Chapter 9. The Scope Of Contractual Obligations (200-230) Flashcards
A, a tenant of B, promises to pay $1,000 for “such repairs as an architect appointed by B shall approve.” What are the conditions of A’s duty to pay for repairs?
The appointment by B of an architect and the architect’s approval of repairs are conditions of A’s duty to pay for repairs. Restatement 2d of Contracts § 226(a)
A and B agree that A will sell goods to B “f.o.b.” the place of destination. Prior correspondence shows that the price has been adjusted on the assumption that B’s insurance policies will cover the goods during shipment. Is this open to interpretation? What does this mean for B?
Notwithstanding the normal meaning of the “f.o.b.” term declared in Uniform Commercial Code § 2-319, it may be found that the parties have “otherwise agreed” under that section and that B bears the risk in transit. Restatement 2d of Contracts § 201(c)
A signs a negotiable promissory note payable to B’s order, and C signs his name on the back without more. Is this open to interpretation? What does this mean for C?
Under Uniform Commercial Code § 3-402, C’s signature is an indorsement, and evidence of a contrary understanding is not admissible except for the purpose of reformation of the instrument. This conclusion does not rest on interpretation of the writing. Restatement 2d of Contracts § 201(c)
A agrees to sell beer to B at a specified price per barrel. At the time of the agreement both parties and others in their trade use as standard barrels wooden barrels which originally hold 31 gallons and hold less as they continue in use. A statute defines a barrel as 311/2 gallons. Is this open to interpretation?
The statute does not prevent interpretation of the agreement as referring to the barrels in use. Restatement 2d of Contracts § 201(d)
A agrees to sell and B to buy a quantity of eviscerated “chicken.” A tenders “stewing chicken” or “fowl”. B rejects on the ground that the contract calls for “broilers” or “fryers.” Each party makes a claim for damages against the other. It is found that each acted in good faith and that neither had reason to know of the difference in meaning. Which interpretation, if any, is upheld? Who will prevail?
Both claims fail. Restatement 2d of Contracts § 201(d)
A orders goods from B, using A’s standard form. B acknowledges the order, using his own standard form. Each form provides that no terms are agreed to except those on the form and that the other party agrees to the form. One form contains an arbitration clause. the other does not. The goods are delivered and paid for. Later a dispute arises as to their quality. Is this open to interpretation? Is the arbitration clause to be enforced?
There is no agreement to arbitrate the dispute. Restatement 2d of Contracts § 201(d)
A contracts with B to do concrete work on a bridge, to be paid for according to “the number of square yards of concrete surface included in the bridge deck.” An estimate included in the proposal for bids and an estimate submitted by A to B after award are shown to have been based on the top surface only, not including the side and bottom surfaces. Is this open to interpretation? How is the contract to be interpreted?
On a finding that this was the mutual understanding, the contract is to be so interpreted. Restatement 2d of Contracts § 202(b)
In a written agreement between A and B it is stated that B owns half of the stock of C Company, that “A has rendered valuable services to C Company for which B desires to compensate A in the sum of $25,000 payable in the manner hereinafter set forth,” and that B will pay A “one-half of all money received from C Company, such as dividends, or profits until A has been paid the said amount of $25,000.” It is shown that the written agreement was executed after the services were rendered, that there was no prior explicit understanding that A would be compensated, and that before signing the written agreement A and B orally agreed that the $25,000 was to be a “bonus out of B’s profit,” “double or nothing,” “a gamble.” How is the agreement to be interpreted?
The written agreement is to be interpreted in accordance with the oral agreement. Restatement 2d of Contracts § 202(b)
A promises B as follows: “In consideration of your supplying my nephew C with china and earthenware during the coming year, I guarantee the payment of any bills you may draw on him on account thereof to the amount of $200.” C is engaged in the business of selling such goods. B sells C $2,000 of china during the year and draws bills for their price in varying amounts. C pays $1,000 and then defaults. How is A’s promise to be interpreted?
A’s promise is to be interpreted as a continuing undertaking, not limited to the first $200 of purchases. Restatement 2d of Contracts § 202(c)
A agrees with his divorced wife B and C, trustee, to pay to C $1,200 each year for the benefit of D, the 10-year-old son of A and B, until D enters college, and to pay $2,200 each year for the period of D’s higher education but not more than four years. At age 19 D completes high school and is inducted into the army. How is the agreement to be interpreted?
Upon a finding that the main purpose of the agreement is to provide for D’s maintenance and education, the agreement is to be interpreted as not requiring payments during D’s military service. Restatement 2d of Contracts § 202(c)
A written agreement between A and B for the exchange of real estate provides that A and B will each pay a $200 commission to C, a broker, “upon the signing of this agreement by both parties hereto.” The last sentence of the agreement states, “The commission being due and payable upon the transfer of the properties.” It is shown that A refused to sign the agreement until the last sentence was added. How is the agreement to be interpreted?
The agreement is to be interpreted to make the commission due only when both the signing and the transfer take place. Restatement 2d of Contracts § 202(d)
A agrees to appoint B exclusive distributor in a specified area for a new product to be manufactured by A, and B agrees to use his best efforts to promote sale of the product. The written agreement includes an initial retail price list and a provision that A will sell to B at the lowest price and highest discount it gives to any distributor. How is the agreement to be interpreted?
Whether the parties intend to be bound before any other distributor is appointed or any price fixed is a question of the meaning of the entire agreement in its context. If they do, the agreement has the effect of an agreement to sell at a reasonable price at the time for delivery. See Uniform Commercial Code § 2-305. Restatement 2d of Contracts § 202(d)
A contracts in writing to build a house for B according to specifications, and C, a surety company, guarantees A’s performance. After completion and acceptance the house and its contents are damaged by hot water because of defective work by the plumbing and heating subcontractor. How is the contract, specifications and surety bond to be interpreted?
In determining the responsibility of A and C, the contract, specifications and surety bond are to be read together. Restatement 2d of Contracts § 202(d)
A issues to B a fire insurance policy covering lumber stored in “sheds.” B also keeps lumber in the basement of a two-story warehouse. How is the coverage to be interpreted?
In the absence of contrary indication, lumber in the basement of a two-story warehouse is not covered. Restatement 2d of Contracts § 202(e)
A leases restaurant premises to B. The lease provides that A will pay for electricity and that B will “pay for gas or fuel used in the preparation of food.” Can the lease to be interpreted to include general electricity use by B on the restaurant premises?
In the absence of contrary indication, “fuel” should be read not to include electricity. Restatement 2d of Contracts § 202(f)
A leases restaurant premises to B. The lease provides that A will pay for electricity and that B will “pay for gas or fuel used in the preparation of food.” There is a local usage in the restaurant trade that “fuel” includes electricity used in cooking. How is the lease to be interpreted regarding the local usage?
In the absence of contrary indication, “fuel” may be read in accordance with the usage. But a provision in the lease that if B installs a new electric range he will also install a special meter and pay for electricity used by the range would show that the parties did not adopt the local usage. Restatement 2d of Contracts § 202(f)
A contract for the sale of horsemeat scraps calls for “minimum 50% protein.” As both parties know, by a usage of the business in which they are engaged, 49.5 per cent is treated as the equivalent of 50 per cent. How is the contract to be interpreted regarding the usage?
The contract is to be interpreted in accordance with the usage. Restatement 2d of Contracts § 202(f)
A discloses to B a secret formula for an antiseptic liquid and B agrees to pay monthly royalties based on amounts sold. Fifty years later the formula has been published in medical journals. After continuing to pay for 25 years more, B contends that the duty to pay royalties ended when the formula ceased to be secret. Does B still have a duty?
B’s conduct strongly negates the contention. Restatement 2d of Contracts § 202(g)
Several railroads agree in writing to share working expenses and taxes of X, another railroad, on a “wheelage basis.” For several years they pay shares in proportion to their stock ownership in the other railroad. Then all but one agree that they have been mistaken and that future payments will be made on a basis of use of X’s physical properties. How is the performance to be interpreted?
Stock ownership is so plainly unrelated to any possible meaning of “wheelage” that the course of performance does not support an interpretation of “wheelage basis” as requiring payments in proportion to stock ownership. Restatement 2d of Contracts § 202(g)
A licenses B to manufacture pipes under A’s patents, and B agrees to pay “a royalty of 50 cents per 1,000 feet for an output of 5,000,000 or less feet per year, and for an output of over 5,000,000 feet per year at the rate of 30 cents per thousand feet.” The 50 cent rate is payable on the first 5,000,000 feet, the 30 cent rate only on the excess. How is the agreement to be interpreted?
The more literal reading is unreasonable, since it would involve a smaller payment for 6,000,000 feet than for 4,000,000 feet. Restatement 2d of Contracts § 203(c)
A, an agent of C, authorized to make contracts for C, writes a letter to B beginning “We offer,” and stating a proposal in detailed and clear language, signed “C by A, Agent.” At the bottom of the office stationery which A uses for the offer there is printed “All contracts and orders taken are subject to the approval of the executive office.” A portion of the letter is typed over a portion of this printing. How might a jury find that there is an offer? Can this be set aside?
A jury’s finding that the printed words were not part of the letter and that it is therefore an offer will not be set aside. Restatement 2d of Contracts § 203(f)
A charter party contains the printed provision “vessel to have turn in loading.” There is written below this, “vessel to be loaded promptly.” What is the appropriate interpretation?
The printed and written provisions are given the consistent meaning that the vessel shall take its turn in loading, though this involves considerable delay, but when its turn arrives, the vessel shall be loaded promptly. Restatement 2d of Contracts § 203(f)
A’s agent B draws checks on the C bank, imprinting the amounts with perforations made by a check-writing machine. The amounts are also handwritten in figures. Does this open up the question of interpretation? Which should control: the perforation or the handwritten figures?
In case of conflict, since the perforated amounts are more difficult to alter, they control the handwritten figures. See Uniform Commercial Code § 3-118(b), (c). Restatement 2d of Contracts § 203(f)
A and his wife convey their ranch to A’s sister and her husband, reserving an option to repurchase. The parties agree orally that the property will be kept in the family, but the deed says nothing as to assignment of the option. How does partial integration or complete integration change the assignability of the option?
If the deed is found to be a partial integration, the oral agreement is effective to show that the option is not assignable. If the deed is found to be a complete integration, the oral agreement is discharged and the option is assignable. Restatement 2d of Contracts § 204(e)
A, an oil dealer, borrows $100,000 from B, a supplier, and agrees to buy all his requirements of certain oil products from B on stated terms until the debt is repaid. Before the debt is repaid, A makes a new arrangement with C, a competitor of B. Under the new arrangement A’s business is conducted by a corporation formed and owned by A and C and managed by A, and the corporation buys all its oil products from C. What may the new arrangement be found to be? Has the contract been breached?
The new arrangement may be found to be a subterfuge or evasion and a breach of contract by A. Restatement 2d of Contracts § 205(d)
A, owner of a shopping center, leases part of it to B, giving B the exclusive right to conduct a supermarket, the rent to be a percentage of B’s gross receipts. During the term of the lease A acquires adjoining land, expands the shopping center, and leases part of the adjoining land to C for a competing supermarket. Has the contract been breached?
Unless such action was contemplated or is otherwise justified, there is a breach of contract by A. Restatement 2d of Contracts § 205(d)
A Insurance Company insures B against legal liability for certain bodily injuries to third persons, with a limit of liability of $10,000 for an accident to any one person. The policy provides that A will defend any suit covered by it but may settle. C sues B on a claim covered by the policy and offers to settle for $9,500. A refuses to settle on the ground that the amount is excessive, and judgment is rendered against B for $20,000 after a trial defended by A. A then refuses to appeal, and offers to pay $10,000 only if B satisfies the judgment, impairing B’s opportunity to negotiate for settlement. B prosecutes an appeal, reasonably expending $7,500, and obtains dismissal of the claim. Is A liable? Why?
A has failed to deal fairly and in good faith with B and is liable for B’s appeal expense. Restatement 2d of Contracts § 205(d)
A and B contract that A will perform certain demolition work for B and pay B a specified sum for materials salvaged, the contract not to “become effective until” certain insurance policies “are in full force and effect.” A makes a good faith effort to obtain the insurance, but financial difficulty arising from injury to an employee of A on another job prevents A from obtaining them. Does A have a duty?
A’s duty to perform is discharged. Restatement 2d of Contracts § 205(d)
B submits and A accepts a bid to supply approximately 4000 tons of trap rock for an airport at a unit price. The parties execute a standard form of “Invitation, Bid, and Acceptance (Short Form Contract)” supplied by A, including typed terms “to be delivered to project as required,” “delivery to start immediately,” “cancellation by A may be effected at any time.” What does “good faith” require of A?
Good faith requires that A order and accept the rock within a reasonable time unless A has given B notice of intent to cancel. Restatement 2d of Contracts § 205(d)
A contracts to perform services for B for such compensation “as you, in your sole judgment, may decide is reasonable.” After A has performed the services, B refuses to make any determination of the value of the services. What, if anything, is A entitled to?
A is entitled to their value as determined by a court. Restatement 2d of Contracts § 205(d)
A suffers a loss of property covered by an insurance policy issued by B, and submits to B notice and proof of loss. The notice and proof fail to comply with requirements of the policy as to form and detail. B does not point out the defects, but remains silent and evasive, telling A broadly to perfect his claim. What recourse does A have regarding the policy?
The defects do not bar recovery on the policy. Restatement 2d of Contracts § 205(d)
A contracts to sell and ship goods to B on credit. The contract provides that, if B’s credit or financial responsibility becomes impaired or unsatisfactory to A, A may demand cash or security before making shipment and may cancel if the demand is not met. What recourse does A have?
A may properly demand cash or security only if he honestly believes, with reason, that the prospect of payment is impaired. Restatement 2d of Contracts § 205(e)
A contracts to sell and ship goods to B. On arrival B rejects the goods on the erroneous ground that delivery was late. Can B make further claims, e.g. damage to the goods?
B is thereafter precluded from asserting other unstated grounds then known to him which A could have cured if stated seasonably. Restatement 2d of Contracts § 205(e)
A is employed by B as an inventor. In an agreement settling their disputes on termination of the employment, A promises to assign to B all A’s rights in a pending patent application and all improvements on the invention covered. Thereafter A makes an invention and applies for a patent, and B claims it as an improvement. How is the agreement to be interpreted regarding future improvements?
The public interest in encouraging invention supports an interpretation of the agreement excluding future improvements unless future improvements were specifically included. Restatement 2d of Contracts § 207(a)
A, an individual, contracts in June to sell at a fixed price per ton to B, a large soup manufacturer, the carrots to be grown on A’s farm. The contract, written on B’s standard printed form, is obviously drawn to protect B’s interests and not A’s. it contains numerous provisions to protect B against various contingencies and none giving analogous protection to A. Each of the clauses can be read restrictively so that it is not unconscionable, but several can be read literally to give unrestricted discretion to B. In January, when the market price has risen above the contract price, A repudiates the contract, and B seeks specific performance. What might the court determine regarding specific performance?
In the absence of justification by evidence of commercial setting, purpose, or effect, the court may determine that the contract as a whole was unconscionable when made, and may then deny specific performance. Restatement 2d of Contracts § 208(c)
A, a homeowner, executes a standard printed form used by B, a merchant, agreeing to pay $1,700 for specified home improvements. A also executes a credit application asking for payment in 60 monthly installments but specifying no rate. Four days later A is informed that the credit application has been approved and is given a payment schedule calling for finance and insurance charges amounting to $800 in addition to the $1,700. Before B does any of the work, A repudiates the agreement, and B sues A for $800 damages, claiming that a commission of $800 was paid to B’s salesman in reliance on the agreement. What might the court determine regarding the claim?
The court may determine that the agreement was unconscionable when made, and may then dismiss the claim. Restatement 2d of Contracts § 208(c)
A, literate only in Spanish, is visited in his home by a salesman of refrigerator-freezers for B. They negotiate in Spanish. A tells the salesman he cannot afford to buy the appliance because his job will end in one week, and the salesman tells A that A will be paid numerous $25 commissions on sales to his friends. A signs a complex installment contract printed in English. The contract provides for a cash price of $900 plus a finance charge of $250. A defaults after paying $32, and B sues for the balance plus late charges and a 20% attorney’s fee authorized by the contract. The appliance cost B $350. What might the court determine regarding recovery for B?
The court may determine that the contract was unconscionable when made, and may then limit B’s recovery to a reasonable sum. Restatement 2d of Contracts § 208(d)
A, a packer, sells and ships 300 cases of canned catsup to B, a wholesale grocer. The contract provides, “All claims other than swells must be made within ten days from receipt of goods.” Six months later a government inspector, upon microscopic examination of samples, finds excessive mold in the cans and obtains a court order for destruction of the 270 remaining cases in B’s warehouse. What might the court determine regarding a claim for damages for breach of warranty?
In the absence of justifying evidence, the court may determine that the quoted clause is unconscionable as applied to latent defects and does not bar a claim for damages for breach of warranty by B against A. Restatement 2d of Contracts § 208(e)
A, a retail furniture store, sells furniture on installment credit to B, retaining a security interest. As A knows, B is a woman of limited education, separated from her husband, maintaining herself and seven children by means of $218 per month public assistance. After 13 purchases over a period of five years for a total of $1,200, B owes A $164. B then buys a stereo set for $514. Each contract contains a paragraph of some 800 words in extremely fine print, in the middle of which are the words “all payments … shall be credited pro rata on all outstanding … accounts.” The effect of this language is to keep a balance due on each item until all are paid for. On B’s default, A sues for possession of all the items sold. What might the court determine regarding the clause and/or contract?
It may be determined that either the quoted clause or the contract as a whole was unconscionable when made. Restatement 2d of Contracts § 208(e)
A, a corporation with its principal office in State X, contracts with B, a resident of State X, to make improvements on B’s home in State X. The contract is made on A’s standard printed form, which contains a clause by which the parties submit to the jurisdiction of a court in State Y, 200 miles away. No reason for the clause appears except to make litigation inconvenient and expensive for B. Is the clause unconscionable?
The clause is unconscionable. Restatement 2d of Contracts § 208(e)
A, a finance company, lends money to B, a manufacturing company, on the security of an assignment by B of its accounts receivable. The agreement provides for loans of 75% of the value of assigned accounts acceptable to A, and forbids B to dispose of or hypothecate any assets without A’s written consent. The agreed interest rate of 18% would be usurious but for a statute precluding a corporation from raising the defense of usury. Substantial advances are made, and the balance owed is $14,000 when B becomes bankrupt, three months after the first advance. Is the agreement unconscionable?
A determination that the agreement is unconscionable on its face, without regard to context, is error. The agreement is unconscionable only if it is not a reasonable commercial device in the light of all the circumstances when it was made. Restatement 2d of Contracts § 208(f)
A and B enter into an oral contract, and prepare and sign a writing to incorporate its terms. Though the writing contains substantially all the orally agreed terms, they are not fully satisfied with it, and they agree to have it redrafted. Is there an integrated agreement?
There is no integrated agreement. Restatement 2d of Contracts § 209(b)
A orally agrees to employ B on certain terms. B immediately writes and A receives a letter beginning, “Confirming our oral arrangement this morning,” and fully stating the contract as he understands it. A makes no reply but with knowledge of B’s understanding accepts services from B under the contract. Is there an integrated agreement?
The letter is a completely integrated agreement. Even though the letter is not in all respects accurate, it operates as an offer of substituted terms, and A’s acquiescence manifests assent to those terms. Restatement 2d of Contracts § 209(b)
A sells and delivers a hotel to B. Later A takes possession of the hotel furniture, and B sues to recover it. B claims the furniture under an oral agreement. A proves an apparently complete written agreement for the sale of the real property, and objects to consideration of the oral agreement. Is there an integrated agreement?
In the absence of contrary evidence, the writing is taken to be an integration. whether it is a complete integration is decided on the basis of all relevant evidence. If the oral agreement contradicts the writing, or if the writing is a complete integration, evidence of the oral agreement is excluded. otherwise the trier of fact is to decide whether the oral agreement was made. Restatement 2d of Contracts § 209(c)
A, a college, owns premises which have no toilet or plumbing facilities or heating equipment. In negotiating a lease to B for use of the premises as a radio station, A orally agrees to permit the use of facilities in an adjacent building and to provide heat. The parties subsequently execute a written lease agreement which makes no mention of facilities or heat. How is the existence of an integrated agreement be determined?
The question whether the written lease was adopted as a completely integrated agreement is to be decided on the basis of all relevant evidence of the prior and contemporaneous conduct and language of the parties. Restatement 2d of Contracts § 210(b)
A writes to B a letter offer containing four provisions. B replies by letter that three of the provisions are satisfactory, but makes a counter proposal as to the fourth. After further discussion of the fourth provision, the parties come to oral agreement on a revision of it, but make no further statements as to the other three terms. Is there an integrated agreement?
A’s letter is a partially integrated agreement with respect to the first three provisions. Restatement 2d of Contracts § 210(c)
A delivers a fur coat to B for storage and receives a warehouse receipt which purports on its face to set forth the terms of the storage contract. Has A assented to the terms of the contract?
By accepting the receipt, whether or not A reads it or understands it, A assents to its terms. Restatement 2d of Contracts § 211(d)
A pays ten cents and checks a parcel in a parcel room in a bus terminal, and receives a parcel check three inches long and two and one-half inches wide. The check bears an identifying number and the word “contract,” both conspicuous, and contractual terms in fine print, but A does not read it or know of the terms until later. Are the terms part of the checking agreement?
The terms are not part of the checking agreement. Restatement 2d of Contracts § 211(d)
A sells plant bulbs to B. Later A delivers the bulbs with an invoice containing contractual language. B writes on a copy of the invoice “picked up October 27th” and signs his name. Are the terms part of the checking contract?
The invoice terms are not part of the contract. Restatement 2d of Contracts § 211(d)
A, an insurance company, issues an insurance policy to B covering injuries “by accidental means.” A clause in the policy excludes “disability or other loss resulting from or contributed to by any disease or ailment.” B believes himself to be in good health, but has a latent Parkinson’s disease. Later an accidental blow activates the disease into a disabling condition. Is the policy enforceable?
B is covered by the policy without regard to his knowledge or understanding of the quoted language at the time of contracting. Restatement 2d of Contracts § 211(e)
A applies to B, an insurance company, for burglary insurance. B issues to A a written binder by which B “agrees to insure property as herein described for amounts subscribed” until a policy is issued. The policy in ordinary use by B includes a provision for cancellation by B on written notice and requires suit within one year after loss. Are the terms part of the contract?
Those terms are part of the contract. Restatement 2d of Contracts § 211(f)
A ships goods via B, a carrier. B carries an insurance policy with C, an insurance company, and with C’s authority issues to A a certificate that A’s shipment is insured under the policy. The policy contains a clause excluding coverage of trips on the Great Lakes unless approved by D, an individual, but this clause is not referred to in the certificate or known to A. Are the terms part of the contract?
It is not part of the contract between A and C. Restatement 2d of Contracts § 211(f)
A sends to B an invitation to bid on ship repairs. Annexed to the invitation are contract terms, including a promise by B to save A harmless from certain claims. B’s bid has printed at the top, in print which cannot be read without a magnifying glass, a clause negating liability for personal injuries beyond that imposed by law. A accepts the bid. Does the clause negate B’s obligation to save A?
The clause in the bid is ineffective to negate B’s obligation to save A harmless. Restatement 2d of Contracts § 211(f)
A sells an electric generator to B by a written contract incorporating typewritten specifications and printed standard terms. The specifications include “1136 kilowatts,” and the standard terms disclaim any warranties not set forth in the documents. Does the disclaimer impair the warranty that the generator will produce 1136 kilowatts?
The disclaimer does not impair A’s warranty that the generator will produce 1136 kilowatts. See Uniform Commercial Code § 2-316(1). Restatement 2d of Contracts § 211(f)
In an integrated agreement A promises to sell and B to buy described real estate. A intends to sell Blackacre. B intends to buy Whiteacre. The writing reasonably describes Greenacre, and neither party has any more reason than the other to know of the misdescription. Is there a contract?
There is no contract. Restatement 2d of Contracts § 212(a)
In an integrated agreement A agrees to sell and B to buy certain patent rights. A intends to sell only the rights under the British patent on a certain invention. B intends also to buy rights under American and French patents. How is the agreement to be interpreted?
If A has reason to know that B intends to buy the American rights, B has reason to know that A does not intend to sell the French rights, and the language used can be read to cover the British and American but not the French rights, that may be determined to be the proper interpretation. Restatement 2d of Contracts § 212(a)
A agrees orally with B, a stockbroker, that in transactions between them “abracadabra” shall mean X Company. A sends a signed written order to B to buy 100 shares “abracadabra,” and B buys 100 shares of X Company. Is this binding?
The parties are bound in accordance with the oral agreement. Restatement 2d of Contracts § 212(b)
A and B are engaged in buying and selling shares of stock from each other, and agree orally to conceal the nature of their dealings by using the word “sell” to mean “buy” and using the word “buy” to mean “sell.” A sends a written offer to B to “sell” certain shares, and B accepts. Is this binding?
The parties are bound in accordance with the oral agreement. Restatement 2d of Contracts § 212(b)
In an integrated agreement A promises B to insert B’s “business card” in A’s “advertising chart” for a price to be paid when the chart is “published.” How are the terms to be interpreted?
The quoted terms are to be read in the light of the circumstances known to the parties, including their oral statements as to their meaning. Restatement 2d of Contracts § 212(c)
In an integrated agreement A contracts to sell “my horse,” and B contracts to buy it. A owns two horses. How is the agreement to be interpreted?
It may be shown by oral evidence, including statements of the parties, that both A and B meant the same horse. Restatement 2d of Contracts § 212(c)
D Corporation regularly borrows money from C Bank. S, the principal stockholder in D, offers to guarantee payment if C will increase the amounts lent. There is a bank custom to make such loans only on adequate collateral supplied by the borrower, and C promises S to follow the custom. S then executes a written agreement with C guaranteeing payment of future loans to D “with or without security.” How might C’s prior promise be discharged?
If the written agreement is a binding integrated agreement, C’s prior promise is discharged. Restatement 2d of Contracts § 213(b)
A orally agrees to sell a city lot to B. The city is installing a sidewalk in front of the lot, and A orally agrees to pay the cost to be assessed by the city in an amount not exceeding $45. B then retains a lawyer to draw up a written agreement, and A and B execute it, A without reading it. The agreement provides that A will pay all costs of the installation of the sidewalk, but does not mention any dollar limit. How might the agreement for a $45 limit be discharged?
If the written agreement is a binding integrated agreement, any agreement for a $45 limit is discharged. Restatement 2d of Contracts § 213(b)
In May A and B exchange properties and agree orally that A will make certain repairs on the property to be conveyed by A to B, the repairs to be finished by October 1. A and B then draw up and sign a memorandum of the repair agreement, specifying all the terms except that the memorandum is silent as to time of performance. How might the agreement to finish by October 1 be discharged?
If the memorandum is a binding completely integrated agreement, the agreement to finish by October 1 is discharged, and the repairs are to be finished within a reasonable time. The oral agreement as to October 1 may be relevant evidence as to what is a reasonable time. Restatement 2d of Contracts § 213(c)
A and B make an oral agreement for the sale of land and a hotel thereon, together with the hotel furniture. They employ a lawyer to prepare a written contract. He does so, and they sign it. It contains no mention of personal property. How might the agreement as to furniture be discharged?
The agreement as to furniture is discharged if there is a binding completely integrated agreement covering the entire transaction, but not if only the part of the agreement relating to real property is integrated. Restatement 2d of Contracts § 213(c)
A and B enter into a contract that B will build a house on A’s land for a price. Later they enter into an oral contract by which B promises to add a porch and A promises to pay an extra $2,000. Still later they enter into an integrated agreement in which B promises to build according to the original plans and A promises to pay the extra $2,000. Is the integrated agreement binding? Is there consideration? Can the oral agreement be discharged?
The integrated agreement is not binding for lack of consideration, and the oral intermediate agreement is not discharged. Restatement 2d of Contracts § 213(d)
A and B enter into a contract that B will build a house on A’s land for a price. Later B offers to add a porch if A will sign a new contract. They then enter into an integrated agreement in which B promises to build according to the original plans and A promises to pay an extra $2,000. How might the integrated agreement discharge the matter of the porch? Is there consideration?
If the integrated agreement is inconsistent with the porch offer, or if it is a completely integrated agreement and the matter of the porch is within its scope, the integrated agreement is effective to discharge the porch offer but is not binding for lack of consideration. Restatement 2d of Contracts § 213(d)
A and B in an integrated contract agree that A shall serve as captain of B’s ship, and shall have a certain rate of pay instead of “privilege and primage.” What would be used to show that the meaning to the parties of the quoted words when used was the privilege of transporting goods in the captain’s cabin establish that as the meaning in the contract?
Previous negotiations showing that the meaning to the parties of the quoted words when used was the privilege of transporting goods in the captain’s cabin establish that as the meaning in the contract. Restatement 2d of Contracts § 214(b)
In an integrated contract with A, B promises to buy “your wool.” Previous negotiations of the parties related to both wool from A’s sheep and wool that A had contracted to buy from other persons. Are the negotiations admissible in court? Why?
The negotiations are admissible to establish both classes as the meaning of the words “your wool” in the contract. Restatement 2d of Contracts § 214(b)
A, in an integrated contract with B, promises B to sell certain goods to be manufactured by A, and B promises to pay the “total cost.” What would be used to establish the meaning to the parties of the quoted words?
Previous negotiations may establish the meaning of “total cost.” Rst. 214(b)
A and B make an integrated contract by which A promises to sell and B to buy goods “ex Peerless.” There are two ships named “Peerless.” What would be used to establish the meaning to the parties of the quoted words?
Evidence is admissible to show that there are two ships of that name, which one each party meant, and, in case of misunderstanding, whether either had knowledge or reason to know of the other’s meaning. Restatement 2d of Contracts § 214(b)
A and B make an integrated agreement by which A promises to complete an unfinished building according to certain plans and specifications, and B promises to pay A $2,000 for so doing. It may be shown that, by a contract made previously with B, A had promised to erect and complete the building for $10,000. that he had not fully completed it though paid the whole price. Is this evidence admissible in court? Why?
This evidence is admissible to show that there is no consideration for B’s new promise, since A is promising no more than he is bound by his original contract to perform. Restatement 2d of Contracts § 214(c)
A and B make an integrated agreement by which A promises to sell and B promises to buy a large quantity of rifles for the purpose of fomenting a rebellion. Why might this integrated agreement be invalidated?
If it may be shown that A and B had previously agreed that the rifles when bought by B should be used in fomenting a rebellion in violation of law, the agreement is invalidated because it is illegal. Restatement 2d of Contracts § 214(c)
A and B make an integrated agreement by which A promises to sell and B promises to buy a tract of land described in the agreement. Owing to a mutual mistake the description is not an accurate one of the tract in regard to which both A and B were bargaining. What would be used to establish the meaning to the parties of the description to establish the right to reformation of the integration?
Prior oral agreements may be shown to establish the right to reformation of the integration so that it shall accurately describe the tract intended. Restatement 2d of Contracts § 214(d)
A check states no date of payment, but it is orally agreed that the check will be paid only after six months. Is the oral agreement contradictory?
The oral agreement contradicts the check. Under Uniform Commercial Code § 3-108 the check is payable on demand, and most competent adults in the United States have reason to know the rule. Restatement 2d of Contracts § 216(b)
A owes B two debts, and sends a check for an amount less than the amount of either. In the absence of any contrary manifestation of intention by either party, the rule of law would be that the check is applied to the debt which first matured. Is the oral agreement contradictory?
An agreement that the other debt is to be paid is not inconsistent with the check. Restatement 2d of Contracts § 216(b)
A and B in an integrated writing promise to sell and buy a specific automobile. As part of the transaction they orally agree that B may keep the automobile in A’s garage for one year, paying $15 a month. Is the oral agreement within the scope of the integration?
The oral agreement is not within the scope of the integration and is not superseded. Restatement 2d of Contracts § 216(c)
A and B in an integrated writing promise to sell and buy a specifiA owes B $1,000. They agree orally that A will sell B Blackacre for $3,000 and that the $1,000 will be credited against the price, and then sign a written agreement, complete on its face, which does not mention the $1,000 debt or the credit. Is the written agreement completely integrated? Is the oral agreement admissible?
The written agreement is not completely integrated, and the oral agreement for a credit is admissible in evidence to supplement the written agreement. Restatement 2d of Contracts § 216(d)
A and B sign a written agreement, complete on its face, that A will sell B Blackacre for $3,000, conveyance and payment to be made within 60 days. It is claimed that B was about to render services for A and that the written agreement was signed on the oral understanding that B would be permitted to pay the price by rendering the services at $50 an hour. Is the oral agreement admissible? How might it be otherwise?
The oral understanding is admissible in evidence unless it is found that the written agreement was completely integrated. Restatement 2d of Contracts § 216(d)
A and B sign a standard form of written agreement for the sale of goods, complete on its face except that a blank for time and place of delivery is not filled in. It is claimed that the writing was signed on the oral understanding that delivery would be made within 30 days at the buyer’s place of business. Are the goods deliverable within a reasonable time? Is the written agreement completely integrated? Is the oral agreement admissible?
Under Uniform Commercial Code §§ 2-308 and 2-309, the goods would be deliverable, unless otherwise agreed, within a reasonable time at the seller’s place of business. The written agreement is not completely integrated, and the oral understanding is admissible in evidence to supplement its terms. Restatement 2d of Contracts § 216(d)
A and B sign a written agreement complete on its face, for the sale of goods to be shipped by A from Chicago to New York. It is claimed that the written agreement was signed on the oral understanding that the shipment would be made by a specified route. Can A properly ship by any reasonable route? Is the written agreement completely integrated? Is the oral agreement admissible?
Under Uniform Commercial Code §§ 2-311 and 2-504, unless otherwise agreed, A could properly ship by any reasonable route. The written agreement is not completely integrated, and the oral understanding is admissible in evidence to supplement its terms. Restatement 2d of Contracts § 216(d)
A and B orally agree that A shall work for B in specified employment for $3,000. B delivers to A an absolute written promise to pay $3,000 in six months. Does the written promise qualify B’s duty to pay? Is the oral agreement admissible?
The terms of the oral agreement are admissible in evidence to supplement the written promise and to qualify B’s duty to pay $3,000. Restatement 2d of Contracts § 216(d)
A and B sign a written agreement, complete on its face, for the sale of a specific machine by A to B. The writing describes the machine and warrants that it is new, but contains no other terms relevant to warranty. What would need to be established in order to determine whether an additional oral warranty of quality is superseded?
Warranties of title, conformity to the description, merchantability, or fitness for a particular purpose, arising under Uniform Commercial Code §§ 2-312 through 2-315, are not excluded. Whether an additional oral warranty of quality is superseded depends on whether the agreement is completely integrated. Restatement 2d of Contracts § 216(d)
A and B agree that A will sell a patent to B for $10,000 if C, an engineer advising B, approves. A and B sign a written agreement covering all of the agreement except C’s approval, and agree orally that it will take effect only if C approves. Is there a contract? Does B have a duty?
There is an immediate contract, but B’s duty is conditional on C’s approval. Restatement 2d of Contracts § 217(a)
A and B sign a written agreement for an exchange of real property and leave it with C, an attorney, on the oral understanding that it is not to take effect until each has consulted his wife and notified C that he still wishes to close the exchange. Is there a contract?
There is no contract until each has notified C. Restatement 2d of Contracts § 217(a)
A and B sign a written agreement for the sale of goods, and orally agree that the writing shall not take effect unless railroad cars are available within ten days. Is there an effective agreement?
The oral agreement is effective. Restatement 2d of Contracts § 217(b)
Evidence of the facts stated in Illustration 3 is offered, and the writing contains a provision that “delivery shall be made within 30 days.” How might evidence of the oral agreement be excluded by a court?
Evidence of the oral agreement is excluded only if the court makes a preliminary determination that performance of the written agreement could not in the circumstances reasonably be found to have been subject to the oral agreement. Restatement 2d of Contracts § 217(b)
A and B make and sign an elaborate written agreement for the merger of their corporate holdings into a single new company. The writing provides that all obligations under it will terminate unless agreed subscriptions to the stock of the new company are accepted within twenty days. It is also orally agreed that the project is not to be operative unless the parties raise $600,000 additional capital. How might there be a contract?
If the additional capital is not raised, there is no contract. Restatement 2d of Contracts § 217(b)
A gives B a written promise to pay $100. The writing states no consideration. B promises orally to build a fence in consideration of the promise of $100. Are these promises operative?
Both promises are operative. Restatement 2d of Contracts § 218(d)
A, an insurance company, issues a fire insurance policy to B. The policy provides that A is not bound until the premium is paid, and falsely recites payment. What happens if B accepts the policy?
On accepting the policy, B impliedly promises to pay the premium and A is bound by the policy. Restatement 2d of Contracts § 218(e)
A, desiring to make a gift of Blackacre to his daughter B, delivers to B a written promise to transfer Blackacre to her in consideration of $1,000 paid by B, receipt of which is acknowledged. No money is in fact paid by B, and the circumstances do not justify implication of a promise to pay. Is A’s promise binding? Why?
A’s promise is not binding for want of consideration. Restatement 2d of Contracts § 218(e)
A contracts to sell and B to buy ten bushels of oats. By very general usage 32 pounds constitutes a bushel of oats. How should “ten bushels” be interpreted regarding the contract?
In the absence of contrary evidence, ten bushels in the contract means 320 pounds. Restatement 2d of Contracts § 220(b)
A contracts with B to “sponsor” a bowling team and to pay B “the usual sponsoring fees.” A repudiates the contract in a dispute over the fees. What must B prove in order to recover?
In an action against A for repudiating the contract in a dispute over the fees, B cannot recover without proving a usage as to “usual sponsoring fees.” Rst. 220(b)
A employs B as exclusive broker to sell business premises subject to a one-year lease back to A. B submits an agreement for sale to C subject to a one-year lease, with a provision for termination of the lease on six months notice. A rejects the agreement. In an action for the agreed commission B claims that by local usage all business leases contain such a provision. What must B establish in order to recover?
B has the burden of establishing the usage and A’s knowledge or reason to know of it. Restatement 2d of Contracts § 220(b)
A and B contract for a year’s employment of B by A. As both parties know, there is a usage that such a contract may be terminated by a month’s notice. Is the usage part of the contract?
Unless a contrary intention is manifested, the usage is part of the contract. Restatement 2d of Contracts § 220(c)
A sends goods to B by C, a private carrier, receiving a bill of lading from C. B rejects the shipment. The usage of such carriers, known to A and C, is to notify the shipper of such a rejection. Is the usage added to the terms of the bill of lading?
Unless a contrary intention is manifested, the requirement of notification is added to the terms of the bill of lading. Restatement 2d of Contracts § 220(c)
A contracts to sell and B to buy 100 barrels of flour at $8 a barrel. By a usage of the trade known to A and B payment under such contracts is due ten days after delivery unless otherwise agreed. Is the usage part of the contract?
The usage is part of the contract. Restatement 2d of Contracts § 220(c)
A contracts to sell and B to buy 100 barrels of mackerel. By a usage of trade known to A and B, sellers of mackerel, unless they agree otherwise, warrant that the fish are not below a certain size. Is the usage part of the contract?
The usage is part of the contract. See Uniform Commercial Code §§ 2-314(3), 2-316(3)(c). Restatement 2d of Contracts § 220(c)
A leases a rabbit warren to B. The written lease contains a covenant that at the end of the term A will buy and B will sell the rabbits at “60£ per thousand.” The parties contract with reference to a local usage that 1,000 rabbits means 100 dozen. Is the usage part of the contract?
The usage is part of the contract. Restatement 2d of Contracts § 220(d)
In an integrated contract, A promises to sell and B to buy a certain quantity of “white arsenic” for a stated price. The parties contract with reference to a usage of trade that “white arsenic” includes arsenic colored with lamp black. Is the usage part of the contract?
The usage is part of the contract. Restatement 2d of Contracts § 220(d)
A, a bank in New York City, issues to B a letter of credit promising a payment on presentation of documents including a “full set of bills of lading.” By a general banking usage in New York City, banks accept less than a full set in such cases if there is a guaranty by a responsible New York bank in lieu of the missing part. Is the usage part of the contract?
Unless otherwise agreed, the usage is part of the contract. Uniform Commercial Code § 5-109. Restatement 2d of Contracts § 220(d)
A, a canner, and B, a wholesale grocer, contract for the sale by A to B of canned fruit products, using a standard form of contract approved by canning and wholesale grocer trade associations. By uniform usage among canners, where the standard form is used title to unshipped goods passes on billing dates specified on the form. Is the usage part of the contract?
In the absence of contrary indication, the usage is part of the contract. Restatement 2d of Contracts § 221(a)
A, an ordained rabbi, is employed by B, an orthodox Jewish congregation, to officiate as cantor at specified religious services. At the time the contract is made, it is the practice of such congregations to seat men and women separately at services, and a contrary practice would violate A’s religious beliefs. At a time when it is too late for A to obtain substitute employment, B adopts a contrary practice. A refuses to officiate. Is the practice part of the contract? Is A entitled to anything?
The practice is part of the contract, and A is entitled to the agreed compensation. Restatement 2d of Contracts § 221(a)
A, in Washington, sends an order to B, a broker in Baltimore, to be executed on the New York Stock Exchange. In accordance with which usage––Washington, Baltimore, or the New York Stock Exchange––should the order be interpreted?
Unless both A and B give the order a different and identical interpretation or B has reason to know that A has a different intention, the order is interpreted in accordance with the reasonable usages of the New York Stock Exchange. Restatement 2d of Contracts § 221(b)
A, a publisher, contracts with B to publish a two-volume work. The contract provides for binding “10,000 copies at .538,” which by usage of the publishing business refers to the number of volumes rather than the number of sets. Is the usage part of the contract?
The usage is part of the contract even though the work is B’s first and he does not know of the usage. Restatement 2d of Contracts § 221(b)
A and B, both members of a Mercantile Exchange, enter into an oral contract within the Statute of Frauds. By usage of the Exchange oral agreements between members of the Exchange are enforceable. Does the usage make the contract enforceable?
The usage does not make the contract enforceable if it is otherwise unenforceable. Restatement 2d of Contracts § 221(c)
A makes B a promise without consideration. By usage such promises are binding without consideration. Does the usage make the promise legally binding?
The usage does not make the promise legally binding. Restatement 2d of Contracts § 221(c)
A makes an offer to B by telephone, and B accepts by telephone. By usage known to both parties such an agreement is not binding unless promptly confirmed in writing by the acceptor. Is the usage part of the agreement? How might a contract be formed?
Unless a contrary intention is indicated, the usage is part of the agreement, and there is no contract unless B gives prompt written confirmation. Restatement 2d of Contracts § 221(c)
A, a resident of Philadelphia, makes a contract with B, a resident of New York, by which A promises to build a brick wall in Philadelphia. There is a local usage in Philadelphia as to measuring brick which differs from that elsewhere. B is not aware of the Philadelphia usage, as A has reason to know. Is the usage part of the contract?
The usage is not part of the contract. Restatement 2d of Contracts § 221(d)
A, a bank, issues a letter of credit promising to honor drafts accompanied by bills of lading covering “Coromandel groundnuts.” Dealers in groundnuts understand “Coromandel groundnuts” to mean “machine-shelled groundnut kernels.” Is this binding for A?
A is not bound to honor drafts accompanied by bills of lading covering “machine-shelled groundnut kernels.” See Uniform Commercial Code § 5-109(1)(c). Restatement 2d of Contracts § 221(d)
A contracts to sell B 10,000 shingles. By usage of the lumber trade, in which both are engaged, two packs of a certain size constitute 1,000, though not containing that exact number. What does 1,000 mean regarding the contract?
Unless otherwise agreed, 1,000 in the contract means two packs. Restatement 2d of Contracts § 222(b)
A contracts to sell B 1,000 feet of San Domingo mahogany. By usage of dealers in mahogany, known to A and B, good figured mahogany of a certain density is known as San Domingo mahogany, though it does not come from San Domingo. Is the usage part of the contract?
Unless otherwise agreed, the usage is part of the contract. Restatement 2d of Contracts § 222(b)
A promises to act as B’s agent in a certain business, and B promises to pay a certain commission for each “order.” By a local usage in that business, “order” means only an order on which the purchaser has paid a certain price. Is the usage part of the contract?
Unless otherwise agreed, the usage is part of the contract. Restatement 2d of Contracts § 222(b)
A and B enter into a contract for the sawing of logs during the “winter season.” What might be used to establish the meaning of “winter season” to be the period between the closing of a sawmill in the autumn and the arrival of logs in the spring, assuming A and B are both in or know about the logging business?
Usage in the logging business may show that “winter season” means the period between the closing of a sawmill in the autumn and the arrival of logs in the spring. Restatement 2d of Contracts § 222(b)
A and B enter into a contract of charter party in which A promises to discharge the vessel “in 14 days.” What might be used to establish the meaning of “14 days” to be 14 working days, assuming A and B are both in or know about the shipping business?
Usage in the shipping business may show this means 14 working days. Restatement 2d of Contracts § 222(b)
A and B enter into a contract for the purchase and sale of “No. 1 heavy book paper guaranteed free from ground wood.” What might be used to establish the meaning of “free from ground wood” to be not containing over 3% ground wood, assuming A and B are both in or know about the paper trade?
Usage in the paper trade may show that this means paper not containing over 3% ground wood. Restatement 2d of Contracts § 222(b)
A contracts to employ B for 20 days. In the kind of work to which the employment relates, in the place where both reside and the work is to be performed, a day’s work is eight hours. How is 20 days to be interpreted?
Unless otherwise agreed, B’s employment is for 20 eight-hour days. Restatement 2d of Contracts § 222(c)
A leases to B a portion of a building for “confectionery store purposes.” By local usage at the time and place where the lease is made and the building is located, “confectionery store purposes” include the giving of light lunches. Is the usage part of the contract?
Unless otherwise agreed, the usage is part of the contract. Restatement 2d of Contracts § 222(c)
A promises B to keep certain premises “fully insured.” At the time and place where the contract is made and to be performed and where the parties reside, insurance companies will not insure such premises for more than three-fourths of their value, and such premises insured for three-fourths of their value are called “fully insured.” Is the local usage part of the contract?
Unless otherwise agreed, the local usage is part of the contract. Restatement 2d of Contracts § 222(c)
A of Chicago negotiates and concludes in South Carolina an integrated contract to sell and deliver to B in South Carolina “ground sheep manure.” These words mean a finer grinding in South Carolina than they do in Chicago, and A has reason to know of the South Carolina usage. How is the contract to be interpreted?
Unless otherwise agreed, the contract is taken to refer to the South Carolina usage. Restatement 2d of Contracts § 222(c)
A, a sugar company, enters into a written agreement with B, a grower of sugar beets, by which B agrees to raise and deliver and A to purchase specified quantities of beets during the coming season. No price is fixed. The agreement is on a standard form used for B and many other growers in prior years. A’s practice is to pay all growers uniformly on a formula based on A’s “net return” according to A’s established accounting system. Is the established pattern part of the agreement?
Unless otherwise agreed, the established pattern of pricing is part of the agreement. Restatement 2d of Contracts § 223(b)
A, a manufacturer, sends a price quotation on goods to B, a dealer, together with printed “conditions of sale.” B then sends orders to A. And, A fills them. B takes advantage of discount terms of the quotation not referred to in B’s orders. Are the “conditions of sale” part of the contract?
Unless otherwise agreed, the “conditions of sale” are part of each contract. Restatement 2d of Contracts § 223(b)
A contracts to sell and B to buy goods pursuant to a writing which provides, under the heading “Conditions of Sale,” that “the obligations of the parties are conditional on B obtaining from X Bank by June 30 a letter of credit” on stated terms. What is a term of the agreement? What is a condition of the agreement?
The quoted language is a term of the agreement (§ 5), not a condition. The event referred to by the term, obtaining the letter of credit by June 30, is a condition. Restatement 2d of Contracts § 224(a)
A tells B, “If you will paint my house, I will pay you $1,000 on condition that 30 days have passed after you have finished.” B paints A’s house. Is the passage of 30 days a condition of the agreement?
Although A is not under a duty to pay B $1,000 until 30 days have passed, the passage of that time is not a condition of A’s duty to pay B $1,000. Restatement 2d of Contracts § 224(b)
A contracts to sell and B to buy goods to be shipped “C.I.F.,” payment to be “on arrival of goods.” The goods are lost in transit. Who bears the risk of loss? Is the “arrival of goods” a condition of B’s duty to pay for the goods?
Risk of loss of the goods passes from A to B when A, having otherwise complied with the C.I.F. term of the contract, puts the goods in the possession of the carrier (Uniform Commercial Code § 2-320(2)). If the goods are lost in transit, B is under a duty to pay the price when the goods should have arrived (Uniform Commercial Code §§ 2-709(1)(a), 2-321(3)). The arrival of the goods is not a condition of B’s duty to pay for the goods. Restatement 2d of Contracts § 224(b)
A tells B, “I promise to pay you $1,000 if you paint my house.” B begins to paint A’s house. Is there a contract? What is a condition of A’s duty to pay B $1,000?
Since B’s beginning of the invited performance gives rise to an option contract, B’s completion of performance is a condition of A’s duty under that contract to pay B $1,000. See § 45. Restatement 2d of Contracts § 224(c)
A, as the result of financial reverses, sells B a valuable painting for $1,000,000, but reserves a right to repurchase it by tendering the same price on or before August 18 if he again finds himself in such a financial condition that he can keep it for his personal enjoyment. What are the conditions of redelivery of the painting?
A’s tender of $1,000,000 by August 18 and his being in such financial condition that he can keep the painting for his personal enjoyment are cumulative conditions and redelivery of the painting does not become due unless both of them occur. Restatement 2d of Contracts § 224(d)
A purchases land from Mrs. B, who is unable to get Mr. B to join her in signing the deed because they are engaged in divorce proceedings. A takes possession under a deed signed by Mrs. B, pays Mrs. B $10,000 and promises to pay an additional $5,000 “if, within one year, (1) Mr. and Mrs. B execute a quitclaim deed to A, or (2) Mrs. B furnishes A with a certificate of the death of Mr. B with Mrs. B surviving him, or (3) Mrs. B as a single person executes a quitclaim deed to A after having been awarded the land following the entry of a final decree of divorce from Mr. B.” What are the conditions of the A’s payment to Mrs. B?
The three enumerated events are alternative conditions and A’s payment of $5,000 to Mrs. B becomes due if any of them occurs. Restatement 2d of Contracts § 224(d)
A and B contract to merge their corporate holdings into a single new company. It is agreed that the project is not to be operative unless the parties raise $600,000 additional capital. What are the conditions of the duties of A and/or B?
The raising of the additional capital is a condition of the duties of both A and B. If it is not raised, neither A’s nor B’s performance becomes due. Restatement 2d of Contracts § 224(d)
A insures B’s property against theft. The policy provides that B’s failure to notify A within 30 days after loss shall “terminate” A’s duty to pay and that suit must be brought within one year after loss. What is the condition of the duty of A? How might A’s duty be discharged?
Since it can be seen from the circumstances that notice must ordinarily be given before payment by A can be expected, B’s notification of A within 30 days after loss is a condition of A’s duty. B’s bringing suit against A within a year after loss is not a condition of A’s duty. B’s failure to bring suit within that time will discharge A’s duty after payment has become due, along with any claim for breach. Restatement 2d of Contracts § 224(e)
A and B make a contract under which A promises to pay B $10,000 in annual installments of $1,000 each, beginning the following January 1, with a provision that “no installments whether or not overdue and unpaid shall be payable in case of A’s death within the 10 years.” What is the condition of the duty of A? How might A’s duty be discharged?
A’s being alive is a condition of his duty to pay any installment. A’s death within ten years will discharge his duty to pay any installment after payment has become due, along with any claim for breach. Restatement 2d of Contracts § 224(e)
A contracts to sell and B to buy A’s business. The contract provides that B is to pay in installments over a five-year period following the conveyance, and that A is to convey on condition that B pledge specified collateral to secure his payment. Conveyance by A does not become due until B pledges the collateral. How might A’s duty be discharged?
If the agreement does not provide for the time within which the collateral is to be pledged, A’s duty is discharged if it is not pledged within a reasonable time. Restatement 2d of Contracts § 225(a)
B gives A $10,000 to use in perfecting an invention, and A promises to repay it only out of royalties received during his lifetime from the sale of the patent rights. In spite of diligent efforts, A is unable to perfect his invention and obtain a patent, and no royalties are received. A dies after six years. Does B have a claim against A’s estate? What is the condition of the duty of A? How might A’s duty be discharged?
B has no claim against A’s estate. Receipt of royalties is a condition of A’s duty to repay the money and A’s duty is discharged by the non-occurrence of that condition during his lifetime. Restatement 2d of Contracts § 225(a)
A contracts with B to build a house for $50,000, payable on condition that A present a certificate from C, B’s architect, showing that the work has been properly completed. A properly completes the work, but C refuses to give the certificate because of collusion with B, and the non-occurrence of the condition is therefore excused. Doe’s A have a claim against B?
See § 239. Since the presentation of the architect’s certificate is not part of the performances to be exchanged under the exchange of promises, A has a claim against B for $50,000. Restatement 2d of Contracts § 225(c)
Under an option contract, A promises to sell B a painting “on condition that B pay $100,000” by a stated date. Before that date, the non-occurrence of the condition is excused by A’s repudiation of the contract. What, if anything, can B claim against A?
See § 255. Since the payment of the $100,000 is B’s part of the performances to be exchanged under the exchange of promises, B saved that amount when the non-occurrence of the condition was excused, and it should be subtracted in determining damages. B has a claim against A for the value of the painting to B less $100,000. Restatement 2d of Contracts § 225(c)
A leases property to B for a stated monthly rental. The lease provides that A is under a duty to remove described property from the premises, and that its removal is a condition of B’s duty to pay the rent. After A has removed most of the property from the premises, B says that he will pay the rent even though not all of it has been removed. Does B have a duty? What, if anything, can B claim against A?
The non-occurrence of the condition is excused and B is under a duty to pay the rent even though A does not remove the rest of the property. See § 84. But A’s duty to remove the rest of the property is not discharged and his failure to remove the rest is a breach. Restatement 2d of Contracts § 225(c)
A, a shipowner, promises to carry B’s cargo on his ship to Portsmouth. B promises to pay A the stipulated freight on condition that A’s ship sail directly there on its next sailing. A’s ship carries B’s cargo to Portsmouth, but puts into port on the way. Does B have a duty? What, if anything, can B claim against A?
Since carrying B’s cargo directly to Portsmouth is a condition of B’s duty, no duty to pay arises, and, since the condition can no longer occur, B’s duty is discharged. Since A is under no duty to carry B’s cargo directly to Portsmouth, however, his failure to do so is not a breach. Restatement 2d of Contracts § 225(d)
A, a shipowner, promises to carry B’s cargo on his ship directly to Portsmouth on its next sailing. B promises to pay A the stipulated freight on condition that A’s ship sail directly there on its next sailing. A’s ship carries B’s cargo to Portsmouth, but puts into port on the way. Does B have a duty? What, if anything, can B claim against A?
Since carrying B’s cargo directly to Portsmouth is a condition of B’s duty, no duty to pay arises and, since the condition can no longer occur, B’s duty is discharged. Since A is under a duty to carry B’s cargo directly to Portsmouth, his failure to do so is also a breach. Restatement 2d of Contracts § 225(d)
A contracts to sell and B to buy a house for $50,000, with the provision, “This contract is conditional on approval by X Bank of B’s pending mortgage application.” Does B have a duty?
Approval by X Bank is a condition of B’s duty. B is under no duty that the X Bank approve his application, but a court will supply a term imposing on him a duty to make reasonable efforts to obtain approval. See §§ 204, 205. Restatement 2d of Contracts § 225(e)
A, a shipowner, promises to carry B’s cargo on his ship to Portsmouth. B promises to pay A the stipulated freight on condition that A’s ship sail directly there on its next sailing. A’s ship carries B’s cargo to Portsmouth, but puts into port on the way. B refuses to pay the freight without knowing that A’s ship has put into port on the way. Does B have a duty? Is there a breach?
B’s refusal is not a breach since his duty is discharged. Restatement 2d of Contracts § 225(e)
A partnership agreement among physicians provides that A may withdraw from the partnership on three months’ written notice to the partnership’s executive committee, “but in the event that the committee requests him to revoke his notice of withdrawal prior to its effective date, and he refuses to comply, he shall not upon his withdrawal engage in the practice of medicine within a twenty-five mile radius.” A gives notice of his withdrawal. Does A have a duty not to practice medicine within a twenty-five mile radius?
A request by the committee that A revoke his notice is a condition of A’s duty not to practice medicine within a twenty-five mile radius. Restatement 2d of Contracts § 226(a)
A sells an automobile to B, for which B promises to pay $5,000 “on demand.” A sues B for the $5,000 without first making a demand. Can A recover?
A can recover. The quoted language is to be interpreted in the light of the purpose of the parties (§ 202(1)), and the purpose of such language, in connection with a promise that is one to pay money and is otherwise unconditional, is to fix the time after which interest at the legal rate is payable. A’s suit should therefore not be dismissed merely because he did not demand payment, and a demand by A is not a condition of B’s duty. The same interpretation follows by analogy from the rule of Uniform Commercial Code § 3-122(1)(b), under which a claim on a demand instrument arises on its date or date of issue. Restatement 2d of Contracts § 226(a)
A contracts to sell and B to buy a house for $50,000. The contract contains the provision, “This contract is conditional on approval by X Bank of B’s pending mortgage application.” What does this condition entail regarding the duty of B? What of A?
Approval by X Bank is a condition of B’s duty but not of A’s duty. The quoted language is to be interpreted in the light of the purpose of the parties (§ 202(1)), and their purpose in including such a provision is to protect B and not A in the event that the application is not approved. If X Bank does not approve B’s application, performance by B will not become due even if A makes a conditional offer to deliver a deed, but performance by A will become due if, in spite of X Bank’s failure to approve B’s application, B makes a conditional offer to pay the $50,000. Cf. Illustration 8 to § 225. Restatement 2d of Contracts § 226(a)
A, an insurance company, insures B, a storekeeper, against safe burglary, “provided entry be made by actual force and violence, of which there are visible marks upon the exterior of all of the doors of the safe if entry is made through such doors.” A burglar robs B’s safe by picking the lock of the outer door, leaving no visible marks, and punching out the lock of the inner door. How might the quoted language be interpreted?
If the requirement of visible marks on both doors is merely evidentiary, the condition occurs when there is as here, adequate evidence of force and violence to prevent fraudulent claims, even though there are no visible marks on the outer door. Since A was the draftsman of the policy, the meaning favorable to B is preferred (§ 206). Restatement 2d of Contracts § 226(b)
A contracts to sell and B to buy a house for $50,000. The contract recites that financing is to take the form of “$30,000 mortgage from X Bank” on stated terms and provides that B’s duty is “conditional upon B’s ability to arrange above described financing.” B is unable to get the mortgage from X Bank but A offers to take a $30,000 purchase money mortgage on the stated terms and makes a conditional offer to deliver a deed. B refuses to perform. Has the contract been breached? How will the quoted language be interpreted?
Although circumstances may show a contrary intention, the quoted language will ordinarily be interpreted so that the condition occurs only if B is able to get the mortgage from X Bank, and not if B is able to get a similar mortgage from A. Under this interpretation, B’s refusal is not a breach. Restatement 2d of Contracts § 226(b)
A promises to make necessary interior repairs on a building that he has leased to B, but reserves no privilege of entering the building. Does B have a duty to give notice of any necessary interior repairs?
B’s giving reasonable notice to A of any necessary interior repairs of which A would otherwise be unaware is a condition of A’s duty to make those repairs, although B is under no duty to give notice. Restatement 2d of Contracts § 226(c)
A, a general contractor, contracts with B, a town, to construct a sewer system, agreeing in addition to defend any action against the town arising out of the work and to pay any damages recovered in such an action. Does B have a duty to give notice of the commencement of any action?
B’s giving reasonable notice to A of the commencement of any action of which A would otherwise be unaware is a condition of A’s duties to defend and pay damages, although B is under no duty to give notice. Restatement 2d of Contracts § 226(c)
A, a general contractor, contracts with B, a sub-contractor, for the plumbing work on a construction project. B is to receive $100,000, “no part of which shall be due until five days after Owner shall have paid Contractor therefor.” B does the plumbing work, but the owner becomes insolvent and fails to pay A. Does A have a duty?
A is under a duty to pay B after a reasonable time. Restatement 2d of Contracts § 227(b)
A, a mining company, hires B, an engineer, to help reopen one of its mines for “$10,000 to be payable as soon as the mine is in successful operation.” $10,000 is a reasonable compensation for B’s service. B performs the required services, but the attempt to reopen the mine is unsuccessful and A abandons it. Does A have a duty?
A is under a duty to pay B $10,000 after the passage of a reasonable time. Restatement 2d of Contracts § 227(b)
A, a mining company, contracts with B, the owner of an untested experimental patented process, to help reopen one of its mines for $5,000 paid in advance and an additional “$15,000 to be payable as soon as the mine is in successful operation.” $10,000 is a reasonable compensation for B’s services. B performs the required services, but because the process proves to be unsuccessful, A abandons the attempt to reopen the mine. Does A have a duty?
A is under no duty to pay B any additional amount. In all the circumstances the risk of failure of the process was, to that extent, assumed by B. Restatement 2d of Contracts § 227(b)
A contracts to sell and B to buy land for $100,000. At the same time, A contracts to pay C, a real estate broker, as his commission, $5,000 “on the closing of title.” B refuses to consummate the sale. Does A have a duty?
Absent a showing of a contrary intention, a court may conclude that C assumed this risk, and that A’s duty is conditional on the sale being consummated. A is then under no duty to pay C. Restatement 2d of Contracts § 227(b)
A contracts with B to repair B’s building for $20,000, payment to be made “on the satisfaction of C, B’s architect, and the issuance of his certificate.” A makes the repairs, but C refuses to issue his certificate, and explains why he is not satisfied. Other experts in the field consider A’s performance to be satisfactory and disagree with C’s explanation. Does A have a claim against B?
A has no claim against B. The quoted language is sufficiently clear that Subsection (1) does not apply. If C is honestly not satisfied, B is under no duty to pay A, and it makes no difference if his dissatisfaction was not reasonable. Restatement 2d of Contracts § 227(c)
A contracts with B to repair B’s building for $20,000, payment to be made “on the satisfaction of C, B’s architect, and the issuance of his certificate.” A makes the repairs, but C refuses to issue his certificate although he admits that he is satisfied. Other experts in the field consider A’s performance to be satisfactory and disagree with C. Does A have a claim against B?
A has a claim against B for $20,000. The quoted language will be interpreted so that the requirement of the certificate is merely evidentiary and the condition occurs when there is, as here, adequate evidence that C is honestly satisfied. Restatement 2d of Contracts § 227(c)
A contracts with B to repair B’s building for $20,000, payment to be made “on the satisfaction of C, B’s architect, and the issuance of his certificate.” A makes the repairs, but C refuses to issue his certificate. C does not make a proper inspection of the work and gives no reasons for his dissatisfaction. Other experts in the field consider A’s performance to be satisfactory and disagree with C. Does A have a claim against B?
A has a claim against B for $20,000. In using the quoted language, A and B assumed that C would exercise an honest judgment and by failing to make a proper inspection, C did not exercise such a judgment. Since the parties have omitted an essential term to cover this situation, the court will supply a term (see § 204) requiring A to pay B if C ought reasonably to have been satisfied. Restatement 2d of Contracts § 227(c)
A contracts with B to repair B’s building for $20,000, payment to be made “on the satisfaction of C, B’s architect, and the issuance of his certificate.” A makes the repairs, but C refuses to issue his certificate, and explains why he is not satisfied. C makes a gross mistake with reference to the facts on which his refusal to give a certificate is based. Other experts in the field consider A’s performance to be satisfactory and disagree with C’s explanation. Does A have a claim against B?
A has a claim against B for $20,000. In using the quoted language, A and B assumed that C would exercise his judgment without a gross mistake as to the facts. Since the parties have omitted an essential term to cover this situation, the court will supply a term (see § 204) requiring A to pay B if C ought reasonably to have been satisfied. Restatement 2d of Contracts § 227(d)
On August 1, A contracts to sell and B to buy goods, “selection to be made by buyer before September 1.” B merely has a duty to make his selection by September 1, and his making it by that date is not a condition of A’s duty. Has the contract been breached?
A failure by B to make a selection by September 1 is a breach, and if material it operates as the non-occurrence of a condition of A’s duty. See §§ 237, 241. Restatement 2d of Contracts § 227(d)
A, B, and C make a contract under which A agrees to buy the inventory of B’s grocery business, C agrees to finance A’s down payment, and B agrees to subordinate A’s obligation to him to pay the balance to A’s obligation to C to repay the amount of the down payment. The contract provides that “C shall maintain the books of account for A, and shall inventory A’s stock of merchandise every two months, rendering statements to B.” Has the contract been breached? Who has what duty?
C merely has a duty to do these acts and doing them is not a condition of B’s duty. A failure by C to do them is a breach, and if material it operates as the non-occurrence of a condition of B’s duty. See §§ 237, 241. Restatement 2d of Contracts § 227(d)
A insures B’s house against fire for $50,000 under a policy providing, “other insurance is prohibited.” Does B have a duty?
Because the insured has undertaken no other duties under the contract, Subsection (2) of § 227 does not apply. Because a policy of fire insurance is a type of contract under which only the insurer generally undertakes duties, the absence of other insurance is merely a condition of A’s duty, and B is not under a duty not to procure other insurance. Restatement 2d of Contracts § 227(d)
In return for a fee paid by X, A signs and delivers to B a bond which reads: “I acknowledge myself to be indebted to B in the sum of $50,000. The condition of this obligation is such that if X shall faithfully perform his duties as executor of the will of Y, this obligation shall be void, but otherwise of full effect.” X faithfully performs his duty as executor of the will of Y. Does A have a duty?
X’s failure faithfully to perform his duties is a condition of A’s duty under the bond. Restatement 2d of Contracts § 227(e)
A promises to pay B $10,000 for a quantity of oil, and promises to pay B an additional $5,000 “but if a greater quantity of oil arrives in vessels during the first quarter of the year than arrived during the same quarter last year, then this obligation to be void.” When and what condition would A have a duty to pay the addition $5,000?
A’s payment of the additional $5,000 is not due until the end of the first quarter, and the failure of a greater quantity of oil to arrive by that time is a condition of A’s duty to pay the additional $5,000. Restatement 2d of Contracts § 227(e)
A grants to B an exclusive license in a designated territory to bottle and sell a soft drink on specified terms for a five-year period. The contract describes in detail B’s duty diligently to represent A in the territory and provides that A may terminate the license at any time if in A’s “sole, exclusive and final judgment made in good faith” B does not perform that duty. After a year, A terminates, honestly telling B that in A’s judgment B has not performed his duty under the contract. What claim, if any, does B have against A?
B has no claim against A since the agreement clearly provides a test of honest satisfaction. Restatement 2d of Contracts § 228(a)
A contracts to sell and B to buy 500 barrels of cherries in syrup “quality to be satisfactory in buyer’s honest judgment,” delivery to be in installments. After deliveries of and payments for a total of 100 barrels, B states that he is not satisfied and refuses to take more. Has the contract been breached? How might it be shown otherwise?
Since the agreement clearly provides a test of honest satisfaction, B’s termination is effective if his judgment is in fact made honestly in accordance with his duty of good faith and fair dealing (§ 205). However, A may show that B’s rejection was for other reasons by proving, for example, that B expressed satisfaction at the time of the first deliveries, that B’s demand had dropped sharply, and that A’s cherries are selected and put up with great care and are of the highest quality. Restatement 2d of Contracts § 228(a)
A contracts with B to install a heating system in B’s factory, for a price of $20,000 to be paid “on condition of satisfactory completion.” A installs the heating system, but B states that he is not satisfied with it and refuses to pay the $20,000. B gives no reason except that he does not approve of the heating system, and according to experts in the field the system as installed is entirely satisfactory. What claim, if any, does A have against B?
A has a claim against B for $20,000 since it is practicable to apply an objective test to the installation of the heating system. This interpretation is also preferred because it reduces A’s risk of forfeiture. Restatement 2d of Contracts § 228(b)
A contracts with B to paint a portrait of B’s daughter, for which B promises to pay $5,000 “if entirely satisfied.” A paints the portrait, but B honestly states that he is not satisfied with it and refuses to pay the $5,000. B gives no reason except that the portrait does not please him, and according to experts in the field the portrait is an admirable work of art. What claim, if any, does A have against B?
A has no claim against B since it is not practicable to apply an objective test to the painting. Restatement 2d of Contracts § 228(b)
A contracts to have B furnish a four-piece band to play in A’s inn for six months, with a provision, “If band proves unsatisfactory to A contract is subject to two weeks’ notice.” A occasionally objects when B is absent and a guitar is substituted for B’s string bass. After two months, A gives notice of termination, stating that he is dissatisfied for this reason. What claim, if any, does B have against A?
B has no claim against A since it is not practicable to apply an objective test to the band’s performance. Restatement 2d of Contracts § 228(b)
A contracts to build a house for B, using pipe of Reading manufacture. In return, B agrees to pay $75,000 in progress payments, each payment to be made “on condition that no pipe other than that of Reading manufacture has been used.” Without A’s knowledge, a subcontractor mistakenly uses pipe of Cohoes manufacture which is identical in quality and is distinguishable only by the name of the manufacturer which is stamped on it. The mistake is not discovered until the house is completed, when replacement of the pipe will require destruction of substantial parts of the house. B refuses to pay the unpaid balance of $10,000. What claim, if any, may A have against B?
A court may conclude that the use of Reading rather than Cohoes pipe is so relatively unimportant to B that the forfeiture that would result from denying A the entire balance would be disproportionate, and may allow recovery by A subject to any claim for damages for A’s breach of his duty to use Reading pipe. Restatement 2d of Contracts § 229(b)
A, an ocean carrier, carries B’s goods under a contract providing that it is a condition of A’s liability for damage to cargo that “written notice of claim for loss or damage must be given within 10 days after removal of goods. ” B’s cargo is damaged during carriage and A knows of this. On removal of the goods, B notes in writing on the delivery record that the cargo is damaged, and five days later informs A over the telephone of a claim for that damage and invites A to participate in an inspection within the ten day period. A inspects the goods within the period, but B does not give written notice of its claim until 25 days after removal of the goods. How and to what extent might a court excuse the non-occurrence of the condition?
Since the purpose of requiring the condition of written notice is to alert the carrier and enable it to make a prompt investigation, and since this purpose had been served by the written notice of damage and the oral notice of claim, the court may excuse the non-occurrence of the condition to the extent required to allow recovery by B. Restatement 2d of Contracts § 229(b)
A contracts to make repairs on B’s house, in return for which B agrees to pay $10,000 “on condition that the repairs are completed by October 1.” The repairs are not completed until October 2. How and to what extent might a court excuse the non-occurrence of the condition?
A court may decide that there are two cumulative conditions, repair of the house and completion of the repairs by October 1, and that the non-occurrence of the second condition is excused to the extent of one day. Restatement 2d of Contracts § 229(c)
On July 1, A makes an option contract with B, under which B has the right to buy land for $200,000, on condition that he exercise it no later than June 30 five years later. B makes an initial payment of $10,000 and agrees to make additional $10,000 payments on or before June 30 of each of the four succeeding years, unless he has already exercised the option, his right being “conditional on his paying the $10,000 on or before the prescribed date.” These payments are not to be applied to the purchase price. After paying for two years and building on adjacent land, substantially increasing the value of the land subject to the option, B mails a $10,000 check for the third year on June 30. A receives it on July 1 and returns it to B, stating that the option contract is cancelled. How and to what extent might a court excuse the non-occurrence of the condition?
A court may decide that there are two cumulative conditions, payment of $10,000 and payment on or before June 30, and that the non-occurrence of the second condition is excused to the extent of one day. Restatement 2d of Contracts § 229(c)
On July 1, A makes an option contract with B, under which B has the right to buy land for $200,000, on condition that he exercise it no later than June 30 five years later. B makes an initial payment of $10,000 and agrees to make additional $10,000 payments on or before June 30 of each of the four succeeding years, unless he has already exercised the option, his right being “conditional on his paying the $10,000 on or before the prescribed date.” These payments are not to be applied to the purchase price. B makes the payments on June 30 of each of the four succeeding years, but does not exercise the option by tendering the $200,000 until July 1, following the June 30 expiration date. How and to what extent might a court not excuse the non-occurrence of the condition?
Even if a court decides that there are two cumulative conditions, payment of $200,000 and payment on or before June 30, it may not decide that the non-occurrence of the second condition is excused to the extent of one day because that would give B a more extensive option than that on which the parties agreed. Restatement 2d of Contracts § 229(c)
A, an insurance company, insures the property of B under a policy providing that no recovery can be had if suit is not brought on the policy within two years after a loss. A loss occurs and B lets two years pass before bringing suit. Does A have a duty?
A’s duty to pay B for the loss is discharged and B cannot maintain the action on the policy. Restatement 2d of Contracts § 230(a)
A, an insurance company, insures the property of B under a policy providing that no recovery can be had if suit is not brought on the policy within two years after a loss. A loss occurs. B lives in a foreign country and is prevented by the outbreak of war from bringing suit against A for two years. Does A have a duty?
A’s duty to pay B for the loss is not discharged and B can maintain an action on the policy when the war is ended. Restatement 2d of Contracts § 230(a)
A, an insurance company, insures the property of B under a policy providing that no recovery can be had if suit is not brought on the policy within two years after a loss. A loss occurs and, afterwards, A tells B that it is not necessary to bring suit within two years, and B relies on the statement in refraining from suing for two years. Does A have a duty?
A’s duty to pay B for the loss is not discharged and B can maintain an action on the policy even after two years have passed. Restatement 2d of Contracts § 230(b)
