Contract MBE Flashcards
A woman owns an exceptionally seaworthy boat that she charters for sport fishing at a $500 daily rate. The fee includes the use of the boat with the woman as the captain, and one other crew member, as well as fishing tackle and bait. On May 1, a father agreed with the woman that the father would have the full-day use of the boat on May 15 for himself and his family for $500. The father paid an advance deposit of $200 and signed an agreement that the deposit could be retained by the woman as liquidated damages in the event the father canceled or failed to appear.
At the time of contracting, the woman told the father to be at the dock at 5 a.m. on May 15. The father and his family, however, did not show up on May 15 until noon. In the meantime, the owner of the boat agreed at 10 a.m. to take a second family out fishing for the rest of the day. The second family happened to come by and inquire about the possibility of such an outing. In view of the late hour, the owner of the boat charged the family $400 and stayed out two hours beyond the customary return time. The father’s failure to appear until noon was due to the fact that he had been trying to charter another boat across the bay at a lower rate and had gotten lost after he was unsuccessful in getting such a charter.
Which of the following is an accurate statement concerning the rights of the parties?
A - The woman can retain the $200 paid by the father, because it would be difficult for the woman to establish her actual damages and the sum appears to have been a reasonable forecast in light of anticipated loss of profit from the charter.
A is correct. When entering into the contract, it would have been difficult for the owner to calculate damages of the father’s potential breach and $200 is reasonable given the actual damages that resulted. The owner received $600 total ($200 from the security deposit and $400 from the second family), which is reasonable given that the daily fee is normally $500. The owner’s receipt of an extra $100 accounts for other factors, including her uncertainty and inconvenience from the father’s failure to arrive on time and the need to take another family out, at a reduced price, which went two hours longer than planned.
Question
On June 1, a seller and a buyer contracted in writing for the sale and purchase of the seller’s cattle ranch (a large single tract) and to close the transaction on December 1.
On October 1, the buyer told the seller, “I’m increasingly unhappy about our June 1 contract because of the current cattle market, and do not intend to buy your ranch unless I’m legally obligated to do so.”
If the seller sues the buyer on October 15 for breach of contract, the seller will probably
D is correct. Anticipatory repudiation requires an unequivocal statement of unwillingness to perform on a contractual obligation, not mere doubt or uncertainty. Here, the buyer expressed serious doubt and may have established insecurity, but did not amount to a full repudiation. This was also not a breach because the time for performance had not yet passed.
A fixtures company, in a signed writing, contracted with an apartment complex for the sale to the apartment complex of 50 identical sets of specified bathroom fixtures, 25 sets to be delivered on March 1, and the remaining 25 sets on April 1. The agreement did not specify the place of delivery, or the time or place of payment.
On March 1, the fixtures company tendered 24 sets to the apartment complex and explained, “One of the 25 sets was damaged in transit from the manufacturer to us, but we will deliver a replacement within five days.”
Which of the following statements is correct?
D - The apartment complex must accept the 24 sets and is not entitled to cancel the rest of the contract.
In exchange for valid and sufficient consideration, a mother orally promised her son, who had no car and wanted a minivan, “to pay to anyone from whom you buy a minivan within the next six months the full purchase-price thereof.” Two months later, the son bought a used minivan on credit from a car dealership for $8,000. At the time, the dealership was unaware of the mother’s earlier promise to her son, but learned of it shortly after the sale.
Can the dealership enforce the mother’s promise to her son?
Yes, because the dealership is an intended beneficiary of the mother-son contract.
the mother’s oral promise to her son, supported by valid and sufficient consideration, was to pay “anyone” (i.e., the individual or entity) who sells a minivan to her son “within the next six months the full purchase-price thereof.” This promise explicitly intended for the performance (conferring the benefit of the payment for the minivan) to run to the third party who sold the minivan to the son. This is sufficient for the dealership to have standing to enforce its rights under the promise as an intended third-party beneficiary.
D, No, because the dealership was neither identified when the mother’s promise was made nor aware of it when the minivan sale was made.
D is incorrect. The dealership’s lack of identification or awareness of the mother’s promise are relevant to determining when its beneficiary rights vest. But those facts are not dispositive regarding whether it was an intended or incidental beneficiary, as explained above.
In a written contract, an architect agreed to draw up the plans for and to supervise construction of a client’s new house. In return, the client agreed to pay the architect a fee of $10,000 to be paid upon the house’s completion. After completion, the client claimed erroneously but in good faith that the architect’s plans were defective. The client orally offered to pay the architect $7,500 in full settlement of the claim for the fee. The architect orally accepted that offer despite the fact that the reasonable value of his services was in fact $10,000. The client paid the architect $7,500 pursuant to their agreement.
The architect subsequently sued the client for the remaining $2,500. In a preliminary finding, the trier of fact found that there were no defects in the architect’s plans.
Will the architect be likely to prevail in his action against the client for $2,500?
C - No, because the architect’s promise to accept $7,500 became binding when the client made the payment.
C is correct. The architect’s agreement to accept payment for less than the amount due constituted an effective accord, supported by consideration, which was satisfied with the payment of $7,500. Consideration is present because of the good faith dispute as to the amount owed. By compromising, each party surrenders its respective claim as to how much is owed.
Under the terms of a written contract, a builder agreed to construct a garage for a homeowner for $10,000. Nothing was stated in the parties’ negotiations or in the contract about progress payments during the course of the work.
After completing 25 percent of the garage according to the homeowner’s specifications, the builder demanded $2,000 as a reasonable progress payment. The homeowner refused, and the builder abandoned the job.
If each party sues the other for breach of contract, which of the following will the court decide?
B. Only the builder is in breach and liable for the homeowner’s damages, if any.
Where one party’s performance is to take place over a period of time, that party must complete its performance before the other party is required to perform, unless the language or circumstances indicate otherwise. Here the parties did not provide for progress payments in the contract. Therefore the builder was required to complete performance before the homeowner was obligated to pay for any of the work the builder had performed. The builder’s abandonment of the job constituted a wrongful repudiation, giving the homeowner an action for breach.
A restaurant supplier sent a letter to a regular customer offering to sell the customer an industrial freezer for $10,000. Two days later, the customer responded with a letter that stated: “I accept your offer on the condition that you provide me with a warranty that the freezer is merchantable.” In response to the customer’s letter, the supplier called the customer and stated that the offer was no longer open. The supplier promptly sold the freezer to another buyer for $11,000.
If the customer sues the supplier for breach of contract, is the customer likely to prevail?
Yes, because the customer’s letter was an acceptance of the supplier’s offer, since the warranty of merchantability was already implied in the sale, which means it would not have added or changed any term of the offer originally made.
UCC default rules
Implied warranties of good title, merchantability (for merchants, goods are fit for ordinary purposes, unless displaced by “as is” language), fitness for a particular purpose buyer intends to use them for (seller has good reason to know the purpose + buyer relies on seller’s skill/judgment)
a. Any disclaimer must be in conspicuous writing so that a reasonable person can notice it
Open quantity term (not specifying quantity) typically fatal to a K. EXCEPTIONS under UCC:
a. Output K: Buyer agrees to purchase all of a supplier’s output
b. Requirements K: Supplier agrees to supply all of the goods required by buyer
Quantity demanded may not be unreasonably disproportionate (higher/lower) to a stated estimate or comparable prior numbers
For several weeks, a wealthy, unemployed widow and a car dealer negotiated unsuccessfully over the purchase price of a new sports car. The car dealer knew the widow wanted her son to have the sports car as a wedding gift. On April 27, the car dealer sent the widow a signed, dated memo saying, “If we can arrive at the same price within the next week, do we have a deal?” The widow wrote “Yes” and her signature at the bottom of the memo and delivered it back to the car dealer on April 29.
On May 1, the widow wrote the car dealer a signed letter offering to buy “one new sports car, with all available equipment, for $180,000 cash on delivery not later than June 1.” By coincidence, the car dealer wrote the widow a signed letter on May 1 offering to sell her “one new sports car, with all available equipment, for $180,000 cash on delivery not later than June 1.” These letters crossed in the mail and were respectively received and read by the widow and car dealer on May 2.
In an action brought by the widow, if the car dealer denies that the parties had a binding contract on May 3, which of the following most persuasively supports the widow’s position?
A sale-of-goods contract may be made in any manner sufficient to show agreement, even though the moment of its making is undetermined.
A is correct. Under the Uniform Commercial Code (UCC), appropriate conduct between the parties may be sufficient to show agreement to a contract for the sale of goods, even if an exchange of correspondence between the parties makes the exact moment of contract formation indeterminate. The car dealer and the widow agreed to enter into a contract for the sale of one new sports car if they could reach an agreement on a price within a week. Five days later, each party received a letter from the other proposing the exact same terms. Although it is unclear which communication was the offer and which was the acceptance, the exchange of correspondence proposing identical terms demonstrates that the condition was met and that the parties’ conduct manifested agreement.
On March 1, an apartment complex received a letter from a retailer offering to sell the apartment complex 1,200 window air conditioners suitable for the apartments in the complex’s buildings. The retailer’s offer stated that it would remain open until March 20, but that the apartment complex’s acceptance must be received on or before that date. On March 16, the apartment complex posted a letter of acceptance. On March 17, the retailer telegraphed the apartment complex to advise that it was revoking the offer. The telegram reached the apartment complex on March 17, but the apartment complex’s letter did not arrive at the retailer’s address until March 21.
As of March 22, which of the following is a correct statement?
D. Under the terms of the retailer’s offer, the apartment complex’s attempted acceptance was ineffective.
This was a UCC firm offer because it was: (i) made by a merchant (the retailer); (ii) the offer was in a signed writing (the offer letter); and (iii) the writing explicitly stated the offer would remain open until March 20. As such, the offer was irrevocable until March 20.
Additionally, the offer stated that the apartment complex’s acceptance must be received on or before March 20, which means the mailbox rule does not apply.
When the retailer attempted to revoke, it was ineffective because of the irrevocability under this firm offer. When the apartment complex tried to accept, it was ineffective under the terms of the offer because it was not received until March 21.
