Free MBE Contracts Practice Questions

1. On June 1, Bert called Carol, a jewelry designer, to discuss a potential custom engagement ring. After describing the design he wanted, Bert asked, 'Will you make this ring for $3,500?' Carol responded, 'That sounds like a reasonable price, but I need to order the diamond and check my schedule. I'll call you back tomorrow with a final answer.' The next day, Carol called Bert and said, 'I can make the ring, and I'm confirming the price of $3,500.' Bert said, 'Great. I look forward to it.' Carol then ordered the diamond, but before starting work, the price of diamonds surged and the raw materials would now cost her $4,500. Carol refused to proceed with the ring and told Bert the project was off. Bert has now sued for breach of contract. Which of the following best describes the legal status of the parties?

1. (A) Bert will lose because Carol's initial response was a counteroffer that required Bert to accept in writing before a contract formed.
2. (B) Bert will lose because the diamond price surge constitutes an unforeseen circumstance that discharges Carol's obligations.
3. (C) Bert will likely win because Carol began performance by ordering the diamond before repudiating the contract.
4. (D) Bert will likely win because Carol's call on June 2 was an acceptance that formed a binding contract with Bert's response.

2. Michelle, a software developer, submitted a written bid to BuildCo for a $50,000 custom application project. The bid stated: 'This offer is good for 30 days from the date below.' BuildCo did not respond within 30 days, but on day 35, BuildCo's purchasing manager called Michelle and said, 'We've decided to accept your bid and we're awarding you the contract.' Michelle responded, 'I appreciate the call, but my offer has expired, and I'd need to re-quote you now because my labor costs have increased.' BuildCo replied, 'Your original price was locked in for 30 days. Your offer is still good.' Michelle refused to proceed at the original price. Has a contract been formed?

1. (A) No, because Michelle's offer expired after 30 days and BuildCo's late acceptance on day 35 did not form a contract.
2. (B) Yes, because BuildCo relied on Michelle's initial bid by awarding the contract within a reasonable period.
3. (C) Yes, because BuildCo's oral acceptance by phone constituted acceptance within the meaning of the mailbox rule.
4. (D) No, because the contract must have been formed in writing to be enforceable under the statute of frauds.

3. A software company offered to sell a database system to a accounting firm for $50,000, with delivery "on or about June 15." The offer did not expressly state when payment was due. The accounting firm accepted the offer in writing. On June 14, the software company tendered the system, and the accounting firm accepted it. On June 20, the software company demanded payment, and the accounting firm refused, claiming it was not yet obligated to pay because the delivery date had not been met. The software company sued for the contract price. Which of the following best supports the software company's position?

1. (A) The accounting firm's acceptance of the system constituted a waiver of the delivery condition.
2. (B) The software company materially breached by delivering on June 14 instead of June 15, excusing the accounting firm's payment obligation.
3. (C) The delivery date was only a condition precedent to formation and does not affect when payment becomes due.
4. (D) Under the UCC, payment and delivery are concurrent conditions, so the accounting firm's acceptance of the system triggered its obligation to pay.

4. An owner hired a general contractor to renovate a commercial building for $200,000. The contract stated: "Contractor must obtain a certificate of occupancy from the city before the owner is obligated to pay the final installment of $50,000." After the contractor substantially completed the work, the city building inspector flagged numerous code violations that the contractor failed to remediate. The contractor refused to fix the violations, claiming that correcting them would cost an additional $30,000. The owner refused to pay the final installment because the contractor could not obtain the certificate of occupancy. The contractor sued for $50,000. Which of the following best describes the owner's liability?

1. (A) The owner is not liable because the certificate of occupancy is an express condition precedent to the owner's payment obligation, and it has not been satisfied.
2. (B) The owner is liable for the full $50,000 because the contractor substantially performed the contract, excusing the condition.
3. (C) The owner is liable for $20,000 because the contractor is entitled to recover the reasonable value of work performed despite failing to obtain the certificate.
4. (D) The owner is not liable because the contractor materially breached by not obtaining the certificate of occupancy, which was the only obligation listed in the contract.

5. A homeowner promised her adult daughter that she would pay off the daughter's $50,000 student loan debt as a gift, without any bargained-for exchange. The daughter relied on this promise by declining an out-of-state job that paid significantly more, instead accepting a lower-paying position locally. Six months later, the homeowner learned the daughter had turned down the better job and refused to pay the loan. The daughter sued for breach of contract. Is the daughter likely to prevail?

1. (A) No, because there was no bargained-for consideration; the promise was a gift.
2. (B) Yes, because the daughter provided consideration by accepting the local job.
3. (C) Yes, under promissory estoppel, because the daughter reasonably relied on the promise to her detriment.
4. (D) No, because a promise to pay the debt of another lacks good faith.

6. A contractor agreed in writing to build a house for a homeowner for $300,000, payment due upon completion. The contractor completed the work, but because of market-rate changes, the homeowner discovered that a similar house would now cost $250,000 to build elsewhere. The homeowner refused to pay the full contract price, alleging the contract was unconscionable. The contractor sued for the contract price. Is the contractor likely to prevail?

1. (A) Yes, because the contract price was agreed to in writing and the homeowner received the benefit of the bargain.
2. (B) No, because economic duress allows the homeowner to escape an unfavorable contract.
3. (C) No, because the homeowner is entitled to rescind when the contractor's performance is worthless.
4. (D) Yes, because the contractor substantially performed and mere price disparity does not constitute unconscionability.

7. A 27-year-old first-time homebuyer entered into a written contract to purchase a house for $250,000. The buyer's father, concerned about his son's financial stability, told the real estate agent: "My son doesn't really understand mortgages, and I'm not sure he can handle this commitment." The agent responded, "Don't worry. I've seen lots of young buyers succeed." The father then told his son to sign. Two weeks before closing, the buyer—now having studied the mortgage documents—decided he didn't want the house and claimed he lacked capacity to contract because he was immature and financially inexperienced. The seller sues for specific performance.

1. (A) The buyer will lose because age 27 is presumptively sufficient legal capacity to contract.
2. (B) The buyer will prevail only if the seller knew or should have known the buyer was unable to understand the transaction.
3. (C) The buyer will prevail because his father expressed doubts about his ability to handle the commitment.
4. (D) The buyer will lose only if he can prove he had actual knowledge of the mortgage terms before signing.

8. A lender made a $150,000 construction loan to a developer, with the written agreement stating that the developer must obtain a building permit before drawing down the funds. The developer signed the agreement but did not initially understand that obtaining a permit would take four months and might not be certain. Two weeks before the contract was signed, the developer's business partner had been arrested, and the developer was deeply distressed about the partnership's viability. The lender, aware of the arrest, did not explain the permit timeline or risk and promptly had the developer sign. The developer now seeks to void the contract for duress.

1. (A) The developer will succeed because the lender knew of the developer's emotional distress at the time of signing.
2. (B) The developer will succeed only if the lender's actions created an improper threat or pressure that left the developer no reasonable alternative but to sign.
3. (C) The developer will succeed only if the lender explicitly threatened to call the loan if the developer did not sign.
4. (D) The developer will fail because the developer was not in imminent physical danger and had time to consult an attorney.

9. A restaurant supplier sold a refrigerator to a restaurant owner under a written contract that stated 'as is' and 'all warranties excluded.' The supplier did not examine the refrigerator before sale and had no knowledge of its condition. The refrigerator had a hidden mechanical defect that caused it to fail completely three days after delivery. The restaurant owner was unable to store perishable goods and lost significant profits. The restaurant owner sues for breach of warranty. Is the supplier liable?

1. (A) Yes, because the supplier, as a merchant, impliedly warranted that the goods were merchantable despite the 'as is' language.
2. (B) No, because the defect was hidden and the supplier could not reasonably inspect for conditions that would not be apparent.
3. (C) No, because the 'as is' and warranty disclaimer language effectively excluded all express and implied warranties.
4. (D) Yes, because the supplier is liable for latent defects even when warranties are disclaimed.

10. On Monday, a homeowner sent a signed written offer to a contractor to renovate the kitchen for $35,000, with materials to be supplied by the contractor. The offer stated: "This offer will remain open for acceptance until 5 p.m. on Friday of this week. Acceptance must be communicated to me in writing, signed by you, and delivered to my home by that deadline." On Wednesday morning, the contractor mailed a signed written acceptance to the homeowner's address. The acceptance letter arrived at the homeowner's mailbox on Thursday at 2 p.m., but the homeowner did not retrieve it until Friday at 6 p.m. At that point, she posted a notice on the contractor's door declining the offer. The contractor learned of the acceptance letter reaching the mailbox on Thursday morning when the homeowner's spouse mentioned it in passing. Does a contract exist between the homeowner and contractor?

1. (A) No, because the homeowner retrieved the letter after the 5 p.m. Friday deadline, so acceptance was ineffective.
2. (B) Yes, because the contractor learned of the acceptance letter's arrival on Thursday morning, which is before the Friday deadline.
3. (C) No, because the homeowner's revocation notice prevented the acceptance from becoming effective.
4. (D) Yes, because the acceptance was mailed on Wednesday and arrived at the homeowner's address by Thursday, before the Friday deadline.

11. A retailer sent a written purchase order to a supplier for 100 cases of bottled juice at $50 per case, total $5,000, with delivery "on or about July 15." The purchase order stated: "This order is subject to all terms on the reverse side of this form," which included a clause requiring the supplier to maintain product liability insurance. The supplier received the purchase order but did not have a form to send back. Instead, the supplier simply prepared the goods and shipped 100 cases on July 14, accompanying the shipment with a packing slip noting the price of $50 per case. The packing slip was silent on insurance. The retailer accepted and paid for the goods. Three weeks later, one customer became ill from the juice and sued the retailer. The retailer had to settle for $50,000. The retailer now seeks $25,000 from the supplier as an indemnity, claiming the supplier breached the insurance requirement in the original purchase order. Can the retailer enforce the insurance clause against the supplier?

1. (A) Yes, because the purchase order was a clear offer that the supplier accepted by shipping the goods, and acceptance incorporated all terms stated on the reverse side.
2. (B) No, because the supplier's shipment was a counteroffer that modified the original terms, and by accepting the goods without objection, the retailer accepted the counteroffer on the supplier's terms.
3. (C) Yes, because the supplier's conduct—shipping the goods on the date requested—demonstrates an intent to accept all terms of the purchase order, including the insurance requirement.
4. (D) No, because the packing slip constituted a separate agreement that superseded the original purchase order's terms, and the retailer accepted the packing slip terms by accepting the goods.

12. A retailer placed a written order with a manufacturer for 500 widgets at $10 each, delivery within 30 days. The retailer's order form contained a clause stating that any additional terms proposed by the seller would not become part of the contract unless the retailer expressly agreed to them in writing. The manufacturer responded with a written acceptance that included a new clause requiring the retailer to pay all shipping costs and a warranty disclaimer limiting the manufacturer's liability to replacement or refund of defective goods. The retailer received the acceptance but did not respond. Goods conforming to the order were delivered 25 days later, and the retailer accepted and paid for them without objection. Which of the following best describes the terms of the contract?

1. (A) The additional terms proposed by the manufacturer became part of the contract because the manufacturer is a merchant and the retailer did not object.
2. (B) The additional terms proposed by the manufacturer did not become part of the contract because the retailer's form explicitly precluded additional terms, and the retailer's conduct in accepting the goods does not constitute acceptance of the additional terms.
3. (C) The additional terms proposed by the manufacturer became part of the contract because the goods were conforming and delivered within the stated timeframe.
4. (D) The additional terms proposed by the manufacturer did not become part of the contract only if the retailer can show that the shipping and warranty terms are materially different from trade usage.