ESTUDYR
AIC 301 UPDATED EXAM WITH MOST TESTED GRADED A+
ASSURED SUCCESS WITH DETAILED RATIONALES
Which of the following is not an essential element of a legally binding contract?
A. Mutual assent
B. Consideration
C. Moral obligation
D. Legal purpose
Rationale: A moral obligation is not legally enforceable; the other three are required elements.
A bilateral contract is best described as:
A. One party promises and the other performs immediately
B. Each party promises to perform an act in exchange for the other's promise
C. A contract that is always voidable
D. A contract enforceable only by the obligee
Rationale: In bilateral contracts both parties exchange promises.
In a unilateral contract:
A. Both parties exchange promises immediately
B. Consideration is always absent
C. One party promises payment only if the other party performs a requested act
D. It is always unenforceable
Rationale: A unilateral contract becomes binding when the requested act is performed.
A voidable contract means:
A. It never was a contract
B. It is automatically illegal
C. It is valid but may be avoided by an innocent party due to defects (e.g., fraud, duress)
D. It cannot be rescinded under any circumstance
Rationale: Voidable contracts are valid until the injured party elects to rescind.
If fraud is proven, a plaintiff may seek:
A. Restitution only
B. Rescission or damages (compensatory, possibly punitive)
C. Specific performance only
D. Cancellation only if criminal charges filed
Rationale: Fraud allows rescission or a tort/damages remedy if rescission is inadequate.
To establish fraudulent concealment, an insurer must prove:
A. The insured was careless
,ESTUDYR
B. The insured made an oral misstatement
C. The insured knew the fact was material and intentionally concealed it
D. The agent failed to ask a question
Rationale: Intent and materiality are required for fraudulent concealment.
A unilateral mistake differs from a bilateral mistake because:
A. Unilateral mistakes always void the contract
B. Unilateral mistakes are made by one party; bilateral mistakes are made by both about the
same material fact
C. Bilateral mistakes are never grounds for relief
D. Only unilateral mistakes involve fraud
Rationale: Relief depends on whether both parties share the same erroneous belief.
A party who reasonably relied on an innocent material misrepresentation may avoid the
contract because:
A. The misrepresentation was criminal
B. Mutual assent was not achieved
C. Their consent was induced by a material falsehood (no true mutual assent)
D. The contract is automatically void under statute
Rationale: Misrepresentation vitiates true mutual assent.
The parol evidence rule is designed primarily to:
A. Allow oral terms to replace written ones
B. Achieve finality and exclude prior or contemporaneous extrinsic evidence that contradicts
a complete written agreement
C. Force parties to disclose secrets
D. Permit any evidence to show intent
Rationale: Parol evidence preserves the integrity of an integrated written contract.
Courts resolve ambiguous contract language by using established interpretive rules such as:
A. Rewriting the contract for the parties
B. Interpreting ambiguous terms against the drafting party and favoring a reasonable
meaning
C. Applying criminal standards of proof
D. Discarding the contract entirely
Rationale: Ambiguities are often construed against the drafter and by common sense.
An entire (indivisible) contract means:
A. Payment is available in parts for partial performance
B. One party must perform all obligations before the other is due to perform
,ESTUDYR
C. The contract is invalid if any part is unenforceable
D. Only divisible contracts are legal
Rationale: Entire contracts require full performance prior to reciprocal performance.
Which handwriting overrides when interpreting a printed contract form?
A. Numbers override words
B. Handwritten terms prevail over typed/printed terms
C. Printed terms always prevail
D. The earliest-dated term prevails
Rationale: Courts give highest effect to handwritten modifications as the parties’ final
expression.
Contract rights are ordinarily unassignable when:
A. The assignee pays consideration
B. Assignment would materially increase the obligor’s duty, risk, or burden, or the right is
personal or prohibited by contract/law
C. The obligor consents orally
D. The court deems it equitable
Rationale: Assignments that change obligor’s obligations or are personal are disallowed.
An assignee’s rights are generally:
A. Greater than the assignor’s rights
B. No greater than the assignor’s — the assignee “stands in the shoes” of the assignor
C. Automatically free from defenses by the obligor
D. Unrelated to the assignor’s rights
Rationale: Assignee takes only those rights and limitations that the assignor had.
A creditor beneficiary differs from a donee beneficiary because:
A. Donee beneficiaries can sue; creditors cannot
B. A creditor beneficiary receives performance to satisfy a preexisting debt, while a donee
receives a gift
C. Creditor beneficiaries are always incidental beneficiaries
D. There is no legal difference
Rationale: Creditor beneficiaries are intended to satisfy obligations owed to them.
Novation requires:
A. Unilateral notice to the original obligee
B. Agreement of all parties to substitute a new promisor and extinguish the original
promisor's liability
C. Only the obligee’s assent
, ESTUDYR
D. Court approval in all cases
Rationale: Novation substitutes parties only with mutual assent.
Impossibility discharges contractual duty when:
A. Performance simply becomes more expensive
B. An unforeseen event (e.g., subject matter destroyed, illegality, death of a unique
performer) makes performance objectively impossible
C. One party regrets the bargain
D. Market prices change after formation
Rationale: Only objective impossibility — not increased cost or disadvantage — excuses
performance.
Which event would not ordinarily excuse performance as “impossibility”?
A. Destruction of the unique subject matter after formation
B. Supervening illegality
C. Death of a personal-services contractor before performing
D. A sharp increase in the cost of materials
Rationale: Increased cost or hardship generally does not excuse performance.
A material breach is characterized by:
A. Slight delay only
B. A substantial failure that deprives the non-breaching party of the contract’s expected
benefit
C. Any nonconformity, no matter how minor
D. A technical error not affecting performance
Rationale: Material breaches are serious and discharge the other party.
If a breach is non-material (substantial performance), the non-breaching party:
A. Is excused from all duties and gets punitive damages
B. Must still perform but can recover damages for the deviation
C. Loses all contractual remedies
D. Can never sue
Rationale: Substantial performance entitles damages but not total discharge.
Which remedy is equitable rather than legal?
A. Compensatory damages
B. Consequential damages
C. Specific performance
D. Statutory penalties
AIC 301 UPDATED EXAM WITH MOST TESTED GRADED A+
ASSURED SUCCESS WITH DETAILED RATIONALES
Which of the following is not an essential element of a legally binding contract?
A. Mutual assent
B. Consideration
C. Moral obligation
D. Legal purpose
Rationale: A moral obligation is not legally enforceable; the other three are required elements.
A bilateral contract is best described as:
A. One party promises and the other performs immediately
B. Each party promises to perform an act in exchange for the other's promise
C. A contract that is always voidable
D. A contract enforceable only by the obligee
Rationale: In bilateral contracts both parties exchange promises.
In a unilateral contract:
A. Both parties exchange promises immediately
B. Consideration is always absent
C. One party promises payment only if the other party performs a requested act
D. It is always unenforceable
Rationale: A unilateral contract becomes binding when the requested act is performed.
A voidable contract means:
A. It never was a contract
B. It is automatically illegal
C. It is valid but may be avoided by an innocent party due to defects (e.g., fraud, duress)
D. It cannot be rescinded under any circumstance
Rationale: Voidable contracts are valid until the injured party elects to rescind.
If fraud is proven, a plaintiff may seek:
A. Restitution only
B. Rescission or damages (compensatory, possibly punitive)
C. Specific performance only
D. Cancellation only if criminal charges filed
Rationale: Fraud allows rescission or a tort/damages remedy if rescission is inadequate.
To establish fraudulent concealment, an insurer must prove:
A. The insured was careless
,ESTUDYR
B. The insured made an oral misstatement
C. The insured knew the fact was material and intentionally concealed it
D. The agent failed to ask a question
Rationale: Intent and materiality are required for fraudulent concealment.
A unilateral mistake differs from a bilateral mistake because:
A. Unilateral mistakes always void the contract
B. Unilateral mistakes are made by one party; bilateral mistakes are made by both about the
same material fact
C. Bilateral mistakes are never grounds for relief
D. Only unilateral mistakes involve fraud
Rationale: Relief depends on whether both parties share the same erroneous belief.
A party who reasonably relied on an innocent material misrepresentation may avoid the
contract because:
A. The misrepresentation was criminal
B. Mutual assent was not achieved
C. Their consent was induced by a material falsehood (no true mutual assent)
D. The contract is automatically void under statute
Rationale: Misrepresentation vitiates true mutual assent.
The parol evidence rule is designed primarily to:
A. Allow oral terms to replace written ones
B. Achieve finality and exclude prior or contemporaneous extrinsic evidence that contradicts
a complete written agreement
C. Force parties to disclose secrets
D. Permit any evidence to show intent
Rationale: Parol evidence preserves the integrity of an integrated written contract.
Courts resolve ambiguous contract language by using established interpretive rules such as:
A. Rewriting the contract for the parties
B. Interpreting ambiguous terms against the drafting party and favoring a reasonable
meaning
C. Applying criminal standards of proof
D. Discarding the contract entirely
Rationale: Ambiguities are often construed against the drafter and by common sense.
An entire (indivisible) contract means:
A. Payment is available in parts for partial performance
B. One party must perform all obligations before the other is due to perform
,ESTUDYR
C. The contract is invalid if any part is unenforceable
D. Only divisible contracts are legal
Rationale: Entire contracts require full performance prior to reciprocal performance.
Which handwriting overrides when interpreting a printed contract form?
A. Numbers override words
B. Handwritten terms prevail over typed/printed terms
C. Printed terms always prevail
D. The earliest-dated term prevails
Rationale: Courts give highest effect to handwritten modifications as the parties’ final
expression.
Contract rights are ordinarily unassignable when:
A. The assignee pays consideration
B. Assignment would materially increase the obligor’s duty, risk, or burden, or the right is
personal or prohibited by contract/law
C. The obligor consents orally
D. The court deems it equitable
Rationale: Assignments that change obligor’s obligations or are personal are disallowed.
An assignee’s rights are generally:
A. Greater than the assignor’s rights
B. No greater than the assignor’s — the assignee “stands in the shoes” of the assignor
C. Automatically free from defenses by the obligor
D. Unrelated to the assignor’s rights
Rationale: Assignee takes only those rights and limitations that the assignor had.
A creditor beneficiary differs from a donee beneficiary because:
A. Donee beneficiaries can sue; creditors cannot
B. A creditor beneficiary receives performance to satisfy a preexisting debt, while a donee
receives a gift
C. Creditor beneficiaries are always incidental beneficiaries
D. There is no legal difference
Rationale: Creditor beneficiaries are intended to satisfy obligations owed to them.
Novation requires:
A. Unilateral notice to the original obligee
B. Agreement of all parties to substitute a new promisor and extinguish the original
promisor's liability
C. Only the obligee’s assent
, ESTUDYR
D. Court approval in all cases
Rationale: Novation substitutes parties only with mutual assent.
Impossibility discharges contractual duty when:
A. Performance simply becomes more expensive
B. An unforeseen event (e.g., subject matter destroyed, illegality, death of a unique
performer) makes performance objectively impossible
C. One party regrets the bargain
D. Market prices change after formation
Rationale: Only objective impossibility — not increased cost or disadvantage — excuses
performance.
Which event would not ordinarily excuse performance as “impossibility”?
A. Destruction of the unique subject matter after formation
B. Supervening illegality
C. Death of a personal-services contractor before performing
D. A sharp increase in the cost of materials
Rationale: Increased cost or hardship generally does not excuse performance.
A material breach is characterized by:
A. Slight delay only
B. A substantial failure that deprives the non-breaching party of the contract’s expected
benefit
C. Any nonconformity, no matter how minor
D. A technical error not affecting performance
Rationale: Material breaches are serious and discharge the other party.
If a breach is non-material (substantial performance), the non-breaching party:
A. Is excused from all duties and gets punitive damages
B. Must still perform but can recover damages for the deviation
C. Loses all contractual remedies
D. Can never sue
Rationale: Substantial performance entitles damages but not total discharge.
Which remedy is equitable rather than legal?
A. Compensatory damages
B. Consequential damages
C. Specific performance
D. Statutory penalties
