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

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 44

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

Question 45

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 45

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

Question 46

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 46

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 47

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 47

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

Question 48

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 48

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

Question 49

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 49

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 50

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 50

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 51

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 51

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 52

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 52

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 53

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 53

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 54

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 54

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

Question 55

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 55

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

Question 56

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 56

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 57

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 57

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

Question 58

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 58

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

Question 59

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

Answer 59

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

Question 60

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 60

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 61

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 61

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 62

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 62

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

Question 63

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 63

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 64

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 64

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 65

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 65

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

Question 66

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 66

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 67

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 67

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

Question 68

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 68

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

Question 69

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 69

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 70

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 70

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 71

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 71

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

Question 72

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

Answer 72

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 73

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 73

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

Question 74

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 74

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 75

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 75

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 76

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 76

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

Question 77

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 77

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 78

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 78

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 79

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 79

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

Question 80

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 80

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

Question 81

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

Answer 81

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

Question 82

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 82

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

Question 83

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 83

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

Question 84

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 84

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

Question 85

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

Answer 85

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

Question 86

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 86

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

Question 87

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 87

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

Question 88

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 88

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

Question 89

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 89

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

Question 90

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 90

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

Question 91

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 91

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

Question 92

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 92

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

Question 93

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 93

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

Question 94

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 94

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

Question 95

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 95

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 96

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 96

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

Question 97

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 97

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

Question 98

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 98

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 99

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 99

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

Question 100

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 100

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

Question 101

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 101

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

Question 102

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 102

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

Question 103

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 103

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

Question 104

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 104

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

Question 105

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 105

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 106

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 106

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

Question 107

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 107

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 108

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 108

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 109

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 109

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 110

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 110

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

Question 111

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 111

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

Question 112

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 112

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 113

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 113

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 114

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 114

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 115

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 115

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 116

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 116

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 117

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 117

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 118

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 118

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

Question 119

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 119

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

Question 120

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 120

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

Question 121

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 121

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

Question 122

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 122

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 123

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 123

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)