Certified Professional Public Buyer (CPPB) Practice Test

Which of the following best describes the concept of legal purpose in a contract?

1. The contract must comply with local laws

2. The contract’s intent must be agreed upon by both parties

3. The contract must be enforceable under the law

4. The contract should outline financial penalties for breach

The correct answer is: The contract must be enforceable under the law

The concept of legal purpose in a contract refers specifically to the requirement that the subject matter of a contract must be lawful and not violate public policy. Therefore, a contract is only enforceable if it is created for a legal purpose. If a contract involves illegal activities or outcomes, it cannot be enforced by the courts, and parties cannot seek legal recourse for any breaches. This principle ensures that the legal system does not support or enforce agreements that contravene the law. A contract involving illegal activities would be considered void, meaning it has no legal effect. Thus, for parties to form a binding agreement, the underlying purpose must be legal and align with existing laws. While complying with local laws and mutual agreement between parties is crucial for various aspects of contract law, these alone do not encapsulate the essence of legal purpose as thoroughly as the enforceability of the contract under law. Additionally, outlining financial penalties for breach pertains more to the contract’s terms rather than its fundamental legal purpose.