Contracts

Contracts on the CP Exam

Contract law accounts for 10% of the NALA Certified Paralegal exam. This content area covers the lifecycle of a contract from formation through breach and remedies. The CP exam tests both common law contract principles and UCC Article 2 (governing sales of goods), so you must understand the differences between the two frameworks.

Contract Formation

A valid contract requires offer, acceptance, consideration, capacity, and legality. Each element has specific rules that the CP exam tests in detail.

• Offer: Must demonstrate intent to be bound, contain definite terms, and be communicated to the offeree. Advertisements are generally invitations to negotiate, not offers. Offers can be revoked before acceptance unless supported by consideration (option contract) or under UCC firm offer rule.
• Acceptance: Under common law, the mirror image rule requires acceptance to match the offer exactly. Under UCC 2-207, acceptance with additional or different terms can still form a contract between merchants.
• Consideration: Each party must provide something of legal value (a bargained-for exchange). Past consideration is not valid. Pre-existing duty rule prevents enforcing promises to do what one is already obligated to do.
• Capacity: Minors (voidable), mentally incapacitated persons, and intoxicated persons may lack capacity. Minors can disaffirm contracts but must return any benefit received.
• Legality: Contracts for illegal purposes or that violate public policy are void and unenforceable.

Defenses to Enforcement

• Statute of Frauds: Certain contracts must be in writing: marriage, year+ performance, land, executor promises, goods $500+ (UCC), and suretyship (MYLEGS mnemonic).
• Mistake: Mutual mistake of a material fact makes a contract voidable. Unilateral mistake generally does not, unless the other party knew or should have known.
• Fraud and misrepresentation: Intentional misrepresentation of a material fact that induces reliance makes the contract voidable.
• Duress and undue influence: Contracts entered under physical threat or improper pressure from a trusted relationship are voidable.
• Unconscionability: Contracts so one-sided that they shock the conscience may be voided or modified by a court.

Performance, Breach, and Remedies

• Conditions: Precedent (must occur before duty arises), concurrent, and subsequent (may discharge a duty).
• Material breach vs. minor breach: Material breach excuses the non-breaching party from performance. Minor breach allows damages but does not excuse performance.
• Remedies: Compensatory damages (expectation, reliance, restitution), consequential damages (Hadley v. Baxendale foreseeability test), liquidated damages (must be reasonable estimate), specific performance (for unique goods or land), and rescission.
• UCC remedies: Buyer's remedies include cover, market price damages, and specific performance. Seller's remedies include resale, market price damages, and action for the price.

Master contract law concepts with CP exam flashcards and practice exams. Sign up free to access all study materials.