Contracts and Sales Multistate Bar Practice Exam

What is required for an effective modification under the UCC?

1. Mutual agreement of both parties

2. No consideration is needed if made in good faith

3. It must be written and signed

4. Performance must occur before the modification is considered

The correct answer is: No consideration is needed if made in good faith

An effective modification of a contract under the UCC does not require new consideration if the modification is made in good faith. This principle is rooted in the understanding that the parties may need to adapt their agreement to changing circumstances, and requiring consideration in every case could hinder flexibility and fairness in commercial transactions. Under UCC Section 2-209, it emphasizes that parties can modify a contract without needing to provide new consideration provided that the modification is made in good faith. This accommodates the practical realities of commercial dealings, where the parties might agree to changes in the order, specifications, or delivery terms due to unforeseen issues or evolving agreements. In contrast, the other options propose requirements that are not necessary under the UCC. While mutual agreement is a critical element of any contract modification, it does not alone constitute an effective modification without consideration of the good faith exception. Writing and signatures, while advisable for clarity and enforceability, are not always legally necessary under the UCC for contract modifications unless the terms fall under the Statute of Frauds. Lastly, performance does not need to occur to validate the modification; the key is reaching a mutual agreement that is made in good faith without needing to fulfill additional prerequisites.