Contracts Examples Flashcards
Divisible contract - Common law
Examples:
- 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.
Is the builder likely to prevail in a suit for the agreed-upon price of the first structure?
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.
Under the terms of a written contract, a builder agreed to construct a garage for a homeowner for $10,000. Nothing was stated in the parties’ negotiations or in the contract about progress payments during the course of the work.
After completing 25 percent of the garage according to the homeowner’s specifications, the builder demanded $2,000
as a reasonable progress payment. The homeowner refused, and the builder abandoned the job.
If each party sues the other for breach of contract, which of the following will the court decide?
(B) Only the builder is in breach and liable for the homeowner’s damages, if any.
Where one party’s performance is to take place over a period of time, that party must complete its
performance before the other party is required to perform, unless the language or circumstances indicate
otherwise. Here the parties did not provide for progress payments in the contract. Therefore the builder was
required to complete performance before the homeowner was obligated to pay for any of the work the builder
had performed. The builder’s abandonment of the job constituted a wrongful repudiation, giving the
homeowner an action for breach.
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-upon price of the first structure?4
Since the builder completed the first structure, it is entitled to the agreed-upon price for that structure despite its failure to complete the others. However, the landowner will be able to deduct any recoverable damages caused by the builder’s failure to complete the contract.
DIVISIBLE + Substantial performance
A carpenter contracted with a homeowner to remodel the homeowner’s home for $10,000, the contract price to be paid
on completion of the work. On May 29, relying on his expectation that he would finish the work and have the
homeowner’s payment on June 1, the carpenter contracted to buy a car under the following terms: “$10,000 in cash, if payment is made on June 1; if payment is made thereafter, the price is $12,000.” The carpenter completed the work according to specifications on June 1 and demanded payment from the homeowner on that date. The homeowner, without any excuse, refused to pay. As a result, the carpenter became very excited, suffered a minor heart attack, and incurred related medical expenses of $4,000. The reasonable value of the carpenter’s services in remodeling the homeowner’s home was $13,000.
In an action by the carpenter against the homeowner, which of the following should be the carpenter’s measure of
recovery?
$10,000, the contract price.
The other items of damage are
unrecoverable either because they were unforeseeable at the time the contract was made or because they were
not caused by the breach
- A general contractor about to bid on a construction job with an owner invited a carpenter to bid on the carpentry work along with several others. The carpenter agreed to bid if the contractor would agree to give the carpenter the job provided that the carpenter’s bid was lowest and the contractor was awarded the main contract. The contractor so agreed. The carpenter, expending time and money in preparing his bid, submitted the lowest carpentry bid of $100,000. The contractor used the carpenter’s bid in calculating his own bid, which was
successful.
Which of the following best supports the carpenter’s position that the contractor is obligated to award the carpentry subcontract to the carpenter?
(A) The carpenter incurred an economic detriment in preparing his bid.
(B) The carpenter gave consideration for the contractor’s conditional promise to award the carpentry subcontract to him.
(C) The contractor has an obligation to the owner to subcontract with the carpenter because the carpenter’s bid was used in calculating the contractor’s bid, and the carpenter is a third-party intended beneficiary of that obligation.
(D) The contractor has an implied duty to deal fairly and in good faith with all bidders whose bids the contractor used in calculating his main bid.
(B) The carpenter gave consideration for the contractor’s conditional promise to award the carpentry subcontract to him.
An engineering firm submitted a bid to a
municipality for the construction of a new
wastewater treatment plant. The firm’s bid
included a subcontractor’s bid to complete
the electrical work on the plant for
$100,000.
The municipality awarded the construction
contract to the firm. Later that day, before
the firm told the subcontractor of the award,
the subcontractor told the firm that it was
withdrawing its bid because it had recently
undertaken a new project that would absorb
all its capacity for the next 18 months. The
firm nevertheless accepted the
subcontractor’s bid and demanded that it
perform the electrical work on the plant, but
the subcontractor refused. The firm had to
hire another subcontractor to perform the
electrical work, at a cost of $115,000. The
firm completed the construction of the plant
at a profit.
Which of the following statements correctly
describes the firm’s legal rights, if any,
against the first subcontractor?
(A) The firm is entitled to recover nominal
damages only, because it completed the
construction at a profit.
(B) The firm is entitled to recover reliance
damages, because it detrimentally relied
on the first subcontractor’s bid when it
submitted its own bid to the
municipality.
(C) The firm is entitled to recover
expectation damages, because the first
subcontractor’s bid was irrevocable for
a reasonable time and the firm timely
accepted it.
(D) The firm has no rights against the first
subcontractor, because the first
subcontractor was free to revoke its bid
at any time before the firm accepted that bid.
(C) The firm is entitled to recover
expectation damages, because the first
subcontractor’s bid was irrevocable for
a reasonable time and the firm timely
accepted it.
