Contracts and Sales Multistate Bar Practice Exam

If a new contract is breached, what options does the debtor have if the creditor sues on the original contract?

1. The debtor can only raise the new contract as a defense

2. The debtor may wait to respond until they incur damages

3. The debtor must dismiss the original contract claim

4. The debtor cannot raise any defenses at all

The correct answer is: The debtor may wait to respond until they incur damages

The correct option indicates that the debtor may wait to respond until they incur damages. This reflects the principle that the decision to pursue a response in a legal claim is often tied to the occurrence of actual harm. In contract law, a debtor can choose to defer engaging with the creditor’s lawsuit until they are able to quantify the damages they might suffer as a result of the creditor’s breach of contract. When dealing with breaches, the debtor has the right to assess the situation and gather sufficient information about how the breach or the original claim may affect them. This can include waiting until potential damages become clearer, thus allowing them to craft a more informed and potentially stronger defense or counterclaim. The other options present limitations or misunderstandings of the debtor’s rights in this situation. By indicating that the debtor can only raise the new contract as a defense, it restricts the debtor's legal strategies in a way that does not reflect the flexibility allowed in litigation. The idea that the debtor must dismiss the original claim is incorrect as well since the debtor can still contest the claim while also considering the implications of the new contract. Lastly, suggesting that the debtor cannot raise any defenses diminishes their rights in legal proceedings, as individuals involved in contracts typically have various defenses available to them