Contracts Flashcards
When a debtor breaches an accord agreement, the creditor may sue __________.
either on the original contract or the accord contract
If a buyer rejects goods, the buyer may resell the goods as long as ______
the seller is notified and the proceeds are held for the seller’s account
What assignments must be in writing to be effective?
(1) wage assignments
(2) assignments of an interest in land
(3) assignments intended as security interests under Article 9 of the uCC
An electronics store located in Los Angeles, California, purchases electronics from an electronics corporation located in San Antonio, Texas. On January 19, the electronics store mailed to the corporation an order for $200,000 worth of electronics, specifying that delivery was to be no later than February 25, F.O.B. South Texas Railroad Depot, San Antonio, Texas.
The corporation delivered the electronics to the railroad depot on February 15 and notified the electronics store by fax that its order was scheduled to arrive at the Southern Pacific Railroad Depot in Los Angeles on February 20. On February 17, the corporation learned that the electronics store was insolvent. The corporation demands immediate payment in cash for the electronics.
Is this demand permissible and why/why not?
It is permissible. Under the UCC, if a buyer is insolvent the seller may stop goods in transit and refuse to deliver except for cash.
In July of last summer a grape grower contracted with a winery to deliver “500 tons of premium quality pinot chardonnay grapes grown on my ranch.” The price was to be $1,000 per ton and delivery was to be on or before September 15. In August of the same year, the grape grower entered into an identical contract with a vineyard to sell 300 tons of premium quality pinot chardonnay grapes.
The grape grower completed his harvest by September 10 and had 800 tons of premium quality grapes. On September 11, an unexpected rain ruined 400 tons, and the grape grower notified the winery and the vineyard on that day that he would only be able to deliver 250 tons to the winery and 150 tons to the vineyard. On September 14, the vineyard purchased an additional 150 tons of premium quality pinot chardonnay grapes from a different grape farmer, one of several other available sources for premium quality pinot chardonnay grapes. These grapes along with the 150 tons from the grape grower gave the vineyard the 300 tons it needed.
On September 15, what is the winery’s legal position with regard to the grape grower’s failure to deliver the 500 tons of grapes required by his contract?
If the winery has given the grape grower a written notice of termination, the winery will have the right to refuse to accept the 250 tons of grapes but will have no cause of action for damages against the grape grower.
If the duration of employment is not specified in an offer, what is implied as to termination?
It is implied that the employment is terminable at the will of either party.
Explain the application of promissory estoppel in regard to the enforceability of contracts that violate the Statute of Frauds
Where an oral promise is not enforceable under contract law because of the Statute of Frauds and the promisor should foresee that it will induce the promisee to change position in reliance on the oral promise, promissory estoppel may be used to take the contract out of the Statute of Frauds.
Explain the effect of supervening illegality when (1) present at time of offer, (2) present after offer but before acceptance, and (3) after the contract is formed.
(1) the offer is invalid
(2) the offer is revoked
(3) the contract is discharged on grounds of illegality
What is a condition precedent?
A condition that must occur before an absolute duty of immediate performance arises in the other party.
What is the legal result if a building is destroyed in the middle of construction of a new building?
The builder is not discharged from performance, but may be excused from timely performance as provided under the original contract, as long as the destruction is not the builder’s fault.
What is required for an effective anticipatory repudiation
A promisor, by words or conduct, unequivocally indicates that he cannot or will not perform under the K.
Several years ago, a lender lent a borrower $1,000, and the parties agreed in writing that the borrower would repay the lender within one year. The borrower failed to repay the lender, but the lender took no action prior to the expiration of the five-year statute of limitations on suits for debt. Some time after that, the lender phoned the borrower and told him, “If you’ll pay me $600 now, I’ll forget all about that unpaid $1,000 debt.” The borrower agreed orally and then sent the lender a signed letter, which stated, “I, the borrower, agree to pay the lender $600.” The borrower never paid the lender the $600 and the lender sued the borrower shortly thereafter.
What is the lender entitled to recover and why?
$600. When a past obligation is not discharged but is unenforceable because the statute of limitations has run, a new promise in writing will be enforceable according to its terms. The existence of the prior obligation acts as a substitute for consideration.
A landowner entered into a written agreement with a real estate broker whereby the broker would receive a commission of 10% of the sale price if he procured a “ready, willing, and able buyer” for the landowner’s property and if the sale actually proceeded through closing. The broker found a buyer who agreed in writing to buy the property from the landowner for $100,000, the landowner’s asking price. The buyer put up $6,000 as a down payment. The agreement between the landowner and the buyer contained a liquidated damages clause providing that, if the buyer defaulted by failing to tender the balance due of $94,000 at the closing date, damages would be 10% of the purchase price. The landowner included that clause because she was counting on using the proceeds of the sale for a business venture that would likely net her at least $10,000.
The buyer became seriously ill and defaulted. When he recovered, he demanded that the landowner return his $6,000, and the landowner refused. The broker also demanded the $6,000 from the landowner and was refused. The broker and the buyer filed separate suits against the landowner, with the buyer pleading impossibility of performance. The two cases are consolidated into a single case.
How should the court rule as to the disposition of the $6,000 and why?
The landowner keeps the entire $6,000.
The buyer’s illness does not entitle him to an impossibility defense because it is not objectively impossible for him to perform under the K.
The broker is not entitled to anything because he was entitled only to 10% of the sale price, not to 10% of anything the landowner received from the deal. The liquidated damages clause is not considered part of the sale price, but is instead a measure of damages.
The liquidated damages clause is enforceable because it is a reasonable measure of the landowner’s damages as a result of the breach.
What is required for a merchant’s firm offer?
(1) made by a merchant
(2) in writing
(3) writing gives assurances that the offer will be held open
(4) up to a maximum period of three months
(5) if the firm offer term is on a form supplied by the offeree, the term must be separately signed off on by the offeror
When is forbearance to sue valid consideration?
When there is an actual claim or the party believes in good faith that there is a valid claim.
On November 7, a painter agreed with a homeowner to paint his house for $10,000, payment to be made upon completion of the job. On November 14, while the job was still incomplete, the painter told her paint supplier that if he would give her the paint she needed, she would have the homeowner pay to him directly the $3,000 for paint that she owed him. The paint supplier agreed, and the painter sent the homeowner a letter setting forth this agreement. On December 1, the painter had completed the job, but the homeowner refused to pay the paint supplier any money.
In a suit by the paint supplier against the homeowner, what would be the homeowner’s best defense?
The best defense would be that the homeowner is not required to pay the painter under the original contract (for example, if the painter had not done the work properly). An assignee is subject to the same defenses that the obligor has against the assignor.
In a breach of contract for the sale of land, can either party request specific performance?
Yes
In a breach of contract for the sale of land, can specific performance be awarded even if money damages are requested as an alternative remedy?
Yes, even if the non-breaching party is agreeable to monetary damages in the absence of specific performance, specific performance is the preferred remedy in a land sale contract because all land is unique.
Who bears the risk of loss after a land sale contract is signed but before closing?
The buyer - after the contract is signed, the buyer is in equitable ownership of the property and must move forward with the sale at the stated contract price unless the contract provides otherwise.
A businesswoman entered into a written contract with a general contractor to build a studio and broadcast transmitter for $3 million by July 1. Among his tasks, the contractor was to install underground cables and fiberoptic lines necessary to broadcast.
When digging the deep trench necessary to lay the conduit containing the fiberoptic lines, the contractor encountered a stretch of extremely soggy soil. This was an indication that an offshoot of the nearby city’s aquifer underlay the property. This was not indicated on any of the geological survey maps available in the office of the county recorder of deeds. The contractor told the businesswoman that it would cost an additional $50,000 to lay the conduit through that stretch of soil. The businesswoman had already launched an advertising campaign indicating that the station would begin broadcasting on July 4, which was rapidly approaching. Therefore, when the contractor threatened to quit the job without the additional $50,000, the businesswoman reluctantly agreed orally to the contractor’s demand as long as he promised that all of the work would be completed by the middle of June. The contractor agreed, proceeded to lay the conduit, and completed building the studio and transmitter by June 15. The businesswoman paid the contractor $3 million, but when the contractor demanded $50,000 more, she refused to pay it. The contractor sues the businesswoman for the $50,000.
Who will prevail?
The contractor. This modification is supported by consideration on both sides. The businesswoman agreed to pay an additional $50,000, and the contractor agreed to finish the job two weeks early.
Under the modern view, it may also be enforceable without consideration considering the unexpected nature of the soil.
A jogger found a stray dog in the park. She took the dog home with her and placed an ad in the paper to try to find the dog’s owner. Soon thereafter, the owner of the dog contacted the jogger. He came to the jogger’s home and identified the dog as his. He offered to pay the jogger a $200 reward at the end of the week. The jogger thanked the dog owner but turned down the reward.
At the end of the week, however, the jogger changed her mind, so she called the dog owner and told him that she would like the reward after all. He refused to pay her, and she sues him for breach of contract.
What will the jogger recover?
Nothing, because there was no consideration to support a contract.
Note here that while the jogger rejected the “offer” of $200, the owner’s communication was not an offer because it was not expressing a promise to enter into a contract (therefore, an answer suggesting that the jogger takes nothing because she rejected the offer is incorrect).
A nephew asked his uncle, who like him was a farmer, to guarantee a loan to buy a new tractor. The local bank had already refused to extend credit to the nephew alone to buy the tractor. The uncle was inclined to refuse, but then decided that he could benefit from his own use of the tractor, so he told his nephew that he would guarantee the loan if he could use the new tractor without cost for 10 days during his harvest season. The nephew agreed to his uncle’s proposal. The uncle went to the bank and told the loan officer that he was willing to guarantee the proposed loan to his nephew. This prompted the loan officer to agree to extend the requested credit to the nephew. Although the loan officer did not make the uncle sign any papers, the uncle provided consideration and the bank issued the nephew a loan commitment statement. That evening, the uncle had a change of heart. The next day, he telephoned the loan officer and told him to forget about his guaranteeing any loan to his nephew. Despite the uncle’s phone call, the loan officer did not stop the check from being issued, and the nephew received the money to purchase the tractor. He drove the tractor over to the uncle’s farm and delivered it for the uncle’s 10-day use, as promised. The uncle told his nephew that he did not want to use the tractor and that he was not guaranteeing his loan. Within six months, it became clear that the nephew could not make good on the loan.
Does the statute of frauds apply to the uncle’s agreement?
No. The SOF does not apply to suretyship agreements where the main purpose of the promisor is to secure an advantage or pecuniary benefit for himself.
The father of a girl whose horse crashed through a neighbor’s fence told the neighbor that he would have the fence repaired immediately at his cost. The father hired a local contractor to do the work. The contractor did a poor job and did not fix the fence properly.
Assuming that there was an enforceable agreement between the father and the neighbor, would the neighbor have an action against the contractor?
Yes, because the neighbor was a creditor beneficiary of the contract between the contractor and the father.
When is a third-party beneficiary a “creditor” beneficiary?
When the promisee’s primary intent in contracting is to discharge an obligation to the third party.
