Contracts Flashcards
Opal offered, in writing, to sell Larkin a parcel of land for $300,000. If Opal dies, the offer will:
- Terminate prior to Larkin’s acceptance only if Larkin received notice of Opal’s death.
- Remain open for a reasonable period of time after Opal’s death.
- Automatically terminate despite Larkin’s prior acceptance.
- Automatically terminate prior to Larkin’s acceptance.
Automatically terminate prior to Larkin’s acceptance. An offer, unless irrevocable, IS terminated immediately upon the death of the offeror, and thus no contract could be formed.
C would be correct if there had been a valid acceptance first, a contract would have been formed. If there is a CONTRACT, then death does not always terminate contract obligations.
On September 27, Summers sent Fox a letter offering to sell Fox a vacation home for $150,000. On October 2, Fox replied by mail agreeing to buy the home for $145,000. Summers did not reply to Fox.
Do Fox and Summers have a binding contract?
- No, because Fox failed to sign and return Summers’ letter.
- No, because Fox’s letter was a counteroffer.
- Yes, because Summers’ offer was validly accepted.
- Yes, because Summers’ silence is an implied acceptance of Fox’s letter.
No, because Fox’s letter was a counteroffer. A counteroffer rejects the original offer. This is a counteroffer, because the terms differ from those in the original offer. For a contract involving real estate or almost anything other than a sale of goods, the “mirror image” rule is in place. If the response is not a mirror image acceptance of the offer, then it is a rejection and if accompanied by a new offer, a counteroffer.
On April 1, Fine Corp. faxed Moss an offer to purchase Moss’ warehouse for $500,000. The offer stated that it would remain open only until April 4 and that acceptance must be received to be effective. Moss sent an acceptance on April 4 by overnight mail and Fine received it on April 5.
Which of the following statements is correct?
- No contract was formed because Moss sent the acceptance by an unauthorized method.
- No contract was formed because Fine received Moss’ acceptance after April 4.
- A contract was formed when Moss sent the acceptance.
- A contract was formed when Fine received Moss’ acceptance.
No contract was formed because Fine received Moss’ acceptance after April 4. Although most acceptances of bilateral offers are sent by an authorized medium and effective when sent by the authorized medium, the offeror can condition acceptance to not be effective until received. Therefore, regardless of the medium used, the acceptance must be received before the offer terminates by lapse of time. This offer terminated at midnight on April 4, and the acceptance was not received until April 5, after the offer was terminated.
Covenants Not to Compete
A sale of a business containing a covenant prohibiting seller from owning or operating similar business as well as the termination of an employee who has agreed not to compete are legal and enforceable provided the agreement:
- Protects legitimate interests of buyer or employer without creating too large a burden on seller or employee (based on ability to find other work)
- Is reasonable as to length of time under the circumstances to protect those interests
- Is reasonable as to area to protect interests of same area
- Same whether employer or employee initiated termination
Wert, an employee of Salam Corp., signed an agreement not to compete with Salam during and after being employed with Salam. Wert is the director of research and has knowledge of many of Salam’s trade secrets. If Wert’s employment with Salam is terminated and Wert wishes to compete with Salam, which of the following statements is not correct?
- The agreement is only enforceable if Wert voluntarily terminates his employment with Salam.
- The agreement must be necessary to protect Salam’s legitimate interests in order to be enforceable.
- The geographic area covered by the agreement must be reasonable in order to be enforceable.
- The court will consider Wert’s ability to obtain other employment against Salam’s right to protect its business.
The agreement is only enforceable if Wert voluntarily terminates his employment with Salam.
When deciding whether a covenant not to compete is enforceable, it is irrelevant whether the employee voluntarily terminates his employment. To be enforceable, the agreement must protect Salam’s legitimate interests and the geographic area covered must be reasonable. In deciding the issue, the court will balance Wert’s ability to obtain other employment against Salam’s right to protect its business.
Undue Influence
Unfair persuasion of one person over another which prevents understanding or voluntary action
- Usually occurs when very dominant person has extreme influence over weaker person
- Also occurs through abuse of fiduciary relationship (e.g., CPA, attorney, guardian, trustee, etc.)
- Normally causes agreement to be voidable
To satisfy the UCC Statute of Frauds, a written agreement for the sale of goods must
- Contain payment terms.
- Be signed by both buyer and seller.
- Indicate that a contract for sale has been made.
- Refer to the time and place of delivery.
Indicate that a contract for sale has been made. Under the UCC Statute of Frauds, a written agreement for the sale of goods is adequate if it indicates a contract for the sale of goods has been made between parties and is signed by the party to be charged. The written agreement may omit material terms (i.e., price, delivery, time for performance) as long as the quantity is stated. Reasonable terms will be inferred for those terms which are missing from the written agreement.
Dunne and Cook signed a contract requiring Cook to rebind 500 of Dunne’s books at $3.00 per book. Later, Dunne requested, in good faith, that the price be reduced to $2.70 per book. Cook agreed orally to reduce the price to $2.70.
Under the circumstances, the oral agreement is
- Enforceable, but proof of it is inadmissible into evidence.
- Enforceable, and proof of it is admissible into evidence.
- Unenforceable, because Dunne failed to give consideration, but proof of it is otherwise admissible into evidence.
- Unenforceable, due to the statute of frauds, and proof of it is inadmissible into evidence.
Unenforceable, because Dunne failed to give consideration, but proof of it is otherwise admissible into evidence. There are two issues here.
- The first is the enforceability of the modification. This modification is invalid, because it is a contract for services, and it is not supported by new consideration. Dunne has not agreed to do anything new, and, therefore, since he had a preexisting duty to pay $3.00 per book, the modification cannot be enforced.
- The second issue is whether evidence of the agreement can be introduced for other reasons. The answer here is yes. The parole evidence rule prohibits testimony about agreements that existed before a contract was signed, because contracts are generally presumed to be the final word on an agreement. However, evidence about things taking place after a contact was signed (subsequent modification) is admissible.
In determining whether the consideration requirement to form a contract has been satisfied, the consideration exchanged by the parties to the contract must be:
- Of approximately equal value.
- Legally sufficient.
- Exchanged simultaneously by the parties.
- Fair and reasonable under the circumstances.
Legally sufficient. Consideration must be sufficient. However, the general rule is that any obligation of legal value and bargained-for is sufficient consideration.
In which of the following situations does the first promise serve as valid consideration for the second promise?
- A police officer’s promise to catch a thief for a victim’s promise to pay a reward.
- A builder’s promise to complete a contract for a purchaser’s promise to extend the time for completion.
- A debtor’s promise to pay $500 for a creditor’s promise to forgive the balance of a $600 liquidated debt.
- A debtor’s promise to pay $500 for a creditor’s promise to forgive the balance of a $600 disputed debt.
A debtor’s promise to pay $500 for a creditor’s promise to forgive the balance of a $600 disputed debt. To give consideration, a person must promise to do something new or something not already obligated to do. If the debt is rightfully disputed, a debtor is not under a preexisting obligation to pay the full amount. In offering to pay $500, the offeror is promising to do something he or she does not otherwise have to do – pay $500. This promise, then, is consideration that supports the forgiveness of the rest of the disputed debt.
Define Consideration
Consideration: Consists of the benefit promised by the offeror (promisor) and the legal detriment promised or performed by the offeree (promisee). In a bilateral contract, both the offeror and offeree are promisors (those making a promise) and promisees (those receiving the promise). Both sides must have benefit and detriment for valid consideration to be present and the detriment on one side induces the detriment on the other side. The exchange of the detriment is bargained for by the parties.
Fiore owed Lutz $5,000. As the result of an unrelated transaction, Lutz owed Bing that same amount. The three parties signed an agreement that Fiore would pay Bing instead of Lutz and Lutz would be discharged from all liability. The agreement among the parties is
- Unenforceable for lack of consideration.
- Voidable at Bing’s option.
- An executed accord and satisfaction.
- A novation.
A novation. A novation is a three-party agreement between the contracting parties and a third party, whereby one of the contracting parties is discharged from his/her duty and the third party is substituted in the discharged party’s place. In this case, all three parties agree to discharge the old contracts between Fiore and Lutz, and Lutz and Bing, by the creation of a new contract between Fiore and Bing. The new contract is a novation.
A party to a contract who seeks to rescind the contract because of that party’s reliance on the unintentional but materially false statements of the other party will assert
- Reformation.
- Actual fraud.
- Misrepresentation.
- Constructive fraud.
Misrepresentation. may involve an innocent misstatement made in good faith (i.e., there is no scienter or intent to mislead). In order to rescind a contract because of a misrepresentation, the rescinding party must prove that there was a misrepresentation of a material fact, that there was reliance on this fact, and that there was injury as a result.
Breach of Contract Statute of Limitations
Statute begins to run from time cause of action accrues (e.g., breach)
With regard to an agreement for the sale of real estate, the Statute of Frauds
- Does not require that the agreement be signed by all parties.
- Does not apply if the value of the real estate is less than $500.
- Requires that the entire agreement be in a single writing.
- Requires that the purchase price be fair and adequate in relation to the value of the real estate.
Does not require that the agreement be signed by all parties.
Contracts required to be in writing and signed by party to be charged—these are said to be within the Statute:
- An agreement to sell land or any interest in land
- Includes buildings, easements, and contracts to sell real estate
- Part performance typically satisfies Statute even though real estate contract was oral, but this requires
- Possession of the land
- Either part payment or making of improvements on real estate
- Many courts require all three
All of the following statements regarding compliance with the statute of frauds are correct except:
- Any necessary writing must be signed by all parties against whom enforcement is sought.
- Contracts involving the sale of goods in an amount greater than $500 must be in writing.
- Contract terms must be contained in only one document.
- Contracts that by their terms cannot be completed within one year must be in writing.
Contract terms must be contained in only one document.
Statute of Frauds - Exception to Writing Requirement
- Oral contract involving specially manufactured goods (i.e., not saleable in ordinary course of business) if seller has made substantial start in their manufacture (or even made a contract for necessary raw materials) is enforceable
- Oral contract is enforceable against party who admits it in court but not beyond quantity of goods admitted
- Goods that have been paid for (if seller accepts payment) or goods which buyer has accepted are part of enforceable contract even if oral
Kent, a 16-year old, purchased a used car from Mint Motors, Inc. Ten months later, the car was stolen and never recovered. Which of the following statements is correct?
- The car’s theft is a de facto ratification of the purchase because it is impossible to return the car.
- Kent may disaffirm the purchase because Kent is a minor.
- Kent effectively ratified the purchase because Kent used the car for an unreasonable period of time.
- Kent may disaffirm the purchase because Mint, a merchant, is subject to the UCC.
Kent may disaffirm the purchase because Kent is a minor. Minor may disaffirm contract at any time until a reasonable time after reaching majority age.
Failure to disaffirm within reasonable time after reaching majority acts as ratification (e.g., 1 year is too long in the absence of very special circumstances such as being out of the country)
Statute of Frauds - What must be in Writing?
- Sale of a golf cart for $750
- Sale of 1/20 acre of land for $300
- 3 year advertising services contract
- Sale of a mobile home by manufacturer
- Sale of a horse for $350
- Sale of a painting for $1,000
- Officer’s guarantee of a corporate note
- Sole proprietor’s guarantee of a business note
- Sale of a golf cart for $750 = YES
- Sale of 1/20 acre of land for $300 = YES
- 3 year advertising services contract = YES
- Sale of a mobile home by manufacturer = DEPENDS on price
- Sale of a horse for $350 = NO
- Sale of a painting for $1,000 = YES
- Officer’s guarantee of a corporate note = YES, guarantee of a another’s debt, the corportation is a “separate person”
- Sole proprietor’s guarantee of a business note = NO, this is original debt to the sole proprietor, not another’s debt.
The Parol Evidence Rule…
Applies to complete and unambiguous written contracts and makes any evidence that would modify or alter the written contract terms inadmissible.
This rule applies to any oral agreements made prior to or contemporaneous with the written contract.
The parol evidence rule will not allow evidence of prior agreements to be admitted as evidence. If a contract is established as a final expression of an agreement or a “total integration,” it is assumed that anything not in the final, written contract was not intended to be a part of the agreement.
An exception to the parol evidence rule allows evidence of “subsequent agreements” to be admitted into evidence.
Rice contracted with Locke to build an oil refinery for Locke. The contract provided that Rice was to use United pipe fittings. Rice did not do so. United learned of the contract and, anticipating the order, manufactured additional fittings. United sued Locke and Rice. United is
- Entitled to recover from Rice only because Rice breached the contract.
- Entitled to recover from either Locke or Rice because it detrimentally relied on the contract.
- Not entitled to recover because it is a donee beneficiary.
- Not entitled to recover because it is an incidental beneficiary.
Not entitled to recover because it is an incidental beneficiary. United is an incidental beneficiary because the contract was not made for its primary benefit. It will benefit from the contract if it is performed, but the parties did not have United’s benefit in mind when making the contract. Incidental beneficiaries may not sue to enforce contracts.
Union Bank lent $200,000 to Wagner. Union required Wagner to obtain a life insurance policy naming Union as beneficiary. While the loan was outstanding, Wagner stopped paying the premiums on the policy. Union paid the premiums, adding the amounts paid to Wagner’s loan. Wagner died and the insurance company refused to pay the policy proceeds to Union. Union may
- Recover the policy proceeds because it is a creditor beneficiary.
- Recover the policy proceeds because it is a donee beneficiary.
- Not recover the policy proceeds because it is not in privity of contract with the insurance company.
- Not recover the policy proceeds because it is only an incidental beneficiary.
Recover the policy proceeds because it is a creditor beneficiary. A person is a creditor beneficiary if two things are in place: one party to a contract in question owed the creditor money, and the contract in question was made specifically to satisfy that debt. Here, Wagner owed Union money and named Union as beneficiary in the life insurance contract to partially satisfy that debt. A creditor beneficiary may sue to enforce the contract.
West, Inc., and Barton entered into a contract. After receiving valuable consideration from Egan, West assigned its rights under the Barton contract to Egan. In which of the following circumstances would West not be liable to Egan?
- West released Barton.
- West breached the contract.
- Egan released Barton.
- Barton paid West.
Egan released Barton. Egan has all the rights of West based on the assignment. Thus, Egan can release Barton, discharging the Barton contract, and West has no further liability to Egan.
Pierce owed Duke $3,000. Pierce contracted with Lodge to paint Lodge’s house and Lodge agreed to pay Duke $3,000 to satisfy Pierce’s debt. Pierce painted Lodge’s house, but Lodge did not pay Duke the $3,000. In a lawsuit by Duke against Pierce and Lodge, who will be liable to Duke?
- Pierce only.
- Lodge only.
- Both Pierce and Lodge.
- Neither Pierce nor Lodge.
Both Pierce and Lodge. Pierce has made an assignment of his benefits under the contract or named Duke as a creditor beneficiary. Either way, Duke has contract rights against both of them as an assignee or a creditor beneficiary.
Which of the following statements is correct regarding the effect of the expiration of the period of the statute of limitations on a contract?
- Once the period of the statute of limitations has expired, the contract is void.
- The expiration of the period of the statute of limitations extinguishes the contract’s underlying obligation.
- A cause of action barred by the statute of limitations may not be revived.
- The running of the statute of limitations bars access to judicial remedies.
The running of the statute of limitations bars access to judicial remedies. The statute of limitations is a period of time within which a plaintiff must file an action in an appropriate court to receive judicial remedies. The period of time limitation usually begins at the time the cause for action occurs. Failure to file within the time period removes from the court the ability to grant a remedy. In a contract for the sale of goods, the statute of limitations period is four years but by agreement can be reduced to one year. A, B, and C are incorrect because although the plaintiff cannot seek a judicial remedy, it is a valid contract that can still be voluntarily completed, and for debts (an underlying obligation, for example), can be revived.
Which of the following actions could result in the discharge of a party to a contract?
- Prevention of Performance?
- Accord and satisfaction?
Both. An accord is acceptance of an offer and satisfaction by accord is a discharge of the contract. If an accord (for example, a partial payment check marked “paid in full” for an unliquidated debt) is accepted, this is a satisfaction and discharges the contract. If performance of a contract is prevented because of objective impossibility or commercial impracticability, performance is discharged.
To cancel a contract and to restore the parties to their original positions before the contract, the parties should execute a
- Novation
- Release
- Rescission
- Revocation
Rescission. A rescission is the undoing of a contract. Both sides are returned to their original positions, and the contractual obligations on both sides are discharged.
A novation takes place when one person takes over another’s contractual obligations, and the other is discharged. For example, a father might call a bank and say, “If you let my son out of his loan payments, I will make them.”
Under the UCC Sales Article, which of the following conditions will prevent the formation of an enforceable sale of goods contract?
- Open price.
- Open delivery.
- Open quantity.
- Open acceptance.
Open acceptance. Under the UCC, many terms may be left “open,” which means they will be determined at a later time. In this way, the UCC encourages the formation of agreements. Price, time of delivery and payment, and quantity may be left open. However, an acceptance must be made before a contract is enforceable. One can accept open terms, but the acceptance itself must be made. Before acceptance, the sides are merely carrying out unenforceable “preliminary negotiations.”
Under the Sales Article of the UCC, when a written offer has been made without specifying a means of acceptance but providing that the offer will only remain open for ten days, which of the following statements represent(s) a valid acceptance of the offer?
- I. An acceptance sent by regular mail the day before the ten-day period expires that reaches the offeror on the eleventh day.
- II. An acceptance faxed the day before the ten-day period expires that reaches the offeror on the eleventh day, due to a malfunction of the offeror’s printer.
Both I and II. The first scenario constitutes acceptance because of the mailbox rule. The second scenario constitutes acceptance because acceptances by mail or fax are deemed valid as soon as mailed or sent. As soon as the fax is properly “sent,” the acceptance becomes effective.
Under the Sales Article of the UCC, when a contract for the sale of goods stipulates that the seller ship the goods by common carrier “F.O.B. purchaser’s loading dock,” which of the parties bears the risk of loss during shipment?
- The purchaser, because risk of loss passes when the goods are delivered to the carrier.
- The purchaser, because risk of loss passes with the title.
- The seller, because risk of loss passes only when the goods reach the purchaser’s loading dock.
- The seller, because risk of loss remains with the seller until the goods are accepted by the purchaser.
The seller, because risk of loss passes only when the goods reach the purchaser’s loading dock. When the terms of a sale’s contract calls for delivery by a carrier at F.O.B. purchaser’s loading dock, “risk of loss” (in absence of express contract) passes from the seller to the buyer upon tender or delivery of the goods at the purchaser’s loading dock. Thus, the seller has the risk during shipment.
Under the Sales Article of the UCC, which of the following events will result in the risk of loss passing from a merchant seller to a buyer?
- Tender of the goods at the seller’s place of business
- Use of the seller’s truck to deliver the goods
NEITHER. The risk of loss starts with the seller. In neither of these situations does it pass to the buyer. The seller’s use of his or her own truck does nothing to affect the risk of loss until there is tender at buyer’s place of business or residence. Likewise, the seller’s placing of the goods at seller’s own place of business does not pass risk of loss if the buyer is to pick up the goods. Since the seller is a merchant, risk of loss does not pass until the buyer takes possession of the goods.
On September 10, Bell Corp. entered into a contract to purchase 50 lamps from Glow Manufacturing to be used in Bell Corp’s executive company offices. Bell prepaid 40% of the purchase price. Glow became insolvent on September 19 before segregating, in its inventory, the lamps to be delivered to Bell. Bell will not be able to recover the lamps because
- Bell is regarded as a merchant.
- The lamps were not identified to the contract.
- Glow became insolvent fewer than 10 days after receipt of Bell’s prepayment.
- Bell did not pay the full price at the time of purchase.
The lamps were not identified to the contract. The seller is the one who must identify goods by segregating them from general inventory and associating them with a specific contract before title would pass to the buyer. Since this has not yet been done, the buyer will have no rights in the goods under the contract.
Under the Sales Article of the UCC, which of the following statements is correct regarding a seller’s obligation under a F.O.B. destination contract?
- The seller is required to arrange for the buyer to pick up the conforming goods at a specified destination.
- The seller is required to tender delivery of conforming goods at a specified destination.
- The seller is required to tender delivery of conforming goods at the buyer’s place of business.
- The seller is required to tender delivery of conforming goods to a carrier who delivers to a destination specified by the buyer.
The seller is required to tender delivery of conforming goods at a specified destination. If the shipment terms require the seller to deliver goods under an F.O.B. destination contract, the seller is required to properly “tender” the goods to the buyer at the specific destination stated in the contract (not a destination specified by the buyer). This place can be other than the buyer’s place of business.
West purchased a painting from Noll, who is not in the business of selling art. West is picking up the painting from Noll. Noll tendered delivery of the painting after receiving payment in full from West. West informed Noll that West would be unable to take possession of the painting until later that day. Thieves stole the painting before West returned.
The risk of loss…
- Remained with Noll, because West had not yet received the painting.
- Remained with Noll, because the parties agreed on a later time of delivery.
- Passed to West at the time the contract was formed and payment was made.
- Passed to West on Noll’s tender of delivery.
Passed to West on Noll’s tender of delivery. In this case, there is a contract for delivery of goods without physical movement not represented by a document of title. Since Noll is a nonmerchant, risk of loss passes to West upon Noll’s tender of delivery. Thus, delivery need not be actually made for risk of loss to pass from seller to buyer. Delivery is tendered when, as was the case in this question, the goods are made available for a reasonable time for pick-up by the buyer.
Bond purchased a painting from Wool, who is not in the business of selling art. Wool tendered delivery of the painting after receiving payment in full from Bond. Bond informed Wool that Bond would be unable to take possession of the painting until later that day. Thieves stole the painting before Bond returned.
The risk of loss…
- Passed to Bond at Wool’s tender of delivery.
- Passed to Bond at the time the contract was formed and payment was made.
- Remained with Wool, because the parties agreed on a later time of delivery.
- Remained with Wool, because Bond had not yet received the painting.
Passed to Bond at Wool’s tender of delivery. In absence of agreement, where the buyer takes possession of the goods without a contractual obligation to ship or deliver by the seller, and the goods are not represented by a document of title, if the seller is a nonmerchant, risk of loss passes from seller to buyer at the time the seller tenders delivery. Bond suffers the loss.
Under the Sales Article of the UCC, most goods sold by merchants are covered by certain warranties.
An example of an express warranty would be a warranty of
- Usage of trade.
- Fitness for a particular purpose.
- Merchantability.
- Conformity of goods to sample.
Conformity of goods to sample.
There are three types of express warranty under the Sales Article of the UCC (if made as part of the bargain or sale), they are:
- Affirmations of fact or promises
- Description of the goods
- Sample or model - Bulk will conform exactly to the sample.
The UCC gives the buyer (unless disclaimed by the seller) certain implied warranties. Three of those implied warranties are the implied warranty of fitness for a particular purpose, the implied warranty of merchantability, and the implied warranty of the usage of trade. A sale by use of a sample is an express warranty the goods received conform to the sample.
Under the Sales Article of the UCC, which of the following circumstances best describes how the implied warranty of fitness for a particular purpose arises in a sale of goods transaction?
- The buyer is purchasing the goods for a particular purpose and is relying on the seller’s skill or judgment to select suitable goods.
- The buyer is purchasing the goods for a particular purpose and the seller is a merchant in such goods.
- The seller knows the particular purpose for which the buyer will use the goods and knows the buyer is relying on the seller’s skill or judgment to select suitable goods.
- The seller knows the particular purpose for which the buyer will use the goods and the seller is a merchant in such goods.
The seller knows the particular purpose for which the buyer will use the goods and knows the buyer is relying on the seller’s skill or judgment to select suitable goods.
It is the awareness of the seller that is the key.
Under the UCC Sales Article, an action for breach of the implied warranty of merchantability by a party who sustains personal injuries may be successful against the seller of the product only when
- The seller is a merchant of the product involved.
- An action based on negligence can also be successfully maintained.
- The injured party is in privity of contract with the seller.
- An action based on strict liability in tort can also be successfully maintained.
The seller is a merchant of the product involved.
To win a case under a breach of the implied warranty of merchantability, the plaintiff must show that a merchant sold the goods and that a breach of this warranty was the cause of an injury suffered.
Gray Fabricating Co. and Pine Corp. agreed orally that Pine would custom manufacture a processor for Gray at a price of $80,000.
After Pine completed the work at a cost of $60,000, Gray notified Pine that the processor was no longer needed. Pine is holding the processor and has requested payment from Gray. Pine has been unable to resell the processor for any price. Pine incurred storage fees of $1,000.
If Gray refuses to pay Pine and Pine sues Gray, the most Pine will be entitled to recover is?
- $60,000
- $61,000
- $80,000
- $81,000
$81,000
The point of contractual damages is to give the wronged party the “benefit of the bargain.” In this case, Gray expected $80,000 as that benefit in exchange for the processor. It did not get any of that expectation, and incurred an extra $1000 in expenses. To make it realize its expected benefit of $80,000, Gray must give Pine $81,000, as it is currently out $1000 after paying the storage. It will get $81,000.
On May 6, Maple entered into a signed contract with Ard, whereby Maple was to sell Ard a painting having a fair market value of $350,000 for $130,000. Maple believed the painting was worth only $130,000. Unknown to either party the painting had been destroyed by fire on May 4. If Ard sued Maple for breach of contract, Maple’s best defense is
- Risk of loss had passed to Ard.
- Lack of adequate consideration.
- Mutual mistake.
- Unconscionability.
A mutual mistake occurs when two parties intentionally enter into an agreement, but under an erroneous conviction. In this case, at the time of entering the contract, both parties reasonably believed that the destroyed painting was still in existence. Thus Maple’s best defense is that there was a mutual mistake of an existing fact, which renders the contract voidable.
Mutual mistake (i.e., by both parties) about existence, identity, or important characteristics of subject matter in contract makes contract voidable by either party
Assuming all other requirements have been met, which of the following terms generally must be included in a writing in order to satisfy the UCC Statute of Frauds regarding the sale of goods for?
- Price
- Quantity
- Time of payment
- Price = NO
- Quantity = YES
- Time of payment = NO
In order to satisfy the UCC Statute of Frauds regarding the sale of goods, only the quantity term must be included in the writing. Failure to include the time of payment will not cause the writing to fail to satisfy the UCC Statute of Frauds because a reasonable time of payment will be inferred. Failure to include other terms of the contract, including price, will not result in an insufficient writing either. The Code implies that the parties will in “good faith” determine a reasonable price.
Which of the following will be legally binding on all parties despite lack of consideration?
- An irrevocable oral promise by a merchant to keep an offer open for 60 days.
- A promise to donate money to a charity which the charity relied upon in incurring large expenditures.
- A promise to pay for the college education of the child of a person who saved the promisor’s life.
- A signed modification to a contract to purchase a parcel of land.
A promise to donate money to a charity which the charity relied upon in incurring large expenditures.
A promise to donate money to a charity which the charity relied upon in incurring large expenditures is a situation involving promissory estoppel. Promissory estoppel acts as a substitute for consideration and renders the promise enforceable. The elements necessary for promissory estoppel are:
- detrimental reliance on a promise,
- reliance on the promise is reasonable and foreseeable, and
- damage results (injustice) if the promise is not enforced.
Ward is attempting to introduce oral evidence in an action relating to a written contract between Ward and Weaver. Weaver has pleaded the parol evidence rule. Ward will be prohibited from introducing parol evidence if it relates to
- A modification made several days after the contract was executed.
- A change in the meaning of an unambiguous provision in the contract.
- Fraud in the inducement.
- An obvious error in drafting.
A change in the meaning of an unambiguous provision in the contract. The parol evidence rule prohibits the presentation as evidence of any prior or contemporaneous oral statements for the purpose of modifying or changing a written agreement intended by the parties to be the final and complete expression of their contract. It would bar the admission of evidence which relates to a change in an unambiguous provision in the contract but would not bar the admission of evidence which clarifies an ambiguous provision.
Montrose sent Bilbo a written offer to sell his tract of land located in Majorsville for $50,000. The parties were engaged in a separate dispute. The offer stated that it would be irrevocable for 30 days if Bilbo would promise to refrain from suing Montrose during this time. Bilbo promptly delivered a promise not to sue during the term of the offer and to forego suit if she accepted the offer. Montrose subsequently decided that the possible suit by Bilbo was groundless and therefore phoned Bilbo and revoked the offer 10 days after making it. Bilbo mailed an acceptance on the 30th day. Montrose did not reply. Under the circumstances
- Montrose’s offer was supported by consideration, and was irrevocable for the 30 day period.
- Bilbo’s promise was accepted by Montrose by his silence.
- Montrose’s revocation, not being in writing, was invalid.
- Montrose’s written offer would be irrevocable even without consideration.
Montrose’s offer was supported by consideration, and was irrevocable for the 30 day period. Bilbo’s promise to forego suit would be sufficient consideration to create an option offer. An option offer is irrevocable for the stated time period.