Contracts on the NextGen Bar Exam
Contracts is the subject where candidates lose points on the first sentence of their analysis. The single most important move on any Contracts question is identifying whether common law or UCC Article 2 governs — and getting it wrong poisons everything that follows. Service contracts, real estate, employment? Common law. Sale of goods? UCC. Mixed contracts (installing custom software, for example)? Predominant purpose test. Nail this threshold and the rest flows logically. Miss it and you're applying the wrong rules to every sub-issue.
Formation follows a predictable sequence: offer → acceptance → consideration. Under common law, the mirror-image rule is absolute — any deviation in acceptance creates a counteroffer. Under the UCC, § 2-207 (the "battle of the forms") changes everything: a definite acceptance with different or additional terms can still form a contract. Between merchants, additional terms become part of the contract unless they materially alter it, the offer limits acceptance, or the offeror objects. This is tested constantly because it's counterintuitive — most students expect the common-law rule to apply everywhere.
The consideration trap that catches people: pre-existing duty rule. A promise to do what you're already contractually obligated to do isn't fresh consideration under common law. But here's the split — UCC modifications require no consideration at all. A seller calling to say "the price went up 10%" is enforceable under the UCC if made in good faith. Under common law, that same modification fails without new consideration.
Statute of Frauds is tested as a checklist problem: goods $500+ (UCC), land, contracts not performable within one year, suretyship, marriage. The "one year" rule trips students up because it's narrower than it sounds — if there's any possible way the contract could be performed within one year (even if unlikely), the Statute doesn't apply. Under the UCC, the writing only needs to state the quantity term. Everything else can be oral.
Breach analysis is where the exam separates good answers from great ones. The key distinction: material vs. immaterial breach. A material breach excuses the other party's performance entirely and triggers an immediate suit for total breach. An immaterial breach only suspends the other party's performance temporarily. Most exam questions present a breach that falls in the gray area — and the answer depends on how substantially the breach impaired the value of the contract to the non-breaching party.
Remedies default to expectation damages: put the plaintiff in the position they'd be in if the contract had been performed. The Hadley v. Baxendale limitation (foreseeable at time of formation) cuts off consequential damages that the breaching party couldn't have anticipated. Specific performance is the exception, not the rule — available when damages are inadequate, typically for unique goods or real property.
Exam Tips
- First sentence of every Contracts answer: "This is governed by [common law / UCC Article 2] because..." Get this wrong and every subsequent point is potentially wrong.
- UCC § 2-207 is the most tested Contracts rule. Between merchants, additional terms in acceptance become part of the contract unless materially altering. Different terms? Knockout rule in most jurisdictions.
- Pre-existing duty trap: under common law, a promise to perform an existing obligation isn't consideration. Under UCC, modifications need no consideration if made in good faith.
- The "one year" Statute of Frauds rule is narrower than it sounds: if there's ANY possibility the contract could be performed within one year, the Statute doesn't apply.
- On remedies, always calculate expectation damages first — it's the default. Only reach for specific performance if you can articulate why money damages are inadequate.
Key Rules to Know
- UCC § 2-207: definite acceptance forms contract even with additional/different terms; additional merchant terms become part unless material alteration
- Common-law mirror-image rule: any deviation = counteroffer that terminates the original offer
- Material breach: substantially impairs contract value → non-breaching party excused from performance + immediate suit for total breach
- Hadley v. Baxendale: consequential damages limited to those reasonably foreseeable at time of contract formation
- Statute of Frauds: goods $500+ (UCC, quantity term required), land, one-year impossibility, suretyship, marriage
Sample Practice Questions
Elena, a retired art collector, told her nephew Marcus that she would sell him a painting worth approximately $85,000 for $500, saying, "I'd rather you have it than anyone else, and I know you can't afford the full price." Marcus agreed and paid Elena $500, and Elena delivered the painting. Six months later, Elena's financial situation changed dramatically, and she sued Marcus to rescind the transaction, arguing that the $500 consideration was grossly inadequate and therefore the contract was unenforceable. Marcus claims the contract is valid. Which of the following is the most accurate statement regarding the enforceability of this agreement?
- The contract is unenforceable because the gross disparity between $500 and $85,000 renders the consideration legally insufficient.
- The contract is enforceable because courts generally do not inquire into the adequacy of consideration, and the $500 payment constitutes legally sufficient consideration for the painting.
- The contract is unenforceable because the extreme price disparity creates a presumption of unconscionability that shifts the burden to Marcus to prove fairness.
- The contract is enforceable, but only because the transaction is properly characterized as a gift with a condition, rather than a bargained-for exchange.
Show answer
Correct: The contract is enforceable because courts generally do not inquire into the adequacy of consideration, and the $500 payment constitutes legally sufficient consideration for the painting.
This is correct. Under the Restatement (Second) of Contracts § 79, 'if the requirement of consideration is met, there is no additional requirement of ... equivalence in the values exchanged.' The general rule is that courts will not examine whether the bargain was fair or whether the consideration was adequate, as long as there was a bargained-for exchange. Here, Elena bargained for and received $500 in exchange for the painting. The disparity in value, without more (such as fraud, duress, undue influence, or unconscionability), does not invalidate the contract.
Greenfield Construction entered into a contract with the City of Lakewood to build a new public library. A provision in the contract required Greenfield to purchase all building materials from Henderson Supply Co., a local business the city wanted to support economically. Henderson learned of the contract and, relying on the expected orders, hired three additional employees and leased extra warehouse space. Before Greenfield placed any orders, Greenfield and the City of Lakewood mutually agreed to modify the contract to allow Greenfield to purchase materials from any supplier. Henderson sued Greenfield and the City, claiming it was a third-party beneficiary whose rights had vested and could not be modified without its consent. Which of the following is the strongest argument against Henderson's claim?
- Henderson was merely an incidental beneficiary of the contract because the primary purpose of the provision was to serve the city's economic development goals, not to confer a direct benefit on Henderson.
- Henderson's rights had not yet vested because Henderson had not yet provided any materials under the contract, meaning no performance had been rendered by Henderson.
- The contract between Greenfield and the City contained an implied power to modify terms, and third-party beneficiaries take their rights subject to any such modification power.
- Henderson's reliance was not justifiable because Henderson was not a party to the contract and had no guarantee that the contract would not be modified before any orders were placed.
Show answer
Correct: Henderson's reliance was not justifiable because Henderson was not a party to the contract and had no guarantee that the contract would not be modified before any orders were placed.
This is the strongest argument against Henderson's claim. Under Restatement (Second) of Contracts § 311(3), vesting through reliance requires that the beneficiary's change of position be both material and in justifiable reliance on the promise. A strong argument exists that Henderson's reliance was not justifiable because, as a non-party with no contractual protections, Henderson knew or should have known that the contracting parties retained the power to modify or rescind the contract before any orders were placed. Without a guarantee or communication from the parties that the provision would not be changed, Henderson's decision to hire employees and lease space—before any actual purchase orders were made—may be deemed speculative rather than justifiably reliant. See Restatement (Second) of Contracts § 311 cmt. h (discussing the circumstances under which reliance is justifiable).
Greenfield Farms, a commercial apple grower, orally agreed to sell 500 bushels of Honeycrisp apples to Baker's Grocery, a retail food store, for $12,000. The next day, Greenfield Farms sent Baker's Grocery a signed written confirmation of the agreement, which Baker's Grocery received and read but never responded to. Two weeks later, when apple prices had risen sharply, Baker's Grocery refused to accept or pay for the apples, claiming the contract was unenforceable under the Statute of Frauds because Baker's Grocery never signed any writing. Is the oral contract enforceable against Baker's Grocery?
- Yes, because Baker's Grocery received a written confirmation sufficient against the sender and failed to object within 10 days.
- Yes, because any oral agreement for the sale of goods becomes enforceable once one party sends a written confirmation to the other.
- No, because the Statute of Frauds requires that the party to be charged must have signed the writing, and Baker's Grocery never signed anything.
- No, because a retail grocery store is not a 'merchant' for purposes of UCC Article 2's merchant rules governing the sale of apples.
Show answer
Correct: Yes, because Baker's Grocery received a written confirmation sufficient against the sender and failed to object within 10 days.
Under UCC § 2-201(2), between merchants, a written confirmation that is sufficient against the sender satisfies the Statute of Frauds against the recipient if the recipient has reason to know of its contents and does not send a written notice of objection within 10 days of receipt. Both Greenfield Farms (a commercial grower) and Baker's Grocery (a retail food store) qualify as merchants under UCC § 2-104(1) because they deal in goods of the kind or hold themselves out as having knowledge or skill peculiar to the goods involved. Baker's Grocery received the confirmation, read it, and failed to object within 10 days, so the merchant's confirmatory memorandum exception applies.
Related Reading
Other Subjects
Practice hundreds more Contracts questions in the app.
Download on the App Store