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Contract Law

1,453 Questions

Contract Law encompasses the rules and statutes governing legally binding agreements between parties. This hub provides practice questions on essential topics like legal obligations, breach of contract, and termination clauses. These concepts are frequently tested in law entrance tests and various other competitive government examinations.

Legal obligationsVoid contractsBreach of contractCommunication of acceptanceStatute of FraudsContract clauses

Contract Law Questions

Multiple choice

What are some of the consequences of failing to comply with MCLE requirements?

  1. Suspension of law license.

  2. Fines.

  3. Both of the above.

  4. None of the above.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Failing to comply with MCLE requirements can result in suspension of law license, fines, or both.

Multiple choice

Which of the following is NOT an essential element of consideration?

  1. It must be of value.

  2. It must be legal.

  3. It must be in writing.

  4. It must be capable of being performed.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Consideration does not have to be in writing to be valid. It can be oral, written, or implied.

Multiple choice

What is the rule regarding illusory promises?

  1. Illusory promises are valid consideration.

  2. Illusory promises are not valid consideration.

  3. Illusory promises are valid consideration only if they are in writing.

  4. Illusory promises are valid consideration only if they are supported by a moral obligation.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Illusory promises are not valid consideration because they do not give the promisor any real choice. The promisor is not obligated to do anything, so there is no consideration for the promise.

Multiple choice

What is the rule regarding penalties?

  1. Penalties are valid consideration.

  2. Penalties are not valid consideration.

  3. Penalties are valid consideration only if they are in writing.

  4. Penalties are valid consideration only if they are supported by a moral obligation.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Penalties are not valid consideration because they are not a reasonable estimate of the actual damages that will be suffered if the contract is breached.

Multiple choice

What is the rule regarding impossibility?

  1. Impossibility is a valid defense to a breach of contract action.

  2. Impossibility is not a valid defense to a breach of contract action.

  3. Impossibility is a valid defense to a breach of contract action only if it is in writing.

  4. Impossibility is a valid defense to a breach of contract action only if it is supported by a moral obligation.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Impossibility is a valid defense to a breach of contract action because it makes the performance of the contract impossible. If the performance of the contract is impossible, then the promisor is not liable for breach of contract.

Multiple choice

What is the rule regarding frustration of purpose?

  1. Frustration of purpose is a valid defense to a breach of contract action.

  2. Frustration of purpose is not a valid defense to a breach of contract action.

  3. Frustration of purpose is a valid defense to a breach of contract action only if it is in writing.

  4. Frustration of purpose is a valid defense to a breach of contract action only if it is supported by a moral obligation.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Frustration of purpose is not a valid defense to a breach of contract action because it does not make the performance of the contract impossible. The promisor is still liable for breach of contract even if the purpose of the contract is frustrated.

Multiple choice

What is the rule regarding anticipatory breach?

  1. An anticipatory breach is a breach of contract that occurs before the time for performance.

  2. An anticipatory breach is a breach of contract that occurs after the time for performance.

  3. An anticipatory breach is a breach of contract that is in writing.

  4. An anticipatory breach is a breach of contract that is supported by a moral obligation.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

An anticipatory breach is a breach of contract that occurs before the time for performance. It gives the non-breaching party the right to terminate the contract and sue for damages.

Multiple choice

What is the rule regarding substantial performance?

  1. Substantial performance is a defense to a breach of contract action.

  2. Substantial performance is not a defense to a breach of contract action.

  3. Substantial performance is a defense to a breach of contract action only if it is in writing.

  4. Substantial performance is a defense to a breach of contract action only if it is supported by a moral obligation.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Substantial performance is a defense to a breach of contract action because it means that the promisor has substantially performed the contract and the non-breaching party has received the benefit of the contract. The non-breaching party is not entitled to damages if the promisor has substantially performed the contract.

Multiple choice

What is the rule regarding accord and satisfaction?

  1. Accord and satisfaction is a valid defense to a breach of contract action.

  2. Accord and satisfaction is not a valid defense to a breach of contract action.

  3. Accord and satisfaction is a valid defense to a breach of contract action only if it is in writing.

  4. Accord and satisfaction is a valid defense to a breach of contract action only if it is supported by a moral obligation.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accord and satisfaction is a valid defense to a breach of contract action because it is a new agreement that replaces the original contract. The new agreement is supported by consideration and is therefore binding on the parties.

Multiple choice

What is the rule regarding novation?

  1. Novation is a valid defense to a breach of contract action.

  2. Novation is not a valid defense to a breach of contract action.

  3. Novation is a valid defense to a breach of contract action only if it is in writing.

  4. Novation is a valid defense to a breach of contract action only if it is supported by a moral obligation.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Novation is a valid defense to a breach of contract action because it is a new agreement that replaces the original contract. The new agreement is supported by consideration and is therefore binding on the parties.

Multiple choice

What is the rule regarding rescission?

  1. Rescission is a valid remedy for breach of contract.

  2. Rescission is not a valid remedy for breach of contract.

  3. Rescission is a valid remedy for breach of contract only if it is in writing.

  4. Rescission is a valid remedy for breach of contract only if it is supported by a moral obligation.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Rescission is a valid remedy for breach of contract because it allows the non-breaching party to cancel the contract and be restored to the position they were in before the contract was entered into.

Multiple choice

What is an option?

  1. A contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date.

  2. A contract that requires the buyer to buy or sell an underlying asset at a specified price on or before a specified date.

  3. A contract that gives the seller the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date.

  4. A contract that requires the seller to buy or sell an underlying asset at a specified price on or before a specified date.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date.

Multiple choice

What is a future?

  1. A contract that requires the buyer to buy or sell an underlying asset at a specified price on or before a specified date.

  2. A contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date.

  3. A contract that requires the seller to buy or sell an underlying asset at a specified price on or before a specified date.

  4. A contract that gives the seller the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A future is a contract that requires the buyer to buy or sell an underlying asset at a specified price on or before a specified date.

Multiple choice

When is specific performance an appropriate remedy?

  1. When the subject matter of the contract is unique

  2. When the non-breaching party has suffered significant financial losses

  3. When the breaching party is insolvent

  4. When the contract is for the sale of land
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Specific performance is an appropriate remedy when the subject matter of the contract is unique and cannot be easily replaced.

Multiple choice

What is an injunction?

  1. A court order that requires a party to do or refrain from doing a specific act

  2. A court order that awards damages to the non-breaching party

  3. A court order that rescinds a contract

  4. A court order that cancels a contract
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

An injunction is a court order that requires a party to do or refrain from doing a specific act.