Contracts Flashcards
4) Where a client accepts the services of an attorney without an agreement concerning the amount of the fee, there is A) An implied-in-fact contract. B) An implied-in-law contract. C) An express contract. D) No contract.
A) An implied-in-fact contract.
The contract for the payment of fees would be implied by the fact that the client accepts the services of the attorney.
5) Sarah Student was a third-year law student who had just purchased the Rigos MBE Review program. She was studying in the law library and decided to take a short refreshment break. When she returned to her study desk ten minutes later, her Rigos MBE Review book was gone. She ran into the student lounge and announced, “I will pay $20 to anyone who identifies the dirty bum who took my Rigos MBE Review books.” Donna Doubtful saw Terry Thief pick up Sarah’s Rigos MBE books, but did not believe that Sarah would actually pay her the $20 if she made the identification. Thus, Donna went up to Sarah and said, “I know the identity of the thief and promise to tell you, but I want the $20 in advance.” The effect of Donna’s statement is to
A) Create a unilateral contract.
B) Create a bilateral contract.
C) Create no contract.
D) Create a contract which is defeasible unless Donna makes the required disclosure within a reasonable period of time.
C) Create no contract.
The offeror, Sarah, was bargaining for a unilateral contract in which acceptance is only rendered by performance of the act requested. Note that in this common law contract, Donna’s communication is not treated as accepting Sarah’s offer but rather creating a new offer.
10) In order to have an irrevocable offer under the UCC Article 2, the offer must
A) Be made by a merchant to a merchant.
B) Be contained in a signed writing which gives assurance that the offer will be held open.
C) State the period of time for which it is irrevocable.
D) Not be contained in a form supplied by the offeror.
B) Be contained in a signed writing which gives assurance that the offer will be held open.
It is a concise statement of UCC Article 2s “firm offer” rule.
12) A merchant’s irrevocable written offer (firm offer) under Article 2 of the UCC to sell goods
A) Must be separately signed by the offeror if the offeree supplies a form contract containing the offer.
B) Is always valid for three months.
C) Is nonassignable.
D) Cannot exceed a three-month duration even if consideration is given.
A) Must be separately signed by the offeror if the offeree supplies a form contract containing the offer.
If the other party provides the contract, the merchant must separately sign the agreement to constitute a firm offer under UCC 2.205.
14) Betty Buyer wanted to buy an antique Volvo automobile owned by Sarah Seller who had previously expressed some interest in selling the car. Betty mailed Sarah a signed letter on April 1 stating “I will buy your Volvo for $10,000 cash upon your bringing the vehicle to my home before April 5. This offer is not subject to countermand.” On April 2 Sarah received the letter and wrote back a signed letter to Betty stating “I accept your offer and promise to deliver the Volvo to you as you request.” Unfortunately, the Postal Authority delayed delivery of Sarah’s letter for 10 days. In the meantime, Betty grew tired of not hearing from Sarah and purchased another car. When she learned that Betty would not complete the transfer, Sarah sued for breach of contract. The court will likely hold that
A) The mailing of the April 2nd letter did not prevent a subsequent effective revocation by Betty.
B) The April 2nd letter bound both parties to a bilateral contract when received.
C) The April 2nd letter bound both parties to a unilateral contract.
D) The April 2nd letter was effective to form a contract on April 12th, when the offeror received it.
A) The mailing of the April 2nd letter did not prevent a subsequent effective revocation by Betty.
The offer was clearly seeking performance as acceptance and not a mere promise to perform; as a result, there was no acceptance because there was no performance by the seller. Therefore, the revocation by action of the buyer was effective because a prior valid acceptance had not been made.
16) Base Electric Co. has entered into an agreement to buy its actual requirements of copper wiring for six months from the Seymour Metal Wire Company. Seymour Metal has agreed to sell all the copper wiring Base will require for six months. The agreement between the two companies is
A) Unenforceable because it is too indefinite as to quantity.
B) Unenforceable because it lacks mutuality of obligation.
C) Unenforceable because of lack of consideration.
D) Valid and enforceable.
D) Valid and enforceable.
This is a contract falling under UCC 2.306. Requirement contracts are valid and enforceable without specifying quantity as long as there is a reasonable basis for giving an appropriate remedy. A reasonable quantity would be imposed.
17) A contractor and homeowner were bargaining on the price of the construction of a new home. The contractor proposed a number of offers for construction to the homeowner including one for $100,000. Which of the following communications would not terminate the offer, such that a subsequent acceptance could be effective?
A) The homeowner asks the contractor if they would be willing to build the house for $95,000.
B) The contractor contacts the homeowner and states that the offer is withdrawn.
C) The contractor dies before the homeowner accepts, but the contractor’s son intends to continue the business.
D) The homeowner states “I accept your offer but the price is to be $97,000.”
A) The homeowner asks the contractor if they would be willing to build the house for $95,000.
The answer is correct because it appears to be a mere inquiry by the offeree, which has no effect on the offer; therefore, a subsequent acceptance could be still be effective.
21) Berg offered to sell a parcel of land to Jones for $75,000 cash. The offer was made in writing on March 1 by sending an email to Jones. Jones responded by mailing a letter on March 10 which stated “I accept but would like to request that I pay $25,000 in three equal installments over the next three years.” Berg received the letter on March 15. A contract was
A) Formed on March 10.
B) Formed on March 15.
C) Not formed because Jones’ addition of the three-year payment request was a condition that Berg had to agree should be included.
D) Not formed because the addition of the three-year request was, in effect, a rejection.
B) Formed on March 15.
Under the traditional common law, mailbox treatment for acceptance requires that “as fast or faster” means be used to communicate the acceptance. Here the mailed response was slower than the emailed offer, so the acceptance can only be effective on receipt. Therefore the acceptance is effective on March 15, when Berg received it. And the three-year payment term was a mere request which did not operate to cancel Jones’ acceptance.
25) In which of the following situations would an oral agreement without any consideration be binding under UCC Article 2?
A) A renunciation of a claim or right arising out of an alleged breach.
B) A merchant’s firm offer to sell or buy goods which gives assurance that the offer will be held open.
C) An agreement comprising a large requirements contract.
D) An agreement that modifies an existing sales contract.
D) An agreement that modifies an existing sales contract.
UCC 2.209 states that a modification to a goods contract made in good faith requires no consideration. If $500 or more, a writing would be required.
26) Egan, a 17-year-old minor, contracted with Baker to purchase Baker’s used computer for $400. The computer was purchased for Egan’s personal use. The agreement provided that Egan would pay $200 down on delivery and $200 thirty days later. Egan took delivery and paid the $200 down payment. Twenty days later, the computer was damaged seriously as a result of Egan’s negligence. Four days later, Egan reached the age of majority, and the day after that, Egan attempted to disaffirm the contract with Baker. Egan will
A) Be able to disaffirm despite the fact that Egan was not a minor at the time of disaffirmation.
B) Be able to disaffirm only if Egan does so in writing.
C) Not be able to disaffirm because Egan had failed to pay the balance of the purchase price.
D) Not be able to disaffirm because the computer was damaged as a result of Egan’s negligence.
A) Be able to disaffirm despite the fact that Egan was not a minor at the time of disaffirmation.
For contracts entered into as a minor, disaffirmation is effective within a reasonable time period after reaching the age of majority.
32) Doral, Inc., wished to obtain an adequate supply of lumber for its factory extension, which was to be constructed in the spring. It contacted Ace Lumber Company and obtained a 75-day written option (firm offer) to buy its estimated needs for the building. Doral supplied a form contract which included the option. The price of lumber has since risen drastically and Ace wishes to avoid its obligation. Which of the following is Ace’s (seller’s) best defense against Doral’s assertion that Ace is legally bound by the option?
A) Such an option is invalid if its duration is for more than two months.
B) The option is not supported by any consideration on Doral’s part.
C) Doral is not a merchant.
D) The promise of irrevocability was contained in a form supplied by Doral and was not separately signed by Ace.
D) The promise of irrevocability was contained in a form supplied by Doral and was not separately signed by Ace.
An authentication of the party to be charged is required by the Statute of Frauds. Lacking even Ace’s authentication, UCC Article 2 would dictate that the contract is not enforceable against Ace because when a form contract containing an option is supplied by the buyer, it must be separately signed by the seller in order to be enforceable against the seller.
34) Deborah Debtor took out a loan at Friendly Finance to start a small retail specialty shop. She had no credit history so her friend Samuel Surety offered to guarantee the repayment in the event Deborah defaulted. Unfortunately, Deborah’s new shop was unable to generate the volume of revenue she had hoped it would. The shop’s working capital position grew progressively worse and Deborah was pressed by her more aggressive creditors. She eventually found it necessary to seek relief from her creditors by filing a bankruptcy petition. If Friendly Finance brings suit against Samuel on his guarantee, Samuel’s worst defense is that:
A) He did not receive any consideration for his promise that he made to Deborah.
B) An agreement he entered into with Deborah contained a right of indemnification/reimbursement so the responsibility remains with Deborah.
C) The loan was never made to Deborah.
D) His undertaking was only oral.
B) An agreement he entered into with Deborah contained a right of indemnification/reimbursement so the responsibility remains with Deborah.
An agreement between the surety and the debtor is not binding on and does not limit the creditor’s rights. While this may allow Samuel to collect from Deborah any sums he may have to pay Friendly, it does not stop the creditor from pursuing the surety directly.
36) Sarah Sailor owned two sailboats, a 32 footer and a 37 footer. Bill Buyer has seen the 37-foot sailboat but is not aware of the existence of the smaller sailboat. Sarah offered in writing to sell “my sailboat” to Bill for $15,000 cash. Bill accepted and paid Sarah the $15,000 cash. The next day, Sarah delivered the 32-foot sailboat to Bill who rejected the tender because it was not the sailboat he thought he was buying. Sarah refused to return Bill’s $15,000 payment and insisted that Bill take the smaller sailboat. The best argument supporting Bill’s right to relief would be
A) Express fraud by Sarah.
B) A latent ambiguity was known by Sarah but not by Bill.
C) There was a mutual mistake.
D) Bill’s subjective intent should control, requiring reformation of the contract subject.
B) A latent ambiguity was known by Sarah but not by Bill.
If one party is aware of a latent ambiguity and does not inform the other party, the contract will generally be enforced against the aware party.
43) Mighty Manufacturing orders two large production line machines for use in their assembly line from Mega Equipment. The machines were received in a large crate at Mighty’s receiving dock with no visible defects on the outside of the crate. The receiving clerk signed an “Acceptance of Delivery” form. Mighty paid Mega the full price 30 days after delivery. One machine was moved to the assembly line area. It took five weeks for Mighty to reconfigure the assembly line so the new equipment would perform. As soon as the new equipment was installed, it was clear there were serious defects in the new equipment. Mighty notified Mega of the defect and requested that Mega pick up the equipment. The night before Mega was to pick up the equipment, a fire destroyed the Mighty Manufacturing assembly line area. If Mighty’s insurance is insufficient to cover the machine loss, the balance of the loss should be borne by
A) Mighty, because the machine was on their premises.
B) Mega, because the machine was defective.
C) Mega, if it was reasonable for Mighty to have waited five weeks before notifying Mega of the defect.
D) Mighty, because paying for the goods usually constitutes acceptance.
C) Mega, if it was reasonable for Mighty to have waited five weeks before notifying Mega of the defect.
The general rule is that risk of loss passes to the buyer upon acceptance. Acceptance may be revoked if the defect was hidden and it was reasonable not to discover the defect in order to reject the goods prior to the date of rejection. If the revocation was proper, risk of loss would shift back to the seller at that time. Therefore, to the extent that Mighty’s insurance did not cover the damage, the seller would be responsible for the difference if the goods were defective.
46) The UCC Article 2 implies a warranty of merchantability to protect buyers of goods. To be subject to this warranty, the goods need not be
A) Fit for all of the purposes for which the buyer intends to use the goods.
B) Adequately packaged and labeled.
C) Sold by a merchant.
D) In conformity with any promises or affirmations of fact made on the container or label.
A) Fit for all of the purposes for which the buyer intends to use the goods.
UCC Article 2 only requires the goods to be fit for the ordinary purposes for which such goods are used. “All” is too broad and the focus is only normal usage, not the particular buyer’s use.
48) The UCC Article 2 provides for a warranty of title and against infringement. The primary purpose of this warranty is to protect the buyer of goods from infringement upon the rights of third parties. This warranty
A) Only applies if the sale is between merchants.
B) Must be expressly stated in the contract or the Statute of Frauds will prevent its enforceability.
C) Does not apply to the seller if the buyer furnishes specifications which result in an infringement.
D) Cannot be disclaimed.
C) Does not apply to the seller if the buyer furnishes specifications which result in an infringement.
If the specifications provided by the buyer were such that the resulting sale of goods infringes on the rights of third parties, the seller is not liable to the buyer.
53) Magnum, Inc. contracted with Kent Construction Company to construct four small dwellings according to specifications provided by Magnum. To save money, Kent deliberately substituted 2 x 4s for the more expensive 2 x 6s called for in the plans in all places where the 2 x 4s would not be readily detected. Magnum’s inspection revealed the contract variance and Magnum is now withholding the final payment on the contract. The contract was for $100,000, and the final payment would have been $25,000. Damages were estimated to be $15,000. In a lawsuit for the balance due, Kent will
A) Prevail on the contract, less damages of $15,000, because it has substantially performed.
B) Prevail because the damages in question were not substantial in relation to the contract amount.
C) Lose because the law unqualifiedly requires literal performance of such contracts.
D) Lose all rights under the contract because it has intentionally breached it.
D) Lose all rights under the contract because it has intentionally breached it.
Under the common law doctrine of substantial performance, “perfect tender” is not required as it is under the UCC Article 2; recovery is possible for less than 100% perfect performance. However, the doctrine requires that the deviation not be intentional or material.
56) Charlie Crawford owns Crawford’s Vineyards. He entered into firm sale agreements to sell 200 tons of Sirhan wine grapes to Hogue Winery on January 15, and 100 tons to St. Michelle Winery on February 15. The contract specified that all the grapes were to come only from Crawford’s vineyard. A very unusual mid-summer rain and thunderstorm occurred. There was lightning generated in the storm and it started a field fire in the vineyard where Crawford grew the Sirhan wine grapes. The fire destroyed all but 30 tons of Crawford’s Sirhan wine grapes. Crawford then contacted Hogue and St. Michelle and offered to replace the Sirhan grapes with Merlot grapes at a reduced price. He also offered to deliver to Hogue 20 tons and to St. Michelle 10 tons of the Sirhan grapes. Hogue demanded all the 30 tons because they purchased first. Crawford gave him the 20-ton allocation and Hogue purchased their other 180 tons from another grower at a price that was $24,000 higher than the price he had negotiated with Crawford. If Hogue brings suit against Crawford, Crawford’s worst defense is
A) The cause of the shortage was beyond his control.
B) His pro-rata allocation between Hogue and St. Michelle was reasonable.
C) He should not be held liable because he offered a substitute grape at no extra price.
D) Neither he nor Hogue foresaw that a fire would occur in the grape fields.
C) He should not be held liable because he offered a substitute grape at no extra price.
This alternative would appear to be Crawford’s worst defense. C assumes that Crawford bears liability for a breach and that offering a substitute grape might assist in mitigation; in fact, the failure of a UCC presupposed condition is not a breach at all.
59) Under Article 2 of the UCC, which of the following rights are available to the buyer when a seller commits an anticipatory breach of contract?
A) Demand assurance of performance or cancel the contract and collect punitive damages.
B) Demand assurance of performance or cancel the contract without a punitive damages award.
C) Although the buyer may not cancel the contract without a present breach, he may demand assurance of performance and collect punitive damages after the deadline for performance has passed.
D) Although it would amount to involuntary servitude for the buyer to demand assurance of the seller’s performance, he may cancel the contract and collect punitive damages.
B) Demand assurance of performance or cancel the contract without a punitive damages award.
The unequivocal repudiation of a future performance duty is an anticipatory breach of contract. Cancellation and demand of assurance of performance by the non-breaching party are permitted, but not punitive damages.
70) Wally Waterworks contracted with Harriet Homeowner to install an underground watering system at her new home. Subsequently Wally found that he had booked too many orders after Harriet’s. Wally was therefore unable to complete some of the jobs he had contracted for including Harriet’s. Harriet was furious because some of the new trees and plants she had planted died without the water. She investigated and learned that while Wally was refusing to do her watering system, he was doing one for Nancy Next. If Harriet files suit against Wally
A) She will be able to collect punitive damages and obtain an injunction prohibiting Wally from working on Nancy’s watering system.
B) She will neither be able to collect punitive damages nor obtain an injunction against Wally.
C) She will not be able to collect punitive damages, but she will be able to obtain an injunction prohibiting Wally from working on Nancy’s watering system.
D) She will be able to collect punitive damages, but she will not be able to obtain an injunction prohibiting Wally from working on Nancy’s watering system.
C) She will not be able to collect punitive damages, but she will be able to obtain an injunction prohibiting Wally from working on Nancy’s watering system.
The best answer. Punitive damages are not usually available for mere breach of contract absent egregious circumstances or willful breach of contract by a fiduciary. Injunctions and restraining orders may be sought in personal service contracts to prohibit the D from working for anyone other than the P if the D refuses to complete the contract.
71) Carol Consumer hired Albert Attorney to prepare a will for her. Under state law only admitted attorneys are allowed to prepare wills. Albert did not tell Carol that he had failed the bar examination and had not been admitted to the local State Bar Association. The completed will was accepted and paid for by Carol. Carol passed away eight years later and her personal representative discovered that the will did not contain a disclaimer provision, which would have allowed her heirs to avoid a large part of the federal estate tax. If Carol’s personal representative brings a civil professional malpractice suit against Albert, the best defense he can assert is:
A) Carol never paid him for preparing the will.
B) Carol knew and appreciated that a disclaimer clause was not included.
C) The contract was illegal because it violated the state law requiring the drafter to be admitted to the local bar association to practice law.
D) The suit is not timely because the malpractice statute of limitations in the state is three years and it has run.
B) Carol knew and appreciated that a disclaimer clause was not included.
If Carol actually knew and appreciated that the disclaimer provision had been omitted, there would seem to be a waiver that would at least allow a partial defense to the claim.
76) A common law duty is delegable even though the
A) Contract provides that the duty is nondelegable.
B) Duty delegated is the payment of money and the delegatee is less creditworthy than the delegator.
C) Delegation will result in a material variance in performance by the delegatee.
D) Duty to be performed involves the personal skill of the delegator.
B) Duty delegated is the payment of money and the delegatee is less creditworthy than the delegator.
Because the delegator remains liable when the duty to pay money is delegated, the obligee cannot show prejudice or increased risk.
77) Harper is opening a small retail business in Hometown, USA. To announce her grand opening, Harper placed an advertisement in the newspaper stating “52-inch televisions for only $99.00.” Many local residents came in and attempted to make purchases. Harper’s grand opening is such a huge success that she is unable to totally satisfy the demand of the customers for the televisions. Which of the following correctly applies to the situation?
A) Harper has made an offer to the people reading the advertisement.
B) Harper has made a contract with the people reading the advertisement.
C) Harper has made an invitation seeking offers.
D) Any customer who demands the goods advertised and tenders the money is entitled to them at the sale price.
C) Harper has made an invitation seeking offers.
A general advertisement in a newspaper not containing details of make, model, etc., and specific words of commitment is generally construed as an invitation to deal. The customer makes the offer by tendering the price and the store accepts by delivery of the goods or a promise to deliver the goods.
78) Nichols wrote Dilk and offered to sell Dilk a building and land for $50,000. The offer stated that it would expire 30 days from July 1. Nichols has changed his mind and does not wish to be bound by his offer. In a legal dispute between the parties, which of the following would be correct?
A) The offer will not expire prior to the 30 days even if Nichols sells the property to a third person and notifies Dilk.
B) If Dilk categorically rejected the offer on July 10, Dilk could not validly accept within the remaining stated period of time.
C) If Dilk phoned Nichols on August 1 and unequivocally accepted the offer, it would create a contract, provided he had no notice of withdrawal of the offer.
D) The offer cannot be legally withdrawn for the stated period of time.
B) If Dilk categorically rejected the offer on July 10, Dilk could not validly accept within the remaining stated period of time.
Under the common law, a categorical rejection by an offeree operates to terminate the offer so that a subsequent acceptance is treated as a mere counteroffer.