Contracts and Sales Multistate Bar Practice Exam

What does the equal dignity rule require in contract law?

1. An agent's authority must be verbal

2. It requires all contracts made on behalf of a principal to be in writing

3. The contract terms must be negotiated in person

4. All parties must sign an agreement

The correct answer is: It requires all contracts made on behalf of a principal to be in writing

The equal dignity rule is a legal principle that mandates that when an agent acts on behalf of a principal, the authority to do so must be executed in the same form as the contract being made. This means if the underlying contract is required by law to be in writing, the agent’s authority to enter into that contract on behalf of the principal must also be in writing. Thus, the requirement that all contracts made on behalf of a principal must be in writing aligns with the equal dignity rule, ensuring consistency between the authority granted to an agent and the formalities required for the specific type of contract. This alignment helps to avoid disputes over the validity of contracts and the authority of agents, maintaining the integrity of contractual relationships. The other options do not accurately reflect the requirements of the equal dignity rule. For example, claiming that authority must be verbal overlooks the necessity for written authority when the contract itself demands written form. Similarly, stating that contract terms must be negotiated in person or that all parties must sign an agreement does not capture the essence of the equal dignity rule, which centers specifically on the relationship between the form of authority and the form of the contract.