Contracts Issue Spotting
Identify formation, consideration, enforceability, and breach issues in realistic transactional scenarios involving offers, acceptances, and performance disputes.
5 exercises across Beginner, Intermediate, and Advanced difficulty levels
Fact Pattern
On March 1, Jordan sends an email to Alex stating: "I'll sell you my 2020 Honda Accord, 45,000 miles, for $18,000 firm. Let me know by Friday." Alex responds on Tuesday: "I'll take it for $18,000. Can we meet Saturday to finalize?" Jordan reads the email but does not respond.
On Wednesday, Jordan's neighbor, Pat, offers Jordan $20,000 cash for the same car after seeing it parked outside. Jordan accepts Pat's offer and signs a bill of sale that evening. On Thursday, Alex sends another email: "Just confirming — I'll bring a cashier's check Saturday morning." Jordan responds: "Sorry, the car is sold."
Alex sues Jordan for breach of contract, seeking either specific performance or expectation damages. Jordan argues no binding contract was ever formed because there was no signed writing and no consideration was exchanged.
Issues to Spot (4)
1. Offer and Acceptance
Jordan's email appears to be a valid offer with definite terms (identified goods, specific price, deadline). Alex's Tuesday reply is a timely, unequivocal acceptance that mirrors the offer's terms, likely forming a contract at that moment under the objective theory of contracts.
2. Statute of Frauds — UCC Article 2
Under UCC 2-201, contracts for the sale of goods over $500 require a writing sufficient to indicate a contract. The email exchange may satisfy this requirement, as courts increasingly treat emails as writings, but the analysis depends on whether the emails contain a sufficient signature (e.g., the sender's name in the email).
3. Revocation of Offer
An offer can generally be revoked any time before acceptance. However, Alex accepted on Tuesday before Jordan revoked. Jordan's sale to Pat on Wednesday would only be effective as a revocation if it occurred before Alex's acceptance, which it did not. An offer stating a deadline is not irrevocable unless supported by consideration (option contract) or under UCC firm offer rules.
4. Specific Performance vs. Damages
Specific performance is generally not available for ordinary goods that can be purchased on the open market. Since a 2020 Honda Accord is not unique, Alex's remedy would likely be limited to expectation damages — the difference between the contract price and the market price for a comparable vehicle.
Fact Pattern
Riverside Construction enters into a written contract with the Greenfield School District to build a new gymnasium for $2.4 million, with completion due by August 15 before the school year starts. The contract includes a liquidated damages clause of $1,000 per day for late completion. Three months into construction, workers discover that the soil beneath the foundation contains an undisclosed layer of contaminated fill that requires $180,000 in remediation before work can continue.
Riverside notifies the school district and requests a change order for the additional $180,000 and a 60-day extension. The school district's project manager verbally agrees: "Do whatever you need to do — we'll cover the extra cost." Riverside proceeds with remediation and completes the gym on October 3, 49 days after the original deadline.
The school district refuses to pay the additional $180,000, arguing the verbal promise is unenforceable, and withholds $49,000 under the liquidated damages clause. Riverside sues for the remediation costs and the withheld funds.
Issues to Spot (5)
1. Modification and the Pre-Existing Duty Rule
Under common law, a modification requires new consideration from both sides. However, UCC 2-209 and the Restatement (Second) approach recognize that modifications are enforceable without consideration if made in good faith. The discovery of contaminated soil — an unanticipated circumstance — likely supports a good-faith modification argument.
2. Statute of Frauds — Oral Modification
The original contract is in writing and likely exceeds the one-year or $500 thresholds. Many construction contracts include a 'no oral modification' clause. Even without such a clause, the oral promise to cover $180,000 may be unenforceable under the statute of frauds unless partial performance (the completed remediation) takes it outside the statute.
3. Impracticability / Mutual Mistake
The undisclosed contaminated soil may qualify as a mutual mistake about a basic assumption of the contract (soil conditions) or as commercial impracticability under Restatement Section 261. If neither party knew about the contamination, the risk allocation was not addressed, and the additional cost is significant, Riverside may be excused or entitled to an equitable adjustment.
4. Liquidated Damages Enforceability
The $1,000-per-day clause is enforceable only if the amount is a reasonable forecast of actual harm and actual damages would be difficult to calculate at the time of contracting. If $49,000 is grossly disproportionate to the school district's actual losses from the delay, it may be struck down as an unenforceable penalty.
5. Promissory Estoppel
Even if the oral modification is unenforceable, Riverside may argue promissory estoppel: the project manager's promise was clear, Riverside reasonably relied on it by performing the remediation, and injustice can only be avoided by enforcing the promise. This could support recovery of the $180,000 in remediation costs.
Fact Pattern
Maya, a freelance graphic designer, enters into a written contract with BrightEdge Marketing to design a company logo and business card template for $3,000, payable upon completion. The contract states: "Scope: one logo design with up to two rounds of revisions and one business card layout. Delivery within 14 days."
After Maya delivers the first logo draft, BrightEdge's CEO emails: "Love it. Can you also put together a full brand kit — letterhead, social media headers, and an email signature? Same style." Maya responds: "Sure, happy to help." She spends an additional 30 hours creating the expanded materials. When she submits the full package and invoices for $7,500 (original $3,000 plus $4,500 for the additional work), BrightEdge pays only $3,000, arguing the extra work was included in the original agreement's scope and that Maya never quoted a separate price for the additions.
Maya sues for the remaining $4,500. BrightEdge counterclaims that the logo Maya delivered is substantially similar to a design she previously created for another client, constituting a breach of an implied warranty of originality.
Issues to Spot (4)
1. Scope of the Original Contract
The written contract explicitly limits the scope to one logo and one business card template. Letterhead, social media headers, and email signatures are clearly outside this defined scope, making BrightEdge's argument that they were included a difficult position to maintain given the parol evidence rule and the contract's plain language.
2. Implied-in-Fact Contract for Additional Work
When BrightEdge requested additional work and Maya performed it, their conduct may have formed an implied-in-fact contract. The CEO's request and Maya's acceptance, combined with her performance, establish mutual assent. The reasonable value of Maya's additional services would be recoverable under this theory.
3. Quantum Meruit / Unjust Enrichment
Even absent an enforceable contract for the extra work, Maya may recover under quantum meruit for the reasonable value of services rendered. BrightEdge requested and received the benefit of 30 additional hours of professional design work, and it would be unjust to allow BrightEdge to retain those materials without compensation.
4. Implied Warranty of Originality
In creative services contracts, there may be an implied warranty that deliverables are original work. If Maya's logo is substantially similar to a prior design for another client, BrightEdge may have a valid counterclaim for breach of this implied warranty, which could reduce or offset Maya's recovery.
Fact Pattern
In January, Sarah books the Lakeview Estate for her October wedding, signing a contract that requires a $5,000 non-refundable deposit and a total venue fee of $25,000. The contract includes a force majeure clause excusing performance for "natural disasters, acts of God, or government-mandated closures" but does not mention epidemics, pandemics, or personal emergencies.
In July, Sarah's fiance is seriously injured in a car accident, and the couple decides to postpone the wedding indefinitely. Sarah requests a full refund of her $5,000 deposit. Lakeview Estate refuses, pointing to the non-refundable deposit clause. Sarah argues the accident constitutes an unforeseeable event that should excuse her performance.
Separately, in August, the county health department issues an advisory — but not a mandate — recommending that large indoor gatherings be limited to 50 persons due to a respiratory illness outbreak. Sarah's wedding was planned for 200 guests. Sarah now also argues the health advisory makes performance impracticable.
Issues to Spot (5)
1. Force Majeure Clause Interpretation
The force majeure clause lists specific triggering events but does not include personal emergencies or health advisories. Under the principle of ejusdem generis, a court would likely interpret the clause narrowly to cover only events similar to those listed (natural disasters, government mandates), excluding a fiance's car accident and a non-mandatory health advisory.
2. Impracticability of Performance
Sarah may argue that the fiance's injury makes performance impracticable under Restatement Section 261. However, impracticability generally requires an objective impossibility or extreme hardship, not mere personal inconvenience. Courts are reluctant to excuse performance for personal misfortunes that do not destroy the subject matter of the contract.
3. Frustration of Purpose
The doctrine of frustration of purpose may be stronger than impracticability here. The principal purpose of the contract — hosting Sarah's wedding — has been substantially frustrated by the postponement. However, the frustration must be caused by an event the parties assumed would not occur, and whether a car accident qualifies is debatable.
4. Non-Refundable Deposit vs. Penalty
The enforceability of the $5,000 non-refundable deposit depends on whether it constitutes a reasonable liquidated damages provision or an unenforceable penalty. If Lakeview can rebook the October date and suffers no actual loss, a court might find that retaining the full deposit is disproportionate to actual damages.
5. Health Advisory vs. Government Mandate
A health advisory recommending limits is materially different from a government-mandated closure. The force majeure clause requires 'government-mandated closures,' and a mere recommendation does not meet this threshold. Sarah would need to show that compliance with the advisory was practically compelled, not just prudent.
Fact Pattern
Tom owns a small bakery and has been buying flour from Millbrook Farms for three years on a handshake basis — no written contract. Each month, Tom calls Millbrook, orders 500 pounds of organic flour at the current market price, and Millbrook delivers within a week. Payment is made on a net-30 basis, and both parties have performed consistently without any disputes.
In April, Tom calls and orders his usual 500 pounds. Millbrook's owner, Dave, confirms: "Same as always — I'll have it to you by Thursday." On Wednesday, Dave calls Tom and says he has sold his entire April inventory to a large grocery chain at a higher price. Tom is forced to buy flour from another supplier at $0.45 per pound more, costing him an extra $225. Tom also loses a $2,000 custom cake order because the substitute flour does not meet his client's organic certification requirement.
Tom sues Millbrook for breach of contract and consequential damages. Dave argues there was never an enforceable contract because nothing was in writing and the terms changed each month.
Issues to Spot (4)
1. Contract Formation Under the UCC
Flour is a good, so UCC Article 2 governs. Under UCC 2-204, a contract may be formed by any manner sufficient to show agreement, including conduct. The three-year course of dealing — monthly orders, confirmations, deliveries, and payments — likely establishes an enforceable contract for the April order despite the absence of a formal writing.
2. Statute of Frauds — UCC 2-201
Contracts for goods over $500 generally require a writing. The April order ($500 x market price) may exceed this threshold. However, the oral contract may be enforceable under exceptions: the specially manufactured goods exception likely does not apply, but the merchant confirmation or partial performance exceptions might, and course of dealing between merchants may also be relevant.
3. Course of Dealing and Trade Usage
Under UCC 1-303, the parties' three-year pattern of monthly ordering establishes a course of dealing that supplements and informs the April agreement. This course of dealing can supply missing terms (quantity, delivery timeline, payment terms) and demonstrates the parties' mutual understanding of their obligations.
4. Consequential Damages — Foreseeability
The $225 cover cost is a straightforward direct damage. However, the $2,000 lost cake order is a consequential damage recoverable only if Millbrook had reason to know at the time of contracting that Tom's specific use required organic certification. Under Hadley v. Baxendale, consequential damages must be foreseeable to the breaching party.