Illustrations (20-211)

Question 1

Physician provides emergency medical assistance to unconscious accident Victim. The services are medically appropriate and properly performed, but Victim dies without regaining consciousness. Physician seeks restitution from Victim’s Estate by the rule of this section. Resisting the claim, Estate argues that Physician’s unsuccessful intervention conferred no benefit; accordingly—and contrary to the rule of § 50(3)—restitution would leave Estate worse off (by the amount of Physician’s eventual recovery) than if Physician had not intervened.

Answer 1

The objection is misplaced. Medical services provided in an emergency are presumed to be desirable; though unrequested (the recipient having no opportunity to request them), they are valued for restitution purposes as if they had been requested. Physician is entitled to restitution from Estate in the amount of his reasonable and customary charge (Restatement (Third) Restitution and Unjust Enrichment 20)

Question 2

A acts in an emergency to save the lives of B and C, sustaining crippling injuries as a result. In gratitude for A’s assistance, B promises to pay him a weekly pension of $100.

Answer 2

B’s promise is unsupported by consideration, but it may nevertheless be enforceable as a matter of contract law. (If such a promise is enforceable, B’s recognition of the fact and value of the benefit conferred by A is a significant part of the rationale. See Restatement Second, Contracts § 86, Comment d, Illustration 7.) Unlike B, C makes no promise of compensation and later rejects A’s suggestion that he is entitled to a reward. A is possibly entitled to enforce B’s promise, but A has no claim in restitution against either B or C.(Restatement (Third) Restitution and Unjust Enrichment 20)

Question 3

Daughter, a minor living with and supported by her Parents, is injured in an automobile accident. She is transported by helicopter to Hospital where she receives emergency medical attention. Daughter lacks capacity to contract, and Hospital renders services before Parents can be informed.

Answer 3

Daughter and Parents are jointly liable in restitution to Hospital for the reasonable cost of Daughter’s care. Daughter’s liability to Hospital is within the rule of this section; Parents’ liability arises under § 22. (The law of the jurisdiction may identify primary and secondary liabilities of Parents and Daughter with respect to necessaries supplied to Daughter, and may require Hospital to establish Parents’ inability to pay before proceeding against Daughter. Such rules depend on principles of family law outside the scope of this Restatement.) (Restatement (Third) Restitution and Unjust Enrichment 20)

Question 4

Doctor is summoned by Bystander to attend accident Victim, who is lying unconscious. Doctor performs emergency surgery. Doctor’s reasonable and customary charge for the services rendered is $1000, which Victim refuses to pay.

Answer 4

Doctor has a claim in restitution for $1000 against Victim (Restatement (Third) Restitution and Unjust Enrichment 20)

Question 5

Doctor is summoned by Bystander to attend accident Victim, who is lying unconscious. The circumstances of the accident are such that both Bystander and Doctor act courageously and at great personal risk in coming to the aid of Victim. Doctor performs emergency surgery. Doctor’s reasonable and customary charge for the services rendered is $1000, which Victim refuses to pay

Answer 5

Their heroic intervention is not, in itself, a source of unjust enrichment. Bystander has no claim in restitution under this section, while Doctor’s entitlement to restitution is limited (as in Illustration 1) to his reasonable and customary charge of $1000 for professional services rendered (Restatement (Third) Restitution and Unjust Enrichment 20)

Question 6

Owner and Builder contract for specified work at a price of $235,000. Builder abandons the job after part performance, and Owner has the work completed by a third party. Builder sues Owner seeking damages for breach of contract or, in the alternative, restitution by the rule of this section. The jury finds that Builder committed a material breach; that the value of labor and materials furnished by Builder is $200,000, for which Owner has paid $150,000; that Owner has been obliged to spend a further $100,000 to have the work completed according to contract specifications; and that the value of the completed work is $260,000

Answer 6

Because Owner was entitled to have the work done for $235,000 (and has spent $250,000), Owner has not been unjustly enriched by Builder’s part performance (§ 36(2)). Builder has no claim in restitution. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 7

Painter agrees to paint Owner’s house for $20,000. During the course of the work, Owner makes progress payments of $15,000. When the job is 90 percent complete Painter demands another $10,000, announcing that he will suspend work until this additional sum is paid. Owner refuses, and Painter moves his equipment to another job across town. Owner has the work completed by someone else at a cost of $2000. Painter sues Owner in restitution.

Answer 7

The value of Painter’s work on a quantum meruit basis is $18,000. If Painter’s claim is not barred outright by his inequitable conduct, Painter might be able to demonstrate enrichment in the amount of $3000-in that Owner has obtained performance worth $20,000 for an aggregate expenditure of $17,000 (§ 36(2)). On the facts supposed, however, the court might reasonably allow $3000 in incidental damages to compensate Owner for the delay and aggravation caused by Painter’s willful breach. On this view there is no net benefit to Owner, and Painter is not entitled to restitution. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 8

Mechanic contracts with Owner on January 1 for the restoration of Owner’s 1931 Duesenberg roadster. The price of the work is $50,000, payable on completion; the job is to be completed by June 30; Owner may terminate the contract for lack of timely performance; Mechanic will pay liquidated damages of $100 for each day that the work remains unfinished after June 30. Mechanic performs only part of the work specified. On October 1, Owner regains possession of the vehicle by legal process, then has the work completed elsewhere at a cost of $25,000 and a further delay of three months. Mechanic sues Owner in restitution, offering to prove that his uncompensated work on the car had a reasonable value of $25,000.

Answer 8

The provision of the parties’ agreement fixing damages of $100 for each day of delay is valid and enforceable by the contract law of the jurisdiction. Calculating on the basis of 180 days’ delay, there is no net enrichment of Owner (and Mechanic has no claim in restitution) except to the extent that the value of Mechanic’s uncompensated labor and materials exceeds $18,000. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 9

A agrees to use his earthmoving equipment to clear and grade Blackacre, the property of B, making the land suitable for subdivision; in return, A will share in the proceeds from the sale of the improved lots. A improves a number of lots before the parties’ agreement dissolves in acrimony, each claiming breach by the other. Regulatory obstacles prevent sale of the lots as originally contemplated, with the result that neither party would be able to prove expectation damages from the other’s breach. A sues B seeking damages for breach of contract or, in the alternative, restitution by the rule of this section.

Answer 9

If B is liable for breach of contract, A is entitled to performance-based damages measured by the cost or value of his uncompensated services (§ 38), without regard to any resulting increase in the value of Blackacre. If on the other hand A is the party in default, A’s recovery under § 36 is limited to B’s net enrichment, which cannot exceed the increased value of Blackacre attributable to A’s services. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 10

Architect undertakes to prepare plans for Owner’s building for a fee of eight percent of the cost of construction. The parties’ agreement stipulates that the total cost of the building shall not exceed $1 million. Architect spends 250 hours preparing plans for a building that would cost at least $2 million to construct. The reasonable value of Architect’s services is $200 per hour. Owner makes no use of the plans and refuses to pay for them

Answer 10

Architect’s services have not resulted in Owner’s enrichment, and Architect has no claim in restitution. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 11

Purchaser agrees to buy a condominium apartment from Vendor, making an initial payment of $15,000 against the contract price of $150,000. Two months later, having discovered another apartment he likes better, Purchaser repudiates his agreement with Vendor and requests the return of his initial payment. Vendor promptly sells the apartment to another buyer for $160,000 and refuses to refund any money to Purchaser. The parties’ contract provides that “In the event of default by Purchaser, Vendor shall retain all sums of money paid hereunder as liquidated damages.” By the law of the jurisdiction, a clause in a real estate sales contract establishing liquidated damages for the purchaser’s default at 10 percent of the sales price is presumptively valid; the presumption may be rebutted by evidence that the vendor’s actual damages are substantially less than the amount stipulated by contract. Purchaser introduces evidence of the $10,000 realized by Vendor on resale of the apartment as proof that Vendor sustained no damages from the breach. Vendor offers evidence of incidental damages associated with the necessity of resale, but the damages established do not exceed $5000.

Answer 11

Purchaser has a claim in restitution to recover $10,000 of the $15,000 initial payment. If local law were more favorable to liquidated damages in this context, or if the court were free to presume (with reasonable limits) the existence of unquantifiable injury to the disappointed seller, restitution to Purchaser might be further reduced or denied altogether. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 12

On signing an agreement to buy Blackacre at a price of $100,000, Purchaser pays Vendor $5000. The parties’ agreement contains no provision specifying remedies in the event of default. Purchaser later changes her mind, repudiates the contract, and brings suit for restitution of $5000. In support of her claim, Purchaser proves only that Vendor resold the property, six months following Purchaser’s default, at a price of $110,000.

Answer 12

Purchaser’s liability for breach of contract is measured at the time of the breach; it is not reduced by a subsequent increase in the market value of Vendor’s property. For this reason, proof of a profitable resale is insufficient (by itself) to prove net enrichment of Vendor as a result of Purchaser’s down payment. Purchaser is not entitled to restitution. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 13

Buyer purchases standing timber on land owned by Seller. The price to Buyer is to be determined by the price Buyer eventually receives from the mill for the harvested timber. Buyer makes a substantial payment in advance, to be credited against the purchase price as subsequently determined. After half the timber has been harvested, the relationship breaks down. Buyer and Seller sue each other for breach of contract. The court determines that Buyer is liable to Seller for breach of contract; that Buyer’s default has caused damages to Seller of $30,000; and that Buyer’s payment to Seller exceeds Buyer’s payment obligation under the contract by $100,000.

Answer 13

Buyer’s claim in restitution is governed by the Uniform Commercial Code, which (as applied to these facts) authorizes Buyer to recover $70,000 from Seller. U.C.C. § 2-718(3). (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 14

Buyer agrees to purchase Seller’s used car for $10,000. Buyer pays $1000 down and promises to pay $9000 on taking delivery in 10 days. The parties’ agreement contains no provision specifying remedies in the event of default. Buyer is unable to finance the purchase and seeks return of his down payment. Seller refuses to return the money and resells the car to another purchaser for $12,000 cash.

Answer 14

Buyer’s claim in restitution is governed by the Uniform Commercial Code, which (as applied to these facts) displaces any inquiry into Seller’s net enrichment. Buyer is entitled to restitution of $500, being the amount of his payment less $500 in statutory liquidated damages. U.C.C. §§ 2-706(6), 2-718(2). (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 15

As part of its employment benefits for professional staff, Company offers (i) to make an interest-free loan to Employee to cover the cost of approved graduate education, (ii) to rehire Employee after the degree has been obtained, and (iii) to forgive the principal of the loan if Employee remains with Company for 24 months thereafter. Employee borrows $20,000 under this program and obtains the intended degree; but on returning to work, Employee is assigned to a menial position at a reduced salary. Employee refuses this employment and refuses to repay the loan. The court determines that it was an implied but essential term of the parties’ agreement that Employee’s post-degree employment would be at least equal in salary and responsibility to the position previously occupied; that Employee’s loan obligation is not severable from the rest of the agreement; and that Company’s breach of contract has caused Employee $12,000 in damages

Answer 15

Company has a claim in restitution to recover $8000 from Employee (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 16

Borrower lends to its Franchisees and takes their promissory Notes. Borrower finances its loans by selling the Notes to Bank, while assuming an obligation to repurchase any Notes on which Franchisees might default. As part of the transaction, the parties create a “reserve account” to secure the performance of Borrower’s repurchase obligation. The agreement between Borrower and Bank provides that—in the absence of a default by Borrower—Borrower shall be entitled to any balance of the reserve account, once Bank has recovered its advances, interest, and fees. Borrower files for bankruptcy and rejects the executory contract with Bank (Bankruptcy Code § 365).

Answer 16

Because rejection constitutes a breach of contract by the debtor, Borrower cannot enforce the contract to recover the net surplus in the reserve account. By contrast, Borrower has a claim by the rule of this section to any surplus in the account once Bank has been indemnified. The inchoate restitution claim is part of Borrower’s bankruptcy estate. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 17

Member reserves a place on a “wilderness tour” of Alaska, organized by Society and operated by Carrier. Terms and conditions set forth in Society’s brochure specify that each reservation must be accompanied by a nonrefundable $500 deposit, and that the balance of $4500 per person must be paid not later than 30 days before the scheduled departure, on penalty of cancellation. Member instead pays the full price of $5000 six months in advance, then changes his mind and attempts to cancel the reservation 60 days before the tour is to begin. Society refuses to refund any part of the payment. On suit for restitution, Member establishes that Society made no payment to Carrier in respect of his reservation, and that the tour operated at full capacity, as the place he paid for was resold to someone on a waiting list. Interpreting the parties’ agreement, the court concludes that Society made no promise, express or implied, to make any refunds in respect of a canceled reservation; but also that the parties agreed to no forfeiture or liquidated damages beyond the $500 deposit that was stated to be nonrefundable. The rule of this section applies a fortiori to authorize Member’s claim, since Member would be entitled to restitution had he paid something less than the full contract price.

Answer 17

Member can recover $4500 from Society by the rule of this section. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 18

A and his wife B move onto C’s farm. By written agreement, they undertake to care for C and C’s property for the rest of her life, in exchange for C’s promise to leave them her real and personal property by will. Relations between the parties are harmonious for several years: A and B are conscientious caretakers, and C makes a will in accordance with her promise. Later, following a domestic dispute, A and B terminate the arrangement and vacate the premises. In subsequent litigation between the parties, the court determines that A and B breached their contract with C; but that (given the difficulty of apportioning blame for the breakdown in the relationship) their wrongful termination did not cause compensable injury

Answer 18

A and B have a claim in restitution to the reasonable value of their services and expenditures in the care of C and her property, net of the compensation they have already received—in the form of room and board—over the course of the relationship. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 19

A is employed by B Co. as regional manager, receiving a monthly salary plus a commission on B’s sales in A’s region. The commission is calculated and paid quarterly in arrears. On April 15, B discovers that A has been engaged since February 15 in organizing a new company to compete with B. B immediately discharges A and refuses to pay him further compensation. A sues B to recover commissions on sales from January 1 to April 15. The court determines that (i) A was in breach of his duty of loyalty to B on February 15 and thereafter, but (ii) A continued to perform valuable services for B until the date of his discharge.

Answer 19

A has a claim in restitution for the commissions otherwise payable in respect of sales prior to February 15. A’s restitution claim in respect of services performed after that date is precluded by A’s inequitable conduct toward B. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 20

Attorney represents Client in litigation on a contingent-fee basis. Becoming dissatisfied with Attorney’s handling of the matter, Client discharges Attorney and retains another lawyer to take over the representation. When substitute counsel obtains a favorable settlement, Attorney sues Client to recover a fee.

Answer 20

Attorney’s remedy depends on whether his discharge was with or without cause. Because public policy demands that a client be free to discharge an attorney, there is no breach of contract by Client in either event. If Attorney was discharged without cause, Attorney is entitled to restitution as if he had been performing under an unenforceable contract (§ 31): he recovers the reasonable value of his interrupted services in quantum meruit (§ 50(2)(b)). If Attorney was discharged with cause, his claim to a fee is within the rule of this section. As such it is limited to the net benefit, if any, conferred on Client by Attorney’s interrupted services. (If Client has been obliged to pay the same contingent fee to substitute counsel, the services of an attorney previously discharged for cause are not a source of benefit to Client.) If Attorney’s performance prior to discharge for cause involved professional misconduct, the claim in restitution may be denied on that account (§ 36(4)). (Restatement (Third) Restitution and Unjust Enrichment 36

Question 21

Attorney represents Client in litigation on a contingent-fee basis. Becoming dissatisfied with Attorney’s handling of the matter, Client discharges Attorney and retains another lawyer to take over the representation. Client obtains no recovery on its underlying claim, and no contingent fee is payable to successor counsel.

Answer 21

If Attorney was discharged without cause, he may or may not be entitled to restitution for the value of his interrupted services, depending on the court’s assessment of the reasons for the failure of Client’s underlying claim. If Attorney was discharged for cause he has no claim to have conferred a net benefit. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 22

Attorney represents Client in litigation on a contingent-fee basis. Attorney recommends that Client accept a settlement offer that Client rejects. Attorney withdraws from the representation. Client engages other counsel and eventually obtains a settlement; Attorney sues Client to recover a fee. The court finds that Attorney’s withdrawal was without justification and a violation of Attorney’s fiduciary duty to Client.

Answer 22

Although Attorney’s services conferred a net benefit on Client, Attorney is not entitled to restitution. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 23

Builder and Owner contract for the remodeling of Owner’s house at a price of $25,000. Work is interrupted when the project is 80 percent completed and $15,000 of the price has been paid. In subsequent litigation the parties accuse each other of breach. The court finds that there has been no substantial performance; Builder breached the contract by performing portions of the work in a manner that was not workmanlike. On the other hand, Builder furnished labor and materials having a value of $20,000 before performance was interrupted; and Owner’s cost to complete the work and correct the defects of Builder’s performance will not exceed $8000.

Answer 23

Builder has a claim in restitution to recover $2000. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 24

Builder and Owner contract for the construction of an apartment house at a price of $2 million. Upon completion of the work, when $1.5 million of the price has been paid, a final inspection reveals that the building fails to conform to specifications: Builder has placed floor joists 18 inches apart when the plans required joists every 12 inches. When Owner refuses to pay the balance of the price, Builder sues for breach of contract and (alternatively) for restitution by the rule of this section. The court finds that the Builder’s deviations from specifications constitute a material breach; in consequence, Builder has no claim on the contract. On the restitution claim, it is conceded that joists on 18-inch centers are standard for construction of this type, and that the difference in the appraised value of the property as a result of the nonconformity is nil. The court finds, however, that the deviation from specifications was intentional and fraudulent: Builder’s object was to economize on labor and materials by making unauthorized changes that would not be readily apparent.

Answer 24

The fact that Builder’s inequitable conduct resulted in no diminution in the value of the structure is irrelevant. Builder is not entitled to restitution. (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 25

Builder agrees to install a swimming pool in Owner’s backyard. Pools of this type are normally eight feet deep, a depth that is adequate for diving and meets all building code requirements. Such a pool costs $25,000. Owner informs Builder that, for reasons of personal preference, he wants a pool nine feet deep. Builder agrees to construct a nine-foot pool at a cost of $30,000, payable $10,000 in advance and the balance on completion. Builder’s foreman misreads the order, and the completed pool is only eight feet deep. Owner refuses to pay the balance of the price. Builder sues Owner in restitution, seeking the $25,000 price of an eight-foot pool less $10,000 already paid. Builder establishes by expert testimony that the eight-foot pool is fully as suitable as a nine-foot pool for all uses to which Owner or anyone else will put it. The difference in depth makes no difference to the appraised value of Owner’s property, to which the completed pool has added $15,000. Owner can prove no quantifiable damages as a result of Builder’s breach. Because the depth of the pool is an element of Builder’s performance for which Owner specifically bargained, however, restitution by the rule of this section (measured by the usual price or market value of Builder’s labor and materials) would subject Owner to an unacceptable forced exchange, imposing the very bargain that Owner had rejected. A court sympathetic to Builder might permit him to recover instead by the rule of § 10.

Answer 25

Treating the eight-foot pool as a mistaken improvement yields a recovery of $5000 in restitution ($15,000 added value less $10,000 already paid). (Restatement (Third) Restitution and Unjust Enrichment 36)

Question 26

A writes and signs in pencil a receipt for $1,000 which recites that the money is received from B as part payment of the price of $5,000 for a parcel of land.

Answer 26

The receipt is a sufficient memorandum to charge A on the agreement recited. (131. General Requisites of a Memorandum)

Question 27

A and B enter into an oral contract by which A promises to sell and B to buy such of A’s iron in his millyard as he may decide to sell. A memorandum describes the subject matter of the contract as “all A’s iron which he may decide to sell.”

Answer 27

The description is sufficient (131. General Requisites of a Memorandum)

Question 28

A and B enter into an oral contract for the sale and purchase of Blackacre. An otherwise sufficient memorandum, signed by A and B, describes the subject matter as “the land on the corner of X and Y Streets,” omitting any statement as to the city or state. A owns only one of the four lots at the intersection.

Answer 28

The description is sufficient. (131. General Requisites of a Memorandum)

Question 29

A and B enter into a written contract for the employment of B as A’s sales manager for a term of two years. At the end of the two years, A and B orally agree to extend the employment for three more years at an increased salary. A year later A signs the following memorandum: “It is understood that the arrangements made for employment of B in our business on January 1, 1977, for a period of three years from that date at a salary of $30,000 per year, continues in force until January 1, 1980.”

Answer 29

The memorandum sufficiently identifies the nature of B’s employment. (131. General Requisites of a Memorandum)

Question 30

A and B are negotiating for the sale of A’s restaurant to B. B gives A a check for $500 bearing the notation “Tentative deposit on tentative purchase of 1415 City Line Ave., Phila. Restaurant, Fixtures, Equipment, Good Will.” Later A and B orally agree on terms of sale.

Answer 30

The quoted memorandum is not sufficient to indicate that a contract for sale has been made. (131. General Requisites of a Memorandum)

Question 31

A and B enter into an oral contract for the sale of Blackacre by A to B. A memorandum is made and signed which states sufficiently the parties, subject matter and terms of the oral bargain except that, though the parties in fact orally agreed that the price should be payable on delivery of a deed, the memorandum contains no statement as to when the price is payable.

Answer 31

The memorandum is sufficient (131. General Requisites of a Memorandum)

Question 32

A and B enter into an oral contract for the sale of Blackacre by A to B, and both sign a memorandum providing for a “purchase money mortgage in the amount of $18,000 payable for 15 years at 5%.” B claims a right to pay $142.35 per month; A claims a payment of $100 a month plus monthly interest at 5%. No usage is shown.

Answer 32

The memorandum is not sufficient to support an action by B for specific performance on his terms. (131. General Requisites of a Memorandum)

Question 33

A signs and sends to B a letter stating that he is interested in leasing a parcel of land from B. After six months of negotiations A and B orally agree on an eight-year lease of the parcel with an option to purchase, and both sign a memorandum which is sufficient except that it does not identify the land.

Answer 33

The two documents together constitute a sufficient memorandum to charge A (132. Several Writings)

Question 34

A and B enter into an oral contract within the Statute. A memorandum of the contract is made on two sheets of paper. The contents of the sheets do not show that they belong together, but A signs one and then fastens the sheets together with a clip.

Answer 34

Even though the clip is later removed, the fastening is a sufficient adoption of A’s signature with reference to both sheets to charge A, but only if the evidence of the fastening is clear and convincing (132. Several Writings)

Question 35

A and B make an oral contract within the Statute. A sends to B a written acceptance, stating the terms, on a form bearing A’s name as a printed heading. At the foot of the form is the word “Accepted” followed by a blank space for signature, which is not filled in.

Answer 35

In the absence of other evidence of intention, the form is not signed by A (134. Signature)

Question 36

A and B make an oral contract within the Statute. A writes a memorandum stating the terms which begins, “I, A, make the following contract with B.” A then delivers the memorandum to B

Answer 36

This is A’s signature if the trier of fact infers A’s intent to authenticate the writing (134. Signature)

Question 37

A and B make an oral contract within the Statute. A clerk makes a written statement of the contract, and A writes at the top thereof—”O.K.” followed by A’s initials.

Answer 37

This is a signature by A (134. Signature)

Question 38

A has a number of forms of letters printed ending with the words, “Yours very truly, A.” With A’s authority a clerk fills in one of the forms with the terms of an offer to B and sends it to B. B accepts orally.

Answer 38

A’s printed name is his signature (134. Signature)

Question 39

A contracts to sell and B to buy a tract of land, the value of which has depended mainly on the timber on it. Both A and B believe that the timber is still there, but in fact it has been destroyed by fire

Answer 39

The contract is voidable by B (152. When Mistake of Both Parties Makes a Contract Voidable)

Question 40

A offers to sell B goods shipped from Bombay ex steamer “Peerless.” B accepts. There are two steamers of the name “Peerless” sailing from Bombay at materially different times. B means Peerless No. 2, and A has reason to know this. A means Peerless No. 1, but B has no reason to know this.

Answer 40

Under the rule stated in § 20 there is a contract for the sale of goods from Peerless No. 2, but, under the rule stated in this Section, if the court determines that its enforcement would be unconscionable, it is voidable by A. See Illustration 4 to § 20 (153. When Mistake of One Party Makes a Contract Voidable)

Question 41

A, seeking to induce B to make a contract to buy land, knows that B does not know that the land has been filled with debris and covered but does not disclose this to B. B makes the contract.

Answer 41

A’s non-disclosure is equivalent to an assertion that the land has not been filled with debris and covered, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164 (161. When Non-Disclosure is Equivalent to an Assertion)

Question 42

A, seeking to induce B to make a contract to buy A’s house, knows that B does not know that the house is riddled with termites but does not disclose this to B. B makes the contract.

Answer 42

A’s non-disclosure is equivalent to an assertion that the house is not riddled with termites, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. (161. When Non-Disclosure is Equivalent to an Assertion)

Question 43

A, seeking to induce B to make a contract to buy a food-processing business, knows that B does not know that the health department has given repeated warnings that a necessary license will not be renewed unless expensive improvements are made but does not disclose this to B. B makes the contract.

Answer 43

A’s non-disclosure is equivalent to an assertion that no warnings have been given by the health department, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164 (161. When Non-Disclosure is Equivalent to an Assertion)

Question 44

A, seeking to induce B to make a contract to sell land, knows that B does not know that the land has appreciably increased in value because of a proposed shopping center but does not disclose this to B. B makes the contract.

Answer 44

Since B’s mistake is not one as to a basic assumption (see Comment b to § 152 and Comment b to § 261), A’s non-disclosure is not equivalent to an assertion that the value of the land has not appreciably increased, and this assertion is not a misrepresentation. The contract is not voidable by B. See Illustration 13 (161. When Non-Disclosure is Equivalent to an Assertion)

Question 45

In response to B’s invitation for bids on the construction of a building according to stated specifications, A submits an offer to do the work for $150,000. A believes that this is the total of a column of figures, but he has made an error by inadvertently omitting a $5,000 item, and in fact the total is $155,000. B knows this but accepts A’s bid without disclosing it.

Answer 45

B’s non-disclosure is equivalent to an assertion that no error has been made in the total, and this assertion is a misrepresentation. Whether the contract is voidable by A is determined by the rule stated in § 164. See Illustrations 1 and 2 to § 153. See also Comment a to § 167 (161. When Non-Disclosure is Equivalent to an Assertion)

Question 46

In answer to an inquiry from “J.B. Smith Company,” A offers to sell goods for cash on delivery. A mistakenly believes that the offeree is John B. Smith, who has an established business of good repute, but in fact it is a business run by his son, with whom A has refused to deal because of previous disputes. The son learns of A’s mistake but accepts A’s offer without disclosing his identity.

Answer 46

The son’s non-disclosure is equivalent to an assertion that the business is run by the father, and this assertion is a misrepresentation. Whether the contract is voidable by A is determined by the rule stated in § 164. See Illustration 11 to § 153. See also Comment a to § 167 (161. When Non-Disclosure is Equivalent to an Assertion)

Question 47

A, seeking to induce B to make a contract to sell A land, learns from government surveys that the land contains valuable mineral deposits and knows that B does not know this, but does not disclose this to B. B makes the contract.

Answer 47

A’s non-disclosure does not amount to a failure to act in good faith and in accordance with reasonable standards of fair dealing and is therefore not equivalent to an assertion that the land does not contain valuable mineral deposits. The contract is not voidable by B (161. When Non-Disclosure is Equivalent to an Assertion)

Question 48

A, seeking to induce B to make a contract to sell A land, learns of valuable mineral deposits from trespassing on B’s land and not from government surveys. A knows that B does not know this, but does not disclose this to B. B makes the contract.

Answer 48

A’s non-disclosure is equivalent to an assertion that the land does not contain valuable mineral deposits, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164 (161. When Non-Disclosure is Equivalent to an Assertion)

Question 49

A delivers a fur coat to B for storage and receives a warehouse receipt which purports on its face to set forth the terms of the storage contract

Answer 49

By accepting the receipt, whether or not A reads it or understands it, A assents to its terms (211. Standardized Agreements)

Question 50

A sells plant bulbs to B. Later A delivers the bulbs with an invoice containing contractual language. B writes on a copy of the invoice “picked up October 27th” and signs his name.

Answer 50

The invoice terms are not part of the contract. (211. Standardized Agreements)

Question 51

A ships goods via B, a carrier. B carries an insurance policy with C, an insurance company, and with C’s authority issues to A a certificate that A’s shipment is insured under the policy. The policy contains a clause excluding coverage of trips on the Great Lakes unless approved by D, an individual, but this clause is not referred to in the certificate or known to A

Answer 51

It is not part of the contract between A and C (211. Standardized Agreements)