Contracts Flashcards
On May 1, an uncle mailed a letter to his adult nephew that stated, “I am thinking of selling my pickup truck, which you have seen and ridden in. I would consider taking $7,000 for it.” On May 3, the nephew mailed the following response: “I will buy your pick up for $7,000 cash.” The uncle received this letter on May 5 and on May 6 mailed a note that stated: “It’s a deal.” On May 7, before the nephew had received the letter of May 6, he phoned his uncle to report that he no longer wanted to buy the pickup truck because his driver’s license had been suspended.
Which of the following statements concerning this exchange is accurate?
(A) There is a contract as of May 3.
(B) There is a contract as of May 5.
(C) There is a contract as of May 6.
(D) There is no contract.
(C) Contract as of May 6.
On April 1, Owner and Buyer signed a writing in which Owner, “in consideration of $100 to be paid to Owner by Buyer,” offered Buyer the right to purchase Greenacre for $100,000 within 30 days. The writing further provided, “This offer will become effective as an option only if and when the $100 consideration is in fact paid.”
On April 20, Owner, having received no payment or other communication from Buyer, sold and conveyed Greenacre to Citizen for $120,000. On April 21, Owner received a letter from Buyer enclosing a cashier’s check for $100 payable to Owner and stating, “I am hereby exercising my option to purchase Greenacre and am prepared to close whenever you’re ready.”
Which of the following, if proved, best supports Buyer’s suit against Owner for breach of contract?
(A) When the April 1 writing was signed, Owner said to Buyer, “Don’t worry about the $100; the recital of ‘$100 to be paid’ makes this deal binding.
(B) On April 15, Buyer decided to purchase Greenacre, and applied for an obtained a commitment from Bank for a $75,000 loan to help finance the purchase.
(C) Buyer was unaware of the sale to Citizen when Owner received the letter and check from Buyer on April 21.
(D) Owner and Buyer are both professional dealers in real estate.
(C) Buyer was unaware of the sale to Citizen when owner received the letter and check from Buyer on April 21.
On December 15, Lawyer received from Stationer, Inc., a retailer of office supplies, an offer consisting of its catalog and a signed letter stating, “We will supply you with as many of the items in the enclosed catalog as you order during the next calendar year. We assure you that this offer and the prices in the catalog will remain firm throughout the coming year.” On January 15, having at that time received no reply from the lawyer, Stationer notified Lawyer that effective February 1, it was increasing the prices of certain specified items in its catalog.
Is the price increase effective with respect to catalog orders Stationer receives from Lawyer during the month of February?
(A) No, because Stationer’s original offer, including the price term, became irrevocable under the doctrine of promissory estoppel.
(B) No, because Stationer is a merchant with respect to office supplies, and its original offer, including the price term, was irrevocable throughout the month of February.
(C) Yes, because Stationer received no consideration to support its assurance that it would not increase prices.
(D) Yes, because the period for which Stationer gave assurance that it would not raise prices was longer than three months.
(B) No, because Stationer is a merchant with respect to office supplies, and its original offer, including the price term, was irrevocable throughout the month of February.
On June 1, a seller received a mail order from a buyer requesting prompt shipment of a specified computer model at the seller’s current catalog price. On June 2, the seller mailed to the buyer a letter accepting the order and assuring the buyer that the computer would be shipped on June 3. On June 3, the seller realized that he was out of that computer model and shipped to the buyer a different computer model and a notice of accommodation. On June 5, the buyer received the seller’s June 2 letter and the different computer model, but not the notice of accommodation.
At that juncture, which of the following is a correct statement of the parties’ legal rights and duties?
(A) The seller’s prompt shipment of nonconforming good constituted an acceptance of the buyer’s offer, thereby creating a contract for the sale of the replacement computer model.
(B) The buyer can either accept or reject the different computer model, but if he rejects it, he will thereby waive any remedy for breach of contract.
(C) The buyer can either accept or reject the different computer model and in either event recover damages, if any, for breach of contract.
(D) The seller’s notice of accommodation was timely mailed and his shipment of the different computer model constituted a counteroffer.
(C) The buyer can either accept or reject the different computer model ad in either even recover damages, if any, for breach of contract.
On June 1, Topline Wholesale, Inc., received a purchase-order form from Wonder-Good, Inc., a retailer and new customer, in which the latter ordered 1,000 anti-recoil widgets for delivery no later than August 30 at a delivered total price of $10,000, as quoted in Topline’s current catalog. Both parties are merchants with respect to widgets of all types. On June 2, Topline mailed to Wonder-Good its own form, across the top of which Topline’s president had written, “We are pleased to accept your order.” This form contained the same terms as Wonder-Good’s form except for an additional printed clause in Topline’s form that provided for a maximum liability of $100 for any breach of contract by Topline.
As of June 5, when Wonder-Good received Topline’s acceptance form, which of the following is an accurate statement concerning the legal relationship between Toplne and Wonder-Good?
(A) There is no contract, because the liability-limitation clause in Topline’s form is a material alteration of Wonder-Good’s offer.
(B) There is no contract, because Wonder-Good did not consent to the liability-limitation clause in Topline’s form.
(C) There is an enforceable contract whose terms include the liability limitation clause in Topline’s form, because liquidation of damages is expressly authorized by the UCC.
(D) There is an enforceable contract whose terms do not include the liability limitation clause in Topline’s form.
(D) There is an enforceable contract whose terms do not include the liability-limitation clause in Topline’s form.
Breeder bought a two-month-old registered boar at auction from Pigstyle for $800. No express warranty was made. Fifteen months later, tests by experts proved conclusively that the board had been born incurably sterile. If this had been known at the time of the sale, the boar would have been worth no more than $100. In an action by the Breeder against Pigstyle to avoid the contract and recover the price paid, the parties stipulate that, as both were and had been aware, the minimum age at which the fertility of the boar can be determined is about 12 months.
Which of the following will the court probably decide?
(A) Breeder wins, because Pigstyle impliedly warranted that the boar was fit for breeding.
(B) Breeder wins, because the parties were mutually mistaken as to the boar’s fertility when they made the agreement.
(C) Pigstyle wins, because Breeder assumed the risk of the boar’s fertility.
(D) Pigstyle wins, because any mistake involved was unilateral, not mutual.
(C) Pigstyle wins, because Breeder assumed the risk of the boar’s fertility.
Mural, a wallpaper hanger, sent Gennybelle, a GC, this telegram: “Will do all paperhanging on new Doctor’s Office, per owner’s specs, for $14,000 if you accept within reasonable time after the main contract is awarded. /s/ Mural.
Three other competing hangers sent Gennybelle similar bids in the respective amounts of $18k, $19k, and $20k. Gennybelle used Mural’s $14k figure in preparing the bid.
Before the bids were opened, Mural truthfully advised Gennybelle that the former’s telegraphic sub-bid had been based on a $4k computation error and was therefore revoked. Shortly thereafter, Gennybelle was awarded the contract, and subsequently contracted with another paperhanger for a price of $18k. Gennybelle now sues Mural to recover $4k.
Which of the following, if proved, would best support Mural’s defense?
(A) Gennybell gave Mural no consideration for an irrevocable sub-bid.
(B) Even after paying $18k for the paperhanging, Gennybelle would make a net profit of $100k on the contract.
(C) Before submitting her own bid, Gennybelle had reason to suspect that Mural had made a computation error in figuring the sub-bid.
(D) Mural’s sub-bid expressly requested Gennybelle’s acceptance after awarding of the main contract.
(C) Before submitting her own bid, Gennybelle had reason to suspect Mural’s computation error.
Loyal, age 60, who had made no plans for early retirement, had worked for Mutate, Inc., for 20 years as a managerial employee-at-will when he had a conversation with the company’s president, George Mutate, about Loyal’s post-retirement goal of extensive travel around the United States. A month later, Mutate handed Loyal a written, signed resolution of the company’s Board of Directors stating that when and if Loyal should decide to retire, at his option, the company, in recognition of his past service, would pay him a $2,000 per month lifetime pension. The company had no regularized retirement plan for at will employees. Shortly thereafter, Loyal retired and immediately bought a $30,000 RV for his planned travels. After receiving the promised $2,000 monthly pension for six months, Loyal, no unemployable elsewhere, received a letter cancelling his pension.
In a suit against Mutate, Inc., for breach of contract, Loyal will probably…
(A) Lose, because the board’s promise was an unenforceable gift promise.
(B) Lose, because he had been an employee at will throughout his time with the company.
(C) Win, because he retired from the company as bargained for consideration for which the Board’s promise to him of a lifetime pension.
(D) Win, because he timed his decision to retire and buy the RV, in reasonable reliance on the Board’s promise to him of a lifetime pension.
(D) Win, because he timed his decision to retire and buy the RV, in reasonable reliance on the Board’s promise to him of a lifetime pension.
A burglar stole Collecta’s impressionist painting valued at $400,000. Collecta, who had insured the paining for $300,000 with Artistic Insurance, Co., promised to pay $25,000 to Snoop, a full time investigator for Artistic, if he effected the return of the painting to her in good condition. By company rules, Artistic permits its investigators to accept and retain rewards from policyholders for the recovery of insured property. Snoop, by long and skillful detective work, recovered the picture and returned it undamaged to Collecta.
If Collecta refuses to pay Snoop anything, and he sues her for $25,000, what is the probable result under the prevailing modern rule?
(A) Snoop wins, because the pre-existing duty rule does not apply if the promisee’s duty was owed to a third person.
(B) Collecta wins, because Snoop owed Artistic a preexisting duty to recover the picture if possible.
(C) Snoop wins, because Collecta will benefit more from return of the painting than the insurance proceeds.
(D) Collecta wins, because Artistic, Snoop’s employer, had a preexisting duty to return the recovered painting to Collecta.
(A) Snoop wins, because the pre-existing duty rule does not apply if the promisee’s duty was owed to a third person.
An innkeeper, who had no previous experience in the motel or commercial laundry business and who knew nothing about the trade usages of either business, bought a motel and signed an agreement with a laundry company for the motel’s laundry services. The one-year agreement provided for “daily service at $500/week.” From their conversations during negotiation, the laundry company knew that the innkeeper expected laundry service seven days/week. When laundry company refused to pick up laundry on two successive Sundays and indicated that it would never do so, the innkeeper canceled the agreement. The laundry company sued to innkeeper for breach of contract. At trial, clear evidence was introduced to show that in the commercial laundry business “daily service” did not include service on Sundays.
Will the laundry company succeed in its action?
(A) No, because the laundry company knew the meaning the innkeeper attached to “daily service,” and therefore, the innkeeper’s meaning will control.
(B) No, because the parties attached materially different meanings to “daily service,” and, therefore, no contract was formed.
(C) Yes, because the parol evidence rule will not permit the innkeeper to prove the meaning she attached to “daily service.”
(D) Yes, because the trade usage will control the interpretation of “daily service.”
(A) No, because the laundry company knew the meaning the innkeeper attached to “daily service,” and therefore, the innkeeper’s meaning will control.
A seller and a buyer have dealt with each other in hundreds of separate grain contracts over the last five years. in performing each contract, the seller delivered the grain to the buyer and, upon delivery, the buyer signed an invoice that showed an agreed upon price for that delivery. Each invoice was silent in regard to any discount from the price for prompt shipment. The custom of the grain trade is to allow a 2% discount from the invoice price for payment within 10 days of delivery. In all of their prior transactions and without objection from the seller, the buyer took 15 days to pay and deducted 5% from the invoice price. The same delivery procedure and invoice were used in the present contract as had been used previously. The present contract called for a single delivery of wheat at a price of $300,000. The seller delivered the wheat and the buyer then signed the invoice. On the third day after delivery, the buyer received the following note from the seller: “Payment in full in accordance with the signed invoice is due immediately. No discounts permitted.” /s/ Seller.
Which of the following statements concerning these facts is most accurate?
(A) Custom of the trade controls, and the buyer is entitled to a 2% discount if paid within 10 days.
(B) Course of dealing controls, and the buyer is entitled to a 5% discount if he pays within 15 days.
(C) The seller’s retraction controls, and there is no discount.
(D) The written contract controls, and the PE Rule prevents any discounts.
(B) Course of dealing controls, and the buyer is entitled to a 5% discount if he pays within 15 days.
A buyer and a seller entered into a contract for the sale of 10,000 novelty bracelets. The seller had the bracelets in stock. The contract specified that the seller would ship the bracelets 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 bracelets.
On the above facts, when would the risk of loss to the buyer.
(A) When the contract was made.
(B) When the bracelets were identified to the contract by the seller, assuming the goods conformed to the contract
(C) When the bracelets were delivered to a carrier and a proper contract for the carriage was made.
(D) When the bracelets were unloaded on the buyer’s premises by the carrier.
(C) When the bracelets were delivered to a carrier and a proper contract for the carriage was made.
A seller owned a single family house. A buyer gave the seller a signed handwritten offer to purchase the house. The offer was unconditional and sufficient to satisfy the statute of frauds, and when the seller signed an acceptance an enforceable contract resulted. The house on the land had been the seller’s home, but he had moved to an apartment, so the house was vacant at all times relevant to the proposed transaction. Two weeks after the parties entered into their contract, one week after the buyer had obtained a written mortgage lending commitment from a lender, and one week before the agreed-upon closing date, the house was struck by lightning and burned to the ground. The loss was not insured because the seller had let his policy lapse after he paid his mortgage in full. The handwritten contract was wholly silent on matters of financing, risk of loss, and insurance. The buyer declared the contract voided by the fire, but the seller asserted a right to enforce the contract despite the loss. There is no applicable statute.
If a court finds for the seller, what is the likely reason?
(A) The contract was construed against the buyer, who drafted it.
(B) The RoL passed to the buyer on the contract date under doctrine of equitable conversion.
(C) The RoL falls on the party in possession, and constructive possession passed to the buyer on the contract date.
(D) The lender’s written commitment to make a mortgage loan to the buyer made the contract of sale fully binding on the buyer.
(B) The RoL passed to the buyer on the contract date under doctrine of equitable conversion.
On March 1, a homeowner contracted a builder about constructing an addition to the homeowner’s house. The builder orally offered to perform the work for $200,000 if his pending bid on another project was rejected. The homeowner accepted the builder’s terms and the builder then prepared a written contract that both parties signed. The contract did not refer to the builder’s pending bid. One week later, upon learning that his pending bid on the other project had been accepted, the builder refused to perform any work for the homeowner.
Can the homeowner recover for nonperformance?
(A) Yes, because the builder’s attempt to condition his duty to perform rendered the contract illusory.
(B) Yes, because the parol evidence rule would bar the builder from presenting evidence of oral understandings not included in the final writing.
(C) No, because efficiency principles justify the builder’s services being directed to a higher-valued use.
(D) No, because the builder’s duty to perform was subject to a condition.
(D) No, because the builder’s duty to perform was subject to a condition.
A landowner entered into a single contract with a builder to have three different structures built on separate pieces of property owned by the landowner. Each structure was distinct from the other two and the parties agreed on a specific price for each. After completing the first structure in accordance with the terms of the contract, the builder demanded payment of the specified price for that structure. At the same time, the builder told the
landowner that the builder was “tired of the construction business” and would not even begin the other two structures. The landowner refused to pay anything to the builder.
Is the builder likely to prevail in a suit for the agreed price of the first structure?
(A) Yes, because the contract is divisible, but the landowner will be able to deduct any recoverable damages caused by the builder’s failure to
complete the contract.
(B) Yes, because the contract is divisible, and the landowner will be required to bring a separate claim for the builder’s failure to complete the other two
structures.
(C) No, because substantial performance is a constructive condition to the landowner’s duty to pay at the contract rate.
(D) No, because the builder’s cessation of performance without legal excuse is a willful breach of the contract.
(A) Yes, because the contract is divisible, but the landowner will be able to deduct any recoverable damages caused by the builder’s failure to
complete the contract.
On March 1, an excavator entered into a contract with a contractor to perform excavation work on a large project. The contract expressly required that the excavator begin work on June 1 to enable other subcontractors to install utilities. On May 15, the excavator requested a 30-day delay in the start date for the excavation work because he was seriously behind schedule on another project. When the contractor refused to grant the delay, the excavator stated that he would try to begin the work for the contractor on June 1.
Does the contractor have valid legal grounds to cancel the contract with the excavator and hire a replacement?
(A) Yes, because the excavator committed an anticipatory repudiation of the contract by causing the contractor to feel insecure about the performance.
(B) Yes, because the excavator breached the implied covenant of good faith and fair dealing.
(C) No, because the excavator would be entitled to specific performance of the contract if he could begin by June 1.
(D) No, because the excavator did not state unequivocally that he would delay the beginning of his work.
(D) No, because the excavator did not state unequivocally that he would delay the beginning of his work.
In a single writing, Painter contracted with Farmer to paint three identical barns on her rural estate for $2,000 each. The contract provided for Farmer’s payment of $6,000 upon Painter’s completion of the work on all three barns.
Painter did not ask for any payment when the first barn was completely painted, but she demanded $4,000 after painting the second barn.
Is Farmer obligated to make the $4,000 payment?
(A) Yes, because the contract is divisible.
(B) Yes, because Painter has substantially performed the entire contract.
(C) No, because Painter waived her right, if any, to payment on a per-barn basis by failing to demand $2,000 upon completion of the first barn.
(D) No, because Farmer has no duty under the contract to pay anything to Painter until all three barns have been painted.
(D) No, because Farmer has no duty under the contract to pay anything to Painter until all three barns have been painted.
In a signed writing, Nimrod contracted to purchase a 25-foot travel trailer from Trailco for $15,000, cash on delivery no later than June 1. Nimrod arrived at the
Trailco sales lot on Sunday, May 31, to pay for and take delivery of the trailer, but refused to do so when he discovered that the spare tire was missing. Trailco offered to install a spare tire on Monday when its service department would open, but Nimrod replied that he did not want the trailer and would purchase another one elsewhere.
Which of the following is accurate?
(A) Nimrod had a right to reject the trailer and terminate the contract under the perfect tender rule.
(B) Nimrod was required to accept the trailer, because the defect could be readily cured.
(C) Nimrod was required to accept the trailer, because the defect did not substantially impair its value.
(D) Nimrod had a right to reject the trailer, but Trailco was entitled to a reasonable opportunity to cure the defect.
(D) Nimrod had a right to reject the trailer, but Trailco was entitled to a reasonable opportunity to cure the defect.
Fixtures, Inc., in a signed writing, contracted with Apartments for the sale to Apartments of 50 identical sets of specified bathroom fixtures, 25 sets to be delivered on March 1, and the remaining 25 sets on April 1. The agreement did not specify the place of delivery, or the time or place of payment. On March 1, Fixtures tendered 24 sets to Apartments and explained, “One of the 25 sets was damaged in transit from the manufacturer to us, but we will deliver a replacement within 5 days.
Which of the following statements is correct?
(A) Apartments must accept the 24 sets but is entitled to cancel the rest of the contract.
(B) Apartments is entitled to accept any number of the 24 sets, reject the rest, and cancel the contract both as to any rejected sets and the lot due on April 1.
(C) Apartments is entitled to accept any number of the 24 sets and to reject the rest, but is not entitled to cancel the contract as to any rejected sets or the lot due on
April 1.
(D) Apartments must accept the 24 sets and is not entitled to cancel the rest of the contract, but is entitled to any damage it has incurred as a result of the deficiency
in the installment.
(D) Apartments must accept the 24 sets and is not entitled to cancel the rest of the contract, but is entitled to any damage it has incurred as a result of the deficiency
in the installment.
Buyer, Inc., contracted in writing with Shareholder, who owned all of XYZ Corporation’s outstanding stock, to purchase all of her stock at a specified price per
share. At the time this contract was executed, Buyer’s contracting officer said to Shareholder, “Of course, our commitment to buy is conditioned on our obtaining
approval of the contract from Conglomerate, Ltd., our parent company.” Shareholder replied, “Fine. No problem.” Shareholder subsequently refused to consummate the sale on the ground that Buyer
had neglected to request Conglomerate’s approval of the contract, which was true. Conglomerate’s chief executive officer, however, is prepared to testify that
Conglomerate would have routinely approved the contract if requested to do so. Buyer can also prove that it has made a substantial sale of other assets to finance the stock purchase, although it admittedly had not anticipated any such necessity when it entered into the stock purchase agreement.
If Buyer sues Shareholder for breach of contract, is Buyer likely to prevail?
(A) No, because the express condition of Conglomerate’s approval had not occurred prior to the lawsuit.
(B) No, because obtaining Conglomerate’s approval of the contract was an event within Buyer’s control and Buyer’s failure to obtain it was itself a material breach
of contract.
(C) Yes, because the condition of Conglomerate’s approval of the contract, being designed to protect only Buyer and Conglomerate, can be and has been waived by those entities.
(D) Yes, because Buyer detrimentally relied on Shareholder’s commitment by selling off other assets to finance the stock purchase.
(C) Yes, because the condition of Conglomerate’s approval of the contract, being designed to protect only Buyer and Conglomerate, can be and has been waived by those entities.
