NALA Contracts and Commercial Law 2 — Questions and Answers
Question 1: Under UCC Article 2, which of the following best describes a 'firm offer' made by a merchant?
- An offer that can be revoked any time before acceptance
- A signed written offer by a merchant that is irrevocable for up to 90 days without consideration (Correct answer)
- An offer that requires consideration to remain open
- An offer that automatically becomes a contract if not rejected within 30 days
Correct answer: A signed written offer by a merchant that is irrevocable for up to 90 days without consideration
UCC 2-205 provides that a signed written offer by a merchant is irrevocable for the time stated, or a reasonable time, not to exceed 90 days, even without consideration.
Question 2: Which doctrine allows a court to refuse enforcement of a contract clause that is both procedurally and substantively unfair to one party?
- Frustration of purpose
- Unconscionability (Correct answer)
- Promissory estoppel
- Economic duress
Correct answer: Unconscionability
Unconscionability under UCC 2-302 and common law allows courts to refuse enforcement of contracts or clauses that are oppressively one-sided and resulted from unfair bargaining processes.
Question 3: A contract for the sale of goods worth $750 is oral. Under the UCC Statute of Frauds, this contract is:
- Enforceable because it is below the $1,000 threshold
- Unenforceable because all goods contracts require writing
- Unenforceable because it exceeds the $500 threshold under original UCC (Correct answer)
- Enforceable only if the buyer has already paid
Correct answer: Unenforceable because it exceeds the $500 threshold under original UCC
Original UCC 2-201 requires a writing for sales of goods for $500 or more; the contract here exceeds that threshold and is therefore unenforceable without a writing absent an exception.
Question 4: In a contract for services with an incidental goods component, which body of law typically governs?
- UCC Article 2 if any goods are involved
- Common law, because the predominant purpose is services (Correct answer)
- Federal contract law exclusively
- UCC Article 9 as a secured transaction
Correct answer: Common law, because the predominant purpose is services
Courts apply the predominant purpose test: if the contract is mainly for services with goods incidentally involved, common law governs rather than UCC Article 2.
Question 5: Which of the following is an example of a bilateral contract?
- A reward posted for the return of a lost dog
- A promise to pay $500 if someone walks across a bridge
- An exchange of promises where both parties commit to future performance (Correct answer)
- A unilateral promise supported by past consideration
Correct answer: An exchange of promises where both parties commit to future performance
A bilateral contract is formed by the mutual exchange of promises, where each party's promise serves as consideration for the other's promise.
Question 6: Under common law, when does the 'battle of the forms' arise?
- When a court must choose between two competing written contracts
- When offeree's acceptance contains additional or different terms from the offer (Correct answer)
- When both parties use identical standard forms
- When a contract is partially oral and partially written
Correct answer: When offeree's acceptance contains additional or different terms from the offer
The battle of the forms occurs when an acceptance or confirmation contains terms that differ from the original offer, requiring application of the mirror image rule (common law) or UCC 2-207.
Question 7: An agreement not to compete (non-compete clause) in an employment contract is generally enforceable only if it:
- Is unlimited in time and geography to protect business interests
- Is reasonable in scope, duration, and geographic area (Correct answer)
- Is signed by an attorney for both parties
- Covers all future employers in the same industry
Correct answer: Is reasonable in scope, duration, and geographic area
Courts enforce non-compete clauses only when they are reasonable as to the time period, geographic area, and scope of restricted activity to protect legitimate business interests.
NALA Contracts and Commercial Law 2
Under UCC Article 2, which of the following best describes a 'firm offer' made by a merchant?