Chapter 4. Formation Of Contracts—Consideration (71-109)

Question 1

A owes B $500 on a negotiable note. C, an indorser of the note, was duly charged at maturity. B’s rights against A and C are barred by the statute of limitations. A promises C to pay B the amount of the note. Is this promise binding?

Answer 1

The promise is binding for the benefit of B. Restatement 2d of Contracts § 92(b)

Question 2

A offers to buy a book owned by B and to pay B $10 in exchange therefor. B accepts the offer and delivers the book to A. Is there consideration?

Answer 2

The transfer and delivery of the book constitute a performance and are consideration for A’s promise. See Uniform Commercial Code § § 2-106, 2-301. This is so even though A at the time he makes the offer secretly intends to pay B $10 whether or not he gets the book, or even though B at the time he accepts secretly intends not to collect the $10. Restatement 2d of Contracts § 71(b)

Question 3

A receives a gift from B of a book worth $10. Subsequently A promises to pay B the value of the book. Is there consideration?

Answer 3

There is no consideration for A’s promise. This is so even though B at the time he makes the gift secretly hopes that A will pay him for it. As to the enforcement of such promises, see § 86. Restatement 2d of Contracts § 71(b)

Question 4

A promises to make a gift of $10 to B. In reliance on the promise B buys a book from C and promises to pay C $10 for it. Is there consideration?

Answer 4

There is no consideration for A’s promise. As to the enforcement of such promises, see § 90. Restatement 2d of Contracts § 71(b)

Question 5

A desires to make a binding promise to give $1000 to his son B. Being advised that a gratuitous promise is not binding, A writes out and signs a false recital that B has sold him a car for $1000 and a promise to pay that amount. Is there consideration?

Answer 5

There is no consideration for A’s promise. Restatement 2d of Contracts § 71(b)

Question 6

A desires to make a binding promise to give $1000 to his son B. Being advised that a gratuitous promise is not binding, A offers to buy from B for $1000 a book worth less than $1. B accepts the offer knowing that the purchase of the book is a mere pretense. Is there consideration?

Answer 6

There is no consideration for A’s promise to pay $1000. Restatement 2d of Contracts § 71(b)

Question 7

A offers to buy a book owned by B and to pay B $10 in exchange therefor. Is there consideration?

Answer 7

B’s transfer and delivery of the book are consideration for A’s promise even though both parties know that such books regularly sell for $5 and that part of A’s motive in making the offer is to make a gift to B. See § § 79, 81. Restatement 2d of Contracts § 71(c)

Question 8

A owns land worth $10,000 which is subject to a mortgage to secure a debt of $5,000. A promises to make a gift of the land to his son B and to pay off the mortgage, and later gives B a deed subject to the mortgage. Is there consideration?

Answer 8

B’s acceptance of the deed is not consideration for A’s promise to pay the mortgage debt. Restatement 2d of Contracts § 71(c)

Question 9

A and B agree that A will advance $1000 to B as a gratuitous loan. Is there consideration?

Answer 9

B’s promise to accept the loan is not consideration for A’s promise to make it. But the loan when made is consideration for B’s promise to repay. Restatement 2d of Contracts § 71(c)

Question 10

A promises B, his nephew aged 16, that A will pay B $1000 when B becomes 21 if B does not smoke before then. Is there consideration?

Answer 10

B’s forbearance to smoke is a performance and––if bargained for––is consideration for A’s promise. Restatement 2d of Contracts § 71(d)

Question 11

A says to B, the owner of a garage, “I will pay you $100 if you will make my car run properly.” Is there consideration?

Answer 11

The production of this result is consideration for A’s promise. Restatement 2d of Contracts § 71(d)

Question 12

A has B’s horse in his possession. B writes to A, “If you will promise me $100 for the horse, he is yours.” A promptly replies making the requested promise. The property in the horse at once passes to A. Is there consideration?

Answer 12

The change in ownership is consideration for A’s promise. Restatement 2d of Contracts § 71(d)

Question 13

A promises to pay B $1,000 if B will make an offer to C to sell C certain land for $25,000 and will leave the offer open for 24 hours. B makes the requested offer and forbears to revoke it for 24 hours, but C does not accept. Is there consideration?

Answer 13

The creation of a power of acceptance in C is consideration for A’s promise. Restatement 2d of Contracts § 71(d)

Question 14

A mails a written order to B, offering to buy specified machinery on specified terms. The order provides “Ship at once.” How could consideration be manifested?

Answer 14

B’s prompt shipment or promise to ship is consideration for A’s promise to pay the price. See § 32. Uniform Commercial Code § 2-206( 1)( b). Restatement 2d of Contracts § 71(d)

Question 15

A, at C’s request and in exchange for $1 paid by C, promises B to give him a book. Is there consideration?

Answer 15

The payment is consideration for A’s promise. Restatement 2d of Contracts § 71(e)

Question 16

A promises B to pay B $1, in exchange for C’s promise to A to give A a book. Is there consideration?

Answer 16

The promises are consideration for one another. Restatement 2d of Contracts § 71(e)

Question 17

A promises to pay $1,000 to B, a bank, in exchange for the delivery of a car by C to A’s son D. How could consideration be manifested?

Answer 17

The delivery of the car is consideration for A’s promise. Restatement 2d of Contracts § 71(e)

Question 18

A offers a reward to whoever produces evidence leading to the arrest and conviction of the murderer of B. C produces such evidence in the performance of his duty as a police officer. Is there consideration?

Answer 18

C’s performance is not consideration for A’s promise. Restatement 2d of Contracts § 73(b)

Question 19

A offers a reward to whoever produces evidence leading to the arrest and conviction of the murderer of B. C produces such evidence in the performance of his duty as a police officer. C’s duties as a police officer are limited to crimes committed in a particular State, and while on vacation he gathers evidence as to a crime committed elsewhere. Is there consideration?

Answer 19

C’s performance is consideration for the promise. Restatement 2d of Contracts § 73(b)

Question 20

In a State where contracts between husband and wife are enforced and spouses are under a duty not to leave without just cause, A’s wife, B, leaves him without just cause. A promises to pay B $1,000 if she will return. Induced thereby, B returns. Is there consideration?

Answer 20

Her return is not consideration. Compare § § 175-77, 190. Restatement 2d of Contracts § 73(b)

Question 21

A, an architect, agrees with B to superintend a construction project for a fixed fee. During the course of the project, without excuse, A takes away his plans and refuses to continue, and B promises him an extra fee if A will resume work. Is A’s resumption of work consideration?

Answer 21

A’s resumption of work is not consideration for B’s promise of an extra fee. Restatement 2d of Contracts § 73(c)

Question 22

A files a claim for total disability under an accident insurance policy written by B. Without investigation, discussion or dispute, B pays A the lesser amount which would be payable for partial disability, and A signs a receipt for “full payment” of the claim. Is there consideration?

Answer 22

The payment is not consideration for A’s promise to accept it in full satisfaction of his claim for total disability. Restatement 2d of Contracts § 73(c)

Question 23

A, being insolvent and contemplating bankruptcy, offers B $30 in full settlement of a debt of $100. B dissuades A from going into bankruptcy, accepts the offer, receives the money, and closes the account. Is there consideration?

Answer 23

A’s forbearance to seek a discharge in bankruptcy is consideration for B’s promise not to seek further payment. Restatement 2d of Contracts § 73(c)

Question 24

A owes B a liquidated sum. How could consideration be manifested?

Answer 24

Any payment by A at an earlier time, or in a different medium from that required by the duty, is consideration for B’s promise to accept it in full satisfaction if the difference in performance is part of what is requested and given in exchange for the promise. Restatement 2d of Contracts § 73(c)

Question 25

A owes B a matured liquidated debt bearing interest. They agree to extend the debt for two years at a lower interest rate. If A manages to get enough money to pay off the debt, can A terminate the interest?

Answer 25

Mutual promises to extend the debt for a year even at a lower rate of interest are binding. By such an agreement A gives up the right to terminate the running of interest by paying the debt. Restatement 2d of Contracts § 73(c)

Question 26

A and B are engaged to be married. In an antenuptial agreement C, A’s father, promises B that C will pay an annuity to A, and A and B marry in reliance on the promise. Is there consideration?

Answer 26

The marriage is consideration for C’s promise. Restatement 2d of Contracts § 73(d)

Question 27

A and her husband B are employed as domestic servants of C. B having become ill, C employs A to care for B in the home of A and B. Is there consideration?

Answer 27

A’s care for B is consideration for C’s promise to pay wages to A. Restatement 2d of Contracts § 73(d)

Question 28

A contracts with B to install heating units in houses being built by B for C. B becomes insolvent and discontinues work, and C promises to pay A if A completes the installation in accordance with the contract between A and B. How would consideration be manifested?

Answer 28

A’s performance is consideration for C’s promise. Restatement 2d of Contracts § 73(d)

Question 29

A is employed to drive B’s horse in a race. C owns the dam of B’s horse and is entitled to a prize if B’s horse wins the race. C promises A a bonus if he wins the race. How could consideration be manifested by A? Does B have any claim?

Answer 29

A’s driving in the race is consideration for C’s promise, but B may be entitled to the bonus. See Restatement, Second, Agency § § 313, 388. Restatement 2d of Contracts § 73(d)

Question 30

A, an infant, promises B to pay B $50 for a set of books which A does not need. B delivers the books. A becomes of age and threatens to rescind the bargain, as the law permits him to do. B promises A that if A will pay the $50 as originally agreed, B will give A another book. A, induced thereby, pays the $50. Is there consideration?

Answer 30

The payment is consideration. Restatement 2d of Contracts § 73(e)

Question 31

A sells goods to B, who becomes indebted therefor in the sum of $100. The Statute of Limitations bars any remedy of A to recover the debt. A promises B that if B will pay the debt, A will give B a specified book. B pays the debt. Is there consideration?

Answer 31

The payment is consideration. Restatement 2d of Contracts § 73(e)

Question 32

A, a shipowner, has a legal duty to provide maintenance and cure for B, a seaman. B honestly but unreasonably claims that adequate care is not available in a free public hospital and that he is entitled to treatment by a private physician. Is there consideration?

Answer 32

B’s forbearance to press this claim is consideration for A’s promise to be responsible for the consequences of any improper treatment in the public hospital. Restatement 2d of Contracts § 74(b)

Question 33

A, knowing that he has no legal basis for complaint, frequently complains to B, his father, that B has made more gifts to B’s other children than to A. B promises that if A will cease complaining, B will forgive a debt owed by A to B. A stops complaining. Is there consideration?

Answer 33

A’s forbearance to assert his claim of discrimination is not consideration for B’s promise. Restatement 2d of Contracts § 74(b)

Question 34

A, knowing that B is a married man, cohabits with him for several years. During that time B promises to marry A as soon as he is divorced. After the cohabitation ceases, A surrenders all her claims on account of the promise to marry in consideration of B’s promise to pay her $1000 a month during her life. Is there consideration?

Answer 34

Under applicable state law A has no valid claim. If it is found that A knew there was no valid claim, there is no consideration for B’s promise of payment. Compare § § 189-90. Restatement 2d of Contracts § 74(b)

Question 35

A, a real estate broker, is entitled to a commission for selling B’s land, amounting to five per cent or $1,500. B claims in good faith that he owes only one per cent or $300, and offers to pay that amount in full settlement of the claim for commission. A accepts the offer. How would consideration be manifested?

Answer 35

The payment is consideration for B’s promise to surrender his entire claim. Restatement 2d of Contracts § 74(c)

Question 36

A owes B at least $4,280 on a logging contract. Additional items in the account are unliquidated, and some of them are the subject of honest dispute. A disputes B’s right to all above $4,280 on grounds he knows to be untrue, and offers $4,000 in full settlement. If A pays, is there consideration?

Answer 36

A’s payment of $4,000 is not consideration for B’s promise to surrender his entire claim. Restatement 2d of Contracts § 74(c)

Question 37

A contracts to sell and deliver a lot of goods to B. On delivery B accepts a commercial unit priced at $30 and rejects the rest, priced at $50. See Uniform Commercial Code § 2-601. B claims in good faith but erroneously that the rejected goods are defective. A promises to surrender any claim based on the rejection if B pays the $30. How would consideration be manifested?

Answer 37

B’s payment is consideration for A’s promise. Restatement 2d of Contracts § 74(c)

Question 38

A stops payment on a check for $200 drawn on his account in the B bank, but the bank pays the check and charges his account, leaving a balance of $800. There is an honest dispute as to the propriety of the charge, and the bank refuses to pay any part of the $800 until the dispute is settled. To obtain the money, A promises to make no further claim. If the bank pays the $800, would that be consideration?

Answer 38

Payment of the $800 by the bank is not consideration for the promise. Restatement 2d of Contracts § 74(c)

Question 39

A owes B $120. Without requesting B to forbear suit, C promises B in April that if A does not pay by October 1 C will pay $100. B waits until October. Is there consideration?

Answer 39

B’s forbearance to sue until October is not consideration for C’s promise. Restatement 2d of Contracts § 74(d)

Question 40

A owes B a debt secured by mortgage, and B begins foreclosure proceedings. C requests B to forbear and promises to pay the debt. How would consideration be manifested?

Answer 40

B’s forbearance for a reasonable time is consideration for C’s promise. Restatement 2d of Contracts § 74(d)

Question 41

A owns land and desires to mortgage it. He is informed that his title may be defective by reason of a possible interest in B. B says that he has no claim and has previously given a deed to the land to A’s grantor. A promises to pay $50 for a new quit-claim deed. How would consideration be manifested?

Answer 41

B’s execution and delivery of such a deed is consideration for A’s promise. Restatement 2d of Contracts § 74(e)

Question 42

A promises to pay a debt to B, or to perform an existing contractual duty to B, or to perform his duty as a public official. The legal duty is neither doubtful nor the subject of honest dispute, but A would not have fulfilled the duty but for B’s return promise. Is there consideration?

Answer 42

A’s promise is not consideration for B’s return promise. Compare § 73. Restatement 2d of Contracts § 75(c)

Question 43

A promises B to surrender or to forbear suit upon a claim either against B or against C. A knows the claim is invalid. Is there consideration?

Answer 43

A’s promise is not consideration for a return promise by B. Compare § 74. Restatement 2d of Contracts § 75(c)

Question 44

While A’s property is under guardianship by reason of an adjudication of mental illness, A makes an agreement with B in which B makes a promise. Is there a contract?

Answer 44

B’s promise is not a contract, whether the consideration consists of a promise by A or performance by A. Compare § 13. Restatement of Restitution § 139. Restatement 2d of Contracts § 75(d)

Question 45

A promises to forbear suit against B in exchange for B’s promise to pay a liquidated and undisputed debt to A. Is this binding?

Answer 45

A’s promise is not binding because B’s promise is not consideration under § 73, but A’s promise is nevertheless consideration for B’s. Moreover, B’s promise would be enforceable without consideration under § 82. On either basis, B’s promise is conditional on A’s forbearance and can be enforced only if the condition is met. Restatement 2d of Contracts § 75(d)

Question 46

A, a married man , and B, an unmarried woman, make mutual promises to marry. B neither knows nor has reason to know that A is married. Is there consideration?

Answer 46

B’s promise is consideration and B may recover damages from A for breach of his promise though B would have a defense to a similar action by A. See § 180. Restatement 2d of Contracts § 75(d)

Question 47

A promises B $100 in return for B’s promise to cut timber on land upon which A is a trespasser. B neither knows nor has reason to know that A is not privileged to cut the timber. Is there consideration?

Answer 47

B’s promise is consideration and B may recover damages from A for breach of his promise though B would have a defense to a similar action by A. See Illustration 2 to § 180. Restatement 2d of Contracts § 75(d)

Question 48

A promises B to pay him $5,000 if B’s ship now at sea has already been lost, knowing that the ship has not been lost. Is there consideration?

Answer 48

A’s promise is illusory and is not consideration for a return promise. 2. The facts being otherwise as stated in Illustration 1, A makes the promise not knowing whether the ship has been lost or not. A’s promise is consideration even though A has reason to know that the ship has not been lost. Restatement 2d of Contracts § 76(b)

Question 49

A sells to B a tract of land said to contain 500 acres. Later A and B agree to have the land surveyed. A promises to pay B $16 for each acre of deficiency. B promises to pay A $16 for each acre of excess. Is there consideration?

Answer 49

A’s promise is consideration for B’s promise, and B’s promise is consideration for A’s. Restatement 2d of Contracts § 76(b)

Question 50

A promises to sell and B to buy goods if A’s employees do not strike before the time for delivery. Is there consideration?

Answer 50

The promises are consideration for each other. Restatement 2d of Contracts § 76(c)

Question 51

A promises to convey to B immediately a patent owned by A. B promises to pay A $10,000 when pending litigation is terminated, if the patent is not held invalid. Is there consideration?

Answer 51

B’s promise is consideration for A’s promise. Restatement 2d of Contracts § 76(c)

Question 52

A promises B to pay him $5000 if his house burns within a year. Is there consideration?

Answer 52

This is consideration for a return promise. Restatement 2d of Contracts § 76(c)

Question 53

A promises B to pay him $5000 if A enters a competing business within three years. Is there consideration?

Answer 53

This is consideration for a return promise, since forbearance to compete would be consideration. See § 77. Restatement 2d of Contracts § 76(d)

Question 54

A promises B that, “subject to purchase” of a certain ship, he will charter it to B, and B promises to accept the charter. Is there consideration?

Answer 54

A’s promise is consideration for B’s. A’s forbearance to buy the ship could have been consideration for a different promise, such as a promise to pay money. See § 77. Restatement 2d of Contracts § 76(d)

Question 55

A offers to deliver to B at $2 a bushel as many bushels of wheat, not exceeding 5,000, as B may choose to order within the next 30 days. B accepts, agreeing to buy at that price as much as he shall order from A within that time. Is B’s acceptance consideration?

Answer 55

B’s acceptance involves no promise by him, and is not consideration. Compare § § 31, 34. Restatement 2d of Contracts § 77(a)

Question 56

A promises B to act as B’s agent for three years from a future date on certain terms. B agrees that A may so act, but reserves the power to terminate the agreement at any time. Is there consideration?

Answer 56

B’s agreement is not consideration, since it involves no promise by him. Restatement 2d of Contracts § 77(a)

Question 57

A offers to deliver to B at $2 a bushel as many bushels of wheat, not exceeding 5,000, as B may choose to order within the next 30 days, if B will promise to order at least 1,000 bushels within that time. B accepts. Is there consideration?

Answer 57

B’s promise is consideration since it reserves only a limited option and cannot be performed without doing something which would be consideration if it alone were bargained for. Restatement 2d of Contracts § 77(b)

Question 58

A agrees to sell and B to buy between 400 and 600 tons of fertilizer in installments as ordered by B, A reserving the right to terminate the agreement at any time without notice. Is there consideration?

Answer 58

B’s promise is without consideration. Restatement 2d of Contracts § 77(b)

Question 59

A promises B to act as B’s agent for three years on certain terms, starting immediately. B agrees that A may so act, but reserves the power to terminate the agreement on 30 days notice. Is there consideration?

Answer 59

B’s agreement is consideration, since he promises to continue the agency for at least 30 days. Restatement 2d of Contracts § 77(b)

Question 60

A owes B an undisputed debt of $5,000 payable in five years. A makes a subsequent promise that he will either pay $4,000 at the end of the first year or pay the debt at maturity. in return B promises to accept the $4,000, if paid at the end of the first year, in full satisfaction of the debt. Is there consideration?

Answer 60

A’s subsequent promise is not consideration for B’s return promise, since the alternative of performing his legal duty is not consideration. See § § 73, 75. Restatement 2d of Contracts § 77(b)

Question 61

A orders goods from B for shipment within three months, reserving the right to cancel the order before shipment. B has the goods in stock and accepts the order. Is there consideration?

Answer 61

A’s promise to pay for the goods is consideration for B’s promise to ship, since B can prevent cancellation by shipping immediately. Restatement 2d of Contracts § 77(c)

Question 62

A promises to sell his output or buy his requirements of a specified type of goods from B on specified terms. Is there consideration?

Answer 62

A’s promise is consideration for a return promise by B. A must operate his plant or conduct his business in good faith and according to commercial standards of fair dealing in the trade so that his output or requirements will approximate a reasonably foreseeable figure. See Comment 2 to Uniform Commercial Code § 2-306. Restatement 2d of Contracts § 77(d)

Question 63

A promises to pay B half of any profits he derives from the sale of goods manufactured by B. in return B promises that A shall have the exclusive right to market such goods. Is there consideration?

Answer 63

The promises are consideration for each other, since the agreement for exclusive dealing imposes an obligation on A to use best efforts to promote sale of the goods and on B to use best efforts to supply them. See Uniform Commercial Code § 2-306(2). Restatement 2d of Contracts § 77(d)

Question 64

A owes B a matured liquidated debt bearing interest. In an agreement to extend the debt for a year at a lower rate of interest, B reserves the right to accelerate payment “at will,” but under Uniform Commercial Code § 1-208, B may accelerate payment only if he in good faith believes that the prospect of payment is impaired. Is there consideration?

Answer 64

B’s surrender of the unconditional right to demand immediate payment is consideration. Compare Illustration 8 to § 73. Restatement 2d of Contracts § 77(d)

Question 65

A is under a contractual duty to deliver to B a described automobile. Because it is doubtful whether such a car will be available at the agreed time, A promises that if he cannot obtain it he will deliver a described substitute. B agrees to accept the substitute if delivered. Is there consideration?

Answer 65

A’s promise is consideration. Restatement 2d of Contracts § 77(d)

Question 66

A makes a promise in exchange for a return promise by B. A is an infant. B makes a fraudulent promise. Is there consideration?

Answer 66

The fact that the contract is voidable by A because of his own infancy or because of B’s fraud does not prevent A’s promise from being consideration for B’s promise. Restatement 2d of Contracts § 78(b)

Question 67

A makes an oral promise in violation of the Statute of Frauds in exchange for a return promise by B. Is there consideration?

Answer 67

The fact that A’s promise is unenforceable under the local Statute of Frauds does not prevent it from being consideration for B’s promise. Restatement 2d of Contracts § 78(c)

Question 68

A makes a promise in exchange for a promise by B, a foreign government not subject to suit. Is there consideration?

Answer 68

The fact that B’s promise is unenforceable does not prevent it from being consideration for A’s promise. Restatement 2d of Contracts § 78(c)

Question 69

A contracts to sell property to B. As a favor to B, who is C’s friend, and in consideration of A’s performance of the contract, C guarantees that B will pay the agreed price. How would consideration be manifest for C?

Answer 69

A’s performance is consideration for C’s promise. See § 73. Restatement 2d of Contracts § 79(b)

Question 70

A has executed a document in the form of a guaranty which imposes no obligation on A and has no value. A promises B to pay $10,000 to B for the document. B surrenders the document. Is there consideration?

Answer 70

B’s surrender of the document to A, if bargained for, is consideration for a promise by A to pay $10,000. Compare § 74. Restatement 2d of Contracts § 79(b)

Question 71

A borrows $300 from B to enable A to begin litigation to recover a gold mine through litigation, and promises to repay $10,000 when he recovers the mine. Is there consideration?

Answer 71

The loan is consideration for the promise. Restatement 2d of Contracts § 79(c)

Question 72

A is pregnant with the illegitimate child of B, a wealthy man. A promises to give the child A’s surname and B’s given name, and B promises to provide for the support and education of the child and to set up a trust of securities to provide the child with a minimum net income of $100 per week until he reaches the age of 21. Is there consideration?

Answer 72

The naming of the child is consideration for B’s promise. Restatement 2d of Contracts § 79(c)

Question 73

In consideration of one cent received, A promises to pay $600 in three yearly installments of $200 each. Is there consideration?

Answer 73

The one cent is merely nominal and is not consideration for A’s promise. Restatement 2d of Contracts § 79(d)

Question 74

A dies leaving no assets and owing $4000 to the B bank. C, A’s widow, promises to pay the debt, and B promises to make no claim against A’s estate. Is there consideration?

Answer 74

Without some further showing, B’s promise is a mere formality and is not consideration for C’s promise. Restatement 2d of Contracts § 79(d)

Question 75

A pays B or promises B to pay him $5, not then owed by A, in consideration of which B promises A to give him a book and also promises to surrender a letter. Is there consideration for either promise?

Answer 75

Both of B’s promises are supported by consideration. Restatement 2d of Contracts § 80(a)

Question 76

A pays B or promises B to pay him $50 not then owed by A, in exchange for the following promises: a promise by C to dig a well for D, a promise by E to discharge F from a debt of $100 owing by F to E. Is there consideration for any of the promises?

Answer 76

All the promises are supported by consideration. Restatement 2d of Contracts § 80(a)

Question 77

A owes B $5. B promises to give A a book if A will pay the $5 and $1 in addition. A pays the $6. Is there consideration?

Answer 77

B’s promise is binding, although A’s payment of the $5 which he owed would not of itself have been consideration. Restatement 2d of Contracts § 80(b)

Question 78

A makes a composition with B, C and D, three of his creditors, whereby each of them promises to accept forty cents on the dollar as full satisfaction, A promising to treat all assenting creditors equally. Is there consideration?

Answer 78

A’s promise and the promises of the other two creditors are consideration for the promise of each creditor, even though there are other non-assenting creditors. Restatement 2d of Contracts § 80(c)

Question 79

A owes B $100 and the claim is not yet barred by the statute of limitations. A promises B in a signed writing to pay the debt. Is this promise binding?

Answer 79

The promise is binding, and the statute of limitations will not bar the claim for the statutory period after the making of the new promise. Restatement 2d of Contracts § 82(b)

Question 80

A owes B three debts of $500 each. All of the debts are barred by the statute of limitations. A writes to B, “I promise to pay you one of those $500 debts which I owe. the other two I shall not pay.” Is this promise binding?

Answer 80

A’s promise of $500 is binding. Restatement 2d of Contracts § 82(b)

Question 81

A owes B a debt for some work which B has done but the amount due is in dispute. A writes to B, “I will pay you whatever I owe.” Is this promise binding?

Answer 81

The promise is binding during the statutory period of limitation from the time when it was made, and subjects A to a duty to pay whatever amount B can prove was due him. Restatement 2d of Contracts § 82(b)

Question 82

A wrongfully purports to sell B’s horse to C, who pays A $100 and takes possession of the horse. A later promises B in a signed writing to pay B either $100 or the value of the horse, or C signs a written promise to pay B the value of the horse. Is this promise binding?

Answer 82

The promise is binding as a promise to pay a quasi-contractual indebtedness. See Restatement of Restitution § 128. Restatement 2d of Contracts § 82(b)

Question 83

A is indebted to B on a judgment, which is barred by a twelve-year statute of limitations, and makes a written promise to B to pay the debt. Is this promise binding?

Answer 83

The subsequent promise does not revive the judgment, but may be the basis of an action. Restatement 2d of Contracts § 82(b)

Question 84

A owes B a debt of $500, and writes to B, “I will pay you $400 in full satisfaction if you will so accept it.” B does not reply. Is this promise binding?

Answer 84

A’s promise is not binding, whether made before or after the debt of $500 was barred by the statute of limitations, because B has not complied with the condition requiring acceptance. Restatement 2d of Contracts § 82(c)

Question 85

A owes B $500, barred by the statute of limitations. A has an invalid claim for $250 against B, and writes B, “I will pay you the $500 I owe you subject to my claim of setoff.” Does this create a new promise?

Answer 85

A is bound by his new promise to pay only $250. Restatement 2d of Contracts § 82(c)

Question 86

A is indebted to B on a bond under seal, which is barred by a twelve-year statute of limitations, and makes a promise to B in a signed writing not under seal to pay the debt. The statute of limitations for debts under written contracts not under seal is six years. Does this create a new promise?

Answer 86

An action on the subsequent promise is subject to the six-year statute. Restatement 2d of Contracts § 82(c)

Question 87

A owes B a debt barred by the statute of limitations, and promises B in a signed writing to pay the debt as soon as he is able to do so. Is this promise binding?

Answer 87

B has no claim on the subsequent promise until A is able to pay, and the statute of limitations runs again from that time. Restatement 2d of Contracts § 82(c)

Question 88

A owes B a debt, and lists the debt in a sworn schedule required to be filed in his voluntary bankruptcy proceeding. Does this create a new promise?

Answer 88

A’s admission that he owes the debt does not impose a new obligation on him, whether the statute of limitations has or has not completely run on the original obligation when the admission is made. See Comment a to § 83. Restatement 2d of Contracts § 82(d)

Question 89

A owes B $500, and writes B, “I admit that I owe you $500, but I am unable to pay it.” Is this binding?

Answer 89

A’s letter imposes no duty upon him. Restatement 2d of Contracts § 82(d)

Question 90

A owes B $500 and without comment sends B a check for $300. Does this create a new promise?

Answer 90

Absent other facts establishing that the check is referrable to the larger debt, it does not operate as a new promise. Restatement 2d of Contracts § 82(e)

Question 91

A owes B $5,000, secured by a pledge of corporate bonds. On A’s default B sells the bonds under a power given by law or by the pledge agreement and applies the proceeds to the debt, leaving a balance of $2000. Does this create a new promise?

Answer 91

The part payment does not operate as a new promise by A. Restatement 2d of Contracts § 82(e)

Question 92

A owes B $500 and sends B a post-dated check for $200, stating that it is sent as part payment of the debt. Does this create a new promise?

Answer 92

The delivery of the check operates as a new promise to pay the debt, and payment of the check by the drawee bank on the subsequent date shown on the check operates as a second new promise. The bank’s authority to pay was revocable, and A could have stopped payment. Restatement 2d of Contracts § 82(e)

Question 93

A owes B a debt of $1000, barred by the statute of limitations. A orally promises to pay the debt in monthly installments of $10, and subsequently pays $5 on account of the first installment. Is this binding?

Answer 93

The part payment, though excepted from a statute requiring a writing, binds A only to pay in monthly installments. Restatement 2d of Contracts § 82(e)

Question 94

A owes B $500, and writes B “I cannot pay you now, but I will never set up the statute of limitations against your claim.” B delays bringing an action to collect his claim until more than the statutory period from the time of A’s promise not to set up the statute has expired. Can A assert the bar of the statute?

Answer 94

A may then successfully assert the bar of the statute. Restatement 2d of Contracts § 82(f)

Question 95

A owes B $100 and is about to go into bankruptcy. Immediately before filing his petition he promises B to pay the debt in spite of any discharge that he may get in bankruptcy. Is this binding?

Answer 95

The promise is not binding but would have been binding if it had been made after the petition in bankruptcy was filed. Restatement 2d of Contracts § 83(a)

Question 96

A owes B $100, and the debt is discharged in A’s bankruptcy. Thereafter A promises in writing to pay the debt “as soon as I sell the mill.” Two years later A sells the mill. Is this promise binding? Does B have any recourse?

Answer 96

B can recover the debt from A by an action brought within the period fixed by the statute of limitations after the sale. If the subsequent promise were oral, B would be limited in most States to an action within the statutory period after the original debt became due. Restatement 2d of Contracts § 83(a)

Question 97

A owes B $100, and the debt is discharged by a composition among creditors without bankruptcy proceedings, B receiving $45 and expressly reserving A’s “moral obligation.” A subsequently promises to pay B the balance of $55. Is this promise binding?

Answer 97

The promise is binding. Restatement 2d of Contracts § 83(b)

Question 98

In an insurance policy the insurer promises to pay $1000 if the insured is killed on a railroad. Is this promise binding?

Answer 98

The insurer’s subsequent promise to pay $1000 even though the insured is not killed on a railroad is not binding under this Section, whether the promise is made before or after the death of the insured. Restatement 2d of Contracts § 84(c)

Question 99

A is surety for B on a debt due C. C makes a contract with B, the principal debtor, extending the time for payment. Thereafter A, with knowledge of that fact, promises C to pay the debt. Is this promise binding?

Answer 99

The promise is binding, and A has no power to retract it. Restatement 2d of Contracts § 84(d)

Question 100

A employs B to build a house, promising to pay therefor $10,000 on the production of a certificate from A’s architect, C, stating that the work has been satisfactorily completed. B builds the house but the work is defective in certain trivial particulars. C refuses to give B a certificate. A says to B, “My architect rightfully refuses to give you a certificate but the defects are not serious. I will pay you the full price which I promised.” Is this promise binding?

Answer 100

A is bound to do so, and has no power to restore the requirement of the condition. Restatement 2d of Contracts § 84(d)

Question 101

A, an insurance company, insures B’s house for $5000 against loss by fire. The insurance policy provides that it shall be payable only if B gives written notification of any loss within thirty days after its occurrence. An insured loss occurs and B gives only oral notification thereof within thirty days. A tells him, either before or after the lapse of thirty days from the loss, that this notification is sufficient. Is this binding?

Answer 101

A cannot thereafter rely upon B’s failure to give written notification as an excuse for failure to pay for the loss. Restatement 2d of Contracts § 84(d)

Question 102

A, an insurance company, issues to B a policy of automobile liability insurance, under which it is a condition of A’s duty to pay that B notify A “as soon as practicable” after an accident. An accident occurs, but B does not notify A as soon as practicable. Without any statement concerning the non-occurrence of the condition, A begins to defend B in an action brought against B as a result of the accident. Is this binding?

Answer 102

A’s beginning to defend B operates as a promise to pay in spite of the non-occurrence of the condition. Restatement 2d of Contracts § 84(e)

Question 103

A, an insurance company, insures B’s house for $5000 against loss by fire. The insurance policy provides that it shall be payable only if B gives written notification of any loss within thirty days after its occurrence. An insured loss occurs and B gives only oral notification thereof within thirty days. Can A restore the requirement condition?

Answer 103

A can restore the requirement of the condition by notifying B of his intention to do so if there still remains a reasonable time for the occurrence of the condition before the expiration of the thirty-day period, unless such action would be unjust in view of a material change of position by B in reliance on A’s waiver. If a reasonable time does not remain, A cannot restore the requirement of the condition by extending the time. Restatement 2d of Contracts § 84(f)

Question 104

A, an insurance company, insures B’s house against loss by fire. The insurance policy provides that unless suit is brought on the policy within twelve months after a loss, no recovery can be had. An insured loss occurs and A tells B that it is unnecessary to bring suit within that time. Unless B has so changed his position that it would be unjust to restore the time limitation, A can do so by giving B notice. Thereafter B has a reasonable time to bring suit. When will the reasonable time espire?

Answer 104

In the absence of special circumstances, the reasonable time will expire twelve months after the notice is received. Restatement 2d of Contracts § 84(f)

Question 105

On February 1, A agrees to sell and B to buy land for the price of $10,000, the transfer to be made on March 1. B makes an advance payment of $1,000, and the contract provides that time is of the essence and that if the balance of the price is not paid promptly B’s rights are forfeited and A may retain the $1,000. On February 15, A informs B that A will not insist on the March 1 date. Can A restore the requirement condition?

Answer 105

In the absence of special circumstances, A can thereafter restore the requirement of the condition by giving B notice that A will insist on performance within thirty days from the time of the notice. Restatement 2d of Contracts § 84(f)

Question 106

A is induced by B’s fraud to promise $100 in return for a worthless chattel. After discovering the fraud A promises B to pay as agreed. Is this promise binding?

Answer 106

The promise is binding. Restatement 2d of Contracts § 85(b)

Question 107

A, an infant, promises B to pay him $100 in consideration of a bicycle which B transfers to him. The bicycle is worth $60. On coming of age A promises to pay B the sum he originally agreed to pay. Is this binding?

Answer 107

He is bound to do so. If instead of such a promise he promises to pay a smaller sum, as $40, he is also bound, but only to that extent. Restatement 2d of Contracts § 85(b)

Question 108

A gives emergency care to B’s adult son while the son is sick and without funds far from home. B subsequently promises to reimburse A for his expenses. Is this promise binding?

Answer 108

The promise is not binding under this Section. Restatement 2d of Contracts § 86(a)

Question 109

A lends money to B, who later dies. B’s widow promises to pay the debt. Is this promise binding?

Answer 109

The promise is not binding under this Section. Restatement 2d of Contracts § 86(a)

Question 110

A has immoral relations with B, a woman not his wife, to her injury. A’s subsequently promises to reimburse B for her loss. Is the promise binding?

Answer 110

A’s subsequent promise to reimburse B for her loss is not binding under this Section. Restatement 2d of Contracts § 86(a)

Question 111

A is employed by B to repair a vacant house. By mistake A repairs the house next door, which belongs to C. C promises to pay A for the repairs. Is this promise binding?

Answer 111

A subsequent promise by C to pay A the value of the repairs is binding. Restatement 2d of Contracts § 86(c)

Question 112

A pays B a debt and gets a signed receipt. Later B obtains a default judgment against A for the amount of the debt, and A pays again. B promises to repay A the second payment. Is this promise binding?

Answer 112

B’s subsequent promise to refund the second payment if A has a receipt is binding. Restatement 2d of Contracts § 86(c)

Question 113

A finds B’s escaped bull and feeds and cares for it. B promises to pay back A. Is this promise binding?

Answer 113

B’s subsequent promise to pay reasonable compensation to A is binding. Restatement 2d of Contracts § 86(d)

Question 114

A saves B’s life in an emergency and is totally and permanently disabled in so doing. One month later B promises to pay A $15 every two weeks for the rest of A’s life, and B makes the payments for 8 years until he dies. Is this promise binding?

Answer 114

The promise is binding. Restatement 2d of Contracts § 86(d)

Question 115

A submits to B at B’s request a plan for advertising products manufactured by B, expecting payment only if the plan is adopted. Because of a change in B’s selling arrangements, B rejects the plan without giving it fair consideration. Still, B says that he’ll pay A for the expense of preparing. Is this binding?

Answer 115

B’s subsequent promise to reimburse A’s expenses in preparing the plan is binding. Restatement 2d of Contracts § 86(e)

Question 116

A contributes capital to B, an insurance company, on the understanding that B is not liable to reimburse A but that A will be reimbursed through salary and commissions. Later A withdraws from the company and B promises to pay him ten percent of premiums received until he is reimbursed. Is this promise binding?

Answer 116

The promise is binding. Restatement 2d of Contracts § 86(e)

Question 117

A digs a well on B’s land in performance of a bargain with B’s tenant C. C is unable to pay as agreed, and B promises to pay A the reasonable value of the well. Is this promise binding?

Answer 117

The promise is binding. Restatement 2d of Contracts § 86(f)

Question 118

By statute an agreement authorizing a real estate broker to sell land for compensation is void unless the agreement or a memorandum thereof is in writing. A, a real estate broker, procures a purchaser for B’s land without any written agreement. In the written sale agreement, signed by B, B promises to pay A $200, the usual commission, “for services rendered.” Is this promise binding?

Answer 118

The promise is binding. Restatement 2d of Contracts § 86(g)

Question 119

A , a married woman of sixty, has rendered household services without compensation over a period of years for B, a man of eighty living alone and having no close relatives. B has a net worth of three million dollars and has often assured A that she will be well paid for her services, whose reasonable value is not in excess of $6,000. B executes and delivers to A a written promise to pay A $25,000 “to be taken from my estate.” Is this promise binding?

Answer 119

The promise is binding. Restatement 2d of Contracts § 86(i)

Question 120

A , a married woman of sixty, has rendered household services without compensation over a period of years for B, a man of eighty living alone and having no close relatives. B has a net worth of three million dollars and has often assured A that she will be well paid for her services, whose reasonable value is not in excess of $6,000. B’s promise is made orally and is to leave A his entire estate. Is this promise binding?

Answer 120

A cannot recover more than the reasonable value of her services. Restatement 2d of Contracts § 86(i)

Question 121

In consideration of twenty-five cents paid by B, A executes and delivers to B a written option agreement giving B the right to buy a piece of land for $100,000 if B gives notice of intention to buy within 120 days. The price and terms of sale are fair. Is this offer irrevocable?

Answer 121

A has made an irrevocable offer. Restatement 2d of Contracts § 87(b)

Question 122

In consideration of one dollar paid by B, A, a widow who owns land worth $25,000 as a farm, gives B a ten-year option to take phosphate rock from the land on paying a royalty of twenty-five cents per ton. As B knows but A does not, the prevailing royalty in such transactions ranges from $1.00 to $1.10 per ton. Is this offer irrevocable?

Answer 122

The offer is not made irrevocable by the one-dollar payment. Restatement 2d of Contracts § 87(b)

Question 123

A executes and delivers to B a written agreement “in consideration of one dollar in hand paid” giving B an option to buy described land belonging to A for $15,000, the option to expire at noon six days later. Is this offer irrevocable?

Answer 123

The fact that the dollar is not in fact paid does not prevent the offer from being irrevocable. Restatement 2d of Contracts § 87(c)

Question 124

A leases a farm to B and later gives B an “option” to buy the farm for $15,500 within five years. With A’s approval, B makes permanent improvements in the farm buildings, builds roads, drains and dams, and contours plow land, using his own labor and expending several thousand dollars. Toward the end of the five years, A purports to revoke the option, demanding a higher price. B then gives written notice of acceptance in accordance with the terms of the offer. Is this offer irrevocable?

Answer 124

Specific performance by A may be decreed. Restatement 2d of Contracts § 87(e)

Question 125

A offers to B a “blanket arrangement” to buy “poultry grown by you” at stated prices. As contemplated, B buys 7,000 baby chicks and begins raising them for sale to A as “broilers.” Thereafter A purports to revoke the offer. Was A’s offer revocable?

Answer 125

B has the rights of an aggrieved seller under a contract for the sale of 7,000 “broilers.” Rst. 87(e)

Question 126

A submits a written offer for paving work to be used by B as a partial basis for B’s bid as general contractor on a large building. As A knows, B is required to name his subcontractors in his general bid. B uses A’s offer and B’s bid is accepted. Is A’s offer revocable?

Answer 126

A’s offer is irrevocable until B has had a reasonable opportunity to notify A of the award and B’s acceptance of A’s offer. Restatement 2d of Contracts § 87(e)

Question 127

A executes a written guaranty to B of a debt then due from C. The guaranty is stated to be “in consideration of one dollar paid to me by B, the receipt of which is hereby acknowledged.” Is this binding?

Answer 127

The guaranty is binding whether the dollar is in fact paid or not. Restatement 2d of Contracts § 88(b)

Question 128

A owes $10,000 to B, a stockbroker . To prevent sale of A’s stock held by B as collateral, C executes a written guaranty to B of A’s account. A’s father D subsequently executes a written guaranty to C against losses in the account. There are no further transactions in the account, but in reliance on D’s guaranty C for two years refrains from liquidating the account, while the stock fluctuates in value. Is this guaranty binding?

Answer 128

The guaranty is binding. Restatement 2d of Contracts § 88(d)

Question 129

A, an agent to sell books published by B, dies owing B $4,000 and leaves all his property to his widow C. C, desiring to continue the agency, promises in writing to pay the debt. In reliance on the promise B continues the agency for a year and makes no claim against A’s estate, which is solvent, until the time for filing claims has expired. Is this promise binding?

Answer 129

C’s promise is binding. Restatement 2d of Contracts § 88(d)

Question 130

A draws checks on the B bank, forging the signature of A’s father-in-law C as drawer. After the checks are paid and the forgeries discovered C promises B to make good the amount, since C wants no prosecution of A and no publicity about the matter. In reliance on C’s promise B forbears for a month to seek evidence of the forgery or to seek recourse against A and solvent endorsers. Is this promise binding?

Answer 130

C’s promise is binding. Under Uniform Commercial Code § 3-404 2) the promise is binding without regard to reliance. Restatement 2d of Contracts § 88(d)

Question 131

A owes $10,000 to the B bank. In response to criticism by a bank examiner that there is insufficient collateral for the obligation, C, an officer of the bank, executes a written guaranty of the obligation, and the bank examiner then finds the bank’s assets sufficient. Subsequently the bank is found to be insolvent and placed in liquidation. Is C’s guaranty binding?

Answer 131

C’s guaranty is binding. Restatement 2d of Contracts § 88(d)

Question 132

By a written contract A agrees to excavate a cellar for B for a stated price. Solid rock is unexpectedly encountered and A so notifies B. A and B then orally agree that A will remove the rock at a unit price which is reasonable but nine times that used in computing the original price, and A completes the job. Is the oral agreement binding?

Answer 132

B is bound to pay the increased amount. Restatement 2d of Contracts § 89(b)

Question 133

A contracts with B to supply for $300 a laundry chute for a building B has contracted to build for the Government for $150,000. Later A discovers that he made an error as to the type of material to be used and should have bid $1,200. A offers to supply the chute for $1000, eliminating overhead and profit. After ascertaining that other suppliers would charge more, B agrees. Is this binding?

Answer 133

The new agreement is binding. Restatement 2d of Contracts § 89(b)

Question 134

A is employed by B as a designer of coats at $90 a week for a year beginning November 1 under a written contract executed September 1. A is offered $115 a week by another employer and so informs B. A and B then agree that A will be paid $100 a week and in October execute a new written contract to that effect, simultaneously tearing up the prior contract. Is the new contract binding?

Answer 134

The new contract is binding. Restatement 2d of Contracts § 89(b)

Question 135

A contracts to manufacture and sell to B 2,000 steel roofs for corn cribs at $60. Before A begins manufacture a threat of a nationwide steel strike raises the cost of steel about $10 per roof, and A and B agree orally to increase the price to $70 per roof. A thereafter manufactures and delivers 1700 of the roofs, and B pays for 1,500 of them at the increased price without protest, increasing the selling price of the corn cribs by $10. Is the new agreement binding?

Answer 135

The new agreement is binding. Restatement 2d of Contracts § 89(b)

Question 136

A contracts to manufacture and sell to B 100,000 castings for lawn mowers at 50 cents each. After partial delivery and after B has contracted to sell a substantial number of lawn mowers at a fixed price, A notifies B that increased metal costs require that the price be increased to 75 cents. Substitute castings are available at 55 cents, but only after several months delay. B protests but is forced to agree to the new price to keep its plant in operation. Is the modification binding?

Answer 136

The modification is not binding. Restatement 2d of Contracts § 89(b)

Question 137

A defaults in payment of a premium on a life insurance policy issued by B, an insurance company. Pursuant to the terms of the policy, B notifies A of the lapse of the policy and undertakes to continue the insurance until a specified future date, but by mistake specifies a date two months later than the insured would be entitled to under the policy. On inquiry by A two years later, B repeats the mistake, offering A an option to take a cash payment. A fails to do so, and dies one month before the specified date. Is B’s offer still binding?

Answer 137

B is bound to pay the insurance. Restatement 2d of Contracts § 89(d)

Question 138

A is the lessee of an apartment house under a 99-year lease from B at a rent of $10,000 per year. Because of war conditions many of the apartments become vacant, and in order to enable A to stay in business B agrees to reduce the rent to $5,000. The reduced rent is paid for five years. The war being over, the apartments are then fully rented, and B notifies A that the full rent called for by the lease must be paid. Is this binding?

Answer 138

A is bound to pay the full rent only from a reasonable time after the receipt of the notification. Restatement 2d of Contracts § 89(d)

Question 139

A contracts with B to carry a shipment of fish under refrigeration. During the short first leg of the voyage the refrigeration equipment on the ship breaks down, and A offers either to continue under ventilation or to hold the cargo at the first port for later shipment. B agrees to shipment under ventilation but later changes his mind. A receives notification of the change before he has changed his position. Is this binding?

Answer 139

A is bound to ship under refrigeration. Restatement 2d of Contracts § 89(d)

Question 140

A, knowing that B is going to college, promises B that A will give him $5,000 on completion of his course. B goes to college, and borrows and spends more than $5,000 for college expenses. When he has nearly completed his course, A notifies him of an intention to revoke the promise. Was A’s promise binding?

Answer 140

A’s promise is binding and B is entitled to payment on completion of the course without regard to whether his performance was “bargained for” under § 71. Restatement 2d of Contracts § 90(a)

Question 141

A promises B not to foreclose, for a specified time, a mortgage which A holds on B’s land. B thereafter makes improvements on the land. Is A’s promise binding?

Answer 141

A’s promise is binding and may be enforced by denial of foreclosure before the time has elapsed. Restatement 2d of Contracts § 90(b)

Question 142

A sues B in a municipal court for damages for personal injuries caused by B’s negligence. After the one year statute of limitations has run, B requests A to discontinue the action and start again in the superior court where the action can be consolidated with other actions against B arising out of the same accident. A does so. Does A have any recourse?

Answer 142

B’s implied promise that no harm to A will result bars B from asserting the statute of limitations as a defense. Restatement 2d of Contracts § 90(b)

Question 143

A has been employed by B for 40 years. B promises to pay A a pension of $200 per month when A retires. A retires and forbears to work elsewhere for several years while B pays the pension. Is B’s promise binding?

Answer 143

B’s promise is binding. Restatement 2d of Contracts § 90(b)

Question 144

A executes and delivers a promissory note to B, a bank, to give B a false appearance of assets, deceive the banking authorities, and enable the bank to continue to operate. After several years B fails and is taken over by C, a representative of B’s creditors. Is A’s note enforceable?

Answer 144

A’s note is enforceable by C. Restatement 2d of Contracts § 90(c)

Question 145

A and B, husband and wife, are tenants by the entirety of a tract of land. They make an oral promise to B’s niece C to give her the tract. B, C and C’s husband expend money in building a house on the tract and C and her husband take possession and live there for several years until B dies. Is the promise still binding?

Answer 145

The expenditures by B and by C’s husband are treated like those by C in determining whether justice requires enforcement of the promise against A. Restatement 2d of Contracts § 90(c)

Question 146

A applies to B, a distributor of radios manufactured by C, for a “dealer franchise” to sell C’s products. Such franchises are revocable at will. B erroneously informs A that C has accepted the application and will soon award the franchise, that A can proceed to employ salesmen and solicit orders, and that A will receive an initial delivery of at least 30 radios. A expends $1,150 in preparing to do business, but does not receive the franchise or any radios. Is B liable?

Answer 146

B is liable to A for the $1,150 but not for the lost profit on 30 radios. Compare Restatement, Second, Agency § 329. Restatement 2d of Contracts § 90(d)

Question 147

The facts being otherwise as stated in Illustration 8, B gives A the erroneous information deliberately and with C’s approval and requires A to buy the assets of a deceased former dealer and thus discharge C’s “moral obligation” to the widow. Is C liable?

Answer 147

C is liable to A not only for A’s expenses but also for the lost profit on 30 radios. Restatement 2d of Contracts § 90(d)

Question 148

A, who owns and operates a bakery, desires to go into the grocery business. He approaches B, a franchisor of supermarkets. B states to A that for $18,000 B will establish A in a store. B also advises A to move to another town and buy a small grocery to gain experience. A does so. Later B advises A to sell the grocery, which A does, taking a capital loss and foregoing expected profits from the summer tourist trade. B also advises A to sell his bakery to raise capital for the supermarket franchise, saying “Everything is ready to go. Get your money together and we are set.” A sells the bakery taking a capital loss on this sale as well. Still later, B tells A that considerably more than an $18,000 investment will be needed, and the negotiations between the parties collapse. At the point of collapse many details of the proposed agreement between the parties are unresolved. Does A have any recourse?

Answer 148

The assurances from B to A are promises on which B reasonably should have expected A to rely, and A is entitled to his actual losses on the sales of the bakery and grocery and for his moving and temporary living expenses. Since the proposed agreement was never made, however, A is not entitled to lost profits from the sale of the grocery or to his expectation interest in the proposed franchise from B. Rst. 90(d)

Question 149

A is about to buy a house on a hill . Before buying he obtains a promise from B, who owns adjoining land, that B will not build on a particular portion of his lot, where a building would obstruct the view from the house. A then buys the house in reliance on the promise. Is B’s promise binding?

Answer 149

B’s promise is binding, but will be specifically enforced only so long as A and his successors do not permanently terminate the use of the view. Restatement 2d of Contracts § 90(d)

Question 150

A promises to make a gift of a tract of land to B, his son-in-law. B takes possession and lives on the land for 17 years, making valuable improvements. A then dispossesses B, and specific performance is denied because the proof of the terms of the promise is not sufficiently clear and definite. Is A’s promise binding?

Answer 150

B is entitled to a lien on the land for the value of the improvements, not exceeding their cost. Restatement 2d of Contracts § 90(d)

Question 151

A, a bank, lends money to B on the security of a mortgage on B’s new home. The mortgage requires B to insure the property. At the closing of the transaction A promises to arrange for the required insurance, and in reliance on the promise B fails to insure. Six months later the property, still uninsured, is destroyed by fire. Is this promise binding?

Answer 151

The promise is binding. Restatement 2d of Contracts § 90(e)

Question 152

A sells an airplane to B, retaining title to secure payment of the price . After the closing A promises to keep the airplane covered by insurance until B can obtain insurance. B could obtain insurance in three days but makes no effort to do so, and the airplane is destroyed after six days. Is this promise binding?

Answer 152

A is not subject to liability by virtue of the promise. Restatement 2d of Contracts § 90(e)

Question 153

A promises B $5000, knowing that B desires that sum for the purchase of a parcel of land. Induced thereby, B secures without any payment an option to buy the parcel. A then tells B that he withdraws his promise. Is this promise binding?

Answer 153

A’s promise is not binding. Restatement 2d of Contracts § 90(f)

Question 154

A orally promises to give her son B a tract of land to live on. As A intended, B gives up a homestead elsewhere, takes possession of the land, lives there for a year and makes substantial improvements. Is this promise binding?

Answer 154

A’s promise is binding. Restatement 2d of Contracts § 90(f)

Question 155

A orally promises to pay B, a university, $100,000 in five annual installments for the purposes of its fund-raising campaign then in progress. The promise is confirmed in writing by A’s agent, and two annual installments are paid before A dies. Is this promise binding?

Answer 155

The continuance of the fund-raising campaign by B is sufficient reliance to make the promise binding on A and his estate. Restatement 2d of Contracts § 90(f)

Question 156

A and B are engaged to be married. In anticipation of the marriage A and his father C enter into a formal written agreement by which C promises to leave certain property to A by will. Is this promise binding?

Answer 156

A’s subsequent marriage to B is sufficient reliance to make the promise binding on C and his estate. Restatement 2d of Contracts § 90(f)

Question 157

A owes B a debt of $60, but B’s claim is barred by the statute of limitations. A promises in a signed writing to pay B in satisfaction of the claim $5 monthly for a year. Is this promise binding?

Answer 157

The promise is binding but B’s only right is to the payment of $5 at the end of each month. Restatement 2d of Contracts § 91

Question 158

A holds bonds issued by B, a city, which are overdue as to principal and interest. B’s city treasurer writes a letter to B’s fiscal agents in another city, acknowledging B’s indebtedness on the bonds held by A and instructing the fiscal agents to redeem the bonds to the extent of the fund in their hands. Is the letter binding?

Answer 158

The letter is not binding as a new promise by B to A. Restatement 2d of Contracts § 92(a)

Question 159

A owes $5,000 to his daughter B on a note which B has lost. A signs and mails a letter to C, a bank named as executor in A’s will, describing the debt and the note and stating that interest has been paid to date although not credited on the note because of its loss. Is the letter binding?

Answer 159

The letter is binding as a new promise from A to B. Restatement 2d of Contracts § 92(a)

Question 160

A, induced by B’s fraud, contracts to pay B $100. B assigns to C who knows of the fraud. A with knowledge of the fraud now promises C to pay C $100 as promised originally to B. Is this promise binding?

Answer 160

The promise to C is binding. Restatement 2d of Contracts § 92(c)

Question 161

A owes B $500 on a negotiable promissory note. B’s right against A is barred by the statute of limitations. A promises B to pay the note. Subsequently B indorses the note to C. Is this promise binding?

Answer 161

C may recover from A. Restatement 2d of Contracts § 92(c)

Question 162

A is an indorser of a negotiable note which is dishonored by the maker. The holder B fails to give due notification of dishonor to A. Subsequently A promises B to pay the note. B transfers the note to C. Is this promise binding?

Answer 162

C, though ignorant of the promise at the time of the transfer, may recover upon it. Restatement 2d of Contracts § 92(c)

Question 163

A owes his father B a $500 debt barred by the statute of limitations. B dies intestate, and A is appointed administrator. A then promises his sister C to pay the debt. Is this promise binding?

Answer 163

The promise is binding for the benefit of B’s estate. Restatement 2d of Contracts § 92(c)

Question 164

A secures from B a promise to pay $100 by fraudulently representing that a watch given as consideration for the promise is made of gold. B, knowing the facts but not knowing that A’s fraud justifies him in avoiding the transaction, promises to pay the $100. Is this promise binding?

Answer 164

The promise is binding. Restatement 2d of Contracts § 93

Question 165

A, an indorser of a note, did not receive due notification of its dishonor by the maker. Subsequently, in ignorance of the fact that the lack of notification had discharged him, A promises B, the holder of the note, to pay it. Is this promise binding?

Answer 165

The promise is binding. Restatement 2d of Contracts § 93

Question 166

A owes a debt to B secured by a mortgage. In foreclosure proceedings A signs and files in court a stipulation waiving service of all papers, relying on B’s oral promise to bid the amount of the debt and costs at a sale of the mortgaged premises. At the sale B bids less and a judgment is entered against A for the deficiency. Is this promise binding?

Answer 166

Notwithstanding a rule of court requiring a writing, the court may order a resale on A’s application. Restatement 2d of Contracts § 94(b)

Question 167

A signs a written promise to B and after his signature attaches a gummed wafer. The document contains no recital that it is sealed. Does the wafer serve as a seal?

Answer 167

In the absence of circumstances manifesting a contrary intention, it is inferred from A’s act that he intended the wafer to serve as a seal. Restatement 2d of Contracts § 96(b)

Question 168

A signs a written promise to B and after his signature adds a dash or wavy line. The document contains no recital that it is sealed. Does this constitute a seal?

Answer 168

Even though a seal may consist of a pen scrawl, these facts are insufficient to establish a contract under seal. Restatement 2d of Contracts § 96(b)

Question 169

The facts being otherwise as stated in Illustration 2, the document recites that it is under seal. Does this constitute a seal?

Answer 169

The court may infer that the dash or line is a seal. Restatement 2d of Contracts § 96(b)

Question 170

A signs a written promise to B. B, without A’s knowledge, affixes a wafer after A’s signature. Inspection of the document indicates that the wafer is a seal, but A neither affixed nor adopted it. Does this constitute a seal?

Answer 170

A is not bound by a promise under seal. Restatement 2d of Contracts § 97(a)

Question 171

A signs and delivers a written promise to B, his signature being immediately in front of the word “seal,” which has been previously printed or written there by another person. Does this constitute a seal?

Answer 171

Unless A manifests a contrary intention, he thereby adopts the seal and makes a contract under seal. Restatement 2d of Contracts § 98(a)

Question 172

A, B and C sign a written promise in that order, and C affixes a seal after his signature. Thereafter A, B and C deliver the document. Does this constitute a seal?

Answer 172

It is inferred that A and B adopt the seal. But if the promisee knows or has reason to know that A has a contrary intention, the seal is not adopted by A. Restatement 2d of Contracts § 98(a)

Question 173

A, B, C and D sign a subscription paper by which each agrees to pay a sum set opposite his name. There is one seal on the document which recites, “A seal is attached hereto which each of the subscribers adopts.” Does this constitute a seal?

Answer 173

The promise of each of the subscribers is under seal. Restatement 2d of Contracts § 99

Question 174

A delivers to B a sealed promise naming B or C as promisee. There is a present contract under seal, whether or not the promisee knows of the promise. Is there a contract?

Answer 174

If the delivery is conditional or in escrow, the contract is conditional. Restatement 2d of Contracts § 101(a)

Question 175

A hands to B a sealed promise by A in which C is named as promisee, and requests B to give the document to C unless B receives contrary instructions from A. Is there a contract?

Answer 175

There is no delivery and no contract under seal until the document is delivered to C. Restatement 2d of Contracts § 102(a)

Question 176

A signs and seals a written promise to make a gift to B and deposits the document in the mail addressed to B. There has been a delivery. Is this binding?

Answer 176

Unless consideration is required, the promise is binding even though A dies before B receives the document. Restatement 2d of Contracts § 102(a)

Question 177

A signs and seals a written promise to B and deposits the document in the drawer of his own desk, saying to B and to a third person as he does so that he intends the promise to be immediately binding. Has there been delivery?

Answer 177

There has been no delivery. Restatement 2d of Contracts § 102(b)

Question 178

A delivers to B a sealed promise by A in which B is named as promisee. On receiving the document B returns it to A, saying “Please keep it for me.” Has there been delivery?

Answer 178

The return does not impair the effectiveness of the delivery. Restatement 2d of Contracts § 102(b)

Question 179

A delivers to B a sealed promise to pay C $10,000, stating that it is delivered in escrow and is to be delivered to C if C within ten days deposits with B a deed to a parcel of land. Is the contract revocable within the ten-day period?

Answer 179

In the absence of statute A has made an option contract under seal which cannot be revoked during the ten-day period. Restatement 2d of Contracts § 103(b)

Question 180

A delivers to B a sealed promise in which B is named as promisee, stating that the document is not to take effect unless B shall first erect a certain fence, and that the fence must be erected by July 1. Is the contract revocable?

Answer 180

In the absence of statute A cannot revoke the delivery until B has had the time specified for building the fence. Restatement 2d of Contracts § 103(d)

Question 181

A makes a promise to B under seal, and unconditionally delivers the document to C, an independent third person, as a present contract. Is the contract revocable?

Answer 181

It is immediately operative according to its terms and remains so unless B disclaims within a reasonable time after learning of its existence and terms. Restatement 2d of Contracts § 104(a)

Question 182

A seals and delivers to B a written promise to C to transfer Blackacre to C, then to D, stating at the time that the promise is to be enforceable only when C shall marry X. On learning of the promise either before or after marrying X, C notifies either A or B that he refuses the benefit of the promise. Is the contract revoked for D?

Answer 182

The contract under seal is discharged, and an intervening conveyance by A to D is validated even though D knew of the contract. Restatement 2d of Contracts § 104(b)

Question 183

A signs and seals a document containing promises by him and by B and hands it to B for execution. Is this binding?

Answer 183

Until B executes it, neither party is bound. Restatement 2d of Contracts § 105(a)

Question 184

A signs and seals a written promise to pay B $30,000 on B’s completion of a building and delivers the document to C, instructing C that the promise is to be irrevocable for 30 days and is to be effective thereafter only if within that time B files with C specified written promises and other documents. Is this binding?

Answer 184

A is bound by an option contract. Restatement 2d of Contracts § 105, cmt.

Question 185

A makes a deed of conveyance of Blackacre to his son B. The deed contains this clause: “This conveyance is subject to a mortgage of $10,000 to D which the said B assumes and agrees to pay.” A delivers the deed unconditionally to C to hold on behalf of B. Does B have a duty?

Answer 185

B is subject to no duty to pay the mortgage unless he accepts the deed. Restatement 2d of Contracts § 105(b)

Question 186

A makes a deed of conveyance of Blackacre to his son B. The deed contains this clause: “This conveyance is subject to a mortgage of $10,000 to D which the said B assumes and agrees to pay.” A delivers the deed unconditionally to C to hold on behalf of B. C hands the deed to B and B takes it without objection. Does B have a duty?

Answer 186

Unless A or C has reason to know that B is ignorant of the clause relating to the mortgage, B is bound by a contract to pay the mortgage debt. The question whether the contract is voidable by reason of such ignorance is governed by the rules stated in Chapters 6 and 7 on mistake, misrepresentation, duress and undue influence. Restatement 2d of Contracts § 106(a)

Question 187

A and B agree orally that A shall transfer to B Blackacre, which is subject to a mortgage, that the deed shall contain a promise by B to pay the mortgage debt, and that the deed may be delivered to C on B’s behalf. A makes and delivers to C a deed in accordance with the oral agreement. Is this binding?

Answer 187

There has been acceptance by B, and though he refuses to take the deed from C, he is bound by a contract to pay the mortgage debt. Restatement 2d of Contracts § 106(b)

Question 188

A owes B a liquidated debt of $200. A prepares and signs and seals a writing in duplicate, which states a promise on his part to pay $100 immediately and a promise on B’s part to forbear for a year any attempt to collect the remaining $100 on account of the debt. A sends the duplicates to B by mail with a letter saying “If you care to accept my proposition sign these papers and return one to me.” B with intent to accept the proposition retains one copy and returns the other with a letter saying “I accept your proposition,” but does not sign or seal either writing. Is B’s promise operative?

Answer 188

His promise to forbear is inoperative for failure to comply with A’s offer. Restatement 2d of Contracts § 107

Question 189

A promise under seal purporting to be by “the eldest son of A,” is duly sealed and delivered by B under this description without the use of his own name. B is at the time the eldest son of A. Is this promise operative?

Answer 189

The promise is operative as a contract under seal by him. The fact that before the time for performance the eldest living son of A, owing to the death of B, is a different person, does not alter this effect or make the instrument binding upon the survivor. Restatement 2d of Contracts § 108(a)

Question 190

A promise purporting to be made by whoever may be the eldest son of A at the time when performance thereof is due is sealed and delivered by the son who ultimately turns out to be the eldest at the time of the promised performance. Is there a contract?

Answer 190

It is not his contract under seal. Restatement 2d of Contracts § 108(a)

Question 191

A promise is delivered under seal to whoever shall be the wife of A at the time when performance of the promise is due. Is there a contract?

Answer 191

There is not a contract under seal with the person who ultimately fulfills that description, though she is A’s wife at the time when the writing is delivered, as well as when performance is due. Restatement 2d of Contracts § 108(a)

Question 192

A gives an option under seal to B. B is acting on behalf of C, but C’s name does not appear in the instrument. Within the time limited in the option B accepts by an unsealed writing delivered to A. Is C bound by contract?

Answer 192

C is bound by an unsealed contract created by the unsealed acceptance by B. Restatement 2d of Contracts § 108(a)