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.
84) Walton owed $10,000 to Grant. Grant assigned his claim against Walton to the Line Finance Company for value on October 15. On October 25, Hayes assigned his matured claim for $2,000 against Grant to Walton for value. On October 30, Line notified Walton of the assignment to them of the $10,000 debt owed by Walton to Grant. Line has demanded payment in full. Insofar as the rights of the various parties are concerned
A) Walton has the right of a $2,000 set-off against the debt which he owed Grant.
B) Walton must pay Line in full, but has the right to obtain a $2,000 reimbursement from Grant.
C) Line is a creditor-beneficiary of the debt owed by Walton.
D) The claimed set-off of the Hayes claim for $2,000 is invalid because it is for an amount which is less than the principal debt.
A) Walton has the right of a $2,000 set-off against the debt which he owed Grant.
The $2,000 set-off right that would be good against Grant is also good against Grant’s assignee, Line. Thus the net amount of $8,000 is the maximum the assignee, Line, may assert against the debtor, Walton.
86) Megabank U.S. has historically made a year-to-year loan to Fred and Sally, who operate a small convenience store. A large discount store opened across the street from Fred and Sally’s store, which caused them to lose business and pay some of the loan payments late. Megabank has requested that the borrowers obtain a guarantee if they want to renew the loan for the next year. As a favor, Sally’s father orally promised Fred and Sally he would be jointly liable and pay one-third of Megabank’s loan if they defaulted again. If Megabank sues Sally’s father on his guarantee, the strongest legal defense that he can assert is
A) The promise was oral and is thus invalidated by the Statute of Frauds.
B) There was no consideration to support the father’s promise.
C) The requirements of promissory estoppel are not met.
D) The bank did not first pursue Fred and Sally.
B) There was no consideration to support the father’s promise.
Consideration is necessary to render Sally’s father’s promise enforceable. Consideration requires either a benefit to the promisor or a detriment to the promisee. Sally’s father did not receive an economic benefit and the promisees - Fred and Sally - did not suffer a detriment.
87) Archie Architect in New York contracted with Donna Developer to design the architectural plans for a twenty-story office building in New Jersey. The architectural firm drafted a contract that contained a clause stating, "Any and all claims of any type resulting from performance under this contract must be formally asserted within one year from the date of occurrence." The state statute of limitations in New York for a written contract is six (6) years, while the same statute in New Jersey is four (4) years. Five years after the office building had been completed, the parties were still disagreeing about the final balance due on the architectural contract, and Architect filed suit. If Donna brings a suit seeking a declaratory judgment, the court is most likely to hold that the applicable statute of limitations should be A) One year. B) Four years. C) Five years. D) Six years.
A) One year.
Under the common law, the parties may usually stipulate in the contract the length of time a cause of action may remain alive.
91) Richard Rescuer saw a child hanging from a cliff. Realizing that the child could fall to her death, Richard scaled the cliff and brought the child down. Richard then threatened to sue the child’s parents and the child if they did not pay him $10,000. The child’s mother signed a promissory note in which she promised to pay Richard Rescuer $10,000 “in consideration of him agreeing not to sue me, my husband, or my child and for saving my child’s life.” The mother later had second thoughts about paying the $10,000. Does Richard Rescuer saving the child alone constitute sufficient consideration for the $10,000 promise?
A) No, because the value of the act is too uncertain.
B) Yes, because the child and her parents became morally obligated to the rescuer.
C) Yes, because the child and her parents substantially benefited from the rescue.
D) No, because neither the child nor her parents requested Rescuer to save the child.
D) No, because neither the child nor her parents requested Rescuer to save the child.
The rescue was performed without knowledge of the offer and it was not the consequence of a request so Richard Rescuer is treated as a mere volunteer.
90) Linda Landlord owned a small rental house that was in need of repairs. She entered into an oral contract with Robert Rental to sell him the house for $59,000 cash. Robert relied upon this representation and borrowed the purchase money from his parents. Robert paid the $59,000 to Linda, moved into the house, began to make improvements, and paid the property taxes. Linda developed seller’s remorse six months later, refunded the money, and demanded that Robert leave the house. If Robert sues Linda for specific performance of the house transfer, Linda’s best defense is
A) The Statute of Frauds requires a writing signed by the seller.
B) Whatever improvements Robert made were not substantial.
C) She returned the $59,000 to Robert Rental.
D) The house was a rental unit and Robert was just a tenant.
B) Whatever improvements Robert made were not substantial.
In order for specific performance of the house transfer to be ordered, the improvements made by the land possessor must be substantial enough to clearly show that the claiming party is more than a mere tenant
92) Mary Manufacturer and Tony Trucker entered into a written contract on January 1st in which Mary agreed to build 100 trucks for Tony over the next 10 months. The price was to be $100,000 per truck and the manufacturing schedule dictated that 10 trucks per month were to be completed. The contract stated in part “it is expressly agreed that Tony will be under no payment obligation under this agreement unless 10 trucks are completed no later than June 30th.” Five trucks meeting the contract specifications were completed and tendered to Tony by Mary on June 30th. The remaining five trucks were completed and tendered on September 1st. The above contract is
A) Entire.
B) Divisible.
C) Neither divisible nor entire.
D) Partially divisible and partly entire.
D) Partially divisible and partly entire.
The UCC rule is that goods must be delivered in one entire lot unless the terms or circumstances indicate to the contrary. In this case, the contract was for 100 trucks in total to be delivered in 10 different lots over 10 months. Thus the contract here is partially divisible and partially entire.
93) Mary Manufacturer and Tony Trucker entered into a written contract on January 1st in which Mary agreed to build 100 trucks for Tony over the next 10 months. The price was to be $100,000 per truck and the manufacturing schedule dictated that 10 trucks per month were to be completed. The contract stated in part “it is expressly agreed that Tony will be under no payment obligation under this agreement unless 10 trucks are completed no later than June 30th.” Five trucks meeting the contract specifications were completed and tendered to Tony by Mary on June 30th. The remaining five trucks were completed and tendered on September 1st. The shipment of five trucks instead of ten was
A) Not a breach but rather an accommodation.
B) A breach of the whole contract.
C) Grounds for Tony to refuse to pay.
D) Grounds for Tony to request assurances of performance of the remainder of the order.
D) Grounds for Tony to request assurances of performance of the remainder of the order.
The receipt of performance that is not in accordance with the contract terms allows the other contracting party to seek assurances of performance under the UCC.
101) Fred Farmer owned and actively worked two separate fruit orchards. One 5,000-acre farm was used to grow apples and the other 5,000-acre farm was used to grow grapes. The grapes were sold to wine and juice producers and the grape orchard was more valuable than the apple farm. Wendy Winemaker was an attorney who made wine as a hobby once a year. She bought all her wine grapes from Fred every fall and always purchased a few boxes of apples at the same time. In the summer, Wendy visited the wine grape orchard, but Fred was not there. During Fred’s annual trip to the city to sell his crops, Fred mentioned to Wendy that he was growing tired of fruit farming and was thinking about selling his “fruit farm.” Wendy had always wanted to buy an orchard of her own and asked if Fred would give her an option for the purchase of the fruit orchard so she could attempt to raise the money. Fred was reluctant to tie up his properties, but at Wendy’s urging, he signed an agreement she drew up, which stated “I hereby agree to sell my fruit farm to Wendy for $500,000. This offer will expire 60 days from date and seller has the right to withdraw it at any time.” Wendy orally promised to give Fred $500 for signing and said she would forward him her check covering the option fee when she returned to her home. Two days after signing the agreement with Wendy, Fred’s neighbor Bob, who was a real estate broker, called him on the phone. Bob said that he had a customer who was interested in purchasing the fruit farms. Fred said he would sell the grape farm for $750,000 and/or the apple farm for $500,000. Bob said that he would charge a 5% brokerage commission if he could provide a satisfactory buyer. Fred did not reply, nor did he mention the previous agreement he had entered into with Wendy. Later that same day, Bob produced a written offer for both farms at Fred’s full asking prices. The buyers had previously made direct offers to Fred. Fred accepted the new offer but refused to sell unless the buyers dealt directly with him without Bob’s involvement. The buyers really wanted the farms and agreed. Fred then called Wendy and told her what had transpired. Wendy was very upset because she had just raised the $500,000 she intended to use to buy the grape farm. Wendy refused to send the $500 option fee to Fred. If Wendy sues Fred for specific performance, a court would be most likely to hold
A) The subject of the Fred to Wendy contract was the grape fruit farm.
B) The subject of the Fred to Wendy contract was the apple fruit farm.
C) There was no Fred to Wendy contract because there was no true meeting of the minds.
D) Ambiguity should be construed against Wendy because she drafted the agreement.
C) There was no Fred to Wendy contract because there was no true meeting of the minds.
There was a bilateral contract, but there appears to be a mutual mistake of fact as to which farm was to be subject to the option. There clearly was no true meeting of the minds. While the mistake does affect the value of the option that Wendy sought, it is more likely to be characterized as factual to allow rescission.
104) Alice Attorney prepared a will and estate plan for Carol Client. She delivered the legal documents to Carol on 12/15/01. On 12/15/02, Carol was audited by the Internal Revenue Service and was assessed a large tax penalty because Alice had prepared the will and estate plan in a negligent manner. Alice left the state for 2 years from 12/15/03 until 12/15/05. On 12/15/07 Carol filed suit against Alice for malpractice. The state statute of limitations specifies a three-year period of time for negligence. Carol’s suit was
A) Filed timely because the statute of limitations was tolled and only triggered on discovery.
B) Not filed timely because it was six years after the will and estate plan were delivered.
C) Filed timely because there is no statute of limitations applicable to clients bringing a malpractice suit against an attorney.
D) Not filed timely because it was five years after the IRS asserted the tax deficiency.
A) Filed timely because the statute of limitations was tolled and only triggered on discovery.
The lawsuit was timely filed because the three-year statute of limitations was tolled during the two years that Alice was outside the jurisdiction, and was only triggered on 12/15/02, when the negligence was discovered.
108) Alice Actress contracted to direct and star in a Broadway play in New York. The financiers were very hopeful the play would be a big hit and that they could syndicate the theme for a television series. Alice signed a $600,000 agreement paying her $50,000 per month for a minimum of 12 months for acting and directing the play. The first two payments of $100,000 were given to her at signing. Three months later, when she was owed $450,000 for the last nine months she assigned her rights to Albert Assignee as consideration for the purchase of his home. She then assigned the same right to her favorite nephew as a gift. Subsequently she assigned the same rights to First National Bank as additional collateral for a loan she owed the Bank from a previous year. All three assignees are requesting that the financiers pay them the $450,000 executory balance on the Alice contract. As between the parties, which of the following most accurately describes their respective rights?
A) Albert Assignee has a priority because this was the first assignment the promisee made.
B) First National Bank has a priority because the date they made the loan predates both Alice’s gift to Alice’s nephew and her home purchase.
C) All three assignees will share the funds in an amount their obligation bears to the total of the three obligations.
D) None of the three assignees will have any claim to the funds due Alice from the financiers of the Broadway play.
D) None of the three assignees will have any claim to the funds due Alice from the financiers of the Broadway play.
The right to receive payment from an executory personal service contract is not usually assignable. Performance by Alice must have already occurred in order to assign the right to receive payment, because the compensation is a substantial factor promoting satisfactory performance. Another approach is to treat personal service contract rights as divisible; assignment of the payment would be allowed for the time period that Alice has already performed.
110) Bertha Basketball was a very successful personal injury attorney who received a multi-million dollar fee after winning a big case. She decided to purchase a basketball team, but her CPA convinced her that the risk was very high and that a lease agreement would minimize this risk. The lease contract she entered into with Slippery Seller to purchase the Othello Ordinary Boomers Basketball team contained a provision that if the team did not win at least half their games in the next season, the lease would terminate. After Bertha assumed management of the Boomers team, she began to make improvements including firing the existing coach and hiring a winning coach named Wally Winner. The Wally contract provided for a penalty of $500 for every game that the team lost if Wally quit before the end of the season. Wally coached for 4 weeks and won 10 out of the first 12 games but got into frequent disagreements with Bertha. Wally then left to coach another team and Bertha hired another coach to complete the season. The new coach was not proficient enough to sustain the winning momentum and the team began to lose. With one game left to go, the win-loss record was 24-24. Unfortunately, the Othello Boomers lost their last game of the season. If Bertha sues Wally for the penalty sum of $1,000, the likely outcome is
A) For Wally because penalties are not enforceable.
B) For Bertha because penalties are enforceable.
C) For Wally because Bertha can show no actual damages.
D) For Bertha because Wally intentionally breached the contract.
D) For Bertha because Wally intentionally breached the contract.
The best answer. Although the contract calls the liquidated damages provision a “penalty” it seems to meet the requirement of being difficult to ascertain the actual damages.
114) Paula Painter and Harriet Homeowner entered into a written agreement in which Paula agreed to paint the exterior of Harriet’s home for $8,000 payable at $2,000 per side. The contract they signed stated it was the parties’ final integrated agreement by both parties. When Paula had painted three sides of the house and had been paid $6,000, she informed Harriet that a shortage of painters made it impossible for her to complete the job for the final $2,000 and that it would cost an additional $500. Harriet, believing it would be impossible to get another painter to do only one side of her home, agreed to pay the extra $500. After the house painting was completed, Harriet paid the $2,000 but refused to pay the $500 on the basis that there was no consideration for the promise and that it violated the parol evidence rule. Paula is least likely to recover the additional $500 if she attempts to show that the parties intended to
A) Ensure completion of the original contract.
B) Establish new duties for Paula.
C) Rescind the original agreement.
D) Enter into a novation.
A) Ensure completion of the original contract.
If the modification by the parties was only executed in an attempt to secure completion of the original contract, there would be a lack of consideration, which would violate the pre-existing duty rule. A novation is a new contract with consideration.
118) Roger Ready was a young law student sitting for the bar exam. To encourage Roger to study harder for the exam, Roger’s favorite Uncle Harry promised to give Roger $200,000 the day after he sat for the bar. Pretty Porsche, Inc., sold expensive sports cars. Roger went into Pretty Porsche’s showroom and ordered a brand new model “Super Car” for $90,000, putting $10,000 down with the balance due on delivery. Pretty Porsche ordered the Porsche as soon as Roger placed the order. Roger also ordered a custom made stereo system from Good Sound, Inc., for $30,000. Good Sound ordered the stereo system components and began the assembly process as soon as Roger placed the order. Roger subsequently got mono and had to drop out of his bar review class. His Uncle Harry told Roger that the $200,000 gift would not be forthcoming. Roger called Pretty and told them he was canceling the order and would like his $10,000 deposit back. Pretty refused to make a refund, so Roger filed a lawsuit for restitution. Pretty filed a counterclaim. Pretty’s wholesale purchase cost for the “Super Car” model was $65,000 and it accurately allocated $4,000 per car for related overhead expenses. While Pretty was able to sell the car to another car buyer at full price, they did have to pay an additional $6,000 commission to facilitate the sale to the other buyer. The court should decide the lawsuit by awarding
A) For Roger in an amount of the $10,000 he paid Pretty because the seller should not make a double profit.
B) For Roger in a net amount of $9,500 calculated as the $10,000 he paid as a deposit less $500 deposit which is deemed forfeited on the buyer’s repudiation.
C) For Pretty in a net amount of $15,000.
D) For Pretty in a net amount of $25,000.
D) For Pretty in a net amount of $25,000.
Upon a buyer’s breach, an aggrieved seller is entitled to the profit if the market price is the same as the contract price. This $25,000 is increased by the reasonable overhead of $4,000 and incidental damages of $6,000 and reduced by the $10,000 deposit.
121) Connie Contractor agreed to build a deluxe custom garden for Harry Homeowner for a flat fee of $5,000. Connie began to craft the garden areas and plant as per their preliminary plan. Harry wanted an active hand in the project and kept changing the layout and preliminary plans. Connie became progressively more discouraged and told Harry he should make a final decision on the plan and leave her and the workers alone. Harry refused and Connie became so emotionally distraught that she could not complete the work with Harry’s continual interference. At the time she left the job, she had not substantially performed, but an appraiser said her work was valued at $4,000. Harry had paid Connie $2,500. Harry hired Mary Mellow to complete the garden at a cost of $2,000. If Harry sues Connie for breach of contract, the likely outcome of the suit is that Harry will
A) Prevail because Connie breached the contract when she walked off the garden job.
B) Not prevail because his involvement was the cause of the incapacity of the personal service contractor.
C) Not prevail because he breached an implied condition of cooperation.
D) Prevail because the total job cost him more than the $5,000 contractual amount.
C) Not prevail because he breached an implied condition of cooperation.
The best answer because it appears the breach of contract was caused in substantial part by Harry. Thus, the general rule of “cost to complete” is not available. The court could create a constructive condition that would preclude unreasonable interference as a form of negative cooperation; Harry’s violation of this condition would excuse Connie’s performance.
124) A sailboat dealer was negotiating to buy two sailboats. The first boat was being sold by a yacht manufacturer and the second by a private seller. The dealer/buyer was contacted by both sellers and told that both boats were ready to be picked up in the early afternoon. The buyer decided that it would be more convenient to pick them up the next morning. A storm destroyed both sailboats later that evening. Assuming no insurance coverage, the risk of loss would be
A) Borne by both the buyer and seller on a 50/50 basis.
B) Borne by both sellers because they had physical control over the boats.
C) Borne by the private seller and the dealer/buyer.
D) Borne by the yacht manufacturer and the dealer/buyer.
D) Borne by the yacht manufacturer and the dealer/buyer.
Risk of loss shifts to the buyer upon tender of delivery if the seller is a non-merchant/casual seller. For a merchant seller, tender of performance is inadequate to shift the risk of loss.
125) A wholesaler wants to provide his retailer with inventory on credit but has learned that the retailer is in financial trouble. One of his salesmen reported that the retailer may have lien creditors and judgment creditors who could levy on the inventory. Under the circumstances, the wholesaler might be best advised to
A) Ship the goods on a “sale or return” basis.
B) Make sure the retailer signs an agreement that he will not give the inventory to third parties until he has paid for the goods.
C) Ship the goods on a “sale on approval” basis.
D) File a financing statement within 20 days of the retailer receiving the goods.
C) Ship the goods on a “sale on approval” basis.
“Sale on approval” retains title and risk of loss in the seller so the buyer’s creditors can not levy on the inventory.
128) Dey ordered 100 cases of Fancy Brand carrots at list price from Ned Wholesaler. Immediately upon receipt of Dey’s order, Ned sent Dey an acceptance which was received by Dey. The acceptance indicated that shipment would be made within seven days. On the seventh day Ned discovered that all of its supply of Fancy Brand carrots had been sold. Instead it shipped 100 cases of Rabbit Brand, stating clearly on the invoice that the shipment was sent only as an accommodation. Which of the following is correct?
A) Ned’s note of accommodation cancels the contract between Ned and Dey.
B) Dey’s order is a unilateral offer, and can only be accepted by Ned’s shipment of the goods ordered.
C) Ned’s shipment of Rabbit Brand constitutes a breach of contract.
D) Ned’s shipment of Rabbit Brand is a counteroffer, thus no contract exists between Dey and Ned.
C) Ned’s shipment of Rabbit Brand constitutes a breach of contract.
The acceptance created a contract and the subsequent non-conforming shipment of Rabbit Brand carrots, of which Dey can accept all, none, or a commercially reasonable portion, constituted a breach.
133) Larch Corp. manufactured and sold Mr. and Mrs. Oak a stove. The sale documents included a disclaimer of warranty for personal injury. The stove was defective. It exploded causing serious injuries and death to Oak’s spouse. Larch was notified one week after the explosion. Under the UCC Sales Article 2, which of the following statements concerning Larch’s liability for personal injury and death to Oak’s spouse would be correct?
A) Larch cannot be liable because of a lack of privity with Oak’s spouse.
B) Larch will not be liable because of a failure to give proper notice.
C) Larch will be liable because the disclaimer was not a disclaimer of all liability.
D) Larch will be liable because liability for personal injury cannot be disclaimed.
D) Larch will be liable because liability for personal injury cannot be disclaimed.
UCC 2.719 states that a disclaimer attempting to limit personal injury damages is prima facie unconscionable and thus not enforceable.
134) On January 1st Barbara Buyer and Sarah Seller entered into a written contract to buy and sell, respectively, 300 units of widgets on February 28th at $5.00 per unit. On January 15th the market price rose to $6.00 per unit. On February 1st the market price rose to $7.00 per unit. Sarah then wrote to Barbara and stated, “I am not going to deliver the widgets due on February 28th.” Barbara wrote back to Sarah and stated, “I know you have repudiated your contract but hope you will reconsider before the due date of February 28th.” Sarah refused to reconsider and Barbara finally purchased substitute goods at $9.00 per unit on February 28th. If Barbara brings suit on March 10th when the price was $8.00 per unit, the market price of the widgets for purposes of computing damages would be
A) $5.00 per unit, the agreed-upon price as of the contract date.
B) $7.00 per unit, the market price on the contract repudiation date.
C) $8.00 per unit if Sarah did not respond to Barbara’s request for her to reconsider the repudiation.
D) $9.00 per unit the market price on the date the buyer purchased substitute equivalent goods.
B) $7.00 per unit, the market price on the contract repudiation date.
The measure of damages available to an aggrieved buyer for a seller’s non-delivery or repudiation is the difference between the contract price and the market cover price as of the time the buyer learned of the breach. [UCC 2.712 and 2.713]
137) Larry Lessee was in the pizza restaurant business. He had a number of stores in the metropolitan area and desired to locate a new store in a mall being built by David Developer. David and Larry entered into a lease agreement for five years for 4,000 square feet of space in the new wing of the mall. Larry hired an architect to design the planned pizza restaurant and paid $10,000 for the plans. Larry also hired a new restaurant manager to supervise the pizza restaurant. Just before the mall was to open, David changed his mind and decided to lease the space to another pizza operator. If Larry Lessee seeks an order of specific performance against David Developer, the likely outcome is that the order should
A) Issue because the subject of the contract was unique.
B) Not issue if there were other shopping malls in the neighborhood with space available for a pizza restaurant.
C) Not issue because a court will not issue an order for a party not to breach a contract.
D) Issue because the lease agreement is not a personal service contract.
A) Issue because the subject of the contract was unique.
The best answer because specific performance is usually available if the subject of the contract is a unique item, such as the lease of a particular portion of real property.
138) Apple Farm entered into an agreement with Cider Bottling in which Cider Bottling agreed to buy all of the apples it needed for its next year’s bottling operation. Apple Farm, for its part, agreed to sell to Cider Bottling all the output from its fall harvest that Cider Bottling would need to keep its bottling plant at full capacity through the end of the next year. One month before the apples were to be harvested, Mega Growers, Inc., approached Cider Bottling and offered to sell them their apples for 10% less than Apple Farm’s agreed upon price. Cider Bottling agreed to buy at least some of their requirements from Mega at the lower price.|The Apple Farm to Cider Bottling agreement was
A) A requirements, output, and exclusive dealings contract.
B) A requirements and output contract.
C) A requirements contract.
D) An output contract.
B) A requirements and output contract.
This is both a requirements contract (as to Cider Bottling, who promised to buy all the apples it would use) and an output contract (as to Apple Farm, who promised to furnish all the customer’s needs for the next year).
139) Apple Farm entered into an agreement with Cider Bottling in which Cider Bottling agreed to buy all of the apples it needed for its next year’s bottling operation. Apple Farm, for its part, agreed to sell to Cider Bottling all the output from its fall harvest that Cider Bottling would need to keep its bottling plant at full capacity through the end of the next year. One month before the apples were to be harvested, Mega Growers, Inc., approached Cider Bottling and offered to sell them their apples for 10% less than Apple Farm’s agreed upon price. Cider Bottling agreed to buy at least some of their requirements from Mega at the lower price. Apple Farm is very upset about Cider Bottling’s plan to purchase some of their requirements from Mega Growers. They have come to your law office and asked about their remedies. Apple believes that they could sell their output elsewhere but at a substantially lower price due to the fact that most of the bottlers have already made their purchase agreements. They would like you to seek an injunction to block Mega from selling to Cider Bottling. Your legal advice to Apple Farm is
A) The injunction will issue because the Apple Farm to Cider Bottling contract predated the Mega to Cider agreement.
B) The injunction will issue because performance of the Mega to Cider agreement will breach the Apple Farm to Cider Bottling contract.
C) The injunction will be denied because Apple Farm can sell their crop to another buyer.
D) The injunction will be denied because Apple Farm can sue for damages later.
C) The injunction will be denied because Apple Farm can sell their crop to another buyer.
If Cider Bottling actually fails to purchase all their requirements from Apple Farm, they will breach their requirements contract, and collect damages if the (then) market price is less than the contract price. Courts do not usually issue orders to prevent breach of contract.
141) Charlie Supplier operated a hardware store and also a small contracting operation. He entered into a contract with Henry Homeowner to build a garage and with Betty Buyer to sell her enough lumber so she could build a second garden shed identical to one she built last year. Charlie's form specified prices of $5,000 and $800 for the two contracts, respectively. Henry's purchase order specified $4,000 and Betty's purchase order specified $600. All the parties would like the contract to be at their price. The industry average price for the garden shed lumber was $650. Betty Buyer had paid $625 for the same lumber from Charlie for her first garden shed last year. Charlie completed Henry's garage and delivered the lumber for the garden shed to Betty. Both buyers were satisfied with the quality but still disagree with Charlie on the prices they should have to pay. What price will a court likely assign to the two contracts? A) $5,000 $625 B) $5,000 $800 C) $4,000 $600 D) $4,000 $650
A) $5,000 $625
This question tests the different treatment under the common law and UCC Article 2 when the forms of the offeror and offeree contain conflicting and different terms. Because it is a service contract, Henry’s contract falls under the common law. Under the common law, the offeror is “the master of the bargain” and therefore Charlies term ($5,000) would control the price of the construction contract. Because Betty’s is a contract for goods, it falls under the UCC. Under the UCC, when a term on each party’s forms varies, it is assumed that both parties object to the others terms. The UCC contract consists of the terms expressly agreed to and the “gap filling” provisions of Article 2. [UCC 2.207]. The order of “gap filling” priority is: course of performance in the present contract, past course of dealings, and usage of trade. The past course of dealings price ($625) would thus probably be used to fill in the gap in Betty’s garden shed contract.
142) Sam Seller and Betty Buyer entered into a $1,000 contract for the sale of a large color television. The agreement called for shipment terms of “ex-ship” and stated that “assignment of this contract is prohibited unless both parties consent in writing.” Sam also asked Betty if she knew a good shipper and she reported that a local common carrier, Speedy Shipping Co. had done a good job for them in the past. Without informing Sam, Betty then gratuitously assigned “all my rights and obligations under the contract” to Alice Assignee. The television was loaded onto a vessel owned by Speedy and Sam paid them $100 for the shipment charges. Unfortunately, the Speedy vessel was destroyed in an explosion during an unexpected massive vessel traffic accident at the destination port, through no fault of Speedy. Delivery to Betty of the television was thus not made. If Betty brings a breach of contract suit against Sam, the court should hold for
A) Sam, because Betty designated the vessel to transport the goods.
B) Sam, because the television had been delivered to Speedy in good working order.
C) Betty, because the carrier is deemed to be the agent of the seller if the shipment terms are “ex-ship.”
D) Betty, because the goods were not delivered to Betty.
D) Betty, because the goods were not delivered to Betty.
Shipment terms of “ex-ship” require the seller to deliver goods to the buyer at a named port of destination and pay for unloading. Risk of loss then transfers to the buyer. [UCC 2.322] Here, delivery to the port of destination was never made, so the seller retained the risk of loss and is liable for breach of contract.
147) Don Distributor sells auto parts to a network of local gas stations, garages, and automobile repair shops. Don purchases his parts from a number of wholesale distributors at many different prices, discounts, and payment terms. Albert Automobile Manufacturing is one of Don’s suppliers. Don offered to buy all of his next year’s requirements of spark plugs from Albert; Albert agreed to fulfill Don’s order. The agreement was memorialized in a written memorandum identifying both parties and the spark plugs, but it was not signed. The memorandum also did not state the unit price, quantity, place of delivery, or terms of payment. Don’s customers often come into his store to buy and pick up their automobile parts, including sparkplugs. Many of the customers would prefer that the parts be delivered to their place of business by the wholesaler. Under the Albert to Don contract, the place of delivery would be
A) Subject to negotiation between Albert and Don’s customers.
B) Albert’s place of business.
C) Don’s place of business.
D) Don’s customers’ place of business if they so requested.
B) Albert’s place of business.
UCC 2.308 specifies that the place for delivery of goods is the seller’s place of business (unless otherwise agreed).
148) Don Distributor sells auto parts to a network of local gas stations, garages, and automobile repair shops. Don purchases his parts from a number of wholesale distributors at many different prices, discounts, and payment terms. Albert Automobile Manufacturing is one of Don’s suppliers. Don offered to buy all of his next year’s requirements of spark plugs from Albert; Albert agreed to fulfill Don’s order. The agreement was memorialized in a written memorandum identifying both parties and the spark plugs, but it was not signed. The memorandum also did not state the unit price, quantity, place of delivery, or terms of payment. The market pricing for various brands of sparkplugs varies, but Don usually realizes a price from his customers of a 40% mark-up over his cost. Don gives some customers a discount and other customers pay his “list” price. Under the Albert to Don contract, the price for sparkplugs would be
A) Subject to negotiations between Albert and Don.
B) A reasonable price at the time that Don orders the sparkplugs in question.
C) A reasonable price when the sparkplugs are delivered.
D) At a price 40% lower than Don charged his customers for the sparkplugs.
C) A reasonable price when the sparkplugs are delivered.
UCC 2.305 specifies that if the price term is left open, it is to be a reasonable price at the time for delivery. The court will determine this “reasonable” price through (in order of priority) course of performance, past course of dealings, and usage of trade.
149) Insolvent Incorporated is a large older corporation that sold circuit boards to mainframe computer manufacturers for many years. Bill Heavengates started a software company that reduced the demand for circuit boards and Insolvent began to get further and further behind in meeting their trade payables. Sarah Supplier furnished Insolvent with plastic on a 45-day open account for their circuit boards. On January 1st, Insolvent owed Sarah over $100,000 that was over 90 days delinquent. On January 13th, the vice president of sales told Sarah that he had heard from a reliable trade source that Insolvent was about to declare bankruptcy. Sarah had delivered $6,000 worth of plastic to Insolvent on January 1st, and another $5,000 on January 12th. Another $4,000 was in transit to Insolvent and scheduled to be delivered on January 15th. On January 20th, Insolvent declared bankruptcy. Regarding Sarah’s delivery of plastic to Insolvent on January 1st and 12th
A) Sarah has to put in a claim with Insolvent’s bankruptcy trustee as an unsecured creditor.
B) Sarah can reclaim all the goods she delivered within 20 days of Insolvent’s bankruptcy.
C) Sarah can reclaim all the goods she delivered within 10 days of Insolvent’s bankruptcy.
D) Sarah can reclaim the goods and sue the bankrupt estate for incidental damages.
C) Sarah can reclaim all the goods she delivered within 10 days of Insolvent’s bankruptcy.
Upon a buyer’s insolvency a seller may reclaim goods from an insolvent buyer up to 10 days after delivery.
151) Rebecca Retailer operates a computer software retail store in a regional mall. Microhard’s Bong 2010 software platform has proven to be a big seller in the store. Rebecca referred to her wholesale software catalog from Microhard while restocking her inventory. The catalog price per unit of Bong 2010 platform software was $29.00. On July 4th, Rebecca placed an order for a dozen Bong 2010 programs via email to Microhard stating, “Ship at once a dozen units of Bong 2010 software at $29.00 each.” On July 10th Microhard mailed an order acknowledgment to Rebecca, which stated, “The dozen Bong 2010 software platforms at $32.00 each will be shipped on July 25th.” Rebecca received the Microhard correspondence on July 13th and did not respond. On July 22nd, Rebecca discovered that Orange Company offered an equivalent software platform for $29.00 and called Microhard to cancel her order. On July 25th, Microhard shipped the dozen Bong 2010 software platforms to Rebecca, which she received on July 28th. If Microhard brings suit against Rebecca to enforce the sale of the dozen Bong 2010 software units, a court would likely hold for
A) Microhard, because the acknowledgment and promise to ship was acceptance.
B) Microhard, because Rebecca’s July 22nd phone call is proof she knew there was a contract.
C) Rebecca, because she did not agree to the higher price so there was no contract.
D) Rebecca, because she canceled the order before it was shipped, so there was no contract.
A) Microhard, because the acknowledgment and promise to ship was acceptance.
The issue here is whether a promise to ship is adequate to constitute acceptance in response to an offer specifying “ship at once.” UCC 2.206(1)(b) specifies that a prompt promise to ship is adequate unless the offeror has made it unambiguously clear that a promise would not be acceptable. Rebecca’s wording does not seem to meet this level in that the offer does not preclude a promise constituting acceptance. In addition, the comments to the UCC section specifically give “ship at once” as an example of insufficient wording.
152) Rebecca Retailer operates a computer software retail store in a regional mall. Microhard’s Bong 2010 software platform has proven to be a big seller in the store. Rebecca referred to her wholesale software catalog from Microhard while restocking her inventory. The catalog price per unit of Bong 2010 platform software was $29.00. On July 4th, Rebecca placed an order for a dozen Bong 2010 programs via email to Microhard stating, “Ship at once a dozen units of Bong 2010 software at $29.00 each.” On July 10th Microhard mailed an order acknowledgment to Rebecca, which stated, “The dozen Bong 2010 software platforms at $32.00 each will be shipped on July 25th.” Rebecca received the Microhard correspondence on July 13th and did not respond. On July 22nd, Rebecca discovered that Orange Company offered an equivalent software platform for $29.00 and called Microhard to cancel her order. On July 25th, Microhard shipped the dozen Bong 2010 software platforms to Rebecca, which she received on July 28th. Assuming that a contract resulted from the above communications, it was effective on
A) July 10th, the day that Microhard sent their order acknowledgment to Rebecca.
B) July 13th, the day that Rebecca received Microhard’s order acknowledgment.
C) July 25th, the day that the goods were shipped.
D) July 28th, the day that the goods were received.
A) July 10th, the day that Microhard sent their order acknowledgment to Rebecca.
The issue here is whether the mailbox rule would validate acceptance and thus create a contract on dispatch on July 10. Under the common law, the means and mode of communication of the acceptance must be “as fast or faster” than the offer; here the offer was by email and the acceptance by regular mail, which is slower. However, the UCC only requires that the means and mode used to communicate the acceptance be reasonable under the circumstances. This is a UCC goods contract and a mailed acceptance appears reasonable in response to an emailed offer. Therefore, acceptance occurred on July 10th and a contract was effective upon dispatch of the acceptance.
154) Harry Homeowner hired Allen Architect to design a custom built home on a steep bank of a hill for his retirement. After the plans were complete, Harry solicited construction bids from a number of contractors. Cheapest Contractor submitted the low bid of $250,000. The plans upon which the bid was made did not reveal that there was water in the hill and much of the bank consisted of sand. Had Cheapest Contractor known of the defects, it would have bid substantially more, probably about $400,000 in total. In addition, a provision in the construction contract stated that the architect had to approve the contractor’s work before the owner was required to make progress payments to the contractor. Finally, the agreement stated that any dispute was subject to mandatory arbitration. The parties entered into arbitration on the above issue. The arbitrator heard the arguments of both sides and physically inspected the property. The arbitrator decided that there was fault on both sides and that the contract price should be raised to $350,000. Harry Homeowner was outraged by the arbitrator’s decision. He secretly instructed Allen Architect not to certify the work by the contractor. Pursuant to his instruction, Allen Architect refused to issue a certificate of compliance even though the home was in substantial compliance with the plans. The legal effect of this action is
A) Harry Homeowner has waived the condition precedent of architect certification.
B) Cheapest is excused from performance because the homeowner would not cooperate.
C) Harry Homeowner’s scheme to prevent the occurrence of the condition precedent matured his conditional payment responsibility into a contractual duty.
D) None, because the architect’s refusal to certify is measured by a subjective good faith standard.
C) Harry Homeowner’s scheme to prevent the occurrence of the condition precedent matured his conditional payment responsibility into a contractual duty.
A party who wrongfully prevents the occurring of a condition precedent creates a maturity of the duty that otherwise was conditional.
159) Betty Buyer paid $500 cash for 50 widgets upon delivery by the Wally Widget Company. Later, an inspection determined that the widgets did not conform to the contract. Betty contacted Wally, who refused to accept a return of the widgets and refused to refund any part of the $500 Betty had paid. Betty then told Wally she was going to sell the goods herself to recover her payment. The widgets brought $800 dollars at a public sale and Betty incurred advertising costs of $100. Betty should remit to Wally
A) $0, because Wally breached the contract.
B) $300.
C) $200.
D) $120.
D) $120.
UCC 2.603 specifies that a buyer who undertakes a sale of the seller’s non-conforming rejected goods to recover costs and advances is entitled to receive any cash proceeds for the goods paid by a buyer, reimbursement for reasonable sale expenses, and a selling commission not to exceed 10 percent of the gross proceeds. The net amount to be remitted to the seller would be calculated as follows, Proceeds on Mitigation Re-sale $800, Less Prior Payment $500, Less Sale Advertising Expenses $100, Less 10 percent Selling Commission $80, Net Buyer Remittance to Seller $120.
161) Carol Celebrity was walking through a public crowd when Fred Factum asked her for her signature. Carol said "sure" and Fred gave her a pad of paper to sign and a pen. Carol signed her full name near the bottom of the page and returned the tablet to Fred. Later, Fred carefully took apart the pad of paper and typed in text above Carol's signature using wording to complete a contract to sell her home to Fred. If Fred sued Carol for specific performance of a conveyance of her home, the best defense that she can assert is A) Fraud in the inducement. B) Fraud in the execution. C) Illegal contract. D) Fraudulent concealment.
B) Fraud in the execution.
Fraud in the execution (or fraud in the factum under UCC Article 3 commercial paper) goes to the instrument itself and creates a void transaction because the defendant was tricked into unknowingly executing a contract.
164) Carol Carpenter entered into a contract with Larry Landlord to purchase his home and repair his automobile. Carol began repairing the automobile and applied for a mortgage to purchase the property. Unfortunately, Carol had a heart attack, quit repairing Larry's car, and repudiated the responsibility to purchase Larry's home. If Larry brings suit on the contract seeking specific performance on both contractual responsibilities, the likely outcome is: Home Purchase | Car Repair A) Prevail Prevail B) Prevail Not prevail C) Not prevail Prevail D) Not prevail Not prevail
B) Prevail Not prevail
While the personal service portion of the contract will likely be excused, incapacity does not usually discharge a non-personal service contract. Thus, Carol could be required to perform the home purchase contract because her heart attack would not affect a non-personal service obligation. Carol could still purchase the home.
169) Mary Megabucks owned a large estate in Beverly Hills, California that had a deluxe swimming pool. She signed a two-year agreement with Paula Poolcleaner to clean the pool weekly at a price of $200 per month. The contract stated, “Mary agrees not to assign this contract without the prior written approval of Paula.” Mary sold the estate to Betty Buyer and asked Paula to agree to an assignment of the pool-cleaning contract to the new owner, Betty. Paula refused, but Mary still assigned the cleaning contract to Betty with the home sale. Betty was not told about the assignment prohibition. Paula refused to work for Betty and Betty had to hire another pool cleaning service at twice the price. If Betty sues Paula for breach of contract, the likely outcome is that the court will find for
A) Paula, because the contract was for her personal services.
B) Betty, because Paula had no right to unreasonably withhold consent to assignment of the contract.
C) Betty, because the assignment was valid in spite of Paula’s refusal to consent.
D) Paula, because the contract prohibited assignment by Mary without Paula’s consent.
C) Betty, because the assignment was valid in spite of Paula’s refusal to consent.
The assignment only involved a change in the identity of the person making the monthly payment; as such, the Restatement and most courts would not enforce a prohibition on assignment. If Paula could show damages from the assignment (this would seem unlikely), she could sue the promisor, Mary.
171) Go Public, Inc., wanted to take their corporation public in an initial public offering (IPO). They hired Big Influence Law Firm to assist them in the process. Ike Influence was a senior partner of the law firm and had been the lead person in several IPOs. Go Public’s president, Ernest Entrepreneur, met with the law firm to negotiate the contract. He was told that there would be a charge of $400,000 to file the IPO documents with the Security and Exchange Commission (SEC) and that Ike Influence receives $500,000 for every offering he is personally involved in. In addition, the law firm demanded 1% of the offering security proceeds if the offering raised at least $50 million.||The law firm then sent a written “engagement proposal” to Go Public specifying their fee to be “$400,000, $500,000 for Ike Influence if you want his involvement, and 1% of the proceeds.” Ernest Entrepreneur signed the document on behalf of the corporation. The offering raised $40 million and Big Influence Law Firm sent a bill for $1,300,000 to Go Public. The charges were broken down as “basic IPO fee of $400,000; Ike Influence fee of $500,000; and 1% of the offering proceeds of $400,000.” Go Public refused to pay and Big Influence Law Firm sued, asserting the parol evidence rule to keep all the oral negotiations out of evidence. During the trial, Ernest Entrepreneur wanted to testify that the $400,000 fee for the 1% of the offering proceeds was not due because the offering did not raise at least $50 million. Based upon Big Influence’s timely objection, this testimony should be
A) Excluded, unless it is considered to be evidence of a past course of dealings between the parties.
B) Admitted, because the condition precedent does not contradict a term in the final integrated agreement.
C) Admitted, if the court decides that the parties may have had different understandings of the terms of the final agreement.
D) Excluded, unless it is considered to be consistent with customs and usage of trade within the legal profession.
B) Admitted, because the condition precedent does not contradict a term in the final integrated agreement.
The best answer. There is no mention of the minimum offering dollar amount in the final integrated agreement, so evidence of a condition precedent (minimum sale proceeds of $50 million) that did not occur is admissible because it does not contradict a term in the final written agreement; the parol evidence rule (PER) only excludes inconsistent extrinsic terms.
172) Sally Seller wanted to sell a piece of property and employed Betty Broker to assist her. They entered into a written agreement in which Sally authorized Betty to sign the closing documents on her behalf. Paula Purchaser saw the “For Sale” sign on the property and orally authorized her friend Alice Agent to sign the closing documents. Betty and Alice met and both signed all the closing documents indicating that they were both agents for their respective principals. Paula later decided not to purchase the property. If Sally Seller sues Paula Purchaser, she will likely
A) Succeed, because the land sales contract was in writing.
B) Not succeed, because she did not sign the contract with Paula herself.
C) Not succeed, because Paula’s agency contract with Alice was not written.
D) Succeed, because Sally’s agency contract is in writing.
C) Not succeed, because Paula’s agency contract with Alice was not written.
Because the contract for land must be in writing, the “equal dignity rule” requires that any related agency agreement also be written.
173) Park Place, Inc., owned a very old structure that was originally a large Victorian era house. Over the years, the structure had been sub-divided into numerous small apartments. The electrical system in the building was very old and Park Place decided to rewire the building. They hired Elise Electrician to do the work for a flat fee of $10,000, due upon completion of the whole electrical job. Elise made a substantial beginning of the rewiring job when the area experienced an unexpected earthquake. Due to the age of the building, it collapsed. At the time, Elise had completed half the electrical job, which increased the value of the building by $4,000, but had expended $6,000 in costs. If Park Place refuses to pay and Elise brings suit, the likely recovery is
A) Nothing, because Elise completing the job was a condition precedent to payment.
B) $4,000 in restitution to avoid Park Place’s unjust enrichment.
C) $5,000, because Elise had completed half the work.
D) $6,000, because Elise is entitled to be reimbursed her out-of-pocket costs.
B) $4,000 in restitution to avoid Park Place’s unjust enrichment.
The owner, Park Place, had the risk of loss and thus the earthquake did not extinguish its legal responsibility (even though the executory portion of the contract might be discharged because of the unforeseeable destruction of the subject matter). The measure of restitution recovery is the value bestowed on the D because of the P’s performance.
175) Paul Claimant threatened to sue Iola Innocent for breach of an employment contract seeking $10,000 damages. Iola felt that the lawsuit had no merit, but discussed the case with Larry Lawyer, who demanded a non-refundable retainer of $5,000 to defend the case. Iola did not pay the $5,000 immediately and ran into Paul later in the day at the local Starbucks Coffee store. She apologized to Paul, who stated, “Maybe I overreacted. I will not enforce the agreement if you publicly apologize.” Iola publicly apologized and in relief, told Paul that she had decided to use the $10,000 to purchase a cruise in the Bahamas. Three months later, Iola returned to her home and was served with a summons and complaint initiated by Paul based upon the alleged breach of the employment contract. The court will likely hold for
A) Paul, because his statement that he would not enforce the contract is a pre-lawsuit settlement negotiation, which is not binding.
B) Iola, because Paul is estopped due to Iola purchasing the cruise ticket.
C) Iola, because the requirements of the doctrine of promissory estoppel are met.
D) Paul, because he received no consideration for his promise.
B) Iola, because Paul is estopped due to Iola purchasing the cruise ticket.
Equitable estoppel applies where the P deliberately said that they would not enforce an alleged breach of contract and this factual statement created a justifiable belief and movement by the other party.
179) Unreliable Supplier entered into a contract with Bobbie Buyer for 100 widgets at $15.00 each. One month before the contract designated delivery date, Unreliable called Bobbie and stated that they would not perform. As of that date, the market price of an equivalent widget was $20.00. Bobbie pleaded with Unreliable in the hope that they would change their minds. One month later on the originally scheduled delivery date, Bobbie concluded that she needed to cover and purchased substitute equivalent goods. Which of the following is correct?
A) Bobbie will recover $500 if the price she purchased the substitute widgets at was $17.00.
B) Bobbie will recover $700 if the price she purchased the substitute widgets at was $22.00.
C) Bobbie will recover $500 if the price she purchased the substitute widgets at was $25.00.
D) Bobbie will recover nothing unless she covered by buying substitute equivalent goods, as they were available on the open market.
C) Bobbie will recover $500 if the price she purchased the substitute widgets at was $25.00.
The buyer is entitled to the difference between the contract price and the cost of cover as of the date the buyer learned of the breach. This would be $500 or 100 widgets times ($20 - $15).
180) Paul Promisor entered into a contract with Alex Assignor in which Paul promised to pay $5,000 and Alex promised to deliver goods on a net 30-day basis. Two days after Paul received the goods, Alex decided to assign the right to receive the $5,000 as a gift to his favorite niece, Alice Assignee. Alice was elated and told her uncle that she was contracting to buy a car with the $5,000. Alex later changed his mind and instructed Paul not to pay Alice. If Alice files suit against Alex for a declaratory judgment, the court is likely to hold for
A) Alex, who may revoke at will prior to Paul receiving notice of the assignment.
B) Alice, even if she did not give consideration for the assignment.
C) Alice, if she foreseeably relied on the assignment to her detriment.
D) Alex, because he received no consideration for the gratuitous assignment.
C) Alice, if she foreseeably relied on the assignment to her detriment.
This is the best answer because while gratuitous assignments are generally revocable at will, an exception applies where the assignee relies to her detriment and this reliance is reasonably foreseeable by the assignor. This is also an application of the doctrine of promissory estoppel.
182) Peter Professor was a tenured professor at Easy Way Law School. He was under contract with the school at a rate of $10,000 per month. In the summer, the law school experienced a substantial decline in enrollment for the fall semester. To get the budget back into balance, the law school cut back on library hours and laid off some support staff. Peter’s September paycheck was reduced to $9,000. Peter endorsed the back of the check and deposited it into his bank. Later, he inquired of the law school payroll department as to when he was going to receive the $1,000 balance. The law school’s worst argument for why they should not have to pay the $1,000 deficiency is
A) Peter knew that all the law school expenses were being reduced.
B) All the other staff members received a reduced salary.
C) On the back of the paycheck was the statement “tendered in full payment of this month’s salary.”
D) Partial payment of an unliquidated claim constitutes sufficient consideration for the discharge of the entire claim.
D) Partial payment of an unliquidated claim constitutes sufficient consideration for the discharge of the entire claim.
This is the worst argument because the claim between the law school and Peter Professor was liquidated, not unliquidated. Peter was under a certain contract that required the law school to pay him $10,000 per month.
183) Fred Firebug entered into a contract with Paynoclaims Insurance Co. for a homeowner’s policy on his personal residence. The policy covered up to $300,000 of damage to the house from any source. The premium was $200 per month due no later than the 10th of the month. On October 20th, 2005, the house experienced a fire caused by a faulty electrical appliance. Unfortunately, Fred had not paid the $200 premium due October 10th, 2005. Paynoclaims Insurance denied the fire loss claim of Fred because the premium was not paid timely. If Fred sues Paynoclaims for the fire loss, his best theory of recovery is that
A) Fred did not receive notice that the policy coverage had been cancelled.
B) Paynoclaims Insurance was under an independent duty to pay for the fire loss.
C) Although he failed to make the insurance premium payment, there was a bargained-for exchange.
D) Paynoclaims Insurance’s duty to pay a claim was not expressly conditioned on Fred’s duty to pay the premiums.
B) Paynoclaims Insurance was under an independent duty to pay for the fire loss.
This is the best answer because it is the most general and high-level statement of the controlling legal rule. This was a bilateral aleatory contract involving two promises, so each party can normally sue the other for breach even though they themselves are in default. Thus the best theory of recovery is that the insurance company was under an independent duty to pay a claim. The coverage had not been affirmatively cancelled by Paynoclaims Insurance.
186) Profitisall, Inc., opened a dry cleaning and laundry business. In an attempt to lower its employee expense, the company began to hire immigrant children. A 15-year-old girl named Nancy Newcomer signed an employment agreement to work up to 60 hours a week at $4.00 per hour. Both the state and federal minimum wage was $5.05 per hour at the time. Nancy was aware that the agreed terms violated the law, but she needed the money to support her family. Six months later, Profitisall fired Nancy and has refused to pay her the last two weeks’ wages due of $480.00. If Nancy sues Profitisall, the likely outcome will be a judgment for
A) $480 in unpaid wages, plus $1,092 for the minimum wage deficiency.
B) $480 in unpaid wages.
C) $1,092, for the minimum wage deficiency.
D) $0 because the doctrine of in pari delicto applies.
A) $480 in unpaid wages, plus $1,092 for the minimum wage deficiency.
Nancy agreed to the terms of the employment contract in order to get the job and Profitisall will argue that she, therefore, may not invoke the doctrine of “in pari delicto.” However, she is a member of the “protected class” which the statute was intended to benefit. Thus, she may be able to recover the minimum wage deficiency of $1,092. (If this most likely outcome did not result and the contract was held illegal, Nancy would still potentially recover in quasi-contract.).
189) Roberta Retailer operated a retail computer store in Anycity, U.S.A. She purchased her inventory of computers from a wide variety of manufacturers, usually based upon catalogs left by sales representatives. One manufacturer, Southern Sales Company, had sent Roberta a catalog containing a tear-out order form. The written order form specified that a 2% discount would be given for orders of over five computers if paid within 10 days. Roberta decided to buy six computers, and on the order form she handwrote, “Send six computers and I will pay in 30 days after deducting the 2% discount.” Barbara mailed the order form on December 1st, which was received by Southern on December 3rd. On December 5th, the six computers were trucked to Roberta. On December 7th, Southern billed Roberta in the “final sales invoice,” which stated, “We shipped pursuant to your request, but if you do not pay within 10 days, the 2% discount does not apply.” The invoice was received by Roberta on December 9th. On December 31st, Roberta paid the bill after deducting the 2% discount. If Southern receives the discounted check and brings suit against Roberta for the discount, the likely outcome will be for
A) Southern, if Roberta knew that the order form specified that the 2% discount required payment within 10 days.
B) Roberta, because Southern accepted the offer of 30 days payment with the discount.
C) Roberta, only if she had received the 2% discount for payment in the past.
D) Southern, because Roberta’s agreement to purchase was on Southern’s order form.
B) Roberta, because Southern accepted the offer of 30 days payment with the discount.
Southern accepted Roberta’s counteroffer by shipping the six computers. Roberta therefore had 30 days to submit payment at a 2% discount.
192) Oscar Owner owned Greenacre Farm in fee simple after inheriting the family farm property from his parents. After each of Oscar’s children reached the age of majority, they decided not to continue helping Oscar to run the farm and moved to the city. Oscar thus decided he should sell the property. He contacted a licensed real estate sales broker named Brian Broker on December 26th, 2004, and signed an agreement specifying that Brian had an exclusive right to sell Greenacre for two months at a price of $250,000. The contract specified Brian was to be paid a 5% commission upon transfer of title to a buyer whom Brian produced. Brian advertised and showed Greenacre to Paula Purchaser who offered to pay full price for the property if Oscar delivered evidence of clear title. Oscar commissioned Grand Title Insurance Company, which researched the chain of title and issued a title policy to Oscar with no unusual exceptions. Oscar’s daughter, Denise, learned of the contemplated transaction with Paula and began to have second thoughts about the family farm being sold to an outsider. She therefore pressured her father not to complete the sale to Paula. After waiting one month, Paula notified Oscar that she was going to purchase another farm because of Oscar’s failure to deliver Greenacre’s abstract of title. Oscar then contracted to sell Greenacre Farm to Denise for $200,000 on February 20th, 2005 with closing to be held on March 10th, 2005. Two days later Denise passed away without closing the transaction. Oscar decided to keep Greenacre. If Brian brings suit to collect the 5% commission on the sale of Greenacre to Denise, the most effective argument to defeat the commission claim would be that
A) As a result of Denise’s death, transfer of title did not take place.
B) Brian did not produce Denise as a potential buyer.
C) The price of the purchase by Denise was $200,000, not $250,000.
D) The closing was scheduled for March 10th, 2005, which was more than two months from the listing date.
A) As a result of Denise’s death, transfer of title did not take place.
Transfer of title was specified in the brokerage contract as a condition precedent to the right to a commission. Because title did not transfer, this is an effective argument.
193) Penny Public was a 3L student in law school. One of her non-law school friends lived in a run-down apartment house that was owned by a slum landlord. The building was continually rendered uninhabitable because the landlord failed to make basic repairs. When the landlord failed to pay utility bills, the tenants experienced utility service disruptions. Penny volunteered to prepare a complaint on behalf of all the tenants. At a meeting one of the tenants asked, “What will you charge for this?” Penny answered, “I’m not doing this for money.” Penny graduated from law school but the law firm she was hoping would employ her withdrew its employment offer after she failed the bar exam. The tenants’ lawsuit was successful and resulted in a large cash judgment in favor of the tenants. Penny then told the tenants she should receive one-third of the recovery from the case. Many tenants disagreed. Penny said that she would bring suit if she did not receive some fee. The tenants agreed in a written vote to give Penny 1/6, provided she would not bring her suit. Assume that the tenants changed their minds and now refuse to pay Penny 1/6 of the judgment amount. If Penny brings a collection lawsuit and prevails, the most likely reason would be:
A) A judgment for the tenants would result in the unjust enrichment of the tenants at Penny’s expense.
B) The tenants’ agreement with Penny was a compromise.
C) The document that the tenants executed was an offer for a unilateral contract, which Penny accepted by not bringing her prior lawsuit.
D) The tenants are estopped from denying the validity of the agreement to pay 1/6.
B) The tenants’ agreement with Penny was a compromise.
A promise to pay given in return for the other party’s promise to forbear or abandon a claim is referred to as a compromise. The new agreement is an executory accord and the promise to forbear is sufficient consideration if the claim could have been asserted in good faith. Even though the facts do not indicate whether Penny believed in good faith that she had a colorable claim, this is still the best alternative.
194) Article 2 of the Uniform Commercial Code
A) Applies to the purchase and sale of a live golden retriever dog by one consumer from another consumer.
B) Applies only if one of the parties to the live golden retriever purchase and sale is a merchant.
C) Does not apply to a live golden retriever purchase and sale because a dog is a living thing, and thus does not meet the definition of a “good” under the UCC.
D) Does not apply to a contract for the purchase and sale of the first pup of a specified golden retriever dog unless that pup has been born at the contract date.
A) Applies to the purchase and sale of a live golden retriever dog by one consumer from another consumer.
The UCC applies to contracts for “goods” that are movable, and “goods” includes animals. The status of the parties as consumers or merchants is irrelevant.
196) Well Computer, Inc., manufactured computers for business and personal use. Well sold directly to both consumers and retailers. One of Roberta Retailer’s customers ordered, through Roberta’s store, 10 super-deluxe Well computers, to be delivered no later than December 31st. In turn, Roberta ordered ten super-deluxe computers from Well, subject to delivery on or before December 30th. Well ran short of the super-deluxe model. Two of the ten computers sent as an accommodation were the model just below the super-deluxe. Roberta received all ten computers on December 30th. Upon receipt of the ten computers, which of the following correctly identifies Roberta’s rights against Well?
A) Accept or reject the entire ten computers only.
B) Accept the eight conforming computers and reject the two non-conforming computers only.
C) Accept or reject all or part of the ten computers, and sue Well for damages.
D) Roberta must keep the ten computers but can sue Well for damages.
C) Accept or reject all or part of the ten computers, and sue Well for damages.
If tendered goods fail to conform to the contract specifications in any respect, an aggrieved buyer has multiple and alternative remedies. The buyer may (1) reject the whole amount; (2) accept the whole amount; or (3) accept some and reject some. In addition to one of the preceding specific remedies, an aggrieved buyer may usually pursue the breaching party for any other remedy including damages.
197) Greta Guarantor had a friend, Diane Debtor, who was a third year law student. Diane was short on cash and had exhausted all of her student loans. Greta approached another friend, Carol Creditor and said, “My friend Diane needs $30,000 to complete her final year of law school. Will you lend it to her for two years?” Carol responded, “I would like to help out, but Diane has no way to pay me back.” Greta answered, “Well, okay, but why don’t you lend the money to me but give it to Diane?” Carol said, “That’s fine.” The next day, Carol mailed to Diane a check for $30,000 payable to Diane’s order. Two years came and went, and Carol had not received her repayment. After making a demand on both Greta and Diane, Carol filed suit against both defendants. If Greta brings a motion to dismiss herself as a defendant on the basis that there was not a written agreement between her and Carol, the likely outcome is that the motion would be
A) Denied, if Carol’s statement “That’s fine” was an acceptance of Greta’s promise to pay Diane’s debt to Carol.
B) Granted, because the $30,000 that Carol lent to Diane exceeded $500.
C) Granted, if Greta’s statement “Well, okay, but why don’t you lend the money to me but give it to Diane?” was a promise to guarantee Diane’s debt to Carol.
D) Denied, if Carol’s check was a written negotiable instrument that memorialized the debt.
C) Granted, if Greta’s statement “Well, okay, but why don’t you lend the money to me but give it to Diane?” was a promise to guarantee Diane’s debt to Carol.
If the court interpreted Greta’s statement to be one of a guarantee/surety rather than a statement by the principal debtor, the oral statement would be unenforceable under the Statute of Frauds. Therefore, Greta’s motion to dismiss herself as a defendant would be granted.
202) Cablevision operated a cable television station in Pleasant Town, USA, offering television and Internet connection services to businesses and personal homes. Cablevision purchased its installation cable in standard 6, 12, 20, and 15-foot lengths. On January 1st, Cablevision placed an order for 10,000 6-foot cables with Cablesupplier Inc. On February 1st, the cables were delivered in huge reels to Cablevision on a 30-day open account. On February 15th, the first of the Cabblesupplier’s cables were used on an installation job. It was then discovered that the 6-foot cables were only 5 feet in length, and not the 6-foot variety as ordered. The workman informed the purchasing agent that same week, leading to the purchasing agent preparing a memorandum of nonconformity. Before it was mailed to Cablesupplier, the memorandum had to be reviewed by the Operational Vice President. Somewhere in the chain of command, the memorandum was lost and not sent to Cablesupplier. If Cablesupplier brings suit on April 1st for the amount due under the invoice and Cablevision defends upon the basis that the cable delivery did not conform to the contract, the court will likely hold for
A) Cablevision, unless 15 days was an unreasonable time to delay discovery of the non-conformity.
B) Cablesupplier, because a merchant purchaser is not entitled to claim revocation of acceptance if a reasonable inspection at the time of receipt would have discovered the defect.
C) Cablesupplier, because the buyer, Cablevision, failed to inform them that the 6-foot cables delivered were only 5 feet in length.
D) Cablevision, because the 5-foot cable did not conform to the contract and a perfect tender is required.
C) Cablesupplier, because the buyer, Cablevision, failed to inform them that the 6-foot cables delivered were only 5 feet in length.
Acceptance is deemed to occur when the buyer fails to make a rejection upon discovering the goods as tendered are nonconforming [UCC 2.606]. While rejection does not have to be made at delivery if the defects are hidden, it must be made within a reasonable time after discovery. Here, the rejection was never made.
203) Terri Tenant signed a six-year lease with Louise Landlord for a retail space in Louise’s strip mall. The lease contract did not address the question of whether a new party could receive an assignment. Terri started a pizza restaurant called Pizza Place, which was very successful. Three years later, Terri sold Pizza Place to Betty Buyer and signed a three-year non-compete agreement prohibiting her from operating a restaurant within a one-mile radius. Terri then sent a written memorandum to Louise specifying that Betty would be paying the rent in the future. Betty took over operation of the restaurant and began to pay the rent to Louise. Two years later, Terri opened a Mexican restaurant within one mile of the Pizza Place. Betty was unable to compete, her business declined, and she vacated Louise’s strip mall and ceased paying rent. If Louise Landlord sues Terri Tenant for the unpaid balance of the rent due under the lease contract the most effective argument in defense would be that
A) Louise’s acceptance of the rent from Betty without objection was an implied consent to Terri’s assignment to Betty.
B) The lease document did not specifically prohibit the assignment of the balance of the contract obligations.
C) Louise’s accepting rent from Betty resulted in an effective novation.
D) Louise’s accepting rent from Betty resulted in an accord and satisfaction
C) Louise’s accepting rent from Betty resulted in an effective novation.
The strongest argument that Terri could raise as a defense is that there was an effective novation. A novation involves a new party being substituted in lieu of the original obligor and would include an express assumption of the lease contract obligation by Betty. This would release Terri.
204) Alice Accountant operated a medium-sized CPA firm in Middletown, USA. Her husband, David Downer, was a third-year law student whose class standing was very low. Alice was commissioned by a large law firm to do an audit of its financial statements and assist with a significant litigation support engagement. She offered to take a 10% discount on the accounting work if the law firm would hire her husband, David. In a subsequent written agreement for her work there was no mention of the law firm hiring David, although the senior partner told Alice they would bring him on for the next year as a new associate beginning immediately. Alice subsequently told David of the one-year employment agreement. David quit his job as a bartender in a local bar and went to work for the law firm. Eight months later, Alice and David divorced and she informed the law firm she was waiving the requirement of David’s employment. The law firm immediately discharged David. David has brought suit against the law firm for the balance of the compensation due under the one-year employment agreement. The court will likely decide the dispute by finding for
A) The law firm, because David gave nothing in return for the law firm’s employment promise.
B) David, if he can show damages.
C) David, only if the promise of employment was in writing.
D) The law firm, because the firm and Alice rescinded their contract by mutual acceptance.
B) David, if he can show damages.
David was a third party beneficiary of the Alice-law firm contract, whose rights had vested. If he could show damages he would likely prevail against the law firm promisor; there would also be a duty to mitigate by accepting other comparable employment.
205) Wild Wendy was the daughter of Paul and Paula from Hicktown, Washington. She moved to New York City immediately after graduating from Pow Dunk College. Her parents kept hoping she would return to Hicktown, where all the family lived. To facilitate such a decision by their daughter, Paul and Paula orally promised to give Wild a single-family residence that they owned in Hicktown. Wild made plans to return to Hicktown and immediately cancelled a contract she had made to purchase a flat on the upper east side of Manhattan. Paul and Paula changed their minds about making the gift to Wild after she hooked up with her boyfriend, Wildman, whom Paul and Paula did not like. If Wild brings suit against Paul and Paula seeking specific performance of transferring title of the Hicktown residence, which of the following would be the most effective defense?
A) The move from New York City to Hicktown was not consideration for Paul and Paula’s promise to give the house to Wild.
B) The contract for the transfer of property was not in writing.
C) The relinquishment of the contract to purchase the flat on the Upper East Side was not adequate consideration.
D) This was a mere gift promise that remains revocable prior to performance.
B) The contract for the transfer of property was not in writing.
This is the best defense because, under the Statute of Frauds, a contract for the transfer of land ordinarily requires a writing signed by the party to be charged. Here, the promise of Paul and Paula to convey the house was only oral.
207) Susan Summer was driving through the Cascade Mountains in Washington State during the end of her cross-country journey from Boston to Seattle. Alongside the road was a picture-perfect lake with a small island in the middle. Susan had an uncontrollable urge to go for a swim. She parked her car, put on her bathing suit and dove in. About half-way out to the Island, she had a bad leg cramp. Penny Passerby saw Susan in the lake and heard her scream for help. Penny voluntarily and quickly swam out, pulled Susan back to shore and drove her to a hospital that was 20 miles away. The attending doctor told both women that Susan could have possibly drowned if not for Penny’s quick rescue. Susan then made out a writing stating, “I hereby promise to pay you, Penny, $25,000 in return for saving my life.” Penny made plans to use the money to buy a new car. Two months later, Penny contacted Susan demanding the $25,000, and Susan stated that she had changed her mind. If Penny brings suit, which of the following would be the most effective argument to support her claim?
A) Penny detrimentally relied upon Susan’s promise.
B) Susan’s promise to pay the $25,000 was written.
C) Penny’s rescue of Susan resulted in a contract in quantum merit or implied-in-fact.
D) Susan’s promise to pay the $25,000 was supported by the moral obligation created when a person’s life is saved.
D) Susan’s promise to pay the $25,000 was supported by the moral obligation created when a person’s life is saved.
The best answer because it is the only argument of those given which a court could use to find for Penny. Traditionally, however, moral obligation has not been considered sufficient to provide the consideration necessary to support a promise like Susan’s $25,000 promise.
209) Oscar Owner operated a successful Thai food restaurant in Pleasantville, New York. His cousin, Clark Kent lived in Localview, Kansas, and learned of Oscar’s restaurant. Clark called Oscar and asked if the restaurant was for sale. Oscar said yes and sent Clark a video showing the restaurant and the restaurant’s financial statements. Based upon this information, Clark agreed to purchase Oscar’s restaurant at a set price to be paid in cash upon taking over the restaurant. Clark told Oscar that he would sell his home in Kansas and move with his family to Pleasantville. When Clark arrived in Pleasantville, Oscar informed him that he had changed his mind and now planned to keep the restaurant. If Clark sues Oscar for breach of contract the court will likely hold for
A) Clark, because he detrimentally relied upon Oscar’s promise to sell him the restaurant.
B) Oscar, because Clark did not pay for the restaurant.
C) Oscar, because his family affection for Clark is not sufficient consideration to support the promise to sell the restaurant.
D) Clark, because the agreement was a bargained-for exchange.
D) Clark, because the agreement was a bargained-for exchange.
Consideration is present in this bargained-for-exchange, in the form of a detriment to Clark, the promisee (his having sold his home and moved his family to Pleasantville). Because consideration is present, it is not necessary to invoke the doctrine of promissory estoppel as a substitute for consideration.
211) Sammy Slippery owned an outdoor clothing manufacturing company and hired a Certified Public Accountant (CPA) to upgrade his computer and accounting systems for a reasonable fee. The written agreement specified, “Sammy retains the right to end this CPA’s contract before completion if a quicker substitute computer program becomes available.” Sammy did not pay the billings of the CPA firm. After many months, the CPA firm finally decided to bring a contract collection lawsuit against Sammy. In deciding the contract collection action, the court will likely hold for
A) The CPA firm, because the contract is not illusory.
B) Sammy, because the right to cancel made the contract illusory.
C) Sammy, because the “reasonable fee” protection rendered the contract too uncertain to be enforced.
D) The CPA firm, under a promissory estoppel theory because it detrimentally relied.
A) The CPA firm, because the contract is not illusory.
The contract was not illusory because Sammy’s right to cancel was dependent upon an aleatory condition outside his control - a quicker substitute computer becoming available. Therefore, the contract was enforceable, and Sammy committed a breach thereof.
212) Gerry Gambler operated a racetrack for thoroughbred horses. The revenue came both from spectators at the races and gamblers that put down bets on particular horses for particular races. Gerry tried to attract the best-known thoroughbreds she could book because attendance and bets both increased in races having a big-name horse participating. Gerry contracted with the owner of Racerstar, a stallion that ran very fast, for four races the weekend of July 4th and 5th. Gerry featured Racerstar in photographic layouts that were heavily advertised.||On July 1st Racerstar’s owner contacted Gerry and explained that Racerstar had come down with a mysterious attack of horicitis. The attendant veterinarian believed that horicitis was very contagious. The owner offered to substitute three other horses in place of Racerstar. Gerry was very upset that the track’s July 4th and 5th weekend would not include Racerstar’s participation. If Gerry sues for breach of contract, the remedy will be
A) Nothing, because of the defense of impossibility.
B) Compensatory damages, including any profits lost, because Racerstar did not run in the July 4th and 5th races and such services may not be performed by others.
C) Specific performance, because Racerstar is unique and still able to enter the races.
D) Nothing, because damages resulting from one more or less horse in the race are too uncertain to be awarded.
A) Nothing, because of the defense of impossibility.
If performance has become objectively impossible, the contractual duties may be excused and/or discharged. Racerstar’s disease could be transmitted to the other horses, thereby creating tortious liability. There is no suggestion that there was any fault by the owner or that the offered substitute is not comparable.
213) Roberta Retailer operated a retail store specializing in selling industrial vacuum cleaners. She looked at an online catalog from Super Vacuum Cleaner Manufacturing Co., containing a wide variety of vacuums. Roberta completed the online order form for 10 model AB vacuums at $50 each. The catalog stated that this model would vacuum five pounds of dirt per minute. In the miscellaneous section of the order form Roberta typed the words, “This order for prompt shipment with delivery no later than July 1st and preferably earlier.” Roberta’s server transmitted the email on June 5th and it was received the same day by Super. On June 10th, Super’s sale manager authorized an order confirmation form to Roberta stating, “We are out of stock in model AB but are shipping you 10 model BCs as an accommodation.” Roberta did not respond to the email. On June 15th a truck appeared at Roberta’s business. The truck driver wanted to unload the 10 Super vacuums. Roberta said, “Just a minute while I inspect the vacuums.” Seeing that they were model BC instead of model AB, Roberta said, “I refuse to accept this shipment and you should return the vacuums to Super.” As of June 16th the status of the agreement was that
A) The contract was formed on June 10th when Super’s sales manager accepted Roberta’s order.
B) No contract was formed and neither Roberta nor Super had any liability to each other.
C) The contract was formed when Super shipped the goods and Roberta breached the contract upon her refusal to accept the vacuums.
D) The contract was formed when Super shipped the goods and Super committed a material breach when it shipped nonconforming goods.
B) No contract was formed and neither Roberta nor Super had any liability to each other.
The general rule is that the shipment of nonconforming goods may be treated as both an acceptance and a breach. An exception applies if the seller delivers early and reasonably notifies the buyer that the shipment is being made as an accommodation. Here, there was no acceptance because the goods that were delivered early did not conform, so the buyer had the right to reject and there was no contract.
214) Helen Healthcare operated a large carrot juice factory that was very popular with customers of health food stores. She contracted with Carol Carrotgrower, a carrot farmer, to provide her with all the raw carrots she would require for the next four years at an annual price equal to that of the previous year. Helen was required to specify the number of tons she would require in the next year by December 1st of the current year. Helen had been in business for five years and her purchase of carrots had been increasing about 20% per year. The prior year, Helen had purchased 100 tons of carrots. Helen ordered and used 120 tons of carrots from Carol’s farm in the first year of the agreement. In the fall of the next year, a government agency concluded that drinking carrot juice substantially reduced the chances of getting cancer. Demand for carrots and carrot juice increased immediately and prices for carrots increased by 100%. Helen’s customers increased their orders for the next year and on December 1st Helen informed Carol that her carrot requirement for the next year would be 300 tons. Which of the following describes the legal situation concerning Carol’s duty to provide Helen with carrots in the next year?
A) Carol will not have to supply any carrots to Helen because it would be unconscionable to force Carol to sell her farm products at 50% below market value.
B) Carol will have to supply 144 tons of carrots to Helen.
C) Carol must supply 300 tons of carrots to Helen because the agreement provided that she would supply all of Helen’s requirements.
D) Carol must supply 300 tons of carrots to Helen because the increased demand for Helen’s product did not arise from any actions on her part, such as a building a second store.
B) Carol will have to supply 144 tons of carrots to Helen.
UCC 2.306 provides that a quantity demanded in a requirement contract may not be demanded if it is unreasonably disproportionate to a stated estimate or prior requirement quantities. Here, a 20% increase over the previous year would appear to be reasonable as history supports that growth.
216) Debbie Debtor was a very talented but insolvent painter who borrowed $10,000 from Connie Creditor as an unsecured business debt. Debbie made some false statements to Connie to induce her to make the $10,000 loan. Unfortunately, the loan from Connie was not sufficient to carry Debbie’s business out of the cash shortage position. Debbie found it necessary to seek relief from the demands of her creditors by filing bankruptcy. To persuade Connie to not object to the bankruptcy, Debbie promised in a writing to paint an oil painting of Connie’s family in the future. Connie agreed. The claim of Connie against Debbie for $10,000 was discharged with all the other creditors’ claims, although, as an unsecured creditor, Connie was paid $2,000. Two years after the bankruptcy had been finalized Connie asked Debbie to paint an oil painting of her family. More than six years had elapsed since the $10,000 discharged loan was made. Debbie then did the family oil painting that everyone was satisfied with. Two months after receiving the painting Connie received a bill from Debbie for $20,000 for the painting. Both parties agreed that $20,000 was a fair value for the painting. Debbie told Connie that her attorney had told her that her promise to do the painting was unenforceable. If Connie brings an action seeking a judgment against Debbie, the court would likely find
A) For Debbie for $20,000 because past consideration is no consideration.
B) For Connie, because no amount is due.
C) Against Connie, holding that $12,000 is due Debbie.
D) For Debbie for $8,000.
C) Against Connie, holding that $12,000 is due Debbie.
This compelling MBE fact pattern is intended to raise the issue of whether moral obligation is a contractually enforceable substitute for consideration. Traditionally, the answer is no, but some modern courts might enforce written promises made for past consideration to the extent that a benefit was received. If so, the measure of recovery is the extent to which the discharged promisee received prior benefits. Because Connie received $2,000 of the $10,000 debt, Debbie’s benefit is valued at $8000, and only $12,000 ($20,000 - $8,000) is due to Debbie.
217) Oscar Owner was a property developer who owned a 40-acre tract of property, which was subdivided into 80 one-half acre lots. Oscar contracted with Betty Builder, a general contractor who specialized in building tract homes. The contract stated, “The cost of $125,000 per home will be paid upon completion of each of the 80 homes as determined by Alice Architect.” Betty worked on 40 homes of which 30 had been completed, approved by Alice Architect and payment made by Oscar. The 10 uncompleted homes were 80% complete when a fire destroyed all 40 homes. In addition, Betty’s construction equipment on the site was destroyed by the fire. Oscar received a letter from Betty that stated “All my construction equipment was destroyed in the fire on your property, so I cannot complete the remaining 40 houses. Please send me the $1,250,000 for the 10 houses I worked on which you have not paid for.” Betty waited for 30 days and then went out to Oscar’s office to try to collect. When Oscar was accosted he stated, “I am sorry, but if you will not build the remaining 40 homes at the agreed price, I will not pay for the 10 destroyed in the fire.” Assume that Oscar was unable to find another contractor who would build the 40 remaining homes at $125,000 per home. Therefore, he filed a lawsuit against Betty seeking specific performance to compel her to build the 40 remaining homes. The court will likely find for
A) Betty, since specific performance does not apply to personal service contracts.
B) Oscar, because the destruction of Betty’s construction equipment will not excuse performance.
C) Oscar, only if he did not expressly assume the risk of the occurrence of a subsequent contract condition such as an unexpected fire.
D) Betty, because the fire was a frustration of purpose that excuses performance.
B) Oscar, because the destruction of Betty’s construction equipment will not excuse performance.
The fire may have excused the builder’s responsibility to complete the 10 houses under construction, but the destroyed equipment was not unique and can be replaced. Thus, this does not constitute excusable non-performance for the executory portion of the contract.
218) Bertha Builder was a general contractor who specialized in the construction of custom designed homes. She was commissioned to construct a $500,000 personal residence for Priscilla Perfect. Priscilla had a full set of construction plans and specifications prepared by an architect that Bertha agreed to follow. The construction of Priscilla's house began, but it soon became clear that Bertha and Priscilla had personality conflicts. The two parties would blow up over small points in determining whether Bertha's performance met the plan specifications. In addition, there was substantial inflation in both the costs of material and the price of the finished new homes in the locale. This conflict went from bad to worse and resulted in Bertha and Priscilla hardly ever talking to each other. The straw that broke the camel's back was that Bertha used copper bathroom fixtures in the master bathroom rather than the chrome fixtures specified on the architect's drawing. At this point, the contract was 80% complete; Bertha had incurred $300,000 in costs and Priscilla had paid $250,000, but Bertha's costs to complete would have been another $75,000. The completed home was expected to be worth $600,000. Assume for this question only that Priscilla wrongfully terminates Bertha and bars her and her workers from coming back onto the construction site. If Bertha brings suit for breach of contract, the likely judgment against Priscilla will be A) $0. B) $50,000. C) $175,000. D) $225,000.
C) $175,000.
If the owner commits a fatal breach by wrongfully barring the contractor from finishing the project, the component approach to recovery is the contract price less the cost to complete, or $500,000 - $75,000. This is $425,000, less the $250,000 amount paid to the date of the breach or $175,000.
220) A disagreement has developed between executives in one of your client corporations about the legal distinctions between a modification, accord, and waiver, and they have called you to clear it up. Which of the following can you confirm is true?
A) A modification is more likely in a contract that is totally executory.
B) All three require consideration.
C) In an accord and a waiver, the original promise remains alive until the new substituted promise or performance is completed.
D) All of the above.
A) A modification is more likely in a contract that is totally executory.
This is the only true statement. Normally, a change in an executory contract (where no performance has been rendered by either party) is characterized as a modification rather than an accord or waiver.
222) Alice Author, a law school professor, had written three non-fiction books focusing on the political rights of law students. Her publisher, Non-American Publishing, was paying her royalties on these three books. Non-American Publishing management began to receive pressure to drop Alice’s books because the sales were decreasing and many law school administrators were upset with her central thesis that to eliminate law school grades and class rank would increase the quality of the legal educational experience. Nervertheless, Alice began her fourth book, Law Students’ Rights Are At Risk.” When she had completed the second draft of the manuscript, she ran out of money. Barbara Banker agreed to loan Alice $100,000. The loan was collateralized by a written assignment of one-half the royalties from both the contract Alice had with Non-American and a contract for the new fourth book, which Alice hoped to negotiate with a different publisher named Ludicrous Law School Books. When the royalty checks on the first three books were received from Non-American, Alice began to endorse them over to Barbara. Six months later, Alice had completed her new book. When the law school Dean learned of the new book under contract, he fired Alice on the basis of insubordination. Three days later, Alice had a heart attack and died. The local newspapers’ publicity about the unusual reason for her firing was extensive and her book sales rocketed. Ludicrous Law School Books signed a publishing agreement with the executor of Alice’s estate. Barbara learned about the Ludicrous Law School Books publishing agreement. Ludicrous refused to pay to Barbara the royalties from the new book. If she brings suit against the executor, Barbara will likely
A) Win, because Alice’s written assignment of the fourth book royalties to Barbara predated the executor’s involvement.
B) Lose, because the contract right in question was not assignable.
C) Lose, because the right of assignment is automatically revoked on the death of the assignor.
D) Win, because she made the $100,000 loan to Alice.
B) Lose, because the contract right in question was not assignable.
An assignment of future rights under a contract not yet in existence at the assignment date is not enforceable.
223) Sharon Shopper was a very alert customer who spent most of her spare time carefully scrutinizing advertisements for good buys of products on sale. She spotted an advertisement for Lucky Store in the local evening newspaper that stated: “A real diamond necklace which is easily worth $250.00 will be sold for $9.95 on Saturday, April 15th. First come first serve.” Sharon went down to the Lucky Store on Friday night and camped out. When the doors opened at 9:00 a.m. Sharon rushed in and demanded the diamond necklace for $9.95. The salesperson refused to sell the necklace for $9.95 stating that the advertisement was a mistake and the true sale price of the necklace was $99.50. If Sharon brings suit against Lucky Store for specific performance at a price of $9.95 the court will likely hold for
A) Lucky Store, because there was a mistake made in the advertisement.
B) Sharon, because her acceptance created a bilateral contract.
C) Sharon, because her acceptance created a unilateral contract.
D) Lucky Store, only if Sharon’s actions were insufficient to constitute promissory estoppel.
C) Sharon, because her acceptance created a unilateral contract.
The best answer because the advertisement by Lucky Store has sufficient specificity as to item offered and acceptable offeree - first come - to be characterized by most courts as a unilateral offer, and therefore, Sharon’s performance constituted acceptance.
225) Victoria Vineyard was a widow who specialized in growing merlot grapes for sale to amateur winemakers. She had two children who assisted her in cultivating the fields and harvesting the crops. Victoria signed a written contract with Wanda Winemaker to deliver two tons of merlot wine grapes on or before August 20, 2005. Wanda was the president of the Merlot Club of New York and every year scheduled a “wine stomp,” at which the members consumed much of last season’s product and stomped the grapes for the next season’s wine output. Unfortunately, on August 15th, both of Victoria’s children became sick with summeritis and were unable to pick the wine grapes. Victoria called Wanda on August 16th and informed her that because of the pickers’ illness she might not be able to deliver timely on August 20th. Victoria further stated she was trying to find other pickers. Wanda said, “That’s OK because the stomp event is not for two more weeks, so I can wait. However, I will still hold you liable for any losses we incur because of your failure to deliver.” When Wanda did not receive the grapes on August 23rd, she began to get quite nervous because the club was expecting a big crowd for the stomp. She then sent an email to Victoria stating “we must receive the grapes by August 28th.” Assume for this question only that Victoria delivers the grapes late in the afternoon of August 28th and that after inspection Wanda accepts them. If Wanda later brings a breach of contract claim because of the late delivery, the court will likely hold for
A) Victoria, because the illness of her children constituted incapacity, so temporary impracticality excused her performance.
B) Victoria, because Wanda’s statement, “That’s OK,” and subsequent acceptance after inspection constituted a waiver of timely performance.
C) Wanda, because her statements to Victoria did not constitute a waiver of an action for breach of contract.
D) Wanda, because her waiver, if any, did not have adequate consideration.
C) Wanda, because her statements to Victoria did not constitute a waiver of an action for breach of contract.
On the MBE, the student must carefully analyze any party’s wording that may waive a nonconforming aspect of performance. Here, the delivery date may have been extended by Wanda, but the right to claim for damages was specifically reserved.
226) Ethyl Homentertainer Extra-Ordinaire contracted with Grenda Gardener to provide daisy flower arrangements for her monthly home entertainment tea and bridge parties. The agreement was for 24 months at $20 per month, and both parties signed an agreement which stated, “Any change to this contract must be written.” The contract proceeded and each month Grenda would appear with a suitable flower bouquet and Ethyl would pay her $20 in cash. Fifteen months into the agreement, the market price of daisy flowers skyrocketed. Grenda telephoned Ethyl and told her that she had to raise the price to $25 per month. Ethyl agreed to the increase but insisted that she be allowed to pay at the end of the nine months left on the agreement. At the end of the nine months, Ethyl refused to pay more than $180. If suit is brought, which of the following is the court most likely to hold?
A) The Statute of Frauds does not apply to the original contract because it was under $500.
B) The contract modification from $20 to $25 per month was not enforceable because it was not supported by new consideration.
C) The modification from $20 to $25 per month was not enforceable because it was not written.
D) The oral modification is conclusive evidence that the parties waived the “written modifications only” provision.
C) The modification from $20 to $25 per month was not enforceable because it was not written.
A contract requirement that all modifications must be in writing is usually enforceable under UCC 2.209.
227) Alice owned a small mini-car. She borrowed Betty’s pickup truck to move some of her personal belongings and promised to return the truck within a reasonable period of time. Alice completed the move, but found she enjoyed driving the larger vehicle. She kept Alice’s truck and decided to return the truck only when Betty made a demand. The truck had a fair market value of $10,000. Three weeks later, Betty met with Connie, who was a friend of both Alice and Betty. Betty disclosed to Connie that she had not yet received the pickup truck back from Alice. Connie disclosed to Betty that she owed Alice $10,000 but did not have the money to repay the loan. Betty felt sorry for her friend Connie and told Connie that she would make arrangements to satisfy the $10,000 loan Connie owed Alice. One week later, Betty met with Alice. She attempted to convince Alice to trade the pickup truck for the $10,000 debt, but Alice refused and said that she really wanted the money. Alice did agree in writing to accept a promissory note executed by Betty for $10,000 with payment terms of $500 per month. The writing also recited that Alice promised to return the pickup truck to Betty. While the agreement was signed by both parties, Alice made no statement that she would release or forbear to sue the original debtor, Connie. One week later, Alice returned the pickup truck to Betty. For three months, Betty paid $500 per month to Alice. During this time period, Alice did not bring suit against Connie. Betty then developed personal financial problems and expressly repudiated her payment agreement. Alice then initiated a breach of contract claim against Betty. Assume that the statute of limitations on Alice’s original $10,000 claim against Connie expired one week after the written contract between Alice and Betty. Which of the following is Alice’s strongest argument that Betty is liable?
A) Betty’s payment of $1,500 to Alice is a waiver of any formation defect and a ratification of the liability.
B) Betty’s payment of $1,500 to Alice manifested serious intention to be bound, thus serving as an effective substitute for consideration.
C) Betty’s written promise and Alice’s reliance thereon created a valid legal claim by Alice against Betty based upon the doctrine of promissory estoppel.
D) The suretyship obligation was written and therefore legally enforceable.
C) Betty’s written promise and Alice’s reliance thereon created a valid legal claim by Alice against Betty based upon the doctrine of promissory estoppel.
There was no legal benefit to the promisor or detriment to the promisee to provide the necessary consideration for Betty’s promise. Therefore, the promisee’s strongest argument is that a substitute for consideration exists such as promissory estoppel.
228) Frank Forever had worked for Magnum Industries as a welder for fifteen years. In an attempt to reduce employee turnover and reward long term service, the Company put a bonus system in effect. All employees with over 10 years of service were issued the following two-part certificate of award. The top portion was prepared by the Company and the bottom half beneficiary designation completed by the employee. “As a reward for your faithful service, Magnum Industries will pay $10,000 upon your death, if you remain in our employ, to the individual you designate below.” /s/ Magnum Industries “I hereby accept this certificate of award and designate my daughter Betty as beneficiary.” /s/ Frank Forever Frank did not tell his daughter of the certificate of award. On January 1st, 2006, Frank was walking to his car after work and saw three thugs robbing the president of the company. He intervened and one of the thugs turned his knife on Frank, seriously cutting Frank’s arm. Seeing Frank’s injuries, the president was so grateful that he stated, “Frank, you will have a job with this company for life.” Two months later, Frank’s injury worsened and his arm had to be amputated. Without the arm, Frank could not work as a welder, but the president kept him on the payroll. On June 1st, 2009, Magnum revoked the certificates by mailing letters to all of the employees who had received the certificates. On June 2nd, 2009, Frank died before he received the letter. On June 4th, 2009, Frank’s daughter Betty opened Frank’s safe deposit box and discovered the certificate of award designating her as beneficiary. She contacted Magnum Industries and asked for the $10,000 award. Magnum refused to pay and Betty brought suit. The strongest argument that Magnum can assert against Betty’s $10,000 claim is
A) Privity of contract between Betty and Magnum was missing.
B) Consideration to support the certificate of award was insufficient.
C) Betty was unaware of the certificate of award until after Frank’s death.
D) Magnum effectively revoked the certificate of award before Frank’s death.
B) Consideration to support the certificate of award was insufficient. OR
C) Betty was unaware of the certificate of award until after Frank’s death.
Infrequently the MBE gives credit for two alternatives. Answer C would work too. Answer B is a strong argument because there was no current consideration provided to support the original certificate of award; past consideration is no consideration. (C) is a strong argument because the original parties can rescind a contract prior to a third party beneficiary’s rights “vesting” and “vesting” requires at least that the beneficiary know that the rights have been bestowed; here the facts say there was no knowledge.
