Contracts

Question 1

A merchant who offers to buy or sell goods in a signed writing that gives assurances that the offer will be held open is offering…

Answer 1

a merchant’s firm offer

Question 2

Offer gives consideration for a promise by the offeror not to revoke an outstanding offer for a period of time

Answer 2

option K

Question 3

a merchant’s firm offer will remain open for….

Answer 3

a maximum of three months (reasonable time)

Question 4

Elements of a UCC firm offer (3)

Answer 4

1) offeror is a merchant 2) assurance in writing that offer will be kept open; 3) signed in writing by offeror

Question 5

An option contract requires that the…

Answer 5

offeree give consideration (I will pay you $100 to keep the offer open)

Question 6

An offeree’s power to accept will lapse when… (2)

Answer 6

1. specified in K or 2) within reasonable time

Question 7

What rule does NOT apply for option Ks?

Answer 7

Mailbox rule, so acceptance is effective when received. not the second it hits the mailbox

Question 8

A farmer who supplies several local bakeries with grains wanted to sell his rye before the growing season was over. The farmer sent the following e-mail to a local baker: “Will sell my unprocessed rye, 20 bushels maximum, best price $100 per bushel, firm for 48 hours. /s/ Farmer.” Unsure how the baker would respond, and anxious to find a buyer for the rye, the farmer made the same offer to the baker’s chief competitor by e-mail later that same day. The baker was delighted to receive the offer, but needed a day or so to figure out how much rye she needed. When she accepted the farmer’s offer the next day, e-mailing to him an order for 20 bushels, she was aware of the farmer’s offer to her competitor, and that her competitor had also e-mailed an order to the farmer for 20 bushels. Unbeknownst to the baker, the farmer has only 30 bushels of rye left in his fields.

Assuming the farmer is a merchant with respect to rye, which of the following states the probable legal consequences of the correspondence between the parties?

The farmer has a contract with the baker and her competitor for 15 bushels each.The farmer has a contract with the baker and her competitor for 15 bushels each.

B The farmer has a contract with the baker’s competitor for 20 bushels and a contract with the baker for the remaining 10 bushels.The farmer has a contract with the baker’s competitor for 20 bushels and a contract with the baker for the remaining 10 bushels.

C The farmer has a contract with the baker for 20 bushels and a contract with her competitor for 20 bushels.The farmer has a contract with the baker for 20 bushels and a contract with her competitor for 20 bushels.

D The farmer has a contract with neither the baker nor her competitor.

Answer 8

The farmer has a contract with the baker for 20 bushels and a contract with her competitor for 20 bushels. Firm offer rule applies and is irrevocable for 48 hours. The farmer will need to get more rye or else he will be in trouble for breach.

Question 9

under the ucc, the court will apply WHAT to determine whether the additional or different terms become part of the K

Answer 9

Battle of forms provision

Question 10

Under the UCC, the proposal of additional or different terms by the offeree in a definite and timely acceptance is effective as an acceptance, unless

Answer 10

the acceptance is expressly made conditional on assent to the additional or different terms. Whether the additional or different terms become part of the contract depends on whether or not both parties are merchants.

Question 11

Under the UCC, contracts between merchants will typically allow additional terms to be included unless they (3)

Answer 11

1) materially alter the original terms of the offer; 2) the offer expressly limits acceptance to the terms of the offer; or 3) the offeror has already objected to the terms

Question 12

Under the UCC, an acceptance with additional terms is typically ok if…

Answer 12

not made expressly conditional on the assent to the additional terms (but whether the additional terms become part of the agreement depends on whether both parties are merchants)

So there can be a valid acceptance and the terms CAN/CANNOT come in. There is 2 parts to the UCC additional terms analysis

Question 13

If it is a sale of goods but the acceptance requires a disclaimer of all implied warranties and express warranties, will this additional term typically come in?

Answer 13

No because the terms materially alter the original terms of the offer, they change a parties remedies available

Question 14

A letter of revocation is effective upon

Answer 14

receipt. At common law, a written communication is considered received as soon as it comes into physically possession of the person addressed.

Acceptance can be effective when sent (mailbox rule)

Question 15

Mailbox rule applies unless: (3 situations)

Answer 15

1) offer states otherwise
2) offer is irrevocable (option K)
3) rejection sent before acceptance (whichever arrives first)

Question 16

Mailbox rule apples to both cases involving

Answer 16

1) sale of goods; and 2) common law

Question 17

If the offeree sends rejection, followed by an acceptance, what happens?

Answer 17

whichever is received first controls

Question 18

If the offeree sends an acceptance first, then followed by a rejection, what happens?

Answer 18

mailbox rule applies, acceptance controls

Question 19

A doll collector knew that an acquaintance from her doll collectors’ club coveted one particular doll that she owned. The doll collector mailed a letter to the acquaintance on May 3 offering to sell the doll to her for $750. Her letter arrived on May 4. On May 5, the doll collector changed her mind and immediately mailed a revocation to the acquaintance. This revocation arrived on May 7. As the mail carrier handed it to her, the acquaintance simultaneously handed to the mail carrier her own letter to the doll collector, unequivocally accepting her offer.

What is the result of the actions here?

Answer 19

The outcome would turn on the court’s determination as to whether the doll collector’s letter had been received by the acquaintance before she had entrusted the letter of acceptance to the mail carrier.

Question 20

If the offeree mails their acceptance within the period specified in an option K, but it was not received by the offeror within that period, the ….

Answer 20

acceptance is not effective

Question 21

The promise to performance, or the performance of, an existing legal duty is ….

Answer 21

not consideration unless an exception to preexisting duty rule applies

Question 22

Exceptions to the preexisting duty rule: there is consideration if:

Answer 22

There is consideration if:
1) New or different consideration is promised;
2) The promise is to ratify a voidable obligation (for example, a promise to ratify a minor’s contract after reaching majority or a promise to go through with a contract despite the other party’s fraud);
3) The preexisting duty is owed to a third person rather than to the promisor;
4) There is an honest dispute as to the duty; OR
5) There are unforeseen circumstances sufficient to discharge a party (such as impracticability), or under the modern view, if the modification is fair and equitable in view of circumstances not anticipated when the contract was made.

Question 23

What is one way to avoid a violation of the preexisting duty rule?

Answer 23

modifying the original consideration (even slightly)

Question 24

You owe MasterCard $3,000. You and MasterCard orally agree that
if you pay $2,000, MasterCard will forgive the rest of the debt. If
you pay $2,000, can MasterCard recover the $1,000 balance?

Answer 24

Yes MC can make and break that promise. There was no consideration. There is no consideration given if you are merely promising to pay back 2K when you owe 3K, There was no consideration for the release of the extra 1K.

But, new consideration can be enough for a creditor to discharge an existing debt (like using an alternative method of payment)

Question 25

what will always not be sufficient consideration for a promise by a creditor to discharge a debt?

Answer 25

payment of a smaller sum of the debt than what is due (paying part of your debt)

Question 26

The owner of a summer cottage contracted to put new vinyl siding on the cottage for $10,500. Two weeks before the work was to start, however, the contractor called to say that there was a clerical error in the bid and that he could not do the work for less than $12,000 or he would lose money. The cottage owner agreed to pay the additional $1,500 but told the contractor that he was being unfair. After the work was completed, the cottage owner handed the contractor a check for $10,500, telling the contractor that that was all he would pay him because he had no right to raise the price.

If the contractor sues the cottage owner for the additional $1,500, who will prevail?

A The cottage owner, because the contractor was already under a preexisting legal duty to replace the siding on the cottage for $10,500.

B The cottage owner, because the promise to pay the additional money was not in writing.The cottage owner, because the promise to pay the additional money was not in writing.

C The contractor, because he relied on the cottage owner’s promise to pay the additional money to his detriment.The contractor, because he relied on the cottage owner’s promise to pay the additional money to his detriment.
D The contractor, because there was a valid modification of the parties’ original contract.

Answer 26

The cottage owner, because the contractor was already under a preexisting legal duty to replace the siding on the cottage for $10,500.

the contractor was already under a binding contract to replace the siding on the cottage for $10,500. The contract is primarily for services, and thus not governed by the UCC. Moreover, the obligations of both parties under the modified agreement are not varied; the modification (paying the contractor an additional $1,500) would benefit only the contractor. The contractor’s performance of a duty that he was already obligated to perform does not constitute sufficient consideration to support the modification. Therefore, the cottage owner is obligated to pay only the originally agreed-upon $10,500.

Question 27

A professional baseball player visited a sick boy in the hospital. The player told the boy that in consideration of the boy’s courage, he would hit a home run for him in his next game. As the player was leaving the hospital, the boy’s father stopped the player and told him how important the home run could be in improving his son’s spirits and health. The father told the player he would pay him $5,000 if he did hit a home run in his next game. The player agreed and took extra batting practice before his next game to improve his chances. In his next game, the player hit two home runs. The player’s contract with his ball club does not forbid him from accepting money from fans for good performance. The player has now asked the father for the $5,000.

If the father refuses to pay and the baseball player brings an action against him for damages, which of the following is correct under the prevailing modern rule in contract law?

A The player can recover the $5,000 because the preexisting duty rule does not apply where the duty is owed to a third person.The player can recover the $5,000 because the preexisting duty rule does not apply where the duty is owed to a third person.

B The player can recover the $5,000 if he can prove that the value of the home run to the boy is at least $5,000.The player can recover the $5,000 if he can prove that the value of the home run to the boy is at least $5,000.
C The player cannot recover from the father because the player had a preexisting duty to use his best efforts to hit home runs.The player cannot recover from the father because the player had a preexisting duty to use his best efforts to hit home runs.

D The player cannot recover from the father because, even under the modern trend, moral consideration is not valid.

Answer 27

The player can recover the $5,000 because the preexisting duty rule does not apply where the duty is owed to a third person

if the duty is owed to a third party, a promise to perform given to another is valid consideration as long as it was bargained for, for the preexisting duty rule.

Question 28

a promise to perform an act that a party is already obligated to do is

Answer 28

not sufficient consideration (preexisting duty rule)

Question 29

A steelmaker purchased a tube rolling machine from a manufacturer of heavy machinery. The machine was sold unassembled for a price of $150,000, with $25,000 payable on delivery and the balance ($125,000) to be paid in 10 monthly installments of $12,500 each. After the machine parts were delivered, the steelmaker contacted an assembly company that specialized in assembly and installation of large and complex manufacturing machinery, and told the company that the machinery had to be up and running within 45 days, or the steelmaker would be in breach of a major contract that it relied on for much of its current revenue. The company agreed, in a written contract with the steelmaker, to assemble and install the tube rolling machine within 45 days at a price of $15,000.

Two weeks later, the manufacturer that sold the tube rolling machine to the steelmaker learned that the assembly company was planning to stop work, due to a strike by its labor union. The manufacturer orally offered the assembly company a $3,500 bonus if it would agree to finish the job for the steelmaker. The company accepted the manufacturer’s promise and completed the assembly and installation of the tube rolling machine with supervisory personnel within the 45-day time limit set in the agreement between the company and the steelmaker. However, the manufacturer refused to pay the assembly company the $3,500 bonus, so the company sued the manufacturer.

Which of the following would be the assembly company’s strongest argument to prevail?
Responses

A The assembly company owed the manufacturer no preexisting duty to complete the job for the steelmaker, and such completion was sufficient bargained-for consideration for the manufacturer’s promise to pay the additional $3,500.The assembly company owed the manufacturer no preexisting duty to complete the job for the steelmaker, and such completion was sufficient bargained-for consideration for the manufacturer’s promise to pay the additional $3,500.

B Because the $3,500 payment was characterized as a “bonus,” no further consideration was required and the manufacturer is bound to its promise.Because the $3,500 payment was characterized as a “bonus,” no further consideration was required and the manufacturer is bound to its promise.

C The assembly company would not have completed the job for the steelmaker within the time limit except in reliance on the manufacturer’s promise to pay the additional $3,500.The assembly company would not have completed the job for the steelmaker within the time limit except in reliance on the manufacturer’s promise to pay the additional $3,500.

D By completing the job for the steelmaker, the assembly company conferred a benefit on the manufacturer worth at least $3,500, because such performance assured the steelmaker’s ability to pay the manufacturer the balance on the installment purchase agreement for the tube rolling machine.

Answer 29

The assembly company owed the manufacturer no preexisting duty to complete the job for the steelmaker, and such completion was sufficient bargained-for consideration for the manufacturer’s promise to pay the additional $3,500.The assembly company owed the manufacturer no preexisting duty to complete the job for the steelmaker, and such completion was sufficient bargained-for consideration for the manufacturer’s promise to pay the additional $3,500.

Exception to preexisting duty rule: 3) The preexisting duty is owed to a third person rather than to the promisor; (there is consideration if…)

Question 30

At common law, the Statute of Frauds requires _____________ signed by ____________.

Answer 30

1) all material terms (who/what)
2) defendant’s signature

Question 31

Under the UCC, sale of goods of 500 or more, the writing under the SOF must include:

Answer 31

Quantity term; AND
Defendants signature ONLY (party to be CHARGED with breach)

Question 32

Real estate transactions fall within the SOF when they…

Answer 32

create a promise to sell the land

Question 33

the one year provision that falls with the SOF time period runs from… to….

Answer 33

runs from the date of agreement to completion

Actions that can theoretically be completed in less than a year do NOT fall within the SOF

ex. A contract for one month of service that is to begin 13 mo’s in the future fall within the SOF through the one year

Question 34

in a deal between merchants, UCC governing, if the party to be charged does NOT sign, this is okay only when

Answer 34

the deal is between merchants and the other party does not object to the original writing with the quantity term within 10 days

Question 35

a sale of land falling under the SOF would require the writing to include ..

Answer 35

1) price (essential terms); and 2) signature of Defendant

Question 36

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 __________.

Answer 36

will not discharge the contractor’s duty to perform, but will extend the date of performance

Question 37

Total destruction by an act of nature of renovation in progress…

Answer 37

discharges duties by impossibility

Question 38

if the contract’s subject matter is destroyed…

Answer 38

without fault of either party, the contractual duties are discharged.

Question 39

death or physical incapacity excuse only applies in

Answer 39

personal service contracts where the services involved are truly “unique” (impossibility)

Question 40

a contractual duty to perform may be discharged by

Answer 40

objective impossibility (no one could perform it), but not subjective impossibility (defendant could not perform)