Illustrations (89- 347)

Question 1

By a written contract A agrees to excavate a cellar for B for a stated price. Solid rock is unexpectedly encountered and A so notifies B. A and B then orally agree that A will remove the rock at a unit price which is reasonable but nine times that used in computing the original price, and A completes the job.

Answer 1

B is bound to pay the increased amount (89. Modification of Executory Contract)

Question 2

A contracts to manufacture and sell to B 100,000 castings for lawn mowers at 50 cents each. After partial delivery and after B has contracted to sell a substantial number of lawn mowers at a fixed price, A notifies B that increased metal costs require that the price be increased to 75 cents. Substitute castings are available at 55 cents, but only after several months delay. B protests but is forced to agree to the new price to keep its plant in operation.

Answer 2

The modification is not binding (89. Modification of Executory Contract)

Question 3

A promises B not to foreclose, for a specified time, a mortgage which A holds on B’s land. B thereafter makes improvements on the land

Answer 3

A’s promise is binding and may be enforced by denial of foreclosure before the time has elapsed (90. Promise Reasonably Inducing Action or Forbearance)

Question 4

A sues B in a municipal court for damages for personal injuries caused by B’s negligence. After the one year statute of limitations has run, B requests A to discontinue the action and start again in the superior court where the action can be consolidated with other actions against B arising out of the same accident. A does so.

Answer 4

B’s implied promise that no harm to A will result bars B from asserting the statute of limitations as a defense (90. Promise Reasonably Inducing Action or Forbearance)

Question 5

A has been employed by B for 40 years. B promises to pay A a pension of $200 per month when A retires. A retires and forbears to work elsewhere for several years while B pays the pension

Answer 5

B’s promise is binding (90. Promise Reasonably Inducing Action or Forbearance)

Question 6

A applies to B, a distributor of radios manufactured by C, for a “dealer franchise” to sell C’s products. Such franchises are revocable at will. B erroneously informs A that C has accepted the application and will soon award the franchise, that A can proceed to employ salesmen and solicit orders, and that A will receive an initial delivery of at least 30 radios. A expends $1,150 in preparing to do business, but does not receive the franchise or any radios.

Answer 6

B is liable to A for the $1,150 but not for the lost profit on the 30 radios (90. Promise Reasonably Inducing Action or Forbearance)

Question 7

A and B orally agree to marry three years later

Answer 7

The contract is unenforceable because not to be performed within a year, even though it is excepted from the provision for contracts in consideration of marriage (110. Classes of Contracts Covered)

Question 8

A and B agree by an unsigned writing that A will sell Blackacre to B for $5,000. B pays the price to A as agreed, and A accepts the payment but refuses to transfer the land as agreed.

Answer 8

B is not entitled to specific performance, but can recover the amount of the payment (129. Action in Reliance; Specific Performance)

Question 9

A orally leases A’s farm to B for five years, agreeing that B will repair the premises at prevailing wages to be credited on the rent. B takes possession of the farm and does $1,000 worth of repair work, using material furnished by A. A then seeks to evict B.

Answer 9

B is entitled to $1,000 less the fair rental of the farm for the period of his occupancy, but is not entitled to specific performance or damages (129. Action in Reliance; Specific Performance)

Question 10

A and B make an oral agreement for the sale of Blackacre by A to B. With A’s consent B takes possession of the land, pays part of the price, builds a dwelling house on the land and occupies it. Two years later, as a result of a dispute over the amount still to be paid, A repudiates the agreement.

Answer 10

B may obtain a decree of specific performance (129. Action in Reliance; Specific Performance)

Question 11

A orally promises to make a gift of Blackacre to his son B and puts B in possession. With A’s consent B builds a dwelling house on the land and lives in it for twenty years until A dies, paying all taxes on the land.

Answer 11

B may obtain a decree of specific performance against A’s heir or personal representative (129. Action in Reliance; Specific Performance)

Question 12

A, an insurance company, orally promises to insure B’s house against fire for five years, B promising to pay the premium therefor within the week.

Answer 12

The contract is not within the Statute of Frauds, since if the house burns and the insurer pays within a year the contract will be fully performed (130. Contract Not to Be Performed Within a Year)

Question 13

A orally promises to work for B, and B promises to employ A during A’s life at a stated salary

Answer 13

The promises are not within the one-year provision of the Statute, since A’s life may terminate within a year (130. Contract Not to Be Performed Within a Year)

Question 14

A and B, a railway, agree that A will provide grading and ties and B will construct a switch and maintain it as long as A needs it for shipping purposes. A plans to use it for shipping lumber from adjoining land which contains enough lumber to run a mill for 30 years, and uses the switch for 15 years

Answer 14

The contract is not within the one-year provision of the Statute (130. Contract Not to Be Performed Within a Year)

Question 15

A orally promises B to sell him five crops of potatoes to be grown on a specified farm in Minnesota, and B promises to pay a stated price on delivery.

Answer 15

The contract is within the Statute of Frauds. It is impossible in Minnesota for five crops of potatoes to mature in one year (130. Contract Not to Be Performed Within a Year)

Question 16

A orally promises to work for B, and B promises to employ A for five years at a stated salary.

Answer 16

The promises are within the Statute of Frauds. Though the duties of both parties will be discharged if A dies within a year, the duties cannot be “performed” within a year. This conclusion is not affected by a term in the oral agreement that the employment shall terminate on A’s death (130. Contract Not to Be Performed Within a Year)

Question 17

A orally promises to work for B, and B promises to employ A for five years at a stated salary, and the agreement provides that either party may terminate the contract by giving 30 days notice at any time.

Answer 17

The agreement is one of uncertain duration and is not within the one-year provision of the Statute(130. Contract Not to Be Performed Within a Year)

Question 18

A orally promises to work for B, and B promises to employ A for five years at a stated salary, and the agreement provides that A may quit at any time.

Answer 18

The agreement is within the Statute (130. Contract Not to Be Performed Within a Year)

Question 19

A, the maternal grandmother of a new-born illegitimate child, agrees with B, the father, that A will care for the child and B will make support payments until the child becomes 21 years old.

Answer 19

The agreement is not within the one-year provision of the Statute. If the child dies within a year, the primary object of furnishing necessaries to the child will be fully “performed” (130. Contract Not to Be Performed Within a Year)

Question 20

A sells his grocery business to B, who pays part of the price and promises to pay the balance in a month, A agreeing orally not to engage in the grocery business in the same town for five years.

Answer 20

The contract is not within the one-year provision of the Statute, since A’s death within one year will give B the equivalent of full performance (130. Contract Not to Be Performed Within a Year)

Question 21

Without consideration A promises B that, so long as B buys through A B’s requirements for gasoline and A accepts B’s orders, A will pay B an amount equal to the discount other distributors would allow B. For several years A accepts orders from B.

Answer 21

A’s promise is not within the one-year provision, since a separate contract is made each time A accepts an order (130. Contract Not to Be Performed Within a Year)

Question 22

On December 1, 1966, A and B contract orally for A’s employment by B at a stated salary for a year beginning the following day.

Answer 22

The contract is not within the one-year provision, since the promised performance will be fully rendered before midnight of December 1, 1967 (130. Contract Not to Be Performed Within a Year)

Question 23

On December 1, 1966, A and B enter into an oral contract for the employment of A at a stated salary for the calendar year 1967. On the first working day in 1967, A presents himself for work, says “I understand these are the terms on which I am to be employed,” and restates the terms. B replies, “That is right.”

Answer 23

Though the original contract was within the Statute of Frauds, the subsequent restatement makes a new contract performable within a year (130. Contract Not to Be Performed Within a Year)

Question 24

A sells and delivers goods to B in return for B’s promise to pay $1,000 in six months, $1,000 in a year and $1,000 in eighteen months

Answer 24

B’s promises are not within the one-year provision of the Statute (130. Contract Not to Be Performed Within a Year)

Question 25

A promises to pay B $5,000 in two years in return for B’s promise to render a stated performance for five years. A pays the $5,000 as agreed. B then refuses further performance.

Answer 25

The contract is withdrawn from the operation of the Statute (130. Contract Not to Be Performed Within a Year)

Question 26

A and B contract orally for A’s employment by B at a stated salary for the ensuing two years. A works under the contract for 15 months when B discharges him without cause.

Answer 26

The contract is not withdrawn from the operation of the Statute, and A may not recover damages for wrongful discharge. But A may recover any unpaid salary (130. Contract Not to Be Performed Within a Year)

Question 27

A publishes in a newspaper an offer to buy certain goods, stating the terms of his proposal, and his name is printed under the advertisement. B accepts the offer

Answer 27

The advertisement is a sufficient memorandum to charge A (131. General Requisites of a Memorandum)

Question 28

A is lessee of a building for five years at $75 per month and has sublet it for three years at $100 per month. A seeks to induce B to purchase the building, and to that end orally promises to assign to B the lease and sublease and to execute a written assignment as soon as B obtains a deed. B purchases the building in reliance on the promise

Answer 28

B is entitled to the rentals from the sublease (139. Enforcement by Virtue of Action in Reliance)

Question 29

A is a pilot with an established airline having rights to continued employment, and could take up to six months leave without prejudice to those rights. He takes such leave to become general manager of B, a small airline which hopes to expand if a certificate to operate over an important route is granted. When his six months leave is about to expire, A demands definite employment because of that fact, and B orally agrees to employ A for two years and on the granting of the certificate to give A an increase in salary and a written contract. In reliance on this agreement A lets his right to return to his prior employer expire. The certificate is soon granted, but A is discharged in breach of the agreement.

Answer 29

The Statute of Frauds does not prevent recovery of damages by A (139. Enforcement by Virtue of Action in Reliance)

Question 30

A orally promises to pay B a commission for services in negotiating the sale of a business opportunity, and B finds a purchaser to whom A sells the business opportunity. A statute extends the Statute of Frauds to such promises, and is interpreted to preclude recovery of the reasonable value of such services.

Answer 30

The promise is not made enforceable by B’s reliance on it (139. Enforcement by Virtue of Action in Reliance)

Question 31

A renders services to B under an oral contract within the Statute by which B promises to pay for the services.

Answer 31

On discharge without cause in breach of the contract, A is entitled to the reasonable value of the services, but in the absence of additional circumstances is not entitled to damages for wrongful discharge (139. Enforcement by Virtue of Action in Reliance)

Question 32

A, an oil dealer, borrows $100,000 from B, a supplier, and agrees to buy all his requirements of certain oil products from B on stated terms until the debt is repaid. Before the debt is repaid, A makes a new arrangement with C, a competitor of B. Under the new arrangement A’s business is conducted by a corporation formed and owned by A and C and managed by A, and the corporation buys all its oil products from C.

Answer 32

The new arrangement may be found to be a subterfuge or evasion and a breach of contract by A (205. Duty of Good Faith and Fair Dealing)

Question 33

A, owner of a shopping center, leases part of it to B, giving B the exclusive right to conduct a supermarket, the rent to be a percentage of B’s gross receipts. During the term of the lease A acquires adjoining land, expands the shopping center, and leases part of the adjoining land to C for a competing supermarket

Answer 33

Unless such action was contemplated or is otherwise justified, there is a breach of contract by A (205. Duty of Good Faith and Fair Dealing)

Question 34

A Insurance Company insures B against legal liability for certain bodily injuries to third persons, with a limit of liability of $10,000 for an accident to any one person. The policy provides that A will defend any suit covered by it but may settle. C sues B on a claim covered by the policy and offers to settle for $9,500. A refuses to settle on the ground that the amount is excessive, and judgment is rendered against B for $20,000 after a trial defended by A. A then refuses to appeal, and offers to pay $10,000 only if B satisfies the judgment, impairing B’s opportunity to negotiate for settlement. B prosecutes an appeal, reasonably expending $7,500, and obtains dismissal of the claim.

Answer 34

A has failed to deal fairly and in good faith with B and is liable for B’s appeal expense (205. Duty of Good Faith and Fair Dealing)

Question 35

A and B contract that A will perform certain demolition work for B and pay B a specified sum for materials salvaged, the contract not to “become effective until” certain insurance policies “are in full force and effect.” A makes a good faith effort to obtain the insurance, but financial difficulty arising from injury to an employee of A on another job prevents A from obtaining them.

Answer 35

A’s duty to perform is discharged (205. Duty of Good Faith and Fair Dealing)

Question 36

B submits and A accepts a bid to supply approximately 4000 tons of trap rock for an airport at a unit price. The parties execute a standard form of “Invitation, Bid, and Acceptance (Short Form Contract)” supplied by A, including typed terms “to be delivered to project as required,” “delivery to start immediately,” “cancellation by A may be effected at any time.”

Answer 36

Good faith requires that A order and accept the rock within a reasonable time unless A has given B notice of intent to cancel (205. Duty of Good Faith and Fair Dealing)

Question 37

A contracts to perform services for B for such compensation “as you, in your sole judgment, may decide is reasonable.” After A has performed the services, B refuses to make any determination of the value of the services.

Answer 37

A is entitled to their value as determined by a court (205. Duty of Good Faith and Fair Dealing)

Question 38

A suffers a loss of property covered by an insurance policy issued by B, and submits to B notice and proof of loss. The notice and proof fail to comply with requirements of the policy as to form and detail. B does not point out the defects, but remains silent and evasive, telling A broadly to perfect his claim.

Answer 38

The defects do not bar recovery on the policy (205. Duty of Good Faith and Fair Dealing)

Question 39

A contracts to build a building for B on B’s land for $100,000. B repudiates the contract before either party has done anything in reliance on it. It would have cost A $90,000 to build the building.

Answer 39

A has an expectation interest of $10,000, the difference between the $100,000 price and his savings of $90,000 in not having to do the work. Since A has done nothing in reliance, A’s reliance interest is zero. Since A has conferred no benefit on B, A’s restitution interest is zero (344. Purposes of Remedies)

Question 40

A contracts to build a building for B on B’s land for $100,000. B does not repudiate until A has spent $60,000 of the $90,000. A has been paid nothing and can salvage nothing from the $60,000 he has spent.

Answer 40

A now has an expectation interest of $70,000, the difference between the $100,000 price and his saving of $30,000 in not having to do the work. A also has a reliance interest of $60,000, the amount that he has spent. If the benefit to B of the partly finished building is $40,000, A has a restitution interest of $40,000 (344. Purposes of Remedies)

Question 41

A, who is about to produce a play, makes a contract with B, an actor, under which B is to play the lead in the play at a stated salary for the season. A breaks the contract and has the part played by another actor.

Answer 41

B’s expectation interest includes the extent to which B’s reputation would have been enhanced if he had been allowed to play the lead in A’s play, as well as B’s loss in salary, both subject to the limitations stated in Topic 2 (344. Purposes of Remedies)

Question 42

A contracts to construct a monument in B’s yard for $10,000 but abandons the work after the foundation has been laid. It will cost B $6,000 to have another contractor complete the work. The monument planned is so ugly that it would decrease the market price of the house.

Answer 42

Nevertheless, B’s expectation interest is the value of the monument to him, which, under the rule stated in 348(2)(b), would be measured by the cost of completion, $6,000 (344. Purposes of Remedies)

Question 43

A makes a contract with B under which A is to pay B for drilling an oil well on B’s land, adjacent to that of A, for development and exploration purposes. Both A and B believe that the well will be productive and will substantially enhance the value of A’s land in an amount they estimate to be $1,000,000. Before A has paid anything, B breaks the contract by refusing to drill the well. Other exploration then proves that there is no oil in the region.

Answer 43

A’s expectation interest is zero (344. Purposes of Remedies)

Question 44

A contracts to publish a novel that B has written. A repudiates the contract and B is unable to get his novel published elsewhere.

Answer 44

Subject to the limitations stated in 350-53, B’s damages include the loss of royalties that he would have received had the novel been published together with the value to him of the resulting enhancement of his reputation (347. Measure of Damages in General)

Question 45

A, a manufacturer, contracts to sell B, a dealer in used machinery, a used machine that B plans to resell. A repudiates and B is unable to obtain a similar machine elsewhere.

Answer 45

Subject to the limitations stated in 350-53, B’s damages include the net profit that he would have made on resale of the machine (347. Measure of Damages in General)

Question 46

A contracts to employ B for $10,000 to supervise the production of A’s crop, but breaks his contract by firing B at the beginning of the season. B reasonably spends $200 in fees attempting to find other suitable employment throughout appropriate agencies.

Answer 46

B can recover the $200 incidental loss in addition to any other loss suffered, whether or not he succeeds in finding other employment (347. Measure of Damages in General)

Question 47

A leases a machine to B for a year, warranting its suitability for B’s purpose. The machine is not suitable for B’s purpose and causes $10,000 in damage to B’s property and $15,000 in personal injuries.

Answer 47

B can recover the $25,000 consequential loss in addition to any other loss suffered. See UCC 2-715(2)(b) (347. Measure of Damages in General)

Question 48

A contracts to build a hotel for B for $500,000 and to have it ready for occupancy by May 1. B’s occupancy of the hotel is delayed for a month because of a breach by A.

Answer 48

The cost avoided by B as a result of not having to operate the hotel during May is subtracted from the May rent lost in determining B’s damages (347. Measure of Damages in General)

Question 49

A contracts to build a house for B for $100,000. When it is partly built, B repudiates the contract and A stops work. A would have to spend $60,000 more to finish the house.

Answer 49

The $60,000 cost avoided by A as a result of not having to finish the house is subtracted from the $100,000 price lost in determining A’s damages. A has a right to $40,000 in damages from B, less any progress payments that he has already received (347. Measure of Damages in General)

Question 50

A contracts to build a house for B for $100,000. When it is partly built, B repudiates the contract and A stops work. A would have to spend $60,000 more to finish the house. A has bought materials that are left over and that he can use for other purposes, saving him $5,000.

Answer 50

The $5,000 cost avoided is subtracted in determining A’s damages, resulting in damages of only $35,000 rather than $40,000 (347. Measure of Damages in General).

Question 51

A contracts to convey land to B in return for B’s working for a year. B repudiates the contract before A has conveyed the land.

Answer 51

The value of land to A is subtracted from the value to A of B’s services in determining A’s damages (347. Measure of Damages in General)

Question 52

A contract to employ B for $10,000 to supervise the production of A’s crop, but breaks his contract by firing B at the beginning of the season. B instead takes another job as a supervisor at $9,500.

Answer 52

The $9,500 is subtracted from the $10,000 loss of earning in determining B’s damages (347. Measure of Damages in General)

Question 53

A contract to build a machine for B and deliver it to be installed in his factory by June 30. A breaks the contract and does not deliver the machine. B’s factory is destroyed by a fire on December 31, and the machine, if it had been installed there, would also have been destroyed.

Answer 53

The fact that the factory was burned is not considered in determining B’s damages (347. Measure of Damages in General)

Question 54

A contracts to send his daughter to B’s school for $5,000 tuition. After the academic year has begun, A withdraws her and refuses to pay anything. A’s breach does not reduce B’s instructional or other costs and B is unable to find another student to take the place of A’s daughter.

Answer 54

B has a right to damages equal to the full $5,000 (347. Measure of Damages in General)

Question 55

A contracts to build a house for B for $100,000, but repudiates the contract after doing part of the work and having been paid $40,000. Other builders would charge B $80,000 to finish the house, but B finds a builder in need of work who does it for $70,000.

Answer 55

B’s damages are limited to the $70,000 that he actually had to pay to finish the work less the $60,000 cost avoided or $10,000 together with damages for any loss caused by the delay (347. Measure of Damages in General)

Question 56

A contracts to employ B for $10,000 to supervise the production of A’s crop. A breaks the contract by firing B at the beginning of the season, and B, unable to find another job, instead takes a job as a farm laborer for the entire season at $6,000.

Answer 56

The $6,000 he made as a farm laborer is subtracted from the $10,000 loss of earnings in determining B’s damages (347. Measure of Damages in General)