Contract Law Learning Questions - Set 4 Flashcards
When a contractor is under a contractual duty to construct a building and the building is destroyed by an act of nature while it is still a work in progress, the destruction __________.
A
will discharge the contractor’s duty to perform
B
will not discharge the contractor’s duty to perform, but will extend the date of performance
C
will discharge the contractor’s duty to perform if rebuilding cannot be reasonably completed by the date of performance
D
will neither discharge the contractor’s duty to perform nor extend the date of performance
B
A contractor’s duty to construct a building is not discharged by destruction of the work in progress. However, if the destruction was not caused by the contractor, such as by an act of nature, most courts will extend the date of performance beyond the original deadline.
A building that is the subject of a contract between its owner and a contractor is completely destroyed by an act of nature.
If the contractor was working on a renovation, the destruction _____________; if the contractor was constructing the building, the destruction ________________.
A
Does not discharge the contractor’s duties; discharges the contractor’s duties by impossibility
B
Discharges the contractor’s duties by impossibility; does not discharge the contractor’s duties
C
Discharges the contractor’s duties by impracticability; discharges the contractor’s duties by frustration
D
Discharges the contractor’s duties by frustration; discharges the contractor’s duties by impossibility
B
The total destruction by an act of nature of a renovation in progress discharges the contractor’s duties by impossibility. If a contract’s subject matter is destroyed without the fault of either party, the contractual duties are discharged. If the original building no longer exists, it is impossible to renovate it. The construction of a new building, even if destroyed during progress, is not impossible and thus will not discharge the contractor’s duty to perform. However, if the destruction was not caused by the contractor, courts typically will extend the time for the contractor to perform.
Discharge by impracticability occurs when performance is possible, but can be accomplished only with extreme and unreasonable difficulty or expense. It is impossible, not impracticable, to renovate a building that no longer exists. Moreover, discharge by frustration may not be raised by the contractor in either case. His purpose in entering into the contract was to make money. Frustration occurs when the purpose of the contract has become valueless by virtue of a supervening event. Frustration of purpose would be a valid defense of the owner in the contract for renovation. Without the building, there is no point in paying to renovate it.
A farmer contracts with a mechanic to repaint his antique tractor for display in the upcoming county fair.
Which of the following would discharge the contract by impossibility?
A
The unexpected death of the mechanic
B
The destruction of the tractor by a tornado
C
The cancellation of the county fair due to a drought
D
The unexpected death of the farmer
B
The destruction of the tractor by a tornado would discharge the mechanic’s performance due to impossibility. If a contract’s subject matter is destroyed without the fault of either party, contractual duties are discharged. If the tractor was destroyed by an act of nature, it is impossible for the mechanic to repaint it.
Neither the death of the farmer nor the death of the mechanic would discharge the contract by impossibility. Death or physical incapacity of a person necessary to effectuate the contract serves to discharge it, but this applies in personal service contracts where the services involved are “unique.” If the services are the kind that could be delegated, the contract is not discharged by the death of the person who was to perform them. Painting a tractor probably does not qualify as a unique or artistic service that could not be delegated, so the death of the mechanic would not discharge his duties under the contract. The farmer’s duty to pay for the painting could easily be performed by his estate after his death, so his death also will not result in a discharge of the contract by impossibility.
The cancellation of the county fair would not make fulfillment of the contract impossible. The mechanic’s duty is to paint the tractor, which he can do even if the fair is cancelled, and the farmer’s duty is to pay the mechanic for his painting, which again he can do even if the fair is cancelled. It could be argued that the purpose of the contract was frustrated, but the contract would not be discharged by impossibility.
A woman entered into a contract with a famous painter for a portrait of her cat. Tragically, the painter, the cat, and the half-completed portrait perished together in a fire.
If the woman sues the painter’s estate for breach of contract, a court will likely find that the fire caused the painter’s contractual duties to be discharged by:
A
Frustration
B
Impossibility
C
Impracticability
D
Destruction of the subject matter
B
The painter’s contractual duties will be discharged by impossibility due to the death of the painter. The death of a person necessary to effectuate the contract serves to discharge it for impossibility. Personal service contracts are discharged in this manner only if the services involved are unique. If the services are the kind that can be delegated, the contract is not discharged by the death of the person who was to perform them. Here the woman contracted with a famous painter for the portrait of her cat. His artistic skills would be considered unique, and his death would serve to discharge the contract.
This is not a case for discharge by impracticability. The test for a finding of impracticability is that the party to perform has encountered extreme and unreasonable difficulty and/or expense, and its nonoccurrence was a basic assumption of the parties. As discussed above, due to painter’s death, his unique performance is now impossible, not merely more difficult or more expensive.
The contract was not discharged due to destruction of the subject matter. The cat’s death is not destruction of the subject matter. The painting, not the cat, is the subject matter of the contract. If the painter had lived, he still could have painted the cat from memory or from a prior photograph of the cat. Although the painting itself was destroyed as a work in progress, if the painter had survived, he would still be expected to deliver a portrait of the cat, although he may have been given additional time to perform due to the fire. This is similar to when a building in progress is destroyed by an act of nature before completion; the contractor’s duty to build is not discharged, but he may be given additional time to perform.
This was not a case of frustration. Frustration will exist if the purpose of the contract has become valueless by virtue of some supervening event not the fault of the party seeking discharge. Although the cat has now died, this does not mean that the woman would no longer want the portrait. In fact, she may want the portrait even more as a remembrance of her pet.
A homeowner and a contractor duly executed a contract providing that the contractor was to construct a residence on a specified lot. No date was included in the contract for completion of the home. After the contractor completed 5% of the residence, a tornado demolished the construction but left the lot undamaged.
Which of the following states the probable legal consequences of the tornado damage?
A The contract is void because the subject matter of the contract was destroyed through no fault of the parties.
B The contractor’s duty of performance is discharged because of impossibility.
C The contractor remains obligated to construct the residence, but he is entitled to a quantum meruit recovery for the work done prior to the tornado.
D The contractor remains obligated to perform under the original contract without any compensation for the work done prior to the tornado.
D
The contractor remains bound under the original contract, and he is not entitled to compensation for the work that was destroyed. The general rule is that a contractor is responsible for destruction of the premises under construction prior to completion. Once the residence is completed, risk of loss shifts to the owner. (A) is wrong because the subject matter was not destroyed. Note that even if the subject matter were destroyed, it would not void the contract; it would merely discharge the contractor’s duties under the contract. (B) is wrong because performance is not impossible; the contractor can rebuild the residence.
A craftsperson entered into a written agreement with an electrician to install electrical wiring in her standalone garage so that she could convert the garage into a workshop. The contract contained a clause requiring all electrical work to be completed within two days and provided that the craftsperson would pay the electrician $700 for his work. After the first day, approximately half of the job was completed. That evening, a piece of a defunct satellite reentered the Earth’s atmosphere and a large chunk of it crashed directly into the craftsperson’s garage, catching the garage on fire and destroying it.
Which of the following best describes the obligations of the electrician and the craftsperson after the crash?
A Neither the electrician nor the craftsperson is discharged from their obligations under the contract.
B Neither the electrician nor the craftsperson has any further obligations.
C The craftsperson is obliged to pay the electrician the full contract price of $700.
D The electrician is discharged from his obligation but is entitled to recover from the craftsperson the fair value of the work he performed prior to the destruction of the garage.
D
The destruction of the garage discharges the electrician’s duties due to impossibility, but the electrician has a right to recover for the reasonable value of the work he performed. Contractual duties are discharged where it has become impossible to perform them. The occurrence of an unanticipated or extraordinary event may make contractual duties impossible to perform. If the nonoccurrence of the event was a basic assumption of the parties in making the contract, and neither party has assumed the risk of the event’s occurrence, duties under the contract may be discharged. If there is impossibility, each party is excused from duties that are yet to be performed. If either party has partially performed prior to the existence of facts resulting in impossibility, that party has a right to recover in quasi-contract for the reasonable value of his performance. While that value is usually based on the benefit received by the defendant (unjust enrichment), it also may be measured by the detriment suffered by the plaintiff (the reasonable value of the work performed). Here, the garage that the electrician was wiring burned down after a chunk of a satellite crashed into it. That event was of such an unexpected nature that its nonoccurrence was a basic assumption of the parties, and neither party was likely to have assumed the risk of its occurrence. Thus, it has become objectively impossible for the electrician (or anyone else) to complete the job. This impossibility will discharge both the craftsperson and the electrician from performing any contractual duties still to be fulfilled. Therefore, the electrician need not finish the wiring work, and the craftsperson is not obligated to pay the entire amount of $700. However, the electrician can recover under quasi-contract. (A) is incorrect because both parties are discharged. (B) is incorrect because it fails to account for the fact that the craftsperson will have to pay the electrician for the value of the work already performed. (C) is incorrect because, as discussed above, the craftsperson is obligated to pay for the value of the electrician’s services to date, not the full contract price.
An advertising agency specializing in aerial banners and skywriting signed a contract with a film production company that was premiering a new blockbuster film. The contract provided that the agency would advertise the film by flying over the city towing a giant streamer belonging to the film company heralding the film’s catch phrase and title in large letters. This contract specified that the flight was to be conducted on the first Saturday in June at noon (the day of the local premier), and the film company was to pay the advertising agency $500 for the flight.
On the designated Saturday, the advertising agency was unable to fly because of a defective fuel pump. The defective condition was entirely unforeseeable and did not occur through any negligence or fault of the agency. The film company did not pay the agency, and each of the parties has sued the other for damages.
Which of the following best states the rights and liabilities of the parties?
A The film company is entitled to recover damages from the advertising agency on account of the agency’s failure to fly.
B The advertising agency is entitled to recover from the film company the $500 contract price, as the incapacity of the airplane was not the agency’s fault.
C Neither party is entitled to recover against the other, because the advertising agency’s duty to fly was discharged by impossibility, and the film company’s duty to pay was contingent on the agency’s flight.
D Neither party is entitled to recover against the other, because the film company’s offer to pay $500 for the flight was in effect an offer for an act, and because the act was not performed, there was no valid acceptance.
A
The film company will be able to recover damages from the advertising agency because the agency’s failure to fly constituted a breach of contract. The parties entered into a bilateral contract—the agency promised to fly with the streamer and the film company promised to pay for the flight. The agency breached the contract by failing to fly on the designated Saturday. Its duty to fly was not discharged by impossibility. A contractual duty to perform may be discharged by objective impossibility (i.e., no one could have performed), but subjective impossibility (defendant could not perform) is insufficient. Here, the defect in the plane constituted only subjective impossibility (if it amounted to impossibility at all) because the agency could have obtained another plane to pull the streamer. If the agency had been unable to fly the plane because of weather (e.g., a severe ice storm), its performance would have been objectively impossible, and the agency would have been discharged. However, under these facts, the film company is entitled to damages for the agency’s breach. (B) is incorrect because the film company’s duty to perform (pay $500) was subject to the condition precedent of the agency’s performance (flying), and, as discussed above, the agency breached the contract by failing to fly. Therefore, the film company’s duty to pay never arose. The fact that the engine problem was not the agency’s fault does not change things. The agency’s inability to perform, even if it were due to impossibility, would merely discharge the contract, and each party would be excused from performance; the film company would not have to pay the $500. (C) is incorrect because, as determined above, the agency’s duty was not discharged because performance was still possible. (If there had been objective impossibility, (C) would have been the correct choice.) (D) is incorrect because it suggests that the contract was a unilateral one (the offer to pay could be accepted only by completion of performance). This interpretation is clearly contrary to the facts. Although the film company offered to pay $500 for the flight, the agency accepted that offer by signing the contract. A promise to pay was given in exchange for a promise to fly. Thus, there was a contract to which both parties were bound.
On April 1, a graduate student who owned an antique dictionary agreed to sell it to a buyer for $1,500. The written contract between the seller and the buyer provided that the dictionary would not be delivered to the buyer until April 20. Late on April 15, a fire swept through the seller’s apartment building, through no fault of the seller, and the dictionary was destroyed. Fortunately for the seller, he had insurance that covered all of his damages, including compensation for the destroyed dictionary. On April 20, the seller told the buyer of the fire, but still demanded payment, claiming that the buyer was the equitable owner of the dictionary when it was destroyed, and told her that she could have obtained insurance on the dictionary had she wanted to, because she had an insurable interest in the dictionary as soon as the contract was made. The buyer refused to pay. The seller brings an action against the buyer for the $1,500.
Who will prevail?
A The buyer, because the seller was fully compensated for his dictionary and making the buyer pay would therefore result in unjust enrichment.
B The buyer, because destruction of the dictionary avoids the contract and discharges her duty to pay.
C The seller, because when he contracted with the buyer, the risk of loss passed to her.
D The seller, because of the doctrine of equitable conversion.
B
The buyer will prevail because complete destruction of the dictionary results in avoidance of the contract and discharge of her duty to pay, since the seller still had the risk of loss. Because the contract here is for the sale of goods, it is governed by the Uniform Commercial Code (“UCC”). Under the UCC, if a contract requires for its performance particular goods identified when the contract is made, and, before risk of loss passes to the buyer, the goods are destroyed without the fault of either party, the contract is avoided. [UCC §2-613] All of the elements of section 2-613 are present here. The contract required the seller’s particular dictionary, which was identified at the time the contract was made. The risk of loss had not yet passed to the buyer because, in a sale by a nonmerchant such as the seller, risk of loss does not pass to the buyer until tender [UCC §2-509], and the seller never tendered the dictionary here (there was no actual tender and delivery was not due until April 20). Finally, the goods were destroyed by a fire and without the fault of either party. Thus, the contract is avoided. (The same conclusion would result under the common law doctrine of impossibility—all executory duties are discharged when the subsequent destruction of the subject matter of a contract renders performance impossible.) (A) is wrong because the UCC contains no such rule. The only UCC remedy that depends on an injured party’s insurance involves the risk of loss after the buyer’s revocation of acceptance or wrongful repudiation under section 2-510. Here, the buyer does not have to pay because the destruction of the dictionary discharged her duty to do so. (C) is wrong because, as explained above, the risk of loss had not yet passed to the buyer. (D) is wrong because the UCC does not follow the doctrine of equitable conversion; rather, the Code contains very specific risk of loss rules, as detailed above.
