ContractsMC Flashcards
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A retired couple owned a home surrounded by a variety of large, beautiful trees. One evening a violent thunderstorm brought down one of the largest trees. It fell directly over the couple’s driveway, blocking access to their garage and vehicles. The couple phoned several tree removal services but all of their crews were assisting other customers. The husband then went to his neighbor, who owned a chain saw, and offered him $100 if he would come and cut up the tree.
Within the hour the neighbor appeared with his chain saw and began cutting and removing tree branches. He had removed almost half of the tree when a township vehicle arrived. The driver told the couple that he was authorized to clear the debris free of charge. The husband went to the neighbor and said “Thanks anyway, but the deal is off—this guy will do it for free.”
Which of the following accurately reflects the situation?
A. The couple owes nothing because the township was under a preexisting duty to remove the tree.
B. The couple owes nothing because the husband withdrew his offer before the neighbor completed his performance.
C. The couple owes the neighbor $100 if he completes the tree removal.
D. The couple owes the neighbor $50 for services rendered.
C. The couple owes the neighbor $100 if he completes the tree removal.
Discussion of correct answer: This is a unilateral contract. The offeror’s method of acceptance is the commencement of performance. Once performance begins, the offer becomes irrevocable. Therefore, when the neighbor began to work on the tree, a valid contract was formed and the husband’s attempted revocation was ineffective. The neighbor is entitled to full payment, but not until his performance is completed.
Shortly after his 16th birthday, a 16-year-old was drafted by a leading professional baseball team. He celebrated his signing by taking out an eight-year lease on an extremely high-end luxury car. Two years later, while celebrating his 18th birthday, the baseball player crashed the expensive leased car.
At that point, will he be allowed to disaffirm his lease?
(A) He will not be able to disaffirm the lease, because he is no longer a minor.
(B) He will not be able to disaffirm the lease, because it constituted a contract for necessities.
(C) He will be able to disaffirm the contract, because eight years is an unconscionable length of time for a car lease.
(D) He will be able to disaffirm the lease, because he has just recently turned 18 years of age.
(D) He will be able to disaffirm the lease, because he has just recently turned 18 years of age.
A makeup artist owed her sister-in-law $300, but the statute of limitations had run on the debt. She offered to make up a mother and daughter for a family photography shoot on December 6 if the mother would, on that day, pay the $300 debt that the makeup artist owed to the sister-in-law. When the mother agreed, the makeup artist informed the sister-in-law of the agreement. After the makeup artist made up the mother and daughter, the sister-in-law demanded payment but the mother refused to pay.
Is the fact that the statute of limitations had run on the makeup artist’s debt to her sister-in-law a good defense for the mother if the sister-in-law sues the mother for the $300?
(A) No, because the contract to pay the sister-in-law is a separate transaction from the underlying debt.
(B) No, unless the mother can show that the sister-in-law knew that the statute of limitations had run.
(C) Yes, because the contract with the mother was actually agratuitous promise.
(D) Yes, unless the sister-in-law can show that she changed her position in reliance on the makeup artist-mother contract.
(A) No, because the contract to pay the sister-in-law is a separate transaction from the underlying debt.
On January 1, a widget distributor inquired via email about purchasing widgets from a manufacturer. The manufacturer sent the following return e-mail: “Have 1,000 widgets available at $10 each for February delivery. Be advised that this offer will remain open until February 1.” On January 31, the distributor sent the following fax to the manufacturer: “Your offer is hereby accepted, but instead of receiving them all at once, I’d like to request delivery of 500 widgets in February and a second delivery of the remaining 500 widgets in March.” The manufacturer received the fax the same day, but did not respond.
Which of the following is the most accurate statement regarding the legal effect of the distributor’s January 31 fax?
(A) It constituted a counteroffer, because it contains different terms from those contained in the original offer.
(B) It constituted a rejection, because the offer implied limited acceptance to the terms contained therein.
(C) It created an enforceable contract with delivery of 500 widgets in February and delivery of 500 widgets in March.
(D) It created a reformation integrating the terms of both writings.
(C) It created an enforceable contract with delivery of 500 widgets in February and delivery of 500 widgets in March.
A man decides to move out of the city and start a farm in the countryside. He contacts a farmer who wants to sell his land and the two parties orally agree that the man will purchase the farmer’s piece of land. The parties agree that the man will make regular payments to the farmer as part of an installment plan for two years. The man then moves into the farm and starts making regular payments to the farmer. However, after six months, the farmer rejects the contract. The man, on the other hand, is seeking to enforce the agreement in an action for specific performance.
Which of the following is correct?
A. The contract is enforceable, because the man took possession of the land and paid part of the price.
B. The contract is enforceable in an action for specific performance or money damages.
C. The contract is not enforceable, because the man has not made at least one year of payments.
D. The contract is not enforceable, because contracts for the sale of land must be evidenced by a signed writing.
A. The contract is enforceable because the man took possession of the land and paid part of the price.
Discussion of correct answer: Under the Statute of Frauds, for a contract to be enforceable, it must be evidenced by a signed writing reflecting that contract. The Statute of Frauds applies to certain categories of contracts, such as contracts for the sale of real estate or contracts lasting more than one year.
Because this is a contract for the sale of real property, the Statute of Frauds applies. However, the Statute of Frauds may be satisfied with respect to some of the categories of governed contracts via part performance. Part performance of a land contract would be taking possession of the land and paying at least part of the price. In this case, the man took possession of the land and made payments for six months. Additionally, this is an action by the buyer, and the man is seeking specific performance, so the Statute of Frauds is satisfied and the contract is enforceable. Therefore, this is the correct answer.
Think Like a Lawyer
Memorizing the exceptions to the Statute of Frauds is essential.
Step by Step Walkthrough
Step 1: The Statute of Frauds governs: (1) contracts to marry; (2) contracts not to be performed within one year; (3) contracts for the sale of land; (4) contracts for an executor to answer for the duty of a decedent; (5) contracts of guaranty or suretyship; and (6) contracts for the sale of goods of $500 or more.
Step 2: The doctrine of part performance may be used to enforce an otherwise invalid oral contract of sale, provided the acts of part performance unequivocally prove the existence of the contract. To satisfy this doctrine, a showing of at least two of the following three facts must be made: (a) payment of all or part of the purchase price; (b) taking of possession; and (c) making substantial improvements.
Step 3: Here, the man has paid part of the purchase price, and the man has taken possession. Consequently, he can bind the seller (farmer) into allowing the man to finish paying for the farm. The man is entitled to specific performance of the contract.
Step 4: Please note that the man could not sue for money damages, because the doctrine of part performance only protects the purchase rights of the buyer. It does not give the buyer the right to sue for damages, as he would be able to do with a written contract. Instead, the doctrine of part performance is an equitable measure designed to prevent sellers from taking a buyer’s money yet never delivering title to the land.
Step 5: Therefore, choose the answer that states that the contract is enforceable in the man’s lawsuit for specific performance because he paid part of the price and he took possession. This is what he is entitled to; no less, no more.
A costume designer orally agreed with a producer that for $10,000 the designer would provide the 50 costumes the producer needed for his new play. The play had a surrealistic plot in which the characters were all costumed as hairy spiders to emphasize the “tangled web” of today’s society. After the designer had completed almost half of the costumes, the producer decided he would rather do an old musical in which all the actors wore all white. The producer immediately advised the designer that the producer would not accept any of the costumes.
If the designer sues the producer, the court should find in favor of which party?
(A) The designer, because the cost per costume was less than $500, and so the contract did not need to be written.
(B) The designer, because the oral contract was enforceable, as the designer had made a substantial start on the work.
(C) The producer, because this was a contract for specifically produced goods and the agreement was oral.
(D) The producer, because it was a contract for goods in excess of $500 and the agreement was only oral.
(B) The designer, because the oral contract was enforceable, as the designer had made a substantial start on the work.
A soldier had just gotten out of the army when his aunt suggested he move across the country near her. The aunt told him that there were lots of jobs in her area, and that he could stay with her until he found employment. The soldier considered it for a few days, then decided to make the move. When he arrived at her house, his aunt said she would be unable to put him up.
Has the aunt breached a contract with the soldier?
(B) No, because there was no consideration given.
After negotiations, a scientist wrote to a carpenter and said, “I will pay you $1,000 if you build a custom entertainment center in my apartment according to the measurements I am including here. I must have your reply by May 30.” The carpenter replied by letter, saying, “Will not do it for less than $1,500.” The scientist received the reply on May 15.
On May 20, the carpenter wrote to the scientist and said, “I reconsidered. I will do the work for $1,000. Unless I hear from you to the contrary, I will begin work on June 5.” The scientist received this letter on May 22, but did not reply to it. The carpenter, without the scientist’s knowledge, then began the work on June 5.
Which of the following best characterizes the legal relationship between the scientist and the carpenter as of June 5?
A. A contract was formed on May 20, when the carpenter posted his letter.
B. A contract was formed on May 22, when the scientist received the carpenter’s letter.
C. A contract was formed on June 5 when the carpenter began to work.
D. There was no contract between the parties as of June 5.
D. There was no contract between the parties as of June 5.
Discussion of correct answer: According to Restatement Section 39, “A counter-offer is an offer relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.” Be advised that an offeree’s power of acceptance is terminated by his making of a counteroffer. Because the carpenter’s reply letter of May 15 constituted a counteroffer, his power of acceptance was terminated. Therefore, the carpenter’s May 20 letter did not have any legal effect.
A dentist entered into an agreement with a supply company pursuant to which the dentist promised to purchase all of her supplies from the company for two years. However, when the dentist decided to move into a new office, she ordered three new dental chairs from a different company. The cost of the chairs was $9,000, payable 60 days after delivery. The agreement with the original supplier was primarily oral; the only document that could prove the agreement was a letter, signed by the dentist but not by the company, which outlined the general nature of the agreement. It contained no specific terms such as item or quantity.
Can the supply company enforce the agreement?
A) Yes, under the doctrine of promissory estoppel.
B) Yes, because the parties entered into a valid requirements contract.
C) No, because neither party agreed to a quantity term.
D) No, because the dentist’s promise was illusory.
Explanation
The correct answer is:Yes, because the parties entered into a valid requirements contract.
Discussion of correct answer:Under the facts presented, the dentist and the supply company entered into a requirements contract. Under such a contract, the seller undertakes to supply all of the requirements needed by the buyer. Under the Uniform Commercial Code, contracts to supply a buyer’s requirements are considered to provide sufficient legal detriment and can be enforced. It is implied that both buyer and seller will act in good faith in making their determination of the quantities needed. Therefore, the supply company can enforce the agreement with the dentist.
Discussion of incorrect answers:
Incorrect. Yes, under the doctrine of promissory estoppel. Under the facts presented, the parties entered into a requirements contract, which will be governed by the Uniform Commercial Code. Given that a valid contract was created, there is no need to invoke the doctrine of promissory estoppel, which applies only under certain circumstances, and only in the absence of an enforceable contract.
Incorrect. No, because neither party agreed to a quantity term. The dentist and the supply company did not have to reach a specific quantity term in order for the supply company to enforce the agreement. Under the Uniform Commercial Code, requirements contracts, in which a seller agrees to supply all of a buyer’s requirements, are enforceable, as long as both parties act in good faith and the quantity required is not more than would be normally necessary to meet the buyer’s needs. In this case, because the parties can determine the amount of supplies the dentist will need during the term of the agreement, a specific quantity term was not necessary to make the requirements contract enforceable. As such, this answer is incorrect.
Incorrect. No, because the dentist’s promise was illusory. It is true that an illusory promise given in support of a bilateral contract would not subject the promisor to a legal detriment, in which case the purported contract would fail for lack of consideration. However, modern common law and the Uniform Commercial Code recognize that a promise to purchase “requirements” from a seller is not illusory. As such, the dentist’s promise to purchase all of her required supplies from the supply company is enforceable.
On October 1, a seller mailed a letter to a buyer offering to sell a specified quantity of shirts at list price. The buyer received the seller’s offer on October 2. The next day, the buyer mailed the seller a letter of rejection. The buyer then changed his mind and decided to accept the seller’s offer. On October 4, the seller sent the buyer a letter revoking his original October 1 offer. On October 5, the buyer emailed the seller indicating that he wished to accept the seller’s offer. The seller read the email on October 6. On October 7, the buyer received the seller’s letter of revocation. The following day, the seller received the buyer’s rejection. The seller subsequently refused to sell the shirts to the buyer, and the buyer sued for breach of contract. Assume that the buyer’s email complies with the Statute of Frauds.
Which of the following is most accurate?
(A) Judgment for the buyer, because he accepted in a reasonable manner and before receiving notice of the seller’s revocation.
(B) Judgment for the buyer, because his acceptance was effective upon dispatch.
(C) Judgment for the seller, because he revoked his offer before receiving the buyer’s acceptance.
(D) Judgment for the seller, because the buyer did not accept in a proper manner.
(A) Judgment for the buyer, because he accepted in a reasonable manner and before receiving notice of the seller’s revocation.
A chef was a buyer for a gourmet grocery store. He contracted in writing with a seafood supplier for the purchase of 5,000 frozen swordfish steaks at $2 each, for a total contract price of $10,000. The manager of the gourmet grocery store was very pleased with the chef’s purchase. The purchase price of the swordfish steaks was only half of the usual price. The gourmet grocery store would be able to sell each steak for $5 each, reaping a substantial profit. The manager approached the chef one afternoon and told him that, because of his good work, he would be receiving a raise in salary of $50 per week beginning the next pay period. Three days later, the manager of the seafood supplier called the chef and informed him that the price per swordfish steak was actually $4, for a total contract price of $20,000. Further, given the size of the error, the seafood supplier would not be able to deliver the swordfish unless the grocery store agreed to pay the additional $10,000. The chef advised the manager of the problem and the manager approved payment of the entire $20,000.
Which of the following accurately states the legal effect of the manager’s promise to give the chef a raise in pay?
A) The promise is unenforceable, because it was illusory.
B) The promise is unenforceable, because it was not supported by consideration.
C) The promise is enforceable, because the manager is morally obligated to perform.
D) The promise is enforceable, assuming the chef conferred a benefit on the manager.
Explanation
The correct answer is: The promise is unenforceable, because it was not supported by consideration.
Discussion of correct answer: To be enforceable, a promise must be supported by consideration. Consideration is defined as a bargained-for exchange or, alternatively, as a bargained-for legal detriment. A legal detriment does not arise unless a promisee does something that he is not otherwise legally obligated to do or refrains from doing something that he is legally entitled to do. Under the facts presented, there has been no bargained-for legal detriment. The manager has not bargained for a legal detriment on the chef’s part; the chef had already performed the work when the promise was made. These facts provide a classic example of past consideration, which, in fact, is not consideration at all. Thus, the manager’s promise to give the chef a raise is not enforceable because it was not supported by consideration.
Discussion of incorrect answers:
Incorrect. The promise is unenforceable, because it was illusory. An illusory promise involves a situation in which one of the parties to the contract does not, in fact, commit to do anything (e.g., “I promise to sell my house to you unless I change my mind.”). The manager made an unequivocal, unconditional promise to the chef.
Incorrect. The promise is enforceable, because the manager is morally obligated to perform. To be enforceable, a promise must be supported by consideration. Consideration is defined as a bargained-for exchange or, alternatively, as a bargained-for legal detriment. A legal detriment does not arise unless a promisee does something that he is not otherwise legally obligated to do or refrains from doing something that he is legally entitled to do. Under the facts presented, there has been no bargained-for legal detriment. The manager has not bargained for a legal detriment on the chef’s part; the chef had already performed the work when the promise was made. These facts provide a classic example of past consideration which, in fact, is not consideration at all. Moral obligation is not a substitute for consideration. In fact, the term “moral obligation” is merely another way of referring to past consideration.
Incorrect. The promise is enforceable, assuming the chef conferred a benefit on the manager. Even if the chef conferred a benefit on the manager, it was not a bargained-for benefit. Moreover, quasi-contract theory does not apply here, because the chef did not make the contract with the seafood supplier in expectation that he would be paid additional compensation for his efforts.
A housing contractor offered to hire an expert cabinet maker to design and install 10,000 rare and expensive agarwood cabinets for a new upscale housing development. Three days later, before the cabinet maker had accepted the offer, the contractor told the cabinet maker that he had changed his mind. Ten days later, the cabinet maker learned that the contractor hired his unemployed, inexperienced nephew for the job. The cabinet maker filed suit against the contractor.
Should the contractor prevail?
A. Yes, because adequate consideration was never discussed.
B. Yes, because the cabinet maker had not yet accepted the offer.
C. No, because as a professional, the contractor’s offer is a firm offer and therefore irrevocable for a reasonable period of time.
D. No, because three days is an unreasonable amount of time in which to revoke an offer.
B. Yes, because the cabinet maker had not yet accepted the offer.
An emergency room doctor was camping with his family in a local state park. As the doctor was walking to get water, he heard a woman screaming that her husband was choking. The doctor rushed to help, but was unable to dislodge whatever was causing the man to choke, and the man died. The doctor now seeks your advice as to whether he can charge the man’s estate for his services. This jurisdiction does not have a Good Samaritan statute, and the hospital that the doctor works at treats all doctors as independent contractors.
What advice would be most accurate?
A) The doctor can recover, because he is not a full-time employee at the hospital.
B) The doctor can recover, based on quasi-contract.
C) The doctor cannot recover, because allowing a doctor to benefit in such a situation would be against public policy.
D) The doctor cannot not recover, because the man died.
Explanation
The correct answer is: The doctor can recover, based on quasi-contract.
Discussion of correct answer:Although there is no formal contract entered into between the man and the doctor, the doctor can recover in quasi-contract for two reasons. First, courts will find an implied-in-law contractual obligation where there is an equitable imposition of a would-be contract. Second, it will prevent unjust enrichment, where one party has bestowed a benefit on the other. Emergency services are a typical situation where courts will find that a quasi-contract exists.
Discussion of incorrect answers:
Incorrect. The doctor can recover, because he is not a full-time employee at the hospital. The doctor’s recovery is based on the fact that he performed emergency services to the man, and this has created an implied-in-law contractual obligation. Therefore, whether he is a full-time or part-time employee of the hospital is not relevant. Had he been on-duty and in the emergency room, he would have had a preexisting duty to provide these services to the man, but outside of work, there is no duty to come to the aid of another.
Incorrect. The doctor cannot recover, because allowing a doctor to benefit in such a situation would be against public policy. Actually, it is just the opposite; courts want to foster the idea of doctors and other emergency personnel coming to the aid of others.
Incorrect. The doctor cannot not recover, because the man died. The doctor’s recovery is not based on his success, but rather, on the fact that he rendered services for which he should be compensated.
A contractor and a homeowner entered into a written contract under which the contractor agreed to build a swimming pool in the owner’s backyard. The owner agreed to pay the contractor $20,000 in three installments: $5,000 at the beginning of the project, $5,000 when the swimming pool was one-half completed, and $10,000 upon completion. The contract contained a clause prohibiting assignment of rights. However, in the midst of constructing the swimming pool, the contractor received a letter from his cement supplier demanding payment of an overdue bill. The contractor assigned the right to final contract payment of $10,000 to the supplier. The owner made the first two payments required by the contract as scheduled. However, she defaulted on the final payment.
If the supplier filed suit against the owner, would he prevail?
(A) No, because a clause in the contract prohibited assignment.
(B) No, because a party to a contract may not assign the right to future payments.
(C) Yes, if the owner consented to the assignment.
(D) Yes, with or without the owner’s consent to the assignment.
(D) Yes, with or without the owner’s consent to the assignment.
A man offered to buy a woman’s farm for $100,000. The woman did not wish to sell her farm, but she jokingly accepted the offer because she did not believe that the man has the $100,000. The man and the woman worked out the terms of the contract and the woman, still joking, wrote out the contract on a sheet of paper which both parties signed. The man took the writing and subsequently tried to enforce it, arriving with a check for $100,000.
In a suit by the man against the woman, what is the likely outcome?
(A) The man will win, because they signed the agreement.
(B) The man will win, because the contract is binding even if the woman did not intend to sell her farm, as the man actually believed this to be a serious transaction and his belief was reasonable.
(C) The woman will win, because there was no good faith on her part to enter into a contract.
(D) The woman will win, because there was no true meeting of the minds.
(B) The man will win, because the contract is binding even if the woman did not intend to sell her farm, as the man actually believed this to be a serious transaction and his belief was reasonable
On Monday, a consultant received an offer in the mail to do a speaking engagement for $300 plus expenses. The consultant mailed an acceptance letter on Tuesday. After mailing the acceptance letter, the consultant changed her mind about the speaking engagement. On Wednesday, the consultant called the offeror and left a voicemail stating that she was rejecting the offer. On Thursday, the acceptance letter reached the offeror. Later on Thursday, the offeror listened to the voicemail.
Did a contract form?
A. Yes, because the acceptance letter was received before the offeror listened to the voicemail.
B. Yes, because a contract formed on Tuesday when the consultant mailed the acceptance letter.
C. No, because the consultant dispatched both an acceptance and a rejection, and the rejection reached the offeror first when the voicemail was left.
D. No, because the contract does not satisfy the statute of frauds.
B. Yes, because a contract formed on Tuesday when the consultant mailed the acceptance letter.
An international oil company offered to pay a top-selling author $1 million to ghostwrite a memoir for the company’s president. However, before the author’s agent could notify the company that the author accepted the offer, the company sent the agent an e-mail stating, “We’ve changed our minds. Due to budget cuts, we can’t afford to do the project.” However, in the meantime, the author had already begun an outline of the book.
Can the author recover the value of the work done on the outline?
(A) No, because the author did not accept the oil company’s offer.
Wanting to spend his 18th birthday somewhere exciting, a teenager traveled from his home in a rural part of the state to the city. He arrived in the city a couple of nights before the big day. While he could have spent the night with friends, the teenager wanted to live it up, and he checked into one of the best hotels in the city. The following morning, the teenager informed the management that he was a minor and, in fact, could not pay for his lodging. While frustrated, the manager let the teenager go, because he felt it would be too difficult and time-consuming to recover the lost fees. Six weeks later, the teenager felt guilty about what he had done. He phoned the manager and promised to pay the bill if the manager would send him a new copy. When the bill arrived, however, the teenager realized that he still could not afford to cover the high cost of his hotel stay.
Is the teenager’s promise to pay enforceable?
(A) Yes, but only if the promise is supported by new consideration.
(B) Yes, it is fully enforceable.
(C) No, because the contract was for a necessity.
(D) No, because the teenager’s promise is voidable.
(B) Yes, it is fully enforceable.
Two sisters led very different lives. One sister became a respected bank president, while the other looked to her parents and the government for support. The bank president learned that her sister had obtained a new wide screen television on her parents’ account at the local appliance store. The bank president believed that her parents had not authorized this purchase; however, she wanted to spare them further pain in any way possible. Therefore, she wrote to the appliance store owner: “If you will not seek payment from my parents, I will pay for the television.” A few months later, the parents filed for bankruptcy.
If the store owner did not attempt to collect the purchase price for the television from the parents, should he succeed in an action against the bank president for the purchase price?
A. Yes, because the bank president’s promise was supported by a bargained-for exchange.
B. Yes, because the store detrimentally relied on the bank president’s promise.
C. No, because the bank president, at most, had only a moral obligation to pay the debt.
D. No, because the store owner’s claim against the parents was worthless.
A. Yes, because the bank president’s promise was supported by a bargained-for exchange.
Think Like a Lawyer
Giving up a possible good-faith legal claim is giving up something of value.
Step by Step Walkthrough
Step 1: A contract requires offer, acceptance, and consideration. Consideration can consist of waiving a good-faith legal claim.
Step 2: Here, the store owner has waived his legal right to file a claim against the parents in exchange for payment by the bank president. This creates consideration on both sides for a valid contract, so long as the owner in good faith believes that he might have a valid claim.
Step 3: Choose the answer that recites this rule of law. Do not make it any more complicated than that.
Step 4: Note that detrimental reliance implies promissory estoppel, which is an equitable remedy. Equitable remedies are only needed where there is no legal remedy. Here, the owner has a legal remedy and does not need to argue for promissory estoppel.
The owner of a lakefront house had leased the house to a renter for the past three summers. Last year, on October 1, the owner sent the renter a letter stating, “Because you have been such a great tenant, I will rent you the house on the same terms as last year. However, I need your answer by February 1.” The renter, uncertain as to when he would be taking his annual vacation, decided to put the letter aside for the time being, intending to respond to it by February 1. On January 15, the owner received an offer from the renter’s cousin to rent the house at a higher price than the renter had paid the prior year. The owner accepted. On January 20, after learning about his cousin’s rental, the renter telephoned the owner and said, “I have decided that I want the house for the summer.” The owner replied that he had already accepted an offer to rent the house from the renter’s cousin. The renter then filed a lawsuit seeking to enforce the contract.
If the renter is unsuccessful in his lawsuit, which of the following provides the best reason?
(A) The contract with the cousin indirectly revoked the offer to the renter.
(B) The contract with the cousin terminated the offer to the renter.
(C) There was no mutual assent because the renter was unsure whether he wanted to vacation at the lake.
(D) A common law offer cannot extend beyond three months without consideration.
(A) The contract with the cousin indirectly revoked the offer to the renter
A man decides to sell his car that he has owned for three years. The man places an advertisement in a local newspaper and soon receives a call from a potential buyer. During the call the buyer offers $6,000 for the car and the man agrees. The buyer gives his address to the man so the man can drive the car to the buyer. The man calls his friend and tells him about the details of the transaction. However, after thinking about the sale for a couple of hours, the man decides not to sell the car and sends a signed letter to the buyer stating that he will not be accepting the $6,000 payment for the car. The buyer seeks to enforce the contract.
Which of the following is correct regarding this transaction?
(A) The contract satisfies the Statute of Frauds, because the man notified his friend about the details of the transaction.
(B) The contract satisfies the Statute of Frauds, because the man sent the buyer a signed repudiation.
(C) The contract does not satisfy the Statute of Frauds, because the price of the car is more than $500.
(D) The contract does not satisfy the Statute of Frauds, because the price of the car is more than $1,000.
(B) The contract satisfies the Statute of Frauds, because the man sent the buyer a signed repudiation.
An insurance brokerage agency wished to completely refurbish its office space. The owner of the insurance brokerage agency entered into an agreement with a construction firm which provided that the construction firm would build the addition for $50,000. Under the agreement, the fee of $50,000 was to be all-inclusive, and the construction firm would be responsible for purchasing all the cabinets, molding, woodwork, plumbing materials, and other supplies. The parties entered into the agreement on March 6. During the negotiations, the owner of the insurance brokerage agency stated that he wanted construction to begin on May 1, and the construction firm agreed, but advised the owner that to begin construction on time, it would be necessary to order the bathroom fixtures, cabinets, and other materials very soon.
On March 17, the construction firm placed an irrevocable order with a cabinet manufacturer for the necessary materials. On April 15, the insurance brokerage agency owner sold the building to an affiliated company, which became the new occupant of the building. The insurance brokerage agency owner informed the new occupant that the construction was planned and that the new occupant would be required to pay the associated costs. The president of the new occupant told the insurance brokerage agency owner that the new occupant could use the new office space and would be happy to cover the construction costs, but never expressed this agreement to the construction firm. On April 25, the president of the new occupant contacted the construction firm and told its representative that the new occupant was cancelling the scheduled construction. The construction firm filed suit against the insurance brokerage agency for breach of contract.
What is the most likely outcome?
A. The construction firm will prevail, because the insurance brokerage agency breached its duty of good faith and fair dealing in selling its office to the new occupant.
B. The construction firm will prevail, because the insurance brokerage agency breached its contract with the construction firm for the office refurbishing project.
C. The construction firm will not prevail, because the new occupant assumed the obligation to pay the construction firm and they cancelled the project.
D. The construction firm will not prevail, because the construction firm never completed the office refurbishing project.
B. The construction firm will prevail, because the insurance brokerage agency breached its contract with the construction firm for the office refurbishing project.
Discussion of correct answer: The insurance brokerage agency and the construction firm entered into a valid contract, pursuant to which the construction firm agreed to refurbish the insurance brokerage agency’s office, and the insurance brokerage agency agreed to pay the construction firm $50,000, with payment due upon completion of the project. The construction firm reasonably relied on its contract with the insurance brokerage agency in ordering the materials necessary for the project, and the construction firm informed the insurance brokerage agency during the contract negotiations that it would be placing this order. When the construction firm was prevented from beginning the agreed-upon construction, a breach occurred. Therefore, this answer choice is correct, because the construction firm will prevail in an action to enforce its contract with the insurance brokerage agency.
A banker purchased two tickets for the Super Bowl. The tickets, which cost the banker $200, were now selling for between $600 and $800. On March 1, the banker sent to his three friends–an artist, a singer, and a dancer–an identical copy of the following letter:
“Dear friends: I have two seats for the Super Bowl. Regrettably, I can’t attend. If anyone is interested, I will let you have the tickets for a reasonable price. However, I must have your reply by March 20. s/The banker”
On March 19, the banker received a letter from the artist that stated, “I accept your offer and will pay you $600 for the two tickets.” The banker did not immediately respond to the artist’s letter. On March 22, the banker received the following letter from the singer: “My only wish in life is to go to the Super Bowl…I will pay $800 for your seats.” The next day, the banker sent a telegram to the singer which read, “The tickets belong to you. You may take delivery upon payment of the $800.” The dancer never responded to the banker’s letter. The artist then gave $600 to the banker within a reasonable time, but the banker refused to give the tickets to him.
In an action by the artist against the banker for breach of contract, judgment should be for whom?
A. The banker, because his letter of March 1 and the artist’s reply were too indefinite to constitute an offer and acceptance.
B. The banker, because his letter of March 1 manifested on its face to the three recipients that it was not intended to be construed as an offer.
C. The artist, because his was the highest bid submitted before the March 20 deadline.
D. The artist, because the banker’s attempt to sell the tickets to the singer was a breach of an implied promise to act in good faith.
B. The banker, because his letter of March 1 manifested on its face to the three recipients that it was not intended to be construed as an offer.
A student got into various forms of trouble at college during his first semester, and the Disciplinary Board notified his parents, who refused to provide him with any spending money as a result. The student asked for a loan of $500 from his roommate with the agreement that he would pay the roommate back with interest in one year. The roommate lent him the $500, but the student never paid him back. The statute of limitations in the jurisdiction for breach of contract actions was three years from the date of the agreement. Ten years later, the student saw the roommate at a class reunion, and remembered that he had never paid him back. He told the roommate, “I am so sorry I forgot to pay you back, but I promise I will send you a check to cover the unpaid debt as soon as I get back home on Monday.” The student failed to send the check, and the roommate now sues to recover the $500.
Will the roommate be successful in enforcing the promise?
A. No, because there was no new consideration for the promise.
B. No, because the student’s statement was merely a recital of consideration.
C. Yes, because the student is now estopped from arguing that the enforcement of the contract is barred by the statute of limitations.
D. Yes, because the student’s promise was to pay a debt that was barred by the statute of limitations.
A. No, because there was no new consideration for the promise.
The owner of a retail garden supply store ordered 500 terracotta flower pots from a wholesaler for a total price of $2,500. Under the contract, the wholesaler is to deliver the flower pots to the store on May 5. On May 1, the wholesaler delivers the flower pots to the store. Upon delivery, the owner of the store inspects the shipment. Although the wholesaler’s catalog stated that the flower pots had drainage holes, the flower pots which were delivered did not. The store owner immediately notifies the wholesaler that the flower pots are defective. The wholesaler offers to replace the flower pots with a shipment of conforming flower pots to be delivered on May 4. The store owner refuses the wholesaler’s offer and tells the wholesaler that he has decided to buy flower pots from a different wholesaler.
Which of the following is the most accurate description of the parties’ rights?
(A) The store owner had the right to reject the flower pots, subject to the wholesaler’s right to cure, but only if the wholesaler delivered conforming pots immediately upon learning of the defects.
(B) The store owner had the right to reject the flower pots, subject to the wholesaler’s right to cure.
(C) The store owner had the right to reject the defective flower pots under the UCC’s perfect tender rule.
(D) The store owner was required to accept the flower pots, because they were still of merchantable quality.
(B) The store owner had the right to reject the flower pots, subject to the wholesaler’s right to cure.
Two neighbors hired the same contractor to repair their roofs. The first neighbor also contracted to have a new deck constructed. Both neighbors unexpectedly left town, and the contractor mixed up the projects, installing a deck on the second neighbor’s house, not the first neighbor’s. When the contractor discovered the mistake, the second neighbor refused to pay. She claimed that because it was the contractor’s mistake, he should absorb the cost. The contractor filed suit against the second neighbor for payment.
If the contractor prevails in his suit, his success will likely be based on which of the following principles of contract law?
(A) Unjust enrichment.
(B) Benefit of the bargain.
(C) Liquidated damages.
(D) The clean hands doctrine.
(A) Unjust enrichment
A homeowner hired a contractor to remodel her kitchen, pursuant to the design of a famous architect. The contract specifies that the homeowner shall pay the cost of the materials up front, but the labor costs of the contract price will be due only upon the architect’s certification of satisfaction that the contractor’s work is in compliance with the architect’s designs and specifications. The architect had worked with the contractor on another project, and was not satisfied with the contractor’s work on that project. In fact, that project is currently involved in litigation. Although the homeowner’s kitchen was remodeled according to the architect’s designs and specifications, the architect withheld the certificate of satisfaction unless the contractor would make certain concessions in the unrelated litigation, which the contractor refused to do. The homeowner, not knowing about the litigation between the architect and the contractor, refused to pay the contractor without the architect’s certification. The contractor is now suing the homeowner for payment under the contract.
Will the contractor prevail?
(A) Yes, because the architect has maliciously withheld certification of satisfaction.
(B) Yes, because the architect has withheld certification of satisfaction in bad faith.
(C) No, because the architect has complete discretion as to whether or not to issue the certificate of satisfaction.
(D) No, because the homeowner is unaware of the dispute between the architect and contractor
(B) Yes, because the architect has withheld certification of satisfaction in bad faith.
A neon sign designer contracted with a theater to create and mount a splashy new sign using the theater’s new logo by June 1. After many consultations, the sign was completed on May 30. However, due to a shortage of scaffolding, the sign was not mounted until June 5. The theater director asserted that the theater owed nothing to the designer, because the designer had completed the project four days later than promised.
Is the theater required to render payment under the contract despite designer’s delay in completing the project?
(A) No, because the doctrine of substantial performance is not applicable to a commercial contract.
(B) No, because the designer’s agreement to complete by June 1 was an express condition.
(C) Yes, because the liquidated damages clause sets the amount of damages due for delay.
(D) Yes, because the designer’s breach was not a material one.
(D) Yes, because the designer’s breach was not a material one.
A music store ran the following ad in the newspaper on Thursday: “This Sunday ONLY take advantage of the best offer this side of the Mississippi! Rock and Rap albums at outlandish prices, only $20 each. Come and get ‘em!”
On Sunday, after reading the advertisement, a professor went to the store to cash in on the awesome deal. The professor picked out thee rock albums and went to the register to pay. The clerk asked the professor for his e-mail address, and found that he was already in the computer. He then charged the professor the regular rate for the albums. The professor mentioned the $20 ad in the paper. The clerk said, “I apologize; that was intended for new customers only, and you do not qualify, because you are already in the computer.”
If the professor sues the music store for breach of contract, for whom should the court rule?
A. The professor, because he detrimentally relied upon the ad in the paper.
B. The professor, because the music store’s advertisement was an offer that the professor accepted by attempting to purchase the albums.
C. The music store, because the advertisement will not be construed as containing a promise to sell a specific set of merchandise.
D. The music store, because the ad was intended to attract new customers.
C. The music store, because the advertisement will not be construed as containing a promise to sell a specific set of merchandise.
Discussion of correct answer: As a general rule, advertisements for the sale of goods, circular letters, price lists, and articles displayed on a shelf with a price tag are construed as preliminary proposals inviting offers. However, in certain situations, an advertisement for the sale of goods may constitute an offer. Students may be familiar with the case of Lefkowitz v. Great Minneapolis Surplus Store [86 N.W.2d 689 (1957)], where the court held that an advertisement in a newspaper proposing the sale of a coat “first come, first served” did, in fact, constitute an offer because the language in the ad indicated a promise to sell.
However, under these facts, there was no specific promise to sell a specified item or enumerated list of items. While choice (B) does mimic the rule of Lefkowitz, choice (C) is better because the advertisement was of the type that is a mere proposal inviting offers.
On August 1, a manufacturer of whole grain breads and cereals decided to expand his product line to include wheat-based items in addition to the oat-based products he currently produced. He sent a signed letter to his oat supplier offering to purchase 100 barrels of wheat at $20 per barrel to be paid in full upon delivery. The letter stated that the offer would remain open for 30 days from supplier’s receipt of the offer. The supplier received the letter on August 4. On August 6 the manufacturer found another grain supplier who could provide higher quality wheat for $18 per barrel. He telephoned his regular supplier to say that he was revoking his offer. The supplier replied that he planned to ship the wheat the following day and that full payment would be expected upon receipt.
Which of the following accurately describes the legal relationship between the manufacturer and the supplier when the wheat is delivered on August 10?
A. No contract exists, because the manufacturer revoked his offer before he received the shipment from the supplier.
B. No contract exists, because the supplier provided no additional consideration to keep the offer open.
C. A contract exists, because a bilateral offer to purchase goods may be accepted by either a promise to ship or by shipment itself.
D. A contract exists, because the manufacturer’s offer was irrevocable.
D. A contract exists, because the manufacturer’s offer was irrevocable.
Discussion of correct answer: This is a contract between merchants governed by UCC § 2-205, often referred to as the firm offer rule. The rule clearly states that an offer made by a merchant to sell or purchase goods becomes irrevocable if the offeror gives assurances that it will remain open for a specified time or, if no time is specified, for a reasonable time, not to exceed three months. This is true regardless of whether additional consideration is supplied by the offeree. The supplier accepted well in advance of the 30-day time limit specified by the manufacturer, so a contract was formed upon delivery.
Think Like a Lawyer
The UCC’s firm offer rule applies to merchants who promise that an offer will be held open for a stated period of time.
Step by Step Walkthrough
Step 1: Under UCC 2-205 regarding firm offers, an offer by a merchant to buy or sell goods in a signed writing, which by its terms gives assurance that it will be held open, is not revocable, for lack of consideration, during the time stated, or if no time is stated then for a reasonable time, but in no event may such period of irrevocability exceed three months.
Step 2: Here, both parties are merchants who deal in the type of goods under discussion. The letter stated that the offer would be held open for 30 days. Thus, under UCC 2-205 it cannot be revoked for 30 days.
Step 3: The supplier accepted the offer within 30 days. The two parties have an enforceable contract for 100 barrels of wheat at $20 per barrel. Select the answer saying that a contract exists, because the manufacturer’s offer was irrevocable.
Step 4: Discard the answer choice saying that no contract exists, because the manufacturer revoked his offer before he received the shipment from the supplier. Under the “firm offer rule” of UCC 2-205, the manufacturer could not revoke his offer until 30 days had passed.
Step 5: Discard the answer choice saying that no contract exists, because the supplier provided no additional consideration to keep the offer open. Under the “firm offer rule” there is no need for the offeree to provide consideration.
Step 6: Finally, discard the answer choice saying that a contract exists, because a bilateral offer to purchase goods may be accepted by either a promise to ship or by shipment itself. This is true, but the answer choice fails to address the attempted revocation of the offer.
A man makes the following statement to a woman: “I hereby offer to sell you Blackacre for $10,000. This offer expires in 30 days.”
Which of the following is most accurate regarding the man’s offer?
(A) It is a firm offer that is irrevocable before the 30-day period has passed.
(B) It is neither a firm offer nor an option contract, and is revocable at any time before acceptance has been made.
(C) Because the man is not a merchant, the woman has a reasonable time to accept.
(D) Regardless of the man’s status, the woman must accept within 30 days and before receiving notice of the man’s direct revocation.
(B) It is neither a firm offer nor an option contract, and is revocable at any time before acceptance has been made.
A locksmith had known an artist for twenty years. One day, the two friends were watching a baseball game on television when the artist said to the locksmith, “Hey, you know, your walls are really bare. If you want, I’ll paint a mural on your living room wall for $100.” The locksmith replied, “That seems like a fair deal.” A few seconds later, the home team hit a home run and the two men jumped up, started cheering, and gave each other a high five. Nothing further was said about painting a mural on the locksmith’s wall.
The next day, the locksmith telephoned the artist and said, “I accept your offer.” The artist replied, “I can’t paint your wall now, because after I left your house last night, I contracted to paint a mural at a bar.”
If the locksmith sues the artist for breach of contract, who will likely prevail?
A. The artist, because the offer lapsed at the end of their conversation.
B. The artist, because his contract with the bar effectuated a revocation of his offer to the locksmith.
C. The locksmith, because the acceptance was communicated before the attempted revocation.
D. The locksmith, because the revocation was ineffective.
A. The artist, because the offer lapsed at the end of their conversation.
Discussion of correct answer: The duration of an offer that states no time limit for acceptance is a reasonable time. The factors determining a reasonable time are: (1) the subject matter of the offer; (2) its rate of price fluctuation; (3) the period within which the offeror’s known purpose in inducing the contract can be effectuated; and, of lesser importance, (4) the mode of communication of the offer. Certain offers, such as those involving stock purchases, have a short life expectancy, due to ever-changing market fluctuations. Thus, a bid on the floor of a stock exchange in an active market will create a power of acceptance lasting only a few minutes. Similarly, under the face-to-face conversation rule, an offer expires at the conclusion of a face-to-face conversation (unless there is an acceptance).
While a grocer was on vacation, sudden flooding started in her town. Her neighbor, a retiree who knew that the grocer was out of town, spent eight hours erecting a wall of sandbags around the grocer’s house. The sandbags kept the house dry and prevented many thousands of dollars in damages. When the grocer returned, she thanked her neighbor and told him that she would pay him $500 the following week. Several months later, the grocer had not paid. Incensed, the neighbor sued the grocer for $500.
In a jurisdiction which has adopted the theory of moral consideration, will the neighbor prevail?
A. Yes, because the neighbor conferred a material benefit on the grocer.
B. Yes, because a reasonable person would have asked the neighbor to help prevent flooding.
C. No, because the neighbor was not performing professional services when he made the sandbag walls.
D. No, because the grocer did not have a contract with the neighbor to take action to save her house.
A. Yes, because the neighbor conferred a material benefit on the grocer.
An experienced antique collector orally agreed to pay a dealer $250,000 for a rare Stradivarius violin. During their negotiations, both parties referred to the violin as “an original Stradivarius.” The collector paid the dealer $250,000 and received the violin. At the time of the purchase, the dealer also handed the collector a bill of sale disclaiming, under applicable provisions of the Uniform Commercial Code, all express or implied warranties. A short time later, the collector discovered that the violin he purchased was not an original Stradivarius, but in fact, a masterful imitation. The violin was valued at only $500. The collector subsequently brought an appropriate action against the dealer to rescind the contract and recover the $250,000.
The court will likely find in favor of which party?
(A) The dealer, because the sales contract was valid and enforceable under the doctrine of caveat emptor.
(B) The dealer, because the bill of sale disclaimed any warranties as to the genuineness of the violin.
(C) The collector, because the dealer’s actions were tantamount to fraud.
(D) The collector, because although the sales contract was valid, it would be voidable by the collector due to the mutual mistake of the parties regarding the genuineness of the violin.
(D) The collector, because although the sales contract was valid, it would be voidable by the collector due to the mutual mistake of the parties regarding the genuineness of the violin.
A chef negotiated with a contractor to remodel his home kitchen to look like the kitchen in his restaurant. In order to do this, the contractor had to order top-of-the-line appliances. He also needed to remove some sections of a wall and install new electrical sockets to accommodate the appliances. The cost of the remodel was $50,000, with two-thirds of the price coming from the purchase of the appliances. A dispute arose and the parties both suspended their obligations. The contractor refused to further perform and the chef refused to pay the contractor.
What law should be used to analyze the dispute?
A) The UCC applies to the purchase of the appliances and common law applies to the delivery, the wall removal, and the electrical socket installation.
B) The UCC should be applied to the entire transaction, because the primary purpose of the contract was the appliances, which account for the overwhelming majority of the contract price.
C) Common law should be applied to the entire transaction, because the primary purpose was to provide a service, regardless of the cost of the appliances.
D) When a contract is for both goods and services, in the absence of a choice-of-law selection clause, common law is the default law to be applied.
Explanation
The correct answer is: Common law should be applied to the entire transaction, because the primary purpose was to provide a service, regardless of the cost of the appliances.
Discussion of correct answer:Following the predominant purpose test, a court will view the predominant purpose of the contract to be for services–specifically, a kitchen remodel. Where a contract has a mix of goods and services, relevant criteria for determining whether the UCC will control will include: (1) the contract language; (2) the nature of the seller’s business; (3) the reason for entering the contract; and (4) the amounts charged under the contract for the goods and services. Here, although most of the contract price was for the purchase of the appliances, the purchase was not made directly to an appliance store, where delivery was the only service. Rather, the chef went to a contractor, presumably for his skill and experience in remodeling. The end result that the chef was contracting for was not the appliances, but a kitchen that looked like the one he used in his restaurant. As such, this is primarily a services contract, with the goods being incidental to the agreement.
Discussion of incorrect answers:
Incorrect. The UCC applies to the purchase of the appliances and common law applies to the delivery, the wall removal, and the electrical socket installation. This is a rule followed in only a minority of jurisdictions, splitting the contract between the different components.
Incorrect. The UCC should be applied to the entire transaction, because the primary purpose of the contract was the appliances, which account for the overwhelming majority of the contract price. The predominant purpose of the agreement here was to remodel the chef’s home kitchen to look like the one in his restaurant. The purchase of appliances was incidental to this purpose.
Incorrect. When a contract is for both goods and services, in the absence of a choice-of-law selection clause, common law is the default law to be applied. There is no requirement that the parties choose what law applies (UCC or common law), and there is no default rule, as the majority of states follow the predominant purpose test.
A porcelain doll collector is 17 years old and has been buying and selling antique and custom-made dolls for the past five years. An older personal shopper, who had never been interested in dolls before, saw the doll collector’s showcase at an antique toy convention and decided that she would like to own one. The personal shopper asked the doll collector if she knew where she could get such a doll, and the doll collector showed the personal shopper a very rare and old doll she had in her collection. Although the doll was missing two buttons and a strap on her dress, when the personal shopper asked the doll collector whether the lack of buttons and strap would affect the doll’s potential resale value, the doll collector replied that it would have no effect at all. Actually, the doll collector knew that the lack of the buttons and strap probably would interfere substantially with the potential market/resale value of the doll. Unaware of this significance, the personal shopper arranged to come by the doll collector’s house the following weekend to bring the doll collector $150 cash and to pick up the doll. The doll collector wrote the terms of their agreement with lipstick on a small receipt she had gotten from buying lunch earlier in the day and both parties signed it. A few days later, the personal shopper found out from one of her clients that the incomplete dress would diminish the resale value of the doll considerably. The personal shopper called the doll collector that night and told her that the deal was off. The doll collector sued the personal shopper for breach of contract.
Will the doll collector prevail?
A. Yes, because the agreement was a voidable obligation only at the doll collector’s election.
B. Yes, because it was not reasonable for the personal shopper to rely on the doll collector’s statement.
C. No, because the personal shopper relied on a material misrepresentation.
D. No, because the doll collector cannot enter into an enforceable contract because she is still a minor.
C. No, because the personal shopper relied on a material misrepresentation.
After a two week unpaid internship, a designer offered his services to an architect for $150 per hour. The architect replied, “Sounds good but I’ll get back to you tomorrow.” The next day, just as the architect was about to accept the designer’s offer to work for her, the architect received a text message from the designer that said, “Leaving for parts unknown on vacation, I need to clear my head. I’ll call when I get back.” In need of immediate services for a big project, the architect was forced to hire another designer for $250 per hour. The architect then filed an action for breach of contract against the designer seeking to recover the extra expenses she incurred.
Who should prevail in the action?
A. The architect, because she detrimentally relied on the graphic artist’s promise of performance, causing the creation of an enforceable contract.
B. The architect, because the designer’s vacation deprived her of the benefit of the bargain.
C. The designer, because the architect’s refusal acted as a counteroffer, which effectively revoked the designer’s offer.
D. The designer, because the parties did not have a valid contract.
D. The designer, because the parties did not have a valid contract.
A retired teacher loved being around cars, and she frequently stopped by a mechanic’s garage to watch the mechanics work and help out with various odd jobs. Finding that the retired teacher was a big help around the shop, the mechanic decided to offer to pay the retired teacher for her work. The mechanic told the retired teacher, “You’ve been doing such a good job that I’d like to pay you $50 per week to keep helping out. Come to think of it, I’ll also pay you $500 for all of the work you’ve done so far.” Delighted, the retired teacher accepted the mechanic’s offer and continued to perform odd jobs for the mechanic.
If the mechanic refuses to pay her, what may the retired teacher recover under the common law?
A. Nothing.
B. Only the actual value of the services she has rendered.
C. $50 per week, but not the $500.
D. $50 per week, plus $500.
C. $50 per week, but not the $500.
A unilateral contract is one that is accepted by performance, rather than by a return promise.
Step by Step Walkthrough
Step 1: A contract requires offer, acceptance, and consideration. A unilateral contract requires performance as the acceptance, rather than a promise as the acceptance.
Step 2: Here, the team offered $1 million for one backwards half-court shot. The fan performed as agreed, thus accepting the offer by performance. His shot was the consideration for the $1 million. A valid contract exists, and the team must pay.
Step 3: Select the answer stating that a binding contract exists between the team and the fan, because it was a unilateral contract.
Step 4: Note that there is no need for the equitable doctrine of promissory estoppel, because there is a contract on which to rely.
Step 5: Note that there was no failure of consideration, because the fan performed the task requested.
Step 6: Finally, note that there was no gratuitous promise, because a task was offered in exchange for the money. The team must pay the $1 million. (Also note that, in real life, teams buy insurance to make these prize payments.)
A museum enters into a contract with an art institute to manage a nationwide tour of numerous priceless paintings owned by the art institute. The contract calls for the art institute to lend the works of art to the museum and for the parties to cooperate in the display of the art in various museums over a two-year period. Just before the tour is to begin, the art institute refuses to abide by the contract.
Is a court likely to order the art institute to specifically perform the contract?
(A) Yes, because the art works involved are unique.
(B) Yes, because specific performance would be in the public interest.
(C) No, because such a remedy would require the parties to cooperate over a long period of time.
(D) No, because this contract does not involve the sale of land.
(C) No, because such a remedy would require the parties to cooperate over a long period of time.
A well-known fisherman lived in the southeast by the Gulf of Mexico. One day a local sportsman approached the fisherman and said, “If you catch a marlin weighing over 100 pounds today, I’ll pay you $1000”. The fisherman then purchased special bait that he knew would attract a marlin and filled his boat with gas for the ride out to the fishing grounds. As the boat approached the fishing grounds, the fisherman baited the hooks with herring roe, set the lines, and began trolling for marlin. After the sportsman had his third beer, he exclaimed “New deal, I will only pay if you catch a marlin weighing over 500 pounds.” That day, fisherman caught a 250 pound marlin.
Can the fisherman recover $1000 from the sportsman?
A. Yes, under the doctrine of quasi-contract.
B. Yes, because there was an offer for a unilateral contract that became irrevocable prior to the sportsman’s attempted revocation.
C. No, because there was no consideration.
D. No, because the sportsman’s revocation and modification were effective since the fisherman had not completed performance.
B. Yes, because there was an offer for a unilateral contract that became irrevocable prior to the sportsman’s attempted revocation.
Discussion of correct answer: An offer that invites performance of an act, rather than a return promise, as acceptance, becomes irrevocable as soon as the offeree has started to perform the act. This rule is deemed essential to prevent hardship to the offeree where his part performance does not benefit the offeror and so would give him no recovery in quasi-contract. Students should be advised that although some of the older decisions have applied the logical view that a unilateral offer may be revoked at any time prior to full completion of the act bargained for, by the majority rule today such an offer becomes irrevocable as soon as the offeree has started to perform the act requested. Part of the actual performance requested must have been given in order to render the offer irrevocable. Mere preparation for performance, no matter how detrimental to the offeree, will not affect the offeror’s power and privilege to revoke a unilateral offer. Here, the fisherman went beyond mere preparation because he had already baited the hooks, set the lines and actually began fishing. The sportsman’s attempted revocation and modification was too late, thus he must pay the fisherman $1000.
A cleetch is a custom-designed transmitter device that is used in wireless phones. A phone company entered into a written contract with a cleetch manufacturer to purchase 1,000 cleetches for the total contract price of $100,000. After the 1,000 cleetches were manufactured, the phone company received a telephone call from the manufacturer. During their conversation, the manufacturer told the phone company that the manufacturer would not deliver the cleetches unless the phone company agreed to pay an additional $5 per cleetch. Reluctantly, the phone company agreed to pay the additional $5 per cleetch. Following their phone conversation, the manufacturer authorized the delivery of the 1,000 cleetches to the phone company. After the transmitter devices were accepted by the phone company, the phone company sent the manufacturer a check in the amount of $100,000. The manufacturer has made repeated demands for the additional $5,000, which the phone company refuses to pay.
The manufacturer filed suit against the phone company to recover the additional $5,000.
(A) There was no new consideration for the phone company’s promise to pay the additional $5,000.
(B) The manufacturer acted in bad faith in demanding the additional $5,000.
(C) The manufacturer’s demand for the additional $5 per cleetch makes the contract unconscionable.
(D) The price modification materially altered the terms of the contract and, thus, did not become part of the bargain.
(B) The manufacturer acted in bad faith in demanding the additional $5,000.
A seller sent an email to a potential buyer offering to sell his patio furniture to her for $5,000. The buyer immediately responded via email asking whether the offer included the umbrella that was sitting in the garage. The seller emailed back: “No, it does not; just what is sitting on the patio. If you want an umbrella, you will have to buy one.” The buyer then ordered an umbrella that would fit on the table and matched the color of the chairs. Later that day, the buyer replied to the seller: “I accept your offer.” The seller then wrote back, “I have changed my mind, I’ve decided to keep the furniture.”
If the buyer sues the seller claiming there was a valid contract, who is likely to prevail?
(A) The buyer, because she accepted the seller’s offer within a reasonable amount of time and before the seller revoked his offer.
(B) The buyer, because her ordering the umbrella is a sufficient act in reliance on the seller’s offer.
(C) The seller, because the offer lapsed after the buyer did not accept the original offer.
(D) The seller, because the buyer’s initial email was a counteroffer which terminated her power of acceptance.
(A) The buyer, because she accepted the seller’s offer within a reasonable amount of time and before the seller revoked his offer.
The owner of a salvage business specialized in antique architectural hardware and other architectural elements, such as doors and window frames. He generally sold items to people who were in the process of restoring old houses and other buildings. When a nearby house was demolished, the owner obtained a large set of double parlor doors. Several weeks later, the owner spotted a customer admiring the parlor doors in his showroom. The owner said, “Hey, that’s a great set of standard, 19th-century parlor doors. I’ll sell them to you, including the hardware, for $1,000.” The customer agreed and bought the doors and hardware for $1,000. The customer (whom the owner did not know was an art historian) was well-acquainted with the history of the demolished house. He knew that, shortly after the house was built, a well-known American folk artist painted a mural on the inside of the doors, which had be painted over by the house’s owners when the style of painting went out of fashion. The customer knew that the mural would be worth thousands on the current art market. After having several layers of paint professionally removed, he arranged to sell the painting at auction for an estimated selling price of $20,000.
What is the owner’s best argument for rescinding his contract with the customer?
(A) The owner did not know about the presence of the mural.
(B) The owner was not aware that the customer was an art historian and acquainted with the history of the house from which the doors were obtained.
(C) The customer was aware that the owner did not know about the presence of the mural.
(D) The owner’s mistake had a material effect on the performances the parties agreed to exchange.
(C) The customer was aware that the owner did not know about the presence of the mural.
A dog breeder lost her prized golden retriever puppy during a walk in a nature preserve. To enlist help in finding her dog, the breeder posted a notice on the internet and offered to pay $1,000 for the return of her puppy. A hiker saw the notice, equipped herself, drove to the nature preserve, and subsequently found the puppy. However, before the hiker could return the puppy, the breeder heard that the dog had been found and posted another notice on the internet withdrawing the reward offer. The hiker brought the breeder the dog and demanded the reward. The breeder refused.
Is the breeder liable to pay the hiker the reward?
A) Yes, because the hiker had undertaken substantial steps toward acceptance of the breeder’s offer before it was revoked.
B) Yes, because the hiker did not actually see the breeder’s purported revocation of her reward offer.
C) No, because the hiker did not communicate her acceptance of the breeder’s offer.
D) No, because the breeder revoked the offer before the completion of the hiker’s performance.
Explanation
The correct answer is:Yes, because the hiker had undertaken substantial steps toward acceptance of the breeder’s offer before it was revoked.
Discussion of correct answer:A unilateral contract is created when an offer seeks performance rather than a promise in return. An offer in a unilateral contract cannot be revoked once performance has begun. This answer is correct because the hiker undertook substantial efforts towards acceptance by performance of the breeder’s offer to enter into a unilateral contract. All that remained was delivery of the puppy to the breeder. Therefore, the breeder cannot revoke her offer to enter into a unilateral contract once the hiker began performance.
Discussion of incorrect answers:
Incorrect. Yes, because the hiker did not actually see the breeder’s purported revocation of her reward offer. Revocation of an offer that is made available generally through a particular medium, such as a web site or a newspaper, can be revoked by using the same medium, unless there is a readily available and better alternative. Such a revocation does not require that the other party actually see it. Unilateral contracts which seek performance rather than a promise in consideration can be revoked until performance has begun. The problem in this situation is that the time for revocation had passed, because the hiker had begun performance. The problem is not that the breeder had to give actual notice to the hiker to have effective revocation.
Incorrect. No, because the hiker did not communicate her acceptance of the breeder’s offer. A unilateral contract like a reward contract may be accepted by performance. Therefore, there is no need for the hiker to communicate her acceptance to the breeder.
Incorrect. No, because the breeder revoked the offer before completion of the hiker’s performance. This answer is incorrect. Unilateral contracts, which seek performance rather than a promise in acceptance of the offer, can be revoked until performance has begun. Although posting the note generally would be effective as a revocation, the breeder’s purported revocation was ineffective in this case, because the hiker had already begun performance that would constitute acceptance of the unilateral contract. At that point, the breeder had no power to revoke her offer.
A homeowner hired a roofer to replace the roof on his home, with full payment after completion. The roofer finished half of the job, then had to leave town. He called his friend and requested that she finish the job for him. She agreed to complete the job for half of the money, but failed to complete it. The homeowner sued both the roofer and the friend for breach of contract.
Who is liable for the roofing contract?
(A) The roofer, because his assignment was invalid.
(B) The friend, because the assignment was valid.
(C) Both the roofer and the friend, because they are jointly and severally liable.
(D) Neither party, because the homeowner did not render payment to anybody.
(C) Both the roofer and the friend, because they are jointly and severally liable.
A homeowner renewed her homeowner’s insurance policy without reviewing the terms by mailing the signed copy to her insurance agent. When she read the terms later, she found that her rates had been increased. The homeowner called her agent and said that she had mailed the policy along with a check for the premium, but was not sure about renewing at the increased price. The agent said that he would check for any additional discounts. He later called the homeowner and stated that in fact, he had undercharged her, and a new policy would cost 20% more. He indicated that he was revoking the first policy and preparing a new one for her to sign.
Is there a validly formed contract between the insurance company and the homeowner?
(C) Yes, because the homeowner accepted the agent’s first offer prior to his revocation.
On Monday, Jim decided to sell his vintage car. Bill had always admired the car and inquired as soon as he saw the for-sale sign. Jim said he was firm at $5,000. Bill thought this was a good price, and told Jim he wanted it, but needed to check with his wife before spending such a large amount of money. In the meantime, Bill pulled a $100 bill from his pocket and gave it to Jim, saying, “Here’s a down payment. See you tomorrow!” Jim replied, “Okay, it will be here.” On Tuesday morning, Bill approached Jim with a check written out for $4,900. Jim said, “Sorry, but you’re too late. I accepted an offer last night for $10,000.”
In an action by Bill against Jim for breach of contract, how should the court rule?
(A) For Jim, because $100 is insufficient to create an option contract for a $5,000 car.
(B) For Jim, because Bill’s language was insufficient to create a valid option contract.
(C) For Bill, because Jim created an option contract, which is irrevocable at least until the following day.
(D) For Bill, because the UCC precludes Jim from selling the car to anyone other than Bill before Wednesday.
(C) For Bill, because Jim created an option contract, which is irrevocable at least until the following day.
A buyer ordered 1,000 widgets from a seller for immediate delivery. The seller responded by shipping 800 widgets, along with an accompanying notice to the buyer explaining that the seller did not have an adequate inventory to ship 1,000 widgets, and was therefore shipping 800 widgets as an accommodation to the buyer in light of the buyer’s urgent need.
Which of the following is the most accurate statement?
A) A contract was formed under the mailbox rule when the seller shipped the widgets.
B) A contract will be formed once the widgets arrive at the buyer’s address.
C) No contract exists, because the notice of accommodation operates as a counteroffer.
D) No contract exists, because the buyer’s accommodation is not an acceptance.
Explanation
The correct answer is: No contract exists, because the notice of accommodation operates as a counteroffer.
Discussion of correct answer: The UCC governs contracts for the sale of goods. If the contract falls under the UCC, then the UCC’s provisions will trump any contrary common law rules. Under the UCC, an offer can be accepted by the offeree communicating that acceptance or by the prompt shipment of the goods. When the seller ships nonconforming goods, this operates as an acceptance of the offer and a simultaneous breach of contract. However, the shipment of nonconforming goods will not constitute an acceptance of the offer if the seller notifies the buyer that the shipment is offered only as an accommodation to the buyer. In such circumstances, the shipment instead constitutes a counteroffer, which the buyer is free to accept or reject. Here, the seller notified the buyer of an accommodation in light of the buyer’s urgent need. As such, the notice will operate as a counteroffer.
Discussion of incorrect answers:
Incorrect. A contract was formed under the mailbox rule when the seller shipped the widgets. Under the common law mailbox rule, which is the rule in almost every American jurisdiction, an acceptance by mail is effective upon dispatch so long as the acceptance is properly posted, with the correct address and postage amount. Absent an accommodation, the seller’s shipment of nonconforming goods constitutes an acceptance of the buyer’s offer under the UCC and also constitutes a simultaneous breach of the resulting contract under the perfect tender rule. Because there was a notice of accommodation here, this will act as a counteroffer, and not an acceptance. Therefore, no contract was formed.
Incorrect. A contract will be formed once the widgets arrive at the buyer’s address. Under the UCC, a seller can accept a buyer’s offer to purchase goods for prompt or current shipment in one of three ways: (1) a promise to ship goods in conformity with the terms of the offer, such as an acknowledgment of the order form sent to the buyer; (2) the prompt or current shipment of the goods in conformity with the terms of the offer; or (3) under the UCC, the seller can also accept the buyer’s offer by shipping nonconforming goods. As discussed above, the notice of accommodation operates as a counteroffer to the buyer’s original offer. Therefore, no contract will be formed unless and until the buyer accepts the counteroffer. The arrival of the goods at the buyer’s address is insufficient for contract formation, as the buyer has not necessarily accepted the goods.
Incorrect. No contract exists, because the buyer’s accommodation is not an acceptance. When choosing between answers that are close, the better answer is usually the one that is more accurate on the point of law. Here, the seller’s notice of accommodation was not an acceptance; rather, it was a counteroffer. Furthermore, the buyer did not make an accommodation–the seller did. Be careful when reading the language of the question. Accordingly, this is the not the best answer.
A man owned a store that sold dishware. One day, he decided to expand his inventory by buying more dishware for his store. He contacted a dishware production company and spoke to a company sales agent over the phone. The two agreed that the man would buy 100 sets of dishes for a total of $5,000. The man then asked if he needed to show up in person to the company headquarters so that both parties could sign the contract, but the agent stated that there was no such need since the agent would send the man a letter describing the offer. However, the agent never sent the offer letter, and, two days later, the company denied the existence of the contract. The man suffers damages as a result.
Which of the following is correct?
A. The contract is enforceable, and the man will receive damages via promissory estoppel.
B. The contract is enforceable, because the contract does not need to be evidenced by a signed writing.
C. The contract is not enforceable, and the man will not receive any damages.
D. The contract is not enforceable, but the man can still recover damages via promissory estoppel.
D. The contract is not enforceable, but the man can still recover damages via promissory estoppel.
Discussion of correct answer: Under the Statute of Frauds, for a contract to be enforceable, it must be evidenced by a signed writing reflecting that contract. A contract for the sale of goods at a price of $500 or more falls under the Statute of Frauds. As such, this contract is not enforceable, since it cannot be evidenced by a signed writing. However, where a party to an oral contract within the Statute of Frauds promises the other party that he has created or will create a signed writing evidencing the parties’ agreement, and the other party relies on that assurance by failing to take other steps to satisfy the Statute of Frauds, most courts will find promissory estoppel against the party whose assurances of a signed writing turn out to be false. In this case, the sales agent promised but never sent a written offer to the man, so the man never went to the company headquarters. The man relied on that promise and suffered damages as a result. As such, the company will have to pay the man damages via promissory estoppel.
Think Like a Lawyer
Even where there is no contract, and thus no legal remedy, there still may be a remedy in equity.
Step by Step Walkthrough
Step 1: The Statute of Frauds governs: (1) contracts to marry; (2) contracts not to be performed within one year; (3) contracts for the sale of land; (4) contracts for an executor to answer for the duty of a decedent; (5) contracts of guaranty or suretyship; and (6) contracts for the sale of goods of $500 or more.
Step 2: Here, there was a contract for goods worth $5,000, so it had to be in writing to be enforceable. However, there was no writing. This means that the seller (production company) could, indeed, break the contract before performance was complete.
Step 3: Once the production company decided not to continue with the unenforceable agreement, the man was left without any legal remedy. However, he had suffered damages. Fortunately, there was still a remedy in equity. The equitable remedy is called promissory estoppel. Promissory estoppel requires: (1) a promise; (2) foreseeable reliance on the promise; (3) actual reliance; and (4) injustice without enforcement.
Step 4: The company made a promise. It was foreseeable that the man would rely on the promise by waiting for the written contract. He actually did so. Finally, he suffered damages by relying on the promise, creating an injustice if there is no enforcement of the promise. Equity will allow the man to recover his damages from the production company.
Step 5: The two choices stating that the contract was enforceable can be immediately discarded. Then, of the two remaining answer choices, choose the one that recognizes that the man still can get reimbursed for his losses through an equitable remedy.
A rare coin dealer and a collector met at a stamp-and-coin fair that was held on a monthly basis. The dealer had a mint condition 1905 Silver Eagle in his inventory that was valued at well over $10,000. The collector desperately wanted to purchase the coin, but knew that he did not have enough money to make the purchase. The two spoke for a while, and before leaving, the following note was written from the dealer to the collector: “I will hold the 1905 Silver Eagle you were eyeing up at the fair today for sale to you alone until the next fair.” The dealer signed and dated the note and handed it to the collector.
If the collector wanted to purchase the coin at the following fair, is the offer still in force?
(A) No, because there was no consideration provided to keep the offer open until the next fair.
(B) No, because “until the next fair” does not state a sufficient period of time.
(C) Yes, because it was a firm offer.
(D) Yes, because the offer concerned the sale of goods.
(C) Yes, because it was a firm offer.
On February 3, a florist left a note for one of his customers offering to pay $2,000 for his truck if the customer delivered the truck to the flower shop before 1:00 p.m. on February 13. The florist indicated that the customer needed to accept by delivering the truck because the florist had lots of deliveries for Valentine’s Day. Two days later, the customer sent a letter to the florist indicating his acceptance of the offer to purchase. However, the letter was delayed by the post office and did not reach the flower shop until February 12. By then, having not heard back from his customer, the florist had purchased another used truck for $1,800. On February 13, the customer drove his truck to the florist, arriving at about 12:55 p.m., at which time the florist rejected the customer’s truck. The customer then filed suit for breach of contract.
Which of the following most accurately describes the significance the court will attach to the customer’s letter accepting the offer to purchase the truck?
A) The customer’s letter, upon its receipt by the florist, operated as an effective acceptance of the florist’s offer to purchase.
B) The letter from the customer, upon the customer’s mailing of the letter, created a binding unilateral contract between the florist and the customer for the purchase of the customer’s truck.
C) The mailing of the customer’s letter did not create a binding contract between the customer and the florist.
D) The customer’s letter bound the florist and the customer to a unilateral contract as of February 12, when the florist received the letter.
Explanation
The correct answer is: The mailing of the customer’s letter did not create a binding contract between the customer and the florist.
Discussion of correct answer:When an offeror requests acceptance by actual performance rather than by a promise to perform, the offer is considered an offer for a unilateral contract. An offeree’s promise is insufficient to create acceptance of a unilateral contact; a unilateral contract can be accepted only by the offeree’s performance of the requested act. Here, the florist’s note to his customer was an offer for a unilateral contract, because it requested the customer’s acceptance by performance of the act of delivery of the truck on or before the specified date and time. The customer’s letter containing the promise to deliver the truck by the specified deadline did not operate to create an enforceable contract between the parties, as the customer could accept the florist’s offer only by rendering the requested act of actually delivering the truck by the specified deadline, which the customer failed to do.
Discussion of incorrect answers:
Incorrect. The customer’s letter, upon its receipt by the florist, operated as an effective acceptance of the florist’s offer to purchase. The florist’s note was an offer for a unilateral contract, in that it requested acceptance by performance of an act (the delivery of the truck on or before the specified date and time), rather than by a promise to perform. Thus, the only way the customer could effectively accept this offer was by performance, not by the promise contained in his letter. As such, this answer is incorrect.
Incorrect. The letter from the customer, upon the customer’s mailing of the letter, created a binding unilateral contract between the florist and the customer for the purchase of the customer’s truck. The florist’s note was an offer for a unilateral contract, in that it requested acceptance by performance of an act (delivery of the truck on or before the specified date and time), rather than by a promise to perform. A unilateral contract can be accepted only by performance of the requested act, not by a promise to perform. Therefore, the customer’s letter containing a mere promise to deliver the truck by the specified date and time was insufficient to create any contract between the parties, either upon the customer’s mailing of the letter or the florist’s receipt of the letter.
Incorrect. The customer’s letter bound the florist and the customer to a unilateral contract as of February 12, when the florist received the letter. The florist’s note was an offer for a unilateral contract, in that it requested acceptance by performance of an act (delivery of the truck on or before the specified date and time), rather than by a promise to perform. A unilateral contract can be accepted only by performance of the requested act, not by a promise to perform. Therefore, the customer’s letter containing a mere promise to deliver the truck by the specified date and time was insufficient to create any contract between the parties, either upon the customer’s mailing of the letter or the florist’s receipt of the letter.
A homeowner said to a carpet installer, “My carpets are worn and filthy. I think the pad is shot, too. If you will replace the carpet and pad with all new materials, I’ll pay you $6,000.” The carpet installer replied, “Sure, but I’m really busy for the next two or three weeks.” The homeowner then remarked, “OK, but let me know a soon as possible.” A week later, the installer drove his installation van to the homeowner’s home and unloaded the padding materials and other equipment needed to perform the carpeting job. When the homeowner looked out his window and saw the installer, he immediately ran outside and exclaimed, “What are you doing! No deal. I couldn’t wait for you and decided to do it myself.” The installer filed an action against the homeowner for breach of contract.
Which theory provides the installer with the best chance for recovery?
A. A bilateral contract was formed when the installer purchased the materials and equipment needed to do the carpeting job.
B. A bilateral contract was formed when the installer said, “Sure, but I’m really busy for the next two or three weeks.”
C. The homeowner made an offer that proposed a unilateral contract, and the offer became irrevocable when the installer purchased the materials and equipment needed for the job.
D. The homeowner made an offer that proposed a unilateral contract, and the installer manifested an intent to accept the offer when he began performance by unloading the materials and equipment at the homeowner’s house.
D. The homeowner made an offer that proposed a unilateral contract, and the installer manifested an intent to accept the offer when he began performance by unloading the materials and equipment at the homeowner’s house.
Discussion of correct answer: A unilateral offer which invites performance of an act as acceptance, rather than a return promise, becomes irrevocable as soon as the offeree has started to perform the act. Thus, this answer choice correctly describes the theory that would be most helpful to the roofer. A bilateral contract requires an exchange of promises for the contract to be formed. Neither the purchasing of the material nor the statement by the installer would be a sufficient promise to bind the parties to a bilateral contract. Note that choice (C) is incorrect because purchasing the materials is mere preparation and not the commencement of actual performance.
A tenor entered into a contract with the city opera. The contract was signed by himself and by the city opera’s manager. The tenor was to be employed by the city opera for three seasons, each running from September 1 through March 30, at a salary of $35,000 per season. On September 1, the tenor failed to appear for work at the city opera. On September 4, the manager heard on the news that the tenor had been seriously injured in a water-skiing accident the previous week and would require two to three months of recovery. The manager then hired a local tenor to sing for city opera for a period of three months at a salary of $6,000 per month.
Is the city opera entitled to recover from the tenor the additional $1,000 per month that it has to pay the local tenor beyond what it had contracted to pay the tenor?
(A) Yes, because the tenor knew that the city opera had spent a considerable sum advertising his appearance with the city opera beginning September 1.
(B) Yes, because the tenor did not give the city opera timely notice of his accident and recuperation.
(C) No, because the performance of a personal services contract is excused if a party is injured and cannot perform.
(D) No, because the tenor did not cause the accident and was not at fault for the delay.
(C) No, because performance of a personal services contract is excused if a party is injured and cannot perform.
A young man had been helping his father run the father’s farm for several years. The son wished to move out of town, but his father’s health had been declining to the extent that he was unable to take care of himself anymore. The farm was located south of town, in an area into which the town might be expanding in the next few years. The son was aware of the possible expansion, but his father was not. The son spoke to his father and told him of his plan to move out of town. Worried about his father’s failing health, the son urged his father to sell the farm to a neighbor for $150,000. Unbeknownst to the father, his son and the neighbor were actually planning to hold onto the land until the town expanded south, at which time they planned to subdivide it and make a large profit in the real estate market. The father agreed to sell the farm to the neighbor and signed the papers for a transfer, even though the sales price was below the actual market value. The father later discovered that he could have sold the farm for at least $300,000. He now seeks to void the contract.
Which of the following is the father’s strongest argument?
(A) The contract is voidable by reason of misrepresentation.
(B) The contract is voidable by reason of undue influence.
(C) The contract is voidable by reason of unconscionability.
(D) The contract is voidable by reason of mistake.
(B) The contract is voidable by reason of undue influence.
After several days of negotiations, a homeowner wrote to a plumber and said, “Will pay you $3,000 if you will install new plumbing in my home according to the specifications I have sent you. I must have your reply by March 30.” The plumber replied by a letter that the homeowner received on March 15 stating, “Will not do it for less than $3,500.” On March 20, the plumber wrote to the homeowner, “Have changed my mind. I will do the work for $3,000. Unless I hear from you to the contrary, I will begin work on April 5.” The homeowner received this letter on March 22 but did not reply to it. The plumber, without the homeowner’s knowledge, began the work on April 5.
Which of the following best characterizes the legal relationship between the homeowner and the plumber as of April 5?
(A) A contract was formed on March 20, when the plumber posted his letter.
(B) A contract was formed on March 22, when the homeowner received the plumber’s letter.
(C) A contract was formed on April 5, when the plumber began to work.
(D) There was no contract between the parties as of April 5.
(D) There was no contract between the parties as of April 5.
A man needed to have the oil changed in his car. When he mentioned this to his neighbor, she said, “If you will agree to pay me $50, I’ll change the oil in your car over the weekend.” The man agreed. On Sunday afternoon, the man noticed that his neighbor still had not started working on the car and asked if the car would be ready by Monday morning. The neighbor replied, “I realized $50 is too low a price.” The man then said, “If you change the oil in my car by tomorrow morning, I’ll pay you an additional $25, and I won’t sue you in small claims court.” The neighbor then changed the oil late Sunday afternoon, but the man refused to pay to the neighbor anything more than $50.
Can the neighbor recover the additional $25 from the man?
(B) No, because the neighbor had a pre-existing duty to change the oil in the car for $50.
A homeowner said to a roofer, “My roof leaks. I think the old tiles are cracked. If you will replace them with all new tiles, I will pay you $5,000.” The roofer replied, “Sure, if I can clear my busy schedule.” The homeowner then remarked, “That’s all right, but let me know soon.” Three days later, the roofer drove his pickup truck to the homeowner’s home and unloaded the materials and equipment needed to perform the roofing job. When the homeowner looked out his window and saw what was transpiring, he immediately ran outside and exclaimed, “Stop! The deal’s off. I decided to repair the roof myself.”
In an action by the roofer against the homeowner for breach of contract, which of the following would provide the roofer with his best theory of recovery?
A) A bilateral contract was formed when the roofer purchased the materials and equipment needed to do the job.
B) A bilateral contract was formed when the roofer said, “Sure, if I can clear my busy schedule.”
C) The homeowner made an offer that proposed a unilateral contract, and the offer became irrevocable when the roofer purchased the materials and equipment needed for the job.
D) The homeowner made an offer that proposed a unilateral contract, and the roofer manifested an intent to accept the offer when he began performance by unloading the materials and equipment at the homeowner’s house.
Explanation
The correct answer is: The homeowner made an offer that proposed a unilateral contract, and the roofer manifested an intent to accept the offer when he began performance by unloading the materials and equipment at the homeowner’s house.
Discussion of correct answer: A unilateral offer which invites performance of an act as acceptance, rather than a return promise, becomes irrevocable as soon as the offeree has started to perform the act. Thus, this answer choice correctly describes the theory that would be most helpful to the roofer.
Discussion of incorrect answers:
Incorrect. A bilateral contract was formed when the roofer purchased the materials and equipment needed to do the job. If this was interpreted as a bilateral contract, it would take an exchange of promises for the contract to be formed. Neither the purchasing of the material nor the statement by the roofer would be a sufficient promise to bind the parties to a bilateral contract.
Incorrect. A bilateral contract was formed when the roofer said, “Sure, if I can clear my busy schedule.” If this was interpreted as a bilateral contract, it would take an exchange of promises for the contract to be formed. Neither the purchasing of the material nor the statement by the roofer would be a sufficient promise to bind the parties to a bilateral contract.
Incorrect. The homeowner made an offer that proposed a unilateral contract, and the offer became irrevocable when the roofer purchased the materials and equipment needed for the job. This answer choice is wrong because purchasing the materials is mere preparation, and not the commencement of performance.
On December 1, Arnold, who had purchased two tickets for a holiday magic show, sent the following email to his three friends, Baker, Charlie, and Dora:
“Dear Baker, Charlie, and Dora: I have two tickets for the upcoming holiday magic show. If any of you are interested in buying my tickets, I will let you have them for a reasonable price, but I must have your reply by December 20.
s/Arnold”
The tickets, which cost Arnold $10, were now selling for between $50 and $70. On December 19, Arnold received an email from Baker that stated, “I accept your offer and will pay you $50 for the two tickets.” Arnold did not immediately respond to Baker’s email. On December 22, Arnold received the following text message from Charlie: “I am dying to go to the concert…will pay $70 for your seats.” The next day, Arnold sent a reply text to Charlie which read: “The tickets are yours. You may take delivery upon payment of the $70.” Dora did not respond to Arnold’s letter. Baker tendered the $50 to Arnold within a reasonable time, but Arnold refused to sell the tickets to him.
In an action by Baker against Arnold for breach of contract, judgment should be for whom?
A) Arnold, because his email of December 1 and Baker’s reply were too indefinite to constitute an offer and acceptance.
B) Arnold, because his email was not an offer, but rather, an invitation to bargain, and he was free to accept either Baker or Charlie’s offer.
C) Baker, because he accepted Arnold’s offer first.
D) Baker, because Arnold’s offer lapsed on December 20, and therefore, Charlie’s attempted acceptance was invalid.
Explanation
The correct answer is: Arnold, because his email was not an offer, but rather, an invitation to bargain, and he was free to accept either Baker or Charlie’s offer.
Discussion of correct answer:An offer is the manifestation of a willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. Arnold’s email to three people does not qualify as an offer. An offer must evidence a commitment by the offeror that he reasonably intends to be bound upon acceptance by the offeree, rather than a mere statement of present intention or preliminary negotiations. Arnold’s email stated, “I will let you have [the tickets] for a reasonable price.” This language evidences an intent to invite a reasonable offer by the message’s recipients. Therefore, Arnold’s email was not an offer. On the other hand, Baker’s email was an offer, which Arnold chose not to accept. Charlie’s text was also a valid offer and, in this case, Arnold accepted it upon dispatch of his email on December 23. Therefore, Baker will not prevail against Arnold.
Discussion of incorrect answers:
Incorrect. Arnold, because his email of December 1 and Baker’s reply were too indefinite to constitute an offer and acceptance. Baker did make an offer, but Arnold chose not to accept it.
Incorrect. Baker, because he accepted Arnold’s offer first. Baker made Arnold an offer, not the other way around. Arnold’s initial email was an invitation for reasonable offers, but was not an offer in itself. Baker’s reply was an offer, but Arnold chose not to respond to it, and thus did not accept it.
Incorrect. Baker, because Arnold’s offer lapsed on December 20, and therefore, Charlie’s attempted acceptance was invalid. Arnold is free to accept an offer from Charlie even if it exceeded his initially stated time frame. As this was not a firm offer, nor a situation where the offer lapsed immediately, Arnold was free to accept Charlie’s offer.
A prune preserves manufacturer entered into a contract with a fruit grower. The contract provided that the manufacturer would purchase and the fruit grower would supply all of the manufacturer’s requirements for prunes for the next five years at a specified price per ton reflecting the most recent market price. The contract stated, in part, that the manufacturer need not order any specified amount of prunes, but would notify the fruit grower of his yearly requirements no later than August 15 of each year. The manufacturer notified the fruit grower that it would need 100 tons of prunes for the year. But before the two parties exchanged any prunes or money under the contract, plum blight struck the major growing areas, including the fruit grower’s orchards, causing production to go down and the price of prunes to triple. The fruit grower produced about 120 tons of prunes and decided to sell them on the open market, rather than provide 100 tons at the contract price to the manufacturer.
May the fruit grower rescind the agreement with the manufacturer on the grounds that it was not supported by consideration?
A. No, because an agreement of that nature does not need any consideration to be enforceable.
B. No, because the parties’ mutual promises to purchase and sell the subject goods are sufficient considerations, even though no specific amount of goods to be sold was stated in the contract.
C. Yes, because the manufacturer’s lack of an obligation to purchase any particular amount of prunes was insufficient consideration to support the fruit grower’s return promise.
D. Yes, because requisite mutuality of obligation between the parties is lacking.
B. No, because the parties’ mutual promises to purchase and sell the subject goods are sufficient considerations, even though no specific amount of goods to be sold was stated in the contract.
An elderly woman and a landscaper entered into a written agreement for him to landscape the front yard of her home. The agreement contained no provision regarding assignment. That summer, the area experienced a rash of fires. The landscaper therefore assigned the woman’s contract to another local landscaper. The new landscaper subsequently failed to meet the specifications of the original landscaping agreement.
Which of the following is true?
(A) The woman would not have a cause of action against the original landscaper, because she waived her rights when she permitted the second landscaper to perform the work.
(B) The woman would have a cause of action against the original landscaper only.
(C) The woman must pursue a cause of action against the second landscaper before attempting to recover damages from the first one.
(D) The woman may pursue a cause of action against either landscaper.
(D) The woman may pursue a cause of action against either landscaper.
On Monday, a man told a gardener, “I am having a party on Sunday and I want my house to look good. If you will agree to mow my lawn by Saturday, I will pay you $50. Think about it and let me know.” The man did not hear from the gardener all week. Therefore, the man decided to mow the grass himself. On Saturday, the gardener arrived with his lawn mower, and saw that the grass had been freshly mowed. The man informed the gardener that he had just finished cutting the grass himself. The gardener then brought suit against the man for breach of contract, because he argued that he was within the window of time to accept and that he had given up another job in reliance on mowing the man’s grass.
Who is likely to prevail?
(A) The man, because the gardener never accepted the offer.
(B) The man, because the offer to the gardener was indirectly revoked.
(C) The gardener, because the man did not specify that acceptance had to be by return promise.
(D) The gardener, because he gave up another job in order to accept the man’s offer.
(B) The man, because the offer to the gardener was indirectly revoked.
A science fiction fan met a friend while attending a convention celebrating the science fiction fan’s favorite television show. The friend, a swordsmith, had a table in the dealer’s room, where the friend sold custom-made swords and accompanying accessories. The science fiction fan purchased a custom-made sword. On the bill of sale, the friend noted that the science fiction fan prepaid $300 and received a scabbard, with his actual sword to be delivered in two months. The blade was to be made according to the science fiction fan’s specifications. Six months later, the science fiction fan received his sword. Although substantially similar, the sword did not match the science fiction fan’s specifications.
Can a court order a rescission of the contract?
(A) No, unless both the science fiction fan and the friend agree to the rescission.
(B) No, because the friend substantially performed the contract.
(C) Yes, because the friend materially breached the contract.
(D) Yes, but the science fiction fan must first return the scabbard and sword.
(C) Yes, because the friend materially breached the contract.
A homeowner agreed to prepare his neighbor’s tax return by April 15. In exchange, the neighbor agreed to pay anyone whom the homeowner hired in the next two months to wallpaper the homeowner’s living room. The homeowner prepared the neighbor’s tax return as promised. The homeowner then hired a contractor to wallpaper his living room. The contractor was not aware of the homeowner’s agreement with the neighbor when the contractor agreed to wallpaper the homeowner’s living room. The contractor completed the wallpapering job, but the neighbor refused to pay him.
May the contractor sue the neighbor to enforce the neighbor’s promise to the homeowner?
(A) No, because the contractor was a donee beneficiary.
(B) No, because the contractor was not named in the agreement between the homeowner and the neighbor.
(C) Yes, because the contractor was an intended third-party beneficiary of the contract.
(D) Yes, because the contractor may recover under promissory estoppel.
(C) Yes, because the contractor was an intended third-party beneficiary of the contract.
A seller sent an email to a potential buyer offering to sell his patio furniture to her for $5,000. The buyer immediately responded via email asking whether the offer included the umbrella that was sitting in the garage. The seller emailed back: “No, it does not; just what is sitting on the patio. If you want an umbrella, you will have to buy one.” The buyer then ordered an umbrella that would fit on the table and matched the color of the chairs. Later that day, the buyer replied to the seller: “I accept your offer.” The seller then wrote back, “I have changed my mind, I’ve decided to keep the furniture.”
If the buyer sues the seller claiming there was a valid contract, who is likely to prevail?
A) The buyer, because she accepted the seller’s offer within a reasonable amount of time and before the seller revoked his offer.
B) The buyer, because her ordering the umbrella is a sufficient act in reliance on the seller’s offer.
C) The seller, because the offer lapsed after the buyer did not accept the original offer.
D) The seller, because the buyer’s initial email was a counteroffer which terminated her power of acceptance.
Explanation
The correct answer is: The buyer, because she accepted the seller’s offer within a reasonable amount of time and before the seller revoked his offer.
Discussion of correct answer: The UCC governs contracts for the sale of goods. An offer was made by the seller via email. It was not a firm offer, because it did not specify that it would remain open for a period of time. Therefore, it is revocable either through lapse of time or a rejection or counteroffer. It appears from the facts that this conversation is taking place on the same day, so the offer would not be revoked due to lapse of time. The buyer notified the seller of her intent to accept before the seller revoked the offer, and within a reasonable time. Therefore, a contract was formed.
Discussion of incorrect answers:
Incorrect. The buyer, because her ordering the umbrella is a sufficient act in reliance on the seller’s offer. The buyer validly accepted the agreement before the seller revoked the offer, and as such, there is a valid contract. Therefore, reliance principles are not needed to enforce the agreement.
Incorrect. The seller, because the offer lapsed after the buyer did not accept the original offer. There is no requirement that the buyer accept immediately; in fact, only if there is a rejection, counteroffer, or revocation would there not be a contact here.
Incorrect. The seller, because the buyer’s initial email was a counteroffer which terminated her power of acceptance. This was not a counteroffer, which would terminate the buyer’s power of acceptance. Instead, it was a mere inquiry, allowing the buyer to accept within a reasonable time before receiving notice of revocation.
A restaurant owner contracted in writing with a produce distributor to buy tomatoes. At the time the contract was signed, the owner said to the distributor, “Our chef must approve the quality of the heirloom tomatoes before I will pay you.” The distributor agreed orally to this condition. The distributor delivered the tomatoes, but after inspecting the tomatoes, the chef refused to give his approval, finding them to be of inferior quality. The owner refused to accept and pay for the tomatoes. The distributor brought a breach of contract action against the owner.
Should the court permit the owner to offer evidence that the chef refused to approve the tomatoes that were delivered?
(A) No, because the oral agreement is within the Statute of Frauds.
(B) No, because the written contract appears to be a complete and total integration of the parties’ agreement.
(C) Yes, to show frustration of purpose.
(D) Yes, to show that the written agreement was subject to an oral condition precedent.
(D) Yes, to show that the written agreement was subject to an oral condition precedent.
A homeowner needed a tree removed from his front yard. He hired a landscaper, who specialized in pruning and removing trees, to do the job. The landscaper carefully cut off and removed all the branches of the tree and the main tree trunk, so that all that was left was the stump of the tree. The landscaper then dug around the roots of the tree in preparation to remove the stump. As he had done many times before, he then removed a chain from his truck, secured the chain around the tree stump, and hooked the other end to the front bumper of his truck, intending to use the truck to remove the tree stump from the ground. The landscaper started his truck, put it into reverse, slowly took up the slack in the chain, and slowly pressed on the accelerator to put pressure on the tree trunk to dislodge it from the ground. However, the chain snapped from the pressure, and a portion of the chain flew off and struck a man who was walking by at the time.
If the man brings an action against the landscaper for the injuries suffered when he was hit by the chain, which of the following is the landscaper’s strongest defense?
A. A reasonable person would not have expected the chain to snap.
B.The homeowner instructed the landscaper to remove the tree.
C. The tree was the property of the homeowner.
D. The homeowner should be forced to indemnify the landscaper for any damages he is required to pay.
A. A reasonable person would not have expected the chain to snap.
Discussion of correct answer: The landscaper’s best defense would be that he was not negligent in using the chain in this manner because a reasonable person would not have expected the chain to snap. If the injury was not foreseeable as a result of the landscaper’s activities, the injury was not one he needed to guard against, and he did not breach any duty of care.
A carpet cleaner sent the following terms in a writing to a homeowner. “I will clean your carpets up to 1,000 square feet for a price of $100 per room. This offer is noncancellable for 60 days from today.” The carpet cleaner dated the letter and signed it at the bottom. The homeowner received the letter and immediately wrote a letter accepting the carpet cleaner’s terms, but did not immediately send the letter. A week after sending his letter to the homeowner, the carpet cleaner received an offer from a hotel owner requesting his services for the next month at several of his hotels. The carpet cleaner wanted to accept the hotel owner’s offer but was concerned about the outstanding letter to the homeowner.
Which of the following is most accurate?
(A) The carpet cleaner can revoke his offer to the homeowner because the mailbox rule does not apply to option contracts.
(B) The carpet cleaner can revoke his offer to the homeowner because there was no consideration provided that would make the offer irrevocable.
(C) The homeowner has manifested his intent to accept, and if he accepts within 60 days of the date of the letter, there is a contract.
(D) The homeowner has three months from the date of the letter to accept because offers from merchants are irrevocable.
(B) The carpet cleaner can revoke his offer to the homeowner because there was no consideration provided that would make the offer irrevocable
An employee successfully negotiated a lucrative contract for her employer. As a result, her employer orally promised her a $10,000 bonus payable at the end of the year because of the employee’s “good work.” At the end of the year, the employer informed the employee that the company’s profits were not as large as he expected, so the promised bonus would not be paid.
Which of the following is the legal effect of the employer’s promise to pay the bonus to the employee?
A) It is enforceable because the employee conferred a material benefit on the employer by negotiating the lucrative contract.
B) It is enforceable because the employer was morally obligated to pay the bonus.
C) It is unenforceable because it was not supported by legally sufficient consideration.
D) It is unenforceable because it was not in writing.
Explanation
The correct answer is: It is unenforceable, because it was not supported by legally sufficient consideration.
Discussion of correct answer: Donative promises generally are not enforceable unless supported by consideration or a consideration substitute (like promissory estoppel). Here, the employer’s promise was made in exchange for work already performed by the employee. Past consideration is not considered to be good consideration, so the employer’s promise to pay the bonus would be unenforceable.
Discussion of incorrect answers:
Incorrect. It is enforceable, because the employee conferred a material benefit on the employer by negotiating the lucrative contract. This choice is wrong, because no present material benefit was conferred on the employer in exchange for the bonus; past consideration is not sufficient to support a contract.
Incorrect. It is enforceable, because the employer was morally obligated to pay the bonus. While moral obligation can (in some jurisdictions) make a promise supported by past consideration enforceable, this is generally only done when necessary to prevent unjust enrichment or undue hardship, neither of which would be the case here.
Incorrect. It is unenforceable, because it was not in writing. This answer is wrong, because there would be no reason why the promise would need to be in writing. The duration of the promise would not be for longer than one year, and the only time the amount of the promise can trigger the need for a writing is when the contract involves a sale of goods.
A businessman lived in Japan. He sent a letter to a California car dealership stating that if the dealership would extend his son the credit, he would guarantee the purchase price of any car. The dealership received the letter on February 9, and on February 10, sold a car to the son for $11,500. On February 11, the businessman died suddenly. Unaware of his death, the agency sent him a letter indicating its acceptance of the offer and notifying him of the sale. The dealership also noted that the son had a good credit rating and that the dealership would have extended him credit even without his father’s guarantee. Two months later, the son also died suddenly, leaving a bankrupt estate. The dealership then sought to recover the balance of the car’s purchase price from the businessman’s estate.
Would the dealership prevail in a suit against the businessman’s estate for the balance owed on the car?
A) No, because the dealership would have sold the car to the son even without the businessman’s guarantee of the purchase price.
B) No, because the businessman died before the dealership mailed the letter notifying him of its acceptance.
C) Yes, because the dealership accepted the businessman’s offer before his death.
D) Yes, because the dealership foreseeably, justifiably, and reasonably relied on the businessman’s promise.
Explanation
The correct answer is: Yes because the dealership accepted the businessman’s offer before his death.
Discussion of correct answer:A unilateral contract is created when the offeror requests acceptance of the offer by the performance of an act rather than by a promise to perform the act. The offer is accepted only when the offeree performs the requested act. An offer is revoked by operation of law upon the death of the offeror. Here, given that the businessman’s offer requested acceptance by performance rather than by a promise to perform, the dealership accepted the offer when it performed the act that the businessman had requested (i.e., extending his son credit). Therefore, the businessman’s offer created a unilateral contract, which can be enforced against his estate. The fact that the dealership notified the businessman of its acceptance of the offer after his death is not the controlling factor; what is controlling is that by performing the requested act, the dealership validly accepted the offer (by its performance of the requested act) before the businessman died.
Discussion of incorrect answers:
Incorrect. No, because the dealership would have sold the car to the son even without the businessman’s guarantee of the purchase price. The dealership accepted the businessman’s offer and made its sale to the son based on that offer, not on the basis of the son’s credit. Thus, whether the dealership would have nonetheless extended credit to the son is irrelevant. As such, this answer is incorrect.
Incorrect. No, because the businessman died before the dealership mailed the letter notifying him of its acceptance. Given that the businessman’s offer requested acceptance by performance rather than by a promise to perform, the dealership accepted the offer when it performed the act that the businessman had requested (that is, extending the son credit). Therefore, the businessman’s offer created a unilateral contract, which can be enforced against his estate. The fact that the dealership notified the businessman of its acceptance of his offer after his death is irrelevant; the determining factor is that the dealership, by its performance of the requested act prior to the businessman’s death, accepted the offer before the businessman died.
Incorrect. Yes, because the dealership foreseeably, justifiably, and reasonably relied on the businessman’s promise. Under the doctrine of promissory estoppel, a party who makes a promise cannot assert a lack of consideration as a defense to enforcement of the promise, if the promise is made with the expectation that the promisee will change his position in reliance on the promise. Here, however, the businessman’s promise to the dealership was supported by his bargained-for exchange in the letter to the dealership. Because valid consideration existed to support the agreement between the dealership and the businessman, the dealership need not rely on the doctrine of promissory estoppel to recover under the contract. Therefore, this answer is incorrect.
A woman owned a gardening business that enjoyed much success in a large city. The woman was seeking to expand her business, and so she decided to purchase more gardening equipment. She contacted a gardening store and the two parties entered into a written contract whereby the woman would buy the particular gardening equipment she needed for $3,000. The contract did not state the date on which the store had to make delivery.
Which of the following is correct?
A. The contract is enforceable, but the parties must renegotiate the date of delivery.
B. The contract is enforceable, but the delivery must take place within a reasonable time.
C. The contract is not enforceable, because a necessary term is missing.
D. The contract is not enforceable, because of the Statute of Frauds.
B. The contract is enforceable, but the delivery must take place within a reasonable time.
Think Like a Lawyer
The UCC often supplies defaults for missing terms, and those defaults tend to involve actions that are commercially reasonable.
Step by Step Walkthrough
Step 1: For the sale of goods, the UCC supplies missing terms in many situations. Contracts that are missing terms will still be enforceable, so long as the offer and acceptance are clear about what goods are being purchased.
Step 2: UCC 2-309 sensibly states that: “The time for shipment or delivery or any other action under a contract, if not provided in this Article or agreed upon, shall be a reasonable time.”
Step 3: In this fact pattern, the parties have not set a particular date for delivery, so it will be “a reasonable time.” The contract is still valid, because it has offer, acceptance, and consideration. The UCC fills in the minor details. Choose the answer that reflects this.
A tomato genetics stock researcher had developed and produced a variety of square tomato. The researcher believed that this would revolutionize sandwich-making. On May 1, the researcher orally agreed to sell five tons of this square tomato to a sandwich shop manager for $5,000. The $5,000 was payable on May 31. On May 5, the researcher dictated the agreement to the researcher’s secretary, who was more familiar with typing research papers than with typing contracts. She inadvertently typed in $4,000, instead of $5,000 as the price. Neither the researcher nor the manager noticed the mistake in the purchase price. Both signed the agreement as it was typed. The manager refused to pay more than $4,000 for the square tomatoes, and the researcher filed an action for the
additional $1,000.
Which of the following is the strongest argument in favor of the researcher?
(A) There was a mistake in integration.
(B) The writing was intended only as a sham.
(C) The writing constituted a partial integration.
(D) There was a misunderstanding between the researcher and the manager concerning the purchase price.
(A) There was a mistake in integration.
Discussion of correct answer: Here, the secretary’s error in typing $4,000 instead of $5,000 would be viewed as a mistake in integration, or a “scrivener’s error.” Reformation is available to cure a mistake of this sort. Thus, if it can be determined that the parties intended that the final agreement contain a sale price of $5,000, that is the price the manager will be required to pay.
On Thursday, a seller sent a buyer a letter by over-night mail promising to sell him 1500 pairs of high end running shoes for $200,000. On the following Tuesday, the buyer faxed the seller a letter rejecting the offer. The letter stated “price too high, highway robbery!” The seller immediately called the buyer and said, “I received your letter, it’s a good deal, why don’t you think it over?” The following day, the buyer learned that there was a high demand for the running shoes because a famous basketball player had endorsed them. He immediately telephoned the seller and said, “You were right, it’s a good deal, I accept your offer.” The seller then told the buyer, “Sorry, too late. They are all gone.” The buyer demanded the shoes and tendered a check to the seller for $200,000. The seller returned the check and the buyer sued for breach of contract.
Who should prevail?
A. The seller, because the buyer’s letter faxed on Tuesday constituted a rejection which terminated the offer.
B. The seller, because there was no consideration to keep the offer open beyond Tuesday.
C. The buyer, because the seller revived the offer, which the buyer subsequently accepted in a timely manner.
D. The buyer, because both parties were merchants.
C. The buyer, because the seller revived the offer, which the buyer subsequently accepted in a timely manner.
Discussion of correct answer: There are no magic words required to extend an offer, but all offers contain three elements: (1) an expression of present intent to enter a contract; (2) articulation of the essential terms of the proposed bargain; and (3) communication of the intent and the terms to another party (the offeree) who has the capacity to form a contract by timely acceptance. This contracts question deals with the revival of an offer. If, in the wake of a rejection/counter-offer, the offeror remanifests an intention to trade on the terms of the original offer, that offer is once again open to an acceptance by the offeree. This choice is correct because the seller’s statement, “I received your letter, it’s a good deal, why don’t you think it over?” revived the original offer. Further, the buyer’s acceptance by telephone would be effective even though the offer was by a different medium (letter). Per UCC 2-206, “an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium that is reasonable under the circumstances.” Note that choice (B) is not the best answer. Although consideration is generally required for an option to keep an offer open, this is not the best description of what happened here. Rather, the offer was revived when the seller suggested the buyer think it over.
A famous designer was launching an advertising campaign for her new brand of cosmetics. The designer hired a noted fashion photographer for the ads. In their written contract, the designer agreed to pay the photographer $20,000. Shortly thereafter, the photographer assigned the contract to a second photographer, a colleague who had received awards for his still-life advertising photography. For her part, the designer assigned the contract to a friend, whose company was launching an advertising campaign for a new brand of dog food.
Which statement expresses the allowable interpretation of the described transactions?
(A) The photographer has been assigned the right to receive payment from the designer, and the designer has delegated her duty to pay the photographer to her friend.
(B) The photographer has delegated his duty to photograph the models for the designer’s ads to his colleague.
(C) The designer and the photographer have not effectively assigned any of their rights or delegated any of their duties under their contract.
(D) The designer has assigned her right to have the photographer take advertising photographs to her friend.
(A) The photographer has assigned the right to receive payment from the designer, and the designer has delegated her duty to pay the photographer to her friend.
A 16-year-old girl purchased an expensive pair of designer jeans at a retail store. She paid for the jeans by writing a check in the amount of $150, although she was aware that her account had less than $100 in it. The following day the girl wore the jeans to school. During her fourth period art class she spilled a bottle of paint thinner on herself, ruining the jeans in the process. After school she went home and threw the jeans in the trash. Several days later the store manager discovered that the girl’s check had been returned marked “insufficient funds.” The store promptly sued the girl and her parents for $150 based on breach of contract.
Which of the following is true?
(A) The store has no legal claim against the girl, but they are entitled to recover $150 from her parents.
(B) The store may recover $150 from the girl, but they have no legal claim against her parents.
(C) The store may recover $150 from either the girl or her parents, but it may make only one recovery.
(D) The store cannot recover from anyone.
(D) The store cannot recover from anyone.
A teacher owns three large plots of land in the suburbs. He decided to build an office complex on one of the plots so that he could rent out the offices to gain some extra income. The teacher met an agent of a construction company who laid out the plans for constructing such a complex. The two orally agreed that the company would do the work over a period of one year and eight months, for a price of $2,000,000.
The teacher, wanting to brag, then notified his old college friend via a signed letter of the details of the $2,000,000 transaction. Just before construction was to begin, the teacher balked at the deal and refused to go through with it. The construction company now seeks to enforce the contract.
Which of the following is the best answer?
A. The contract can be enforced, because the teacher and the company agreed on the terms.
B. The contract can be enforced, because the teacher notified his friend of the contract.
C. The contract cannot be enforced, because the contract was for longer than one year.
D. The contract cannot be enforced, because the contract was for $2,000,000.
B. The contract can be enforced, because the teacher notified his friend of the contract.
Discussion of correct answer: The Statute of Frauds requires a contract that cannot be performed within one year to be evidenced by a writing signed by the party against whom enforcement is sought. However, there is no requirement that the parties put their actual agreement in writing. Rather, all that is necessary is that the writing be a memorandum of the agreement, which can be prepared before, during, or after contract formation. Under the common law, a letter from one of the parties to a third party describing the agreement has been held to satisfy the writing requirement. In this case, the agreement falls within the Statute of Frauds, because the agreement was oral and it is for longer than one year. However, the Statute of Frauds is satisfied because the teacher sent a letter to his friend describing the agreement, so the contract can be enforced. Therefore, this is the correct answer.
The owner of a large social function hall hosts various banquets, meetings, and other types of community events in the social function hall. An entrepreneur is in the business of running bingo games sponsored by charities, a legal form of gambling in the state in which the social function hall is located. Without disclosing his intended use for the hall, on June 1, the entrepreneur entered into a one-year lease of the social function hall commencing on July 1. On June 15, a scandal erupted in the state in which the social function hall was located concerning corruption in bingo games sponsored by charities, and the state legislature passed legislation, effective June 30, outlawing bingo games. Upon passage of the legislation, the entrepreneur purported to cancel the lease.
In a suit by the owner against the entrepreneur, what is the likely outcome?
A) The entrepreneur will prevail, because after the lease had been signed, the government made its subject matter illegal.
B) The entrepreneur will prevail, because the contract is voidable under the doctrine of frustration of purpose.
C) The owner will prevail, because the purpose of the contract was not illegal at the time that the contract was formed.
D) The owner will prevail, because the parties formed a valid contract supported by consideration.
Explanation
The correct answer is:The owner will prevail, because the parties formed a valid contract supported by consideration.
Discussion of correct answer:Because neither the doctrine of impossibility nor frustration of purpose will excuse the entrepreneur’s performance, and the subsequent illegality of bingo games will have no effect on the lease, the owner will prevail.
Discussion of incorrect answers:
Incorrect. The entrepreneur will prevail, because after the lease had been signed, the government made its subject matter illegal. This answer choice is incorrect because the contract in question is a lease of space, not a contract to conduct bingo games. If this were a contract to conduct bingo games, the subsequent illegality of those games would excuse performance under the contract. In this case, the owner was unaware of the purpose of the lease of the property, and the fact that bingo was later made illegal does not vitiate the contract.
Incorrect. The entrepreneur will prevail, because the contract is voidable under the doctrine of frustration of purpose. The doctrine of frustration of purpose may excuse performance of a lease when an unseen event destroys its underlying purpose. However, for that doctrine to apply, both parties must know of the purpose. Because the owner was not aware of the intended use of the social function hall for bingo games, this answer is incorrect.
Incorrect. The owner will prevail, because the purpose of the contract was not illegal at the time that the contract was formed. It is true that the owner will prevail in an action to enforce the parties’ valid contract. However, the contract in question is a lease of space, not a contract to conduct bingo games. Therefore, the fact that bingo was later made illegal is irrelevant. Thus, this answer reaches the right conclusion, but cites an irrelevant fact as the basis of this conclusion.
A contractor agreed to build a house for an enigmatic and highly particular billionaire in accordance with detailed plans and specifications. In return, the billionaire agreed to pay the contractor $10,000,000 for the home upon completion. The written contract included the following provision: “The billionaire’s liability is expressly conditioned on the master bedroom being constructed entirely out of malachite.” While the home was under construction, a health pandemic developed in the only country that supplied sheets of malachite, ending the supply of malachite to the United States. Because no malachite was available in the country, the contractor used a similarly colored jade to construct the master bedroom instead. A jeweler had agreed in writing with the contractor to trim the walls with pearls. Unfortunately, the pearls were fake, although otherwise functional. Other than the lack of malachite and the fake pearls, the house was completed according to the plans and specifications contained in the contractor-billionaire contract. Despite these discrepancies, the billionaire paid the contractor the full contract price, moved in, and sued the jeweler for using fake pearls instead of real ones.
For whom should the court find?
(A) The jeweler, because the jeweler was not in privity with the billionaire.
(B) The jeweler, because the billionaire waived his right to claim the damages by paying the contractor and taking possession of the house.
(C) The billionaire, because when the billionaire paid the contractor he acquired an implied assignment of any rights that the contractor had against the jeweler.
(D) The billionaire, because the billionaire was a third-party beneficiary of the contract between the contractor and the jeweler.
(D) The billionaire, because the billionaire was a third-party beneficiary of the contract between the contractor and the jeweler.
A woman agreed to sell a tract of rural farmland to a man, and each signed a writing stating that the farmland was being sold “for $10,000, receipt of which is acknowledged.” In actuality, the man had not yet paid the woman the $10,000. At the date set for closing, the woman transferred a deed to the farmland to the man, who gave the woman a check for $10,000. A few days after the woman deposited the check, it was returned due to insufficient funds in the account. The woman then brought suit against the man for the amount owed.
May she introduce evidence that the man did not pay her the $10,000 as recited in the written instrument?
(A) No, because the doctrine of promissory estoppel will prevent the woman from denying her own signed acknowledgment that she received the $10,000.
(B) No, because the written instrument appears to be a complete integration of the parties’ agreement.
(C) Yes, because the parol evidence rule does not apply to events occurring after the forming of the writing.
(D) Yes, because the parol evidence rule does not operate to exclude evidence to show lack or want of consideration.
(D) Yes, because the parol evidence rule does not operate to exclude evidence to show lack or want of consideration.
A famous football player had his dog stolen from his yard. He immediately went to social media and implored anyone with details to contact him. He put a description of the dog, where it was last seen, and said that he would be forever indebted to whomever found his dog. One particular fan immediately went out looking for the dog in the area surrounding the player’s home. A few days passed and the player became desperate, so he offered a $5,000 reward for finding the dog. After several days of looking, the fan finally saw the dog tied to a bench. He untied the dog and went onto the player’s website to contact him. The fan then saw the reward offer and returned the dog, demanding the reward. The player refused to pay the fan the $5,000.
Is the player liable to pay the fan the reward money?
(A) No, because the fan did not know of the reward before he found the dog.
(B) No, because the player was unaware that the fan had accepted the offer.
(C) Yes, because the fan found the dog as requested.
(D) Yes, because the fan learned of the reward before he returned the dog.
(A) No, because the fan did not know of the reward before he found the dog.
A man wins a lottery prize of $1,000,000. He is so happy that he orally promises a friend that he would give to this friend enough funds for the friend to start the cupcake bakery business the friend was contemplating opening. The friend, based upon this promise, immediately leases a large commercial bakery, hires 10 employees, and resigns from his job. The friend then asked the lottery prizewinner for the monies to pay for the lease, the employees and for his own salary. The lottery prizewinner refuses to pay anything to his friend. Assume that this jurisdiction does not recognize promissory estoppel.
Will the friend’s lawsuit against the lottery prizewinner for breach of contract succeed?
A. Yes, because the lottery prizewinner made a binding agreement to fund the friend’s new business.
B. Yes, because there was adequate consideration for the promise to fund the new business.
C. No, because the promise made to the friend did not have sufficient consideration.
D. No, because the promise to fund the new business was not in writing.
C. No, because the promise made to the friend did not have sufficient consideration.
A shirtmaker and a retailer entered into a written contract whereby the shirtmaker agreed to supply the retailer 1,000 painted sweatshirts, in accordance with specifications set forth in the contract, for sale during the Christmas season. The goods were to be shipped to arrive at the retailer’s store in 10 shipments of 100 each. The first shipment was to be delivered on Sept. 1. The remaining shipments were to be made at one-week intervals until the middle of November. The first shipment arrived at the retailer’s store on Sept. 6, and contained only 80 sweatshirts, 10 of which did not conform to the retailer’s design specifications.
Which of the following most accurately sets forth the obligations of the parties on Sept. 6?
(A) The retailer may declare that the entire contract has been breached because of the defects in the first shipment and seek appropriate buyer’s remedies under the UCC.
(B) The retailer may reject the first shipment even if the shirtmaker agrees to ship 30 conforming sweatshirts the next day.
(C) The retailer may accept the conforming sweatshirts, sue for breach of the obligations with respect to the Sept. 1 delivery, and at a later date terminate the contract with respect to future installments.
(D) The retailer may not terminate the entire contract for breach of the contract obligations with respect to the first installment unless the first shipment substantially impairs the value of the whole contract.
(D) The retailer may not terminate the entire contract for breach of the contract obligations with respect to the first installment unless the first shipment substantially impairs the value of the whole contract.
On Monday, a man offered to sell his lawn mower to his neighbor for $100. After receiving the man’s offer, the neighbor responded, “Let me think it over.” The man then said, “If you say so, but I need to know in a day or two, tops.” On Friday, the man sold the lawn mower to his brother. Thereafter, the neighbor decided to accept the man’s offer and walked to his house, only to find the man’s brother loading it onto his truck.
If the neighbor sued the man for breach of contract, judgment should be for whom?
A) The man, because the offer to the neighbor terminated when the neighbor saw the brother loading the lawn mower onto his truck.
B) The man, because the offer was terminated due to the lapse of time.
C) The neighbor, because the offer became irrevocable for a reasonable time when the neighbor asked to “think it over.”
D) The neighbor, because the sale of a lawn mower is governed by the UCC.
Explanation
The correct answer is: The man because the offer was terminated due to the lapse of time.
Discussion of correct answer:The man agreed to hold the offer open for the neighbor to give the neighbor time to think it over, but the man stated that the offer would only be open for, at most, two days. Thus, when the neighbor failed to accept the offer by the end of Wednesday, two days after the offer was made, the offer lapsed due to time.
Discussion of incorrect answers:
Incorrect. The man, because the offer to the neighbor terminated when the neighbor saw the brother loading the lawn mower onto his truck. An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect. While an indirect revocation may have occurred when the neighbor saw the brother loading the lawn mower onto his truck, the offer terminated due to lapse of time. An offer is open for a reasonable period of time. Given the conversation, that would be two days from Monday, or Wednesday. Here, by Friday, the offer had lapsed, so the neighbor could no longer accept it.
Incorrect. The neighbor, because the offer became irrevocable for a reasonable time when the neighbor asked to “think it over.” Simply allowing an offeree to think over an offer for a period of time does not make the offer irrevocable. Absent consideration, the offeror is not obligated to hold the offer open for that period.
Incorrect. The neighbor, because the sale of a lawn mower is governed by the UCC. Whether the lawn mower is a good governed by the UCC is irrelevant. If the man had been a merchant and his offer was in writing, promising to hold the offer open for a length of time, this would have made the offer irrevocable as a firm offer. However, that is not the case here, and even if it were, the offer was only open for two days, and lapsed before the neighbor attempted to accept it.
After graduating from a state university, a woman could not decide whether to continue on in graduate school or to accept an offer from a company in another city. The woman’s aunt said she would pay all of the woman’s tuition and expenses for the year-and-a-half that the woman would need to complete her master’s degree. The aunt also said she would pay the woman an additional $500 for every A that the woman earned and $250 for every B she earned. The woman told her aunt that she would enroll in a master’s program. The following week, the woman’s father learned of the offer his sister had made. He told the woman that if the aunt did not pay the woman as she had indicated she would, he would pay the woman. The woman enrolled in a master’s program at the state university, and she earned eight A’s and two B’s for her coursework. The aunt died shortly after the woman’s graduation. The executor of the aunt’s estate refused to pay the woman the $4,500 bonus for her good grades. The woman then went to her father and asked him for the $4,500 bonus, but he refused to pay. The woman then sued her father.
What is the most likely reason why the woman would not succeed in trying to enforce his promise?
(A) The woman received sufficient compensation in the form of a year-and-a-half of free tuition and expenses.
(B) It was an illusory contract.
(C) It was an oral contract.
(D) No consideration flowed to the father.
(C) It was an oral contract.
A roofer entered into a contract with a technology company to reseal its roof. The contract contained no provision regarding assignments of the contract. Within a few days of signing the contract, the roofer found himself deluged by calls to reseal other roofs that had been leaking with the onset of the summer rains, and he found himself short of repair crews. The roofer informed the company that it would not be possible for him to finish the resealing within the period called for in the contract.
Rather than be found in breach of contract, he assigned the contract to a general contractor, who was a friend and competitor of his. The competitor began resealing the company’s roof and was halfway through the project before the company even realized that he was substituting for the roofer. Nonetheless, it allowed him to finish the job. After the contractor finished, the company discovered that he failed to perform the resealing according to the terms of the original contract between the company and the roofer.
Which of the following statements is most accurate?
(A) The company has no cause of action against the contractor because there is no privity of contract.
(B) The company has no cause of action against the contractor because it accepted his performance.
(C) The company has a cause of action against the contractor for damages.
(D) The company has a cause of action against either the roofer or the contractor for damages.
(D) The company has a cause of action against either the roofer or the contractor for damages.
A buyer ordered 1,000 widgets from a seller for immediate delivery. The seller responded by shipping 800 widgets, along with an accompanying notice to the buyer explaining that the seller did not have an adequate inventory to ship 1,000 widgets, and was therefore shipping 800 widgets as an accommodation to the buyer in light of the buyer’s urgent need.
Which of the following is the most accurate statement?
(A) A contract was formed under the mailbox rule when the seller shipped the widgets.
(B) A contract will be formed once the widgets arrive at the buyer’s address.
(C) No contract exists, because the notice of accommodation operates as a counteroffer.
(D) No contract exists, because the buyer’s accommodation is not an acceptance.
(C) No contract exists, because the notice of accommodation operates as a counteroffer.
A whitewater rafting tour company and a state college faculty association arranged to rent all of the tour company’s rafts for a faculty ride down the Rocopico River the first weekend of spring break. The contract price was set at $2,500, including a $1,000 nonrefundable deposit. The deposit was designated as “liquidated damages.” The association paid the $1,000 and agreed to meet the tour company’s owner and rafters at Avon on the Rocopico on March 18 at 7:30 a.m. The owner and his rafters showed up at Avon with their rafts in tow at 6:30 a.m. on the morning of March 18. By 10 a.m., however, no one from the faculty had shown up. At 10:30 a.m., a group of students from the local elementary school showed up in Avon and became interested in a short ride when they saw the rafts were available. The tour company owner concluded that the association was not going to show up, so he arranged with the head teacher of the elementary school to take the students on a day trip for $2,000. The owner spent the rest of the day with the students on the river. The association requested a return of the deposit, but the tour company refused to return the deposit. The association has pursued a legal action to recover a refund of the $1,000 deposit.
Will the court enforce the liquidated damages clause?
(A) No, because $1,000 is an unenforceable penalty and damages are sufficient compensation for the breach.
(B) No, because the whitewater rafting tour company was able to mitigate its damages.
(C) Yes, because $1,000 was a reasonable estimate of damages in the event the association breached the contract.
(D) Yes, because the parties agreed to liquidated damages.
(A) No, because $1,000 is an unenforceable penalty and damages are sufficient compensation for the breach
A photographer for a wedding magazine planned a photoshoot in which brides and grooms would model the latest wedding fashions around an elegant mansion that needed to be booked months in advance. All similar venues in the area charged $1,000 for a four-hour rental, but the booking office contracted with the photographer to use the space for $200 because of the good publicity that would result. When the photographer got to the mansion, she discovered that it had not been cleaned from a wedding there the night before. The booking office said that it would take two hours to clean up the mess. That would leave hardly any daylight time to take photos, so the photographer was forced to make a last-minute booking across town for $1,200.
If the court finds that the booking office breached the contract with the photographer, will the booking office be liable for reliance damages?
(A) Yes, because the photographer should be restored to her pre-contract position.
(B) Yes, because the booking office knew why the photographer booked the mansion.
(C) No, because the parties had a valid contract.
(D) No, because restitutionary damages are more appropriate.
(C) No, because the parties had a valid contract.
A publishing company offered to buy a manuscript for $100,000. The writer, as part of an ill-advised negotiating strategy, rejected the offer. The next day, the publishing company filed for bankruptcy. When the writer learned of the bankruptcy, she quickly realized that the original offer was the best she would receive and called the publishing company, telling the receptionist, “I accept your offer.”
Will the writer be successful in her lawsuit to recover $100,000 from the publishing company’s bankruptcy estate?
A) No, because the publishing company’s bankruptcy action negated its contractual liability.
B) No, because the writer had already rejected the offer.
C) Yes, because the bankruptcy action would not affect the valid offer.
D) Yes, because $100,000 is sufficient consideration to support the contract.
Explanation
The correct answer is: No because the writer had already rejected the offer.
Discussion of correct answer:Once an offeree refuses an offer, the offer is closed. Here, because the writer initially refused the publishing company’s offer, the offer was no longer open when she changed course and attempted to accept it. Had she desired more time to consider the offer, she should have sought a written extension of the offer. Under the circumstances, however, the writer cannot recover.
Discussion of incorrect answers:
Incorrect. No, because the publishing company’s bankruptcy action negated its contractual liability. If, as in this case, an offeree refuses an offer, the offer is closed. Because the writer initially refused the offer, the offer was no longer valid when she attempted to accept it. Given that there was no valid contract, the publishing company’s bankruptcy estate would not be implicated. As such, this answer is incorrect.
Incorrect. Yes, because the bankruptcy action would not affect the valid offer. Because there was no valid contract, the publishing company’s bankruptcy estate would never be involved. Once an offeree refuses an offer (as the writer explicitly did here), the offer is no longer valid. Once the writer refused the publishing company’s offer, the offer was no longer open. Therefore, this answer is incorrect.
Incorrect. Yes, because $100,000 is sufficient consideration to support the contract. To create an enforceable contract, there must be an offer followed by an acceptance. The adequacy of consideration is relevant only when the offeree properly accepts an offer by the offeror. Here, given that the writer initially refused the publishing company’s offer, the offer was no longer open at the time that the writer attempted to accept it. Given the writer’s lack of acceptance, there can be no valid contract, regardless of the adequacy of consideration.
An ice cream manufacturer and a small restaurant entered into a contract whereby the restaurant would buy all the ice cream it needed from the ice cream manufacturer, and the ice cream manufacturer would sell as much ice cream as it wanted to the restaurant at their current market price.
The restaurant sent its first order to the ice cream manufacturer. However, the ice cream manufacturer refused to deliver any ice cream to the restaurant, citing purchase orders it had just received from a large national chain of restaurants.
If the restaurant sued the ice cream manufacturer, which of the following is most accurate?
A) A valid contract was formed, because there was valid consideration provided and the parties both acted in good faith.
B) A valid contract was formed, because there was mutual assent to clearly defined terms understood within the industry.
C) No contract exists, because the agreement was illusory.
D) No contract exists, because the parties failed to include a quantity term.
Explanation
The correct answer is: No contract exists, because the agreement was illusory.
Discussion of correct answer:This contract is illusory, because the restaurant is bound to buy all of their ice cream from the ice cream manufacturer, while the manufacturer is bound to nothing at all. In fact, if it so chooses, the manufacturer does not have to sell any ice cream to the restaurant, and can choose to sell instead to another vendor that offers more money. As such, this contract is not enforceable.
Discussion of incorrect answers:
Incorrect. A valid contract was formed, because there was valid consideration provided and the parties both acted in good faith. While the parties appear to have acted in good faith, there is a lack of consideration here, because the ice cream manufacturer has made an illusory promise here, and illusory promises do not constitute valid consideration.
Incorrect. A valid contract was formed, because there was mutual assent to clearly defined terms understood within the industry. While there may have been mutual assent, there is a lack of consideration here, because the ice cream manufacturer’s promise was illusory.
Incorrect. No contract exists, because the parties failed to include a quantity term. While ordinarily, a quantity term is the only term required under the UCC, the UCC also permits output and requirements contracts, which leave the quantity term more vague (“all of the buyer’s needs” or “all of the seller’s output”). As such, the lack of a quantity term will not be the reason why this contract is unenforceable. Instead, it will be because it contains an illusory promise, as the ice cream manufacturer’s obligation to perform is entirely up to its own discretion.
The owner of 25 lots in a prestigious subdivision e-mailed a potential buyer on September 15, indicating that he would sell any or all of the lots for $10,000 each. He also indicated that more details would be sent by regular mail. Several days later, the owner mailed a follow-up letter containing the necessary sales details regarding mortgages, terms of payment, and title insurance. According to the letter, the offer would remain open until October 15. On September 17, even though she had not yet received the detailed letter from the owner of the lots, the buyer mailed her acceptance of the offer–namely, she wished to buy Lot #12, a corner lot on the main road. The owner, however, sold all of the lots to another purchaser on September 21. On September 22, the owner then telephoned the buyer to tell her of the sale of all the lots. The buyer, having finally received the owner’s original letter on September 25, then sent the lot owner another letter accepting his original offer, as e-mailed, and indicated that she would purchase all 25 lots. If the buyer files an action against the owner for breach of contract, what is the likely outcome?
(C) The owner will prevail, because his effective revocation terminated the buyer’s power of acceptance.
A man attended a barbecue hosted by his best friend. As the man was leaving the event, the best friend accidentally backed a car onto a concrete marker in a grassy area next to the road and next to a steep ravine. The best friend exited the vehicle while the engine was still running and without ensuring that the car was in park. He left the driver’s and front-seat passenger’s doors open. The best friend succeeded in dislodging the car free of the concrete marker, but once free, the vehicle began rolling forward slowly down the slope of grass toward the ravine. People were gathered on the grassy slope and other cars were parked on the grass. Seeing this, the man, without any request, jumped into the vehicle to try to stop the car. He was unable to bring the car to a stop, and it rolled into a 25 to 30 foot deep ravine. The man sustained several broken bones and injuries. As it turns out, the path of the automobile did not come close to any person or other vehicle. The man has filed a negligence action for damages against his best friend.
Will the best friend likely succeed in avoiding liability?
A. Yes, the best friend did not owe the man any duty.
B. Yes, because the man’s negligence in getting into the moving vehicle was a superseding intervening cause.
C. No, because the man was acting to prevent injury to the persons in the path of the vehicle.
D. No, because the best friend was not negligent.
C. No, because the man was acting to prevent injury to the persons in the path of the vehicle.
On Monday, a man offered to sell his lawn mower to his neighbor for $100. After receiving the man’s offer, the neighbor responded, “Let me think it over.” The man then said, “If you say so, but I need to know in a day or two, tops.” On Friday, the man sold the lawn mower to his brother. Thereafter, the neighbor decided to accept the man’s offer and walked to his house, only to find the man’s brother loading it onto his truck.
If the neighbor sued the man for breach of contract, judgment should be for whom?
(A) The man, because the offer to the neighbor terminated when the neighbor saw the brother loading the lawn mower onto his truck.
(B) The man, because the offer was terminated due to the lapse of time.
(C) The neighbor, because the offer became irrevocable for a reasonable time when the neighbor asked to “think it over.”
(D) The neighbor, because the sale of a lawn mower is governed by the UCC.
(B) The man, because the offer was terminated due to the lapse of time.
The owner of a seaside cottage had leased the cottage to a renter for the past three summers. Last year, on October 1, the owner sent the renter a letter stating, “Because you have been such a great tenant, I will rent you the seaside cottage on the same terms as last year. I need your answer by June 1.” The renter, uncertain as to when he would be taking his annual seaside vacation, decided to put the letter aside for the time being, intending to respond to it by June 1.
On May 15, the owner received an offer from the renter’s cousin to rent the seaside cottage at a higher price than the renter had paid the prior year. The owner accepted. On May 20, the renter telephoned the owner and said, “My cousin tells me that he has rented the seaside cottage from you. However, you said that I had until June 1 to decide, and even though your rents are too high, I have decided that I want the cottage for the summer.” The owner replied that he had already rented the cottage to the cousin. The renter filed a lawsuit seeking to enforce the contract.
Will the renter succeed in his enforcement lawsuit?
A) Yes, because the renter relied on the owner’s statement that he needed an answer by June 1.
B) Yes, because the renter contacted the cottage owner on May 20.
C) No, because the renter’s response was not the mirror image of the offer and constituted a counteroffer.
D) No, because the owner had already rented the cottage to a different tenant.
Explanation
The correct answer is: No because the owner had already rented the cottage to a different tenant.
Discussion of correct answer:An offer is a manifestation of intent by the offeror to be bound by the contract that is communicated to the offeree with definite and certain terms. Here, the owner wrote, “I will rent you the seaside cottage on the same terms as last year. I need your answer by June 1,” thereby demonstrating his intent to be bound by a contract. Although the letter itself did not specify the terms, the reference to “the same terms as the previous year” is sufficiently definite to form an enforceable offer. The owner’s letter also included the stipulation that he must have a response from the renter by June 1. Generally, promises to keep an offer open are enforceable as long as the offeree pays separate consideration for the option. In this case, the renter did not pay separate consideration for the option, and, as such, the owner was free to revoke the offer at any time before June 1, unless the doctrine of promissory estoppel applies to make his promise enforceable. In order for the doctrine of promissory estoppel to apply, the promise must have been made with the reasonable expectation of inducing reliance, and the offeree must have in fact relied and suffered some detriment as a result of the reliance. Even assuming that the owner made the promise with the reasonable expectation of inducing reliance, there is nothing to indicate that the renter suffered a detriment as a result of his reliance. The renter did not turn down another vacation rental, choose not to make other vacation plans, or incur a cost in expectation of renting the cottage that would demonstrate detriment to the renter. The offer was effectively revoked by the owner’s conduct in renting the seaside cottage to the cousin, and by the communication of that revocation to the renter by the cousin. Therefore, there is no contract to enforce.
Discussion of incorrect answers:
Incorrect. Yes, because the renter relied on the owner’s statement that he needed an answer by June 1. In his letter offering to lease the cottage, the owner included the stipulation that he must have a response by June 1. Generally, promises to keep an offer open are enforceable as long as the offeree pays separate consideration for that option term. Here, because the renter did not pay separate consideration for the option to choose not to reply until June 1, the cottage owner was free to revoke his offer at any time before June 1, since the doctrine of promissory estoppel would not apply to make the owner’s offer to rent him the cottage enforceable. Even assuming that the owner made the promise to rent the cottage with the reasonable expectation of inducing reliance and that the renter did so rely on this statement, there is nothing to indicate that the renter suffered a detriment as a result of his reliance. As such, this answer choice is incorrect.
Incorrect. Yes, because the renter contacted the cottage owner on May 20. In his letter offering to lease the cottage to the renter, the owner included the stipulation that the renter must respond by June 1. While it is true that the renter responded to the offer prior to this date, on May 20, the owner’s offer to keep the cottage available until June 1 for lease by the renter is not enforceable by the renter, because the renter did not pay separate consideration for the option to not respond until June 1. Therefore, this answer choice is incorrect.
Incorrect. No, because the renter’s response was not the mirror image of the offer and constituted a counteroffer. Although the renter complained that the rent was too high, the renter’s response to the owner’s offer was to accept the offer to rent the cottage on precisely the terms the owner had proposed (“the same terms as last year”). As such, the renter’s acceptance of the offer did not differ enough from the terms of the owner’s offer to constitute a counteroffer. As such, this answer choice is incorrect.
A businessman decides to buy a large tract of land because he wants to build a mill on the land. He contacts the owner of the large piece of land and the two parties orally agree that the businessman will buy the land in seven months. However, after about a month, the owner calls the businessman and tells him that the deal is off. Nevertheless, the businessman seeks to enforce the contract.
Which of the following is correct?
(A) The contract is enforceable, because the two parties agreed on a contract.
(B) The contract is enforceable, because the owner admitted the existence of the contract when he contacted the businessman.
(C) The contract is not enforceable, because the contract is for the sale of land.
(D) The contract is not enforceable, because the contract is for longer than six months.
(C) The contract is not enforceable, because the contract is for the sale of land
A homeowner entered into a written contract by which a carpenter agreed to build book shelves and an office area in the homeowner’s new home within six months in exchange for $20,000. The carpenter reported to the homeowner that the work was completed and demanded her $20,000. The homeowner inspected the shelving and discovered that the carpenter had installed three shelves instead of the four called for in the specifications accompanying and incorporated by reference into the contract. The homeowner estimated that it would cost $2,000 to install a fourth shelf and mailed the carpenter a check for $18,000 on which she had written “Payment in Full.” The carpenter cashed the check and then filed an action against the homeowner for the additional $2,000.
For whom should the court award judgment?
A. The carpenter, because she substantially performed under the contract, and the homeowner’s remedy, if any, is to seek a judgment for damages.
B. The homeowner, because the carpenter is estopped from denying that she has been paid in full.
C. The homeowner, because there has been an accord and satisfaction.
D. The homeowner, because the carpenter is in material breach of contract and thus cannot complain of the homeowner’s failure to perform as promised.
C. The homeowner, because there has been an accord and satisfaction.
Discussion of correct answer: An accord is an agreement in which the obligee of a separate contract accepts a lesser performance than was called for by the original contract. A satisfaction is the performance of the accord. As to a bona fide dispute, the compromise of the competing claims provides consideration for the accord, and upon satisfaction, the obligation is extinguished. Here, when the carpenter cashed the $18,000 check marked “Payment in Full,” she was impliedly agreeing to accept $2,000 less than the contract price as a compromise of the dispute over the fourth shelf. Having so agreed, the carpenter cannot thereafter seek to enforce the full contract price.
Think Like a Lawyer
If your client has agreed to settle a dispute, and the settlement payment has been made, your client is bound.
Step by Step Walkthrough
Step 1: An accord is an agreement to settle a dispute. Satisfaction occurs when the payment is made or the substituted performance is rendered. In order to have a valid accord, there must be consideration on both sides. There may be sufficient consideration if the substituted consideration differs significantly from that required by the original duty, or because the original duty was doubtful.
Step 2: Here, the lack of a fourth bookshelf was not a material breach, so the homeowner must pay for the work completed. However, there was a minor breach, and some damages are owed. The question is, how much damages are owed? The homeowner decided on $2,000. The carpenter, without arguing this sum or filing suit, simply cashed the check that was marked “Payment in Full.” Consequently, the carpenter agreed to settle, and took the $18,000 as satisfaction. The carpenter is bound and cannot later complain.
Step 3: Choose the answer that describes accord and satisfaction, without being distracted by the other choices.
Knowing that his niece was looking for a good used car, an uncle sent an email to his niece one Friday afternoon, promising to sell her his car for $1,000 if she accepted before the end of that weekend. After reading the email, the niece sent her uncle a reply email that stated, “The price is a little high. I’ll give you $800.” The uncle responded via email, “I will not accept $800; it is worth more than that.” The next day, the niece emailed her uncle and said, “I changed my mind, I accept at $1,000.” On Sunday, the uncle responded that he refused to sell the niece his car.
If the niece brings a cause of action against her uncle to enforce the agreement, will she prevail?
A) Yes, because she accepted the uncle’s terms.
B) Yes, because she accepted the uncle’s terms before the end of the weekend.
C) No, because she made a counteroffer.
D) No, because the uncle rejected her counteroffer.
Explanation
The correct answer is: No, because she made a counteroffer.
Discussion of correct answer: An offeree’s power of acceptance can be terminated if the offeree refuses to accept the offer. A counteroffer made on the same subject matter operates to simultaneously reject the initial offer, terminating the offeree’s power of acceptance, while making a new offer. Not all statements or questions about an offer are considered counteroffers. An offeree may test the waters by making a “mere inquiry” about the offeror’s willingness to negotiate without creating a counteroffer and terminating the power of acceptance. Here, the niece’s email, “The price is a little high. I’ll give you $800.” goes beyond a mere inquiry, as it modified the terms of the initial offer from $1,000 to $800. By doing so, the niece effectively rejected the offer for $1,000 and made a counteroffer for $800. This terminated her power of acceptance.
Discussion of incorrect answers:
Incorrect. Yes, because she accepted the uncle’s terms. The niece cannot accept the uncle’s original terms of $1,000 any longer, because her power of acceptance was terminated by her counteroffer of $800. The uncle rejected this counteroffer, and no new offer was made by either party after that point. Therefore, this is not the correct answer.
Incorrect. Yes, because she accepted the uncle’s terms before the end of the weekend. The uncle had no legal obligation to accept an offer after it was rejected. The uncle’s offer terminated upon the niece’s counteroffer. The niece’s acceptance was therefore too late.
Incorrect. No, because the uncle rejected her counteroffer. The uncle did reject his niece’s counteroffer when he responded, “I will not accept $800; it is worth more than that.” However, the rejection was not necessary to terminate the niece’s power to accept the original $1,000 offer. Her power of acceptance terminated upon her rejection and counteroffer for $800; the fact that the uncle rejected her counteroffer is not the best reason that the niece will not prevail. The fact that she made a counteroffer is sufficient to terminate the uncle’s original offer and her subsequent power to accept it.
A man offered to sell his barbecue to his neighbor for $100. After receiving the man’s offer, the neighbor responded, “Let me think it over.” The man then said, “If you say so.” The next day, the man sold the barbecue to his brother for $100. Thereafter, the neighbor decided to accept the man’s offer, but learned from a reliable source that the barbecue had been sold to the brother.
If the neighbor sues the man for breach of contract, judgment should be for whom?
A) The man, because the offer to the neighbor terminated when the neighbor learned of the sale to the brother.
B) The man, because there was no consideration to keep the offer open for an extended period of time.
C) The neighbor, because the offer became irrevocable for a reasonable time when the man allowed the neighbor to “think it over.”
D) The neighbor, because he is a merchant.
Explanation
The correct answer is: The man, because the offer to the neighbor terminated when the neighbor learned of the sale to the brother.
Discussion of correct answer: An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect. Thus, the man’s offer was effectively revoked when the neighbor learned from a reliable source that the barbecue had been sold to the man’s brother.
Discussion of incorrect answers:
Incorrect. The man, because there was no consideration to keep the offer open for an extended period of time. The fact that consideration was not paid to keep the offer open speaks to why the offer was not irrevocable, but does not state why the offer was terminated.
Incorrect. The neighbor, because the offer became irrevocable for a reasonable time when the man allowed the neighbor to “think it over.” This answer is incorrect, because simply allowing an offeree to think over an offer for a period of time does not make the offer irrevocable. Absent consideration, the offeror is not obligated to hold the offer open for that period.
Incorrect. The neighbor, because he is a merchant. This choice is incorrect, because the neighbor’s status as a merchant is irrelevant. If the man had been a merchant and his offer was in writing, that may make the offer irrevocable as a merchant’s firm offer.
A man decides that he wants to move to another city in about a year. He has a rare bicycle, but he has been interested in buying a new one, so he decides that when he moves, the man will sell his bicycle. The man talks to his neighbor and learns that the neighbor is a big fan of his bicycle. The two parties orally agree that the man will sell the bicycle to the neighbor for $350 in a year and a half when the man expects to be out of the city. When time comes for the man to sell his bicycle, he refuses. The neighbor sues for breach of contract.
Which of the following is correct?
(A) The contract is enforceable, because the contract was for less than two years.
(B) The contract is enforceable, because the bicycle cost less than $500.
(C) The contract is not enforceable, because the contract was for longer than a year.
(D) The contract is not enforceable, because the bicycle cost more than $300.
(C) The contract is not enforceable, because the contract was for longer than a year.
A car collector owed a debt to a friend, so he sold one of his classic automobiles. The buyer of the car and the collector agreed that the buyer would pay the price of the car directly to the friend. Before the sale was completed, the buyer remembered that the collector owed him money, and deducted the amount of the debt from the amount paid to the friend.
Can the collector bring a breach of contract action against the buyer?
(A) No, because the buyer was entitled to offset the amount of the debt.
(B) No, because the right to secure performance belonged to the friend after the friend’s rights vested.
(C) Yes, because he has suffered damages from the buyer’s failure to pay.
(D) Yes, because the agreement called for payment of the full sum to the friend.
(D) Yes, because the agreement called for payment of the full sum to the friend.
A man offered to buy a woman’s farm for $100,000. The woman did not wish to sell her farm, but she jokingly accepted the offer because she did not believe that the man has the $100,000. The man and the woman worked out the terms of the contract and the woman, still joking, wrote out the contract on a sheet of paper which both parties signed. The man took the writing and subsequently tried to enforce it, arriving with a check for $100,000.
In a suit by the man against the woman, what is the likely outcome?
A) The man will win, because they signed the agreement.
B) The man will win, because the contract is binding even if the woman did not intend to sell her farm, as the man actually believed this to be a serious transaction and his belief was reasonable.
C) The woman will win, because there was no good faith on her part to enter into a contract.
D) The woman will win, because there was no true meeting of the minds.
Explanation
The correct answer is: The man will win, because the contract is binding even if the woman did not intend to sell her farm, as the man actually believed this to be a serious transaction and his belief was reasonable.
Discussion of correct answer:At the heart of any contract issue is the question of whether or not a contract was actually formed. This usually requires a determination of whether there was valid consideration, and whether there was a valid offer and acceptance. In order for a contract to be formed, there must be mutual assent, which is simply the agreement by both parties to enter into a contract. In deciding whether or not there is mutual assent, courts use an objective “reasonable person” test, in which the court examines the exchange between the parties that led to the establishment of the contract and then determines what a reasonable person in the place of the parties would have understood the exchange to mean. Please note that the court is not interested in what the parties actually thought. It is only interested in what a reasonable person in the same circumstances would have thought. Therefore, even if the woman was joking, if the man actually believed this to be a serious transaction and his belief was reasonable, the court will find that an enforceable contract was validly executed.
Discussion of incorrect answers:
Incorrect. The man will win, because they signed the agreement. While it is true that the two parties signed the agreement, it is not the signing that is determinative, but rather, how the parties’ beliefs would appear to a reasonable person. Here, regardless of what the woman thought, a reasonable person viewing her actions would conclude that she entered into a valid contract for the sale of real property.
Incorrect. The woman will win, because there was no good faith on her part to enter into a contract. The contract will be enforced against the woman. There are no defenses that she can avail herself of, because a reasonable person viewing her actions would conclude that she entered into a valid contract for the sale of real property.
Incorrect. The woman will win, because there was no true meeting of the minds. While she did not intend to sell the property, her specific intent alone is not the measure. Rather, if a reasonable person viewing her actions would conclude that she entered into a valid contract for the sale of real property, the agreement will be binding against her. Here, a reasonable person would conclude that she entered into such an agreement, and therefore, it will be valid and binding.
A woman advertised a van for sale for $3,500. Several potential buyers looked at the van and test-drove it. Finally, a buyer said, “I’ll give you $2,000 for this van. I think that transmission is on its last legs, so I’m not paying any more than that.” The woman said, “Well, that’s certainly less than it’s worth, but I’ve got to get it sold. You can have it for $2,000. I’ll find the title, and you can pick up the van and the title this afternoon. Bring cash.” However, when the buyer returned with the money, the woman said, “I’ve changed my mind. I just can’t sell it that cheap.” The fair market value of the van was $2,700.
If the buyer sues in small claims court for $700 in damages, will he prevail?
(A) No, because the damages were unforeseeable.
(B) No, because the contract was not in writing.
(C) Yes, because there was consideration provided by both parties.
(D) Yes, because the advertisement constituted a written offer.
(B) No, because the contract was not in writing.
On Monday, a widget wholesaler faxed to a buyer a letter promising to sell him 500 widgets for $2,000. On Tuesday, the buyer telephoned the wholesaler and said he was rejecting the offer because the price was too high. During the telephone conversation, the wholesaler responded, “Why don’t you wait and think it over until tomorrow?” The following day, the buyer learned that there was a nationwide widget shortage. He immediately telephoned the wholesaler and said, “I’ve changed my mind and will accept your offer.” The wholesaler then told the buyer, “Sorry, pal, you had your chance and blew it.”
After the wholesaler refused to sell the widgets to him, the buyer sued for breach of contract.
(A) No, because the buyer’s telephone call on Tuesday constituted a rejection.
(B) No, because there was no consideration to keep the offer open until Wednesday.
(C) Yes, because the wholesaler’s statement “Why don’t you think it over until tomorrow” revived the offer, which the buyer subsequently accepted in a timely fashion.
(D) Yes, because both parties are merchants.
(C) Yes, because the wholesaler’s statement “Why don’t you think it over until tomorrow” revived the offer, which the buyer subsequently accepted in a timely fashion.
On Monday, a man told a gardener, “I am having a party on Sunday and I want my house to look good. If you will agree to mow my lawn by Saturday, I will pay you $50. Think about it and let me know.” The man did not hear from the gardener all week. Therefore, the man decided to mow the grass himself. On Saturday, the gardener arrived with his lawn mower, and saw that the grass had been freshly mowed. The man informed the gardener that he had just finished cutting the grass himself. The gardener then brought suit against the man for breach of contract, because he argued that he was within the window of time to accept and that he had given up another job in reliance on mowing the man’s grass.
Who is likely to prevail?
A) The man, because the gardener never accepted the offer.
B) The man, because the offer to the gardener was indirectly revoked.
C) The gardener, because the man did not specify that acceptance had to be by return promise.
D) The gardener, because he gave up another job in order to accept the man’s offer.
Explanation
The correct answer is: The man, because the offer to the gardener was indirectly revoked.
Discussion of correct answer: Unless specified otherwise, an offer can be accepted by any means reasonable. Here, a return promise was requested, but not received. When the gardener arrived at the house, he became aware that the man had already mowed the grass. At this point, the offer was revoked, and the gardener could no longer accept the offer.
Discussion of incorrect answers:
Incorrect. The man, because the gardener never accepted the offer. While it is true that the gardener did not provide the return promise that was requested, the issue is one of revocation. Here, before the gardener could accept, the offer was revoked, because the gardener became aware that he could no longer accept the offer once he learned that the man cut his own grass.
Incorrect. The gardener, because the man did not specify that acceptance had to be by return promise. Unless specifically defined, an offer can be accepted by any means reasonable. While it is true that the gardener did not provide the return promise that was requested, he could have accepted by performance. However, before the gardener could accept, the offer was indirectly revoked once the gardener became aware that he could no longer accept the offer, as the man had cut his own grass.
Incorrect. The gardener, because he gave up another job in order to accept the man’s offer. The gardener would try to use this argument to enforce an equitable remedy. However, he failed to accept the offer with a return promise, and his attempt to accept by performance was indirectly revoked when he became aware that the man mowed his own grass.
A computer store places an advertising circular into the local newspaper and advertises that it will sell tablet computers (normally $490.00) for “$.390.00” to the “first fifty customers to come to the store on Wednesday.” The first customer to arrive at the store tenders his check for $.39 to the store, which refuses to sell him the tablet computer. The store tells the customer that the price in the circular was a misprint.
May the customer enforce a contract to sell the tablet computer for the advertised price?
(A) Yes, because the advertisement was an offer, and the customer unequivocally accepted the offer when he tendered his check.
(B) Yes, because the “first fifty customers” language made the advertisement an offer rather than an invitation for offers.
(C) No, because the advertisement was not an offer but rather merely an invitation to make offers.
(D) No, because no reasonable person would believe that the offer to sell the tablet computer for “$.390.00” was anything other than a misprint.
(D) No, because no reasonable person would believe that the offer to sell the tablet computer for “$.390.00” was anything other than a misprint.
On Monday, a chicken farmer emailed a restaurant owner promising to sell him 500 chickens for $2,000. On Tuesday, the owner replied to the farmer that he was rejecting the offer because the price was too high. The farmer quickly replied, “Why don’t you wait and think it over?” The following morning, the owner learned that due to a salmonella outbreak, there was a nationwide chicken shortage. He immediately telephoned the farmer to accept. The farmer knew it was the owner, and so he answered the phone by saying, “Good morning, I hereby revoke my offer.” The owner replied, “You told me yesterday to think it over, and I have, I accept.” The farmer then replied, “You had your chance and you blew it.” After the farmer refused to sell the chickens to him, the owner sued for breach of contract.
Is there an enforceable contract between the parties?
A) No, because the offer terminated due to lapse of time.
B) No, because the farmer revoked the offer before the owner accepted it.
C) Yes, because the farmer’s statement, “Why don’t you think it over until tomorrow,” revived the offer, which the owner subsequently accepted in a timely fashion.
D) Yes, because the farmer made the owner a firm offer, which was irrevocable.
Explanation
The correct answer is: No, because the farmer revoked the offer before the owner accepted it.
Discussion of correct answer:This is a contract for the sale of goods, and so the UCC will govern. There was a valid offer made by the farmer, which was rejected via email by the restaurant owner. There was then a second offer made, or a revival of the original offer, when the farmer told the restaurant owner to wait and think over the decision. Like the first offer, the revived offer was revocable, because it was not a firm offer. Because the farmer revoked the offer before the owner accepted, there was no longer an offer for the owner to accept.
Discussion of incorrect answers:
Incorrect. No, because the offer terminated due to lapse of time. There was a termination of the offer here, but it was due to revocation, not the lapse of time.
Incorrect. Yes, because the farmer’s statement, “Why don’t you think it over until tomorrow,” revived the offer, which the owner subsequently accepted in a timely fashion. Although there was a revival here, the offer was freely revocable, and was revoked before the owner’s attempted acceptance. Therefore, there is no enforceable contract.
Incorrect. Yes, because the farmer made the owner a firm offer, which was irrevocable. This was not a firm offer. It was in writing, and it was by a merchant, but the farmer did not promise to hold it open for a particular period of time.
A financial analyst hired a cowboy to perform at his son’s birthday party. Soon thereafter, the cowboy got pneumonia and informed the analyst that he would be unable to perform. The analyst immediately sent an overnight letter to a balloon-animal maker recommended by a friend: “I had lined up the cowboy to perform at my son’s birthday party, but he can’t perform. I need another performer. You have to be here on the actual birthday. Money is no problem. Sincerely, Financial Analyst.” The balloon-animal maker promptly sent back a letter by overnight mail: “I’m coming to your rescue! Yours truly, Balloon Maker.” After the balloon maker dispatched the letter, but before the analyst received it, the cowboy called the analyst to let him know that his treatment for pneumonia was working better than anticipated, so he could in fact perform as planned. The analyst then called the balloon-animal maker and told her that he no longer needed her. The balloon-animal maker sued the analyst for breach of contract. The analyst asserted the defense that the cowboy’s recovery was a changed circumstance that excused the analyst from liability on his contract with the balloon maker.
Will the analyst prevail?
(A) Yes, because in personal service contracts, illness excuses performance.
(B) Yes, because the balloon maker assumed the risk of the cowboy’s recovery.
(C) No, because the analyst assumed the risk of the cowboy’s recovery, as his offer was not conditioned on the cowboy’s incapacity.
(D) No, because of the analyst’s unilateral mistake as to whether the cowboy would recover in time to perform.
(C) No, because the analyst assumed the risk of the cowboy’s recovery, as his offer was not conditioned on the cowboy’s incapacity.
After a great job interview, a graphic artist offered his services to a website designer for $50 per hour. The designer replied, “I’ll get back to you tomorrow.” The next day, just as she was about to accept the graphic artist’s offer to work for her, the website designer received an e-mail from him that said, “Leaving for China. I’ll call when I get back.” In need of immediate services, the website designer was forced to hire someone else for $100 per hour. She then filed an action for breach of contract against the graphic artist seeking to recover the extra expenses she incurred.
Who should prevail in the breach of contract action?
(A) The graphic artist, because the website designer did not have a valid contract.
A woman owned a valuable diamond necklace which her niece had long admired and one day hoped to purchase from her aunt. Eventually the aunt offered to sell the necklace to her niece, but only if the niece could pay the asking price by January 1. The niece agreed. On December 20 the woman attended her company Christmas party and wore the necklace. The CEO’s mother was visiting for the holidays. She was so taken with the necklace that she offered to purchase then and there for more money than the niece had agreed to pay. The woman sold the necklace on the spot.
Two days later the niece appeared at her aunt’s home with a check and asked for the necklace, only to be told she was too late—it had already been sold.
If the niece sues her aunt for breach of contract, judgment should be in favor of whom?
A. The aunt, because she was entitled to revoke her offer at any time prior to acceptance.
B. The aunt, because the niece had not yet paid for the necklace when the aunt sold it.
C. The niece, because the aunt did not effectively communicate the revocation of her offer to the niece.
D. The niece, because she was ready to perform before the deadline had passed.
C. The niece, because the aunt did not effectively communicate the revocation of her offer to the niece.
Under the common law mailbox rule, an acceptance is effective when it is sent; in other words, when it is “dropped into the mailbox” for posting.
Step by Step Walkthrough
Step 1: A contract requires offer, acceptance, and consideration. Here, the manager made an offer by mail. The freelance anchor promptly responded by mail. Her acceptance was binding as soon as it was dropped into the mailbox, beyond her ability to take it back. The freelance anchor would provide performance in return for money, so there was consideration. Thus, a contract was formed.
Step 2: At this point, it is clear that the manager cannot revoke the offer, and any attempt to do so would be a breach of contract. So the anchor must win her lawsuit for breach of contract, and the station must lose.
Step 3: The call of the question is whether the station can win using the specific argument that the anchor did not effectively accept the contract. All that is needed is an answer choice that addresses that point, noting that the station cannot win.
Step 4: Only one answer choice stating “No” responds to the call of the question about effective acceptance. The anchor accepted before the offer was withdrawn. Be sure to always choose an answer that directly responds to the call of the question.
On Monday, a man told a gardener, “I am having a party on Sunday and I want my house to look good. If you will promise to mow my lawn by Saturday, I will pay you $50.” On Friday, the gardener arrived at the man’s home just as the man was leaving for work and began to mow the man’s lawn. The man said nothing to the gardener, but drove off as he saw the gardener unloading his lawn mower. When the man arrived home from work that evening, he noticed that only half of his lawn had been mowed. He then found a note from the gardener slipped into his mailbox which read, “Sorry, but I ran out of gas to power the lawn mower and did not have time to buy more gas to finish the job. I’m taking the weekend off, but I will be back Monday morning to finish the work.”
If the man brings suit against the gardener for breach of contract, who is likely to prevail?
(A) The gardener, because he never accepted the offer made by the man.
(B) The gardener, because he offered to cure the defective performance by finishing the job on Monday morning.
(C) The man, because the gardener’s part performance necessarily implied an acceptance and a promise that he would render complete performance.
(D) The man, because under the doctrine of equitable estoppel, the gardener’s part performance was evidence of his intent to honor the entire contract.
(C) The man, because the gardener’s part performance necessarily implied an acceptance and a promise that he would render complete performance.
On Monday, Jim decided to sell his vintage car. Bill had always admired the car and inquired as soon as he saw the for-sale sign. Jim said he was firm at $5,000. Bill thought this was a good price, and told Jim he wanted it, but needed to check with his wife before spending such a large amount of money. In the meantime, Bill pulled a $100 bill from his pocket and gave it to Jim, saying, “Here’s a down payment. See you tomorrow!” Jim replied, “Okay, it will be here.” On Tuesday morning, Bill approached Jim with a check written out for $4,900. Jim said, “Sorry, but you’re too late. I accepted an offer last night for $10,000.”
In an action by Bill against Jim for breach of contract, how should the court rule?
A) For Jim, because $100 is insufficient to create an option contract for a $5,000 car.
B) For Jim, because Bill’s language was insufficient to create a valid option contract.
C) For Bill, because Jim created an option contract, which is irrevocable at least until the following day.
D) For Bill, because the UCC precludes Jim from selling the car to anyone other than Bill before Wednesday.
Explanation
The correct answer is: For Bill, because Jim created an option contract, which is irrevocable at least until the following day.
Discussion of correct answer:An option contract is a promise to keep an offer open for a period of time and which is supported by consideration. With an option contact, the offeror is not permitted to revoke the offer during the stated period, because with the payment, he is bargaining away his right to revoke the offer. Because Bill paid Jim $100 to keep the offer open until the next day, the offer was still open when Bill then attempted to accept it.
Discussion of incorrect answers:
Incorrect. For Jim, because $100 is insufficient to create an option contract for a $5,000 car. There is no magic number for what constitutes sufficient consideration. Rather, there is simply a requirement that the parties understand the consideration being provided is to make the offer irrevocable for the stated period of time.
Incorrect. For Jim, because Bill’s language was insufficient to create a valid option contract. There is no magic language or dollar amount required for an option contract. Instead, the parties’ intent and actions offers a better assessment of their agreement. Here, the money was provided along with an express intent for the offer to remain open through the following day. The money was accepted with an indication that the car would be there. Accordingly, a valid option contract was created.
Incorrect. For Bill, because the UCC precludes Jim from selling the car to anyone other than Bill before Wednesday. Although this contract is governed by the UCC, this is not a firm offer under UCC Section 2-205, which requires a signed writing by a merchant to keep the offer open for a stated period of time.
A talented musician landed a lucrative recording contract. He entered into a contract with an elderly couple to purchase their residence for $1,000,000. The purchase contract required the musician to make an earnest money deposit of $10,000, and provided that the couple could keep the deposit in the event of breach of the contract, due to the uncertainty of selling homes in the high-end market. Shortly thereafter, the musician’s recording contract was terminated when he was arrested for drug use. The musician notified the couple that he would be unable to proceed with the purchase of their home. He requested his $10,000 deposit back to pay bail, but the couple refused.
If the musician prevails in an action against the couple to recover his $10,000, which of the following best explains the court’s decision?
(A) The termination of the musician’s recording contract was wrongful.
(B) The purchase contract with the couple specifically provided that the $10,000 could be retained by the couple as a “penalty for breach” by the musician.
(C) Liquidated damage provisions are inappropriate in a contract for the sale of land.
(D) The couple was able to sell their property to another buyer for $1,100,000 soon after the musician refused to perform.
(D) The couple was able to sell their property to another buyer for $1,100,000 soon after the musician refused to perform.
A lawyer decides to refurnish her office located in an old renovated factory building in the downtown section of town. In order to maintain the atmosphere of the old building and of the office space, she decides to buy a roll top desk. The lawyer fancies herself to be an antique desk expert and goes to an inexpensive new and used office furniture store in town. At the store, she sees the perfect desk, which is listed for $1,000. The lawyer is positive that the desk is one that belonged to a famous jurist, and believes that it is worth at least $100,000. She agrees to buy the desk for $1,000 and does not tell the owner about her belief that the desk is very valuable and underpriced. The owner of the store makes no representations about the desk, other than to say that it cannot be returned for any reason. The lawyer believes that she has gotten a tremendous bargain, until her secretary informs her that the desk is a reproduction made in China, which is worth $100. The lawyer is outraged and demands that the store owner take back the desk and refund the money paid for it. The owner refuses.
Will the lawyer succeed at trial against the store owner?
(C) No, because this was a bargained-for exchange and the courts generally do not examine whether consideration is adequate or not.
A businessman decided to purchase five televisions from a television manufacturer to sell them at the businessman’s store. The businessman called the manufacturer and agreed over the phone to purchase five televisions, each for $200. The manufacturer then sent the businessman an e-mail on company letterhead detailing the transaction. However, when the time came to perform, the manufacturer refused to deliver the televisions. The businessman sued for breach of contract.
Which of the following is correct?
(A) The contract is enforceable, because each television cost less than $500.
(B) The contract is enforceable, because the manufacturer sent a letter describing the offer to the businessman.
(C) The contract is not enforceable, because the televisions cost more than $500.
(D) The contract is not enforceable, because an e-mail letter is not sufficient to satisfy the Statute of Frauds.
(B) The contract is enforceable, because the manufacturer sent a letter describing the offer to the businessman.
A 17-year-old high school student wanted to buy a car. His neighbor was selling his car, and said, “If you give me $500 cash today, I will sell it for that.” The student replied, “Thanks anyway, but I want a faster car.” Later the same day, the student changed his mind and returned with $500 cash, but the neighbor would not sell him the car.
Was a contract created for the student to purchase the car?
No, because the student rejected the neighbor’s offer.
A basketball fan was attending the first home game of the season for his home team, and was selected for a halftime contest. The team gave him one chance to hit a backwards half-court shot for $1 million. He made the shot and a wild celebration ensues. However, after the game, the basketball team refused to pay.
Does a binding contract exist between the team and the fan?
AYes, because of promissory estoppel.
BYes, because it was a unilateral contract.
CNo, because of a failure of consideration.
DNo, because it was a gratuitous promise.
B. Yes, because it was a unilateral contract.
A brother and sister both owned small businesses in a small town. On April 28, the brother mailed the sister a letter indicating that he needed to purchase a small delivery truck, and offering to purchase the sister’s small, used pickup truck for $2,000. The letter further stated that the brother needed the truck to be delivered by no later than 1:00 p.m. on May 20. The sister received the letter on April 30. Later that same day, the sister sent out a letter accepting the brother’s offer. However, the sister’s letter was delayed by a mix-up at the post office. On May 18, not having received any reply from his sister, the brother purchased a used pickup truck from a neighbor for $1,800. On May 19, the sister’s letter finally reached the brother. On the evening of May 18, the brother’s neighbor ran into the sister at the local grocery store and mentioned to her that he had just sold his used pickup truck to the brother. The neighbor then asked if the sister would consider selling her used pickup truck to him for $1,750. The sister was surprised to learn that her brother had purchased the neighbor’s truck without telling her, when he had already arranged to purchase a delivery truck from her, but she assumed that the brother must have decided to acquire two delivery trucks instead of one. On May 20, the sister arrived at her brother’s business office with her truck, prepared to deliver it to him and retrieve payment of $2,000.
What legal effect did the conversation between the neighbor and the sister have on the agreement, if any, between the sister and the brother?
(B) The conversation had no legal effect on the agreement between the sister and the brother, because at the time of the conversation, a contract had already been formed between the sister and the brother for the purchase and sale of the sister’s truck.
A retailer makes a deal with a wholesaler to purchase 500 widgets at a price of $1,000 per widget, to be delivered by June 1. The retailer makes sure to tell the wholesaler that time is of the essence. The wholesaler does not deliver the widgets until June 15. One of the retailer’s customers, who needed widgets by June 5, cancels his order with the retailer, costing the retailer $1,000,000 in lost profits. The retailer seeks to recover his lost profits and seeks your legal counsel.
What do you advise?
(A) The retailer may sue to recover his lost profits, because under the theory of punitive damages the wholesaler could reasonably foresee the harm to the retailer.
(B) The retailer may sue to recover his lost profits, because under the theory of estoppel the wholesaler is estopped from denying liability for the damages the retailer incurred.
(C) The wholesaler may sue to recover his lost profits, because he is entitled to recover under the theory of incidental damages.
(D) The retailer may sue to recover his lost profits, because the wholesaler is liable for any damages that flow from the breach.
(D) The retailer may sue to recover his lost profits, because the wholesaler is liable for any damages that flow from the breach.
A woman had known a hairstylist for many years. One day, the hairstylist was walking through the mall when he ran into the woman. The hairstylist said to the woman, “I will straighten your hair tomorrow for $20. Come by the shop.” The woman replied, “That’s a great price.” Thereupon the woman’s husband approached and the three then started gossiping about a man who walked by wearing some out-of-fashion shoes.
The next day, the woman arrived at the hairstylist’s shop and said, “I accept your offer.” The hairstylist replied, “I can’t straighten your hair because after we spoke yesterday, I contracted with several other people to do their hair, and now I’m all booked up.”
If the woman sues the hairstylist for breach of contract, who will likely prevail?
A) The woman, because she relied on the hairstylist’s promise by coming to the shop.
B) The woman because the hairstylist made a unilateral offer, and the woman arrived at the shop ready to pay $20 for the haircut.
C) The hairstylist, because he contracted with other people to do their hair.
D) The hairstylist, because the woman did not accept during their conversation.
Explanation
The correct answer is: The woman because the hairstylist made a unilateral offer, and the woman arrived at the shop ready to pay $20 for the haircut.
Discussion of correct answer:The hairstylist made an offer. While it is true that the woman did not accept the offer during the conversation, the offer was for a unilateral agreement, which the woman accepted by coming by the shop the next day.
Discussion of incorrect answers:
Incorrect. The woman, because she relied on the hairstylist’s promise by coming to the shop. Reliance is not necessary here, because there was an offer that was validly accepted by performance.
Incorrect. The hairstylist, because he contracted with other people to do their hair. The fact that the hairstylist contracted with other people following his conversation with the woman is of no consequence to the woman’s ability to accept the offer.
Incorrect. The hairstylist, because the woman did not accept during their conversation. There is no requirement that the offer be accepted immediately, especially in light of the language stating that the woman should come by the salon the following day. Had the hairstylist revoked his offer before the woman accepted, then the outcome would be different.
A retail store owner entered into a written contract with a sales clerk which provided that the clerk would be employed for two months at $2,000 per month. After one month, the owner noticed that business was slow, and told the sales clerk that unless he agreed to a salary cut, he would be fired. The clerk orally consented to a salary reduction of $500 for the second month.
Which of the following is accurate regarding the oral agreement between the owner and the clerk?
(D) It did not alter the rights and obligations of the parties under the terms of their original contract.
Knowing that his niece was looking at a red sedan on his used car lot, an uncle sent a signed email to his niece one Friday afternoon, promising to sell her the red sedan from his lot for $1,000, and stating that she could have the weekend to think about it and let him know. After reading the email, the niece sent her uncle a reply that stated, “The price is a little high. I’ll give you $800.” The uncle responded via email, “I will not accept $800; it is worth more than that.” On Saturday, the niece emailed her uncle and said, “I changed my mind, I will pay $1,000.” On Sunday, the uncle responded that he refused to sell the niece his car.
If the niece brings a cause of action against her uncle to enforce the agreement, will she prevail?
A) No, because a firm offer is immediately revoked with a rejection.
B) No, because the niece did not provide any consideration to create an option contract.
C) Yes, because she accepted the uncle’s terms before the uncle took any action contrary to the offer to the niece.
D) Yes, because the uncle was a merchant.
Explanation
The correct answer is: Yes because she accepted the uncle’s terms before the uncle took any action contrary to the offer to the niece.
Discussion of correct answer:Not all statements or questions about an offer are considered counteroffers. This was a firm offer, because the uncle was a merchant and stated in a signed writing that he would hold the offer open for a specified period of time. As such, the offer was irrevocable during this period. When there is an irrevocable offer (either a firm offer under the UCC or an option contract at common law), the offer remains open even in the face of an outright rejection by the offeree. However, the offer will be revoked if the offeree rejects it and the offeror, in the face of the rejection, changes his position in reliance on the rejection. If the offeror has not changed his position in reliance, the offeree may still accept the offer during the period even after previously rejecting it. Therefore, the niece could still accept the uncle’s offer here despite having rejected it by making a counteroffer, because the uncle has not changed his position in reliance on the niece’s rejection.
Discussion of incorrect answers:
Incorrect. No, because a firm offer is immediately revoked with a rejection. An offeree may test the waters by making a “mere inquiry” about the offeror’s willingness to negotiate without creating a counteroffer and terminating the power of acceptance. Here, the niece’s email, “The price is a little high. I’ll give you $800” goes beyond a mere inquiry, as it modified the terms of the initial offer from $1,000 to $800. Thus, it operated as a counteroffer, which is a rejection and new offer. However, a firm offer is irrevocable for a particular period of time. Even if the offeree rejects the offer during that time, the offer is still irrevocable for the stated period of time, provided that the offeror has not changed position in reliance of the rejection.
Incorrect. No, because the niece did not provide any consideration to create an option contract. Firm offers, unlike an option contract, need not have consideration to make them irrevocable. Because the uncle was a merchant, and his offer was a firm offer, the niece need not put consideration down to make the offer irrevocable.
Incorrect. Yes, because the uncle was a merchant. While it is true that the uncle was a merchant, this is not the best answer choice. The niece did reject the offer. Usually, a firm offer is irrevocable for the stated period. However, if the offeree rejects the offer and the offeror changes position in reliance on the rejection, the offer is considered revoked, terminating the niece’s power of acceptance. Thus, the fact that the uncle was a merchant is only relevant to a degree. The issue presented is what happens after the firm offer is rejected. In this case, the rejection has no impact on the niece’s power of acceptance.
Under the common law for service contracts, modifications must be supported by new consideration on both sides.
Step by Step Walkthrough
Step 1: Here, the parties have a service contract, which is governed by the common law, not the UCC. Under the common law, modifications (amendments) must be supported by new consideration by both parties. However, in this fact pattern, the landowner’s obligation remained exactly the same, while the contractor received a large benefit. For the modification to have been effective, the contractor would have to give the landowner something of value – usually, a discount on the price in exchange for the smaller daycare center.
Step 2: Because there was no discount on the price given, the modification was never effective. So it had no bearing on the original contract. Choose the only answer option where the landowner wins.
On December 1, Arnold, who had purchased two tickets for a holiday magic show, sent the following email to his three friends, Baker, Charlie, and Dora:
“Dear Baker, Charlie, and Dora: I have two tickets for the upcoming holiday magic show. If any of you are interested in buying my tickets, I will let you have them for a reasonable price, but I must have your reply by December 20.
s/Arnold”
The tickets, which cost Arnold $10, were now selling for between $50 and $70. On December 19, Arnold received an email from Baker that stated, “I accept your offer and will pay you $50 for the two tickets.” Arnold did not immediately respond to Baker’s email.
On December 22, Arnold received the following text message from Charlie: “I am dying to go to the concert…will pay $70 for your seats.” The next day, Arnold sent a reply text to Charlie which read: “The tickets are yours. You may take delivery upon payment of the $70.”
Dora did not respond to Arnold’s letter. Baker tendered the $50 to Arnold within a reasonable time, but Arnold refused to sell the tickets to him.
In an action by Baker against Arnold for breach of contract, judgment should be for whom?
(A) Arnold, because his email of December 1 and Baker’s reply were too indefinite to constitute an offer and acceptance.
(B) Arnold, because his email was not an offer, but rather, an invitation to bargain, and he was free to accept either Baker or Charlie’s offer.
(C) Baker, because he accepted Arnold’s offer first.
(D) Baker, because Arnold’s offer lapsed on December 20, and therefore, Charlie’s attempted acceptance was invalid.
(B) Arnold, because his email was not an offer, but rather, an invitation to bargain, and he was free to accept either Baker or Charlie’s offer.
A famous football player had his dog stolen from his yard. He immediately went to social media and implored anyone with details to contact him. He put a description of the dog, where it was last seen, and said that he would be forever indebted to whomever found his dog.
One particular fan immediately went out looking for the dog in the area surrounding the player’s home. A few days passed and the player became desperate, so he offered a $5,000 reward for finding the dog. After several days of looking, the fan finally saw the dog tied to a bench. He untied the dog and went onto the player’s website to contact him. The fan then saw the reward offer and returned the dog, demanding the reward. The player refused to pay the fan the $5,000.
Is the player liable to pay the fan the reward money?
A) No, because the fan did not know of the reward before he found the dog.
B) No, because the player was unaware that the fan had accepted the offer.
C) Yes, because the fan found the dog as requested.
D) Yes, because the fan learned of the reward before he returned the dog.
Explanation
The correct answer is: No because the fan did not know of the reward before he found the dog.
Discussion of correct answer:A unilateral contract is created when an offeror seeks acceptance by performance, rather than by a promise in return. An offer in a unilateral contract cannot be revoked once performance has begun. Here, however, the fan undertook performance not based on the reward money, but based on the request for help. Further, the fan did not learn of the reward offer until after he had already performed by finding the dog. Therefore, his performance did not act to accept the player’s unilateral offer.
Discussion of incorrect answers:
Incorrect. No, because the player was unaware that the fan had accepted the offer. With a reward offer, the offeree need not make the offeror aware of their acceptance; rather, their acceptance is to perform the required act. Here, the fan did perform the required act, but it was not done in anticipation of the reward. In fact, the fan began and completed the performance without knowledge of the offer.
Incorrect. Yes, because the fan found the dog as requested. The fan did find the dog, but at the initial request by the player, not because of the reward. The reward was not the reason why the fan went out looking for, and eventually found, the dog. Therefore, there is no valid consideration here to require the player to pay the reward.
Incorrect. Yes, because the fan learned of the reward before he returned the dog. He may have learned of the reward prior to returning the dog, but the fan found the dog based on the request, not the reward. Moreover, the reward was for the finding of the dog, not the return of the dog.
The owner of a lakefront house had leased the house to a renter for the past three summers. Last year, on October 1, the owner sent the renter a letter stating, “Because you have been such a great tenant, I will rent you the house on the same terms as last year. However, I need your answer by February 1.” The renter, uncertain as to when he would be taking his annual vacation, decided to put the letter aside for the time being, intending to respond to it by February 1.
On January 15, the owner received an offer from the renter’s cousin to rent the house at a higher price than the renter had paid the prior year. The owner accepted. On January 20, after learning about his cousin’s rental, the renter telephoned the owner and said, “I have decided that I want the house for the summer.” The owner replied that he had already accepted an offer to rent the house from the renter’s cousin. The renter then filed a lawsuit seeking to enforce the contract.
If the renter is unsuccessful in his lawsuit, which of the following provides the best reason?
A) The contract with the cousin indirectly revoked the offer to the renter.
B) The contract with the cousin terminated the offer to the renter.
C) There was no mutual assent, because the renter was unsure whether he wanted to vacation at the lake.
D) A common law offer cannot extend beyond three months without consideration.
Explanation
The correct answer is: The contract with the cousin indirectly revoked the offer to the renter.
Discussion of correct answer:An offer is a manifestation of intent by the offeror to be bound by the contract that is communicated to the offeree with definite and certain terms. Here, the owner wrote, “I will rent you the house on the same terms as last year. I need your answer by February 1,” thereby demonstrating his intent to be bound by a contract. Although the letter itself did not specify the terms, the reference to “the same terms as the previous year” is sufficiently definite to form an enforceable offer. The owner’s letter also included the stipulation that he must have a response from the renter by February 1. Generally, promises to keep an offer open are enforceable and irrevocable as long as the offeree pays separate consideration for the option. In this case, the renter did not pay separate consideration for the option, and, as such, the owner was free to revoke the offer at any time before February 1. When the renter learned of the fact that the owner had rented the lakefront house to his cousin, this indirectly revoked the offer to the renter, and he could no longer accept the offer on January 20.
Discussion of incorrect answers:
Incorrect. The contract with the cousin terminated the offer to the renter. Revocation requires some notice, either directly or indirectly. Here, once the renter learned of the owner’s rental of the house to his cousin, the offer was indirectly revoked, and the renter could no longer accept the offer. The owner’s contract with the cousin would not have automatically terminated the offer to the renter; it would have resulted in revocation of the offer, but this needed to be communicated directly or indirectly to the renter.
Incorrect. There was no mutual assent, because the renter was unsure whether he wanted to vacation at the lake. There was mutual assent. However, the issue is that there was no acceptance of a valid offer.
Incorrect. A common law offer cannot extend beyond three months without consideration. This is an incorrect statement of law. Had this been a firm offer, or had consideration been provided making this offer irrevocable, then the renter would be able to accept the offer and enforce the agreement. However, neither happened in this case; instead, the offer to the renter was no longer valid once the renter learned of the owner’s agreement with the renter’s cousin.
A struggling medical student from a small Midwestern town wished to buy some equipment to start up his own practice in his hometown once he completed his residency. His uncle, a retailer of medical supplies, promised to sell the student some equipment at a discount when the student was ready to set up his practice. The student had worked extra jobs in medical school and had managed to save $3,000. The uncle agreed to sell him the equipment for $3,000. The actual retail value of the equipment was about $6,000. The student finished his residency and secured a building to set up his practice. He sent a check to the uncle for $3,000 and awaited delivery of the equipment. A few days later, the uncle called and said that the equipment had already been sold and that he was returning the student’s check. The student was furious and threatened to sue the uncle.
If the student sues the uncle for breach of contract, who will prevail?
(B) The student, because there was a bargained-for exchange.
A homeowner entered into a written contract with a landscaper whereby the landscaper promised to landscape the exterior of the house. The homeowner was to pay the fee for the job to the landscaper’s son as a graduation present from the landscaper. Once the job was completed, the landscaper asked the homeowner to pay him directly, and the homeowner complied. The next day, the son learned of the contract and the payment. The son brought suit against the homeowner to recover the landscaping payment.
Will the son prevail against the homeowner?
(A) No, because the homeowner and the landscaper effectively modified their agreement, thereby depriving the son of any rights he may have had.
(B) No, because the son did not give any consideration.
(C) Yes, because the son was the intended beneficiary under the terms of the written contract between the homeowner and the landscaper.
(D) Yes, because the written contract between the homeowner and the landscaper operated as a valid assignment to the son.
(A) No, because the homeowner and the landscaper effectively modified their agreement, thereby depriving the son of any rights he may have had.
A bodybuilder borrowed a lawnmower from his neighbor. The bodybuilder misused the lawnmower as part of his weight-lifting routine, and it broke down. The bodybuilder took the machine to a repair shop and had it fixed. Later, after paying for the repair, the bodybuilder returned the lawnmower to the neighbor. The neighbor was so impressed with how well the newly repaired machine ran that he told the bodybuilder that he would repay the bodybuilder for the repair. However, the neighbor never did. The bodybuilder files suit to recover the amount from the neighbor.Will the bodybuilder prevail? (C) No, because there was no consideration for the neighbor’s promise.
(C) No, because there was no consideration for the neighbor’s promise.
A lawyer lived in an exquisite home located in a fashionable neighborhood. He had known a gardener for many years. One day the gardener was walking down the street when he ran into the lawyer. The gardener said to the lawyer, “I will landscape your garden for $200.” The lawyer replied, “That seems like a good deal.” As they were talking, the lawyer’s brother-in-law walked by. The three individuals then started conversing about the stock market. Nothing further was said about the landscaping of the lawyer’s garden. The next day, the lawyer telephoned the gardener and said, “I accept your offer.” The gardener replied, “I can’t landscape your garden because last night I contracted to landscape your neighbor’s property.”
If the lawyer sues the gardener for breach of contract, who will likely prevail?
(A) The gardener, because the offer lapsed at the end of their conversation.
(B) The gardener, because his contract with the neighbor effectuated a revocation of his offer to the lawyer.
(C) The lawyer, because the acceptance was communicated before the attempted revocation.
(D) The lawyer, because the revocation was ineffective.
(A) The gardener, because the offer lapsed at the end of their conversation.
A buyer mailed a signed order to a seller that read: “Please ship us 10,000 widgets at your current price.” The seller received the order on January 7, and that same day mailed to the buyer a letter, which was properly stamped, addressed, and signed, stating that the order was accepted at the seller’s current price of $10 per widget.
On January 8, before receipt of the seller’s letter, the buyer telephoned the seller and said, “I hereby revoke my order.” The seller protested to no avail. The buyer received the seller’s letter on January 9. Because of the buyer’s January 8 telephone message, the seller never shipped the goods.
Under the relevant and prevailing rules, is there a contract between the buyer and the seller as of January 10?
A. No, because the order was an offer that could be accepted only by shipping the goods; and the offer was effectively revoked before shipment.
B. No, because the buyer never effectively agreed to the $10 price term.
C. Yes, because the order was, for a reasonable time, an irrevocable offer.
D. Yes, because the order was an offer that the seller effectively accepted before the buyer attempted to revoke it.
D. Yes, because the order was an offer that the seller effectively accepted before the buyer attempted to revoke it.
Discussion of correct answer: Under the common law mailbox rule, acceptance by mail is effective upon dispatch so long as the acceptance is properly posted, with the correct address and postage amount. Under the UCC, a seller can accept a buyer’s offer to purchase goods for prompt or current shipment in one of three ways: (1) a promise to ship goods in conformity with the terms of the offer, such as an acknowledgment of order form sent to the buyer; (2) prompt or current shipment of the goods in conformity with the terms of the offer; or (3) under the UCC, the seller can also accept the buyer’s offer by shipping nonconforming goods. Here, the seller mailed to the buyer a properly stamped, addressed, and signed letter stating that the order was accepted at the seller’s current price of $10 per widget. Under the mailbox rule, the letter operated as an acceptance upon dispatch. The offer was accepted before the attempted revocation.
A Businessman was planning a lavish party at his seaside estate and wanted to book a Musician whom he had seen playing around town. He offered her $1,000 to play for one hour at the party. The Musician declined the offer, with the explanation that she refused to accept money for her performance because her music was not a commodity. This refusal made the Businessman all the more driven to get the Musician to play at his party. They finally reached a deal where the Musician would play for one hour at the party. An hour before the party, the Musician backed out. The Businessman now sues for breach of contract. The Musician argues that they never had an enforceable contract.
In a jurisdiction applying the benefit/detriment analysis, which of the following facts, if true, will be most useful to proving that there was an enforceable contract?
A The Musician and Businessman spoke for a total of four hours on three different occasions to reach an agreement regarding the Musician’s planned performance. B The Musician has never asked for payment or other services in exchange for her performance prior to this party. C As part of the agreement, the Musician required that the Businessman wear a T-shirt reading “Death to Capitalism” at the party. A devoted capitalist, the Businessman nevertheless thought this was hilarious and readily agreed to do so. D The Musician and Businessman both signed a document including the statement, “The Musician agrees to perform at the party in exchange for value received from the Businessman.”
C. As part of the agreement, the Musician required that the Businessman wear a T-shirt reading “Death to Capitalism” at the party. A devoted capitalist, the Businessman nevertheless thought this was hilarious and readily agreed to do so.
On October 1, a seller mailed a letter to a buyer offering to sell a specified quantity of shirts at list price. The buyer received the seller’s offer on October 2. The next day, the buyer mailed the seller a letter of rejection. The buyer then changed his mind and decided to accept the seller’s offer. On October 4, the seller sent the buyer a letter revoking his original October 1 offer. On October 5, the buyer emailed the seller indicating that he wished to accept the seller’s offer. The seller read the email on October 6. On October 7, the buyer received the seller’s letter of revocation. The following day, the seller received the buyer’s rejection. The seller subsequently refused to sell the shirts to the buyer, and the buyer sued for breach of contract. Assume that the buyer’s email complies with the Statute of Frauds.
Which of the following is most accurate?
A) Judgment for the buyer, because he accepted in a reasonable manner and before receiving notice of the seller’s revocation.
B) Judgment for the buyer, because his acceptance was effective upon dispatch.
C) Judgment for the seller, because he revoked his offer before receiving the buyer’s acceptance.
D) Judgment for the seller, because the buyer did not accept in a proper manner.
Explanation
The correct answer is: Judgment for the buyer because he accepted in a reasonable manner and before receiving notice of the seller’s revocation.
Discussion of correct answer:This is a classic case of the mailbox rule, but with a twist. Because the buyer sent a rejection prior to sending his acceptance, the mailbox rule will not apply, and so the acceptance will not be effective upon dispatch. Instead, the first communication to reach the seller will control. Therefore, as soon as the seller read the email from the buyer accepting the offer, the buyer’s acceptance was effective.
Discussion of incorrect answers:
Incorrect. Judgment for the buyer, because his acceptance was effective upon dispatch. This is the default mailbox rule. However, when the buyer sends a rejection or counteroffer prior to sending an acceptance, the mailbox rule will not apply. Instead, the first communication to be received by the seller will control. Thus, the acceptance was not effective upon dispatch, but rather, was effective because it was communicated to the seller first, before the rejection was received.
Incorrect. Judgment for the seller, because he revoked his offer before receiving the buyer’s acceptance. The offer was accepted via the buyer’s email first, because it was received before either the rejection reached the seller or the revocation reached the buyer.
Incorrect. Judgment for the seller, because the buyer did not accept in a proper manner. Unless stated otherwise, an offer can be accepted by any means reasonable. Here, there was no indication by the seller that the offer could only be accepted by a return letter via the mail. Therefore, the email sent and read was immediately binding as an acceptance.
An owner of an exclusive private summer camp for children hired a clown to perform for the children during the week of August 10 through 16. Unfortunately, the clown came down with acute laryngitis and informed the camp owner by letter that she would be unable to perform until sometime in late August. On August 1, the camp owner sent the following letter by overnight mail to three other clowns. “I’m in a bind. I had lined up a clown for the week of August 10 through 16, but she’s sick and can’t perform. I need another clown. You have to be here at camp by August 9 at the latest so I can prep you on this year’s program. Camp is filled to capacity, so money is no problem.” All three letters were identical and were received by the respective clowns on August 2. As soon as the first clown received the letter, she cancelled her plans to perform at a local renaissance fair the week of August 10, and without letting the camp owner know of her intentions, she showed up at camp during breakfast the morning of August 9. After doing several cartwheels down the dining room center aisle, the first clown landed smiling in front of the camp owner and sang: “Winter, spring, summer, or fall, all you have to do is call, and I’ll be there. Your clown problems are over!” The camp owner took the clown by the arm, and as inconspicuously as possible, slipped out of the dining room. She told the clown that the clown she had originally hired had gotten her voice back and was going to perform as originally planned. The owner explained that because the first clown to receive the letter had not communicated any response to the letter, the owner was not expecting her.
Who will win if the first clown to receive the letter sues the summer camp?
A. The summer camp, because the letter reasonably should have been understood as an offer that required a timely response in return.
B. The summer camp, because the only way to accept an offer is by communicating a return promise.
C. The clown, because she began her performance before the camp owner’s attempted revocation.
D. The clown, because it was reasonable to understand the letter as an offer that invited acceptance by either performance or a return promise.
A. The summer camp, because the letter reasonably should have been understood as an offer that required a timely response in return.
Think Like a Lawyer
Unilateral contracts are very rare, except for reward offers. Most business contracts are bilateral.
Step by Step Walkthrough
Step 1: All the substitute clowns received the letter on August 2, requesting performance beginning on August 9. It would be clear to a reasonable offeree that, if the offeree failed to respond to the offer with a promise, then the offeror would continue looking for someone who could perform. Why would the offeror just wait, doing nothing? No reasonable offeree would let 7 days go by and then simply appear unannounced, assuming that the offeror had done nothing else to solve his problem in the interim.
Step 2: So the letter obviously calls for a return promise. No other form of acceptance will do. Because acceptance had to be by return promise, and none was given, it is clear that the summer camp must win the lawsuit. Only two answer choices favor the summer camp and, of these two, one makes an incorrect statement of law. An incorrect or overbroad statement of law can never be a correct answer. This leaves only the correct answer, that a timely response to the offer was needed.
A barber and a cook owned houses next door to each other in a small rural town. Because the town did not provide many services, they agreed together to hire a contractor to pave the street in front of their residences. They found a contractor who agreed to do the work for them. The barber and the cook agreed that each would pay for the portion of the paving in front of his respective property and for the materials used that could be easily attributed to each of their respective portions of the pavement. After the street was paved and the contractor had been paid, the barber decided that the contractor had made a mistake and charged him too much and the cook too little for the asphalt and for the labor that was used in paving the street in front of their houses.The barber asked the cook to reimburse him for what he believed he had overpaid the contractor. Their discussions went on for some time, with the cook maintaining that she really didn’t owe the barber anything and that they had both paid their fair share for the project. The barber threatened the cook with a lawsuit. The cook, wanting to maintain a good-neighbor policy with the barber, finally reached a verbal agreement with him. In exchange for not reimbursing the barber for what he felt he was owed, she agreed to find a street cleaner in town who would come and plow the street to clear it of snow in the winter for the next two years. Before the second winter, however, the cook went to live in Europe for a year. She did not hire anyone to plow the street that winter. The barber hired someone else to plow the street only as far as his house during the winter, because the cook’s house was vacant. It was later discovered that the contractor for the paving job had not made any mistake, and that the barber had paid only for the materials and labor used to pave the street in front of his house.
Was the cook’s promise to the barber to hire a street cleaner supported by consideration?
Yes, there was valid consideration.
A buyer ordered 1,000 widgets from a seller for immediate delivery. The seller responded by shipping 800 widgets rather than the full 1,000 ordered, because the seller did not have an adequate inventory and thought it better to ship something rather than nothing.
Which of the following is the most accurate statement?
(A) A contract was formed when the seller shipped the widgets.
(B) A contract will be formed once the widgets arrive at the buyer’s address.
(C) No contract exists, because the seller shipped nonconforming goods.
(D) No contract exists, because the seller did not cure the nonconforming tender immediately.
(A) A contract was formed when the seller shipped the widgets.
The owner of a popular sports bar wished to purchase 10 cases of a best-selling brand of beer. His secretary telephoned what she believed to be the correct number for the brand’s closest distributor and placed the order. She told the distributor that the beer was so popular that “it sells out as soon as we can stock it!” Unbeknownst to the secretary she had mistakenly dialed the number of a fledgling micro-brewery from whom the tavern owner had purchased once in the past. The beer from the micro-brewery had not been well received and the owner had decided not to reorder. The micro-brewery was unaware of this decision and assumed that the secretary’s complimentary comment referred to its product. They promptly shipped the ten cases and included an invoice in the amount of $400 marked “payable upon delivery.” When the shipment arrived the owner refused to accept it. He called the microbrewery and said that the order had been a mistake and no payment would be forthcoming.
If the micro-brewery sues the tavern owner, will the micro-brewery win?
(A) Yes, because performance is a proper means of acceptance.
(B) Yes, because it was unaware of the secretary’s mistake.
(C) No, because unilateral contracts are voidable if the mistake has a material effect on the nature of the contract.
(D) No, because the oral contract is void under the Statute of Frauds.
(B) Yes, because it was unaware of the secretary’s mistake.
An island nation was the only nation in the world that produced a rare form of incense for the world market. An international corporation was one of the few companies that could acquire the incense to sell to other merchants. The corporation sent out an announcement to its customers on September 1, announcing the availability of the rare incense that the corporation would have for the following year. They offered their customers 12-ounce lots of its specialty incense for $100 per lot. They also offered the incense in either stick or cone form. The owner of a chain of specialty shops found himself, a week before Christmas, out of his stock of rare incense because of good holiday sales. The owner sent a telegram to the corporation ordering 200 lots of the cone incense. The telegram also indicated he needed the incense delivered by the end of the year, payment to be made upon shipment. The corporation agreed. The corporation delivered the incense on December 30, but sent stick incense instead of cone incense.
Which of the following options is not an available remedy to the owner?
(A) The owner may cover and demand damages measured by the contract-cover differential.
(B) The owner may refuse to cover and receive damages measured by the contract-market differential.
(C) The owner may demand incidental damages.
(D) The owner may demand treble damages.
(D) The owner may demand treble damages.
On Monday, a man told a gardener, “I am having a party on Sunday and I want my house to look good. If you will promise to mow my lawn by Saturday, I will pay you $50.” On Friday, the gardener arrived at the man’s home just as the man was leaving for work and began to mow the man’s lawn. The man said nothing to the gardener, but drove off as he saw the gardener unloading his lawn mower. When the man arrived home from work that evening, he noticed that only half of his lawn had been mowed. He then found a note from the gardener slipped into his mailbox which read, “Sorry, but I ran out of gas to power the lawn mower and did not have time to buy more gas to finish the job. I’m taking the weekend off, but I will be back Monday morning to finish the work.”
If the man brings suit against the gardener for breach of contract, who is likely to prevail?
A) The gardener, because he never accepted the offer made by the man.
B) The gardener, because he offered to cure the defective performance by finishing the job on Monday morning.
C) The man, because the gardener’s part performance necessarily implied an acceptance and a promise that he would render complete performance.
D) The man, because under the doctrine of equitable estoppel, the gardener’s part performance was evidence of his intent to honor the entire contract.
Explanation
The correct answer is: The man, because the gardener’s part performance necessarily implied an acceptance and a promise that he would render complete performance.
Discussion of correct answer: As a general rule, where the offeree (the gardener) begins the performance contemplated, he thereby impliedly promises to complete it. However, in order that the act of part performance may be treated as implying a promise to complete, the following requirements must be present. First, the offer was for an entire contract, and not for a series of separate contracts. Second, that what is begun must be a part of the actual performance bargained for, and not mere preparation for performance. Third, that such implied acceptance is communicated to the offeror, or he had knowledge of it. Since the man saw the gardener beginning to mow his lawn, the gardener will have impliedly promised to mow the lawn by Saturday, and his failure to do so would be a breach.
Discussion of incorrect answers:
Incorrect. The gardener, because he never accepted the offer made by the man. This choice is therefore incorrect, because the implied promise was the acceptance of the offer.
Incorrect. The gardener, because he offered to cure the defective performance by finishing the job on Monday morning. This answer is incorrect for two reasons: First, cure is a concept recognized by the UCC and therefore applies only to a sale of goods contract. Second, even if cure was allowed, a cure must take place before the date performance was due under the contract. Because the contract called for the lawn to be mowed by Saturday, waiting until Monday to finish the job would be a breach.
Incorrect. The man, because under the doctrine of equitable estoppel, the gardener’s part performance was evidence of his intent to honor the entire contract. This is wrong, because estoppel is not needed to make the contract enforceable.
A man offered to sell his barbecue to his neighbor for $100. After receiving the man’s offer, the neighbor responded, “Let me think it over.” The man then said, “If you say so.” The next day, the man sold the barbecue to his brother for $100. Thereafter, the neighbor decided to accept the man’s offer, but learned from a reliable source that the barbecue had been sold to the brother.
If the neighbor sues the man for breach of contract, judgment should be for whom?
(A) The man, because the offer to the neighbor terminated when the neighbor learned of the sale to the brother.
(B) The man, because there was no consideration to keep the offer open for an extended period of time.
(C) The neighbor, because the offer became irrevocable for a reasonable time when the man allowed the neighbor to “think it over.”
(D) The neighbor, because he is a merchant.
(A) The man, because the offer to the neighbor terminated when the neighbor learned of the sale to the brother.
On Monday, a chicken farmer emailed a restaurant owner promising to sell him 500 chickens for $2,000. On Tuesday, the owner replied to the farmer that he was rejecting the offer because the price was too high. The farmer quickly replied, “Why don’t you wait and think it over?” The following morning, the owner learned that due to a salmonella outbreak, there was a nationwide chicken shortage. He immediately telephoned the farmer to accept. The farmer knew it was the owner, and so he answered the phone by saying, “Good morning, I hereby revoke my offer.” The owner replied, “You told me yesterday to think it over, and I have, I accept.” The farmer then replied, “You had your chance and you blew it.” After the farmer refused to sell the chickens to him, the owner sued for breach of contract.
Is there an enforceable contract between the parties?
(A) No, because the offer terminated due to lapse of time.
(B) No, because the farmer revoked the offer before the owner accepted it.
(C) Yes, because the farmer’s statement, “Why don’t you think it over until tomorrow,” revived the offer, which the owner subsequently accepted in a timely fashion.
(D) Yes, because the farmer made the owner a firm offer, which was irrevocable.
(B) No, because the farmer revoked the offer before the owner accepted it.
A woman wants to buy furniture for her home. One day, she sees a new furniture set being produced by a famous furniture manufacturer. She immediately orders the furniture set by calling the manufacturer and orally agreeing to purchase the set for $3,000. The woman then sends a signed letter describing the transaction to the manufacturer. However, two days later, the manufacturer decides not to deliver the furniture set.
Which of the following is correct regarding the manufacturer’s obligation?
(A) The contract is enforceable, because the woman sent a signed letter describing the offer.
(B) The contract is not enforceable, because of the “main purpose” rule.
(C) The contract is not enforceable, because the manufacturer never signed the letter.
(D) The contract is enforceable, because there was a meeting of the minds.
(C) The contract is not enforceable, because the manufacturer never signed the letter.
To commemorate his appointment as president of a telecommunications company, the president wished to have his portrait painted by a famous artist. The artist he chose has a reputation for creating unique portraits that appear to “come alive” in the right light. The president wanted this effect to surprise customers as they entered the company’s headquarters. The president and the artist entered into a contract whereby the artist would paint the president’s portrait for $40,000. A portrait by a comparable artist would cost the president $20,000. The next weekend the artist became ill and, not wishing to delay the president’s portrait, had her assistant paint the portrait. The president was not satisfied with the portrait, which never “came alive.” The president subsequently learned that it was the assistant, not the artist, who had painted the president’s portrait.
Did the artist breach the contract?
(A) Yes, because the assistant painted the portrait.
(B) Yes, because the assistant’s performance materially varied from the artist’s portraits.
(C) No, because the contract did not specify that the “come-alive” effect was an essential term.
(D) No, because the contract did not specify that assignments were void.
(A) Yes, because the assistant painted the portrait.
A father hired a golf pro to give lessons to his 14-year-old son. The father agreed to pay the golf pro $1,000 for 10 one-hour lessons for his son, which were to be held on Saturday mornings. When the father and son arrived for the first lesson, they were accompanied by the father’s daughter. As the golf pro started his instructional lesson with the son, the daughter asked if she could participate. The golf pro did not object and allowed the daughter to receive instructions along with her brother. As it turned out, the sister accompanied her brother and took all 10 lessons as well. Each Saturday, the father was present and watched the golf pro give the same lesson to both children. After the brother and sister received their last lesson, the golf pro requested payment. When the father presented a check for $1,000, the golf pro told the father that he owed an additional $1,000 for the lessons that the daughter received. After the father refused to pay for the daughter’s lessons, the golf pro brought a contract action against the father for $1,000.
What will the father most likely be held liable for?
(A) Nothing, because the golf pro allowed the sister to gratuitously participate in the lessons.
(B) Nothing, because no formal contract was entered into between the golf pro and the father.
(C) $1,000, because an implied-in-fact contract was formed.
(D) The reasonable value of services rendered.
(C) $1,000, because an implied-in-fact contract was formed.
A businessman ran a factory that manufactured motorcycles. One day, the businessman decided to hire an engineer to improve three of the machines that helped produce motorcycles in the factory. The businessman contacted an engineer and the two parties orally agreed that the engineer would work for 14 months on improving the machines and in exchange would receive $120,000. The engineer worked for 14 months and completed the project, but then the businessman refused to honor the contract. The engineer seeks to enforce the contract.
Which of the following is the best answer?
A. The contract is enforceable, and the engineer will receive $120,000.
B. The contract is enforceable, because the two parties made an oral contract.
C. The contract is not enforceable, because the contract was for longer than one year, and the engineer will not receive any payments.
D. The contract is not enforceable, because the contract was for longer than one year, but the engineer will receive payment for the reasonable value of his services.
A. The contract is enforceable, and the engineer will receive $120,000.
Discussion of correct answer: The Statute of Frauds applies to certain categories of contracts, such as contracts for the sale of real estate or contracts lasting more than one year. Under the Statute of Frauds, for a contract to be enforceable, it must be evidenced by a signed writing reflecting that contract. However, full performance of an oral contract for services by the party performing the services will make the contract enforceable against the paying party. In this case, the contract was oral and would ordinarily require to be evidenced by a signed writing. However, the engineer fully performed, so the contract is now enforceable against the businessman. Therefore the engineer will receive the agreed-upon $120,000.
Think Like a Lawyer
A party who has completely performed as agreed will be rewarded by the courts with full payment.
Step by Step Walkthrough
Step 1: The Statute of Frauds governs: (1) contracts to marry; (2) contracts not to be performed within one year; (3) contracts for the sale of land; (4) contracts for an executor to answer for the duty of a decedent; (5) contracts of guaranty or suretyship; and (6) contracts for the sale of goods of $500 or more.
Step 2: Here, there was a service contract to be performed in 14 months, so it had to be in writing to be enforceable. However, there was no writing. The engineer fully performed, without any interruption or objection by the businessman. Thus, the businessman was acting as if the contract were good. The courts will not allow the businessman to now pretend that the contract was invalid. The businessman will be ordered to pay the full amount due.
Step 3: The answer choices must be read very carefully. A very attractive answer choice is that there is no contract, but that the engineer will be paid the reasonable value of his services. This would be correct for partial performance. However, here, there has been full performance as agreed. The contract becomes enforceable against the businessman for the full dollar amount of $120,000.
A well-known rodeo performer lived in the southwest. One day, a rancher approached the performer and said, “If you will ride my bucking bronco for one minute, I will pay you $500.” The rodeo performer then purchased a special saddle for the bronco ride. After saddling the rancher’s bronco, the rodeo performer started riding when the rancher suddenly yelled, “I hereby revoke my offer.”
If the rodeo performer thereafter goes ahead and rides the bronco for one minute, will he recover the $500?
(A) Yes, under the doctrine of quasi-contract.
(B) Yes, because there was an offer for a unilateral contract that became irrevocable prior to the rancher’s attempted revocation.
(C) No, because the agreement lacks consideration.
(D) No, because the rancher’s revocation was effective since the rodeo performer had not completed performance.
(B) Yes, because there was an offer for a unilateral contract that became irrevocable prior to the rancher’s attempted revocation.
On Thursday, a man told his neighbor’s 15 year old son, “I’m having a pool party on Saturday and I want my pool to be crystal clear and clean as a whistle. If you promise to clean my pool before Saturday, I’ll pay you $200.” On Friday, the boy arrived at his neighbor’s home just as the neighbor was leaving the house. He began to brush the walls of the pool with a long wire brush. The neighbor said nothing to the boy and drove away as he saw the boy bringing a bucket of chlorine and some other pool cleaning supplies into his back yard. When the neighbor arrived home from work that evening, he noticed that only half of the pool had been scrubbed. He then found a note from the boy taped to his front door. The note said: “Sorry, but the cleaning brush broke and I didn’t have money to buy a new one. I’m going camping this weekend, but I’ll be back Monday morning to finish the job.”
If the man brings suit against the boy for breach of contract, who is likely to prevail?
A. The boy, because he never accepted the neighbor’s offer.
B. The boy, because he offered to cure the breach by completing the work on Monday morning.
C. The neighbor, because the boy’s part performance implied acceptance of the man’s offer and a promise that he would clean the entire pool.
D. The neighbor, because under the doctrine of equitable estoppel, the boy’s part performance was evidence of his intent to honor the contract.
C. The neighbor, because the boy’s part performance implied acceptance of the man’s offer and a promise that he would clean the entire pool.
Discussion of correct answer: As a general rule, where the offeree (boy) begins the performance contemplated, by implication, he promises to complete it. However, in order that the act of part performance be treated as a promise to complete, the following requirements must be met. First, the offer was for an entire contract, and not for a series of separate contracts. Second, that what is begun must be a part of the actual performance bargained for, and not mere preparation for performance. Third, that acceptance is communicated to the offeror, or he had knowledge of it. Since the neighbor saw the boy beginning to clean the pool, the boy has accepted and implied a promise to clean the entire pool by Saturday. His failure to do so was a breach. (D) is an incorrect trick answer; estoppel is not required to make the contract enforceable. Further, it is irrelevant that the boy was only 15 because none of the answers address the issue of capacity. When in doubt, choose the answer that is the most accurate statement of law as applied to the facts at issue.
A man owned a home in a small town. The man’s home was in need of certain repairs. The man heard from a friend that a certain contractor did repairs for a very low price. The man contacted the contractor and the two parties agreed that the contractor would make the repairs. However, the two did not discuss the price. The contractor then completed the repairs and asked for payment.
Which of the following is correct?
A. The contractor is entitled to a payment at a rate told to the man by the friend.
B. The contractor is entitled to a payment for the reasonable value of services rendered.
C. The contractor is not entitled to any payment, because no price was discussed.
D. The contractor is only entitled to partial payment.
B. The contractor is entitled to a payment for the reasonable value of services rendered.
A carpet cleaner sent the following terms in a writing to a homeowner. “I will clean your carpets up to 1,000 square feet for a price of $100 per room. This offer is non-cancellable for 60 days from today.” The carpet cleaner dated the letter and signed it at the bottom. The homeowner received the letter and immediately wrote a letter accepting the carpet cleaner’s terms, but did not immediately send the letter.
A week after sending his letter to the homeowner, the carpet cleaner received an offer from a hotel owner requesting his services for the next month at several of his hotels. The carpet cleaner wanted to accept the hotel owner’s offer, but was concerned about the outstanding letter to the homeowner.
Which of the following is most accurate?
A) The carpet cleaner can revoke his offer to the homeowner, because the mailbox rule does not apply to option contracts.
B) The carpet cleaner can revoke his offer to the homeowner, because there was no consideration provided that would make the offer irrevocable.
C) The homeowner has manifested his intent to accept, and if he accepts within 60 days of the date of the letter, there is a contract.
D) The homeowner has three months from the date of the letter to accept, because offers from merchants are irrevocable.
Explanation
The correct answer is: The carpet cleaner can revoke his offer to the homeowner, because there was no consideration provided that would make the offer irrevocable.
Discussion of correct answer:This is an offer for services, rather than goods, and therefore it is governed by the common law. As such, the offer would need to be an option contract, rather than a firm offer, to remain irrevocable. An irrevocable offer could be made if there was consideration offered, but here there was not. Therefore, revocation is effective if it comes before acceptance. If the carpet cleaner revokes his offer, no contract exists with the homeowner.
Discussion of incorrect answers:
Incorrect. The carpet cleaner can revoke his offer to the homeowner, because the mailbox rule does not apply to option contracts. This is not an option contract because no consideration was provided that would make the offer irrevocable.
Incorrect. The homeowner has manifested his intent to accept, and if he accepts within 60 days of the date of the letter, there is a contract. This answer is incorrect because it interprets the offer as a firm offer, which is not the case. In fact, this offer is freely revocable at any point prior to acceptance, as it is not a firm offer and no consideration was provided to make the offer irrevocable. If the offeree wants to accept, more than an intent is needed; such acceptance must actually and effectively be made.
Incorrect. The homeowner has three months from the date of the letter to accept, because offers from merchants are irrevocable. While a firm offer is irrevocable for the stated period of time not to exceed 90 days, this is not a firm offer. In fact, this offer is freely revocable at any point prior to acceptance.
A homeowner said to a carpenter, “My porch is in need of repair. I think the boards are cracked. Can you do the job for $5,000?” The carpenter replied, “I’d be happy to, but $5,000 seems a little low. Make it $6,000 and you got a deal.” The homeowner then remarked, “Deal.” Three days later, the carpenter purchased the necessary materials, then drove his pickup truck to the homeowner’s home and unloaded the materials and equipment needed to perform the job. When the homeowner looked out his window and saw what was transpiring, he immediately ran outside and exclaimed, “Stop! The deal’s off. I decided to repair the porch myself.”
In an action by the carpenter against the homeowner for breach of contract, which of the following is the most accurate?
(A) A bilateral contract was formed before the carpenter purchased the materials.
(B) A unilateral contract was formed when the carpenter started to perform.
(C) No contract was formed, because the carpenter did not start to perform.
(D) No contract was formed, because the carpenter rejected the homeowner’s terms.
(A) A bilateral contract was formed before the carpenter purchased the materials.
A homeowner said to a carpenter, “My porch is need of repair. I think the boards are cracked. Can you do the job for $5,000?” The carpenter replied, “I’d be happy to, but $5,000 seems a little low. Make it $6,000 and you got a deal.” The homeowner then remarked, “Deal.” Three days later, the carpenter purchased the necessary materials, then drove his pickup truck to the homeowner’s home and unloaded the materials and equipment needed to perform the job. When the homeowner looked out his window and saw what was transpiring, he immediately ran outside and exclaimed, “Stop! The deal’s off. I decided to repair the porch myself.”
In an action by the carpenter against the homeowner for breach of contract, which of the following is the most accurate?
A) A bilateral contract was formed before the carpenter purchased the materials.
B) A unilateral contract was formed when the carpenter started to perform.
C) No contract was formed, because the carpenter did not start to perform.
D) No contract was formed, because the carpenter rejected the homeowner’s terms.
Explanation
The correct answer is: A bilateral contract was formed before the carpenter purchased the materials.
Discussion of correct answer:A bilateral offer, which seeks a return promise rather than the performance of the requested act as acceptance, becomes enforceable as soon as the offeree has promised to perform the act. Thus, this answer choice is correct. The homeowner and carpenter had a valid, enforceable agreement as soon as the two agreed to each other’s terms.
Discussion of incorrect answers:
Incorrect. A unilateral contract was formed when the carpenter started to perform. This is a bilateral contract, which can be accepted either by performing the requested act or promising to perform. Thus, the contract here became enforceable as soon as the exchange of promises took place. Neither the purchasing of the materials nor the unloading of them at the homeowner’s house was needed, because the exchange of promises was sufficient to bind the parties to the bilateral contract.
Incorrect. No contract was formed, because the carpenter did not start to perform. This is a bilateral contract, which can be accepted either by performing the requested act or promising to perform. Thus, the contract here became enforceable as soon as the exchange of promises took place. Neither the purchasing of the materials nor the unloading of them at the homeowner’s house was needed, because the exchange of promises was sufficient to bind the parties to the bilateral contract.
Incorrect. No contract was formed, because the carpenter rejected the homeowner’s terms. When the carpenter made a counteroffer, this did indeed operate as a rejection of the homeowner’s offer. However, it was also a new offer made by the carpenter to the homeowner, which the homeowner accepted. Therefore, the parties formed an enforceable bilateral agreement once they agreed on terms and exchanged promises to perform.
A skier loved to ski, but she lived far away from the mountains and could rarely enjoy the sport. One day, the skier discovered a contract in the skier’s father’s desk. The contract was between the skier’s father and his friend, the pilot. The contract stated that the father agreed to pay the friend $1,000 to fly the skier to Aspen in the pilot’s private plane. The skier placed the contract back in the desk so that she could act surprised when her father told her about the trip. The skier spent the next week purchasing new clothes and equipment for the trip. She also canceled existing plans that she had to go to Aspen at the time, including refunding her airline ticket. Since the time of the contract, however, the price of fuel increased, and the pilot wished to cancel the trip. The skier’s father informed the skier that he had planned to send the skier to Aspen but that the trip was off. The skier wishes to enforce the contract.
Will the skier succeed in enforcing the contract?
(A) Yes, because the skier was an intended third-party beneficiary.
(B) Yes, because the skier changed her position in reliance of the contract.
(C) No, because the skier was only a donee beneficiary.
(D) No, because neither the skier’s father nor the pilot knew that the skier was aware of the contract.
(B) Yes, because the skier changed her position in reliance of the contract
A shopping center engaged an asphalt company to redo its parking lot. The asphalt company promptly completed the project. However, the shopping center subsequently discovered that the work had not been performed exactly according to the terms of the
contract, although the mistake was cosmetic and the parking lot was perfectly usable. Nevertheless, the shopping center sued the asphalt company, claiming that the parking lot needed to be completely torn out and redone. The asphalt company defended on the
ground that it had substantially performed its contractual duties.
How should the judge rule?
(A) The asphalt company will be ordered to redo the work or pay the shopping center what it would cost to redo the work as damages, because the contract was not performed as agreed.
(B) The asphalt company will not be required to pay any damages, because the shopping center failed to put a personal satisfaction clause in the contract.
(C) The asphalt company will be required to pay only the diminishment in value of the parking lot as constructed, because it substantially performed.
(D) The asphalt company will be required to pay damages equal to what it would cost to tear out and rebuild the parking lot, because it breached its promise.
(C) The asphalt company will be required to pay only the diminishment in value of the parking lot as constructed, because it substantially performed.
A six-year-old girl was kidnapped outside her home in a small town. Following the girl’s abduction, her parents publicly announced a $50,000 reward to anyone responsible for the apprehension of the kidnapper. The girl’s abductor was described as a Caucasian male between the ages of 25 and 30 with curly blond hair. He also was identified as having a pentagram tattoo on his left arm. One afternoon, while on duty, a police officer from a nearby town stopped at a local fast-food restaurant for lunch. Inside the restaurant, the police officer noticed a man fitting the description of the kidnapper. The police officer proceeded to arrest the individual, who, in fact, turned out to be the girl’s abductor. After the girl was found unharmed, the police officer requested the $50,000 reward. However, the girl’s parents have refused to pay the police officer the reward money.
If the police officer brings suit against the girl’s parents to recover the $50,000 reward, for whom should the court enter judgment?
A) The police officer, because he accepted the offer by apprehending the kidnapper.
B) The police officer, if he knew of the existence of the reward offer when he apprehended the kidnapper.
C) The girl’s parents, if their intent was to make the offer open only to members of the general public.
D) The girl’s parents, because recovery by the police officer is against public policy.
Explanation
The correct answer is: The girl’s parents, because recovery by the police officer is against public policy.
Discussion of correct answer: This question deals with the preexisting duty rule. In this question, the issue is whether a police officer on duty is entitled to collect a reward for the apprehension of a criminal. The answer is no if the apprehension occurs while the officer is performing his regular duties. Under the preexisting duty rule, an officer is legally obligated to apprehend criminals as part of his job responsibilities. As a result, the police officer may not obtain a reward for the capture of the abductor. Note that if the law enforcement officer apprehends a criminal while on vacation, then there is no preexisting duty and he is entitled to collect the reward offer.
Discussion of incorrect answers:
Incorrect. The police officer, because he accepted the offer by apprehending the kidnapper. Since the police officer apprehended the kidnapper while on duty, the police officer cannot be said to have accepted the parents’ offer. Because the police officer had a preexisting duty to apprehend the criminal as a result of his job, it would be against public policy to reward the police officer for a job he was already obligated to perform.
Incorrect. The police officer, if he knew of the existence of the reward offer when he apprehended the kidnapper. It is irrelevant whether the police officer knew of the existence of the reward when he apprehended the kidnapper. The police officer will not prevail because he had a preexisting duty to apprehend the criminal.
Incorrect. The girl’s parents, if their intent was to make the offer open only to members of the general public. It is correct that the girl’s parents will prevail, but the reason offered for this result is incorrect, since it is irrelevant whether the parents’ intent was to make an offer only to members of the general public. The police officer will not prevail because he had a preexisting duty, even if the parents did not intend to make the offer only to members of the general public.
Knowing that his niece was looking for a good used car, an uncle sent an email to his niece one Friday afternoon, promising to sell her his car for $1,000 if she accepted before the end of that weekend. After reading the email, the niece sent her uncle a reply email that stated, “The price is a little high. I’ll give you $800.” The uncle responded via email, “I will not accept $800; it is worth more than that.” The next day, the niece emailed her uncle and said, “I changed my mind, I will pay $1,000.” On Sunday, the uncle responded that he refused to sell the niece his car.
If the niece brings a cause of action against her uncle to enforce the agreement, will she prevail?
(A) Yes, because she accepted the uncle’s terms.
(B) Yes, because she accepted the uncle’s terms before the end of the weekend
(C) No, because she made a counteroffer.
(D) No, because the uncle rejected her counteroffer.
(C) No, because she made a counteroffer.
An emergency room doctor was camping with his family in a local state park. As the doctor was walking to get water, he heard a woman screaming that her husband was choking. The doctor rushed to help, but was unable to dislodge whatever was causing the man to choke, and the man died. The doctor now seeks your advice as to whether he can charge the man’s estate for his services. This jurisdiction does not have a Good Samaritan statute, and the hospital that the doctor works at treats all doctors as independent contractors.
What advice would be most accurate?
(A) The doctor can recover, because he is not a full-time employee at the hospital.
(B) The doctor can recover, based on quasi-contract.
(C) The doctor cannot recover, because allowing a doctor to benefit in such a situation would be against public policy.
(D) The doctor cannot not recover, because the man died.
(B) The doctor can recover, based on quasi-contract.
The last winter was especially harsh, with many houses damaged by countless storms that pounded the area. Two neighbors, an engineer and a musician, needed to repair their houses. The engineer hired a roofer to replace his roof. The musician could not afford the expense of repair work. Feeling generous, the engineer contracted with the roofer he was using to also work on the musician’s roof. The written contract specified that the engineer would pay the roofer $8,000 to repair the musician’s roof. The engineer placed a copy of the contract in an envelope addressed to the musician. One day, while the roofer was finishing the engineer’s roof, but before the roofer could start on the musician’s house, the engineer and the musician got into an argument. The engineer contacted the roofer and said, “My neighbor is crazy. Cancel that contract.” Having overbooked, the roofer eagerly agreed to cancel the contract for the musician’s roof. A few days later, the musician got the envelope containing the contract to repair his roof. The musician sued the roofer for the promised repair work.
Will the musician be successful?
(A) Yes, because he was an intended third-party beneficiary.
(B) Yes, because his rights were vested once he discovered the contract.
(C) No, because he was only a donee beneficiary.
(D) No, because the contracting parties were free to cancel the contract before the musician’s rights were vested.
(D) No, because the contracting parties were free to cancel the contract before the musician’s rights were vested.
A businessman sold curtains at his store in a small town. One day, he decided to buy more curtains, because of growing demand. He contacted a curtain producer and the two parties agreed that the producer would sell 20 curtains to the businessman for $2,000. The two parties signed a contract to that effect. However, the contract did not specify where the delivery was to take place.
Which of the following is correct?
A. The place of delivery will be the producer’s place of business.
B. The contract is enforceable, but the parties must renegotiate the place of delivery.
C. The place of delivery will be the businessman’s place of business.
D. The contract is not enforceable.
A. The place of delivery will be the producer’s place of business.
Think Like a Lawyer
Because delivery would ordinarily cost more, if the buyer has not requested delivery, then there will be none.
Step by Step Walkthrough
Step 1: This question involves memorizing a portion of the UCC. Luckily, the UCC is based on common sense.
Step 2: UCC 2-308 says that, when delivery has not been specified, the default is that the goods have to be picked up at the seller’s place of business (or the place where both parties already know the goods will be, if not the seller’s place of business).
Step 3: This makes good sense. If the buyer wanted delivery, he should have asked for it, and the seller could then decide what to charge for that extra service. Thus, if none was requested, there is no delivery to the buyer. The buyer must pick up the goods. Choose the answer choice stating this.
Step 4: Contracts for the sale of goods with missing terms are enforceable if there was offer, acceptance, and consideration. The UCC will supply the missing terms.
An owner of a men’s haberdashery, in anticipation of a cold winter, wanted to have a large quantity of scarves in stock for his customers. The owner telephoned a scarf wholesaler and ordered 600 scarves for October 1 delivery. The wholesaler promised to deliver 600 scarves at the agreed price of $10 per scarf. Thereafter, the wholesaler did an inventory and learned that he only had 550 scarves in stock. Without notifying the owner, the wholesaler went ahead and delivered the 550 scarves to the owner on October 1. When the owner learned that the shipment contained 550 scarves instead of 600, he refused to accept delivery and did not make any payment. The owner brought suit against the wholesaler for breach of contract.
To what damages, if any, is the owner entitled?
(A) None, because the agreement was unenforceable under the Statute of Frauds.
(B) The contract price minus the cost of replacement.
(C) $6,000.
(D) $5,500.
(A) None, because the agreement was unenforceable under the Statute of Frauds.
More than anything else, an elderly widow wanted a cabin in the woods of Vermont. She bought a lot on the side of a hill and hired a local carpenter to build her cabin. Construction began late in the year. By December, the carpenter had finished about 75% of the work on the cabin when an avalanche completely wiped out the cabin. The carpenter refused to build a new cabin for the widow, and the widow refused to pay the carpenter anything for the work he had performed. The carpenter filed a breach of contract action against the widow.
What amount is the carpenter entitled to recover from the widow for his work on the cabin?
(A) 75% of the contract price.
(B) Either the fair market value of his partial cabin construction at the time of the avalanche or the increase in value to the widow from the work on the cabin before the avalanche.
(C) His expected profit from the cabin contract, if he can reasonably establish that value.
(D) Nothing, because the carpenter bore the risk of damage or destruction.
(D) Nothing, because the carpenter bore the risk of damage or destruction.
Knowing that his niece was looking at a red sedan on his used car lot, an uncle sent a signed email to his niece one Friday afternoon, promising to sell her the red sedan from his lot for $1,000, and stating that she could have the weekend to think about it and let him know. After reading the email, the niece sent her uncle a reply that stated, “The price is a little high. I’ll give you $800.” The uncle responded via email, “I will not
accept $800; it is worth more than that.” On Saturday, the niece emailed her uncle and said, “I changed my mind, I will pay $1,000.” On Sunday, the uncle responded that he refused to sell the niece his car.
If the niece brings a cause of action against her uncle to enforce the agreement, will she prevail?
(A) No, because a firm offer is immediately revoked with a rejection.
(B) No, because the niece did not provide any consideration to create an option contract.
(C) Yes, because she accepted the uncle’s terms before the uncle took any action contrary to the offer to the niece.
(D) Yes, because the uncle was a merchant.
(C) Yes, because she accepted the uncle’s terms before the uncle took any action contrary to the offer to the niece.
After inspecting his neighbor’s house, a housecleaner agreed in writing to clean it for $150. That night, the neighbor had dinner with his wealthy nephew, who said that he too was looking for a good housecleaner. The neighbor agreed in writing to assign his rights to the contract with the housecleaner for $150. The nephew paid the $150 and took the signed assignment with him to the housecleaner. After seeing the nephew’s massive house, the housecleaner refused to honor the assignment.
Did the housecleaner breach the contract?
(A) Yes, because the nephew was a third-party beneficiary.
(B) Yes, because the contract did not specify that assignments were void.
(C) Yes, because the assignment was in writing and supported by consideration.
(D) No, because the nephew’s house was much larger than the neighbor’s.
(D) No, because the nephew’s house was much larger than the neighbor’s.
A man makes the following statement to a woman: “I hereby offer to sell you Blackacre for $10,000. This offer expires in 30 days.”
Which of the following is most accurate regarding the man’s offer?
A) It is a firm offer that is irrevocable before the 30-day period has passed.
B) It is neither a firm offer nor an option contract, and is revocable at any time before acceptance has been made.
C) Because the man is not a merchant, the woman has a reasonable time to accept.
D) Regardless of the man’s status, the woman must accept within 30 days and before receiving notice of the man’s direct revocation.
Explanation
The correct answer is: It is neither a firm offer nor an option contract, and is revocable at any time before acceptance has been made.
Discussion of correct answer: An offeree’s power of acceptance terminates at the time stated in the offer. There are two ways for contracting parties to keep an offer open and irrevocable: a common law option contract, and a firm offer under the UCC. Under the UCC, only a merchant can make a firm (irrevocable) offer to either buy or sell goods without consideration, so long as the offer: (1) is made by a merchant; (2) is made in a writing signed by the merchant; and (3) expressly states by its terms that it will be held open. At common law, three elements are required for an enforceable option contract: (i) an offer; (ii) a subsidiary promise to keep the offer open; and (iii) some valid mechanism for securing enforcement of the subsidiary promise (consideration). Here, assuming that Blackacre is real property, the UCC will not apply. Under the rule of free revocability in American contract law, the offeror is free to revoke an outstanding offer, terminating the offeree’s power of acceptance, at any time and for any reason, so long as the revocation occurs prior to acceptance and is effectively communicated. Because there was no consideration exchanged here, no option contract was created. The man’s promise to keep the offer open is therefore simply an offer with an express termination date. As such, the offer was neither a firm offer nor an option contract, and is revocable at any time prior to acceptance.
Discussion of incorrect answers:
Incorrect. It is a firm offer that is irrevocable before the 30-day period has passed. Under the UCC, a merchant can make a firm (irrevocable) offer to either buy or sell goods without consideration, so long as the offer: (1) is made by a merchant; (2) is made in a writing signed by the merchant; and (3) expressly states by its terms that it will be held open. Even if the man is a merchant, there was no writing here, and most likely no sale of goods. Thus, this was not a firm offer under the UCC (or an option contract under the common law, as discussed above). Therefore, this is not the best answer choice.
Incorrect. Because the man is not a merchant, the woman has a reasonable time to accept. An offeree’s power of acceptance ordinarily terminates either at the end of the conversation (the face-to-face conversation rule) or at the time stated in the offer, if any. If the offer indicates that it is to remain open but does not specify the time of termination, then the power of acceptance will terminate after a reasonable time. Here, the offeror stated that his offer expires in 30 days. Therefore, absent revocation by the man, the woman has 30 days to accept, not simply a reasonable time. Also, be careful not to assume facts not provided in the question. While we don’t know whether or not the man here is a merchant, it actually does not affect the outcome. This is because the UCC applies to contracts for the sale of goods, not real property. Thus, this is not the best answer.
Incorrect. Regardless of the man’s status, the woman must accept within 30 days and before receiving notice of the man’s direct revocation. An offeror is free to revoke an outstanding offer, terminating the offeree’s power of acceptance, at any time and for any reason, so long as the revocation: (1) occurs prior to acceptance; and (2) is effectively communicated. This is a tempting answer choice, because the offer is “open” for 30 days, and the woman may (as opposed to must) choose to accept within the 30-day period, absent her receipt of revocation from the man. The woman does not have to accept the offer. Note too that revocation can be either direct or indirect. Accordingly, this answer choice is incorrect.
An avid baseball fan attended a party at the home of his employer. Aware of the employee’s enthusiasm for baseball the employer offered to show the man his own collection of baseball memorabilia. The employee was immediately drawn to an autographed baseball in a glass enclosure. The signature on the ball clearly read “Babe Ruth.” The employee said “My God–I can’t believe it–you have a ball signed by The Babe himself!” The employer nodded, saying “That’s right. I inherited it from my father. It was his most prized possession.” The employee immediately offered a check for $25,000 and the employer agreed to sell him the baseball. The following day the employee took the ball to a professional authenticator to have it appraised. He was shocked to learn that the signature was an obvious fake, and the baseball had no monetary value. He immediately sought the return of his check, but his employer refused.
If the employee sues to rescind the contract and recover the $25,000, which of the following accurately reflects the outcome?
(A) The employee will win based on mutual mistake.
(B) The employee will win based on unilateral mistake.
(C) The employee will lose based on his failure to have the ball appraised prior to purchasing it.
(D) The employee will lose because the employer actually believed the signature was authentic.
(A) The employee will win based on mutual mistake
A college student was involved in a car crash while driving her father’s car. Her negligent driving caused her to collide with a vehicle operated by a teacher. Both the teacher and the college student were seriously injured in the crash. The college student’s father believed that since the college student had been driving his car, he himself was liable for the accident. The father went to visit the teacher in the hospital, where he was being treated for injuries suffered in the accident. The father told the teacher that he would personally reimburse the teacher for any losses he suffered as a result of the accident. The father also told the teacher’s doctor to take good care of the teacher, and that the father would pay the teacher’s bill. A week later, the college student died as a result of her injuries. She left no assets.
If the teacher files suit against the father to recover the amount of his lost wages as a result of the accident, which of the following offers the father his best defense?
(A) The Statute of Frauds.
(B) The indefinite nature of his promise to the teacher.
(C) The father was mistaken as to whether he was responsible for the accident.
(D) Lack of consideration.
(D) Lack of consideration
A plumber hired a carpenter to build him an intricately carved armoire out of solid teak for $10,000. When the carpenter presented the armoire to the plumber, the plumber inspected it and noticed that there was a bubble in the finish on the side of the armoire. In good faith, the plumber believed that the armoire was not finished properly and refused to pay the carpenter anything. On September 5, the carpenter sent the plumber an invoice for the armoire, with a note enclosed that said, “My aunt is disabled, and I need the money so I can make her house accessible. Please send the $10,000 before September 30.” Although the plumber felt sorry for the carpenter, she was displeased with the flaw in the armoire’s finish. On September 10, the plumber wrote to the carpenter, “I would like to settle this as soon as possible. I will pay you $9,000 if you will repair the flaw on the armoire.” The carpenter did not respond.
The plumber’s refusal to pay the carpenter any money upon delivery of the armoire constituted what?
(A) A total breach, if the carpenter had properly or substantially completed the armoire.
(B) A partial breach, if the carpenter had properly or substantially completed the armoire.
(C) A total breach, whether or not the carpenter had properly or substantially completed the armoire.
(D) A partial breach, whether or not the carpenter had properly or substantially completed the armoire.
(A) A total breach, if the carpenter had properly or substantially completed the armoire.
An entrepreneur ran an errand service. He owned his own business for more than 20 years, and developed a good reputation in the local community as a hard worker who kept his customers satisfied. He contracted with a widow to pick up her prescriptions from the pharmacy each month. The agreement between the entrepreneur and the widow contained no provision regarding assignment of the agreement.
Which of the following is true if the entrepreneur decided to assign the contract to his friend, the operator of another errand service, who had also been in business for many years?
(A) A novation exists.
(B) The widow would be required to accept performance by the friend.
(C) The widow could refuse to accept performance by the friend.
(D) The entrepreneur is in breach of his contract with the widow.
(B) The widow would be required to accept performance by the friend.
A commercial landlord owed back property taxes on a rental property and the property was at risk of being sold if the taxes were not paid. The landlord entered into an agreement with one of his tenants, by which a lender loaned the landlord the amount owed on the tax bill, and the landlord assigned the tenant’s rents for the next 12 months to the lender. The landlord knew that the tenant had experienced financial difficulty and had requested a rent reduction. Three months later, the tenant filed for bankruptcy and ceased paying rent, leaving no funds to pay the remaining amounts due. The lender sued the landlord, alleging that the landlord had made an invalid assignment and was liable for the remaining nine months of rent due to the lender.
Which of the following is accurate regarding the assignment?
(A) The assignment was not a present interest transfer.
(B) It was not an assignment, but an order directing the tenant to make payments to the lender.
(C) The lender was properly assigned the rents, but assumed the risk that the tenant may become insolvent and unable to pay.
(D) The lender was properly assigned the rents, but did not assume the risk that the tenant may become insolvent.
(D) The lender was properly assigned the rents but did not assume the risk that the tenant may become insolvent.
A man decides that he wants to move to another city in about a year. He has a rare bicycle, but he has been interested in buying a new one, so he decides that when he moves, the man will sell his bicycle. The man talks to his neighbor and learns that the neighbor is a big fan of his bicycle. The two parties orally agree that the man will sell the bicycle to the neighbor for $350 in a year and a half when the man expects to be out of the city. When time comes for the man to sell his bicycle, he refuses. The neighbor sues for breach of contract.
Which of the following is correct?
(A) The contract is enforceable, because the contract was for less than two years.
(B) The contract is enforceable, because the bicycle cost less than $500.
(C) The contract is not enforceable, because the contract was for longer than a year.
(D) The contract is not enforceable, because the bicycle cost more than $300.
(C) The contract is not enforceable, because the contract was for longer than a year.
A businessman lived in Japan. He sent a letter to a California car dealership stating that if the dealership would extend his son the credit, he would guarantee the purchase price of any car. The dealership received the letter on February 9, and on February 10, sold a car to the son for $11,500. On February 11, the businessman died suddenly. Unaware of his death, the agency sent him a letter indicating its acceptance of the offer and notifying him of the sale. The dealership also noted that the son had a good credit rating and that the dealership would have extended him credit even without his father’s guarantee. Two months later, the son also died suddenly, leaving a bankrupt estate. The dealership then sought to recover the balance of the car’s purchase price from the businessman’s estate.
Would the dealership prevail in a suit against the businessman’s estate for the balance owed on the car?
(A) No, because the dealership would have sold the car to the son even without the businessman’s guarantee of the purchase price.
(B) No, because the businessman died before the dealership mailed the letter notifying him of its acceptance.
(C) Yes, because the dealership accepted the businessman’s offer before his death.
(D) Yes, because the dealership foreseeable, justifiably, and reasonably relied on the businessman’s promise.
(C) Yes, because the dealership accepted the businessman’s offer before his death.
A man entered into an oral contract with a dog walking service to walk his two greyhounds every weekday afternoon at a cost of $100 per week. An employee of the service arrived every day at the agreed-upon time and walked the dogs. A month later the service contacted the man to say that they would no longer be honoring the contract because a new customer had requested the same time slot and had offered to pay $200 per week. The man files a lawsuit seeking the enforcement of his contract with the service by specific performance.
Which of the following accurately predicts the outcome?
(A) The man will lose, because an employer may not force an employee to work for him by seeking specific performance.
(B) The man will lose, because the Statute of Frauds precludes enforcement of the contract.
(C) The man will win, because the service had contracted with him before the new customer made a better offer.
(D) The man will win, because bilateral contracts may not be terminated unless both parties agree to the termination.
(A) The man will lose, because an employer may not force an employee to work for him by seeking specific performance.
The state government advertised for bids from general contractors on construction of a state office building. A contractor, who intended to submit a bid, solicited bids from various sub-contractors for framing, electrical work, and plumbing. The contractor
subsequently received a sub-bid on the plumbing work for the project of $360,000. The next lowest competing sub-bid was $500,000. After compiling all the acceptable sub-bids, the contractor submitted a bid on the total project for $5 million. This was the lowest bid submitted to the state, which accepted it on that basis. That same day, the contractor notified the plumbing sub-bidder that his sub-bid was accepted. A week later, the subcontractor notified the contractor that a transmission error had resulted in his plumbing sub-bid being too low by $200,000; the actual bid should have been $560,000 for the plumbing work. The subcontractor had transmitted his sub-bid to the contractor via fax, and a problem with the line caused the bid to read “$360,000,” instead of the accurate “$560,000.”
If the subcontractor brings an action to rescind his contract with the contractor for the plumbing work, which of the following is his strongest argument for rescission?
(A) The contractor’s negligence in not verifying the accuracy of all sub-bids precludes enforcement of the contract.
(B) The contractor should have known that the sub-bid was erroneous, because it was $140,000 lower than any other plumbing sub-bid.
(C) The contractor has an adequate remedy against the real wrongdoer–the fax company.
(D) The fact that the subcontractor was forced to submit his sub-bid before the contractor submitted the main bid demonstrates that the contractor-subcontractor agreement was an adhesion contract.
(B) The contractor should have known that the sub-bid was erroneous, because it was $140,000 lower than any other plumbing sub-bid.
A woman saw a new painting being painted by a famous artist. She immediately went over to the artist and the two orally agreed that the woman would purchase the painting for $5,000. The woman then sent a signed letter describing the transaction to the artist. However, two days later, the artist decides not to deliver the painting.
Which of the following is correct regarding the artist’s obligation?
A. The contract is enforceable, because the woman sent a signed letter describing the offer.
B. The contract is not enforceable, because of the main purpose rule.
C. The contract is not enforceable, because the artist never signed the letter.
D. The contract is enforceable, because there was a meeting of the minds.
C. The contract is not enforceable, because the artist never signed the letter.
On October 1, a seller mailed a letter to a buyer offering to sell a specified quantity of shirts at list price. The buyer received the seller’s offer on October 2. The next day, the buyer mailed the seller a letter of acceptance. The buyer then changed his mind and decided to reject the seller’s offer. On October 5, the buyer mailed a letter of rejection to the seller. On October 4, the seller sent the buyer a letter revoking his original October 1 offer. On October 6, the seller received the buyer’s acceptance. On October 7, the buyer received the seller’s letter of revocation. The following day, the seller received the buyer’s rejection. The buyer then demanded that the seller sell him the shirts at the specified price, and the seller refused. The buyer has sued for breach of contract.
Judgment should be for whom?
A) The buyer, because he mailed his acceptance before mailing his rejection.
B) The buyer, because the seller received the buyer’s acceptance before receiving the buyer’s rejection.
C) The seller, because the buyer’s dispatch of both a rejection and an acceptance evidences a lack of mutual assent.
D) The seller, because he mailed his revocation before receiving notice of the buyer’s acceptance.
Explanation
The correct answer is: The buyer because he mailed his acceptance before mailing his rejection.
Discussion of correct answer:This is a classic application of the mailbox rule. Under the mailbox rule, when the acceptance by mail is effective upon dispatch as long as the acceptance is properly posted. The fact that there was a later rejection and/or revocation is irrelevant, because the contract was formed on October 3, then the buyer mailed his acceptance of the seller’s offer.
Discussion of incorrect answers:
Incorrect. The buyer, because the seller received the buyer’s acceptance before receiving the buyer’s rejection. When the offeree sends a rejection before sending an acceptance, the mailbox rule will not apply. Instead, the first communication to be received by the offeror will control, whether it is the rejection or the acceptance. Here, however, the buyer mailed the acceptance first, and so the mailbox rule will apply, making the acceptance effective upon dispatch. Thus, the rejection was ineffective, and the order in which the seller receives the communications is irrelevant.
Incorrect. The seller, because the buyer’s dispatch of both a rejection and an acceptance evidences a lack of mutual assent. Although a rejection was also sent in addition to an acceptance, it was after the contract was created. The attempted rejection has no bearing on the contract, which was effectively created upon the buyer’s dispatch of his acceptance.
Incorrect. The seller, because he mailed his revocation before receiving notice of the buyer’s acceptance. A revocation is only effective upon receipt, not dispatch. Additionally, under the mailbox rule, the buyer effectively accepted the agreement when he mailed his acceptance letter on October 3. Therefore, the seller no longer had the power to revoke the offer, because it had already been accepted.
A concert promoter rents a large concert hall for a performance by a famous European symphony orchestra, which many people in his city have wanted to see. When he signs the contract, it is two months ahead of the concert. For several months, a particularly virulent influenza has been prevalent in several regions of the world, including one that the orchestra will be traveling through just before it comes to the promoter’s city. On the day of the performance, the orchestra has to cancel because half of the musicians are ill with the flu.
Which of the following is correct?
(A) The contract between the promoter and the hall is discharged, because of impossibility.
(B) The contract between the promoter and the hall is discharged, because of frustration of purpose.
(C) The contract between the promoter and the hall is not discharged, because the frustration was not substantial.
(D) The contract between the promoter and the hall is not discharged, because the promoter bore the risk.
(D) The contract between the promoter and the hall is not discharged, because the promoter bore the risk.
A six-year-old girl was kidnapped outside her home in a small town. Following the girl’s abduction, her parents publicly announced a $50,000 reward to anyone responsible for the apprehension of the kidnapper. The girl’s abductor was described as a Caucasian male between the ages of 25 and 30 with curly blond hair. He also was identified as having a pentagram tattoo on his left arm. One afternoon, an off-duty police officer from a nearby town stopped at a local fast-food restaurant for lunch. The officer was aware of the kidnapping, but was unaware of the reward. Once he entered the restaurant, the police officer noticed a man fitting the description of the kidnapper. The police officer proceeded to arrest the individual, who, in fact, turned out to be the girl’s abductor. After the girl was found unharmed, the police officer learned of and requested the $50,000 reward. However, the girl’s parents refused to pay the police officer the reward money.
If the police officer brings suit against the girl’s parents to recover the $50,000 reward, for whom should the court enter judgment?
A) The police officer, because he accepted the offer by apprehending the kidnapper.
B) The police officer, because he was off duty when the apprehension occurred.
C) The girl’s parents, because the officer was unaware of the reward when he apprehended the kidnapper.
D) The girl’s parents, because recovery of a reward by a police officer is against public policy.
Explanation
The correct answer is: The girl’s parents, because the officer was unaware of the reward when he apprehended the kidnapper.
Discussion of correct answer:This question deals with the preexisting duty rule. In this question, the issue is whether an offeree can accept a reward that they were unaware was offered before they acted. The answer is no, if the requested action occurs before the offeree is aware. Because the officer was unaware of the reward offered at the time that the apprehended the kidnapper, he may not obtain it later.
Discussion of incorrect answers:
Incorrect. The police officer, because he accepted the offer by apprehending the kidnapper. Because the police officer apprehended the kidnapper while without knowledge of the reward, the police officer cannot be said to have accepted the parents’ offer.
Incorrect. The police officer, because he was off duty when the apprehension occurred. While he was off duty, the true issue is whether he was aware of the offer. If he was not, then he is not entitled to the reward. The facts here indicate that he was unaware of the offer. Therefore, he will not recover.
Incorrect. The girl’s parents, because recovery of a reward by a police officer is against public policy. The police officer would have prevailed if he was aware of the reward offer. Here, however, he was not aware of it. Therefore, his work status is irrelevant. Note that if he was on duty, it would not have mattered whether he was aware of the offer or not, because he would then have had a preexisting duty to apprehend the kidnapper, making acceptance of the offer against public policy.
A man’s dog managed to escape from his backyard and was loose in the neighborhood. The man posted signs with a picture of the dog. The sign said “REWARD: $100 for safe return. Answers to Fluffy.” A neighbor, who found Fluffy in her yard the day before, brought the dog back and requested the reward. The man refused.
Can the neighbor prevail in a suit to recover the reward money?
(D) Yes, because reward offers are binding as unilateral contracts.
A seller sent the following terms in a writing to a buyer: “I will provide 100 units of furniture for a price of $50 per unit. This offer is good for 60 days from today.” The seller dated the letter and signed it at the bottom. The buyer received the letter and immediately wrote a response accepting the seller’s terms, but did not immediately send the letter.
A week after sending his letter to the buyer, the seller received an offer from a furniture wholesaler offering to buy as much furniture as the seller could make at $55 per unit. The seller wanted to accept the wholesaler’s offer, but was concerned about the outstanding letter to the buyer.
Which of the following statements is most accurate?
A) The seller can revoke his offer to the buyer as long as the buyer has neither accepted nor changed position in reliance on the offer.
B) The seller can revoke his offer, because there was no consideration provided that would make the offer irrevocable.
C) The buyer can accept the offer at any time within 60 days from the date of the letter, and the seller cannot revoke the offer.
D) The buyer has three months from the date of the letter to accept, because firm offers are irrevocable for 90 days.
Explanation
The correct answer is:The buyer can accept the offer at any time within 60 days from the date of the letter, and the seller cannot revoke the offer.
Discussion of correct answer: Under the UCC, a merchant can make a firm offer, which is an irrevocable offer, to buy or sell goods. No consideration is needed to make the firm offer irrevocable. In order to create a firm offer, the following requirements must be met [UCC Sec. 2-205]: (1) the offer must be made by a merchant; (2) the offer must be made in a writing signed by the merchant; and (3) the offer must expressly state by its terms that it will be held open. A firm offer can be made irrevocable for a maximum of 90 days; after that, the parties must create an option contract (which requires consideration) in order to make the offer irrevocable for a longer period. Here, because all of the requirements are met, the seller’s offer to the buyer was an irrevocable firm offer. As such, the buyer can accept at any time within the 60-day period, and the seller cannot revoke the offer during this time.
Discussion of incorrect answers:
Incorrect. The seller can revoke his offer to the buyer as long as the buyer has neither accepted nor changed position in reliance on the offer. Because all of the requirements have been met, the letter from the seller to the buyer was a firm offer under the UCC, which is irrevocable for the stated period (up to a maximum of 90 days). Therefore, the seller cannot revoke the offer during this period.
Incorrect. The seller can revoke his offer, because there was no consideration provided that would make the offer irrevocable. Unlike a common law option contract, an irrevocable firm offer under the UCC does not need consideration to be binding.
Incorrect. The buyer has three months from the date of the letter to accept, because firm offers are irrevocable for 90 days. Firm offers under the UCC are irrevocable up to a maximum of 90 days, but that is not an automatic term that is applied to all firm offers. If the firm offer states a shorter period of time, the offer will only be irrevocable for that period of time. Here, because the seller’s letter gave a 60-day period of time in which the buyer could accept, the offer will be irrevocable for 60, and not 90, days.
An owner planned to renovate her office building and requested several contractors to submit bids to perform the work. One of the contractors in turn sought bids from several subcontractors to determine the overall cost of the job. An electrician submitted a bid to the contractor that he used in computing the bid he sent to the owner. The contractor notified the electrician to the effect.
On November 1, the contractor submitted his bid to the owner in which he offered to perform the renovation work for $75,000. On November 4, the electrician notified the contractor that he was unable to perform the electrical work on the owner’s project. On November 5, the owner sent the contractor a signed confirmation letter wherein she stated, “I hereby accept your offer to perform the renovation work for the quoted cost of $75,000.” Thereafter, the contractor hired another electrician to complete the electrical work at a cost of $5,000 above the electrician’s bid. The contractor explained the situation to the owner and informed her that the overall cost of the job would have to be increased to $80,000. The owner responded that she would hold contractor to his original bid of $75,000 and would not be responsible for any additional costs. The contractor then performed the renovation work, but the owner has not yet paid him anything.
Which of the following best supports a claim for $5,000 by the contractor against the electrician?
A) The electrician made an offer that the contractor accepted by using the electrician’s bid in computing the bid he submitted to the owner.
B) The electrician’s bid was a firm offer that was irrevocable, because both the electrician and the contractor were merchants.
C) The contractor made an offer to the electrician that the electrician accepted when he submitted his bid.
D) An option contract was created because the contractor used the electrician’s bid in computing the bid he submitted to the owner and notified the electrician of that fact.
The correct answer is: An option contract was created because the contractor used the electrician’s bid in computing the bid he submitted to the owner and notified the electrician of that fact.
Discussion of correct answer:When a general contractor about to submit a bid on a construction project secures a bid from a subcontractor for a definite part of the proposed work, and uses the bid to determine that part of his cost, he often finds after the principal contract is awarded to him that the subcontractor refuses to go through with the job. He must then find another to do the job, usually at a price much higher than the promised figure. Can he recoup his loss from the defaulting subcontractor? Yes, the subcontractor is bound under the doctrine of promissory estoppel. Thus, a promisor who induces a substantial change of position by the promisee in reliance on the promise is estopped from denying its enforceability as lacking consideration. The reason for the doctrine is to avoid an unjust result. This answer is therefore correct because Restatement of Contracts 2d, Section 87(2) provides, “An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.”
Discussion of incorrect answers:
Incorrect. The electrician made an offer that the contractor accepted by using the electrician’s bid in computing the bid he submitted to the owner. Appropriate acceptance of the electrician’s offer would have occurred when the contractor actually retained the electrician’s services. Merely using the electrician’s bid in computing the overall bid did not constitute acceptance because the contractor might not have actually used the electrician’s services if the contractor’s bid had not been accepted.
Incorrect. The electrician’s bid was a firm offer that was irrevocable, because both the electrician and the contractor were merchants. The electrician’s bid was an offer, but this answer choice implies that any offer made by a merchant to a merchant is irrevocable. This is not the case; a merchant may revoke an offer made to a merchant. Thus, this is not the best answer.
Incorrect. The contractor made an offer to the electrician that the electrician accepted when he submitted his bid. The contractor’s request for bids was not an offer, but an invitation for offers. Thus, this answer choice is not correct.
On March 1, a seller mailed a letter to a buyer offering to sell a specified quantity of shirts at list price. The buyer received the seller’s offer on March 2. The next day the buyer mailed the seller a letter of rejection. The buyer then changed his mind and decided to accept the seller’s offer. On March 5, the buyer mailed a letter of acceptance to the seller. On March 4, the seller sent the buyer a letter revoking his original March 1 offer. On March 6, the seller received the buyer’s acceptance. On March 7, the buyer received the seller’s letter of revocation. The following day, the seller received the buyer’s rejection. The seller is now refusing to sell the shirts to the buyer, and the buyer has sued for breach of contract.
Judgment should be for whom?
(A) The buyer, because he mailed his acceptance before receiving notice of the seller’s revocation.
(B) The buyer, because the seller received his acceptance before receiving notice of the buyer’s rejection.
(C) The seller, because the buyer mailed his rejection before depositing his acceptance.
(D) The seller, because he mailed his revocation before receiving notice of the buyer’s acceptance.
(B) The buyer, because the seller received his acceptance before receiving notice of the buyer’s rejection.
A homeowner said to a roofer, “My roof leaks. I think the old tiles are cracked. If you will replace them with all new tiles, I will pay you $5,000.” The roofer replied, “Sure, if I can clear my busy schedule.” The homeowner then remarked, “That’s all right, but let me know soon.” Three days later, the roofer drove his pickup truck to the homeowner’s home and unloaded the materials and equipment needed to perform the roofing job. When the homeowner looked out his window and saw what was transpiring, he immediately ran outside and exclaimed, “Stop! The deal’s off. I decided to repair the roof myself.”
In an action by the roofer against the homeowner for breach of contract, which of the following would provide the roofer with his best theory of recovery?
(A) A bilateral contract was formed when the roofer purchased the materials and equipment needed to do the job.
(B) A bilateral contract was formed when the roofer said, “Sure, if I can clear my busy schedule.
(C) The homeowner made an offer that proposed a unilateral contract, and the offer became irrevocable when the roofer purchased the materials and equipment needed for the job.
(D) The homeowner made an offer that proposed a unilateral contract, and the roofer manifested an intent to accept the offer when he began performance by unloading the materials and equipment at the homeowner’s house.
(D) The homeowner made an offer that proposed a unilateral contract, and the roofer manifested an intent to accept the offer when he began performance by unloading the materials and equipment at the homeowner’s house.
In May, a cafe owner entered into a written agreement with a general contractor to build a cafe on the cafe owner’s land by the following April for $2,000,000. During construction, the cafe owner realized that it would be too expensive to maintain the building if it were built as originally planned. The parties orally agreed to reduce the size of the cafe and to reduce the cafe owner’s payment to $1,800,000. The contractor completed the cafe and demanded $1,800,000. However, the cafe owner refused to pay that amount, claiming that the reduction in the cafe’s size was a breach of the original contract entitling her to damages, which would significantly reduce the amount owed on the contract by more than $200,000.
If the contractor sues, who will prevail?
A. The contractor, because the oral modification is enforceable.
B. The contractor, because the court can determine the value of his services in quantum meruit.
C. The cafe owner, because the oral modification is unenforceable pursuant to the Statute of Frauds.
D. The cafe owner, because the oral modification is unenforceable pursuant to the parol evidence rule.
A. The contractor, because the oral modification is enforceable.
A chef negotiated with a contractor to remodel his home kitchen to look like the kitchen in his restaurant. In order to do this, the contractor had to order top-of-the-line appliances. He also needed to remove some sections of a wall and install new electrical sockets to accommodate the appliances. The cost of the remodel was $50,000, with two-thirds of the price coming from the purchase of the appliances. A dispute arose and the parties both suspended their obligations. The contractor refused to further perform
and the chef refused to pay the contractor.
What law should be used to analyze the dispute?
(A) The UCC applies to the purchase of the appliances and common law applies to the delivery, the wall removal, and the electrical socket installation.
(B) The UCC should be applied to the entire transaction, because the primary purpose of the contract was the appliances, which account for the overwhelming majority of the contract price.
(C) Common law should be applied to the entire transaction, because the primary purpose was to provide a service, regardless of the cost of the appliances.
(D) When a contract is for both goods and services, in the absence of a choice-of-law selection clause, common law is the default law to be applied.
(C) Common law should be applied to the entire transaction, because the primary purpose was to provide a service, regardless of the cost of the appliances.
A woman had known a hairstylist for many years. One day, the hairstylist was walking through the mall when he ran into the woman. The hairstylist said to the woman, “If you come by the shop tomorrow, I will straighten your hair for $20.” The woman replied, “That’s a great price.” Thereupon the woman’s husband approached and the three then started gossiping about a man who walked by wearing some out-of-fashion shoes. The next day, the woman arrived at the hairstylist’s shop and said, “I accept your offer.” The hairstylist replied, “I can’t straighten your hair because after we spoke yesterday, I contracted with several other people to do their hair, and now I’m all booked up.”
If the woman sues the hairstylist for breach of contract, who will likely prevail?
(A) The woman, because she relied on the hairstylist’s promise by coming to the shop.
(B) The woman, because she accepted the offer before the hairstylist revoked it.
(C) The hairstylist, because he contracted with other people to do their hair.
(D) The hairstylist, because the woman did not accept during their conversation.
(B) The woman, because she accepted the offer before the hairstylist revoked it.
A man approached his cousin who was seven months pregnant, and said, “If you name your daughter after my mother, I will pay you $100 per month for five years.” The cousin agreed and named her child after the man’s mother. Afterwards, the man reneged on his promise and told his cousin that he decided not to pay her the money. Subsequently, the cousin sued the man for breach of contract.
For whom should the court enter judgment?
(A) The cousin, because there was a bargained-for exchange.
(B) The cousin, because naming the child was a condition of a gift made in consideration of carrying out a moral obligation.
(C) The man, because naming the child was a mere gift promise unsupported by consideration.
(D) The man, because the cousin did not experience any recognizable detriment in the naming of her child.
(A) The cousin, because there was a bargained-for exchange.
A state college was looking to fill a one-year position for a faculty member who was taking some time off for an operation. It advertised the position and received about 75 applications, one of which was submitted by a well-known but retired professor. The state college sent a letter to the professor indicating that he was being offered the position, and sent him a one-year contract to sign. The professor signed the contract and sent a letter to the state college indicating that the professor’s acceptance would take effect when the state college notified the professor that the state college had received the letter and the contract. The professor dropped the letter in the mailbox on June 28. The next day, June 29, the state college called the professor to withdraw the offer, because their faculty member was going to postpone the operation. They had not received the professor’s letter and signed contract.
Does the professor have an enforceable contract with the state college?
(D) No, because the state college called the professor before the state college received the professor’s letter and contract.
A gardener owned and operated a nursery. Although he enjoyed working with plants in general, his special interest was in orchids. Unfortunately, that portion of his business rarely made a profit. The gardener consulted with a horticulturist who specialized in orchids. The horticulturist advised the gardener that the orchids could be a profitable venture if he was willing to make certain changes. The horticulturist stated that she would undertake a program that required the construction of certain raised beds and the use of a special potting material. On March 1, the two parties signed an agreement, which provided that the gardener would pay the horticulturist $10,000 in two equal installments within one month of completion, if the horticulturist succeeded in increasing the gardener’s orchid production by 50 percent. The agreement also stated that the horticulturist would complete work by May 1. On April 2, the horticulturist advised the gardener that the work was one-half complete and demanded payment of $5,000. The gardener at first refused to pay but, on further discussion, the parties realized that they had interpreted the “within one month of completion” language differently. They therefore orally modified their agreement. The gardener agreed to pay the $5,000 immediately, and the horticulturist agreed to create a small additional orchid bed.
Was the modification of the original agreement valid?
A. Yes, because the Statute of Frauds does not apply to subsequent oral modifications of written agreements.
B. Yes, because the modification was mutual.
C. No, because the modification was not supported by consideration.
D. No, because the modification was oral.
B. Yes, because the modification was mutual.
The owner of a paperclip company received a call from a distributor, who told him that she needed more paperclips. The parties agreed that the paperclip company would send the distributor three separate deliveries. The day after the telephone call, the paperclip company sent the distributor a letter that stated, “Based on our estimation, you need more paperclips. We will therefore send to you three shipments over three months at the rate of $300 per shipment to restock your supplies.” The letter was signed by the paperclip company owner, and properly identified the parties.
The paperclip company subsequently sent the first shipment of paperclips to the distributor, and the distributor accepted the delivery. Four weeks later, the paperclip company owner sent the next shipment to the distributor. When the distributor received the second shipment of paperclips, she phoned the paperclip company owner and told him that she did not want any more paperclips, that she was rejecting the delivery, and that she would also refuse to accept any future deliveries.
The paperclip company filed a breach of contract action against the distributor, claiming that the distributor had no right to refuse the second and subsequent shipments of paperclips. The distributor asserted the Statute of Frauds as a defense.
Which of the following is true regarding the viability of the distributor’s Statute of Frauds defense?
AThe distributor will fail in asserting the Statute of Frauds as a defense, because the paperclip company had partially performed the contract at the time of the distributor’s attempted repudiation.
BThe distributor will fail in asserting the Statute of Frauds as a defense, because under the circumstances, the paperclip company owner’s letter satisfied the Statute of Frauds requirements for an agreement between merchants.
CThe distributor will succeed in asserting the Statute of Frauds as a defense, because the parties did not enter into a signed, written agreement regarding the purchase of the paperclips.
DThe distributor will succeed in asserting the Statute of Frauds as a defense, because the distributor did not accept the paperclip company’s offer in writing.
B. The distributor will fail in asserting the Statute of Frauds as a defense, because under the circumstances, the paperclip company owner’s letter satisfied the Statute of Frauds requirements for an agreement between merchants.
A baseball card dealer and a collector met at an auction. The baseball card dealer had in his inventory a mint condition rookie card of a famous baseball player that was valued at well over $50,000. The collector desperately wanted to buy the card, but knew that he could not make the purchase until he sold a few other cards that he currently owned. The two spoke for a while, and before leaving, the dealer wrote the collector the following note: “I, will hold the rookie card that we were talking about for sale to you alone for the next six months, in return for the $500 consideration I received from you today.” The dealer signed and dated the note and handed it to the collector.
If the collector saw the dealer at another auction five months later and wanted to purchase the card, is the offer still in force?
A) No, because the collector is not a merchant.
B) No, because the UCC only makes a firm offer irrevocable for a maximum of three months.
C) Yes, because there was consideration to support a common law option contract.
D) Yes, because UCC firm offers are irrevocable for six months.
Explanation
The correct answer is: Yes because there was consideration to support a common law option contract.
Discussion of correct answer:This question concerns a sale of goods by a merchant. If this were a UCC firm offer, it would not need consideration to be effectively irrevocable; however, it would only be irrevocable for a maximum of three months. Ordinarily, the written offer made by the dealer was effective, but would have become revocable after three months. However, by adding the consideration, as the parties did here, they created a valid common law option contract, which can be irrevocable for longer than three months.
Discussion of incorrect answers:
Incorrect. No, because the collector is not a merchant. For a UCC firm offer (a written offer made by a merchant that expressly states that it will be held open), it is only necessary that the party making the offer be a merchant. The offeree need not be a merchant. Additionally, for a common law option contract (which was created here), there is no requirement that either party be a merchant.
Incorrect. No, because the UCC only makes a firm offer irrevocable for a maximum of three months. It is true that a UCC firm offer (a written offer made by a merchant that expressly states that it will be held open) is only irrevocable for three months. However, with the added element of consideration, the parties can create a common law option contract, which can remain irrevocable longer.
Incorrect. Yes, because UCC firm offers are irrevocable for six months. This is not a correct statement of law. A UCC firm offer will be irrevocable for a maximum of three months. In order to make the offer irrevocable beyond that, the parties need to create a common law option contract, which requires consideration.
An inventor and manufacturer of what he predicted will be the novelty craze of the future was inspired by the legendary success of the pet rock to invent the pet dust bunny. He collected dust balls from under his bed and dyed the dust bunnies a variety of psychedelic colors. He then entered into a contract to sell 200 dust bunnies to a novelty shop. The inventor was only able to collect enough balls of dust to create 180 dust bunnies, so he delivered these 180 to the owner of the shop. The owner accepted the shipment and paid the inventor the agreed-upon contract price.
If the owner sues the inventor for damages for breach of contract, is the owner likely to prevail?
(A) Yes, but only if the inventor’s failure to deliver the remaining dust bunnies constituted a material breach.
(B) Yes, because the inventor did not perform his obligation under the contract.
(C) No, because the owner accepted delivery of the shipment containing only 180 dust bunnies.
(D) No, because the inventor substantially performed.
(B) Yes, because the inventor did not perform his obligation under the contract.
A homeowner contracted with a contractor to build the homeowner a porch for $5,000. The contractor successfully built the porch according to the contract specifications. A week later, the homeowner noticed a strong odor emanating from underneath the porch. The homeowner called the contractor to complain, saying, “It smells like something died down there.” The contractor had no explanation for the foul odor. After checking with some neighboring property owners, the homeowner discovered that the odor was common in the area and not the result of anything the contractor had done improperly when building the porch. Because he was upset by the foul odor, the homeowner sent the contractor a check for $4,000 as satisfaction for the obligation, writing in the memo area of the check “Paid in full.”
If the contractor brings suit for the remaining $1,000, will he succeed?
A. Yes, because there was no consideration to support the discharge of the homeowner’s obligation under the original contract.
B. Yes, because the porch was completed according to the specifications set forth in the contract.
C. No, because there was an enforceable accord and satisfaction.
D. No, because the porch was not completed to the homeowner’s satisfaction.
A. Yes, because there was no consideration to support the discharge of the homeowner’s obligation under the original contract.
Discussion of correct answer: An accord and satisfaction requires a good faith dispute as to the quality of the work performed or the value of the services rendered. Here, although there was a foul odor coming from under the porch, it was not the contractor’s fault. The homeowner’s decision to pay less than the agreed-on amount does not obligate the contractor to accept the smaller amount. Because there was no consideration to accept less, (A) is correct and the contractor is due the additional $1,000. Choices (B) and (D) do not address the issue of accord and satisfaction.
A six-year-old girl was kidnapped outside her home in a small town. Following the girl’s abduction, her parents publicly announced payment of a $50,000 reward to anyone responsible for the apprehension of the kidnapper. The girl’s abductor was described as a Caucasian male between the ages of 25 and 30 with curly blond hair. He also was identified as having a pentagram tattoo on his left arm. One afternoon, while on duty, a police officer from a nearby town stopped at a local fast-food restaurant for lunch. Inside the restaurant, the police officer noticed a man fitting the description of the kidnapper. The police officer proceeded to arrest the individual, who, in fact, turned out to be the girl’s abductor. After the girl was found unharmed, the police officer requested the $50,000 reward. However, the girl’s parents have refused to pay the police officer the reward money.
If the police officer brings suit against the girl’s parents to recover the $50,000 reward, for whom should the court enter judgment?
(A) The police officer, because he accepted the offer by apprehending the kidnapper.
(B) The police officer, if he knew of the existence of the reward offer when he apprehended the kidnapper.
(C) The girl’s parents, if their intent was to make the offer open only to members of the general public.
(D) The girl’s parents, because recovery by the police officer is against public policy.
(D) The girl’s parents, because recovery by the police officer is against public policy.
A man offered to sell his lawnmower to his neighbor for $2,000. The neighbor asked the man if he would consider taking less. The man replied “Let me think about it.” The next day the man called his neighbor and said that he would reluctantly accept $1,800 for the mower. The neighbor agreed to pay $1,800, and he went to the bank. When the neighbor arrived at the man’s house with the money, the man told him that he had just sold the lawnmower to a relative for $2,000.
At what point was a contract formed?
(B) When the neighbor said he would pay $1,800.
The owner of a large sailboat hired a deckhand to perform maintenance and repair duties on the vessel on a part-time basis. The parties orally agreed that the deckhand would work for twenty-five hours per week, performing any tasks necessary to keep the boat in good operating condition, and be paid $500 per week for his work. The boat owner and his wife had a three-year-old son, who was cared for by the wife. One afternoon, the wife slipped on the boat deck and gashed her leg on a metal storage unit, causing a deep wound. The boat owner prepared to rush his wife to the emergency room, but did not wish to bring his young son to the hospital. At that time, the deckhand was just finishing up his work on the boat for the day. The boat owner asked the deckhand if he would watch the young boy while the boat owner and his wife were at the hospital. The deckhand protested that he had not been hired as a babysitter, and insisted that the boat owner pay him an additional $100 for that week. Concerned about his wife and eager to leave as quickly as possible, the boat owner reluctantly agreed. When the boat owner and his wife returned several hours later, the boat owner refused to pay the deckhand the promised $100 for minding the child.
Under the general law of contracts, is the boat owner’s promise to pay the deckhand an additional sum for caring for the child legally enforceable? (D) Yes, because the modification was supported by consideration.
(D) Yes, because the modification was supported by consideration.
On May 1, an attorney received a job offer from a law firm for an annual salary of $100,000 to begin August 1, and requesting a response to the offer by the end of the month. On May 25, the attorney sent an email to the managing partner at the law firm stating: “Would you consider $110,000 as my salary? I cannot begin until October 1.” The partner responded: “We really need someone to begin in August, and $100,000 is the best we can do.”
On June 5, the partner had not heard back from the attorney, and the law firm extended an offer to another candidate, who accepted immediately. On June 12, the attorney emailed the partner: “I accept the offer for $100,000 to begin August 1.”
Did a contract form between the attorney and the law firm?
AYes, because the partner never revoked the offer for $100,000 and beginning August 1.
BYes, because the partner revived the offer after the attorney counter-offered.
CNo, because employment contracts are at-will, which the law firm was free to terminate at any time for any reason.
DNo, because the offer lapsed.
D. No, because the offer lapsed.
A publishing company offered to buy all rights to an author’s manuscript for $1 million. The author responded by saying, “I’ll give you the right to distribute the work in the United States for $2 million.” Then, shortly after hanging up the phone, the author died. The publishing company sued the author’s estate to enforce its right under their oral agreement to publish the manuscript.
Will the publishing company prevail?
(B) No, because a contract was never formed.
A juggler and a dancer are neighbors. The juggler washes and details his car once a month. The dancer asked the juggler if the juggler would wash and detail the dancer’s car. The juggler agreed, but only if the dancer agreed to pay the juggler $300. Impressed by the work the dancer had seen the juggler do over the years, the dancer agreed, and promised to bring his car to the juggler’s house at the end of the month. The juggler told his brother about the juggler’s contract with the dancer. The juggler knew that his brother had just lost his job as a lion tamer and needed money, so the juggler told his brother he could have the $300 from the dancer. The juggler washed and detailed the dancer’s car. The dancer was so pleased that the dancer promised to tell everyone he knew that it was the juggler who had cleaned the dancer’s car. The dancer paid the juggler the $300. The juggler decided to use the money for a new set of juggling balls and refused to pay his brother.
Has the juggler breached the contract?
(A) Yes, because the brother was a third-party beneficiary.
(B) Yes, even though the contract did not specify that assignments were void.
(C) No, because the assignment was not in writing.
(D) No, because the juggler’s promise was gratuitous.
(D) No, because the juggler’s promise was gratuitous.
A buyer ordered 1,000 widgets from a seller for immediate delivery. The seller responded by shipping 800 widgets rather than the full 1,000 ordered, because the seller did not have an adequate inventory and thought it better to ship something rather than nothing.
Which of the following is the most accurate statement?
A) A contract was formed when the seller shipped the widgets.
B) A contract will be formed once the widgets arrive at the buyer’s address.
C) No contract exists, because the seller shipped nonconforming goods.
D) No contract exists, because the seller did not cure the nonconforming tender immediately.
Explanation
The correct answer is: A contract was formed when the seller shipped the widgets.
Discussion of correct answer:The UCC governs contracts for the sale of goods. Under the UCC, an offer can be accepted by the offeree communicating acceptance or by the prompt shipment of the goods. When the seller ships nonconforming goods, this operates as an acceptance of the offer and a simultaneous breach of contract.
Discussion of incorrect answers:
Incorrect. A contract will be formed once the widgets arrive at the buyer’s address. Under the UCC, a seller can accept a buyer’s offer to purchase goods for prompt or current shipment in one of three ways: (1) a promise to ship goods in conformity with the terms of the offer, such as an acknowledgment of the order form sent to the buyer; (2) the prompt or current shipment of the goods in conformity with the terms of the offer; or (3) the prompt or current shipment of nonconforming goods, which will operate as a simultaneous acceptance and breach of contract. The arrival of the goods at the buyer’s address is not needed for contract formation, because the seller accepted the buyer’s offer with the shipment of the 800 widgets.
Incorrect. No contract exists, because the seller shipped nonconforming goods. The UCC governs contracts for the sale of goods. Under the UCC, an offer can be accepted by the offeree communicating that acceptance or by the prompt or current shipment of the goods. When the seller ships nonconforming goods, this operates as an acceptance of the offer and a simultaneous breach of contract. Therefore, when the seller shipped the 800 widgets, they accepted the offer and formed a valid contract, while simultaneously breaching the agreement by shipping nonconforming tender.
Incorrect. No contract exists, because the seller did not cure the nonconforming tender immediately. Whether or not the seller cured will have an effect on their liability for breach of contract, but it is not relevant to determine whether a contract was validly formed.
In January, a small electronics firm borrowed $500,000 from a bank to modernize its manufacturing equipment. The loan was secured by a mortgage on the plant and its building site. When the debt was about to become due, the firm was short of ready cash, and the bank threatened to foreclose. Fearing the impact that such a foreclosure would have on his investment, a shareholder who owned 25% of the firm’s stock intervened on behalf of the company. The shareholder told the bank officials that if they would refrain from any legal action against the firm for one year, he would personally “stand as surety and guarantee” the loan. The bank orally agreed to the shareholder’s surety arrangement. The next day, however, the shareholder decided that due to adverse conditions in the electronics industry, the firm was, at best, a marginal credit risk. Believing that his suretyship commitment had been imprudent, the shareholder contacted the bank and repudiated his agreement. Thereafter, the firm became insolvent and defaulted on the $500,000 loan, and the bank sued the shareholder as the firm’s surety.
Which of the following is the most likely outcome?
(A) The shareholder will not be liable, provided that the bank’s security interest in the plant and building site is not impaired by the firm’s insolvency.
(B) The shareholder will not be liable, because enforcement of his oral promise to the bank is barred under the suretyship clause of the Statute of Frauds.
(C) The shareholder will be liable, because the shareholder’s main purpose in making his suretyship promise was to further his own economic advantage, rather than to benefit the firm.
(D) The shareholder will be liable, because under the doctrine of promissory estoppel, the bank relied on the shareholder’s suretyship promise.
(C) The shareholder will be liable, because the shareholder’s main purpose in making his suretyship promise was to further his own economic advantage, rather than to benefit the firm.
A landowner entered into a written contract by which a contractor agreed to construct a daycare center on the landowner’s land within 10 months in exchange for $100,000. During construction of the daycare center, a dispute between Canadian and American timber interests increased the cost of lumber significantly. The contractor discovered that her costs for lumber to complete the daycare center would be $20,000 higher than she had expected. The contractor and landowner subsequently executed a written modification of the contract that provided that the square footage of the daycare center could be reduced from 2,000 to 1,800 square feet and that the contractor would still be entitled to the full contract price of $100,000. When the contractor had completed the building, the landowner refused to pay $100,000 as demanded, claiming that the 10% reduction in the size of the daycare center was a breach of the original contract, entitling her to damages reducing the amount owed on the contract.
In an appropriate action to determine the rights of the parties, applying traditional rules of contract law unmodified by statute, for whom should the court award judgment?
A. The contractor, because the written agreement reducing the size of the daycare center was an enforceable novation.
B. The contractor, because the written agreement reducing the size of the daycare center was an enforceable modification requiring no consideration.
C. The contractor, because the written agreement reducing the size of the daycare center was an enforceable modification supported by the consideration of the contractor’s continued performance in the face of changed conditions.
D. The landowner, because the written agreement reducing the size of the daycare center was not supported by consideration.
D. The landowner, because the written agreement reducing the size of the daycare center was not supported by consideration.
A rare coin dealer and a collector met at a stamp-and-coin fair that was held on a monthly basis. The dealer had a mint condition 1905 Silver Eagle in his inventory that was valued at well over $10,000. The collector desperately wanted to purchase the coin, but knew that he did not have enough money to make the purchase. The two spoke for a while, and before leaving, the following note was written from the dealer to the collector: “I will hold the 1905 Silver Eagle you were eyeing up at the fair today for sale to you alone until the next fair.” The dealer signed and dated the note and handed it to the collector.
If the collector wanted to purchase the coin at the following fair, is the offer still in force?
A) No, because there was no consideration provided to keep the offer open until the next fair.
B) No, because “until the next fair” does not state a sufficient period of time.
C) Yes, because it was a firm offer.
D) Yes, because the offer concerned the sale of goods.
Explanation
The correct answer is: Yes, because it was a firm offer.
Discussion of correct answer: This question concerns a sale of goods by a merchant. The writing from the dealer to the collector here constitutes a firm offer as defined by the UCC. A written offer made by a merchant that expressly states that it will be held open is effective and irrevocable for the stated period (up to a maximum of three months).
Discussion of incorrect answers:
Incorrect. No, because there was no consideration provided to keep the offer open until the next fair. This is a sufficient firm offer as defined by UCC Section 2-205. It would not need any consideration to make it irrevocable, unlike a common law option contract, which does require consideration. By adding consideration, the parties can create a common law option contract, which can be irrevocable for more than three months. However, because this is a firm offer for a period of around one month, no option contract needs to be created.
Incorrect. No, because “until the next fair” does not state a sufficient period of time. The facts indicate that these fairs occur monthly. Even if this fact was not present, the offer would still be a valid firm offer. UCC Section 2-205 states that if there is no time indicated, the offer will remain open for a reasonable period of time, not to exceed three months. “Until the next fair” is an indication of time, and even if it were not, the offer would remain open for a reasonable period of time.
A homeowner contracted with a carpenter to complete certain specified work to the exterior of his home. The homeowner wanted the work to be finished before his daughter’s wedding, which would be taking place in seven months in the backyard. The carpenter estimated that the work would take five months to finish. The homeowner paid the carpenter monthly installments of $2,000. After four months, it was clear that the carpenter would not complete the work in time because of the unanticipated termite damage behind the shingles. The carpenter told the homeowner that it would probably be necessary to have extra workers on the job working for more than 20 hours a week in order to complete the work before the wedding. The carpenter insisted that the parties amend the contract accordingly, and the homeowner orally agreed to pay the carpenter an additional time-and-a-half fee for the after-hours labor until the job was finished. The carpenter submitted statements on this basis for the fifth and sixth months. The homeowner didn’t pay the last two monthly invoices–explaining he was waiting for a check from his ex-wife, who had promised to contribute toward the wedding preparations. After the work was complete, the homeowner repudiated the oral agreement, raising the parol evidence rule and asserting a lack of sufficient consideration. The carpenter sued the homeowner for the unpaid amounts under the contract as amended.
In light of the homeowner’s explanation that he was not paying his monthly statements because he was waiting for funds, what is the carpenter’s best theory of recovery?
(A) The carpenter relied on the explanation in continuing to work.
The owner of a discount luggage store always looks forward to graduation day because the parents of graduating seniors often buy luggage as presents for children who are going away to college. One June, the owner decides to run an advertisement in the local newspaper. The ad copy read, “Valedictorian Sale–June 15! To each high school valedictorian graduating from either of the town’s two high schools this year, the luggage store offers two deluxe suitcases for the price of one. Purchase one and receive a second free! Limit two suitcases per valedictorian.”
The owner believes that because there are two high schools in town, there will be only two valedictorians to qualify to accept his offer. However, he is unaware that students at the two high schools may take a number of Advanced Placement courses and that any student receiving an A in these classes may obtain a cumulative GPA greater than 4.0. In addition, the high school administrators have made it a policy that any senior with a GPA above 4.0 will be deemed a valedictorian.
As a result, one of the high school’s graduating classes has nine valedictorians, and the other high school has ten valedictorians. On June 15, when the third valedictorian attempted to accept the owner’s offer, tendering him the purchase price for one suitcase, the owner refused to honor the advertisement.
If the third valedictorian sues for breach of contract, will she prevail?
(A) Yes, because she relied upon the owner’s offer.
(B) Yes, because she accepted the offer when she tendered the purchase price of one suitcase.
(C) No, because the owner was mistaken about a fact underlying the contract.
(D) No, because the valedictorian’s tender of payment was an offer, which the owner could properly reject.
(B) Yes, because she accepted the offer when she tendered the purchase price of one suitcase.
A vacationer was leaving the mountain resort where he had just spent a week’s vacation. He dropped his suitcase as he was walking over a rope bridge spanning a mountain stream. The suitcase was caught momentarily in the web of support lines under the bridge, and before it could fall into the stream, a local resident of the area, who was behind the vacationer on the bridge, reached under the bridge and retrieved the suitcase. “I have a ticket to the state lottery in that suitcase. If I win the lottery with that ticket, I’m going to give you $500!” the vacationer said to the local resident. When the vacationer got home two days later, he discovered that his state lottery ticket was a winner and was worth $5,000. He wrote the following letter to the local resident: “Because you saved my luggage from loss or destruction, and because you agree to file no claim with the state lottery board against my winning ticket, I will pay you $500.” The vacationer signed the letter. A week later, the local resident was visiting relatives in the city where the vacationer lived and went to his home to see about collecting the $500. The resident discovered that the vacationer had been in an auto accident and had suffered permanent brain damage, had been declared legally incompetent, and remembered nothing of his mountain vacation or of the resident. The vacationer’s legal guardian refused to pay any money to the resident.
In states following traditional common law, would the resident’s saving of the vacationer’s luggage be regarded as sufficient consideration for the vacationer’s promise to pay $500?
A. No, because the vacationer had not asked the resident to save the luggage.
B. No, because the value of the resident’s service was too uncertain.
C. Yes, because the vacationer was morally obligated to the resident.
D. Yes, because the resident’s service materially benefited the vacationer.
A. No, because the vacationer had not asked the resident to save the luggage.
A cleetch is a custom-designed transmitter device that is used in wireless phones. A phone company entered into a written contract with a cleetch manufacturer to purchase 1,000 cleetches for the total contract price of $100,000. After the 1,000 cleetches were manufactured, the phone company received a telephone call from the manufacturer. During their conversation, the manufacturer told the phone company that the manufacturer would not deliver the cleetches unless the phone company agreed to pay an additional $5 per cleetch. Reluctantly, the phone company agreed to pay the additional $5 per cleetch. Following their phone conversation, the manufacturer authorized the delivery of the 1,000 cleetches to the phone company. After the transmitter devices were accepted by the phone company, the phone company sent the manufacturer a check in the amount of $100,000. The manufacturer has made repeated demands for the additional $5,000, which the phone company refuses to pay. The manufacturer filed suit against the phone company to recover the additional $5,000.
Which of the following would provide the phone company with its best argument why it is not obligated to pay the $5,000?
(B) The manufacturer acted in bad faith in demanding the additional $5,000.
An employee successfully negotiated a lucrative contract for her employer. As a result, her employer orally promised her a $10,000 bonus payable at the end of the year because of the employee’s “good work.” At the end of the year, the employer informed the employee that the company’s profits were not as large as he expected, so the promised bonus would not be paid.
Which of the following is the legal effect of the employer’s promise to pay the bonus to the employee?
(A) It is enforceable, because the employee conferred a material benefit on the employer by negotiating the lucrative contract.
(B) It is enforceable, because the employer was morally obligated to pay the bonus.
(C) It is unenforceable, because it was not supported by legally sufficient consideration.
(D) It is unenforceable, because it was not in writing.
(C) It is unenforceable, because it was not supported by legally sufficient consideration.
A six-year-old girl was kidnapped outside her home in a small town. Following the girl’s abduction, her parents publicly announced a $50,000 reward to anyone responsible for the apprehension of the kidnapper. The girl’s abductor was described as a Caucasian male between the ages of 25 and 30 with curly blond hair. He also was identified as having a pentagram tattoo on his left arm. One afternoon, an off-duty police officer from a nearby town stopped at a local fast-food restaurant for lunch. The officer was aware of the kidnapping, but was unaware of the reward. Once he entered the restaurant, the police officer noticed a man fitting the description of the kidnapper. The police officer proceeded to arrest the individual, who, in fact, turned out to be the girl’s abductor. After the girl was found unharmed, the police officer learned of and requested the $50,000 reward. However, the girl’s parents refused to pay the police officer the reward money.
If the police officer brings suit against the girl’s parents to recover the $50,000 reward, for whom should the court enter judgment?
(A) The police officer, because he accepted the offer by apprehending the kidnapper.
(B) The police officer, because he was off duty when the apprehension occurred.
(C) The girl’s parents, because the officer was unaware of the reward when he apprehended the kidnapper.
(D) The girl’s parents, because recovery of a reward by a police officer is against public policy.
(C) The girl’s parents, because the officer was unaware of the reward when he apprehended the kidnapper.
A sixteen-year-old high school student loved classic rock and roll music from the 1950’s and 1960’s and had developed a collection of rare vinyl records, which he sometimes sold to private collectors for a profit. One evening, a plumber came to the student’s family’s home to fix a leak in the bathroom and caught a glimpse of the student’s extensive record collection. When the plumber inquired about the records, the student explained that he had an “eye” for valuable classic records, and that because he purchased them at very low prices, he was able to pass on his savings on to his customers. Impressed with the student’s apparent expertise, the plumber asked whether the student had come across a particular record by a musical group popular in the early 1950’s. The student had not, but told the plumber that he would keep an eye out for the record and contact the plumber if one became available. The plumber told the student that he would be willing to pay $450 for the record, and the student agreed.
Several weeks later, the student noticed the record for sale in a used music store, and he purchased it immediately. Upon examining the record, he saw that the record had a number of flaws, and would probably be classified as in “Good” condition, a relatively average rating used to place a value on vinyl records. Nevertheless, the student contacted the plumber and told him that he’d found a “Near Mint” condition copy of the record - the second-best condition possible for a used record. The plumber again expressed that would pay the student $450 for the record, and the student told the plumber that he could come immediately to collect the record. Upon doing so, the plumber noticed that the record’s condition was not truly “Near Mint,” and he expressed his disappointment to the student. However, since the record was quite rare, the plumber told the student that he would still pay him the agreed-upon $450. At that point, the student realized that the record might be even more valuable than he had suspected, and he told the plumber that he had changed his mind and intended to keep it for himself.
Can the plumber specifically enforce the agreement for the purchase and sale of the record?
A. Yes, because even a minor can be held legally responsible for his misrepresentations.
B. Yes, because by contacting the plumber regarding the record, the student ratified his prior agreement to sell the plumber the record.
C. No, because the contract was merely executory.
D. No, because the student had the power to disaffirm the contract.
D. No, because the student had the power to disaffirm the contract.
Discussion of correct answer: Under the modern law of most states, an “infant” or minor - that is, a person under the age of eighteen (18) - may enter into a contract; however, barring certain limited exceptions, the contract is voidable at the option of the minor. The minor may, however, ratify the contract upon reaching the age of majority. Thus, a minor who enters into a contract has the power to disaffirm the contract. Upon exercising the right to disaffirm a contract, the minor is obligated to return to the other party any goods received under the contract. Here, given that the student was only sixteen years old when he entered into the agreement with the plumber for the sale of the vinyl record, the contract was voidable at the option of the student. Because the student exercised his power to disaffirm the contract, it cannot be specifically enforced by the plumber. As such, this answer is correct.
A television station’s weekend news anchorwoman was scheduled to do her usual weekend work on November 5-7. Unfortunately, she came down with acute laryngitis and emailed the station manager that she would be unable to work that weekend. On November 1, the station manager mailed letters to three freelance anchors, offering to pay a $500 bonus if one of them could take over the anchor duties for that weekend on short notice. One of the freelance anchors received the letter the next day and immediately dropped a note in the mail: “I would love to work for you next weekend. As a matter of fact, I need to! I’m a month behind in my rent and worried about getting evicted. Hope you don’t mind that I’ve dyed my hair red since we last spoke, but I could get a quick blonde dye if you like.” After the freelance anchor sent the letter, but before the station manager received it, the regular anchor phoned the manager to tell her that, due to a new cough syrup she was trying, the anchor was recovering quickly and thought she would be able to do her usual weekend work. The station manager immediately phoned the freelance anchor to tell her she was no longer needed. The freelance anchor was very disappointed and sued the television station for breach of contract. The station asserted in its defense that there was no contract because the freelance anchor had never effectively accepted the station manager’s offer.
Will the station win on the grounds of this defense?
A. Yes, because the manager had the right to reject the freelance anchor’s attempted acceptance since it contained an additional term.
B. Yes, because there was no salary term contained in the freelance anchor’s letter.
C. No, because the station manager’s attempted revocation by telephone was not communicated through the same medium as the station manager’s offer.
D. No, because the freelance anchor dispatched the acceptance before the station manager attempted to revoke her offer.
D. No, because the freelance anchor dispatched the acceptance before the station manager attempted to revoke her offer.
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 and 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 to 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 owners offer.
B) Nothing, because it was no consideration to support contract.
C) $200, because the technical defense of the Statute of Frauds 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.
B) Nothing, because it was no consideration to support contract.
A quilter who had restored a rare Civil War-era quilt spoke with an old friend whose business was selling new and vintage quilts. When the friend learned of the quilter’s latest restoration, she told her that for 15% of the gross, she could find her a buyer, who would pay at least $5,000 for it. The quilter said nothing in reply. The next morning, the friend telephoned the quilter and told her that she had a prospective buyer who was willing to pay $5,200 for the quilt, sight unseen. The quilter asked for the buyer’s phone number, which the friend gave to her, and then called the buyer and arranged a sale. The quilter refused to pay her friend the 15% commission, disclosing to her that another party had expressed interest in the quilt and she instead could have sold it to that party for at least $5,200. The friend sues the quilter for breach of contract, seeking her 15% sales commission.
What will be the probable outcome?
A) The quilter will win, because 15% is unconscionably large as a finder’s fee in such a transaction.
B) The quilter will win, because there was no consideration for any promise to pay that might have been implied from her conduct.
C) The quilter will win, because she could have sold the quilt to another party who would pay at least $5,200 for it.
D) The friend will win, because she obtained a buyer for the quilt and a purchase price over $5,000 was paid.
D) The friend will win, because she obtained a buyer for the quilt and a purchase price over $5,000 was paid.
A homeowner offered to pay a roofer $500 to replace the bad shingles on his roof, provided the roofer could finish the job by October 1. The roofer told the homeowner he would get back to him after he had checked out prices at a local supply store. The next day, the roofer phoned the homeowner, who was not at home, and left a message on his answering machine that he could not do the work for less than $650. The roofer did not hear from the homeowner for several days. Because October 1 was still two weeks away, the roofer phoned the homeowner again and left another message on his answering machine stating that he would do the job for $500 and that he would do the work the next weekend unless that would be inconvenient for the homeowner. The homeowner replayed the second message just as he was leaving town on a business trip and did not contact the roofer. That weekend, unbeknownst to the homeowner, the roofer went to the homeowner’s house and repaired the roof. When the homeowner returned home, the roofer presented him with a bill for $500, which represented the actual value of the work done. The homeowner refused to pay the bill.
If the roofer sues solely for breach of contract, who will likely prevail?
A) The roofer, because he accepted the homeowner’s offer before the latter materially changed his position in reliance on the first telephone message.
B) The roofer, because the work he did was actually worth $500.
C) The homeowner, because there was no writing signed by the homeowner.
D) The homeowner, because he did not accept the roofer’s offer to do the roof repair for $500.
D) The homeowner, because he did not accept the roofer’s offer to do the roof repair for $500.
