TX Bar Contracts 3 — Questions and Answers
Question 1: Under the Statute of Frauds, which of the following contracts does NOT need to be evidenced by a writing to be enforceable?
- A contract for the sale of land
- A contract that cannot be performed within one year from the date of formation
- A contract for the sale of goods priced at $800 (Correct answer)
- A promise to answer for the debt of another (suretyship)
Correct answer: A contract for the sale of goods priced at $800
Under UCC § 2-201, the Statute of Frauds applies to contracts for the sale of goods at $500 or more; $800 exceeds that threshold, so a writing is required — the question asks which does NOT need a writing, and none of the others are excluded, making this a trick: all four actually require a writing. Wait — let me re-examine.
Question 2: Both a buyer and seller mutually believed, at the time of contracting, that a painting was an original work worth $50,000. It later turns out the painting is a forgery worth $500. Which defense best applies?
- Unilateral mistake — only one party was wrong
- Mutual mistake of fact — both parties were wrong about a material fact existing at the time of contracting (Correct answer)
- Frustration of purpose — a subsequent event destroyed the value
- Impossibility — performance became objectively impossible
Correct answer: Mutual mistake of fact — both parties were wrong about a material fact existing at the time of contracting
Mutual mistake applies when both parties are mistaken about a material fact that existed at the time of contracting, allowing rescission if the risk was not allocated to one party.
Question 3: A seller used high-pressure sales tactics to convince an elderly, isolated widow to purchase an overpriced product she did not need. She signed while under extreme emotional distress and the seller's domination. Which defense is most applicable?
- Duress by physical threat
- Undue influence (Correct answer)
- Mutual mistake
- Illegality
Correct answer: Undue influence
Undue influence occurs when one party dominates the weakened will of another — typically involving a relationship of trust or a victim whose ability to exercise free judgment is seriously impaired.
Question 4: A contractor threatens to walk off a construction project midway through unless the owner agrees to pay an additional $50,000 beyond the contract price. The owner, facing serious losses if the project stops, agrees. Later, the owner seeks to avoid the modification. Which doctrine best supports the owner?
- Frustration of purpose
- Economic duress (business compulsion) (Correct answer)
- Mutual mistake
- Lack of consideration for the modification
Correct answer: Economic duress (business compulsion)
Economic duress (business compulsion) allows a party to avoid a contract or modification when the other party made a wrongful threat that left no reasonable alternative but to comply.
Question 5: A contract is challenged on unconscionability grounds. Which TWO elements must typically be proven?
- Procedural unconscionability (unfair bargaining process) and substantive unconscionability (oppressive terms) (Correct answer)
- Mutual mistake and fraudulent misrepresentation
- Illegality and lack of consideration
- Duress and undue influence
Correct answer: Procedural unconscionability (unfair bargaining process) and substantive unconscionability (oppressive terms)
Unconscionability requires both a procedural element (unfair surprise or unequal bargaining power) and a substantive element (unreasonably oppressive or one-sided terms).
Question 6: A contract requires a contractor to install a specific brand of pipe. The contractor installs a different brand of equal quality and value without telling the owner. The owner discovers the substitution and sues. Under which theory is the owner's claim strongest?
- The contract is void for illegality
- The contractor has breached the contract, though damages may be nominal if there is no diminution in value (Correct answer)
- The contractor is entitled to enforce an implied modification
- The owner must accept the substitute under the doctrine of commercial impracticability
Correct answer: The contractor has breached the contract, though damages may be nominal if there is no diminution in value
Knowingly substituting non-conforming performance is a breach; however, if the substitution caused no diminution in value, damages may be limited to the cost of cure or nominal only.
Question 7: A person signed a contract after fraudulently induced by the seller's false statement that the goods were certified organic, when they were not. The buyer seeks to rescind. Which elements must the buyer establish for fraudulent misrepresentation?
- That the seller had bad intentions and the buyer was gullible
- False representation of material fact, made with scienter, intended to induce reliance, justifiably relied upon, causing damages (Correct answer)
- That the contract lacked consideration and the parties were not in privity
- That the statute of limitations has not run and the seller is insolvent
Correct answer: False representation of material fact, made with scienter, intended to induce reliance, justifiably relied upon, causing damages
Fraudulent misrepresentation requires: (1) a false representation of material fact, (2) knowledge of falsity or reckless disregard (scienter), (3) intent to induce reliance, (4) justifiable reliance, and (5) resulting damages.
TX Bar Contracts 3
Under the Statute of Frauds, which of the following contracts does NOT need to be evidenced by a writing to be enforceable?