Illustrations (213-)

Question 1

A orally agrees to sell a city lot to B. The city is installing a sidewalk in front of the lot, and A orally agrees to pay the cost to be assessed by the city in an amount not exceeding $45. B then retains a lawyer to draw up a written agreement, and A and B execute it, A without reading it. The agreement provides that A will pay all costs of the installation of the sidewalk, but does not mention any dollar limit.

Answer 1

If the written agreement is a binding integrated agreement, any agreement for a $45 limit is discharged (213. Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule))

Question 2

In May A and B exchange properties and agree orally that A will make certain repairs on the property to be conveyed by A to B, the repairs to be finished by October 1. A and B then draw up and sign a memorandum of the repair agreement, specifying all the terms except that the memorandum is silent as to time of performance

Answer 2

If the memorandum is a binding completely integrated agreement, the agreement to finish by October 1 is discharged, and the repairs are to be finished within a reasonable time. The oral agreement as to October 1 may be relevant evidence as to what is a reasonable time (213. Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule))

Question 3

A, in an integrated contract with B, promises B to sell certain goods to be manufactured by A, and B promises to pay the “total cost.”

Answer 3

Previous negotiations may establish the meaning of “total cost.” (214. Evidence of Prior or Contemporaneous Agreements and Negotiations)

Question 4

A and B make an integrated contract by which A promises to sell and B to buy goods “ex Peerless.”

Answer 4

Evidence is admissible to show that there are two ships of that name, which one each party meant, and, in case of misunderstanding, whether either had knowledge or reason to know of the other’s meaning (214. Evidence of Prior or Contemporaneous Agreements and Negotiations)

Question 5

On June 1, A agrees to sell and B to buy goods to be delivered in October at a designated port. The port is subsequently closed by quarantine regulations during the entire month of October, no commercially reasonable substitute performance is available (see Uniform Commercial Code § 2-614(1)), and A fails to deliver the goods

Answer 5

A’s duty to deliver the goods is discharged, and A is not liable to B for breach of contract (261. Discharge by Supervening Impracticability)

Question 6

A contracts to produce a movie for B. As B knows, A’s only source of funds is a $100,000 deposit in C bank. C bank fails, and A does not produce the movie.

Answer 6

A’s duty to produce the movie is not discharged, and A is liable to B for breach of contract (261. Discharge by Supervening Impracticability)

Question 7

A and B make a contract under which B is to work for A for two years at a salary of $50,000 a year. At the end of one year, A discontinues his business because governmental regulations have made it unprofitable and fires B.

Answer 7

A’s duty to employ B is not discharged, and A is liable to B for breach of contract (261. Discharge by Supervening Impracticability)

Question 8

A contracts to sell and B to buy a specific machine owned by A to be delivered on July 30. On July 29, as a result of a creditor’s suit against A, a receiver is appointed and takes charge of all of A’s assets, and A does not deliver the goods on July 30.

Answer 8

A’s duty to deliver the goods is not discharged, and A is liable to B for breach of contract (261. Discharge by Supervening Impracticability)

Question 9

A, who has had many years of experience in the field of salvage, contracts to raise and float B’s boat, which has run aground. The contract, prepared by A, contains no clause limiting A’s duty in the case of unfavorable weather, unforeseen circumstances, or otherwise. The boat then slips into deep water and fills with mud, making it impracticable for A to raise it.

Answer 9

If the court concludes, on the basis of such circumstances as A’s experience and the absence of any limitation in the contract that A prepared, that A assumed an absolute duty, it will decide that A’s duty to raise and float the boat is not discharged and that A is liable to B for breach of contract. (261. Discharge by Supervening Impracticability)

Question 10

A contracts to repair B’s grain elevator. While A is engaged in making repairs, a fire destroys the elevator without A’s fault, and A does not finish the repairs.

Answer 10

A’s duty to repair the elevator is discharged, and A is not liable to B for breach of contract. See Illustration 3 to § 263 (261. Discharge by Supervening Impracticability)

Question 11

A contracts with B to carry B’s goods on his ship to a designated foreign port. A civil war then unexpectedly breaks out in that country and the rebels announce that they will try to sink all vessels bound for that port. A refuses to perform.

Answer 11

Although A did not contract to sail on the vessel, the risk of injury to others is sufficient to make A’s performance impracticable. A’s duty to carry the goods to the designated port is discharged, and A is not liable to B for breach of contract. Compare Illustration 5 to § 262 (261. Discharge by Supervening Impracticability)

Question 12

A contracts with B to carry B’s goods on his ship to a designated foreign port. A civil war then unexpectedly breaks out in that country and the rebels announce that they will confiscate all vessels found in the designated port. The goods can be bought and sold on markets throughout the world. A refuses to perform.

Answer 12

Although there is no risk of injury to persons, the court may conclude that the risk of injury to property is disproportionate to the ends to be attained. A’s duty to carry the goods to the designated port is then discharged, and A is not liable to B for breach of contract. If, however, B is a health organization and the goods are scarce medical supplies vital to the health of the population of the designated port, the court may conclude that the risk is not disproportionate to the ends to be attained and may reach a contrary decision (261. Discharge by Supervening Impracticability)

Question 13

A contracts to employ B as his confidential secretary for a year. B dies before the end of the year.

Answer 13

B’s duty to work for A is discharged, and B’s estate is not liable to A for breach of contract (262. Death or Incapacity of Person Necessary for Performance)

Question 14

A contracts to employ B as his confidential secretary for a year. A dies before the end of the year, and B takes other employment

Answer 14

B’s duty to work for A is discharged, and B is not liable to A’s estate for breach of contract. (262. Death or Incapacity of Person Necessary for Performance)

Question 15

A, a corporation, contracts to employ B as its secretary for five years. Within that time the state legislature enacts a law requiring the dissolution of corporations engaged in A’s business.

Answer 15

On dissolution, A’s duty to employ B is discharged, and A is not liable to B for breach of contract. See also § 264. B may have a claim against A under the rule stated in § 272(1) (262. Death or Incapacity of Person Necessary for Performance)

Question 16

A, a corporation, contracts to employ B as its secretary for five years. Within that time, A’s dissolution is voluntary or the result of insolvency.

Answer 16

A’s duty to employ B is not discharged, and A is liable to B for breach of contract. See Comment b and Illustration 3 to § 261. Cf. Illustration 5 to § 319(262. Death or Incapacity of Person Necessary for Performance)

Question 17

A contracts with B to produce a play starring C, a famous actor, in B’s theater on December 16. Early in December, while the play is being performed elsewhere, C experiences a worsening throat condition and, although it does not prevent his performing, he is advised by his doctor to cancel his further performances and have a minor operation. On December 12, A notifies B that the December 16 performance of the play is cancelled for this reason.

Answer 17

A’s duty to produce the play is discharged, and A is not liable to B for breach of contract. Compare Illustration 7 to § 261 (262. Death or Incapacity of Person Necessary for Performance)

Question 18

A contracts with B to cut a tract of standing timber. A dies, and his estate refuses to complete performance.

Answer 18

In the absence of special circumstances showing that A’s personal service or supervision is necessary to performance of his duty, A’s duty to cut the timber is not discharged, and A’s estate is liable to B for breach of contract (262. Death or Incapacity of Person Necessary for Performance)

Question 19

A and B make a contract under which A is to devote full time to prospecting for coal on B’s land, and, if he is successful, B personally is to finance and manage a corporation for the exploitation of the coal. B is to pay A a salary and convey to him a one-quarter interest in any resulting corporation. A locates coal and is paid his salary, but B dies before he is able to finance and manage a corporation to exploit it, and no such corporation is formed.

Answer 19

Whether performance of B’s duty to finance and manage a corporation became impracticable on B’s death depends on whether that duty, as understood by the parties, could only be performed by B himself. If the court concludes that it could, B’s duty to convey an interest in any resulting corporation is discharged, and B’s estate is not liable to A for breach of contract. A may have a claim against B under the rule stated in § 272(1) (262. Death or Incapacity of Person Necessary for Performance)

Question 20

A and B, a firm of architects, contract with C to design a building for C. It is understood by the parties that both A and B shall render services under the contract. A dies and B fails to complete performance.

Answer 20

Both A’s and B’s duties to design the building are discharged, and neither A’s estate nor B is liable to C for breach of contract (262. Death or Incapacity of Person Necessary for Performance)

Question 21

A and B, a firm of contractors doing an extensive business in many localities, contract with C to fill a tract of low land. A dies and B fails to complete performance.

Answer 21

Neither A’s nor B’s duty to fill the land is discharged, and both A’s estate and B are liable to C for breach of contract (262. Death or Incapacity of Person Necessary for Performance)

Question 22

A contracts to sell and B to buy cloth. A expects to manufacture the cloth in his factory, but before he begins manufacture the factory is destroyed by fire without his fault. Although cloth meeting the contract description is available on the market, A refuses to buy and deliver it to B.

Answer 22

A’s duty to deliver the cloth is not discharged, and A is liable to B for breach of contract. See Illustration 12 to § 261; compare Illustration 7 to this Section (263. Destruction, Deterioration or Failure to Come into Existence of Thing Necessary for Performance)

Question 23

A contracts to sell and B to buy cloth to be manufactured in the factory that is later destroyed. A expects to manufacture the cloth in his factory, but before he begins manufacture the factory is destroyed by fire without his fault.

Answer 23

A’s duty to deliver the cloth is discharged, and A is not liable to B for breach of contract (263. Destruction, Deterioration or Failure to Come into Existence of Thing Necessary for Performance)

Question 24

A contracts with B to shingle the roof of B’s house. When A has done part of the work, much of the house including the roof is destroyed by fire without his fault, so that he is unable to complete the work.

Answer 24

A’s duty to shingle the roof is discharged, and A is not liable to B for breach of contract. Compare Illustration 6 to § 261 (263. Destruction, Deterioration or Failure to Come into Existence of Thing Necessary for Performance

Question 25

A contracts with B to build a house for B. When A has done part of the work, much of the structure is destroyed by fire without his fault. A refuses to finish building the house

Answer 25

A’s duty to build the house is not discharged, and A is liable to B for breach of contract (263. Destruction, Deterioration or Failure to Come into Existence of Thing Necessary for Performance)

Question 26

A contracts to sell a specified machine to B for $10,000. Before A tenders the machine to B, a fire destroys it without A’s fault.

Answer 26

A’s duty to deliver the machine is discharged (Uniform Commercial Code § 2-613), and A is not liable for breach of contract. Compare Illustration 4 to § 267 (263. Destruction, Deterioration or Failure to Come into Existence of Thing Necessary for Performance)

Question 27

A contracts with B to drive logs to B’s mill during the following spring. Although the contract does not specify a particular stream, the parties know that there is only one stream down which the logs can be driven. An extraordinary drought dries that stream up during the time for performance.

Answer 27

A’s duty to drive the logs is discharged, and A is not liable to B for breach of contract (263. Destruction, Deterioration or Failure to Come into Existence of Thing Necessary for Performance)

Question 28

A, a farmer, contracts with B in the spring to sell a large quantity of beans to B during the following season. Although the contract does not state where the beans are to be grown, A owns but one tract of land, on which he has in the past raised beans, and both parties understand that the beans will be raised on this tract. A properly plants and cultivates beans on the tract in sufficient quantity to perform the contract, but an extraordinary flood destroys the crop. A delivers no beans to B.

Answer 28

A’s duty to deliver beans is discharged, and A is not liable to B for breach of contract. Compare Illustration 1 to this Section; Illustration 12 to § 261 (263. Destruction, Deterioration or Failure to Come into Existence of Thing Necessary for Performance)

Question 29

A, a farmer, contracts with B in the spring to sell a large quantity of beans to B during the following season. A and B have no common understanding as to where the beans will be grown. A properly plants and cultivates beans on the tract in sufficient quantity to perform the contract, but an extraordinary flood destroys the crop. A delivers no beans to B.

Answer 29

A’s duty to deliver beans is not discharged, and A is liable to B for breach of contract (263. Destruction, Deterioration or Failure to Come into Existence of Thing Necessary for Performance)

Question 30

A sells land to B, who, as part of the contract, promises that the land shall not be built upon. The land is taken by eminent domain under statutory authority and a building is built on it.

Answer 30

B’s duty not to build on the land is discharged, and B is not liable to A for breach of contract (264. Prevention by Governmental Regulation or Order)

Question 31

A, a railroad, promises to give B annual passes for life, in consideration for a conveyance of land by B to A. After thirteen years, a statute is enacted forbidding railroads to grant such passes, and A refuses to give further passes to B.

Answer 31

A’s duty to give passes is discharged, and A is not liable to B for breach of contract. B may have a claim against A under the rule stated in § 272(1) (264. Prevention by Governmental Regulation or Order)

Question 32

A, a manufacturer of sewage treatment equipment, contracts to design and install a central sewage treatment plant, for which B, a developer of a residential subdivision, contracts to pay. The parties understand that A must obtain the approval of the state Department of Health before installation. A is unable to install the plant because the Department of Health disapproves the plans

Answer 32

If the court concludes, on the basis of A’s experience and the absence of any limitation in the contract, that A assumed the risk that approval would be denied, it will decide that A’s duty to install the plant is not discharged and that A is liable to B for breach of contract. Cf. Illustration 3 to § 266 (264. Prevention by Governmental Regulation or Order)

Question 33

A contracts with B to sell him a specific machine on a stated day, time being of the essence. C, by false allegations of ownership of the machine, induces a court to enjoin A from delivering the machine. In spite of diligent efforts, A is unable to have the injunction dissolved in time to fulfill his contract with B

Answer 33

A’s duty to deliver the machine is discharged, and A is not liable to B for breach of contract. The result would be different if due to A’s fault C had just grounds for obtaining the injunction, or if A, in breach of his duty of good faith and fair dealing (§ 205), failed to use diligent efforts which could have secured its dissolution. See Comment d to § 261 and Illustration 11 to that section.(264. Prevention by Governmental Regulation or Order)

Question 34

A and B make a contract under which A is to employ B for a year. B is unable to complete his performance because he is arrested and imprisoned for a burglary that he has committed

Answer 34

Because his inability was due to his own fault, B’s duty to work for a year is not discharged, and B is liable to A for breach of contract. See Comment d to § 261.(264. Prevention by Governmental Regulation or Order)

Question 35

A and B make a contract under which B is to pay A $1,000 and is to have the use of A’s window on January 10 to view a parade that has been scheduled for that day. Because of the illness of an important official, the parade is cancelled. B refuses to use the window or pay the $1,000

Answer 35

B’s duty to pay $1,000 is discharged, and B is not liable to A for breach of contract. (265. Discharge by Supervening Frustration)

Question 36

A contracts with B to print an advertisement in a souvenir program of an international yacht race, which has been scheduled by a yacht club, for a price of $10,000. The yacht club cancels the race because of the outbreak of war. A has already printed the programs, but B refuses to pay the $10,000.

Answer 36

B’s duty to pay $10,000 is discharged, and B is not liable to A for breach of contract. A may have a claim under the rule stated in § 272(1). (265. Discharge by Supervening Frustration)

Question 37

A, who owns a hotel, and B, who owns a country club, make a contract under which A is to pay $1,000 a month and B is to make the club’s membership privileges available to the guests in A’s hotel free of charge to them. A’s building is destroyed by fire without his fault, and A is unable to remain in the hotel business. A refuses to make further monthly payments.

Answer 37

A’s duty to make monthly payments is discharged, and A is not liable to B for breach of contract. (265. Discharge by Supervening Frustration)

Question 38

A leases neon sign installations to B for three years to advertise and illuminate B’s place of business. After one year, a government regulation prohibits the lighting of such signs. B refuses to make further payments of rent.

Answer 38

B’s duty to pay rent is discharged, and B is not liable to A for breach of contract. See Illustration 7 (265. Discharge by Supervening Frustration)

Question 39

A contracts to sell and B to buy a machine, to be delivered to B in the United States. B, as A knows, intends to export the machine to a particular country for resale. Before delivery to B, a government regulation prohibits export of the machine to that country. B refuses to take or pay for the machine.

Answer 39

If B can reasonably make other disposition of the machine, even though at some loss, his principal purpose of putting the machine to commercial use is not substantially frustrated. B’s duty to take and pay for the machine is not discharged, and B is liable to A for breach of contract. (265. Discharge by Supervening Frustration)

Question 40

A leases a gasoline station to B. A change in traffic regulations so reduces B’s business that he is unable to operate the station except at a substantial loss. B refuses to make further payments of rent.

Answer 40

If B can still operate the station, even though at such a loss, his principal purpose of operating a gasoline station is not substantially frustrated. B’s duty to pay rent is not discharged, and B is liable to A for breach of contract. The result would be the same if substantial loss were caused instead by a government regulation rationing gasoline or a termination of the franchise under which B obtained gasoline (265. Discharge by Supervening Frustration)

Question 41

A leases neon sign installations to B for three years to advertise and illuminate B’s place of business. After one year, a government regulation prohibits the lighting of such signs. The government regulation provides for a procedure under which B can apply for an exemption, but B, in breach of his duty of good faith and fair dealing (§ 205), fails to make such an application.

Answer 41

Unless it is found that such an application would have been unsuccessful, B’s duty to pay rent is not discharged, and B is liable to A for breach of contract. Cf. Illustration 11 to § 261; Illustration 3 to § 264. (265. Discharge by Supervening Frustration)

Question 42

A promises to pay B $1,000 if the Buckets win their basketball game with the Hoops, and B promises to pay A $2,000 if the Hoops win. A state statute makes wagering a crime and provides that a promise such as A’s or B’s is “void.”

Answer 42

A’s and B’s promises are unenforceable on grounds of public policy. Any claims of A or B to restitution for money paid under the agreement are governed by the rules stated in Topic 5. See § 199(b) and Illustrations 4 and 5 to that section (178. When a Term is Unenforceable on Grounds of Public Policy)