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
On March 1, Dawson orally agreed to sell his commercial warehouse to Pratt for $350,000, with closing set for June 15. On March 10, Pratt sent Dawson a signed letter stating: 'This confirms our agreement for my purchase of your warehouse at 450 Industrial Blvd. for $350,000, closing June 15.' Dawson received the letter on March 12 and placed it in his desk without responding. On April 20, Dawson received a better offer and informed Pratt he would not go through with the sale. Pratt sued for breach of contract. Both Dawson and Pratt are merchants in the business of buying and selling commercial real estate. Dawson raises the Statute of Frauds as a defense. How should the court rule?
- The Statute of Frauds bars enforcement because Dawson never signed a writing.
- The Statute of Frauds is satisfied because Pratt's signed confirmation letter, unrebutted by Dawson within a reasonable time, binds both parties under the merchant's confirmation rule.
- The Statute of Frauds is satisfied because Dawson's failure to object to the confirmation letter constitutes an adoptive admission and ratification of the writing.
- The Statute of Frauds is satisfied because Pratt's letter contains all essential terms—parties, property identification, price, and closing date—and is signed by one of the contracting parties.
Show answer
Correct: The Statute of Frauds bars enforcement because Dawson never signed a writing.
Under the Statute of Frauds for real property transactions, the party to be charged (here, Dawson as the seller resisting enforcement) must have signed a writing sufficient to indicate a contract for the sale of land. Unlike UCC § 2-201(2), which provides a 'merchant's confirmation' exception allowing an unsigned writing to satisfy the Statute of Frauds against a merchant who fails to object within 10 days, no comparable exception exists for real property contracts. The Restatement (Second) of Contracts § 125 requires a memorandum signed by the party to be charged for land sale contracts. Since Dawson never signed any writing, the Statute of Frauds bars enforcement regardless of Pratt's signed confirmation letter.
Baker, a talented portrait painter, contracted with Henderson to paint Henderson's family portrait for $5,000. The contract contained no provisions addressing assignment or delegation. Baker subsequently delegated the duty to paint the portrait to Carlson, another professional portrait painter of comparable skill and reputation. Henderson learned of the delegation and immediately notified both Baker and Carlson that he refused to accept performance from Carlson. Carlson tendered performance, but Henderson rejected it. Henderson then sued Baker for breach of contract. Which of the following best describes the legal outcome?
- Henderson will prevail because duties involving personal skill or judgment cannot be delegated without the obligee's consent.
- Henderson will not prevail because the contract contained no anti-delegation clause, and Carlson possesses comparable skill.
- Henderson will not prevail because Baker remains liable as a surety for Carlson's performance, which adequately protects Henderson's interests.
- Henderson will not prevail because Henderson's refusal to accept Carlson's tender of performance constituted an anticipatory repudiation of the contract.
Show answer
Correct: Henderson will prevail because duties involving personal skill or judgment cannot be delegated without the obligee's consent.
Under Restatement (Second) of Contracts § 318(2) and UCC analogues, a duty cannot be delegated if the obligee has a substantial interest in having the original promisor perform. Contracts for personal services involving unique artistic skill, taste, or judgment are the classic example of non-delegable duties. Painting a portrait is an inherently personal service depending on the artist's unique creative vision, skill, and style. Even though Carlson may be equally skilled, each artist's work is unique, and Henderson bargained for Baker's particular artistic interpretation. Therefore, Baker's attempted delegation was ineffective without Henderson's consent, and Baker's failure to perform constitutes a breach.
A homeowner contracted with a landscaper to design and install an elaborate garden for $50,000. The landscaper spent $15,000 on specialized plants and materials and performed $20,000 worth of labor before the homeowner repudiated the contract without justification. At the time of breach, the fair market value of the partially completed work conferred on the homeowner's property was $25,000. The landscaper's expected profit on the full contract would have been $12,000. The landscaper sues for breach of contract. If the landscaper elects to recover expectation damages, what is the proper measure of recovery?
- $25,000, representing the market value of the benefit conferred on the homeowner.
- $35,000, representing the costs incurred plus lost profits.
- $47,000, representing costs incurred of $35,000 plus the $12,000 expected profit.
- $12,000, representing only the lost profits on the contract.
Show answer
Correct: $47,000, representing costs incurred of $35,000 plus the $12,000 expected profit.
Under Restatement (Second) of Contracts § 347, expectation damages equal the loss in value caused by the breach plus any other loss (incidental/consequential) minus any cost or loss avoided. An equivalent formulation for a partially performing plaintiff is: costs already incurred ($15,000 materials + $20,000 labor = $35,000) plus the profit the plaintiff would have earned on the full contract ($12,000) = $47,000. This places the landscaper in the same economic position as if the contract had been fully performed—the landscaper would have received $50,000 and spent $38,000 in total costs ($50,000 − $12,000 profit), yielding $12,000 profit. Since $35,000 of costs are already sunk, the landscaper needs $35,000 + $12,000 = $47,000 to be made whole.
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