly enriched under these circumstances.

Correct answer: The painter had a duty to stop work and thus mitigate damages when he received a written repudiation of the contract.

Upon receiving an unequivocal repudiation of a contract, the non-breaching party generally has a duty to stop performance and mitigate their damages. By continuing to paint the remaining 18 units after the owner's clear repudiation, the painter failed to mitigate his damages. Therefore, he can only recover for the work completed up to the point of repudiation, plus any damages incurred in preparing for the remaining work, not the full contract price for all 20 units.

Question 30: A woman owes a co-worker $2000 on a personal debt. The woman’s first cousin promises to pay the co-worker the full debt if the woman will give the cousin’s children dance lessons. She faithfully provides dance lessons regularly over an extended period. Can the co-worker sue the cousin for not paying the debt?

No, because there is no privity of contract between the co-worker and the cousin.
No, because the co-worker is only an incidental beneficiary under the agreement between the woman and her first cousin.
Yes, because the co-worker is a donee beneficiary with full rights to sue the first cousin for the debt owed.
Yes, because the co-worker is an intended beneficiary of the agreement between the woman and her first cousin. (Correct answer)

Correct answer: Yes, because the co-worker is an intended beneficiary of the agreement between the woman and her first cousin.

The co-worker is an intended third-party beneficiary because the primary purpose of the agreement between the woman and her cousin was to benefit the co-worker by discharging the woman's debt. The cousin's promise to pay the co-worker directly in exchange for the dance lessons clearly demonstrates an intent to confer a benefit upon the co-worker. This intent gives the co-worker standing to sue the cousin for breach of that promise.

Contracts MBE Practice Test 2026

An offeror offers to sell a parcel of land to an offeree for $10,000, stating that the offer shall remain open for 30 days.
The offeree replies that she will keep the offeror’s offer under advisement but says, “We can wrap this up immediately if you’ll take $9,000.” The offeror does not reply, but within the 30-day period the offeree accepts the original offer.
The offeror, however, replies that he now wants $12,500.
Was a contract formed when the offeree accepted the $10,000 offer?