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.
