MBE workshops Flashcards
A high-volume pleasure-boat retailer entered into a written contract to sell a customer a power boat for $120,000. The retailer could obtain from the manufacturer, for $90,500, as many of these boats as it could sell. As the contract provided, the customer paid the retailer $40,000 in advance and promised to pay the full balance on delivery of the boat. The contract contained no provision for liquidated damages. Prior to the agreed delivery date, the customer notified the retailer that he would be financially unable to conclude the purchase; the retailer thereafter resold the boat that the customer had ordered to a third person for $120,000 cash. If the customer sues the retailer for restitution of the $40,000 advance payment, which of the following should the court decide? (A) The customer’s claim should be denied, because, as the party in default, he is deemed to have lost any right to restitution of a benefit conferred on the retailer. (B) The customer’s claim should be denied, because, but for his repudiation, the retailer would have made a profit on two boat sales instead of one. (C) The customer’s claim should be upheld in the amount of $40,000 minus the amount of the retailer’s lost profit under its contract with the customer. (D) The customer’s claims should be upheld in the amount of $39,500 ($40,000 minus $500 as statutory damages under the UCC).
The customer should recover $40,000 minus the retailer’s lost profit. The correct measure of damages is the lost profits of the retailer. That amount should be deducted from the deposit and the balance returned. The UCC authorizes four different measures of damages when a buyer defaults after putting down a deposit. First, the Code allows the deposit to serve as liquidated damages if the contract so provides, within certain limits. However, this rule is inapplicable in this case because a liquidated damages clause was not included in the contract. Second, the Code provides in section 2-718(2) that when a deposit is given and there is no liquidated damages provision, the seller may keep 20% of the contract price or $500, whichever is less. In this case, the $500 limitation would control. However, if actual damages are more, as they are in this case, the seller may collect actual damages rather than the statutory amount. In section 2-708, the Code provides two measures of actual damages when the buyer defaults. The first is the traditional expectancy measure of damages, resale price minus contract price. In a case such as this, there are no damages under this measure because the boat was resold for the contract price. The second alternative under section 2-708 applies here. When the seller is a dealer and the traditional measure of damages is inadequate to put him in as good a position as he would be in if the sale went through, then the measure of damages is lost profit. Here, since the dealer could have ordered as many boats as there were buyers, he actually lost his profit on this sale. (A) is incorrect because even a defaulting party has the right to recover a portion of the deposit back in restitution if the amount of the deposit exceeds the contract damages to which the non-defaulting party is entitled. (B) is incorrect. While it is true that the retailer would have made profits on two boat sales instead of one if the customer had not defaulted, it did make the profit on the second sale, and cannot collect this from the customer. The lost profit on the first sale amounts to $29,500, less than the $40,000 advance. Therefore, the customer is entitled to $10,500, the difference between the amount of advance and the profit actually lost. (D) is incorrect because, as discussed above, actual damages allowed under UCC section 2-708 exceed the $500 allowed under UCC section 2-718(2), so the higher amount of damages would be awarded.
A mass marketer contracted with a political campaign to send out mass mailings to voters for $100,000. It subcontracted with a printer to print brochures for $20,000 over a period of several weeks. The printer would be paid on a weekly basis. After providing $15,000 of printing services the first few weeks, the printer unjustifiably refused to perform any additional work for the marketer. The marketer had paid the printer $10,000 to that point, and had to pay another printer $12,000 to print the balance of the brochures. The marketer sued the printer for breach of contract, and the printer counterclaimed for the reasonable value of the benefits conferred on the marketer and not paid. What will be the outcome of this litigation? (A) The printer should recover $5,000, the benefit conferred on the marketer for which the printer has not been paid. (B) The printer should recover $3,000, the benefit conferred on the marketer less the $2,000 in damages suffered by the marketer. (C) The marketer should recover $2,000, the excess it had to pay over the contract price to get the performance the printer had promised. (D) Neither party should recover anything, because the printer was in breach of contract and the marketer received $15,000 in printing services from the printer for $10,000.
The marketer should recover $2,000. The primary objective of contract damages is to put the nonbreaching party in the same position that he would have been in had the contract been performed. The normal measure of damages is expectation damages. The marketer has a legally enforceable right to have the work under the printer contract performed for $20,000. Because the marketer paid the printer $10,000 and needed to spend $12,000 to have the printing completed by a third party, the marketer has spent $22,000. This establishes the marketer’s right to seek $2,000 from the printer for its breach. (A) and (B) are incorrect because the purpose of contract damages is to put the nonbreaching party where he would have been had the promise been performed. For the printer to recover anything, he would have to prove that he is entitled to restitution. The breaching party will prevail in a restitution action only if the nonbreaching party seeks to keep the value of the benefit conferred without paying and, therefore, is unjustly enriched. The marketer had to pay $2,000 more than the price stated in the contract with the printer. The marketer was not unjustly enriched and, in fact, had damages of $2,000 from the breach. The printer’s costs are not relevant. The printer is not entitled to recover anything. (D) is incorrect. To provide no remedy to either party on the theory stated in (D) is to make the marketer pay a total of $22,000 for the performance that was promised by the printer for $20,000. The primary objective of contract damages is to put the nonbreaching party in the same position that he would have been in had the contract been performed. Therefore, this theory fails.
A landscaper entered into a written contract with a developer to landscape a 30-house subdivision at a price of $4,000 for each house. The contract provided for payment of the $120,000 only on completion of the landscaping for all the houses. After completing 20 houses, the landscaper demanded payment of $80,000. The developer refused. The landscaper then walked off the job without doing any landscaping on the other 10 houses. The developer refuses to pay the landscaper. If the landscaper sues the developer, what damages should the court award the landscaper? (A) Nothing, because payment was expressly conditioned on completing the landscaping of all the houses. (B) Nothing, because the landscaper’s breach is material. (C) $80,000, less the developer’s damages resulting from the breach. (D) The amount of the landscaper’s anticipated profit on the 20 houses completed.
The landscaper may recover $80,000 less the developer’s damages resulting from the breach. A contract is divisible if it is possible to apportion the parties’ performances into corresponding pairs. Here the landscaper’s and developer’s performances can be apportioned into corresponding pairs: for each house landscaped by the landscaper, there is a corresponding payment of $4,000 owed by the developer. The contract itself states the price as $4,000 per house, rather than $120,000 for the entire job. If a party performs some of the units of a divisible contract, he is entitled to the agreed-on price for those units even if he fails to perform the other units. However, the right to the contract price for the units performed is offset by the damages arising from the breach of the remaining units. (A) is incorrect because the provision for payment upon completion of all houses is construed by most courts as merely stating a time for payment rather than imposing a condition. This language does not establish that the parties intended the contract to be indivisible. (B) is incorrect because materiality of the breach does not affect the landscaper’s ability to recover under a divisible contract or in restitution. In any case, (A) and (B) are both incorrect because the developer would be unjustly enriched if he were allowed to keep the landscaping without paying for it. Thus, even if a court were to find that the contract was not divisible, the landscaper could recover in restitution either the reasonable value of the services he performed (the detriment suffered) or the increase in value of the properties (the benefit conferred). Under either measure, his recovery would again be offset by the developer’s damages incurred in completing the job. (D) misstates the proper measure of damages.
A shopkeeper loaned a long-time employee $1,500 from his personal bank account because a family illness was causing the employee unexpected financial difficulties. Because the employee had proved himself to be trustworthy, there was no writing evidencing the loan and no payback date established; it was understood that the employee would repay the loan when he was able to do so. Sometime later, the shopkeeper’s nephew asked him if he could help fund a business that he was starting up. Because most of the shopkeeper’s assets were currently tied up, he asked his employee if he would be in a position to repay the $1,500 loan. The employee promised to repay the loan on the following Monday, so the shopkeeper told the employee to pay the $1,500 directly to his nephew. Immediately thereafter, the shopkeeper informed the nephew to expect $1,500 from the employee on the following Monday. When Monday came, the employee decided he would rather tender the money to the shopkeeper than to someone he did not know, and the shopkeeper accepted the money. If the nephew never receives any money from the shopkeeper, will he succeed in an action against the employee for the $1,500? (A) Yes, because the shopkeeper effectively assigned his right to collect the $1,500 to the nephew. (B) No, because the shopkeeper’s acceptance of the $1,500 from the employee revoked the shopkeeper’s gift to the nephew. (C) No, because the assignment was unsupported by consideration and therefore never effective. (D) No, because the employee’s tender of the $1,500 to the shopkeeper and the shopkeeper’s acceptance of it constituted a novation.
The shopkeeper validly assigned his right to receive the money to his nephew. However, this assignment was revocable, and it was revoked when the shopkeeper accepted the money from the employee. A creditor’s right to receive money due from a debtor is a right that can be assigned, regardless of whether the debt is evidenced by a writing. By telling the employee to pay the money to the nephew, the shopkeeper manifested an intent to transfer his rights completely and immediately to the nephew. Neither a writing nor consideration was required for this assignment to be valid. However, these factors do not affect revocability. This assignment was not given for value. Such a gratuitous assignment is generally revocable. An exception to this rule arises when the assignor is estopped from revoking because he should reasonably foresee that the assignee will change his position in reliance on the assignment and such detrimental reliance occurs. Here, there is no indication that the nephew in fact changed his position detrimentally in reliance on the assignment. Consequently, the general rule of revocability of a gratuitous assignment applies. One way in which a gratuitous revocable assignment may be terminated is by the assignor taking performance directly from the obligor. By accepting the money from the employee, the shopkeeper (the assignor) took direct performance from the obligor, thereby revoking the assignment. As a result, the nephew has no right to the money. (A) is incorrect because it fails to account for the fact that, although the shopkeeper effectively assigned his right, he later revoked this assignment. (C) is incorrect because, as discussed in (B) above, a gratuitous assignment (i.e., an assignment not supported by consideration) is effective, although revocable except under certain circumstances not applicable here. (D) is incorrect because the facts do not indicate that there has been a novation. There is a novation when a new contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old contract. Here, the original agreement was between the employee and the shopkeeper. The employee’s payment of the money to the shopkeeper and the shopkeeper’s acceptance thereof did not substitute any new parties or extinguish contractual duties as between the original contracting parties. Thus, there was no novation.
A manufacturer and a buyer entered into a written contract for the manufacturer to produce and sell to the buyer 2,000 widgets at a price of $20 per widget. The contract expressly provided that the buyer shall have no liability under the contract unless 2,000 widgets are delivered to the buyer at his place of business no later than July 1. On July 1, 1,800 widgets meeting the buyer’s specifications were tendered by the manufacturer. The remaining 200 widgets were tendered on July 5. The buyer refused to accept any of the widgets. In an action by the manufacturer against the buyer, which of the following would best support the manufacturer’s case, assuming it can be proven? (A) The buyer had orally agreed, just prior to the time the written contract was executed, to accept and pay for partial deliveries of the widgets. (B) Widgets are a unique product produced only by the manufacturer and in a size and tolerance that varies with the needs of each purchaser. (C) Delivery of the 200 widgets on July 1 was delayed by a storm which disrupted the shipper’s activities, and was not the manufacturer’s fault. (D) A drop in the buyer’s credit rating from good to fair had caused the manufacturer not to produce and tender the full 2,000 widgets on or before July 1.
The storm delay would best support the manufacturer’s case. The storm may have made delivery on time impossible, which may excuse performance under the doctrine of impracticability of performance. This defense can be used not only to excuse performance totally, but also to excuse the delay in full performance. Impracticability discharges the duty to perform to the extent of the impracticability; so if the storm rises to the level of impracticability and prevented the delivery of the 200 widgets, the manufacturer’s duty to perform with respect to those widgets would be discharged. In other words, failure to make perfect tender would be excused to the extent of the short delivery. Of course, it is possible that the storm would not amount to impracticability or that the manufacturer assumed that risk, but this remains the manufacturer’s best argument because it is the only one with any possibility to succeed. (A) is incorrect because an oral agreement made prior to a written agreement on the same subject will not be admissible to alter the written agreement under the parol evidence rule. Therefore, the oral agreement does not modify the terms of the written contract, and this contention will not help the manufacturer’s case. (B) is incorrect. The fact that goods are specially made creates an exception to the Statute of Frauds, but it does not excuse the obligation to tender conforming goods in the correct quantity at or before the time specified for delivery. The perfect tender rule is incorporated into every contract for the sale of goods except where the contract specifies different terms or where there is an explicit installment contract. (D) is incorrect. If the buyer became insolvent, the manufacturer could, under the UCC, require that the buyer pay cash upon delivery or give assurances of payment. Here, however, the manufacturer has not requested that payments be made in cash or that the buyer give assurances. Moreover, the buyer only suffered a decrease in his credit rating; he is not insolvent. Therefore, the manufacturer would have had no basis for making either request. The manufacturer is not excused from performance by the buyer’s decreased credit rating.
An owner of a piece of waterfront property contracted in writing with a contractor to rebuild the owner’s dock in accordance with plans and specifications prepared by the owner. The agreed contract price was $50,000, $25,000 of which was payable on May 1 when the job was to commence and the balance due upon completion of the work. On March 1, the contractor notified the property owner that the contractor would lose money on the job at that price, and would not proceed with the work unless the property owner agreed to increase the price to $80,000. The property owner did not respond to the contractor, instead making a written contract with a third party to repair the dock, commencing May 1, for $60,000, which was the fair market cost of the work to be done. On May 1, both the contractor and the third party showed up at the dock to begin work, the contractor telling the property owner that he had decided to take the loss and would repair the dock for $50,000 as originally agreed. The property owner dismissed the contractor and allowed the third party to begin work on the dock. In a contract action by the contractor against the property owner, is the contractor likely to prevail? (A) Yes, because the property owner did not tell him before May 1 about the contract with the third party. (B) Yes, because he attempted to perform the contract as originally agreed. (C) No, because the contractor in legal effect committed a total breach of contract. (D) No, because the third party’s contract price was $20,000 lower than the $80,000 demanded by the contractor on March 1.
The property owner will prevail because the contractor breached. When the contractor notified the property owner on March 1 that he would not perform his obligations on a binding contract unless he was given more money, he committed an anticipatory breach. That breach gave the property owner the right both to terminate the contract and to engage a new contractor to complete the work. The property owner was not required to give notice to the contractor to exercise that right, which is why choice (A) is incorrect. (B) is incorrect because, as noted above, the contractor committed an anticipatory breach. That breach gave the property owner the right to terminate the contract and engage a new contractor to complete the work, without giving notice to the contractor. A repudiating party may at any time before his next performance is due withdraw his repudiation unless the other party has canceled, materially changed his position in reliance on the repudiation, or otherwise indicated that he considers the repudiation final. The contractor here attempted to withdraw his repudiation, but it was too late. By engaging the third party, the property owner has, as is his prerogative, treated the repudiation as an offer to rescind and treated the contract as discharged (canceled). Further, by obligating himself under a contract with a third party, the property owner materially changed his position and indicated that he considers the repudiation final. Thus, the contractor could not withdraw his repudiation and had no right to perform the contract. The fact that he showed up ready to perform the work on the day required by the contract is irrelevant. (D) is incorrect because the price at which the property owner was able to obtain a replacement contractor has no bearing on whether the property owner had the right to terminate the contractual rights of the original contractor. Indeed, after the contractor’s breach, he could have chosen not to have the dock repaired at all, or if the lowest bid was from someone who would only do the work for more than $80,000, he could have accepted that bid and charged the contractor for the difference between the contract price and the cost of the substitute performance.
A dealer in oriental rugs acquired an antique rug measuring 24 feet by 36 feet. A banker inspected the rug and orally agreed to buy it for the asking price of $65,000, provided he was successful in purchasing the house he was trying to buy, because it had a living room large enough to accommodate the rug. The sale agreement was later reduced to writing, but the provision concerning the purchase of the house was not included in the written agreement. If the banker is unsuccessful in acquiring the house he wants because the owner decided not to sell, and the dealer sues the banker for the purchase price, what is the most likely result? (A) The dealer will prevail because the original oral agreement need not be in writing to be enforceable. (B) The dealer will prevail because of the parol evidence rule. (C) The banker will prevail because he was unable to acquire the house he wanted. (D) The banker will prevail because the dealer is not entitled to specific performance.
The banker will prevail because he could not acquire the house. In general, the parol evidence rule bars oral evidence contradicting a written agreement which was intended to be a final and exclusive embodiment of the parties’ agreement. However, one exception to this general rule provides that parol evidence is admissible to show a condition precedent to the existence of a contract. Here, the contract between the banker and the dealer for the sale and purchase of the rug was only to be effective if the banker acquired the house he wanted. This condition precedent may be shown by the banker despite the fact that it was not reduced to writing. (A) is incorrect. This contract must be in writing because it is for the sale of goods of more than $500 in value. However, there is a written agreement here and the question is whether the written agreement precludes proof of the oral agreement. Under the parol evidence rule, a written agreement can prevent proof of an oral agreement even if the agreement does not have to be in writing. (B) is incorrect because a condition precedent to a written agreement’s enforceability may be shown by parol evidence. (D) is incorrect because specific performance is not the issue here; whether the contract is enforceable at all is the issue. If this contract is enforceable, specific performance may be available because the rug might be considered unique.
A catering company entered into a written contract with a dish supplier to purchase 5,000 plastic dishes at $.10 per dish. The contract called for the supplier to deliver the 5,000 dishes to the caterer on or before October 1. On October 1, the supplier delivered only 3,000 dishes to the caterer. The supplier informed the caterer that it was experiencing manufacturing delays and would deliver the other 2,000 dishes by October 31 at the latest. The caterer accepted delivery of the 3,000 dishes, but because it had a number of catering jobs lined up for early October, the caterer was forced to purchase 2,000 dishes from another supplier at a price of $.12 per dish. The supplier demanded that the caterer pay $300 for the 3,000 dishes delivered, but the caterer refused to pay anything. If the supplier sues the caterer for breach of contract, what will the supplier recover? (A) $300, the price under the contract for the 3,000 dishes that were delivered, with no deduction for the caterer’s extra cost, because the caterer waived its right to cover when it accepted the supplier’s tender without expressly reserving its rights. (B) The reasonable value of the 3,000 dishes that were delivered less $40, which is the extra cost incurred by the caterer to obtain the balance of the dishes. (C) $260, the price under the contract for the 3,000 dishes that were delivered less $40, which is the extra cost incurred by the caterer to obtain the balance of the dishes. (D) Nothing, because the supplier is in material breach of the contract until it tenders delivery of the last 2,000 dishes
The supplier will recover $260. Dishes are movable goods, and so Article 2 of the UCC applies. Under Article 2, when goods fail in any respect to conform to the contract, the buyer may accept the goods [UCC §2-601] and pay the contract price for the goods accepted [UCC §2-607]. However, the buyer has a right to offset its damages. When a seller fails to deliver goods as promised, the buyer may “cover” under UCC section 2-712 by making a reasonable purchase of substitute goods, and then may recover as damages the difference between the contract price and the “cover” price. Here, the difference between the contract price and the cover price is $40 (2,000 plates × $.02). (A) is incorrect because the UCC permits a buyer to accept a nonconforming or partial delivery without waiving the right to sue for damages; thus, there is no need for an express reservation of rights at the time the goods are accepted. (B) is incorrect because the correct measure of damages is not based on the reasonable value of the goods accepted, but rather on the contract price. [See UCC §2-607(1)] (D) is incorrect because the UCC requires that the buyer pay for any goods accepted. [UCC §2-607] The common law rule, which discharges the buyer’s obligation to pay if there has been a material breach, is displaced by UCC section 2-607.
A purchasing agent of a steel company invited bids from several coal companies for 10 lots of metallurgical coal. The coal company with the winning bid offered $750,000, which was substantially under the market price for metallurgical coal. The agent immediately made a written agreement with the coal company to carry out the purchase, but several weeks before the coal was to be delivered, the coal company notified the agent that it had made an arithmetical error in pricing the coal and that the price should have been $1 million. The coal company requested a price increase to $825,000, which the agent approved in writing. If the agent had no reason to believe that the coal company had made an error in its initial calculations, is the modification by which the steel company agreed to pay $825,000 enforceable? (A) Yes, because the request for the modification was made in good faith. (B) Yes, only if the coal company can establish that enforcement of the contract at the $750,000 price would be unconscionable. (C) No, because the coal company was under a preexisting duty to sell at $750,000. (D) No, unless the arithmetical error is tantamount to changed circumstances.
The modification is enforceable because it was made in good faith. Article 2 of the UCC applies because coal is a movable good. Under section 2-209 of the UCC, consideration is not required for an enforceable modification; however, any modification will be subject to the general Code requirement of good faith and fair dealing, which requires honesty in fact and conformity with reasonable commercial standards. It appears that the coal company was being honest in informing the agent of the clerical error and that both parties made the modification freely. There is no indication that the modified price is commercially unreasonable, despite the required assumption that the disparity was not sufficient to indicate any mistake to the agent. (B) is incorrect because it is not true that the law will only support modifications of otherwise unconscionable contracts. (C) is incorrect because UCC Article 2 abolishes the preexisting duty rule and the requirement of additional consideration to support a modification. (D) is incorrect because Article 2 does not require changed circumstances in order to support a valid modification. All that is required is good faith.
A debtor owed $50,000 to a creditor. One week before the statute of limitations was to expire, the debtor’s mother sent the creditor a letter stating that she was sure that her son was about to pay the debt, and that if her son did not pay, she would. Relying on the mother’s letter, the creditor allowed the statute of limitations to expire without bringing an action to recover the money. The debtor refused to pay the creditor. If the creditor brings suit against the mother for the $50,000, will he prevail? (A) No, because the statute of limitations has run against the son’s debt. (B) No, because the mother received no bargained-for exchange to support her promise. (C) Yes, because the creditor reasonably and foreseeably relied on the mother’s promise. (D) Yes, because of the main purpose exception to the statute of limitations.
The creditor will prevail. The mother made a gratuitous promise to the creditor; she received no consideration for it (she did not ask for anything in return for her promise). The creditor’s reliance in allowing the statute of limitations to lapse was not exchanged for the promise. However, even without consideration, under section 90 of the Restatement (Second) of Contracts, the creditor could enforce the mother’s promise because he reasonably and foreseeably relied on the promise in declining to sue the debtor within the limitations period. (A) is incorrect because, although the statute of limitations has run on the debtor’s debt, the creditor is not suing the debtor on his promise, but rather the mother on hers. (B) is incorrect because, while it is true that the mother received no consideration for her promise, the promise is enforceable under promissory estoppel principles. (D) is incorrect because there is no “main purpose” exception to the statute of limitations. The main purpose rule is an exception to the Statute of Frauds; however, that is not an issue here because the mother’s promise was in writing.
A large producer of bread wrote to a distributor of flour, asking, “How much will you charge to supply my needs for flour for the next year?” The distributor replied in writing that it could supply the producer with all the flour it would need next year at a specified price per pound. The producer wrote back, “Your offer to supply me with flour is hereby accepted, provided that you agree to a 10% discount if payment is made within 10 days from date of billing.” What should the producer’s reply concerning a 10% discount be characterized as? (A) An acceptance with a proposal for an additional term that does not become part of the contract unless the supplier expressly agrees. (B) An acceptance with a proposal for an additional term that, absent an objection, is part of the contract. (C) A proposed modification of the contract. (D) A rejection of the distributor’s offer.
The producer’s reply is a conditional acceptance, which is a rejection of the offer. This question deals with the “battle of the forms” provision of the UCC. Under section 2-207 of the UCC, an acceptance containing additional or different terms is effective unless the offeree expressly makes his acceptance conditional on assent by the offeror to the additional terms. When an acceptance is made expressly conditional on the acceptance of new terms, it is a rejection of the offer. The conditional acceptance is essentially a new offer, and the original offeror may form a contract by expressly assenting to the new terms. Here, the producer made his acceptance conditional on the distributor’s assent to the 10% discount. Thus, his communication is a rejection of the distributor’s offer. (A) is incorrect because this is not an acceptance. The rule stated in (A) is the one used for a nonmerchant when an acceptance contains an additional term. (B) would have been correct had the acceptance not been conditional. Because the parties are merchants, an acceptance with an additional term would result in the term becoming part of the contract unless (i) it materially altered the original terms of the offer; (ii) the offer had expressly limited acceptance to the terms of the offer; or (iii) the offeror objected to the terms within a reasonable time after notice of it. (C) is incorrect because at this point there is no contract to be modified; there is no acceptance of the offer.
After a difficult divorce, a mother wrote to her son and daughter the following: In consideration of your emotional support for me during that trying time and your love and affection for me, I promise to divide my estate between you in equal shares. You know you can count on your mother’s word. The daughter thereafter continued her usual practice of calling her mother once a week and visiting her at Christmas and on her birthday until her mother died three years later. Shortly after the funeral, the daughter learned that the mother’s will made the son the sole legatee. If the daughter sues the executor of the mother’s estate for one-half of that estate, based on the mother’s letter to her, will she win? (A) Yes, because she relied to her detriment on her mother’s promise by visiting her mother. (B) Yes, because her emotional support of her mother during the divorce proceedings constituted valid consideration for her mother’s promise. (C) Yes, because even though her mother’s letter is a promise to make a gift in the future, the promise is in writing and intended by her to be enforceable and therefore needs no consideration. (D) No, because the mother’s promise was not supported by consideration.
The daughter will lose because there is no consideration to support the promise. Promises to make gifts in the future are unenforceable even if they are in writing and are intended by the promisor to be enforceable. Hence, (C) is incorrect. A promise to make a gift does not involve a bargained-for exchange, and the requirement of consideration is not fulfilled. (A) is incorrect. This answer states the principle of promissory estoppel. Under the doctrine of promissory estoppel, where there is substantial detrimental reliance by a party on a promise of the promisor, the promise will be enforceable even absent consideration. It is unlikely that the daughter’s continuation of her calling and visiting her mother would constitute substantial detrimental reliance. Absent consideration or a substitute, the mother’s original promise would not be enforceable, and her daughter would be unsuccessful in her suit against the executor. (B) is incorrect because the emotional support given to the mother by her daughter was not bargained-for consideration. It was voluntarily given before there was any promise to leave property by will, and therefore does not make the promise enforceable. In order to be part of the bargain, the element of consideration must be part of the bargained-for exchange. Thus, if the mother had said to her daughter, “If you will give me emotional support, I will leave you half my estate,” the emotional support thereafter given by the daughter would have been bargained for by the mother in exchange for part of her estate. Because the daughter gave her support gratuitously before the promise, the mother’s promise did not induce the legal detriment, and was therefore not supported by consideration.
On September 1, an art collector offered to sell one of his expensive paintings to a buyer. The buyer, who was a friend of the collector, wanted a few days to make up her mind, so the collector and the buyer decided that the collector would keep his offer to her open until September 8 in exchange for a payment of $5. Later that week an art investor tendered to the collector double what he was asking for the painting. On the morning of September 8, the buyer telephoned the collector to tell him that she wanted the painting but his phone was out of order, so she wrote out a check for the agreedon amount and dropped it into a mailbox before leaving town. On September 9 the collector, not having heard from the buyer, sold the painting to the investor. Who is entitled to the painting? (A) The buyer, because she had a valid option contract with the collector and effectively accepted the collector’s offer to sell the painting. (B) The investor, because $5 is inadequate consideration for an option contract involving an expensive purchase such as this one. (C) The investor, because the collector sold the painting to the investor on September 9 before receiving the buyer’s check. (D) The collector, because a sale of goods priced at $500 or more must be in writing to be enforceable
The investor owns the painting. While it is true that the buyer had a valid option contract with the collector, she did not effectively accept the collector’s offer to sell the painting when she dropped the check into the mailbox on September 8. The majority view is that acceptance of an option is effective only when received by the offeror, so the usual “mailbox rule” does not apply to make the acceptance effective on dispatch. This means that the buyer did not effectively accept the option within the stated period, i.e., by September 8. When, as here, the time the offer will remain open is specified in the option, if it is not accepted within that time, the offer terminates due to lapse of time. (A) is incorrect because, as discussed above, the buyer does not own the painting because acceptance of an option is effective only when received by the offeror, and here the collector would not have received the buyer’s acceptance until it was too late. (B) is incorrect because the consideration exchanged by the offeree (the buyer) for the offeror’s (the collector’s) promise not to revoke need not be “adequate”—generally, consideration of any value is sufficient to support an option. (D) is incorrect because the collector sold the painting to the investor. While this choice accurately sets forth the Statute of Frauds rule for the sale of goods, the outcome of the dispute here does not turn on this issue. Perhaps if the collector had changed his mind about selling the painting to the investor, he could assert that the Statute of Frauds required the agreement to be in writing to be enforceable. However, the facts do not present that situation, nor do they indicate whether the sale was oral or in writing
