Contract Law Learning Questions - Set 7 Flashcards
Which of the following acts alone would be sufficient to allow enforcement of an oral contract for the sale of real property?
A
Possession of the property by the purchaser
B
Payment of the full purchase price by the purchaser
C
Valuable improvements to the property by the purchaser
D
Conveyance of the property from the seller to the purchaser
D
Upon the seller’s conveyance of the property to the purchaser, the seller can enforce the buyer’s oral promise to pay.
Under the doctrine of part performance, conduct that unequivocally indicates that the parties have contracted for the sale of the land will take the contract out of the Statute of Frauds. However, most jurisdictions require at least two of the following: payment (in whole or in part), possession, and/or valuable improvements.
A writing is not required to enforce a contract that would otherwise be covered by the Statute of Frauds if:
A
The party against whom enforcement is sought admits to the existence of the contract in court
B
The party seeking to enforce the contract offers evidence of prior dealings between the parties
C
Both parties are nonmerchants
D
Both parties are merchants
A
The Statute of Frauds requires that certain contracts be evidenced by a writing signed by the parties sought to be bound. However, if the party against whom enforcement is sought admits in pleadings, testimony, or otherwise in court that the contract was made, the contract is enforceable without a writing (but in such a case the contract is not enforced beyond the quantity of goods admitted).
Prior dealings alone are not enough to remove a contract from the requirements of the Statute of Frauds. Just because the parties had an agreement in the past does not mean there is sufficient proof of a current agreement. In some such cases, estoppel could be applied where it would be inequitable to allow the Statute of Frauds to defeat a meritorious claim, but for that to occur the party seeking to enforce the agreement would need to show that enforcement is necessary to prevent injustice. An example of this would be if the other party falsely and intentionally told the plaintiff the contract is not within the Statute of Frauds or said he would reduce the agreement to a writing but failed to do so.
The Statute of Frauds applies to both merchants and nonmerchants. There is no general exception to the Statute of Frauds just because both parties are merchants. Note, however, that under the merchant’s confirmatory memo rule, in contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under the Statute of Frauds to bind the sender, it will also bind the recipient if the recipient has reason to know of the confirmation’s contents and does not object to it in writing within 10 days of receipt.
In a contract for a sale of goods priced at $500 or more, if the goods are _________ or __________, the contract will be enforced even if there is no writing.
A
Received and accepted; paid for
B
Shipped; received and accepted
C
Shipped; paid for
D
To be specially manufactured; unique
A
If goods are either received and accepted or paid for, the contract is enforceable without a writing. However, the contract is not enforceable beyond the quantity of goods accepted or paid for. Thus, if only some of the goods called for in the oral contract are accepted or paid for, the contract is only partially enforceable.
A contract for specially manufactured goods, i.e., goods that are to be specially manufactured for the buyer and are not suitable for sale to others by the seller in the ordinary course of his business, can sometimes be enforceable without a writing, but only under circumstances where the seller has reasonably indicated that the goods are for the buyer and made a substantial beginning in their manufacture or committed for their purchase before notice of a repudiation was received. There is no exception to the Statute of Frauds for unique goods.
There is no exception to the Statute of Frauds for contracts in which the goods have been shipped. There is an exception once the goods have been received and accepted or paid for.
A seller of land under an oral sale contract will succeed in a suit against the buyer for the purchase price if:
A
The seller conveys the property to the buyer
B
The buyer is in possession of the property
C
The seller can prove the agreed-upon purchase price
D
The buyer has made valuable improvements to the property
A
Generally, under the Statute of Frauds, a promise creating an interest in land must be evidenced by a writing to be enforceable. A seller can enforce an oral land sale contract only if the seller conveys the property to the buyer.
The question asks about enforcement by a seller, and two choices provide elements necessary for enforcement by a buyer. A buyer can specifically enforce a seller’s oral promise to sell land if the part performance doctrine applies. Under the doctrine of part performance, conduct that unequivocally indicates that the parties have contracted for the sale of the land will take the contract out of the Statute of Frauds. Most jurisdictions require at least two of the following three actions by the buyer to find part performance: payment, possession, and/or valuable improvements.
Proof of the agreed-upon purchase price does nothing to remove an agreement from the Statute of Frauds.
On January 30, a company that designs and builds generators to standard industrial specifications received a telephone call from a buyer who ordered two generators at a price of $25,000 each. The parties agreed that delivery of the first generator would be on March 15, and the second on April 30. Payment was to be made no more than 30 days after delivery. On March 12, the company delivered the first generator, which the buyer accepted. On April 22, the company completed the second generator but had not yet notified the buyer. On April 23, the buyer, having made no payment to the company, canceled the agreement. The company brings an action against the buyer for breach of contract.
How much should the company recover in damages?
A Nothing.
B $25,000 only.
C Damages for total breach of contract for the sale of two generators, because the buyer accepted part performance.
D Damages for total breach of contract for the sale of two generators, because the goods were made for the buyer.
B
The company should recover $25,000 only. Contracts for goods for $500 or more must be evidenced by a writing to be enforceable. There are three exceptions to this rule: specially manufactured goods unsuitable for resale in the seller’s regular course of business, contracts admitted in court, and contracts partially accepted (enforceable to the extent of the acceptance). Here, the contract was for $50,000 and was oral. Thus, it will be enforceable only if one of the exceptions applies. The buyer’s acceptance of the first generator constitutes part acceptance that will make the buyer liable to the extent of the acceptance: $25,000. Therefore, (B) is correct and (A) is incorrect. (C) is incorrect because partial acceptance renders the buyer liable only for the part accepted, not the entire contract. (D) is incorrect because, while the goods were made for the buyer, they were suitable for resale in the company’s business, because they were built to standard industry specifications.
A manufacturing company was in the business of making copper tubing. A retail seller telephoned the manufacturing company’s sales department and placed an order for 10,000 linear feet of copper tubing at a sale price of $2 per foot. The tubing was to be used in the production of a custom order for one of the retail seller’s customers. The manufacturing company installed special equipment for the manufacture of the tubing to the retail seller’s specifications and had completed a portion of the order when the retail seller again telephoned the sales department. This time, however, the retail seller canceled its order, saying it no longer had need of the tubing because its customer had been declared bankrupt and refused to pay for the order.
If the manufacturing company sues for breach, will it win?
A Yes, because the contract is fully enforceable.
B Yes, because the contract is enforceable to the extent of the portion of the order completed.
C No, because a contract for the sale of goods over $500 must be in writing.
D No, because the parol evidence rule would preclude testimony about the initial telephone call.
A
The manufacturing company will win because the contract is fully enforceable under the UCC. Tubing is a good, so Article 2 of the UCC applies. The contract is for the sale of goods over $500 (10,000 linear feet at $2/foot), so ordinarily section 2-201 would require a writing. However, section 2-201(3) provides that a writing is not required where the contract is for “specially manufactured” goods not suitable for resale in the ordinary course of the seller’s business and the seller has made a substantial beginning of their manufacture or commitments for their procurement. Because the tubing is a custom order of unique specifications and the manufacturing company has begun manufacturing it, this exception to the UCC Statute of Frauds applies. (B) is incorrect because the contract is fully enforceable. While the manufacturing company is required to mitigate damages, it is entitled to the full range of contract remedies to put it in the position it would have been in had the retail seller not breached (i.e., benefit of the bargain damages on the entire contract). (C) is incorrect because while it is true that a contract for the sale of goods over $500 must ordinarily be evidenced by a signed writing, the “specially manufactured goods” exception (see above) applies here. (D) is incorrect because the parol evidence rule bars admissibility of evidence that varies an integrated writing; here, there is no writing at all.
The owner of a one-acre parcel of land with a small house on it rented the property to a professor of a nearby college at a monthly rental of $500. Several years later, after the professor got tenure, the parties orally agreed that the professor would purchase the property from the owner for the sum of $60,000, payable at the rate of $500 a month for 10 years. They agreed that the owner would give the professor a deed to the property after five years had passed and $30,000 had been paid toward the purchase price, and that the professor would execute a note secured by a mortgage for the balance. The professor continued in possession of the property and made all monthly payments in a timely fashion. When he had paid $30,000, he tendered a proper note and mortgage to the property owner and demanded that she deliver the deed as agreed. The owner refused because valuable minerals had been discovered on adjacent parcels in recent months, causing the value of this parcel of land to increase to 10 times its former value. The professor brought suit against the property owner for specific performance.
If the court rules in favor of the property owner, what is the likely reason?
A The transaction had not proceeded far enough to amount to an estoppel against enforcement of the Statute of Frauds.
B The purchase price, given the present value of the land, made the contract unconscionable, providing the property owner with a valid defense to enforcement.
C Oral agreements are generally revocable unless expressly made irrevocable.
D The professor’s payments are as consistent with there being a landlord-tenant relationship between them as with there being an oral contract.
D
If the property owner wins, it will be because the payments by the professor may be based on a valid landlord-tenant relationship. A promise creating an interest in land must be in writing to be enforceable. This includes not only agreements for the sale of real property or an interest therein, but also leases for more than one year. However, under the part performance doctrine, conduct that unequivocally indicates that the parties have contracted for the sale of land will take the contract out of the Statute of Frauds. Here, the parties had originally created a landlord-tenant relationship, and the lease would be enforceable even without a writing as a month-to-month tenancy. The continuation of the monthly payments can as readily be explained by a continuation of the lease relationship as by an oral agreement for an installment land sale contract. Thus, because the conduct does not unequivocally indicate a contract for the sale of land, the Statute of Frauds requirements will not be excepted. (A) is wrong because while part performance may create an estoppel, the professor will have a hard time proving it because the parties’ conduct is consistent with a lease relationship as well. (B) is wrong because unconscionability is measured at the time the contract is formed, and there is nothing in the facts to indicate that the price was not fair at that time. Moreover, the property owner was not in a weaker bargaining position vis-à-vis the professor that would have forced her to accept an unfair price for the property; the parties were of roughly equal bargaining position and, as discussed above, the price was not unfair when the deal was struck. (C) is wrong because it states an incorrect position of the law; other than Statute of Frauds requirements, oral agreements are no more revocable than written agreements.
A jeweler was commissioned by a young man to design and create a set of rings (engagement and wedding) for his fiancée. The jeweler designed and created the rings in 18k gold, leaving room in the engagement ring for a large marquise-shaped diamond. The jeweler then entered into an oral agreement with a gemologist. The terms of the agreement were that the gemologist would provide the marquise-shaped diamond and the jeweler would pay the gemologist $20,000 when the jeweler received the payment from the young man. The gemologist found and cut a suitable stone and delivered it to the jeweler, who accepted it. The gemologist waited to be paid, and when he was not, he contacted the jeweler. The jeweler refused to pay him, arguing that their agreement was unenforceable and, anyway, the young man has not paid her.
If the gemologist sues the jeweler for breach of contract, what is the gemologist’s likely recovery?
A The fair market value of the stone, under a quasi-contract theory.
B The cost of materials and labor, under a quasi-contract theory.
C $20,000, the contract price.
D Nothing, because the young man did not pay the jeweler.
C
The gemologist will be able to recover the full $20,000 contract price. Under the UCC, the contract is enforceable, despite the absence of a writing, to the extent of the goods accepted, which here is the entire amount contracted for. The proper remedy is the agreed-upon price of $20,000, which the gemologist will be able to prove by parol evidence. (A) is incorrect because the recovery will be under the contract. Because the promises are enforceable under the acceptance exception to the Statute of Frauds, the quasi-contract remedy need not be applied. Note that if the contract had been unenforceable, quasi-contract would be a basis for a recovery of restitutionary damages. (B) is incorrect because it also is a possible measure of restitutionary damages in a quasi-contract action, and as stated above, the gemologist will be able to recover under the contract here. (D) is incorrect because the court will construe the jeweler’s agreement as a promise to pay at a particular time rather than an express condition for payment. If it were a condition, the jeweler would not have a duty to pay because she was not paid. However, courts prefer to construe language as a promise rather than a condition so as to reduce the obligee’s risk of forfeiture. Where an agreement provides that a duty is to be performed once an event occurs, if the event is not within the control of the promisee, it is less likely that he will have assumed the risk of its nonoccurrence and therefore less likely to be a condition of the promisor’s duty to perform. In doubtful situations, courts are more likely to hold that the provision is a promise rather than a condition because this supports the contract and preserves the reasonable expectations of the parties.
