Contracts and Sales Multistate Bar Practice Exam

What happens when a party changes position based on an oral modification?

1. It legitimizes the modification automatically

2. It may lead to a waiver of the original terms

3. It requires re-signing of the original contract

4. It voids the contract entirely

The correct answer is: It may lead to a waiver of the original terms

When a party changes their position based on an oral modification, this can lead to a waiver of the original terms of the contract. A waiver occurs when one party indicates, explicitly or implicitly, that they will not enforce a provision of the contract. If a party acts in reliance on the oral modification, it implies acceptance of that modification, potentially leading the courts to determine that the original terms are no longer being enforced. In many jurisdictions, contracts that are modified by agreement, even if only orally, can create an enforceable understanding between the parties. However, this does not mean the modification is automatically valid in all cases, particularly if the original contract required modifications to be in writing due to a statute of frauds or similar legal requirements. While the other options present scenarios that might seem plausible, they do not accurately convey the legal implications of relying on an oral modification. Simply changing positions does not automatically legitimize the modification or void the contract in its entirety. The original contract generally remains valid but is subject to the potential new agreement formed by the modification. Re-signing the original contract is not required as long as both parties acknowledge the new terms. Thus, acting on an oral modification can indeed lead to a waiver of the original terms, which is why