Contracts - Missed Questions

Question 1

An art collector was interested in buying a painting from his neighbor. The neighbor told the collector that he could have the painting for $30,000. The collector wanted to think the purchase over. Therefore, the two agreed in writing that the neighbor would keep the offer open for 30 days in exchange for $500, which the collector paid. The terms of the written agreement provided that the offer would expire at 11:59 p.m. on September 30 if the collector failed to accept by that time. On September 20, the collector telephoned his neighbor and told him, “The more I think about it, the less I think that I want your painting.” The neighbor responded, “That’s your decision to make.” On September 26, one of the neighbor’s friends was visiting him, saw the painting, and offered his friend (the neighbor) $35,000 for it.

On September 27, the neighbor mailed a $50 check to the collector with a letter stating that he was terminating his offer to the collector regarding the painting and refunding 10% of the money that the collector paid him to keep the offer open. He mailed the letter at 11:59 p.m. on September 27. The collector received the letter at 11:30 a.m. on September 29. On September 28, at 9:30 a.m., the collector mailed a letter to his neighbor stating that he had decided to purchase the painting and a certified check in the amount of $30,000 was enclosed. Two hours later, the neighbor sold the painting to his friend for $35,000. The neighbor received the collector’s letter on October 1 and immediately mailed the check back to the collector.

Can the collector maintain a successful legal action against his neighbor?

A. Yes, because the neighbor sold the painting after the collector’s effective acceptance, and before the neighbor’s revocation became effective.
B. Yes, because in his revocation the neighbor did not refund the full $500 to the collector.
C. No, because the neighbor effectively revoked his offer before the collector accepted.
D. No, because the collector’s power to accept lapsed before he effectively accepted.

Answer 1

D. No, because the collector’s power to accept lapsed before he effectively accepted

Question 2

On July 1, a cattle breeder, who was planning to retire soon, sent a note to his neighbor offering to sell his prize bull for $15,000. On July 10, the neighbor, who was also a cattle breeder, wrote the following note to the retiring breeder:

“I have decided to take the bull. I will give you a cashier’s check on delivery on Saturday, July 28.”

The retiring breeder did not respond. The retiring breeder did not want to deliver the bull on July 28 and did not think that the delivery day was agreed to. Instead, he delivered the bull on Monday, July 30. The neighbor refused the delivery and stated that he had found another bull he likes better. The retiring breeder sues the neighbor for breach of contract.

Is the retiring breeder likely to prevail?

A. Yes, because his breach, if any, was minor
B. Yes, because the parties had not agreed on July 28 as the delivery date
C. No, because there was no K
D. No, because he did not deliver the bull on July 28

Answer 2

D. No, because he did not deliver the bull on July 28

Neighbor accepted the offer and added the additional term of the delivery date; this is an effective acceptance. Both parties are merchants and the delivery date does not materially alter the contract. When he delivered the bull on July 30th, he breached the K.

Question 3

A photography buff wrote a letter to his brother-in-law offering to sell him his camera for $1,500, because he knew that he had admired it for a long time. The day after the brother-in-law received the letter, he mailed a letter back to the photography buff agreeing to purchase the camera equipment for $1,500. The next day, after describing the camera to a friend who was very knowledgeable about photographic equipment, the brother-in-law learned that the camera was second-rate and not worth more than $1,200. He immediately telephoned the photography buff and told him that he had no interest in buying the camera. The photography buff received his brother-in-law’s letter agreeing to purchase the camera equipment a day after receiving the phone call.

If the photography buff brings an action against his brother-in-law for breach of contract, and the brother-in-law defends on the grounds that no contract was formed, how should the court rule?

A. For the brother in law, because the description of the subject matter of the K was too indefinite to be enforced.
B. For the brother in law, because the photography buff received the telephone call before he received the letter.
C. For the photography buff, because his brother-in-law’s letter accepting the offer was effective when mailed.
D. For the photography buff, because the K is for the sale of goods over $500 in value and his brother in law’s attempted rejection of the offer was oral.

Answer 3

C. For the photography buff, because his brother-in-law’s letter accepting the offer was effective when mailed.

Question 4

The owner of a stationary bicycle wrote a letter to her friend offering to sell her stationary bicycle to him for $150. The friend received the letter on January 18. On January 19, he mailed a letter back saying that he was not interested in purchasing the bike because he had just purchased a gym membership. However, the friend changed his mind the next day and mailed a letter to the owner accepting her offer to sell the bicycle and enclosing a certified check for $150. The owner received the friend’s rejection letter on January 21 but put it aside without reading it. The next day, she received the friend’s acceptance letter, which she opened and read immediately.

Do the parties have a contract?

A. Yes, because under the mailbox rule an acceptance is effective on dispatch, while a rejection is effective on receipt.
B. Yes, because the friend paid for the bicycle when he accepted the offer to buy it.
C. No, because the acceptance was dispatched after the rejection.
D. No, because the mailbox rule does not apply - whichever is received first controls.

Answer 4

D. No, because the mailbox rule does not apply - whichever is received first controls.

No contract here because rejection was received before acceptance was received.

Question 5

A doll collector knew that an acquaintance from her doll collectors’ club coveted one particular doll that she owned. The doll collector mailed a letter to the acquaintance on May 3 offering to sell the doll to her for $750. Her letter arrived on May 4. On May 5, the doll collector changed her mind and immediately mailed a revocation to the acquaintance. This revocation arrived on May 7. As the mail carrier handed it to her, the acquaintance simultaneously handed to the mail carrier her own letter to the doll collector, unequivocally accepting her offer.

What is the result of the actions here?

A. The revocation was effective upon mailing, and the acceptance would be treated as a counteroffer.
B. The acceptance was effective, as long as the acquaintenance had no knowledge of the contents of the doll collector’s letter when she handed her letter to the mail carrier.
C. The outcome would turn on the court’s determination as to whether the doll collector’s letter had been received by the acquaintenance before she had entrusted the letter of acceptance to the mail carrier.
D. Handing a letter to a mail carrier is not a proper posting of the acceptance, and hence the acquaintenance’s purported acceptance is not timely.

Answer 5

C. The outcome would turn on the court’s determination as to whether the doll collector’s letter had been received by the acquaintenance before she had entrusted the letter of acceptance to the mail carrier.

Question 6

On July 1, a cattle rancher offered to sell his ranch to a dairy farmer for $150,000. The dairy farmer paid the cattle rancher $1,000 to hold the offer open for a period of 30 days. On July 10, the dairy farmer wrote to the cattle rancher, telling him that he could not pay more than $100,000 for the ranch, and that if he would not agree to accept that amount, he would not go through with the deal. The dairy farmer received no reply from the cattle rancher.

On July 29, the dairy farmer mailed a letter to the cattle rancher telling him that he accepted his offer to sell the ranch and enclosed a check for $150,000. The cattle rancher received this letter on August 1.

Has a contract been formed between the parties for the sale of the ranch?

A. No, because the dairy farmer’s letter of July 10 terminated the cattle rancher’s offer.
B. No, because the cattle rancher did not accept the dairy farmer’s counteroffer of $100K.
C. No, because the cattle rancher did not receive the dairy farmer’s acceptance within 30 days.
D. Yes, because the dairy farmer dispatched his accpetance of the cattle rancher’s offer prior to the expiration of 30 days.

Answer 6

C. No, because the cattle rancher did not receive the dairy farmer’s acceptance within 30 days.

Question 7

Generally speaking, the promise to perform an existing legal duty is __________.

A. Past consideration
B. Not consideration
C. Sufficient consideration
D. Valuable consideration

Answer 7

B. Not consideration

Question 8

Which of the following contracts must be evidenced in writing?

A. A contract to build a building
B. A mortgage contract
C. A six-month lease of a parcel of land
D. A contract between business partners to buy and sell real estate and divide the profits

Answer 8

B. A mortgage contract

A promise creating an interest in land MUST be evidenced by writing. This includes both agreements relating to the sale of land but also agreements pertaining to land, like a mortgage.

Question 9

A man and a woman met in a bar. While the two enjoyed a couple of drinks, the woman told the man that she greatly admired the diamond stickpin he had in his lapel. “Oh, this,” the man laughed. “It’s no diamond; it’s only a piece of glass.” The woman acknowledged his statement, but kept commenting on how nice it looked. After further conversation, the man orally agreed to sell the stickpin to her for $500. They agreed that in four days, the man would bring the stickpin to the same bar, and the woman would bring the $500 in cash. The woman wrote down her name and phone number on a napkin and asked the man to call her if there were any change in plans. The man duly appeared with the pin, but the woman failed to appear. The man filed suit against the woman for $500.

In an action by the man against the woman for breach of contract, which of the following would be the woman’s best defense?

A. $500 was an unconscionable amount to pay for a piece of glass
B. The parties lacked capacity to contract because they were drinking alcohol
C. The agreement violated the SOF
D. Neither the woman nor the man was a merchant

Answer 9

C. The agreement violated the SOF

Question 10

On April 15, a wholesaler of tulip bulbs telephoned a local nursery and offered to sell to the nursery 80 gross of tulip bulbs for $8,000, not including delivery charges. The nursery accepted immediately. On April 17, the nursery sent the wholesaler an email confirming the deal for the sale of 80 gross of tulip bulbs for $8,000, and stating that it anticipated a waiver of the delivery charges because of the size of the order. On May 3, the wholesaler telephoned the nursery and stated that, due to a poor growing season for tulips, it would not be able to supply any tulip bulbs to the nursery.

If the nursery brings suit against the wholesaler and the wholesaler asserts the Statute of Frauds as a defense, will the nursery prevail?

A. Yes, because its April 17 email contained the quantity term.
B. Yes, because its April 17 email contained the price term.
C. No, because the nursery’s April 17 email varied the terms of the wholesaler’s offer.
D. No, because the wholesaler is the party to be charged and has signed nothing.

Answer 10

A. Yes, because its April 17 email contained the quantity term.

Question 11

A manufacturing company was in the business of making copper tubing. A retail seller telephoned the manufacturing company’s sales department and placed an order, which the manufacturing company agreed to fulfill. The order was for 10,000 linear feet of copper tubing at a sale price of $2 per foot. The tubing was to be used in the production of a custom order for one of the retail seller’s customers. The manufacturing company installed special equipment for the manufacture of the tubing to the retail seller’s specifications and had completed a portion of the order when the retail seller again telephoned the sales department. This time, however, the retail seller canceled its order, saying it no longer had need of the tubing because its customer had been declared bankrupt and refused to pay for the order.

If the manufacturing company sues for breach, will it win?

A. Yes, because the contract is fully enforceable.
B. Yes, because the contract is enforceable to the extent of the portion of the order completed.
C. No, because a contract for the sale of goods for a price of $5oo or more must be in writing.
D. No, because the parole evidence rule would preclude testimony about the initial telephone call.

Answer 11

A. Yes, because the contract is fully enforceable.

Question 12

The owner of a one-acre parcel of land with a small house on it rented the property to a professor of a nearby college at a monthly rental of $500. Several years later, after the professor got tenure, the parties orally agreed that the professor would purchase the property from the owner for the sum of $60,000, payable at the rate of $500 a month for 10 years. They agreed that the owner would give the professor a deed to the property after five years had passed and $30,000 had been paid toward the purchase price, and that the professor would execute a note secured by a mortgage for the balance. The professor continued in possession of the property and made all monthly payments in a timely fashion. When he had paid $30,000, he tendered a proper note and mortgage to the property owner and demanded that she deliver the deed as agreed. The owner refused because valuable minerals had been discovered on adjacent parcels in recent months, causing the value of this parcel of land to increase to 10 times its former value. The professor brought suit against the property owner for specific performance.

If the court rules in favor of the property owner, what is the likely reason?

A. The transaction had not proceeded far enough to amount to an estoppel against enforcement of the SOF.
B. The purchase price, given the present value of the land, made the K unconscionable, providing the property owner with a valid defense to enforcement
C. Oral agreements are generally revocable unless expressly made irrevocable
D. The professor’s payments are as consistent with there being a landlord-tenant relationship between them as with there being an oral contract.

Answer 12

D. The professor’s payments are as consistent with there being a landlord-tenant relationship between them as with there being an oral contract.

Question 13

A jeweler was commissioned by a young man to design and create a set of rings (engagement and wedding) for his fiancée. The jeweler designed and created the rings in 18k gold, leaving room in the engagement ring for a large marquise-shaped diamond. The jeweler then entered into an oral agreement with a gemologist. The terms of the agreement were that the gemologist would provide the marquise-shaped diamond and the jeweler would pay the gemologist $20,000 when the jeweler received the payment from the young man. The gemologist found and cut a suitable stone and delivered it to the jeweler, who accepted it. The gemologist waited to be paid, and when he was not, he contacted the jeweler. The jeweler refused to pay him, arguing that their agreement was unenforceable and, anyway, the young man has not paid her.

If the gemologist sues the jeweler for breach of contract, what is the gemologist’s likely recovery?

A. The fair market value of the stone, under a quasi-contract theory.
B. The cost of materials and labor, under a quasi-contract theory.
C. $20,000 the contract price.
D. Nothing, because the young man did not pay the jeweler.

Answer 13

C. $20,000 the contract price.

Question 14

When a contractor is under a contractual duty to construct a building and the building is destroyed by an act of nature while it is still a work in progress, the destruction __________.

A. will discharge the contractor’s duty to perform
B. will not discharge the contractor’s duty to perform, but will extend the date of performance
C. will discharge the contractor’s duty to perform if rebuilding cannot be reasonably accepted by the date of performance
D. will neither discharge the contractor’s duty to perform nor extend the date of performance

Answer 14

B. will not discharge the contractor’s duty to perform, but will extend the date of performance

Question 15

A farmer contracts with a mechanic to repaint his antique tractor for display in the upcoming county fair.

Which of the following would discharge the contract by impossibility?

A. The unexpected death of the mechanic
B. The unexpected death of the farmer
C. The destruction of the tractor by a tornado
D. The cancellation of the county fair due to a drought

Answer 15

C. The destruction of the tractor by a tornado

Question 16

An advertising agency specializing in aerial banners and skywriting signed a contract with a film production company that was premiering a new blockbuster film. The contract provided that the agency would advertise the film by flying over the city towing a giant streamer belonging to the film company heralding the film’s catch phrase and title in large letters. This contract specified that the flight was to be conducted on the first Saturday in June at noon (the day of the local premier), and the film company was to pay the advertising agency $500 for the flight.

On the designated Saturday, the advertising agency was unable to fly because of a defective fuel pump. The defective condition was entirely unforeseeable and did not occur through any negligence or fault of the agency. The film company did not pay the agency, and each of the parties has sued the other for damages.

Which of the following best states the rights and liabilities of the parties?

A. The film company is entitled to recover damages from the advertising agency on account of the agency’s failure to fly.
B. The advertising agency is entitled to recover from the film company the $500 contract price, as the incapacity of the airplane was not the agency’s fault
C. Neither party is entitled to recover against the other, because the advertising agency’s duty to fly was discharged by impossibility, and the film company’s duty to pay was contingent o the agency’s flight
D. Neither party is entitled to recover against the other, because the film company’s offer to pay $500 for the flight was in effect an offer for an axt, and because the act was not performed, there was no valid acceptance.

Answer 16

A. The film company is entitled to recover damages from the advertising agency on account of the agency’s failure to fly.

Question 17

On April 1, a graduate student who owned an antique dictionary agreed to sell it to a buyer for $1,500. The written contract between the seller and the buyer provided that the dictionary would not be delivered to the buyer until April 20. Late on April 15, a fire swept through the seller’s apartment building, through no fault of the seller, and the dictionary was destroyed. Fortunately for the seller, he had insurance that covered all of his damages, including compensation for the destroyed dictionary. On April 20, the seller told the buyer of the fire, but still demanded payment, claiming that the buyer was the equitable owner of the dictionary when it was destroyed, and told her that she could have obtained insurance on the dictionary had she wanted to, because she had an insurable interest in the dictionary as soon as the contract was made. The buyer refused to pay. The seller brings an action against the buyer for the $1,500.

Who will prevail?

A. The buyer, because the seller was fully compensated for his dictionary and making the buyer pay would result in unjust enrichment.
B. The buyer, because destruciton of the dictionary avoids the K and dishcarges her duty to pay.
C. The seller, because when he contracted with the buyer, the risk of loss passed to her.
D. The seller, because of the doctrine of equitable conversion.

Answer 17

B. The buyer, because destruction of the dictionary avoids the contract and discharges her duty to pay.

Question 18

The UCC gives a seller the right to cure a defective shipment within a reasonable time beyond the original time for performance in the contract if:

A. The buyer would suffer no damages by allowing the seller to cure.
B. Prior dealings with the buyer led the seller to reasonably believe that the defective shipment would be acceptable.
C. The buyer agrees to extend the terms of the contract to allow for late delivery without additional consideration.
D. The seller notifies the buyer of his desire to cure before the time for performance in the original contract.

Answer 18

B. Prior dealings with the buyer led the seller to reasonably believe that the defective shipment would be acceptable.

Question 19

One Saturday, the owner of an art gallery and her friend were discussing art after the friend had helped the owner move some furniture in her home. The friend mentioned that he was very fond of a particular artist. The gallery owner asked her friend if he would like to buy a painting by the artist, entitled “Tears of a Clown,” recently consigned to the gallery. The friend said that he would love it, but he only had $2,700. The gallery owner told her friend that she would let him have the painting for that price. The friend knew that the painting was priced at $7,000. He immediately wrote out a check for $2,700 and gave it to the gallery owner, who told him to visit the gallery on Monday to pick up the painting. On Sunday, a salesperson at the gallery sold “Tears of a Clown” to a gallery customer. Neither the salesperson nor the customer knew of the agreement between the gallery owner and her friend. The customer took the painting with him on Sunday. When the friend arrived at the gallery on Monday, the painting was gone.

Can the friend obtain specific performance from the gallery owner?

A. Yes, because there was a bargained-for exchange of promises between the friend and the gallery owner.
B. Yes, because the friend’s assistance to the gallery owner in moving her furniture should be considered part of the quantum of adequate consideration.
C. No, because the painting was sold to a bona fide purchaser for value and enforcement against the gallery owner is no longer feasible.
D. No, because the gallery owner’s promise was essentially a gift to her friend that she was free to revoke.

Answer 19

C. No, because the painting was sold to a bona fide purchaser for value and enforcement against the gallery owner is no longer feasible.

Question 20

A weather vane collector placed the following ad in a newspaper: “I will pay $300 for information as to where I can purchase a Connecticut copper weather vane with Victorian Serpentine Motif in good condition.” The ad, which included contact information, was placed on Friday, December 5, and was to run a full week, starting on Sunday the 7th. A friend of the collector’s knew of his quest for the weather vane, but she did not see the newspaper ad. On Sunday morning, she saw at a swap meet the exact type of weather vane the collector sought and called him to tell him about it. The collector hurried down to the swap meet and got his weather vane at a good price.

On Monday, December 8, the friend saw the collector’s ad in an open newspaper. She called the collector and asked him to pay her $300 for the tip. After he declined, saying the offer was revoked when he purchased the weather vane, she sued the collector for her reward.

Will she prevail?

A. Yes, because the collector bought the vane based on her tip.
B. Yes, because the collector’s revocation was ineffective.
C. No, because the friend did not know of the offer when she accepted.
D. No, because the collector’s ad was not an offer.

Answer 20

C. No, because the friend did not know of the offer when she accepted.

Question 21

A dog owner owned a mutt of little monetary value. One day, the dog disappeared, and the owner placed the following advertisement in the newspaper: “I will pay $500 to anyone who returns my dog.” A man found the dog the next day. Knowing to whom the dog belonged, the man took the dog home, intending to return it that night. Before he returned the dog, the man read the dog owner’s advertisement in the newspaper.

Assuming that the dog owner’s advertisement was an offer, what are the rights of the man who found the dog?

A. He can recover $500, as he has accepted the offer.
B. He can recover $500 if he returns the dog to the dog owner.
C. He cannot recover the $500, even if he returns the dog, because he did not have knowledge of the offer when he found the dog.
D. He cannot recover the $500 because the dog owner’s promise was not represented by a signed memorandum.

Answer 21

B. He can recover $500 if he returns the dog to the dog owner.

Question 22

A microbrewery and a farming operation entered into a written contract for the sale of barley. The microbrewery agreed to buy from the farm “all the barley that the microbrewery requires” in its manufacture of beer, for a period of five years, at a mutually agreed-upon price. Under the contract, the microbrewery would place its orders on the first of each month and the barley would be delivered within five business days.

For the first two years of the contract, the microbrewery placed its orders on the first of each month for either four or five barrels of barley. At the beginning of the third year of the contract, an article about the microbrewery appeared in a national newspaper, causing its popularity to soar. The following month, the microbrewery placed an order for 20 barrels of barley. The farm could not meet the increased demand and refused to deliver the 20 barrels. The microbrewery sued the farm for breach of contract.

Will the microbrewery be successful in its suit?

A. No, because its order for 20 barrels of barley was unreasonably disporportionate to its previous orders over a 2-yr period.
B. No, because the quantity term in a K for a sale of goods must be certain.
C. Yes, because its order for 20 barrels of barley reflected its actual requirement for that month.
D. Yes, beucase its change in demand was unforeseeable when the parties entered into a K.

Answer 22

A. No, because its order for 20 barrels of barley was unreasonably disporportionate to its previous orders over a 2-yr period.

Question 23

A debtor owed $50,000 to a creditor. One week before the statute of limitations was to expire, the debtor’s mother sent the creditor a letter stating that she was sure that her son was about to pay the debt, and that if her son did not pay, she would. Relying on the mother’s letter, the creditor allowed the statute of limitations to expire without bringing an action to recover the money. The debtor refused to pay the creditor.

If the creditor brings suit against the mother for the $50,000, will he prevail?

A. No, because the statute of limitations has run against the son’s debt.
B. No, because the mother received no bargained-for exchange to support her promise.
C. Yes, because the creditor reasonably and foreseeably relied on the mother’s promise.
D. Yes, because of the main purpose exception to the statute of limitations.

Answer 23

C. Yes, because the creditor reasonably and foreseeably relied on the mother’s promise.

Question 24

A catering company entered into a written contract with a dish supplier to purchase 5,000 plastic dishes at $.10 per dish. The contract called for the supplier to deliver the 5,000 dishes to the caterer on or before October 1. On October 1, the supplier delivered only 3,000 dishes to the caterer. The supplier informed the caterer that it was experiencing manufacturing delays and would deliver the other 2,000 dishes by October 31 at the latest. The caterer accepted delivery of the 3,000 dishes, but because it had a number of catering jobs lined up for early October, the caterer was forced to purchase 2,000 dishes from another supplier at a price of $.12 per dish. The supplier demanded that the caterer pay $300 for the 3,000 dishes delivered, but the caterer refused to pay anything.

If the supplier sues the caterer for breach of contract, what will the supplier recover?

A. $300, the price under the contract for the 3,000 dishes that were delivered, with no deduction for the caterer’s extra cost, because the caterer waived its right to cover when it accepted the supplier’s tender without expressly reserving its rights.

B. The reasonable value of the 3,000 dishes that were delivered less $40, which is the extra cost incurred by the caterer to obtain the balance of the dishes.

C. $260, the price under the contract for the 3,000 dishes that were delivered less $40, which is the extra cost incurred by the caterer to obtain the balance of the dishes.

D. Nothing, because the supplier is in material breach of the contract until it tenders delivery of the last 2,000 dishes.

Answer 24

B. The reasonable value of the 3,000 dishes that were delivered less $40, which is the extra cost incurred by the caterer to obtain the balance of the dishes.

Question 25

A golf pro entered into an employment contract with a country club to be its golf pro. The agreement specified that the golf pro would run the pro shop and provide private instruction to members from April through September of each year for the next five years, at a monthly salary of $5,000, plus instructional fees. During those months, the club’s other instructor was playing on the professional tour and was unavailable.

On March 15, the club’s manager received an e-mail from the golf pro, stating: “Made the final cut in Sarasota Winter Open. May not be able to get to club by April 1. Could be delayed until 5th if playoff necessary.” The club’s manager asked his attorney whether he should bring an immediate action against the golf pro for breach of contract.

Which of the following is the most accurate advice for the manager?

A. Do not file suit; a repudiation must be in a signed writing to be of legal effect
B. Do not file suit; the golf pro has not repudiated the contract.
C. File suit, but only if the club has changed its position to its detriment in reliance on the email.
D. File suit, because the golf pro has repudiated the contract.

Answer 25

B. Do not file suit; the golf pro has not repudiated the contract.

Question 26

A dealer in oriental rugs acquired an antique rug measuring 24 feet by 36 feet. A banker inspected the rug and orally agreed to buy it for the asking price of $65,000, provided he was successful in purchasing the house he was trying to buy, because it had a living room large enough to accommodate the rug. The sale agreement was later reduced to writing, but the provision concerning the purchase of the house was not included in the written agreement.

If the banker is unsuccessful in acquiring the house he wants because the owner decided not to sell, and the dealer sues the banker for the purchase price, what is the most likely result?

A. The dealer will prevail because the original oral agreement need not be in writing to be enforceable.
B. The dealer will prevail because of the parol evidence rule.
C. The banker will prevail because he was unable to acquire the house he wanted.
D. The banker will prevail because the dealer is not entitled to specific performance.

Answer 26

C. The banker will prevail because he was unable to acquire the house he wanted.

Question 27

A shopkeeper loaned a long-time employee $1,500 from his personal bank account because a family illness was causing the employee unexpected financial difficulties. Because the employee had proved himself to be trustworthy, there was no writing evidencing the loan and no payback date established; it was understood that the employee would repay the loan when he was able to do so. Sometime later, the shopkeeper’s nephew asked him if he could help fund a business that he was starting up. Because most of the shopkeeper’s assets were currently tied up, he asked his employee if he would be in a position to repay the $1,500 loan. The employee promised to repay the loan on the following Monday, so the shopkeeper told the employee to pay the $1,500 directly to his nephew. Immediately thereafter, the shopkeeper informed the nephew to expect $1,500 from the employee on the following Monday. When Monday came, the employee decided he would rather tender the money to the shopkeeper than to someone he did not know, and the shopkeeper accepted the money.

If the nephew never receives any money from the shopkeeper, will he succeed in an action against the employee for the $1,500?

A. Yes, because the shopkeeper effectively assigned his right to collect the $1,500 to the nephew.
B. No, because the shopkeeper’s acceptance of the $1,500 from the employee revoked the shopkeeper’s gift to the nephew.
C. No, because the assignment was unsupported by consideration and therefore never effective.
D. No, because the employee’s tender of the $1,500 to the shopkeeper ad the shopkeeper’s acceptance of it constituted a novation.

Answer 27

B. No, because the shopkeeper’s acceptance of the $1,500 from the employee revoked the shopkeeper’s gift to the nephew.

Question 28

A landscaper entered into a written contract with a developer to landscape a 30-house subdivision at a price of $4,000 for each house. The contract provided for payment of the $120,000 only on completion of the landscaping for all the houses. After completing 20 houses, the landscaper demanded payment of $80,000. The developer refused. The landscaper then walked off the job without doing any landscaping on the other 10 houses. The developer refuses to pay the landscaper.

If the landscaper sues the developer, what damages should the court award the landscaper?

A. Nothing, because payment was expressly conditioned on completing the landscaping of all business needs.
B. Nothing, because the landscaper’s breach is material.
C. $80,000 less the developer’s damages resulting from the breach.
D. The amount of the landscaper’s anticipated profit on the 20 houses completed.

Answer 28

C. $80,000 less the developer’s damages resulting from the breach.

Question 29

A high-volume pleasure-boat retailer entered into a written contract to sell a customer a power boat for $120,000. The retailer could obtain from the manufacturer, for $90,500, as many of these boats as it could sell. As the contract provided, the customer paid the retailer $40,000 in advance and promised to pay the full balance on delivery of the boat. The contract contained no provision for liquidated damages. Prior to the agreed delivery date, the customer notified the retailer that he would be financially unable to conclude the purchase; the retailer thereafter resold the boat that the customer had ordered to a third person for $120,000 cash.

If the customer sues the retailer for restitution of the $40,000 advance payment, which of the following should the court decide?

A. The customer’s claim should be denied, because, as the party in default, he is deemed to have lost any right to restitution of a benefit conferred on the retailer.
B. The customer’s claim should be denied, because, but for his repudiation, the retailer would have made a profit on two boat sales instead of one.
C. The customer’s claim should be upheld in the amount of $40,000 minus the amount of the retailer’s lost profit under its contract with the customer.
D. The customer’s claims should be upheld in the amount of $39,500 ($40,000 minus $500 as statutory damages under the UCC).

Answer 29

C. The customer’s claim should be upheld in the amount of $40,000 minus the amount of the retailer’s lost profit under its contract with the customer.

Question 30

On December 6, the owner of an electronics store sent a written request to a computer manufacturer asking for the price of a certain laptop computer. The manufacturer sent a written reply with a catalog listing the prices and descriptions of all of his available computers. The letter stated that the terms of sale were cash within 30 days of delivery. On December 14, by return letter, the store owner ordered the computer, enclosing a check for $4,000, the listed price. Immediately on receipt of the order and check, the manufacturer informed the store owner that there had been a pricing mistake in the catalog, which should have quoted the price as $4,300 for that computer. The store owner refused to pay the additional $300, arguing that his order of December 14 in which the $4,000 check was enclosed was a proper acceptance of the manufacturer’s offer.

In a suit for damages, will the manufacturer prevail?

A. Yes, because his first communication stated terms calling for cash within 30 days of delivery.
B. Yes, because of the mistake as to price.
C. Yes, because his first communication did not constitute an offer.
D. No, because the store owner’s December 14 letter was a proper acceptance of the manufacturer’s offer.

Answer 30

D. No, because the store owner’s December 14 letter was a proper acceptance of the manufacturer’s offer.

Question 31

A builder contracted to build a house for a newly married couple. Terms of the contract provided that the builder would receive the contract price when the building was fully completed. Just when the builder had completed one-half of the structure, a tornado struck the area and demolished the building.

What is the builder entitled to recover from the couple under the contract?

A. Nothing
B. One-half of the contract price
C. One-half of the FMV of what remains of the house
D. Cost of materials and reasonable labor costs

Answer 31

A. Nothing

Question 32

On February 1, the owner of a bowling alley read in a magazine an ad from a major manufacturer of bowling balls offering sets of 40 balls in various weights and drilled in various sizes for $10 per ball. The owner immediately filled out the order form included in the ad for the 40 balls and deposited it, properly stamped and addressed, into the mail. On February 2, the bowling alley owner received in the mail a letter from the manufacturer, sent out as part of its advertising campaign, stating in relevant part that it will sell the bowling alley owner 40 bowling balls at $10 per ball. A day later, on February 3, the manufacturer received the bowling alley owner’s order. On February 4, the balls were shipped.

On what day did an enforceable contract arise?

A. February 1, the day the bowling alley owner deposited his order in the mail.
B. February 2, the day the bowling alley owner received the letter from the manufacturer.
C. February 3, the day the manufacturer received the bowling alley owner’s letter.
D. February 4, the day the balls were shipped.

Answer 32

D. February 4, the day the balls were shipped.

Magazine ads are mere solicitation.

Question 33

A small processor of specialized steel agreed in writing with a small manufacturer of children’s toys that it would supply, and the manufacturer would buy, all of the manufacturer’s specialized steel requirements over a period of years at a set price per ton of steel. Their contract did not include a nonassignment clause. Recently, the toy manufacturer decided to abandon its line of steel toys, so it made an assignment of its rights and delegation of its duties under the contract to a toymaker many times larger. The large toymaker notified the steel processor of the assignment and relayed to the processor its good faith belief that its requirements will approximate those of the assignor.

Must the steel processor supply the requirements of the large toymaker?

A. Yes, because there was no nonassignment clause in the K.
B. Yes, because the large toymaker acted in good faith to assure the steel processor that its requirements will approximate those of the small manufacturer into whose shoes it stepped.
C. No, because requirements contracts are not assignable under UCC.
D. No, because the steel processor did not give prior approval of the assignment.

Answer 33

B. Yes, because the large toymaker acted in good faith to assure the steel processor that its requirements will approximate those of the small manufacturer into whose shoes it stepped.

Question 34

A young man proposed to his girlfriend, but she was reluctant because of his meager income and lack of job potential. The young man told his father about her reluctance. The father told the girlfriend that if she married his son, he would support them for six months and send his son to a six-month computer technology training school. This was sufficient to dispel her reservations and the two were married very soon after. When they returned from their honeymoon, the father refused to go through with his offer. Although the girlfriend is happy in her marriage, she sued the father for damages.

If the father prevails, what is the likely reason?

A. The father’s promise was not supoprted by valid consideration.
B. The contract is against public policy.
C. The contract was oral.
D. The girlfriend is happy and therefore has incurred no detriment.

Answer 34

C. The contract was oral.

Relating to marriage; must be in writing under SOF

Question 35

A retailer entered into an oral contract with an office supply wholesaler to buy 100 file boxes for an upcoming back to school sale at the retailer‘s store. The wholesaler agreed to deliver the file boxes in two weeks at a cost of $4 per file box. A week later, the retailer phoned the wholesaler and asked if she could increase her order to 200 file boxes. The wholesaler agreed. The wholesaler delivered the 200 file boxes as promised, but the retailer accepted only 150 upon discovering that she lacked storage space for all 200.

May the wholesaler recover damages with respect to the 50 file boxes that were not accepted?

A. Yes, because the retailer accepted $600 worth of file boxes.
B. Yes, because the modification was for less than $500.
C. No, because the contract as modified was for $800.
D. No, because the wholesaler is a merchant w/ respect to file boxes.

Answer 35

C. No, because the contract as modified was for $800.

Question 36

The owner of a factory that uses widgets in making its product and a widget maker entered into negotiations over the telephone and, after a time, reached a general understanding that the factory owner would buy widgets from the widget maker. Following their conversation, the widget maker sent the factory owner a contract, which he had already signed, agreeing to sell 1,000 widgets to the factory owner for a total contract price of $10,000. Upon receipt of the contract in the mail, the factory owner signed the contract and deposited an envelope containing the contract in the mailbox located in front of his workplace.

Before the widget maker received the contract, the factory owner had a change of heart. He telephoned the widget maker and told him that he could not afford to buy the widgets he had ordered, and he was “not interested in that contract we talked about.” The widget maker replied, “That’s all right, I understand. Maybe we can do business some other time.” The next day, the signed contract was delivered to the widget maker’s office. The widget maker, also having had a change of mind, decided that he wanted to enforce the contract.

Is the contract enforceable against the factory owner?

A. Yes, because the acceptance occurred prior to rejection.
B. Yes, because of the parol evidence rule.
C. No, because the odder to rescind was accepted and that discharged the original K.
D. No, because the rejection by telephone voided the acceptance by mail.

Answer 36

A. Yes, because the acceptance occurred prior to rejection.

Placed in the contract in the mail before the offer was revoked by the phone.

Question 37

A man shopping for a leather jacket at a clothing store could not decide between two jackets, so the proprietor, who knew the man and his family well, let him take one of the jackets on approval. No mention was made by the proprietor of the method of payment he expected. The man wore the jacket on a visit to his grandfather, who liked it so much that when the man told him what the jacket cost and that he had taken it on approval, the grandfather said he would buy it for him if he promised to give some of his old clothes to a favorite charity for the poor at Christmastime. The man wholeheartedly agreed to donate the clothes to the charity at Christmas. Very pleased, the grandfather called the shop and told the proprietor to send the bill for the jacket to him, which he did. Before the bill was paid and before the Christmas season arrived, the grandfather fell ill and died. The grandfather’s executor has refused to pay the bill, and the man has not yet given any old clothing to the charity.

Will the proprietor be able to recover the price of the jacket from the estate?

A. Yes, because the proprieter was the intended beneficiary of the promise between the man and his grandfather.
B. Yes, because the man has no duty to give the clothing to charity.
C. No, because the grandfather’s implied promise to pay the proprietor arising from the phone call is unenforceable.
D. No, because a condition has not yet occurred.

Answer 37

A. Yes, because the proprieter was the intended beneficiary of the promise between the man and his grandfather.

Question 38

On November 5, an electronics store owner realized that his stock of 15 copies of the most popular video game of the holiday shopping season would not last until the first of the next month. Seeing an advertisement from the manufacturer of the game in a trade journal listing its price at $3,000 per hundred, with delivery one week from order, the store owner e-mailed to the manufacturer an order for 100 copies of the game at $3,000 per hundred. There were no further communications between the store owner and the manufacturer. By November 25, the store owner realized that the manufacturer was not going to deliver any of the video games. He thus was forced to obtain additional stock by purchasing from a middleman at a cost of $4,000 per hundred. The store owner brings an action for breach of contract against the manufacturer.

Who will prevail?

A. The manufacturer, because the communications between the parties were not definite or certain enough to form a K.
B. The manufacturer, because it never accepted the offer contained in the store owner’s email.
C. The store owner, because his email was an acceptance of the manufacturer’s offer.
D. The store owner, because he changed his position in reliance on the manufacturer’s promise to deliver the video games within one week.

Answer 38

B. The manufacturer, because it never accepted the offer contained in the store owner’s email.

Question 39

A jeweler sent a fax to a gold dealer offering to sell the dealer 100 ounces of gold at $900 per ounce. The dealer immediately responded via fax, “What are your terms of shipment?” The jeweler faxed back, “F.O.B. my store.” The dealer faxed back, “I accept.”

Who must pay the freight charge from the shop to the dealer?

A. The jeweler, because of the FOB term.
B. The jeweler, becaue he is a merchant seller.
C. The gold dealer, because of the FOB term.
D. The gold dealer, because both parties are merchants.

Answer 39

C. The gold dealer, because of the FOB term.

Question 40

A dairy farm operated a small processing plant that supplied premium ice cream to nearby specialty shops and ice cream parlors. It entered into a written agreement with a local ice cream parlor to sell “all output” of its Extra Rich ice cream to the ice cream parlor, and the ice cream parlor agreed to sell exclusively the dairy farm’s Extra Rich frozen desserts. The agreement stated that the ice cream parlor would pay $25 for each five-gallon container of Extra Rich ice cream that it ordered from the dairy farm. Several months after the parties entered into this contract, demand for high-fat ice creams dropped sharply among the health-conscious consumers who had formerly patronized the ice cream parlor, and the proprietor had to throw out some of its product because the reduced demand meant that opened containers were not used up before the taste of the ice cream became affected. The ice cream parlor wanted to stop selling the dairy farm’s Extra Rich ice cream and instead sell a frozen yogurt product produced by another dairy.

Can the dairy farm enforce its agreement against the ice cream parlor?

A. Yes, because changing demand is one of the standard risks of business that both parties assumed.
B. Yes, because the court will imply a promise on the part of the ice cream parlor to use its best efforts to sell the dairy farm’s Extra Rich ice cream.
C. No, because there was no consideration on the part of the ice cream parlor to support an enforceable contract.
D. No, because the total price and total quantity terms were never established

Answer 40

A. Yes, because changing demand is one of the standard risks of business that both parties assumed.

Question 41

A homeowner and a local builder entered into a written contract that called for the builder to build a second story onto the top of the homeowner’s one-story residence. When scheduling conflicts arose, the builder asked the homeowner if they could substitute his buddy, an out-of-town builder who had comparable experience and skills, to perform the local builder’s part of the contract. All of the parties agreed to the substitution. Unfortunately, the out-of-town builder made a major blunder that will be quite expensive to correct.

Is the local builder liable to the homeowner for the cost of correcting the defect?

A. Yes, because the substitution in and of itself does not relieve the local builder of liability on the underlying K.
B. Yes, because the local builder did not give any consideration on which to base a release.
C. No, because the local builder transferred his duties to the out of town builder.
D. No, because the local builder was discharged through a novation.

Answer 41

D. No, because the local builder was discharged through a novation.

Question 42

A homeowner entered into a written agreement with a contractor whereby the contractor agreed to completely remodel the homeowner’s bathroom “to her specifications” at a cost of $10,000. The homeowner’s specifications were highly detailed and required custom-made fixtures that would not be usable in other bathroom remodeling jobs. The contractor ordered the custom-made fixtures and paid $4,000 for them when they were delivered to his place of business. Figuring up the cost of the fixtures and labor, the contractor estimated that he would make a total profit of $2,000 on the job after payment for materials and workers. Before the contractor began work on the project, but after he had paid for the fixtures, the homeowner told the contractor that she had had a change of heart and would probably be selling the house the following year, and so would not need a custom bathroom. The contractor made no attempt to sell the fixtures to another contractor and filed suit against the homeowner for damages.

What is the contractor likely to recover?

A. Nothing, because he failed to mitigate damages.
B. His expectation damages of $2,000.
C. $4,000, the cost of materials as restitution.
D. $2,000 as expectation damages, plus $4,000 in reliance damages.

Answer 42

D. $2,000 as expectation damages, plus $4,000 in reliance damages.

Question 43

A retailer entered into a written contract with a wholesaler whereby the wholesaler agreed to sell, and the retailer agreed to buy, 100 boxes of sunglasses manufactured by a large corporation located in a neighboring city. The agreed-upon price was $75 per box. Two weeks before the specified delivery date, the wholesaler told the retailer that it would not be able to fill its order, because of unexpected high demand for sunglasses this season. Although the retailer learned that the needed quantity of the same brand of sunglasses could be shipped within two days for $83 per box from a supplier in another area, the retailer instead purchased 100 boxes of the sunglasses locally at a cost of $90 per box. These sunglasses were of a slightly higher quality than the sunglasses that were originally contracted for. A few days before the original delivery date, the wholesaler notified the retailer that it would fill the order, and tendered 100 boxes of the sunglasses on the date of delivery. However, the retailer refused to accept them. At that time, the wholesale market price of the sunglasses had declined to $80 per box.

If the retailer sues the wholesaler for damages based on the wholesaler’s alleged breach, what is the retailer likely to recover?

A. $1,500 the difference between the cost of cover and the contract price.
B. $800, the difference between the contract price and the nonlocal supplier’s price.
C. $500, representing the difference between the contract price and the wholesale market price at the time of performance.
D. Nothing, because the retailer obtained cover without waiting a commercially reasonable time for the wholesaler to retract the repudiation.

Answer 43

B. $800, the difference between the contract price and the nonlocal supplier’s price.

Question 44

An antique lover spotted a beautiful Early American bedroom ensemble at her favorite antique store. The ensemble included a bed, a mirror, and two dressers. Over a period of several weeks, the shop owner and the antique lover negotiated over a price, but they were unable to come to an agreement.

On April 3, the shop owner and the antique lover signed a statement whereby the shop owner offered to sell to the antique lover an Early American bedroom ensemble, recorded as items 20465, 20466, 20467, and 20468 in the shop’s registry, if the parties agree upon a price on or before April 12.

On April 6, the shop owner sent a letter to the antique lover, telling her that she could have the bedroom ensemble for $22,000. Also on April 6, the antique lover sent a letter to the shop owner telling him that she was willing to pay him $22,000 for the bedroom ensemble. Both parties received their letters on April 7.

Without assuming any additional facts, which of the following statements is most correct as of April 8?

A. The shop owner and the antique lover had a valid contract from the moment the letters of April 6 were mailed.
B. A contract exists between the shop owner and the antique lover, because the shop owner, a merchant, sent the antique lover an offer in writing.
C. A contract exists between the shop owner and the anqique lover, because the crossing offers were identical and received before April 12.
D. No contract exists between the shop owner and the antique lover, because of a lack of mutual assent

Answer 44

D. No contract exists between the shop owner and the antique lover, because of a lack of mutual assent

Question 45

A businesswoman entered into a written contract with a general contractor to build a studio and broadcast transmitter for $3 million by July 1. Among his tasks, the contractor was to install underground cables and fiberoptic lines necessary to broadcast.

When digging the deep trench necessary to lay the conduit containing the fiberoptic lines, the contractor encountered a stretch of extremely soggy soil. This was an indication that an offshoot of the nearby city’s aquifer underlay the property. This was not indicated on any of the geological survey maps available in the office of the county recorder of deeds. The contractor told the businesswoman that it would cost an additional $50,000 to lay the conduit through that stretch of soil. The businesswoman had already launched an advertising campaign indicating that the station would begin broadcasting on July 4, which was rapidly approaching. Therefore, when the contractor threatened to quit the job without the additional $50,000, the businesswoman reluctantly agreed orally to the contractor’s demand as long as he promised that all of the work would be completed by the middle of June. The contractor agreed, proceeded to lay the conduit, and completed building the studio and transmitter by June 15. The businesswoman paid the contractor $3 million, but when the contractor demanded $50,000 more, she refused to pay it. The contractor sues the businesswoman for the $50,000.

Who will prevail?

A. The businesswoman, beause the oral modification was not effective to alter the prior written agreement.
B. The businesswoman, because no valid consideration was provided for the agreement to pay the additional $50K.
C. The contractor, because the modification was supported by consideration.
D. The contractor, because he detrimentally relied on the businesswoman’s promise to pay the additional $50K.

Answer 45

C. The contractor, because the modification was supported by consideration.

Question 46

A proud grandfather who planned to take pictures of his grandson’s graduation purchased a camera from a camera store. He used the camera on several occasions over the next few weeks without incident, but when he used it on the day before his grandson’s graduation, it caught fire and exploded, burning him and destroying an expensive coat he was wearing. Although the grandfather was in a great deal of pain because of his injuries, he insisted on attending his grandson’s graduation. However, because he no longer had a workable camera, the grandfather hired a professional photographer to take pictures of the special day.

In a breach of warranty action, which of the following represents the most that the grandfather may recover?

A. The difference between the value of the camera accepted and its value as if it had been as warranted.
B. The difference between the value of the camera acceped and its value as if it had been warranted, plus medical costs for treating the grandfather’s burns.
C. The difference between the value of the camera accepted and its value as if had been as warranted, medical costs for treating the grandfather’s burns, and the cost to replace the grandfather’s coat.
D. The difference between the value of the camer accepted and its value if it had been as warranted, medical costs for treating the grandfather’s burns, the cost to replace the grandfather’s coat, and the cost of hiring the professional photographer.

Answer 46

C. The difference between the value of the camera accepted and its value as if had been as warranted, medical costs for treating the grandfather’s burns, and the cost to replace the grandfather’s coat.

Question 46

A buyer and seller entered into a written contract on March 31 for the sale of a beach house. Under the terms of the agreement, the buyer would purchase the house for $275,000, with 10% due at closing on May 1 and a 15-year mortgage. At the time the contract was entered into, the parties agreed orally that the written agreement would not become binding unless the buyer notified the homeowner, in writing, by the end of the day on April 15, that she had secured the proper financing. With the summer season approaching, the seller did not wish to risk any delay in selling the house if the buyer was not in a position to buy it. On the morning of April 15, the buyer’s financing was approved. On April 16, the buyer telephoned the seller and told him that her financing had been approved. The buyer also told the seller that she was not able to get written confirmation to him by April 15 because of the postal workers’ slowdown and because her fax machine just broke down. The seller assured the buyer that this was not a problem. However, before closing, the seller had a change of heart and decided not to sell the beach house after all. The buyer files an action for breach.

Which of the following would be the basis for the buyer’s best argument?

A. Statute of Frauds
B. Parol evidence rule
C. Waiver of condition
D. Excuse of condition by hindrance

Answer 46

C. Waiver of condition

Question 47

A jogger found a stray dog in the park. She took the dog home with her and placed an ad in the paper to try to find the dog’s owner. Soon thereafter, the owner of the dog contacted the jogger. He came to the jogger’s home and identified the dog as his. He offered to pay the jogger a $200 reward at the end of the week. The jogger thanked the dog owner but turned down the reward.

At the end of the week, however, the jogger changed her mind, so she called the dog owner and told him that she would like the reward after all. He refused to pay her, and she sues him for breach of contract.

What will the jogger recover?

A. Nothing, because she rejected the dog owner’s offer.
B. Nothing, because there was no consideration to support a contract.
C. $200, because the technical defense of the SOF will be overcome by the dog owner’s moral obligation to pay.
D. $200, because the dog owner could not have revoked his offer until the end of the week, and he failed to do so before the jogger accepted.

Answer 47

B. Nothing, because there was no consideration to support a contract.

Question 48

On March 1, the purchasing agent for a suburban school district sent a “quotation request form” to a supplier of school furniture requesting an offer for the sale of 20 student chairs. The form was on school district letterhead and signed by the purchasing agent. It specified that the offer must be held open for four months and that the price term must be no higher than $30 per chair. The supplier telephoned the purchasing agent and told him that he would sell the school district 20 chairs at $20 per chair. He also agreed to hold the offer open for four months. The purchasing agent thanked the supplier for the offer and indicated that he would get back to him within that time period. On May 1, before the purchasing agent had responded to the supplier’s offer or taken any action in reliance on it, the supplier e-mailed the purchasing agent stating that demand for student chairs had been higher than expected and that the offer was terminated. On May 2, the purchasing agent called the supplier, told him that the school district was treating his offer as still being open, and accepted it on its terms.

Did the purchasing agent’s call on May 2 create a legally enforceable contract with the supplier?

A. Yes, because the contract is for the sale of goods valued at less than $500.
B. Yes, because the school district accepted the offer within three months.
C. No, because the supplier did not sign the form specifying the length of time that the offer would be held open.
D. No, because a firm offer under the UCC is not effective if its term is more than three months.

Answer 48

C. No, because the supplier did not sign the form specifying the length of time that the offer would be held open.