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Contracts Practice Exam

Read the following fact pattern, and answer the question. Give yourself 30 minutes to complete this exam. Do not go over the time limit.

We recommend that you take this exam only after you have completed your study of unconscionable contracts. If necessary, review the Contracts Rules of Law before starting this exam.

Once you have completed the practice exam in the time allotted, then compare your answer with this Contracts Sample Answer.

Contracts Fact Pattern

Fast Eddie is the only car dealer in the west end of Anytown. The west end is in the slums and has a high crime rate. Eddie sells junkers with a high mark up -- typically twice what a similar car would cost in the north end where there are three car dealers.

Fast Eddie has just bought a brand new electrified fence at a substantial cost and hired several security people with attack dogs to patrol his lot at night. Up until the new security measures, one out of three cars had been stolen off of his lot. "The security cost me a bundle," Eddie says, "but I bet I'll only lose one out of six of these junkers now."

Only one bus drives through the west end and makes only two circuits. It picks people up at 10 am and drops them off in the north end at 11 am. It starts from the north end at 3 PM and drops them off in the west end at 4 PM. There are no other buses. There is no way to reasonably walk out of the west end. You either take the bus or have a car.

Laura is a welfare mom. She dropped out of high school to have her baby. Laura is about to lose her welfare money as part of the new welfare-to-work program. She has secured a job in the north end which pays her $1000 a month after taxes. She must report to work by 9 am each day and stay until 4 PM or she will lose the job. There are no taxis willing to go to the west end.

Laura goes to Fast Eddie to buy a car. He offers her any car on the lot for $2400, which is approximately twice the cost of the same vehicle if you bought it in the north end. She tries to negotiate with Eddie, but he brushes her off by saying, "It's part of my 'No Haggle Policy'. One price for everything -- $2400. Take it or leave it. Here's the contract."

The terms are that Laura can pay off the $2400 over the course of a year in 12 equal installments, or $200 a month. If Laura defaults on any payment then Eddie gets to repossess the car and keep all of the payments. Laura's expenses are $750 a month, which Eddie is aware of. The interest rate on a good loan in this city would be 20%.

Laura reads the contract, but doesn't understand the part about keeping all of the payments and repossession. She's desperate for a car, however, so she signs an agreement to these terms and buys the car. She starts work and everything goes well until the 11th month when her baby gets sick. Laura has to pay the doctor and misses a payment on the car. Eddie repossesses. Laura loses her job, gets evicted from her apartment and ends up in a homeless shelter where her baby gets even more sick because of the drafty conditions. Laura's boss says that if she can get the car for transportation, then she gets her job back.

Question: Does Laura have a remedy under a theory of unconscionable contracts?

Once you have completed the practice exam in the time allotted, then compare your answer with this Contracts Sample Answer.

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