Contracts I Quiz
1. What is the challenge of an ideal contracting system? Express your answer in terms of the risk and balance of power.
An ideal contracting system must allow parties the freedom to identify and redistribute all possible commercial risks, while regulating the balance of power between them.
2. In an ordinary commercial transaction, what are the pre-contractual risks of the buyer and the seller, respectively?
The buyer risks that he could pay less for the item, and that the price will go up. The seller risks that he could get more for the item, and that the price will go down. In simple terms, both risk that they could do less well.
3. (T/F) A person can contract to redistribute risks over which he has absolutely no control.
True. As in Anderson v. Backlund, where one party contracted that there would be water, essentially guaranteeing that it would rain.