MBE Practice Exam #4 (Set 2) questions and answers 2022/2023

A builder entered into a written contract with a business owner to construct an addition to the owner's place of business. The builder was to supply all materials for the job, and was to be paid a total of $200,000. The builder anticipated that his profit would be 10 percent of that amount. Before construction began, the builder received a $25,000 payment from the business owner. The business owner, due to a downturn in his business, failed to make the first progress payment and ordered the builder to stop working on the project. At this time, the builder had expended $55,000 and it would have cost the builder $125,000 to continue the project to completion. The work completed added $35,000 in value to the building. The builder retained $10,000 of construction materials purchased but not used in the project, and used them in another construction job. The builder sued the business owner for breach of contract. What is maximum amount of damages to which the builder is entitled? Answers: A. $20,000 B. $35,000 C. $40,000 D. $55,000 Answer choice C is correct. The general measure of damages for the owner's failure to pay the contract price, in whole or in part, is the profits that the builder would have earned, plus any costs incurred by the builder, less the amount of any payments made by the owner to the contractor and any materials purchased by the contractor that are used by the contractor on another job. Here, the builder's profit would have been $20,000 ($200,000 x 10%) and the builder had expended $55,000 in constructing the building, for a total of $75,000. (Note: This amount may also be arrived at by subtracting the cost to complete the building, $125,000, from the contract price, $200,000.) From this amount is subtracted the payment received by the builder from the owner ($25,000) and the amount expended by the builder for materials the builder used on another job ($10,000), leaving $40,000. Answer choice A is incorrect because it takes into account only the profit that the builder would have earned had the contract been completed. Answer choice B is incorrect because, while it states one method for measuring restitutionary damages (i.e., the increase In the value of the owner's building ($35,000)), it fails to take into account the amount paid by the owner to the builder (i.e., $25,000). Moreover, the amount is less than the expectancy damages to which the builder is entitled. Answer choice D is incorrect because, while it states the amount that the builder expended in reliance on the contract in fails to take into account the value of the purchased material that he was able to use on another job ($10,000) and also fails to take into account the amount paid by the owner to the builder (i.e., $25,000). A federal act that provided funds to fight HIV/AIDS includes two relevant provisions. The first provision prohibits the use of funds to promote or advocate the legalization or practice of prostitution. The second provision requires a recipient of the funds to expressly adopt and espouse a policy against prostitution. In adopting this act, Congress specifically found that prostitution was a factor in the spread of HIV/AIDS. Prior to the adoption of this act, a private organization that received substantial funding from private sources did not have such a policy because the organization feared that such a policy would hinder its work with prostitutes, making its programs less effective in addressing the HIV/AIDS problem. Although the private organization otherwise qualified as a recipient of federal funds through the act, because the private organization refused to adopt and espouse the policy against prostitution, the organization's application for such funds was rejected. The organization has filed an action in federal court for a declaratory judgment that the act's anti-prostitution policy requirement violates the organization's First Amendment free speech rights. How should the court rule? Answers: A. For the federal government, because Congress can place conditions on recipients of federal grants pursuant to the Spending Power of Article I, Section 8 of the U.S. Constitution. B. For the federal government, because of the government speech doctrine. C. For the private organization, because a federal grant cannot be contingent on a condition that limits a recipient's freedom of speech. D. For the private organization, because the First Amendment free speech rights include the right not to be forced by the government to adopt and espouse the government's views. Answer choice D is correct. Under the First Amendment, the government may not tell people what they must believe or say. Here, the conditioning of a grant on this requirement places an unconstitutional burden on the organization's exercise of its First Amendment free speech rights. Answer choice A is incorrect. Congress may place conditions on recipients of federal grants. Generally, if the recipient finds the conditions offensive, the recipient's option is to refuse the federal funds. However, Congress may not place conditions on grants that unconstitutionally burden a recipient's First Amendment rights. Answer choice B is incorrect because the government speech doctrine does not apply here. This doctrine provides that government speech is not constrained by the Free Speech Clause of the First Amendment. The speech subject to constraint here is that of the private organization, not the government. Answer choice C is incorrect because a grant can be made contingent on a condition that a recipient refrain from endorsing a particular view. Congress may even select recipients of federal funds based on whether they hold views that are consistent with the manner in which those funds are to be used. However, Congress cannot force a recipient to adopt and espouse a particular view as the recipient's own view in order to obtain funds the recipient would otherwise be entitled to receive. A buyer executed a contract with a seller to purchase the seller's house. The buyer granted a mortgage on the property to a bank in exchange for a loan with which to purchase the house. The terms of the loan stated that in the event of a default, the buyer had the right to redeem the property before the foreclosure sale. The buyer made regular payments for six months before renegotiating new terms with the bank. In exchange for a lowered interest rate, the buyer agreed to strike the redemption language from the mortgage and waive her right of redemption. Six months later, the buyer defaulted on the mortgage and the bank brought foreclosure proceedings. Before the foreclosure sale, the buyer attempted to redeem the property, but the bank refused to accept the buyer's payment. The buyer filed suit to prevent the foreclosure sale. The applicable jurisdiction has enacted a statute giving the mortgagor the right to redeem the mortgaged property for six months after the foreclosure sale. How should the court rule? Answers: A. The court should find for the buyer, because the waiver clogged the buyer's equity of redemption. B. The court should find for the buyer, because the mortgage was a purchase-money mortgage. C. The court should find for the bank, because the waiver was provided after the execution of the mortgage in exchange for a lowered interest rate. D. The court should find for the bank, because the buyer has a statutory right to redeem the property after the foreclosure sale. Answer choice C is correct. After default but prior to foreclosure, a mortgagor retains the right to reclaim clear title to the property and prevent foreclosure; this right is known as the mortgagor's "equity of redemption." Courts routinely reject attempts by the mortgagee to deny the mortgagor this right (i.e., to "clog" the equity of redemption) prior to default such as by the inclusion of a waiver clause in the mortgage. However, a mortgagor may waive the right to redeem after the mortgage has been executed in exchange for good and valuable consideration. Here, because the buyer agreed to waive her right of redemption in consideration of a lower interest rate after the mortgage had already been executed, the court will likely enforce the waiver. Answer choice B is incorrect because the equity of redemption is not dependent on the mortgage being a purchase-money mortgage. Moreover, the buyer waived his right to redeem the property. Answer choice D is incorrect because the existence of a statutory right of redemption after a foreclosure sale does not terminate the mortgagor's equitable right to redeem the mortgaged property prior to the foreclosure sale. A wealthy widower hosted a dinner on his yacht for his son and the son's friend. The son, to induce his friend to marry him, told her that, if she would marry him, he would buy her a new car. After the son's friend accepted his proposal the widower offered to transfer ownership of the yacht to her when she married his son if she agreed to wear the gown that his deceased wife had worn at her wedding to him. The woman readily agreed. The woman and the son married and at the wedding, the woman wore the gown, but due to incompatibility, they separated shortly thereafter and subsequently divorced. Is the woman entitled to either the car from the son or the yacht from the widower? Answers: A. Yes, both the car and the yacht. B. Yes, but only the car. C. Yes, but only the yacht. D. No, neither the car nor the yacht. Answer choice C is correct. The widower made an oral promise to transfer ownership of the yacht to his son's friend. While this promise was conditioned on the friend's marrying the son, the friend's promise to the widower was the wear the gown that the widower's deceased wife had worn at their wedding, which promise the woman kept. Consequently, she is entitled to the yacht. The Statute of Frauds does not apply to the widower's oral promise because the act of marriage was not consideration for the promise, but a condition precedent upon the widower's obligation to fulfill the promise. The Statute of Frauds applies to the son's oral promise and forestalls its enforcement. Answer choice A is incorrect. The widower's oral promise to transfer ownership of the yacht to his son's friend is enforceable. This promise is not subject to the Statute of Frauds, because the act of marriage was not consideration for the promise, but a condition precedent upon the widower's obligation to fulfill the promise; the consideration was the promise to wear the dress. However, the son's oral promise to give a car to his friend is not enforceable because it is subject to the Statute of Frauds. The Statute of Frauds applies to this promise because the act of marriage was consideration for the promise. Accordingly, answer choices B and D are incorrect. Over the years, homeowners on a street have engaged in a friendly competition over decorating the outside of their houses for Halloween. Finding that the favorable publicity about the competition has increased the value of their homes, the homeowners enter into a signed written agreement that each will decorate the outside of his house for Halloween. The agreement, which is not recorded, specifically indicates an intent that successors in interest be bound by the agreement. one elderly homeowner moved away and sold her house to a young, childless couple. The couple was informed of the agreement before they entered into the contract to purchase the house in fee simple absolute. For aesthetic reasons, the couple refuses to decorate their house. The applicable jurisdiction follows the traditional rules with regard to the enforceability of a real covenant. Can the couple's neighbor, who was a party to the agreement, enforce the agreement as a real covenant against the couple? Answers: A. No, because of a lack of privity B. No, because the lack of agreement was not recorded. C. Yes, because the covenant "touches and concerns" the property. D. Yes, because the couple had actual notice of the agreement. Answer choice A is correct. In order for an agreement to be enforceable against a successor in interest as a real covenant, the traditional rule requires that there be horizontal privity of estate between the original parties to the agreement. With regard to the agreement to decorate one's own residence for Halloween, the original parties to the agreement were neighbors. While they had a common purpose of increasing the value of their house through decorating them for Halloween, they did not have a shared ownership in the specific real property. (Note: Although vertical privity is also a requirement for the enforcement of the agreement as a real covenant, that requirement is satisfied since the couple purchased the house from one of the original parties to the covenant, the elderly homeowner, in fee simple absolute, thereby taking the same durational estate as that held by the seller.) Answer choice B is incorrect. While recording an agreement can give a subsequent purchaser of a home on the street, such as the young couple, notice of the agreement, recording it is not the only way in which a subsequent purchaser can acquire such notice. Here, the young couple had actual notice of the agreement. Answer choice C is incorrect. While the agreement "touches and concerns" the property because it requires the homeowners to perform a specific act, decorating their homes, the agreement is not enforceable as a real covenant because of the lack of horizontal privity. Answer choice D is incorrect. While the couple, being informed of the agreement at the time that they entered into a contract to purchase their house, had actual notice of the agreement, the agreement is not enforceable as a real covenant because of the lack of horizontal privity. There is a federal policy to encourage local recycling. A municipality passed an ordinance to enhance the processing of solid waste and improve recycling within its jurisdiction. The municipality required all solid waste to be brought to a transfer station owned by the municipality. Anyone who brought solid waste to the transfer station was charged a "tipping fee." In addition, the municipality required each commercial trash hauler to purchase a permit in order to collect solid waste in the municipality. The combined cost of the "tipping fee" and the permit was fixed at an amount to ensure that the municipality did not lose money in operating the transfer station. Prior to the enactment of the ordinance, a local corporation had collected solid waste in the municipality and delivered it to an out-of-state facility, which charged much less than the combined cost of the fee and the permit. The corporation filed a lawsuit challenging the constitutionality of the municipal ordinance. The court ruled in favor of the municipality. Is the court's ruling correct? Answers: A. Yes, because the ordinance furthers the federal policy of encouraging recycling. B. Yes, because the transfer station is owned by the municipality. C. No, because the ordinance discriminates against interstate commerce. D. No, because the ordinance violates the Comity Clause of Article IV, Section 2. Answer choice B is correct. The ordinance discriminates against the out-of-state facility and in favor of the local transfer station. Because it deals with a traditional local government function (i.e., trash removal)