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Contracts Flashcards
A binding contract is created when you have ___________ and ________ and when _________ do not exist.
(1) Mutual assent (offer and acceptance) and (2) consideration. (3) Defenses
Intent to enter into a contract is judged by the _______ standard.
objective
We judge intent by looking at the bargaining. What types of things do we look at?
Things that the party said when entering into the contract, the way the party acted or appeared at such time, and the circumstances surrounding the transaction. The circumstances surrounding the statement can be critical to determining what would be reasonable to believe.
What is the definition of an offer?
Objective manifestation of willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree. The offeror must have present intent.
True/False. In order to accept the offer, the offeree must know about the offer.
True.
Service contracts are governed by the _________, while goods contracts are governed by the _______.
common law, ucc
Under common law, the terms of the contract must be certain and definite. Under the UCC, what is the standard?
A contract is formed under the UCC if both parties intend to contract and there is a reasonably certain basis for giving a remedy.
The UCC will fill the gap in a contract that is missing terms unless the contract is missing what term?
Quantity. Although in output contracts that’s not required.
Contracts without a duration term last ___________, but if they are employment contracts they are considered _________.
for a reasonable time, at will (even if the contract says “permanent employment”)
Contracts which have ______ terms will not be enforced because the intent of the parties cannot be established.
vague
If a return promise is requested, the contract is ________, if a return performance is requested, the contract is _________.
bilateral, unilateral
Advertisements are generally considered to be (offers/invitations to receive offers)
invitations to receive offers, although if it is a more definite statement then it can be considered an offer.
An offer will terminate after a _________ if no time is specified
A reasonable period of time
If an offer specifies that it will terminate after a specified number of days, then time starts to run from the time __________
the offer is received.
An offer will terminate if the offeror passes away. However, an exception to this rule exists for _______ contracts. An accepted offer creates a contract, and if the offeror were to pass away at this time the contract is ______
Option. The option contract is irrevocable regardless of the death of the offeror. / Enforceable. The death of the offeror could create a defense to enforcement, but the contract itself is valid.
An offer is terminated if the subject matter is _________ or if the offer becomes ______.
Destroyed/Illegal
If an offer states that it will remain open for a period of time, but no consideration supports that, then it is (enforceable/unenforceable)
Unenforceable. In this situation, the offer can be revoked at any time before acceptance.
An option contract which is supported by separation consideration is _________. An option contract which is not supported by consideration nevertheless can be enforceable if ________
A promise not to revoke an offer for a stated period of time/the offeror is a merchant and the offer is in writing and signed with assurances that the offer is to remain open.
Promissory estoppel may make an offer irrevocable if reliance by the offeree implies the existence of an option. However, it must have been ________ ________ that such reliance would occur to imply the existence of the option.
Reasonably foreseeable. Also, the offeror is liable to the extent necessary to avoid injustice, which may include holding the offer open, reimbursing costs, or returning a benefit conferred.
Once the offeree has begun performance, the offeror _________.
Cannot revoke the offer. The offeree may or may not complete the offer.
An option is assumed to last for ______ in the event a duration term is not stated. In addition, an option cannot last beyond _______ unless additional consideration is provided.
90 days/90 days.
A merchant is ________
Any person who normally deals with the goods, or any business person when the transaction is of a commercial nature.
Rejection of an offer is effective _________
upon receipt.
A counteroffer acts as a termination of the original offer and the creation of a new offer. However, in the situation where a _________ exists, the original offer is not terminated by a counter offer. Also, when the offeree is only expressing _______ or ______, the offer remains open.
Option contract/indecision, inquiry.
Who can accept an offer?
Only the party or parties who the offer was extended to.
Acceptance of an offer is valid if it is ___________
communicated to the offeror.
If a contract is bilateral, and such contract demands a return promise from the offeree, and the offeree party commences performance, that commencement operates as a ____________
promise to complete performance.
In a unilateral contract, the offeree’s promise to accept is __________
Meaningless. Think of the example of the offer of a reward for a lost dog. Accepting that offer does nothing for the dog owner. The dog owner wants the dog.
Beth offers to pay Seth $50 every week to wash her car each Saturday for the next year. Is this deal covered by the common law? ___ Is it a valid offer ____
Yes, and yes. It names the parties, the subject, the price and the duration.
Beth offers to pay Seth a fair price every week to wash her car for the next year. Is this a valid offer?
No. All essential terms are necessary for common law contracts, including the price.
Bob offers to buy 500 windshield wiper blades next week from Sue for $5 each. Is this deal covered by the common law? ___ Is it a valid offer? ____
No, yes
Bob offers to buy 500 windshield wiper blades next week from Sue for a fair price. Is this a valid offer?
Yes.
Bob offers to buy windshield wiper blades next week from Sue for a fair price. Is this a valid offer?
No, it’s missing a quantity term.
Bob offers to buy all the windshield wiper blades that I need for the next 10 years from Sue for a fair price. Is this a valid offer? ____
Yes, as a requirements contract.
Advertisements that are very specific and leave nothing open to negotiation are considered (invitations to deal/offers)
Offers
I tell you that you’d better decide fast if you want to buy my house, as I expect to have a ton of offers next week. You say I accept. Is this a contract?
No.
I place an advertisement in the paper promising to sell my 1994 Jeep Wrangler for 5000 first come first served. You show up at my house with a check and say I accept. Is this a contract?
Yes.
I offer to sell you my house for 1 million. A day later, you are talking with Mickey and learn that she bought my house that morning for 1.1 million. You run to my house waving a check and say I accept. Is this a contract.
No.
I offer to sell you my house for 1 million. A day later, you are talking with Mickey and learn that I offered to sell her my house that morning for 1.1 million. You run to my house waving a check and say I accept. Is this a contract?
Yes.
I offer to sell you my signed contracts textbook for $100. A day later, you are talking with Mickey and learn that she bought my signed contracts textbook for $100. You run to my house waving a check and say I accept. Is this a contract?
Yes, assuming that this is not a unique item and that there are multiple ones.
I offer to sell you my Jeep for 5000. A split second later, you say, I offer to buy it for 4500. I remain silent. Ten seconds later, you say Ok, Ok, I’ll buy it for 5000. Is there a contract?
No, the counteroffer terminates the original offer.
I offer to sell you my Jeep for 5000. A split second later, you say Maybe not, I better check my bank balance. I remain silent. Ten seconds later you say Ok, Ok, Ill buy it for 5000. Is there a contract?
Yes.
I offer to sell you 1000 barrels of oil for 100 each. You remain silent, and I never revoke the offer. Five years later, when the price of oil has jumped to 500 you call me up and accept. Is there a contract?
No.
A builder who is bidding on a law school building project receives an offer from a subcontractor to supply all of the carpet for $20k. Armed with this knowledge, the builder offers to renovate the building for $100k. Before the law school accepts the bid, the subcontractor calls to revoke its carpet offer. Can the general contractor builder still accept the carpet offer from the subcontractor?
Yes.
Bob sends a letter to Sue reading, please ship me 500 Bosch windshield wiper blades next week for $5 each. Sue ships 500 Sloshed wiper blades the next day. Is there a contract?
Yes, but also a breach. This is a special UCC rule.
I send you an offer. You mail back your acceptance. You change your mind and call me up before I receive your letter to reject the offer. Is there a contract?
Yes, unless I detrimentally relied on the rejection.
I send you an offer. You mail back a rejection. You change your mind and mail back an acceptance a few hours later. Both letters arrive at my house on the same day. Is there a contract?
It depends on what I open first.
Mickey buys her weekly keg of beer by calling up Pabst Blue Ribbon on monday and leaving a message requesting delivery by Friday. One monday, she leaves her message as usual, but Pabst does not deliver the keg that Friday. Distraught, Mickey asks if she has a contract for this keg. Does she?
Likely, yes, because there is a past history of silence serving as acceptance.
I offer to mow your lawn on Saturday for $50. You say, Ok, if you come over on Sunday. Do we have a contract?
No. Conditional acceptances are just counter offers because they don’t meet the requirements of the mirror image rule.
You send a purchase order requesting acceptance by this Friday. I send back my confirming memo two weeks later. Is there a contract?
No, because the purported acceptance is not timely.
You send a purchase order. I send back a timely confirming memo saying “Thanks, but I no longer sell chainsaws, however, I have a hand saw which you can have on the same terms. Is there a contract?
No, because this is not a definite acceptance of the original offer.
You send a purchase order. I send back a timely confirming memo saying “Ok, on the condition that you agree to indemnify me against a lawsuit for harm arising from the chainsaw.” Do we have a contract?
No. Acceptance is made conditional upon acceptance of the additional term.
You send a purchase order. I send back a timely confirming memo. The memo has a bunch of terms on the back, all of which match yours, except for a clause that says “Buyer agrees to indemnify seller against a lawsuit for harm arising from the chainsaw.” Do we have a contract?
Yes, under 2-207(1). This is not a major part of the agreement, it was just one changed term, so there is still a contract.
The new term of a purported acceptance may control under 2-207(2) but only if all of the following are true: ___ ___ ___ ___
(1) Both parties are merchants; (2) The new term does not materially alter the deal; (3) The initial offer did not expressly limit acceptance to its terms; and (4) The offeror does not object within a reasonable time to the new term.
Acronym: Me,Ma,C,D(enial)
(Family)
Know that new terms very rarely come in.
I promise to give you my Jeep if you come to my house to pick it up. Is there bargained for consideration?
No, I am not bargaining for you to come. This is a conditional gift - note that the party making the gift is not going to sue if the party receiving the gift doesn’t come over to get it.
I promise to sell you my Jeep for $1. Is there bargained for consideration?
No, one dollar is inadequate.
You promise to buy my Jeep for 5000 on December 1, if you feel like it. Is there bargained for consideration?
No. There must be a way for the promisor to breach.
I promise to pay Mickey $500 if she paints a portrait of my family that meets my satisfaction. She says ok. Is there bargained for consideration?
Yes.
Quasi Contract (contract implied in law) is where on party conferred a benefit on another party, and it would be fair to pay for that benefit. What are the elements?
(1) The plaintiff confers a measurable benefit on the defendant; (2) The plaintiff reasonably expected to get paid; (3) It would be unfair to let the defendant keep the benefit without paying (look for an opportunity to decline or good reason why there was no opportunity to decline)
You are trying to win a race to Alcatraz when the sharks start to circle. I swing my boat over to pick you up. Grateful, you promise to pay me $500 for the rescue. Is there bargained for consideration? ___ Might I argue moral obligation plus subsequent promise? ___
no, yes
What are the elements for the defense of misunderstanding?
(1) The parties use a material term that is open to two or more reasonable interpretations (so the objective test cannot apply) (2) each side attaches a different meaning to the term and (3) Neither party knows, or should know, of the confusion.
I verbally contract to sell you a bike for “twelve fifty.” You think I’m trying to unload the bike by selling it for $12.50. I think you recognize that this is a rare edition bike and you are willing to pay $1250. Do we have a contract?
No. This fits the elements of misunderstanding.
I verbally contract to sell you a bike for “twelve fifty.” You think I’m trying to unload the bike by selling it for $12.50. I know that you would never pay $1250 for the bike and must think the price is $12.50. Is there a contract? If yes, for how much?
Yes. For $12.50
Who lacks the capacity to make a contract?
(1) Minors, (2) The mentally Ill if (a) the person cannot understand the nature and consequences of his actions or (b) the person cannot act in a reasonable manner in relation to the transaction (if the other side knows this) (3) Very intoxicated persons (if the other side knows this)
Amelia is 16 but looks much older. She buys a used airplane for $5000. The wings fall off as she pulls away from the dealer’s lot. Can Amelia get her money back?
Yes. for Incapacity.
Amelia is 16 but looks much older. She buys a used airplane for $5000. The plane flies ok. Amelia turns 18 and continues to use the plane. Can she get her money back now?
No.
Amelia is 32. She takes LSD prior to purchasing an airplane. She has no idea what she is doing, but witnesses say she seemed perfectly lucid while negotiating and buying the plane. Can Amelia get her money back?
No.
We are walking along a trial, when I lean down to pick up a shiny rock. “Wow” I say “look at that diamond. I’ll sell it to you for $10,000.” You agree and pay me the money but are sad to learn later that the rock is plain quartz. Can you get out of the contract?
Yes. For Mutual Mistake. Mutual Mistake lets the adversely affected party rescind if (1) there is a mistake of fact existing at the time the deal is made (2) the mistake relates to a basic assumption of the contract and has a material impact on the deal. (3) The impacted party did not assume the risk of mistake.
We are walking along a trial when I lean down to pick up a shiny rock. I say “Wow, look at that shiny rock, I wonder what it is. Well, whatever it is, I’ll sell it to you for $10,000.” Can you get out of the contract?
No, this is a compromise of conscious ignorance.
Unilateral mistake (one party) lets the adversely affected party rescind if…
(1) she can prove all of the elements of mutual mistake, plus (2) the other side knew of, had reason to know of, or caused the mistake.
Mickey decides to move to an annual purchasing model for her beer kegs and solicits 25 brewers for offers. Twenty four of the brewers quote her prices in the 100000 to 120000 range. But one brewer makes a mistake about the quantity of kegs she lists and quotes a price of 10000. Can Mickey get the last deal?
No, Mickey has reason to know of the mistake.
A misrepresentation is a statement at the time of contracting that is not true. It can be intentional (fraudulent) or accidental. To assert this defense, the party must show:
(1) A misrepresentation of a present fact (not opinion) (2) That is material or fraudulent (intentional) and (3) That is made under circumstances in which it is justifiable to rely on the representation.
Before buying my Jeep for $3000 you ask me how the car runs. I say “It’s a great car.” In actuality, it only runs on four out of six cylinders, and the radiator leaks. Can you get out of the contract?
Maybe not, if this is an opinion.
Before buying my Jeep for $3000, you ask me if the car runs ok, and I say “yes,” knowing that it only runs on four out of six cylinders, and the radiator leaks. Can you get out of the contract?
Yes, due to intentional fraud.
Before buying my Jeep for $3000, you ask me if the car runs ok, and I say “yes,” but I don’t know that it has serious problems. Can you get out of the contract?
Yes, due to material misrepresentation.
Before buying my Jeep for $3000, you ask me if the car runs ok, and I say “yes,” but I dont know that the cigarette lighter doesn’t work. Can you get out of the contract?
No.
Fraud in the execution is when…
you trick someone into signing something that she doesn’t even know is a contract.
I’m selling my house, but I have a bad termite problem. I hide the ripples in the floor with carpets and put plants on the damaged stairways. You buy the house but soon learn of the termite infestation. Can you get out of the contract for nondisclosure?
Likely yes, because this is active concealment.
Duress is
an improper threat that deprives a party from making a meaningful choice to contract.
Undue influence is
when a party puts a very intense sales pressure on another party who often seems weak minded or susceptible to high pressure sales tactics.
The statute of frauds applies to the following types of contracts:
M.SOUR.
M - A contract made in consideration of marraige (eg - prenup)
S - A contract promising to guarantee the debt of another.
O - A contract that by its terms cannot be performed within one year from its making.
U - Applies to goods contracts for a price of $500 or more.
R - A contract for the sale of an interest in real property.
Mickey buys beer on credit from Pabst, promising to pay $499 at the end of the month for her five kegs. Pabst sues me at the end of the month claiming that I had offered to pay Mickey’s bill if she could not. Are we in statute of frauds world?
Yes, this is a contract for suretyship.
Mickey buys beer on credit from Pabst, promising to pay $499 at the end of the month for her five kegs. Mickey always brings the beer over to my house for weekly parties. Pabst sues me, claiming that I offered to pay Mickey’s bill if she could not. Are we in statute of fraud’s world?
No, the main purpose of the suretyship is for the benefit of the surety, therefore, it isn’t a suretyship and doesn’t fall into the statute of fraud’s land.
There are ___ main ways to satisfy the statute of frauds. What are they?
performance or a writing signed by the party against whom the contract is asserted which includes an indication that a contract has been made, an identification of the parties, and the essential elements of the deal.
Part performance of a real estate contract can satisfy the statute of frauds if any two of the following three elements are met:
Possession, payment, improvements to the land
For goods contracts, a signed writing will satisfy the statute of frauds, but the writing must meet one requirement. _____. Also, part performance will satisfy the statute of frauds on a goods contract, but only for _________.
(1) The writing must mention the quantity of goods sold. (If the writing leaves out the price it is fine)
(2) the quantity delivered and accepted.
Mickey verbally contracts with Pabst to buy 100 kegs of beer for $75 each. Later Pabst sends her a signed confirmation order stating that the parties agree to contract for 50 kegs of beer (no price is listed). Even later, Pabst asserts a Statute of Frauds defense and refuses to sell Mickey any beer. Can Mickey satisfy the statute of frauds?
Yes, but only for 50 kegs.
_______ contracts are exempt from the statute of frauds even though they are the sale of goods for over $500.
Custom made goods
If ___ _____ ___ ______, then the failure to object to a confirming memo within ___ days will satisfy the statute of frauds.
both parties are merchants, 10
Mickey verbally contracts with Pabst Blue Ribbon to buy 100 kegs of beer for $7500. Later, Pabst sends her a signed confirmation memo with all of the material terms. Mickey has changed her mind, crumples up the memo, and throws it in the corner. Ten days later, does Pabst Satisfy the Statute of Frauds?
No, because Mickey is not a merchant.
Whole Foods verbally contracts with Pabst Blue Ribbon to buy 100 kegs of beer for $7500. Later, Pabst sends WF a signed confirmation memo with all of the material terms. WF has changed their mind, crumples up the memo, and throws it in the corner. Ten days later, does Pabst Satisfy the Statute of Frauds?
Yes, even though there is no signed writing by Whole Foods. This is because failure to object to a confirming memo within 10 days will satisfy the Statute of Frauds - if both parties are merchants.
A homeowner entered into a contract with a landscaper. The contract specified that the homeowner
would pay the landscaper $10,000 upon completion of a list of projects. The landscaper performed the
work while the homeowner was away on vacation. When the landscaper sought payment, the
homeowner refused, noting that a tree had not been trimmed as required by the contract. The
landscaper responded that, since he would now have to forego other work in order to trim the tree, he
would do it but only if the homeowner agreed to pay him a total of $10,500 for his services. The
homeowner, desperate to have the work completed, agreed. Once the work was completed, however,
the homeowner gave the landscaper a check for $10,000, and refused to pay more. The landscaper
sued for breach of contract.
Is the landscaper likely to succeed in his claim?
A. No, because an enforceable contract cannot be renegotiated.
B. No, because there was no consideration for the promise to pay $10,500 and no unanticipated
circumstances arose.
C. Yes, because there was a valid modification of the contract.
D. Yes, because the landscaper suffered a detriment by foregoing other work.
Answer choice B is correct. At common law, a promise to perform a preexisting legal duty does not
qualify as consideration because the promisee is already bound to perform. In this case, the landscaper
had a preexisting legal duty to trim the tree, and thus there was no consideration to support the
homeowner’s promise to pay an additional $500. Answer choice A is incorrect because an enforceable
contract may be renegotiated. Even when there is a preexisting legal duty, there will be consideration if
the promisee gives something in addition to what is already owed or varies the preexisting duty.
Answer choice C is incorrect because modification of a services contract must be supported by
consideration. Or some circumstances that were not anticipated when the contract was made must
have arisen, and modification is fair and equitable in light of those circumstances. Answer choice D is
incorrect because the fact that the landscaper had to forego other work would not serve as
consideration in this case because the landscaper was under a preexisting legal duty.
Completing an online form, a customer ordered a handmade colored glass ornament to hang in the
window of her home. In a box labeled “Comments,” the customer wrote, “red, please.” Via email, the
online retailer sent a notice acknowledging the order, but reserving the right to send an ornament in any
color. The retailer shipped the customer a green ornament.
Which of the following arguments would not support the customer’s position that she does not have to
pay for the ornament?
A. The retailer shipped nonconforming goods.
B. The customer did not separately agree to receive an ornament in any color.
C. Because customer was not a merchant, the retailer’s additional term in acknowledgment is not part
of contract.
D. The retailer’s acceptance did not mirror the customer’s offer.
Answer choice D is correct. The mirror image rule, which states that acceptance must mirror the terms
of the offer, does not apply to a sale of goods, such as a glass ornament. Answer choices A, B, and C are
incorrect because they all support the customer’s position that she does not have to pay for the
ornament. Answer choice A is incorrect because the failure of the retailer to ship conforming goods
(i.e., a red ornament) would constitute a breach of the retailer’s contract obligations. Answer choice B is
incorrect. Because the customer is not a merchant, any additional terms in the acceptance are treated
as a proposal. This proposal must be separately accepted by the customer in order to become part of
the contract. Answer choice C is incorrect because, if the acknowledgement is an acceptance, since the
customer is not a merchant, a different term (i.e., an ornament of any color) is not part of the contract.
A local philanthropist, during a lecture to a class of high school students, promised to pay the college
tuition of any student who received a perfect score on a college admissions test. Immediately after the
lecture, a student told the philanthropist that he accepted the philanthropist’s promise. The student
thereafter signed up for a preparatory class for the test, hired a private tutor at significant expense, and
quit all of his extracurricular activities. Shortly before the student took the test, the philanthropist’s
assistant contacted the student and told the student that the philanthropist withdrew his promise to
pay for college. The student took the test and received a perfect score. The student sued the
philanthropist based on the promise.
Is the student likely to receive relief in his suit against the philanthropist?
A. No, because the philanthropist revoked his offer before the student received a perfect score.
B. No, because there was no consideration for the philanthropist’s promise.
C. Yes, because the student detrimentally relied on the philanthropist’s promise.
D. Yes, because the student accepted the philanthropist’s offer prior to revocation.
Answer choice C is correct. The doctrine of promissory estoppel (detrimental reliance) can be used
under certain circumstances to enforce a promise that is not supported by consideration. A promise is
binding if the promisor should reasonably expect it to induce action or forbearance, it does induce such
action or forbearance, and injustice can be avoided only by enforcement of the promise. In this case,
the student enrolled in a test preparation course, hired a private tutor, and quit his extracurricular
activities in reliance on the promise. Moreover, the philanthropist should have reasonably expected
such actions. Accordingly, the student will likely receive some relief, although he may receive reliance
damages (e.g., money expended to pass the test) rather than expectation damages (i.e., payment of the
student’s college tuition). Answer choice A is incorrect because, although an offer can generally be
revoked at any time before acceptance, an offeror’s power to revoke an offer is limited when an offeree
has detrimentally relied on the promise. Answer choice B is incorrect because the doctrine of
promissory estoppel would likely apply to allow the student some relief despite the absence
consideration. Answer choice D is incorrect because the offer could be accepted only by performance,
that is, by achieving a perfect test score.
A homeowner met with a contractor regarding remodeling the homeowner’s kitchen. At the conclusion
of their meeting, the contractor told the homeowner that he would charge her $9,000-$10,000 for the
work, but that he would get back to her with a definite price once he returned to his office. When he
arrived at his office, the contractor had a voicemail from the homeowner, saying that she would pay him
$9,000 for the work they discussed. The contractor promptly returned her phone call, and left her a
voicemail saying that he would do the work for $9,500, which the homeowner received. The next day,
the contractor, having a change of heart, tried unsuccessful to reach the homeowner by phone. He left
her a voicemail that he would do the work for $9,000 after all, and that he would start the following day
unless he heard otherwise from her. The next day, the contractor showed up at homeowner’s house,
ready to begin.
What best describes the relationship between the parties?
A. A contract was formed when the contractor left the final voicemail.
B. A contract was formed when the homeowner received the final voicemail.
C. A contract was formed when the contractor showed up to begin work on the kitchen.
D. There is no contract between the parties.
Answer choice D is correct. An offer is terminated by rejection. A modification of the terms of the offer
acts as a rejection of the original offer and as a new counteroffer. In this case, the contractor’s first
voicemail served as a rejection of the homeowner’s original offer of $9,000 and a counteroffer of
$9,500. The original offer was terminated; the contractor could not later accept the homeowner’s offer.
Accordingly, no contract was formed. Answer choices A, B, and C are incorrect because the contractor
rejected the homeowner’s offer and thus there was no contract.
An adult daughter called a local restaurant to place a large delivery order. The restaurant generally
requires a credit card for all delivery orders, but the daughter’s father, who is a regular at the restaurant
and happened to be there when the daughter placed the order, told the clerk that, in the event the
daughter failed to pay for the food, he would do so. The restaurant delivered the order to the daughter,
who, having decided to order something else instead, refused to accept or pay for the food.
Can the restaurant collect from the father?
A. No, because the father’s promise was made orally.
B. No, because a third party will not be held liable for the contract obligations of another.
C. Yes, because the father promised to pay.
D. Yes, because a parent is liable to pay for necessities provided to a child.
Answer choice A is correct. The Statute of Frauds applies to suretyship agreements (i.e., one person’s
promise to pay the debts of another). Here, the daughter ordered food and was obligated to pay for the
food. However, the father also promised to pay for the food if the daughter did not. This promise
created a suretyship agreement. Since this agreement was not in writing, the restaurant cannot enforce
it. Note that some oral suretyship contracts can be enforced (indemnity contracts and contracts wherein
the surety’s main reason for paying the debt is the surety’s own economic advantage), but those
circumstances are not present here. Answer choice B is incorrect because third parties may be
liable for the debts of another if they agree to be sureties. In such cases the surety agreement must
generally be in writing. Answer choice C is incorrect because, although the father did promise to pay for
the food if his daughter failed to do so, the Statute of Frauds applies to a suretyship agreement. Since
the agreement was not in writing the father’s promise is unenforceable. Answer choice D is incorrect
because, although a parent is liable for necessities, such as food, provided by a third party to a minor
child, a parent is not liable for necessities provided to an adult daughter or son.
A store owner and a builder entered into a contract for the construction of an addition to the owner’s store for $500,000. The builder calculated that he was to earn a profit of $20,000 for the job. A month later, the builder had spent $80,000 on labor and materials, including $15,000 on uninstalled windows. The reasonable market value of the labor and materials provided at that time was $50,000. At this point, the owner told the builder to stop working because the owner could no longer pay for the addition. The builder was able to sell the windows to a contractor for $10,000.
In an action by the builder against store owner, which of the following is the highest amount of damages the builder may recover?
$50,000, the reasonable value of the services the builder provided to the owner.
B$70,000, the builder’s construction costs.
C$90,000, the builder’s construction costs of $80,000 plus the $20,000 profit minus the $10,000 saved by selling the windows.
D$100,000, the builder’s construction costs of $80,000 plus the $20,000 profit.
Answer choice C is correct. A recovery of$90,000 represents the builder’s expectation measure of recovery and gives him the benefit of the bargain. The general measure of damages for the owner’s failure to pay the contract price, in whole or in part, is the profits that the builder would have earned ($20,000), plus any costs incurred by the builder ($80,000), less the amount of any payments made by the owner to the contractor ($0) and any materials purchased by the contractor that are used by the contractor on another job or sold to a third party ($10,000). This amount would place the builder in the position he would have been in but for the breach. It is also the greatest amount the builder is able to recover. Answer choice A is incorrect because it is a restitutionary measure of damages that will not allow for damages related to benefit of the bargain. Answer choice B is incorrect. Not only does answer choice B also fail to consider the benefit of the bargain, but answer choice B would be the Builder’s reliance damages, and there are no circumstances in this fact pattern that would cause the builder to seek reliance damages over expectation damages. Answer D is incorrect because it fails to subtract the loss avoided by the builder’s sale of the windows to the contractor.
An art collector placed a painting up for auction, alongside a number of other works of art. There was no indication as to whether the painting was being auctioned with or without reserve. After the auctioneer had gaveled the highest bid for the collector’s painting, the collector had seller’s remorse. Before the conclusion of the auction and before the highest bidder, a public museum, paid for the painting, the collector notified the museum that she could not bring herself to part with the painting.
Is the collector entitled to keep the painting?
AYes, because, by default, the painting was sold with reserve and the auction had not concluded.
BYes, because the museum had not paid for the painting.
CNo, because the auctioneer had accepted the museum’s bid.
DNo, because, by default, the painting was sold without reserve.
Answer choice C is correct. The sale of goods by auction is complete when the auctioneer accepts the highest bid by the fall of the auctioneer’s hammer or in any other customary way. Here, because the auctioneer had gaveled the museum bid, the painting belongs to the museum (assuming, of course, that the museum does ultimately pay). Answer choice A is incorrect because the auctioneer had gaveled the bid. In the absence of language to the contrary, the auction of an item is with reserve, and the items may be withdrawn from sale any time before the completion of the sale is announced. In this case, however, the sale was completed upon the auctioneer gaveling the museum’s bid. The fact that the auction itself had not concluded is irrelevant. Answer choice B is incorrect. After the auctioneer accepted the museum’s bid, the collector could not withdraw the painting from auction. The museum had a reasonable time to pay for the painting, and did not have to do so before the auction ended (unless the terms of the auction stated otherwise, and there is no indication that they did). If the museum did not pay for the painting within a reasonable time, then the collector would be able to retain the painting. Answer choice D is incorrect because, by default, an auction is with reserve unless specified to be a no-reserve auction.
A nature magazine advertised a photography contest in its January issue, offering “$1,000 to any subscriber who sends us a photograph of the rare Florida Grasshopper Sparrow that we use for the cover of our May issue. Only submissions meeting our technical specifications and received by April 1 will be considered.” The only subscriber to respond to the advertized contest sent the magazine a photograph of the sparrow that met the magazine’s technical specifications. The photograph arrived on March 15. However, due to an ecological disaster that occurred in early April, the magazine used a different picture on the cover of its May issue. The magazine used the picture on the cover of its June issue, and has refused to pay $1,000 to the subscriber on the grounds that it was not used on the May cover.
Is the subscriber likely to prevail in a breach of contract action against the nature magazine?
ANo, because the subscriber’s photo was not used on the cover of the May issue.
BNo, because the subscriber failed to adequately notify the magazine of his acceptance.
CYes, because all of the express conditions of the offer have been satisfied.
DYes, because the nature magazine prevented the publication of the photograph.
Answer choice D is correct. A performance that is subject to an express condition cannot become due unless the condition occurs or its nonoccurrence is excused. The subscriber’s entitlement to the reward was subject to three conditions—the provision of a satisfactory photograph, the provision of that photograph by April 1, and the use of the photograph on the cover of the magazine’s May issue. The first two conditions were satisfied when the subscriber delivered the photograph to the magazine. The third condition did not occur, but its nonoccurrence is excused under the doctrine of prevention, which requires that a party refrain from conduct that prevents or hinders the occurrence of a condition. In this case, the magazine itself prevented the May 1 publication condition from occurring. Answer choice A is incorrect because the failure of this condition is excused under the doctrine of prevention. Answer choice B is incorrect because in an offer for a unilateral contract, an offeree who accepts by rendering the requested performance is required to give notice only if the offeree has reason to know that the offeror would not otherwise learn of the performance with reasonable certainty and promptness. Such is not the case here. Answer choice C is incorrect because all of the express conditions of the offer have not been satisfied. The photograph of the sparrow did not appear on the cover of the May issue of the magazine. However, his nonperformance of the publication condition is excused by the doctrine of prevention.
On March 1, a company contracted with a singer for the singer to perform for the company picnic on May 1 for a fee of $10,000. On March 17, the singer informed the company that she signed a contract to film a movie. She suggested that the company hire another singer to take her place at the picnic. On April 1, the company hired the recommended replacement singer to perform at its picnic for $15,000. On April 25, the original singer informed the company that she has decided not to take the movie deal and will be available to perform on May 1. Even though the original singer arrived at the picnic on May 1 ready to sing, the company let the replacement singer perform. The company refused to pay $10,000 to the original singer.
Is the company likely to prevail in a breach of contract claim against the original singer?
No, because the company prevented the original singer from fulfilling her contractual obligation by refusing to let her perform on May 1.
BNo, because the original singer retracted her repudiation before the scheduled performance.
CYes, because the company hired the replacement singer as a substitute for the original singer before she retracted her repudiation.
DYes, because the replacement singer’s consent to the delegation of the original singer’s duties did not create a novation.
Answer choice C is correct. The company’s contract with the replacement singer as a substitute for the original singer’s services constituted a material change in position and thus terminated the original singer’s ability to retract her repudiation. Answer choice A is incorrect because acting in reasonable reliance on an unequivocal repudiation does not violate the doctrine of prevention. Answer choice B is incorrect because the company’s material change in position happened before the original singer tried to retract her repudiation. Answer choice D is incorrect because, even if this personal service contract could be delegated, the original singer’s suggestion that the company hire the replacement singer does not constitute an effective delegation of her contractual duties.
A homeowner entered into a contract with a landscaper. The contract specified that the homeowner would pay the landscaper $10,000 upon completion of a list of projects. The landscaper performed the work while the homeowner was away on vacation. When the landscaper sought payment, the homeowner refused, noting that a tree had not been trimmed as required by the contract. The landscaper responded that, since he would now have to forego other work in order to trim the tree, he would do it but only if the homeowner agreed to pay him a total of $10,500 for his services. The homeowner, desperate to have the work completed, agreed. Once the work was completed, however, the homeowner gave the landscaper a check for $10,000, and refused to pay more. The landscaper sued for breach of contract.
Is the landscaper likely to succeed in his claim?
ANo, because an enforceable contract cannot be renegotiated.
BNo, because there was no consideration for the promise to pay $10,500 and no unanticipated circumstances arose.
CYes, because there was a valid modification of the contract.
DYes, because the landscaper suffered a detriment by foregoing other work.
Answer choice B is correct. At common law, a promise to perform a preexisting legal duty does not qualify as consideration because the promisee is already bound to perform. In this case, the landscaper had a preexisting legal duty to trim the tree, and thus there was no consideration to support the homeowner’s promise to pay an additional $500. Answer choice A is incorrect because an enforceable contract may be renegotiated. Even when there is a preexisting legal duty, there will be consideration if the promisee gives something in addition to what is already owed or varies the preexisting duty. Answer choice C is incorrect because modification of a services contract must be supported by consideration. Or some circumstances that were not anticipated when the contract was made must have arisen, and modification is fair and equitable in light of those circumstances. Answer choice D is incorrect because the fact that the landscaper had to forego other work would not serve as consideration in this case because the landscaper was under a preexisting legal duty.
An independent truck driver often received assignments to transport cargo for a delivery company. The driver was one of the delivery company’s most reliable contractors. When the driver was in need of a new truck, the delivery company contracted with a truck manufacturer to purchase the truck on an installment basis. The manufacturer retained a security interest in the truck until all payments were made. The contract between the delivery company and the manufacturer provided that the delivery company “shall not assign this contract without the prior written consent” of the manufacturer. Nonetheless, the delivery company assigned the contract, in writing, to the truck driver. The truck driver made all payments on the truck for two years until she was involved in a serious collision that destroyed the truck. The insurance proceeds on the destroyed truck were paid to the manufacturer. After the manufacturer used the proceeds to satisfy the contract balance, $20,000 remained. The truck driver delivered a copy of the assignment to the manufacturer, and demanded the remainder of the proceeds. The truck manufacturer stated that the contract was non-assignable, and that it would only pay the proceeds to the delivery company. The truck driver then filed suit to compel the truck manufacturer to pay her the proceeds.
Is she likely to succeed?
Yes, because the written assignment from the delivery company to the truck driver was a novation.
BYes, because the contract was assigned to the truck driver.
CNo, because the contract between the delivery company and the truck manufacturer was non-assignable.
DNo, because the truck driver was merely an incidental beneficiary of the contract between the delivery company and the truck manufacturer.
Answer choice B is correct. Most contracts can be assigned. Even if the contract by its terms prohibits assignment, a party retains the power to assign, although an assignment operates as a breach of the contract. Consequently, the truck manufacturer has a claim against the delivery company, but cannot refuse to recognize the assignment to the truck driver. Consequently, it must disburse the remainder of the insurance proceeds to her. For that reason, answer choice C is incorrect. Answer choice A is incorrect because a novation is the substitution of a new contract for an old one; in this case, a novation could only have occurred with the consent of the truck manufacturer, which was not sought, much less given. Answer choice D is incorrect because the truck driver’s status as either an intended or incidental beneficiary of the contract does not bear upon the validity of the assignment of the contract to her.
A store purchased a truck from a dealer and took delivery of the truck. Under the terms of the contract, the store was to make monthly payments for three years. After the store made monthly payments for one year, the truck was involved in an accident that resulted in a fire which totally destroyed the truck. The store, having let its insurance on the truck lapse, refused to make any more payments to the dealer. Six months later, the dealer brought suit against the store.
How much can the dealer recover?
Nothing, because the truck was destroyed.
BThe payments due for six months, because only those payments are currently due and owing.
CThe full amount remaining under the contract, because the dealer fully performed its contractual obligation.
DThe full amount remaining under the contract, because the store repudiated its contractual obligation.
Answer choice B is correct. Where a party to a contract breaches the contract and the only remaining duty with respect to the contract is the payment of money in installments, this breach does not give the other party a claim to damages for total breach. Consequently, the dealer is only entitled to damages based on the payments that are currently due and owing. Answer choice A is incorrect because, in a contract for the sale of goods, the risk of loss generally passes to the buyer upon delivery of the goods to the buyer. Since the store had had possession of the truck for a year, the store bore the risk of loss with respect to the truck. Answer choice C is incorrect because, even though the dealer had fully performed its contractual obligation by transferring the truck to the store, the store’s contractual obligation was spread out over a three-year period. Answer choice D is incorrect because, even though the store repudiated its contractual obligation and such repudiation would usually give the dealer the right to treat the store as having totally breached its contractual obligation, this treatment does not apply where the only remaining duty is the payment of money in installments.
At the beginning of the week, a homeowner met with a contractor regarding remodeling a bathroom in her home. At the conclusion of their meeting, the contractor told the homeowner that he would charge her $5,000-$6,000 for the work, but that he would get back to her with a final price. When he arrived at his office later that day, the contractor opened an email from the homeowner that she had sent earlier. In the email, she stated that she would pay the contractor $5,000 for the job. The next day, the contractor responded by email that he could not complete the work for less than $5,500. The homeowner replied by email that she couldn’t pay $5,500, but that, if the contractor changed his mind, he could begin work before the end of the week. The contractor received the email, but did not respond. The contractor appeared the next day at the homeowner’s house ready to remodel the bathroom.
Which of the following statements regarding the relationship between the parties is most accurate?
A contract was formed at the price of $5,000.
BA contract was formed at the price of $5,500.
CA contract was formed at a reasonable price.
DNo contract was formed.
Answer choice A is correct. An offer is terminated by rejection. A counteroffer acts as a rejection of the original offer and creates a new offer. A terminated offer may be revived by the offeror, however. As with any open offer, the revived offer can be accepted by the offeree. In this case, the contractor rejected the homeowner’s original offer of $5,000 and made a counteroffer of $5,500. The homeowner rejected the counteroffer and revived her offer of $5,000, and invited the contractor to accept the offer by beginning performance. The contractor accepted the revived offer by appearing at the homeowner’s house ready to remodel the bathroom. Answer choice B is incorrect because, although the contractor made a counteroffer of $5,500, the homeowner did not accept it. Answer choice C is incorrect because, as noted with respect to answer choice A, the parties entered into a contract at a price of $5,000. Also, as a construction contract, the contract is controlled by the common law, which, unlike the UCC which governs the sale of goods, generally requires that the parties agree on a price. Answer choice D is incorrect because the homeowner revived her original offer, and the contractor accepted the offer by appearing at the homeowner’s house ready to remodel the bathroom.
A deliveryman for a local bakery was making a delivery when the delivery truck’s brakes failed, causing the deliveryman to lose control of the truck. In the resulting collision, the deliveryman sustained substantial injury. The deliveryman informed the bakery’s manager that he would be forced to sue the bakery unless the bakery would pay his medical bills relating to the injury as they became due. The manager told him that the bakery would refuse, and threatened to wrongfully fire the deliveryman unless he accepted a payment from the bakery in exchange for signing a document that released the bakery from liability for injuries suffered by the deliveryman. In fear of losing his job, the deliveryman agreed.
Subsequently, the deliveryman, upon learning that his injuries from the accident were far more extensive than he had first thought, sued the bakery for negligently failing to maintain a working delivery truck. The bakery moved to dismiss the suit on the basis of the release. The deliveryman, offering to return the payment received from the bakery, moved to set aside the release on the grounds of duress.
Should the court grant the deliveryman’s motion?
AYes, because the bakery’s threat deprived the deliveryman of any meaningful choice.
BYes, because a contract entered into under duress is void.
CNo, because the bakery itself was not the source of the duress.
DNo, because the deliveryman also threatened the bakery.
Answer choice A is correct. A contract may be rescinded on the ground of duress when an improper threat deprives a party of any meaningful choice to refuse to enter the contract. The bakery’s threat to fire the delivery person deprived him of any meaningful choice with regard to entering into the release. Answer choice B is incorrect because, unless the source of the duress is a threat to inflict physical violence, a contract entered into under duress is merely voidable, not automatically void. Answer choice C is incorrect because a contract may be voidable due to duress, even where the duress is not caused by a party to the contract. In any event, the manager’s acts would likely be attributable to the bakery, itself. Answer choice D is incorrect because threatening a civil action is not improper here and does not constitute duress, because party being threatened does have the meaningful choice of defending against the suit.
A restaurant posted a flyer in its serving room, which states: “Take the All-You-Can-Eat Challenge! Any person who can finish five entrées from our dinner menu in less than one hour dines free for a year!” A customer saw the flyer and ordered five entrées. As the customer started on his fifth entrée, the restaurant manager tore down the flyer in full view of the restaurant patrons and the customer, and said “Deal’s off!” The customer finished all five entrées in 59 minutes. When the manager told the customer that he would not be able to dine free for a year, the customer refused to pay for the five entrées.
If the restaurant does not let the customer dine free for a year, does the customer have a claim against the restaurant?
No, because the restaurant manager effectively withdrew the offer before the customer completed the five entrées.
BNo, because the customer did not pay for the five entrées.
CYes, because the restaurant could not revoke its offer once the customer had commenced performance.
DYes, because the customer’s ordering of five entrées constituted acceptance of the restaurant’s offer.
Answer choice C is correct. If an offer invites acceptance by performance, the offeree’s beginning of performance creates an option contract which precludes the offeror from revoking its offer. Because the customer had begun his meal before the flyer was taken down and because he finished in the allotted time, the restaurant is bound to the contract. Answer choice A is incorrect because, once the customer began his meal, the unilateral offer became irrevocable. Answer choice B is incorrect because, although the restaurant may have a claim against the customer for failure to pay for the five entrées, this claim does not negate the customer’s claim against the restaurant for free dining for a year. Answer choice D is also incorrect because the customer’s ordering of five entrées may have given the restaurant notice the customer intended to accept its challenge, but the customer could not accept this unilateral offer unless the customer finished the five entrées in one hour.
A salon owner contacted a manufacturer by email about purchasing shampoo sinks. The manufacturer sent the salon owner the following email: “I will sell you four shampoo sinks at a discounted price of $300 apiece.” The salon owner responded immediately, rejecting the offer. However, due to a transmission problem in the internet routing system, the message was not delivered to the manufacturer until the following day. In the meantime, the salon owner contacted several other sellers, all of whom made significantly higher offers. The salon owner then sent another email to the manufacturer, stating, “I accept your offer.” This email was delivered immediately. The following day, the misrouted rejection email arrived in the manufacturer’s inbox. Assume the parties are in a jurisdiction that applies the mailbox rule to electronic communications.
Was a contract formed?
Yes, because the salon owner accepted the manufacturer’s offer.
BYes, because the mailbox rule applies.
CNo, because the salon owner rejected the offer prior to accepting the offer.
DNo, because the manufacturer received the salon owner’s rejection.
Answer choice A is correct. The mailbox rule states that a timely sent acceptance is effective upon posting, not upon receipt. However, if a communication is sent rejecting the offer, and a later communication is sent accepting the contract, the mailbox rule does not apply, and the first one to be received by the offeror prevails. Here, the salon owner rejected the offer, then sent an acceptance. Since the acceptance was received by the offeror first, the acceptance prevails. Answer choice B is incorrect because, as noted with respect to answer choice A, the mailbox rule does not apply when an acceptance is sent after a rejection. Answer choice C is incorrect because, while a rejection’s effect is to terminate an offer, to be effective, the rejection must be communicated to the offeror. When a rejection is sent before an acceptance, the mailbox rule does not apply and the first communication received by the offeror prevails. Answer choice D is incorrect because a contract was formed when the manufacturer received the acceptance before the rejection. The fact that the manufacturer received the rejection the following day may affect the damages to which the manufacturer is entitled if the salon owner refuses to honor the contract, but it does not control the issue of the formation of a contract.
A professor offered to sell her colleague an autographed first edition book for $1,000. The professor provided her colleague with a signed written statement specifying the terms of the offer, and stating that the offer would remain open for one week. Two days later, the colleague learned that the professor had sold the book to someone else in their department. The next day, the colleague showed up at the professor’s office with $1,000, asking to purchase the book. The professor apologized, saying that the book had already been sold.
Is the colleague likely to succeed in an action for breach of contract?
No, because an option contract is not valid unless the offeror is a merchant.
BNo, because the colleague learned that the book had been sold before accepting the offer.
CYes, because the professor did not revoke the offer prior to the colleague’s acceptance.
DYes, because the offer was contained in a signed writing, and thus could not be revoked.
Answer choice B is correct. In general, an offer can be revoked by the offeror at any time prior to acceptance, even if the offer states that it will remain open for a specific amount of time. A revocation is not effective until communicated. If the offeree acquires reliable information that the offeror has taken definite action inconsistent with the offer, the offer is automatically revoked. In this case, because the book was a unique item, the offer was revoked when the colleague learned that the professor had already sold the book. Answer choice A is incorrect because an option contract, in which an offeree gives consideration to limit an offeror’s power to revoke an offer, may be valid even if entered into by parties who are not merchants. In this case, however, no consideration was provided to keep the offer open, and thus it was not a valid option contract. Answer choice C is incorrect because the offer was effectively revoked when the colleague learned that the book had already been sold. Answer choice D is incorrect because the firm offer rule, under which an offer may be irrevocable if contained in an authenticated writing, applies only when the offeror is a merchant. Because the professor was not a merchant, the fact that the offer was in writing is not relevant.
A recent college graduate offered to buy all of the computers from a struggling online retailer for which he had been an intern during college. The terms of the written agreement were such that the graduate would pay $10,000 for a “reasonable number of computers, as the closing retailer no longer needed them.” Due to the graduate’s internship with the retailer, he knew that there were 50 computers in the office and knew that nearly all of them were unused, so he believed he would receive all 50 computers once the retailer closed. He gave the retailer a check for $10,000 and in return, took ten computers from the office that day. With the help of the $10,000 and a sudden upswing in sales in the online retail market, the retailer became profitable. When the graduate demanded the remaining 40 computers, the retailer refused. Instead, the retailer returned the $10,000 to the graduate and demanded the return of the ten computers in the graduate’s possession. The graduate sued the retailer for breach of contract. The retailer moved to dismiss and argued that no valid contract existed.
How should the court rule?
Grant the motion, because there was no agreement as to quantity.
BGrant the motion, because the retailer’s increased profitability constituted a supervening event.
CDeny the motion, because the court may supply missing terms in a contract.
DDeny the motion, because the parties both had the objective intent to form a contract.
Answer choice A is correct. For a contract to exist, the terms of the contract must be certain and definite, or the contract fails for indefiniteness. Under common law, all essential terms – the parties, subject matter, price, and quantity – must be specified in the agreement or the contract fails. Under the UCC, a court may supply missing terms, but a contract must still specify the parties, subject matter, and quantity. Here, the contract is governed by the UCC, and because it is missing the key term of quantity, it is therefore invalid. Answer choice B is incorrect because the increased profitability would not discharge the retailer’s duty to perform if performance had been required. Answer choice C is incorrect because under the UCC, the court may not supply a missing quantity term. Answer choice D is incorrect because although the parties intended to form a contract, they failed to adequately define the terms of the contract.
A new florist placed a written order with a wholesaler for $15,000 worth of fresh flowers. Delivery was to be made to the florist via a national delivery service. Because the florist was a new customer, the wholesaler accepted the order on the condition that he pay $5,000 in advance, and the remaining $10,000 within 20 days of delivery. There was no discussion as to who bore the risk of loss. The wholesaler arranged with a national delivery service to pick up and deliver the flowers to the florist. The delivery service picked up the flowers, but, due to malfunction of the temperature controls on the transporting plane, the flowers were worthless upon arrival. The florist rejected the flowers and notified the wholesaler, who refused to ship other flowers. The wholesaler filed a claim against the florist for the remaining $10,000. The florist counterclaimed for the return of its $5,000 payment to the wholesaler.
How should the court rule on these claims?
AGrant the wholesaler’s claim for $10,000 and deny the florist’s claim for $5,000 because the risk of loss passed to the florist.
BGrant the florist’s claim for $5,000 and deny the wholesaler’s claim for $10,000 because the risk of loss remained with the wholesaler.
COffset the two claims against each other and require the florist to pay the wholesaler $2,500 because, since neither party was at fault for the loss, each should bear the loss equally.
DDeny both claims because the florist accepted the risk of loss up to the amount he had paid for the goods.
Answer choice B is correct. Where the goods are required to be delivered to a specific place (e.g., the buyer’s place of business) and delivery is to be made by a third-party carrier (i.e., a destination contract), the risk of loss does not pass to the buyer until the goods are tendered to the buyer at the designated place. Since this was a destination contract, the risk of loss remained with the wholesaler because the flowers were destroyed prior to reaching the buyer. Due to the condition of the flowers, the wholesaler failed to make a perfect tender, and the florist had the option to reject the goods. Consequently, the florist is entitled to a return of its $5,000 payment. When the wholesaler refused to ship other goods despite notification of the florist’s rejection, the florist could seek a return of his payment. Answer choice A is incorrect because, although a shipment contract (i.e., a contract that requires the seller to deliver the goods to a third-party carrier rather than the buyer) is the default type of contract, the parties are free to specify the place of delivery. In this case, the parties entered into a destination contract specifying the local florist as the delivery location. As a consequence, the risk of loss did not pass to the local florist. Answer choice C is incorrect because, although the loss of the flowers was not due to the fault of either party, the risk of loss is not shared in such case. Answer choice D is incorrect because payment, in part or full, by the buyer of the purchase price does not shift any portion of risk of loss to the buyer.
At lunch with two co-workers, the owner of a bike offered to sell it to his manager for $100. His manager replied, “That ancient thing? I’ll give you $50 for it.” The owner’s assistant then stated, “I’ll buy it for $75.” Immediately after the owner responded, “OK,” the manager said, “Wait a minute. How old is it?” When the owner replied, “Two years old,” the manager said, “OK, I’ll buy it for $100.”
Which of the following statements is true?
The owner may sell the bike to his manager for $100.
BThe owner must sell the bike to his manager for $100.
CThe owner must sell the bike to his assistant for $75.
DThe owner may accept his manager’s offer of $50.
Answer choice C is correct. The owner made an offer to sell the bike to his manager for $100. Since the owner’s offer was not directed to his assistant, the assistant’s statement, “I’ll buy it for $75” constituted an offer, which the owner accepted. Consequently, the owner must sell the bike to his assistant for $75. Answer choice A is incorrect because the owner accepted his assistant’s offer prior to the manager’s acceptance of the owner’s original offer. Therefore, the owner is bound by his contract with the assistant and cannot sell the bike to the manager. Answer choice B is incorrect because the owner’s acceptance of his assistant’s offer and the manager’s awareness of that acceptance effectively revoked the owner’s offer prior; the manager could not subsequently accept the owner’s offer. Answer choice D is incorrect because, although the owner could have accepted his manager’s counteroffer of $50 for the bike, the owner’s acceptance of his assistant’s offer of $75 and the manager’s awareness of this acceptance operated as a rejection of the manager’s counteroffer. Therefore, the owner may not accept the manager’s offer of $50.
An adult daughter called a local restaurant to place a large delivery order. The restaurant generally requires a credit card for all delivery orders, but the daughter’s father, who is a regular at the restaurant and happened to be there when the daughter placed the order, told the clerk that, in the event the daughter failed to pay for the food, he would do so. The restaurant delivered the order to the daughter, who, having decided to order something else instead, refused to accept or pay for the food.
Can the restaurant collect from the father?
No, because the father’s promise was made orally.
BNo, because a third party will not be held liable for the contract obligations of another.
CYes, because the father promised to pay.
DYes, because a parent is liable to pay for necessities provided to a child.
Answer choice A is correct. The Statute of Frauds applies to suretyship agreements (i.e., one person’s promise to pay the debts of another). Here, the daughter ordered food and was obligated to pay for the food. However, the father also promised to pay for the food if the daughter did not. This promise created a suretyship agreement. Since this agreement was not in writing, the restaurant cannot enforce it. Note that some oral suretyship contracts can be enforced (indemnity contracts and contracts wherein the surety’s main reason for paying the debt is the surety’s own economic advantage), but those circumstances are not present here. Answer choice B is incorrect because third parties may be liable for the debts of another if they agree to be sureties. In such cases the surety agreement must generally be in writing. Answer choice C is incorrect because, although the father did promise to pay for the food if his daughter failed to do so, the Statute of Frauds applies to a suretyship agreement. Since the agreement was not in writing the father’s promise is unenforceable. Answer choice D is incorrect because, although a parent is liable for necessities, such as food, provided by a third party to a minor child, a parent is not liable for necessities provided to an adult daughter or son.
A plastics manufacturer saw an advertisement for a plastic extruding machine. The manufacturer contacted the seller and made arrangements to inspect the machine at the seller’s place of business. The manufacturer walked around the machine once and stated: “Yes, this looks like what I need.” When the manufacturer asked the price, the seller stated a price that was less than half the amount a similar, functioning, used machine commanded on the market. The manufacturer was surprised at the low price, but did not inquire as to the reason. The seller encouraged the manufacturer to perform a closer inspection before finalizing the purchase and offered to open the motor housing so that the motor could be examined, but the manufacturer declined. The parties completed the sale. The manufacturer transported the extruding machine to his factory. When it arrived, he first learned that the motor was burned out and required complete replacement, as was readily apparent upon visual inspection of it. Replacement of the motor would cost roughly the amount the manufacturer had paid for the machine. The manufacturer contacted the seller to return the machine, but the seller refused. The manufacturer filed suit against the seller.
Will the manufacturer prevail?
A Yes, because the seller violated the implied warranty of merchantability by selling a machine with a burned-out motor.
B Yes, because the manufacturer’s unilateral mistake regarding the condition of the machine was caused by the seller.
C No, because the seller made no claims regarding the operability of the machine.
D No, because the manufacturer waived any implied warranties by failing to inspect the machine.
Answer choice D is correct. Under UCC Article 2, a warranty of merchantability is implied whenever the seller of goods is a merchant. To be merchantable, goods must be fit for their ordinary purpose and pass without objection in the trade. A breach of this warranty must have been present at the time of the sale. However, if the buyer, before entering into the contract, has examined the goods as fully as the buyer desires, or has refused to examine the goods, there is no implied warranty with respect to defects that an examination would have revealed to the buyer. Here, the manufacturer declined to closely inspect the machine, even after learning of the unusually low sales price. Had he done so, he would have discovered the damaged motor when he opened the motor housing, which the seller had offered to do. Because the manufacturer refused to examine the goods, he waived any implied warranty of merchantability that would have otherwise attached to the sale. Answer choice A is incorrect because the manufacturer waived the implied warranty of merchantability when he declined to inspect the machine. Answer choice B is incorrect because the seller did not cause the manufacturer’s unilateral mistake; rather, the seller offered to open the motor housing, and the manufacturer declined the offer. Answer choice C is incorrect because the warranty of merchantability is implied in all sales of goods and need not be expressly stated by the seller. If the defect could not have been uncovered by a reasonable inspection, the manufacturer would have had a valid claim against the seller for violation of the implied warranty of merchantability, even though the seller had not expressly made any such claims.
A paving company entered into a contract with a real estate developer to repave a large parking lot in the developer’s shopping center. Since the paving company wanted to establish a good reputation in the market, it discounted its price. The paving company expected to make $20,000 in profit on the contract.
Midway through the project, the developer notified the paving company to cease work; the paving company immediately complied. At the time of the notice, the paving company had incurred costs of $200,000. The cost of hiring another contractor to perform the same work would have been $225,000. The paving work performed had increased the value of the shopping center by $100,000. The paving company filed a lawsuit against the developer. The fact finder determined that the developer’s repudiation of the contract was without justification. What is the maximum amount of damages the paving company can be awarded?
A$100,000, the amount by which the value of the shopping center was increased.
B$200,000, the costs incurred by the paving company.
C$220,000, the developer’s expectancy damages.
D$225,000, the amount that the developer would have had to pay for the portion of the paving job that was completed.
Answer choice D is correct. Although expectancy damages normally are awarded in a breach-of-contract action, restitutionary damages are permitted in cases where the nonbreaching party has partially performed a below-market-price contract. Otherwise, the breaching party would profit from its breach. Consequently, the paving company may recover the benefit conferred upon the developer as measured by the amount the developer would have had to pay to secure the same performance as that rendered by the paving company. Answer choice A is incorrect because, although the increase in the defendant’s property value due to the plaintiff’s performance is one measure of restitutionary damages, that amount is less than the paving company’s restitutionary damages as measured by the cost to the developer of obtaining the same performance rendered by the paving company. Answer choice B is incorrect because the paving company’s reliance damages are exceeded by both its expectancy and restitutionary damages. Answer choice C is incorrect because the paving company’s expectancy damages, based on the cost incurred by the company plus its profit on the contract, are less than the company’s restitutionary damages.
On behalf of an elementary school, the school’s principal entered into a written contract to purchase shirts for the school’s students for a total cost of $5,000. The name of school was to be imprinted on the back of each shirt. After the seller had acquired the shirts but before they had been imprinted, the principal emailed the seller and requested, in good faith, that a picture of the school’s mascot be imprinted on the front of the shirts at no additional cost. In a reply email, the seller agreed to the principal’s request. When the shirts arrived at the school, only the school’s name appeared on the back of each shirt; the school’s mascot did not appear on the shirt. The principal rejected the shirts and refused to pay for them. The seller sued the school for breach of contract. Who will prevail?
AThe seller, because the shirts were specially manufactured goods.
BThe seller, because the seller did not receive consideration for the modification.
CThe school, because the school was not a merchant.
DThe school, because of the perfect tender rule.
Answer choice D is correct. In a sale-of-goods transaction, such as the purchase of shirts, the Uniform Commercial Code (UCC) requires that the goods tendered by the seller conform in all respects to the contract. Although the shirts shipped to the school conformed to the specifications of original contract, this contract was modified by the subsequent emails between the principal and the seller. Answer choice A is incorrect because the fact that the shirts were specially manufactured goods is relevant only when the buyer is claiming the statute of frauds as a defense. The fact that the goods were specially manufactured is irrelevant to the validity of the written agreement to modify the original contract in this case. Answer choice B is incorrect because the UCC, rejecting the preexisting duty rule, does not require consideration in order for the good-faith modification of a contract to be valid. Answer choice C is incorrect because the school’s status as a non-merchant is irrelevant to determining the terms of this contract or its breach.
A machinist was interested in purchasing high-grade aluminum stock from a metal distributor. The aluminum was used in the machining of custom valves. During a Friday evening dinner, the machinist said to the distributor, “Let me order 12,000 pounds of high–grade aluminum from you.” The distributor orally accepted the order, then took a paper napkin and wrote “CONTRACT: 12,000 LBS HIGH-GRADE ALUMINUM FOR MACHINIST” and signed the napkin, which the machinist retained. Over the weekend the market price for aluminum rose from $1 to $1.25 per pound. First thing on Monday morning, the machinist called the distributor. The parties immediately became embroiled in an argument as to the price to be charged for the aluminum, and the distributor refused to deliver the aluminum. The machinist filed suit for breach of contract.
Is there an enforceable contract between the distributor and the machinist?
AYes, because the parties’ oral agreement sufficed to form a binding contract.
BYes, because of the napkin.
CNo, because the parol evidence rule will prevent the introduction of the oral agreement.
DNo, because the distributor and the machinist did not agree on a price term.
Answer choice B is correct. Because the agreement involves a sale of goods, the UCC governs. Under the UCC, a contract is formed if both parties intend to contract and there is a reasonably certain basis for giving a remedy. As long as the parties intend to create a contract, the UCC “fills the gap” when a contract is silent as to a term, such as the time or place for delivery, or even the price for the goods. Although under the Statute of Frauds a sale of goods contract for $500 or more must be evidenced by a writing in order to be enforceable, the writing need only i) indicate that a contract has been made; ii) identify the parties; iii) contain a quantity term; and iv) be signed by the party to be charged. These elements are satisfied by the writing on the napkin. Answer choice A is incorrect because the contract concerns the sale of goods for at least $500, and must therefore satisfy the statute of frauds; an oral argument will not suffice. Answer choice C is incorrect because, although the parol evidence rule applies to introduction of prior extrinsic evidence as to the terms of a written contract, the oral agreement in this case merely establishes the fact that there was an agreement and reflects the quantity term contained in the writing. Answer choice D is incorrect because, although the price term is missing, under the UCC, a court can fill in gaps in a contract when the contract is silent as to certain of its terms, including price. Here, because the court has an objective way of determining a reasonable price for the aluminum, the contract will not fail for want of a price term.
A daughter successfully petitioned a court to have her father declared incompetent to manage his affairs and to have herself appointed as guardian of his property. Subsequently, the father ordered furniture totaling $3,500 from a local store. The store, unaware of the guardianship and not otherwise having a reason from the father’s behavior to learn of his incompetency, delivered the furniture to the father’s residence where he received and accepted it. The next day a flood destroyed the furniture before the daughter had the opportunity to contact the store.
Is the store entitled to enforce the contract for the sale of the furniture?
AYes, because the risk of loss had passed to the father, as buyer of the furniture, upon its delivery.
BYes, because the store was unaware of the guardianship and the father’s incompetency.
CNo, because the daughter did not have the opportunity to contact the store.
DNo, because the father had been adjudicated incompetent.
Answer choice D is correct. An individual who is the subject of a court-ordered guardianship over that individual’s property lacks the capacity to enter into a contract. Consequently, any contract purportedly entered into by such an individual is void. Since the father was under a court-ordered guardianship, his contract to purchase the furniture was void. (Note: If the furniture is a necessity, the store may be able to recover the furniture’s reasonable value in restitution under a quasi-contract action, but cannot enforce the contract of sale between the store and the father.) Answer choice A is incorrect because, although where a contract for the sale of goods exists the delivery of the goods by the seller to the buyer generally shifts the risk of loss to the buyer, here the purported contract entered into by the father for the purchase of the furniture was void. Answer choice B is incorrect because, where a guardianship over an individual’s property has been recognized by a court, the seller’s lack of actual knowledge of the guardianship or the individual’s inability to contract is irrelevant. Answer choice C is incorrect because, since the father’s contract with the store was void rather than merely voidable, the daughter’s lack of opportunity to contact the store is irrelevant.
A farmer contracted with a fruit distributor to sell the distributor 1,000 bushels of peaches at $10 per bushel, the going market price for peaches. After the parties executed the contract, a late frost in a neighboring state completely destroyed that state’s peach crop. The affected state normally produced over half the peaches grown in the country. In response, the market price of peaches spiked to over $50 per bushel. The farmer attempted to renegotiate with the distributor, who refused to modify the contract. Thereafter, the farmer refused to deliver the peaches as scheduled. The distributor sued the farmer, who raised the defense that to force him to sell his produce so far below market value would be unconscionable.
Does the farmer have a valid defense?
AYes, because no reasonable person would agree to sell peaches at one-fifth of market price.
BYes, because the frost was unforeseeable.
CNo, because the farmer and the distributor had fairly equal bargaining power.
DNo, because the contract price was reasonable when the farmer agreed to it.
Answer choice D is correct. The UCC provides that a court may modify or refuse to enforce a contract or part of a contract on the ground that it is unconscionable, that is, when it is so unfair to one party that no reasonable person in the position of the parties would have agreed to it. The contract or part of the contract at issue must have been offensive at the time it was made. Here, the farmer contracted with the distributor to sell peaches at $10 per bushel, which was a fair market price at the time the parties entered the contract. The fact that intervening events caused prices to rise only means that the farmer did not receive as good a deal as he could have if he had waited; this, however, is the risk inherent in business dealings and does not make the transaction unconscionable. Answer choice A is incorrect because this addresses only half of the analysis; the unfairness must also exist at the time of contracting. Answer choice B is incorrect because foreseeability is not a relevant factor in an unconscionability inquiry. Answer choice C is incorrect because, while the defense of unconscionability is often used when there is a contract between parties with vastly unequal bargaining power, that is not the only way that a contract could be unconscionable. In other words, this contract still could have been unconscionable, even if the bargaining power of the two parties was relatively equal.
A carpenter and a homeowner entered into a valid written contract for the carpenter to design, build, and install kitchen cabinets in the homeowner’s house at a cost of $25,000; the price includes the cost of materials used, but mostly reflects the cost of the carpenter’s services. After execution of the contract, but before beginning performance, the carpenter realized that his initial calculations were incorrect. The carpenter phoned the homeowner, explained the matter, and demanded an additional $5,000 in order to perform the job. The homeowner orally agreed, after securing the carpenter’s consent to change the style of handles and hinges to be used on the cabinets, a change that, unaware to the homeowner, resulted in a cost savings to the carpenter. The carpenter constructed and installed the cabinets. When the homeowner tendered a check for $25,000 to the carpenter, the carpenter demanded the agreed-upon contract price of $30,000.
In a common-law jurisdiction, is the carpenter likely to prevail in his demand for the full $30,000?
AYes, because the homeowner agreed to pay the higher amount.
BYes, because the carpenter’s duties under the contract were modified.
CNo, because the carpenter did not suffer a financial detriment.
DNo, because the oral modification violated the Statute of Frauds.
Answer choice B is correct. Unlike a contract for goods, modification of a contract for services must be supported by consideration. Where a contract has both services and goods elements, the predominant purpose test applies. Since the cost of the carpenter’s services exceed those of the materials used to make the cabinets, this contract is likely to be classified as a contract for services. Consideration can be found when there is a change in a party’s duties, even where that change is financially beneficial to the party. Answer choice A is incorrect because, although the homeowner did agree to pay the higher amount, this promise is unenforceable under the pre-existing duty rule unless there is variation in the carpenter’s duties. In this case, the carpenter agreed to use different hardware on the cabinets. Answer choice C is incorrect because, although the carpenter did not suffer a financial detriment as a result of the change in the type of hardware to be used on the cabinets, the carpenter’s duties were varied. Generally, a court will not evaluate the adequacy of consideration where the consideration is given as part of a bargained-for exchange. Answer choice D is incorrect because, although the Statute of Frauds applies to a contract that, as modified, falls with its provisions, this contract, being one for services, does not violate the Statute of Frauds. Even if the value of the materials used by the carpenter is $500 or more, the UCC Statute of Frauds provision does not apply because the contract will be classified as one for services, not goods.
As part of a divorce settlement, an ex-husband purchased from an insurance company an annuity to be paid at a fixed amount quarterly over the life of his ex-wife. Within a week after the purchase, the ex-wife learned that she had a fatal illness, which had not previously manifested itself, but had existed for some time. She died two months later, prior to receiving any payments from the annuity. The ex-husband filed suit to rescind the annuity contract.
Will he be successful?
ANo, because the annuity contract was a third-party beneficiary contract.
BNo, because the ex-husband assumed the risk of his ex-wife’s death.
CYes, because the ex-wife’s death frustrated the purpose of the annuity.
DYes, because the husband and the insurance company made a mutual mistake as to ex-wife’s health.
Answer choice B is correct. An annuity contract requires the payment of a fixed amount periodically for the duration of a person’s life. The purchaser assumes the risk that the person on whose life the annuity is based will die before the price paid for the annuity is recouped, and the issuer of the contract assumes the risk that that person will live beyond the recoupment date. This assumption of the risk is inherent in the nature of the annuity contract. Answer choice A is incorrect because the husband, as one of the parties to the annuity contract, did not surrender his contract rights merely because the contract was entered into by the ex-husband for the benefit of his ex-wife. Answer choice C is incorrect because, although the ex-wife’s death did prevent her from receiving any benefit from the annuity, her death, while unanticipated, could not be characterized as unexpected. Instead, the occurrence of the ex-wife’s death was a basic assumption on which the contract was based. The termination of the insurance company’s obligation was specifically linked to her death. Answer choice D is incorrect because, in order for a contract to be avoided due to a mutual mistake, this risk of the mistake cannot have been assumed by the party seeking to avoid the contract. The ex-husband, as purchaser of the annuity, assumed the risk his ex-wife would die before the purchase price of the annuity could be recouped by her.
A homeowner and his neighbor agreed that each would remove a dying tree from their yards. The homeowner entered into a contract with a tree service to cut down and remove his dying tree for $4,000. Through a mix-up, the tree service cut down and removed a similar dying tree on the neighbor’s property. Upon coming home that evening, the neighbor discovered the absence of her tree and found the tree service’s bill for $4,000 taped to her door. She called the tree service, revealed that she had planned to have the tree removed, and promised that she would pay the bill. The neighbor failed to pay the tree service.
Of the following, which is the tree service’s best argument to recover from the neighbor?
AThe tree service and the neighbor entered into a unilateral contract, which the tree service accepted by performance.
BThere was an implied-in-fact contract between the tree service and neighbor because the neighbor planned to have the tree removed.
CThe neighbor made a promise to pay for a benefit received.
DThe tree service was a third-party beneficiary of the agreement of homeowner and the neighbor.
Answer choice C is correct. When a party performs an unrequested service for another party that constitutes a material benefit, the person may be entitled to recover to the extent that the other person has been unjustly enriched. Note that if the benefit to the neighbor from the tree service’s actions is less than $4,000, the tree service could only enforce the neighbor’s promise to the extent of that benefit. Answer choice A is incorrect because, while a unilateral contract is accepted by performance, at the time of the tree service’s performance, the neighbor did not extend any offer for the service to accept. Answer choice B is incorrect because the neighbor’s plan to have the tree removed did not create an implied in fact contract. The neighbor was not aware of the tree service’s cutting down and removing her tree until after these acts had been completed and thus could not be said to have tacitly consented to them. Answer choice D is incorrect because, under the First Restatement approach, the tree service was neither a creditor nor donor beneficiary of the agreement between the homeowner and his neighbor, and under the Second Restatement approach, the tree service was merely an incidental beneficiary of the agreement. Consequently, the tree service did not have enforceable rights as a third party beneficiary of the agreement.
A lumberyard contracted with a retail home improvement company to provide the company with pine boards of various lengths and amounts. The contract was silent as to delegation, and the lumberyard, acting in good faith, delegated its duties under the contract to a third party. After asking for, and receiving, assurances from the third party that the boards would conform to contract specifications, the company agreed to the delegation. The third party delivered the boards, which the company rejected because the shipment did not conform to its specifications. The company sued both the lumberyard and the third party. The lumberyard moved to dismiss the claims against it.
Should the court dismiss the suit against the lumberyard?
AYes, because the company agreed to the delegation.
BYes, because the lumberyard delegated its contractual duties in good faith.
CNo, because this sale of goods contract did not specifically allow for the delegation of duties.
DNo, because a delegation of duties does not absolve the lumberyard of its contractual liability.
Answer choice D is correct. Generally, when contractual obligations are delegated, the delegator is not released from liability, and recovery can be had against the delegator if the delegatee does not perform. Consequently, the lumberyard remained liable on the contract. Answer choice A is incorrect because, while a party to a contract may be released from liability if the other party agrees to release that party and substitute a new one (a novation), mere acceptance of a delegation does not constitute a novation, and the lumberyard remained liable on the contract. Answer choice B is incorrect because the mere fact that a party to a contract delegates its duties in good faith does not eliminate its duties to perform under the contract. Answer choice C is incorrect because it misstates the law. There is no UCC provision that prevents the delegation of duties unless the contract specifically provides for it.
An electrician and a landlord executed a contract under which the electrician agreed to upgrade the electricity in the landlord’s ten-unit apartment building at a cost of $10,000. The electrician began work as scheduled and completed two of the ten identical units before quarrelling with the landlord. The electrician refused to complete the job. The landlord hired another electrician who completed the last eight units at $1,100 each in the same time frame as was contemplated in the landlord’s contract with the electrician.
If the first electrician sues the landlord for restitution damages, how much will a court likely award?
A$9,200
B$2,000
C$1,200
D$0
Answer choice C is correct. Restitutionary damages restore to the plaintiff (here, the electrician) whatever benefit was conferred upon the defendant (here, the landlord) prior to the breach. If the plaintiff breached the contract, his damages are generally limited to the amount of wealth conferred upon the defendant, which would take into consideration any damages suffered by the defendant. In this case, the electrician conferred roughly $2,000 of benefit on the landlord (two-tenths of the value of the original contract, assuming the contract price reflected the value conferred), and the landlord incurred $800 in extra costs as a result of the electrician’s breach (an extra $100 per unit x eight units). Accordingly, the electrician is entitled to $1,200, or the amount of benefit the electrician conferred upon the landlord. Answer choice A is incorrect because the electrician was in breach and did not substantially perform his contractual obligations. Consequently, he is not entitled to recover the full contract price ($10,000) less damages incurred by the landlord because of the electrician’s breach ($100 x 8, or $800). Answer choice B is incorrect. Had the electrician sought expectation damages under the contract, he may have been entitled to $2,000 if it was determined that the contract was divisible, because he completed two out of the ten units. However, this amount fails to take into account the cost of completion. Answer choice D is incorrect because the electrician would be entitled to recover some amount of damages, namely the amount of wealth incurred upon the landlord.
A seller offered his antique sports car to a buyer for $10,000, with the option expiring in forty-eight hours. The morning after the parties discussed the offer on the phone, the seller offered to drive the car to the buyer’s home so the buyer could inspect the car, see how it looked in his own driveway, and make a final decision on whether he wanted to buy the car. On the way to the buyer’s house, the seller was in an accident that totaled the car. Before the seller called to tell the buyer about the accident, the buyer called him to accept the offer. Once he learned of accident, the buyer demanded that the seller provide him with a similar antique sports car.
Is the seller required to provide the buyer with a similar antique sports car?
AYes, because driving the first car to the buyer’s home constituted partial performance.
BYes, because the first car would not have been destroyed but for the drive to show it to the buyer.
CNo, because the first car was destroyed.
DNo, because the buyer did not accept the offer during the original phone call.
Answer choice C is correct. An offer involving subject matter that is destroyed is terminated. Here, when the car was destroyed in the accident, the offer terminated as well. Therefore, the buyer could not have accepted it or demanded a similar car. Answer choice A is incorrect because performance would not apply when the offer was only an option. Further, the destruction of the car terminates the option. Answer choice B is incorrect because it is not an accurate statement of the law; the manner in which the car was destroyed is irrelevant here. Answer choice D is incorrect because the fact that the buyer did not accept the offer during the phone call would not affect his ability to do so, had the car not been destroyed.
A manufacturer of plywood ordered an adhesive from a commercial seller. The seller shipped the adhesive with an invoice. Printed on the invoice was a notice that limited the manufacturer’s right to bring any action arising from the sale to one year after the accrual of the cause of action. The manufacturer paid the invoice without objection. The statutory period for bringing a cause of action based on sale of goods contracts is four years. The manufacturer filed a suit that arose from the contract two years after the cause of action accrued.
Can the seller successfully challenge the suit as time barred?
AYes, because the manufacturer failed to object to the invoice notice.
BYes, because merchants are free to set whatever limitations period for bringing an action that arises from a sale of goods.
CNo, because the one-year limitation term is not part of the contract.
DNo, because the statutory limitations period cannot be shortened.
Answer choice A is correct. As between merchants, an additional term contained in the acceptance is automatically included in the contract unless the offer expressly limits acceptance to the terms of the offer, the offeror has already objected to the additional terms or does so within a reasonable time, or the term materially alters the original contract. A seller can accept a buyer’s offer by shipping the goods, which the commercial seller did in this case. Since the manufacturer did not object to the notice regarding the shortened limitations period and since a term that limits remedies, such as this notice, typically does not constitute a material alteration of a contract, the seller is likely to be able to successfully raise the one-year limitations period contained in the notice as a defense to the manufacturer’s lawsuit. Answer choice B is incorrect because, while any parties to a sale of goods, not just merchants, can shorten the limitations period in which a lawsuit can be brought, there is a one-year floor below which the period cannot be reduced. In addition, parties to a sale of goods cannot extend the limitations period beyond four years. Answer choice C is incorrect because, as noted with respect to answer choice A, the one-year limitation term became part of the contract upon the failure of the manufacturer to object to this term within a reasonable time. Answer choice D is incorrect because, as noted with respect to answer choice B, the statutory limitations period can be shortened by the parties to as little as one year.
At a fundraising dinner for a homeless shelter, a wealthy philanthropist told the shelter’s director that he would give $50,000 to the shelter at the end of the year. The shelter did not provide consideration for the philanthropist’s promise and there is no evidence that the shelter relied on the philanthropist’s promise. After a falling out with the director, the philanthropist refused to make the promised payment to the shelter.
In an action for breach of contract to recover the $50,000, will the shelter be successful?
A No, because a promise to make a gift is unenforceable without consideration.
B No, because an oral promise to make a gift does not create an enforceable contract.
C Yes, because the philanthropist’s promise is enforceable as a charity subscription.
D Yes, because a charity need not establish that it has relied on philanthropist’s promise in order to enforce that promise.
Answer choice B is correct. A promise to make a gift generally does not create an enforceable contract because there is no consideration for the promise. While the promise of a charitable donation is enforceable under the doctrine of promissory estoppel (i.e., detrimental reliance), and some courts recognize the application of this doctrine without explicit proof that the charity relied on the promise, in order to enforce such a promise, the Second Restatement requires that the promise be in writing. Answer choice A is incorrect because, in order to be enforceable, a promise to make a charitable contribution need not be supported by consideration, but can be enforceable under the doctrine of promissory estoppel. Answer choice C is incorrect because, since the philanthropist’s promise was not in writing, it did not qualify as a charitable subscription. Answer choice D is incorrect because, while some courts do not require that a charity establish that it has relied on a donor’s promise in order to enforce that promise, the Second Restatement does require that such a promise be in writing in order to be enforceable.
A merchant and manufacturer entered into a contract for the sale of a large grandfather clock built by the manufacturer. The manufacturer already had a number of grandfather clocks built, each with slight aesthetic differences, and the contract provided for the sale of a particular clock identified by serial number. The contract specified that the manufacturer would ship the clock by a third-party carrier. However, the contract did not specify either who was to pay the costs of carriage or the place of tender for the clock. The manufacturer shipped the clock identified in the contract to the seller via a carrier pursuant to a proper contract for its carriage. The carrier delivered the clock to merchant and the merchant verified that the clock delivered was the one specified in the contract.
Under these facts, when did risk of loss pass to the merchant?
AWhen the contract was made.
BWhen the clock was delivered to the carrier and a proper contract for its carriage was made.
CWhen the clock was unloaded on the merchant’s premises by the carrier.
DWhen the merchant verified that the clock delivered was the clock specified in the contract.
Answer choice B is correct. Under UCC § 2-509(1), a contract that requires the seller to ship goods to the buyer by a third-party carrier is either a shipment or a destination contract. When the contract requires shipment by a third-party carrier, a shipment contract is presumed unless the contract indicates otherwise. Because this is presumed to be a shipment contract, the risk of loss would pass from the manufacturer to the merchant when the manufacturer duly delivered the clock to the third-party carrier. Therefore, answer choice B is correct. Answer choice A is incorrect because UCC § 2-509(1)(a) and (b) do not pass the risk of loss from the seller to the buyer at the time of contract formation. Answer choice C is incorrect because, due to the presumption of a shipment contract when the contract requires shipment by a third party carrier, this is not a destination contract. Answer choice D is incorrect because, although UCC § 2-510 places the risk of their loss on the seller when a tender or delivery of goods so fails to conform to the contract as to give a right of rejection, since the merchant shipped the clock identified in the contract to the seller, the merchant’s act of identifying the clock as conforming to the contract does not alter the passing of risk to the merchant when the clock was delivered to the carrier and proper contract for its carriage was made.
A car salesman at a car dealership called out with a megaphone, “Free set of wheels to the next person who buys a car from me!” He was surrounded by expensive high-end vehicles at the dealership, which specialized in that type of vehicle. A customer immediately approached the salesman and purchased a new vehicle for his son, believing that he would have a nice new car to give to his daughter as well. The salesman then walked to the dealership’s garage and walked out with a shiny new bicycle. The customer responded that the salesman was contractually obligated to give him a car. The salesman laughed and said that he was never offering a free car, but would cancel the sale of the first car as a consolation.
Is the salesman obligated to give the customer a free car?
AYes, because the customer reasonably believed the salesman was making a valid offer.
BYes, because a reasonable person would have believed the salesman was offering a free car.
CNo, because no reasonable person would believe that the salesman was offering a free car.
DNo, because the salesman was willing to cancel the sale.
Answer choice C is correct. A statement is an offer only if the person to whom it is communicated could reasonably interpret it as an offer. The primary test of whether a communication is an offer is based on the objective theory of contracts; i.e., whether an individual receiving the communication would believe that he could enter into an enforceable agreement by satisfying the condition. Here, although the salesman made a specific offer with a specific method to accept the offer, no reasonable person would believe that the dealer intended to provide buyers with an additional car of the same value. Answer choice A is incorrect because the customer’s subjective belief does not determine whether a contract exists. Answer choice B is incorrect because no reasonable person would believe that the offer and acceptance reflected a free car in exchange for the purchase of another car (though a reasonable person may believe that the dealer intended to provide buyers with a free set of tires, or some other type of less-expensive vehicle, or, as here, a free bicycle). Answer choice D is incorrect because the salesman cannot generally invalidate the offer and acceptance in order to avoid performance, if the customer wanted to go through with the sale.
A homeowner entered into a written contract with a furniture maker to construct ten identical custom-made chairs for her kitchen at a cost of $500 per chair. The chairs were to be paid for upon delivery. After the furniture maker had made three of the chairs at a cost to the furniture maker of $300 per chair, the homeowner cancelled the contract. The furniture maker sold the three chairs to a third party for a total of $700. The furniture maker then sued the homeowner for restitution.
What is the maximum monetary award to which the furniture maker is entitled? ANothing B$800 C$900 D$1,500
Answer choice A is correct. An action in restitution is based on the restoration to the plaintiff of the benefit conferred on the defendant. Here, the homeowner did not receive a benefit from the furniture maker; the chairs had not been delivered to the homeowner. Consequently, in a suit seeking restitution, the furniture maker is not entitled to any recovery. Note that a real-world plaintiff would likely sue for the legal remedy of breach of contract and demand $800 in damages. Answer choice B is incorrect because $800 represents the difference between the contract price for the three chairs ($1,500) and the amount received from selling those chairs ($700), not the amount of the benefit received by the homeowner from the furniture maker. Answer choice C is incorrect because $900 represents the amount that the furniture maker expended in reliance on the contract, not the amount of the benefit received by the homeowner from the furniture maker. Answer choice D is incorrect because $1,500 represents the pro rata contract price of the three chairs that the furniture maker did construct, not the amount of the benefit received by the homeowner from the furniture maker.
On March 1, the owner of a ferry boat that operated only during daylight hours during the summer months of June, July, and August entered into a written agreement with a man to serve as the captain of the boat for the upcoming season. On May 1, the owner contracted with a woman to serve as the captain of the boat. On May 30, the man was diagnosed will an illness, and the treatment for this illness prevented him from being employed until the following year. On May 31, the owner, learning of the man’s illness, told him not to worry about their contract, as he had found someone else to serve as captain of the ferry boat. The woman served as captain of the ferry boat for the summer months of June, July, and August that year.
On September 1, the man sued the owner for damages based on a breach of their contract.
Will his suit succeed?
ANo, because the man was unable to serve as the captain of the boat during the summer months.
BNo, because the owner informed the man about the owner’s contract with the woman prior to June 1.
CYes, because the owner’s contract with the woman constituted an anticipatory breach of the owner’s contract with the man.
DYes, because the owner did not inform the man of the owner’s contract with the woman until after the man learned he had cancer.
Answer choice A is correct. The owner’s contract with the woman to serve as the captain of the ferry boat constituted an anticipatory breach of the owner’s contract with the man, since the owner would not have been able to employ both the man and the woman as the captain of the ferry boat. An anticipatory breach may be effected by an act as well as by words. Despite this breach, the owner’s duty to pay damages to the man was discharged by the man’s inability to have served as the captain of the ferry boat. Answer choice B is incorrect. Although the owner did tell the man about the owner’s contract with the woman prior to the date on which the man was to begin serving as captain, this information constituted an anticipatory breach of the owner’s contract with the man rather than a reason for excusing the owner from honoring that contract. Instead, it is the man’s inability to serve as captain of the ferry boat during the summer months that discharges the owner’s duty to pay damages. Answer choice C is incorrect because, although the owner’s contract with the woman to serve as captain of the ferry boat did constitute an anticipatory breach of the owner’s contract with the man, the owner’s duty to pay damages to the man as a consequence of this breach was discharged by the inability of the man to have served as captain of the ferry boat during the summer months. Answer choice D is incorrect because, while the owner’s delay in telling the man about the other contract was almost certainly not in good faith, there is no indication that this delay caused the man to forego other employment. Moreover, even had the man been able to secure alternative employment for the summer months, the man’s physical condition would have prevented him from being employed during that time.
A party-planning company specialized in creating and selling nine different kits for themed parties. A store that sells party related items entered into a written agreement with the company. Under this agreement, the company was to deliver 500 kits to the buyer by November 1. The agreement stated that selections regarding the type of kit and the number of each were to be made by October 15, but did not specify who was to make the selections. Neither the store nor the company selected any assortment of the kits by October 15. On October 16, the company notified the store that due to its breach, the company would not be shipping the party kits. At that time, the company had a surplus of all of their merchandise and could have filled the store’s order with any combination of themed kits. On October 17, after receiving the company’s notification, the store informed the company of its selections, but the company refused to send the kits that the store selected.
If the store sues the company for breach of contract on November 1, is the store likely to prevail?
ANo, because the failure in the agreement to specify the party responsible for making the selection of type and number of each kit renders the contract unenforceable due to the indefiniteness of its terms.
BNo, because the company had no duty to perform since an assortment was not selected by October 15.
CYes, because the company was required to make a reasonable selection of available merchandise to fill the order.
DYes, because the store’s two-day delay in making its selection did not have a material effect on the company’s ability to perform the contract.
Answer choice D is correct. When a contract fails to specify the assortment of goods, the duty to select the assortment falls on the buyer. If the buyer fails to specify the assortment of goods, then the seller can treat the failure as a breach by failure to accept the contracted-for goods only if the buyer’s failure materially impacts the seller’s performance. Since there is no indication that the store’s failure to select the assortment of party kits by October 15 would affect the company’s ability to satisfy the store’s order, the company could not treat that failure as a breach. Consequently, the company’s own failure to ship the store’s selections constituted a breach of contract for which the store is likely to recover damages. Answer choice A is incorrect because, under the UCC, a contract that is otherwise sufficiently definite is not invalid merely because the agreement fails to specify the assortment of goods to be delivered to the buyer. Answer choice B is incorrect because, even though the selection of the assortment was not made by October 15, the UCC provides that seller can treat the failure as a breach by failure to accept the contracted-for goods only if the buyer’s failure materially impacts the seller’s performance. Here, that is not the case. Answer choice C is incorrect because, while the company is required to act in a commercially reasonable manner when the buyer fails to make a selection of the goods to be shipped, the company as the seller is not required to make the selection.
On May 10, the coach of a youth league baseball team sent a letter to a supplier asking the supplier to promptly ship 20 red jerseys to him. On May 15, the supplier received this letter and sent the coach a reply letter accepting the offer. On May 16, the supplier realized that he had no red jerseys with which to fill the order, and sends the coach 20 blue jerseys with a note that the blue jerseys were tendered as an accommodation. The coach received the jerseys and accommodation note on May 18, and received the supplier’s acceptance letter on May 19.
On May 20, which of the following is a correct statement of the parties’ legal rights and duties?
AThe coach can either accept or reject the blue jerseys and, in either event, recover damages, if any, for breach of contract.
BThe coach can either accept or reject the blue jerseys, but if he rejects them, he will thereby waive any remedy for breach of contract.
CThe supplier’s shipment of nonconforming goods constituted an acceptance of the coach’s offer, thereby creating a contract for the sale of the blue jerseys.
DThe supplier’s shipment of the blue jerseys constituted a counteroffer.
Answer choice A is correct. A seller’s shipment of nonconforming goods with a notice of accommodation does not constitute an acceptance and breach, but rather a counteroffer, which the buyer is free to either accept or reject. However, an offer calling for prompt shipment can be accepted either by a prompt promise to ship or by the prompt shipment of goods. Under the mailbox rule, an acceptance is effective when mailed. Consequently, on May 15 when the supplier mailed his acceptance to the coach, a contract for 20 red jerseys was formed, even though the coach did not receive this acceptance until May 19. With regard to the May 16 shipment of blue jerseys by the supplier that the coach received on May 18, the coach may accept or reject these jerseys as nonconforming goods and, in either event, recover damages, if any. Answer choice B is incorrect. Although a seller’s shipment of nonconforming goods with a notice of accommodation does not constitute an acceptance and breach, but rather a counteroffer, which the buyer is free to either accept or reject, this is only true if the seller has not already accepted the buyer’s offer. Here, the supplier had earlier mailed its acceptance of the coach’s offer to supply red jerseys, so the supplier’s shipment of the blue jersey constitutes a breach of contract. Consequently, the coach may reject the blue jerseys without waiving any remedy for breach of contract. Answer choice C is incorrect because the supplier’s shipment of the blue jerseys did not constitute an acceptance of the coach’s offer, but a breach of the contract that had already been formed for the shipment of red jerseys. Answer choice D is incorrect because, although typically an accommodation shipment constitutes a counteroffer rather than an acceptance and breach of the contract, here the shipment, despite being designated as an accommodation, cannot be a counteroffer because the supplier had already accepted the coach’s offer.
A collector owned an Elizabethan-era tapestry in need of professional restoration and cleaning. The collector set up an appointment for a restorer to view the tapestry. After examining the tapestry, the restorer quoted the collector a price for the restoration and cleaning. The restorer told the collector that her offer would remain open for a week. Two days later, the restorer posted a note to the collector to tell him that she could not in fact perform the restoration due to a scheduling conflict. The next day the collector, before receiving this note, phoned the restorer and told her that he accepted her offer. The collector is suing the restorer for breach of contract.
Will the collector prevail?
ANo, because the offer was not supported by consideration.
BNo, because under the “mailbox rule,” the restorer’s revocation was effective before the collector accepted the offer.
CYes, because the collector had until the end of the week to accept the offer.
DYes, because the offer was not properly revoked before acceptance.
Answer choice D is correct because a revocation of an offer is only effective if the offeree has received the revocation. Here, the acceptance by phone came before the revocation by mail was received. Answer choice A is incorrect because, although generally an offer must be supported by consideration in order to be irrevocable, the offer had not been revoked at the time of its acceptance. Answer choice B is incorrect because the mailbox rule does not apply to a revocation, only to an acceptance. Answer choice C is incorrect because, since the offer was not supported by consideration, it could be withdrawn by the offeror at any time prior to acceptance by the offeree.
A manufacturer of portable X-ray machines contracted with a healthcare system to provide 25 custom-made portable X-ray machines to the system’s member hospitals, at a total cost of $3,000,000, to be delivered within sixty days. The machines use an isotope of the rare earth metal thulium as their radiation source. Without thulium, the portable X-ray machines cannot be manufactured. Several days after the manufacturer and healthcare system entered into the agreement, unprecedented rains in southern China caused a massive mudslide that destroyed operations at the only commercial thulium mine in the world. The mine owner stated that operations would not be restored for at least ninety days. The manufacturer subsequently informed the healthcare system that because of the sudden market shortage of thulium, it would not be able to deliver the portable X-ray machines in the time frame agreed upon in the contract. Sixty-one days after the contract was signed, the healthcare system filed a complaint alleging breach of contract.
Will the healthcare system likely prevail in its suit against the manufacturer?
AYes, because the manufacturer assumed the risk of the occurrence of a thulium shortage.
BYes, because the UCC perfect tender rule requires strict performance of the terms of the contract.
CNo, because the parties had made a mutual mistake.
DNo, because performance was impracticable.
Answer choice D is correct. A party’s duty to perform can be discharged by impracticability. The defense of impracticability is available if: (i) an unforeseen event occurs; (ii) the non-occurrence of which was a basic assumption on which the contract was based; and (iii) the party seeking discharge is not at fault. Here, the weather conditions in southern China were unprecedented, and the parties could not have foreseen a massive mudslide that destroyed the only thulium supply, making it impossible for the manufacturer to produce more portable X-ray machines. The manufacturer was not at fault for the weather in China, and therefore, would be able to raise a valid defense of impracticability. Answer choice A is incorrect because the facts do not indicate that the manufacturer had assumed the risk of a world shortage of thulium, either expressly or impliedly. Answer choice B is incorrect because although the UCC has adopted the perfect tender rule, it also recognizes the defense of impracticability, which discharges the manufacturer’s duties in this case. Answer choice C is incorrect because in order for mutual mistake to apply, the mistaken fact must have been in existence at the time the parties entered the contract.
An elderly woman and her friend went to a sewing shop frequented by quilters to buy a sewing machine. The salesperson showed the woman several models and allowed the woman to test the various units with small swatches of fabric. After using one machine, the woman turned to her friend and exclaimed, “This one sews like a dream; I can’t wait to start quilting on it.” The salesperson, who overheard the woman, knew that the sewing machine was appropriate only for lightweight fabrics and was not powerful enough for quilting, but said nothing. When the woman decided to purchase the machine, the salesperson informed her that all sewing machine sales were final. The salesperson encouraged the woman to read the machine’s user’s manual, but the woman replied, “Oh, I’ve given the machine a test run, and I’m happy with it. Besides, I haven’t brought my reading glasses and I can’t make out the tiny text in the user’s manual.” The woman purchased the sewing machine and was given a sales receipt that was stamped “FINAL SALE.” When she brought the machine home, the woman realized the machine was not appropriate for quilting, and took it back to the store. The salesperson referred to the store’s final sale policy and refused the return.
Does the woman have a valid claim against the sewing shop?
AYes, because the salesperson owed a fiduciary duty to the woman.
BYes, because the salesperson failed to correct the woman’s mistaken belief that the sewing machine was appropriate for quilting.
CNo, because the salesperson made clear that the sale was final.
DNo, because the salesperson did not make any misleading statements regarding the machine.
Answer choice B is correct. A fraudulent misrepresentation gives the person defrauded the chance to avoid a contract with the person who made the fraudulent assertion. Nondisclosure of a known fact is tantamount to an assertion that the fact does not exist, if the party not disclosing the fact knows that disclosure would correct a mistake of the other party as to a basic assumption of the contract, and the failure to disclose would constitute lack of good faith and fair dealing. Here, the salesperson (1) made a false assertion about an existing fact (non-disclosure to the elderly woman of the fact that the sewing machine could not handle quilts); (2) which was fraudulent (i.e., knowingly and intentionally misleading) or at least material; and (3) the elderly woman actually and justifiably relied on the salesperson’s assertion in entering the contract. Accordingly, the woman would be able to avoid the store’s final sale policy. Answer choice A is incorrect because the salesperson owed a duty not to misrepresent facts to the woman, but not a fiduciary duty, to the woman. Answer choice C is incorrect because, although the salesperson informed the woman that the sale was final, the salesperson’s bad-faith nondisclosure rendered the sale voidable at the woman’s election. Answer choice D is incorrect because nondisclosure of a known fact is treated as an assertive misrepresentation in this case.
A hotelier owned a hotel and the surrounding land. A portion of the land immediately behind the hotel was unused, and the hotelier wanted to develop it and install an in-ground pool. She contacted a general contractor in January, and the parties agreed that the contractor would build out a large terrace complete with a fifty-foot in-ground pool. They agreed to a price $400,000, with the contract to be completed before March 15, payable upon completion of the work. The hotelier stressed to the contractor the importance of completing the work before March 15 because that was when her vacation season began and she planned a special advertisement of the pool terrace to boost sales. The hotelier paid the contractor the $150,000 initial payment, but the contractor abandoned the job in late January without performing any work on the site. The hotelier hired a second contractor in February, who charged her $550,000 to complete the job. Despite the rush, the terrace was not ready until April 15, and the hotelier lost $70,000 in net profit due to documented reservation cancellations because of the unfinished construction.
What is the most a court could properly award the hotelier?
A$550,000
B$370,000
C$220,000
D$150,000
Answer choice B is correct. In construction contracts, the general measure of expectation damages for failing to perform is the difference between the contract price and the cost of completion by another builder. Here, that difference is the $550,000 cost to hire the replacement contractor minus the $400,000 contract price, or $150,000. Further, consequential damages may be awarded for reasonably foreseeable losses to a nonbreaching party that go beyond expectation damages, such as loss of profits. Damages are recoverable if they were the natural and probable consequence of breach, or if they were in the contemplation of the parties at the time the contract was made, and may be calculated with reasonable certainty. Here, lost profits due to room cancellations is a natural and probable consequence of ongoing construction at the hotel because guests may have specifically wanted to stay in a hotel with a pool or else avoided a hotel that had ongoing construction on the premises. Further, the hotelier had specifically told the contractor that she planned to specifically advertise the pool terrace to boost sales. Additionally, the hotelier had detailed documentation to support her claim of lost profits. Therefore, a court could award her the $70,000 in lost profits. Finally, the hotelier would be able to recover the $150,000 that she originally paid to the first contractor as a deposit. Therefore, the correct measure of damages would be the $70,000 in lost profits, (consequential damages) plus the $150,000 in expectation damages, plus the $150,000 deposit, for a total of $370,000. Answer choice A is incorrect because this assumes the hotelier would receive the entire $550,000 replacement contract price (an incorrect measure of expectation damages). It also ignores the $70,000 in consequential damages and the deposit. Answer choice C is incorrect because it correctly measures expectation damages and consequential damages, but fails to take into account the deposit. Answer choice D is incorrect because it incorrectly omits the $70,000 in consequential damages and the deposit that the court could award.
An honest dispute develops between a homeowner and an electrician over whether wiring and circuit breakers installed by the electrician satisfied contractual specifications. If the wiring and circuit breakers meet those specifications, the homeowner owes the electrician $10,000 under the terms of the contract. The homeowner offers to pay the electrician $8,000 in satisfaction of the homeowner’s contractual obligations, if the electrician replaces the circuit breakers with a different brand. The electrician accepts the homeowner’s offer. After the electrician replaces the circuit breakers, the homeowner refuses to pay the electrician. In a breach of contract action brought by the electrician, the fact-finder determines that the wiring and circuit breakers originally installed by the electrician did satisfy the contract specifications. The fact-finder also determines that the electrician and the homeowner entered into an accord for which the homeowner failed to prove the required satisfaction.
What is maximum amount that the electrician can seek in damages from the homeowner? A$18,000 B$10,000 C$8,000 DNothing
Answer choice B is correct. Since the electrician and the homeowner entered into an accord for which the homeowner failed to provide the required satisfaction, the electrician may seeks damages under the accord of $8,000 or may seek damages under the original contract of $10,000. Since $8,000 is less than $10,000, answer choice C is incorrect. Answer choice A is incorrect because, even though the homeowner has breached both the original contract and the accord by failing to pay the electrician, the electrician must elect to receive damages under either the original contract or the accord. Answer choice D is incorrect since the homeowner has breached both the accord and the original contract.
A customer entered a hardware store to purchase paint. The associate who helped the customer had just been hired the day before, and was not trained with regard to paint selection. The customer explained that she was painting her house and had applied a water-based primer, and that she needed to select an appropriate top coat. The associate showed the customer an oil-based paint, assuring the customer that the paint was appropriate for the job. The associate then told the customer that he was selling the paint “as is,” and that he could not be responsible for any adverse reactions. The customer made the purchase and used the oil-based paint to paint her house. Upon drying, the paint immediately peeled away from the water-based primer, causing extensive damage to the exterior of the house.
In a breach of warranty action against the hardware store, will the customer prevail?
AYes, because the associate’s promises created an express warranty.
BYes, because the warranty of fitness for a particular purpose cannot be disclaimed.
CNo, because the associate’s statement that the paint was sold “as is” disclaimed any warranties.
DNo, because the associate was not a merchant.
Answer choice A is correct. Any promise, affirmation, description, or sample that is part of the basis of the bargain is an express warranty, unless it is merely the seller’s opinion or commendation of the value of the goods. In this case, the associate’s assurances that the paint selected was appropriate for the job created an express warranty. That warranty was breached, and the customer would prevail. Answer choice B is incorrect because the implied warranty of fitness for a particular purpose can be disclaimed by use of language such as “as is,” which calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty. However, such disclaimer must be in writing and conspicuous. Answer choice C is incorrect because disclaimer clauses that conflict with express warranties are ignored. Thus, any attempt to disclaim the warranty with the language “as is” would be ignored. Answer choice D is incorrect because express warranties may be made by a merchant or a non-merchant. Moreover, the associate in this case was a merchant.
A bank that held a security interest in a delivery van conducted a forced sale of the van at an auction after the owner of the van defaulted on its loan from the bank. The proceeds of the loan had been used to purchase the van, which the owner had used in his floral business. At the auction, which was held in accordance with statutory requirements, the owner, without disclosing his ownership interest, made a good faith bid on the van. Twelve days after the auction, the highest bidder filed an action to void the sale after learning that one of the bidders had been the owner of the van.
Can the sale be voided?
AYes, because the owner bid at the auction without disclosing his interest in the van.
BYes, because the owner was a merchant.
CNo, because the auction was a forced sale of the van.
DNo, because the highest bidder did not file his action to void the sale within 10 days of the auction.
Answer choice C is correct. When an auctioneer knowingly accepts a bid by the seller or on her behalf, or procures such a bid to drive up the price of the goods, the winning bidder may avoid the sale or, at her option, take the goods at the price of the last good-faith bid prior to the end of the auction. There are two exceptions to this rule, which are that (i) a seller may bid at a forced sale and (ii) a seller may bid if she specifically gives notice that she reserves the right to bid. In this case, the bank conducted a forced sale of the owner’s delivery van. As a result, the owner (seller) was permitted to bid on the van at the auction, even without first disclosing his interest in the van and reserving the right to bid. Therefore, the sale cannot be voided. Answer choice A is incorrect. While the owner of goods subject to an auction is generally required to disclose his ownership interest in the goods and reserve the right to bid prior to bidding in the auction or run the risk that the buyer can void the sale, this disclosure is not required when the goods are sold at a forced sale. Answer choice B is incorrect because there is no prohibition on an owner who is a merchant from bidding on his own goods at a forced sale auction. Answer choice D is incorrect because there is no statutory time period under the U.C.C. in which the buyer at an auction must act in order to void the sale.
A professor listed her car for sale on an online site. A buyer called and asked a series of questions, including the following, “I am not much of a music lover, but how does the stereo sound?” The professor replied that it sounded great. In reality, the stereo had short-circuited months earlier and blown out all the speakers in the process. Based on the conversation, the buyer entered into a written contract with the professor to purchase the car at a specified price. The contract provided for the buyer to pay for the car and take possession of it within three days. The next day, remorseful over her lie, the professor had the stereo and speakers restored to factory condition. On the day the buyer was supposed to take possession of the car, he learned from a student that the professor had lied about the condition of the stereo, and decided not to pay for the car. When the professor called the buyer later that day, the buyer told her he was not purchasing the car. The professor admitted her lie, and told the buyer that the stereo and speakers had been replaced. Nevertheless, the buyer refused to pay for the car.
In a subsequent breach of contract suit, who will prevail?
The professor, because she repaired the stereo so that it conformed to the buyer’s expectations.
BThe professor, because the condition of the stereo was not material to the buyer.
CThe buyer, because the professor acted in bad faith in inducing the buyer to enter into the contract.
DThe buyer, because he had the right to terminate the contract following the professor’s misrepresentation.
Answer choice A is correct. A misrepresentation is an assertion that is contrary to the existing facts. A fraudulent misrepresentation exists if the misrepresentation is made knowingly, without confidence in the assertion, or when the person making the assertion knows there is no basis for the assertion. A fraudulent misrepresentation need not be material, and may make the contract voidable at the adversely affected party’s option. The contract is no longer voidable, however, if, following a misrepresentation but before the deceived party has avoided the contract, the facts are cured so as to be in accord with the facts that were previously misrepresented. Here, although the professor made a fraudulent misrepresentation, she cured the misrepresentation by having the stereo restored to factory condition before the buyer avoided the contract. Therefore, the contract is binding on the buyer, and his failure to pay constitutes a breach. Answer choice B is incorrect because a fraudulent misrepresentation need not be material for the contract to be voidable. Moreover, a misrepresentation is considered material if it is likely to induce a reasonable person to manifest assent or the seller knows that the misrepresentation is likely to induce the buyer himself to manifest his assent. In this case, the misrepresentation would likely be considered material. Answer choice C is incorrect because a misrepresentation can be cured at any point before the adversely affected party avoids the contract. Answer choice D is incorrect because the buyer’s right to terminate the contract was subject to whether the professor had first cured the defects underlying her misrepresentation.
A painter entered into a valid contract with a mayor to paint his portrait for $5,000. The contract provided that, rather than paying the painter, the mayor was to pay the $5,000 to the painter’s son. The contract also prohibited the assignment of any rights or duties arising under the contract without the permission of the other party.
Subsequently, the son, upon learning of the contract from his mother, decided to donate this money to a charity and transferred his rights under the contract to the charity without securing the permission of the mayor. The painter painted the portrait, but the mayor did not pay anyone. The charity filed suit against the mayor for breach of contract. The charity has taken no action nor incurred any expenses related to the contract.
Will the charity prevail in its action against the mayor?
AYes, because the charity was an assignee of the son’s contractual rights.
BYes, because the charity is a donee beneficiary of the contract.
CNo, because the charity has not detrimentally relied on the mayor’s promise.
DNo, because the contract prohibits assignments.
Answer choice A is correct. Generally, contract rights are assignable unless the assignment materially increases the duty or risk of the obligor or materially reduces the obligor’s chance of obtaining performance. Here, because the right assigned is the right to receive payment and the painter has performed his obligation under the contract by painting the portrait, this right may be assigned and enforced by the charity through a breach of contract action. Answer choice B is incorrect because, although the charity does benefit from the contract by virtue of the son’s gratuitous assignment, the charity is not a donee beneficiary of the contract because the painter and mayor did not enter into contract with the intent to benefit the charity. Answer choice C is incorrect because, as assignee of the son’s contractual right to receive payment from the mayor, the charity can enforce those rights without the need to establish that it detrimentally relied on the mayor’s promise. Answer choice D is incorrect because, although the assignment of contractual rights in violation of a prohibition against the assignment of rights does constitute a breach of contract, prohibition is not enforceable against the assignee to prevent the assignee from enjoying the assigned rights.
There is a signed writing purporting to be the agreement of the parties. Plaintiff argues for admission of evidence of an earlier oral agreement. There are no ambiguities. Under common law, the court should ask ______________, and under the UCC a court should ask ________________.
Common Law: Whether, under the circumstances, an extrinsic term of the agreement would “naturally be omitted” from the writing.
UCC: Presume that the writing is at most only a partial integration, unless the parties would have “certainly” included a disputed term in the writing.
If a writing is completely integrated, a party can introduce evidence of prior dealings, but how?
(1) Evidence of a second, separate deal.
(2) Evidence of a prior communication designed to interpret an ambiguous term in the agreement.
What are the three types of warranties that arise in the UCC universe?
Express Warranties; Implied Warranty of Merchantability; Implied Warranty of Fitness for a Particular Purpose
What is an Express Warranty?
A promise that affirms or describes the goods and that itself is part of the basis of the bargain is an express warranty unless it is merely the seller’s opinion.
The use of a sample or model good creates an express warranty that the goods sold will be like the sample.
What is an implied warranty of merchantability?
(Only triggered when the seller is a merchant, and furthermore, when the seller regularly deals with the goods at issue)
The seller makes an implied warranty that the goods are fit for ordinary commercial purposes.
How can you tell if a condition has been satisfied?
Are there any exceptions to this rule?
Most conditions use the Objective Standard. If most reasonable people would be satisfied, then the condition is satisfied.
HOWEVER
Contracts involving aesthetic taste, such as art or tutoring services, will measure whether any satisfaction conditions are met with a subjective standard. The party can still breach if they claim dissatisfaction in bad faith.
How can a condition be waived?
The party receiving the protection of the condition may waive the condition in two ways (1) words (2) conduct
Also, a condition can be waived if the other party wrongfully interferes or hinders the occurrence of the condition. (Good Faith Standard)
The constructive condition of exchange is satisfied if
there is no MATERIAL breach (according to the doctrine of substantial performance) Think of material breach as a “big deal.”
A party who has breached in a minor way will still satisfy the constructive condition of exchange unless
the minor breach was willful
When the CCE is met, and there is a minor breach, what remedy is available?
The cost to complete performance. However, sometimes it is more appropriate to be awarded diminution in market value.
A breaching party fails to satisfy the CCE due to a material breach. Can they recover anything regardless?
Not on the contract, but maybe in quasi contract.
A divisible or installment contract is one in which….
the various units of performance are divisible into distinct parts. Recovery is limited to the amount promised for the segment of the contract performed.
Where does tender occur when the contract is a shipment contract?
Seller’s place of business.
Where does tender occur when the contract is a destination contract?
Buyers place of business.
When there is a shipment contract what actions must the seller take?
(1) Get the goods to a common carrier.
(2) Make arrangements for delivery.
(3) Notify the buyer
Where there is a destination contract what actions must the seller take?
The seller must get the goods to the buyer’s business and notify the buyer.
How do you solve a risk of loss problem?
(1) Check whether the parties have already dealt with the risk by contract. If so, their agreement will control.
(2) If not, ask whether either party has breached (typically another part of the contract)
(3) If there is no breach, and the goods are being shipped, ask what type of delivery contract it was:
If it’s a shipment contract, then the risk of loss during delivery is with the buyer.
If it’s a destination contract, then the risk of loss during delivery rests with the seller.
(4) In all other cases, ask whether the seller is a merchant.
If yes, the risk of loss stays with the seller until the buyer receives the goods.
If not, the risk of loss moves to the buyer when the seller tenders the goods.
Impossibility and Impracticability defenses typically manifest themselves in these common fact patterns:
Performance becomes illegal after the contract is formed.
The subject matter of the contract is destroyed
A services contract is with a special person and the performing party dies or is incapacitated
HOWEVER
Something that just makes performance more expensive than expected will not normally excuse. Look for something that hinders the ability to perform, not just the cost.
If a party to a contract dies after the contract is made, is the contractual obligation excused?
No, the estate takes the place of the party, unless the person is a special person.
Frustration of Purpose occurs when
Performance can still occur, but something has happened to undermine the entire reason for the creation of the contract. Note that this is very rare, and the event must be extreme and not previously allocated to one of the parties.
Can both parties agree to just walk away from a contract?
Yes, as long as there is some performance remaining from each side. Otherwise, there is no consideration for this modification.
What is accord and satisfaction?
The parties to an earlier contract agree that performance will be satisfied instead by the completion of a different performance.
o The new performance is called the “accord.”
o The excusing of the initial performance obligation is called the “satisfaction.”
If the accord is not performed in an accord and satisfaction situation, what happens?
What happens if the accord is not performed? In that case, the other side can sue on either the original obligation or the new promise.
What is a novation?
This arises when BOTH parties agree that a substitute person will take over the contractual obligations.
If a party to a contract repudiates, the non breaching party has two options… (except when…)
(1) Treat the repudiation as a breach and sue immediately for damages.
(2) Ignore the repudiation, demand performance, and see what happens
But if the non breaching party has completely performed and is just waiting for payment, they cannot sue early
The doctrine of mitigation states that a breached against party must take reasonable steps to reduce damages from breach. What happens if the party doesn’t mitigate?
If you refuse to mitigate, the law will calculate damages as if you did mitigate. The defendant bears the burden of proving a mitigation failure.
If the paying party breaches in a partially completed building contract, can the builder continue to work on the job?
No, this runs counter to mitigation, it would be running up the damages.
If the paying party breaches in a partially completed building contract, how do we measure damages?
Expectation Damages = Contract Price – Amount already Paid – Amount that Would Be Needed to Finish the Job
If the building party breaches in a partially completed building contract, how do we measure damages?
Cost to complete - except when this would drastically overcompensate the plaintiff - then, if appropriate, use diminution in market value.
In terms of third party beneficiaries, ________ beneficiaries have the right to sue, while _______ beneficiaries do not.
intended; incidental.
An assignment is the transfer of _______ under a k, a delegation is the transfer of ______
rights; duties
What happens if someone assigns the same rights twice?
The answer depends on whether the assignee has paid consideration for the rights:
o If the rights are assigned without consideration, then the last assignment controls.
o If the rights are assigned for consideration, then the first assignment for consideration will typically hold.
Limited exception: A later assignment will take priority if the second assignee does not know of the initial assignment and is first to obtain payment or a judgment.
