MBE- Contracts - Formation Exam
Questions With 100% Verified Answers
On April 1, an owner and a buyer signed a writing in which the
owner, in consideration of $100 to be paid to the owner by the
buyer, offered the buyer the right to purchase Greenacre for
$100,000 within 30 days. The writing further provided, "This offer
will become effective as an option only if and when the $100
consideration is in fact paid." On April 20, the owner, having
received no payment or other communication from the buyer, sold
and conveyed Greenacre to a citizen for $120,000. On April 21, the
owner received a letter from the buyer enclosing a cashier's check
for $100 payable to the owner and stating, "I am hereby exercising
my option to purchase Greenacre and am prepared to close
whenever you're ready."
Which of the following, if proved, best support the buyer's suit
against the owner for breach of contract? -
correct answer ✅The buyer was unaware of the sale to the citizen
when the owner received the letter and check from the buyer on
April 21.
The legal effect of an offer is to create a power in the offeree to
enter into a contract. The offeree enters the contract by making his
acceptance. One kind of offer, however, known as an option, is not
only an offer to contract, but is at the same time a contract that the
offeror promises to keep the offer open for a certain amount of
time. At common law, the only way an option contract could be
,MBE- Contracts - Formation Exam
Questions With 100% Verified Answers
formed was if the offeree gave the offeror consideration in return
for the offer. Otherwise, the option was revocable.
An option promise, which makes an offer irrevocable during the
time stated, requires consideration to be enforceable. Even if
consideration is not furnished, however, the offer can be accepted
by the offeree unless the offer lapses or the offeree receives notice
of revocation by the offeror.
An option contract transforms a unilateral contract into a bilateral
one because it provides some guarantee to any party providing an
agreement to the contract that their actions will receive
compensation. The compensation may begin immediately after the
action is begun or may only come into effect once a significant
portion of the work is completed. The party who has engaged an
action leading to the partial performance of the contract may be
able to claim detrimental reliance upon the belief that the offeror
would provide payment.
A is correct. The requested consideration had not been paid, which
means the owner's April 1 letter was not effective as an option
when the owner conveyed Greenacre to the citizen. Because the
offer was not set to lapse until April 30, on April 21, the buyer was
still free to accept the owner's offer, unless it could be shown that
the buyer received notice that the owner co
, MBE- Contracts - Formation Exam
Questions With 100% Verified Answers
A debtor's liquidated and undisputed $1,000 debt to a creditor was
due on March 1. When the debt was still unpaid on March 15, the
creditor told the debtor that if the debtor promised to pay the
$1,000 on or before December 1, then the creditor would not sue
to collect the debt. The debtor orally agreed. On April 1, the
creditor sued the debtor to collect the debt that had become due
on March 1. The debtor moved to dismiss the creditor's complaint.
Should the court grant the debtor's motion? -
correct answer ✅No, because there was no consideration to
support the creditor's promise not to sue.
A promise is supported by consideration if two things are true: (i)
the promisee is giving up something of value or circumscribes his
liberty in some way to suffer a legal detriment; and (ii) the promisor
makes his promise as part of a bargained-for exchange for the
promisee's legal detriment. The "legal detriment" aspect is
important where it is not clear that one party has really given
anything up in the bargain. The "bargain" aspect is dispositive in
situations that typically do not involve business dealings, such as a
promise to make a gift.
One of the principal purposes of the bargain requirement is to
prevent the enforcement of promises that in reality just promise to
make gifts. In the ordinary case of a promise to make a gift, the
promise fails to be enforceable for lack of consideration not only
Questions With 100% Verified Answers
On April 1, an owner and a buyer signed a writing in which the
owner, in consideration of $100 to be paid to the owner by the
buyer, offered the buyer the right to purchase Greenacre for
$100,000 within 30 days. The writing further provided, "This offer
will become effective as an option only if and when the $100
consideration is in fact paid." On April 20, the owner, having
received no payment or other communication from the buyer, sold
and conveyed Greenacre to a citizen for $120,000. On April 21, the
owner received a letter from the buyer enclosing a cashier's check
for $100 payable to the owner and stating, "I am hereby exercising
my option to purchase Greenacre and am prepared to close
whenever you're ready."
Which of the following, if proved, best support the buyer's suit
against the owner for breach of contract? -
correct answer ✅The buyer was unaware of the sale to the citizen
when the owner received the letter and check from the buyer on
April 21.
The legal effect of an offer is to create a power in the offeree to
enter into a contract. The offeree enters the contract by making his
acceptance. One kind of offer, however, known as an option, is not
only an offer to contract, but is at the same time a contract that the
offeror promises to keep the offer open for a certain amount of
time. At common law, the only way an option contract could be
,MBE- Contracts - Formation Exam
Questions With 100% Verified Answers
formed was if the offeree gave the offeror consideration in return
for the offer. Otherwise, the option was revocable.
An option promise, which makes an offer irrevocable during the
time stated, requires consideration to be enforceable. Even if
consideration is not furnished, however, the offer can be accepted
by the offeree unless the offer lapses or the offeree receives notice
of revocation by the offeror.
An option contract transforms a unilateral contract into a bilateral
one because it provides some guarantee to any party providing an
agreement to the contract that their actions will receive
compensation. The compensation may begin immediately after the
action is begun or may only come into effect once a significant
portion of the work is completed. The party who has engaged an
action leading to the partial performance of the contract may be
able to claim detrimental reliance upon the belief that the offeror
would provide payment.
A is correct. The requested consideration had not been paid, which
means the owner's April 1 letter was not effective as an option
when the owner conveyed Greenacre to the citizen. Because the
offer was not set to lapse until April 30, on April 21, the buyer was
still free to accept the owner's offer, unless it could be shown that
the buyer received notice that the owner co
, MBE- Contracts - Formation Exam
Questions With 100% Verified Answers
A debtor's liquidated and undisputed $1,000 debt to a creditor was
due on March 1. When the debt was still unpaid on March 15, the
creditor told the debtor that if the debtor promised to pay the
$1,000 on or before December 1, then the creditor would not sue
to collect the debt. The debtor orally agreed. On April 1, the
creditor sued the debtor to collect the debt that had become due
on March 1. The debtor moved to dismiss the creditor's complaint.
Should the court grant the debtor's motion? -
correct answer ✅No, because there was no consideration to
support the creditor's promise not to sue.
A promise is supported by consideration if two things are true: (i)
the promisee is giving up something of value or circumscribes his
liberty in some way to suffer a legal detriment; and (ii) the promisor
makes his promise as part of a bargained-for exchange for the
promisee's legal detriment. The "legal detriment" aspect is
important where it is not clear that one party has really given
anything up in the bargain. The "bargain" aspect is dispositive in
situations that typically do not involve business dealings, such as a
promise to make a gift.
One of the principal purposes of the bargain requirement is to
prevent the enforcement of promises that in reality just promise to
make gifts. In the ordinary case of a promise to make a gift, the
promise fails to be enforceable for lack of consideration not only
