Contracts Flashcards by Tom Travers

On May 1, an uncle mailed a letter to his adult nephew that stated, “I am thinking of selling my pickup truck, which you have seen and ridden in. I would consider taking $7,000 for it.” On May 3, the nephew mailed the following response: “I will buy your pick up for $7,000 cash.” The uncle received this letter on May 5 and on May 6 mailed a note that stated: “It’s a deal.” On May 7, before the nephew had received the letter of May 6, he phoned his uncle to report that he no longer wanted to buy the pickup truck because his driver’s license had been suspended.

Which of the following statements concerning this exchange is accurate?

(A) There is a contract as of May 3.
(B) There is a contract as of May 5.
(C) There is a contract as of May 6.
(D) There is no contract.

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On April 1, Owner and Buyer signed a writing in which Owner, “in consideration of $100 to be paid to Owner by Buyer,” offered Buyer the right to purchase Greenacre for $100,000 within 30 days. The writing further provided, “This offer will become effective as an option only if and when the $100 consideration is in fact paid.”

On April 20, Owner, having received no payment or other communication from Buyer, sold and conveyed Greenacre to Citizen for $120,000. On April 21, Owner received a letter from Buyer enclosing a cashier’s check for $100 payable to Owner and stating, “I am hereby exercising my option to purchase Greenacre and am prepared to close whenever you’re ready.”

Which of the following, if proved, best supports Buyer’s suit against Owner for breach of contract?

(A) When the April 1 writing was signed, Owner said to Buyer, “Don’t worry about the $100; the recital of ‘$100 to be paid’ makes this deal binding.

(B) On April 15, Buyer decided to purchase Greenacre, and applied for an obtained a commitment from Bank for a $75,000 loan to help finance the purchase.

(D) Owner and Buyer are both professional dealers in real estate.

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On December 15, Lawyer received from Stationer, Inc., a retailer of office supplies, an offer consisting of its catalog and a signed letter stating, “We will supply you with as many of the items in the enclosed catalog as you order during the next calendar year. We assure you that this offer and the prices in the catalog will remain firm throughout the coming year.” On January 15, having at that time received no reply from the lawyer, Stationer notified Lawyer that effective February 1, it was increasing the prices of certain specified items in its catalog.

Is the price increase effective with respect to catalog orders Stationer receives from Lawyer during the month of February?

(A) No, because Stationer’s original offer, including the price term, became irrevocable under the doctrine of promissory estoppel.

(B) No, because Stationer is a merchant with respect to office supplies, and its original offer, including the price term, was irrevocable throughout the month of February.

(D) Yes, because the period for which Stationer gave assurance that it would not raise prices was longer than three months.

(B) No, because Stationer is a merchant with respect to office supplies, and its original offer, including the price term, was irrevocable throughout the month of February.

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On June 1, a seller received a mail order from a buyer requesting prompt shipment of a specified computer model at the seller’s current catalog price. On June 2, the seller mailed to the buyer a letter accepting the order and assuring the buyer that the computer would be shipped on June 3. On June 3, the seller realized that he was out of that computer model and shipped to the buyer a different computer model and a notice of accommodation. On June 5, the buyer received the seller’s June 2 letter and the different computer model, but not the notice of accommodation.

At that juncture, which of the following is a correct statement of the parties’ legal rights and duties?

(A) The seller’s prompt shipment of nonconforming good constituted an acceptance of the buyer’s offer, thereby creating a contract for the sale of the replacement computer model.

(B) The buyer can either accept or reject the different computer model, but if he rejects it, he will thereby waive any remedy for breach of contract.

(C) The buyer can either accept or reject the different computer model and in either event recover damages, if any, for breach of contract.

(D) The seller’s notice of accommodation was timely mailed and his shipment of the different computer model constituted a counteroffer.

(C) The buyer can either accept or reject the different computer model ad in either even recover damages, if any, for breach of contract.

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On June 1, Topline Wholesale, Inc., received a purchase-order form from Wonder-Good, Inc., a retailer and new customer, in which the latter ordered 1,000 anti-recoil widgets for delivery no later than August 30 at a delivered total price of $10,000, as quoted in Topline’s current catalog. Both parties are merchants with respect to widgets of all types. On June 2, Topline mailed to Wonder-Good its own form, across the top of which Topline’s president had written, “We are pleased to accept your order.” This form contained the same terms as Wonder-Good’s form except for an additional printed clause in Topline’s form that provided for a maximum liability of $100 for any breach of contract by Topline.

As of June 5, when Wonder-Good received Topline’s acceptance form, which of the following is an accurate statement concerning the legal relationship between Toplne and Wonder-Good?

(A) There is no contract, because the liability-limitation clause in Topline’s form is a material alteration of Wonder-Good’s offer.

(B) There is no contract, because Wonder-Good did not consent to the liability-limitation clause in Topline’s form.

(C) There is an enforceable contract whose terms include the liability limitation clause in Topline’s form, because liquidation of damages is expressly authorized by the UCC.

(D) There is an enforceable contract whose terms do not include the liability limitation clause in Topline’s form.

(D) There is an enforceable contract whose terms do not include the liability-limitation clause in Topline’s form.

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Breeder bought a two-month-old registered boar at auction from Pigstyle for $800. No express warranty was made. Fifteen months later, tests by experts proved conclusively that the board had been born incurably sterile. If this had been known at the time of the sale, the boar would have been worth no more than $100. In an action by the Breeder against Pigstyle to avoid the contract and recover the price paid, the parties stipulate that, as both were and had been aware, the minimum age at which the fertility of the boar can be determined is about 12 months.

Which of the following will the court probably decide?

(A) Breeder wins, because Pigstyle impliedly warranted that the boar was fit for breeding.

(B) Breeder wins, because the parties were mutually mistaken as to the boar’s fertility when they made the agreement.

(D) Pigstyle wins, because any mistake involved was unilateral, not mutual.

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Mural, a wallpaper hanger, sent Gennybelle, a GC, this telegram: “Will do all paperhanging on new Doctor’s Office, per owner’s specs, for $14,000 if you accept within reasonable time after the main contract is awarded. /s/ Mural.

Three other competing hangers sent Gennybelle similar bids in the respective amounts of $18k, $19k, and $20k. Gennybelle used Mural’s $14k figure in preparing the bid.

Before the bids were opened, Mural truthfully advised Gennybelle that the former’s telegraphic sub-bid had been based on a $4k computation error and was therefore revoked. Shortly thereafter, Gennybelle was awarded the contract, and subsequently contracted with another paperhanger for a price of $18k. Gennybelle now sues Mural to recover $4k.

Which of the following, if proved, would best support Mural’s defense?

(A) Gennybell gave Mural no consideration for an irrevocable sub-bid.

(B) Even after paying $18k for the paperhanging, Gennybelle would make a net profit of $100k on the contract.

(C) Before submitting her own bid, Gennybelle had reason to suspect that Mural had made a computation error in figuring the sub-bid.

(D) Mural’s sub-bid expressly requested Gennybelle’s acceptance after awarding of the main contract.

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Loyal, age 60, who had made no plans for early retirement, had worked for Mutate, Inc., for 20 years as a managerial employee-at-will when he had a conversation with the company’s president, George Mutate, about Loyal’s post-retirement goal of extensive travel around the United States. A month later, Mutate handed Loyal a written, signed resolution of the company’s Board of Directors stating that when and if Loyal should decide to retire, at his option, the company, in recognition of his past service, would pay him a $2,000 per month lifetime pension. The company had no regularized retirement plan for at will employees. Shortly thereafter, Loyal retired and immediately bought a $30,000 RV for his planned travels. After receiving the promised $2,000 monthly pension for six months, Loyal, no unemployable elsewhere, received a letter cancelling his pension.

In a suit against Mutate, Inc., for breach of contract, Loyal will probably…

(A) Lose, because the board’s promise was an unenforceable gift promise.

(B) Lose, because he had been an employee at will throughout his time with the company.

(C) Win, because he retired from the company as bargained for consideration for which the Board’s promise to him of a lifetime pension.

(D) Win, because he timed his decision to retire and buy the RV, in reasonable reliance on the Board’s promise to him of a lifetime pension.

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A burglar stole Collecta’s impressionist painting valued at $400,000. Collecta, who had insured the paining for $300,000 with Artistic Insurance, Co., promised to pay $25,000 to Snoop, a full time investigator for Artistic, if he effected the return of the painting to her in good condition. By company rules, Artistic permits its investigators to accept and retain rewards from policyholders for the recovery of insured property. Snoop, by long and skillful detective work, recovered the picture and returned it undamaged to Collecta.

If Collecta refuses to pay Snoop anything, and he sues her for $25,000, what is the probable result under the prevailing modern rule?

(A) Snoop wins, because the pre-existing duty rule does not apply if the promisee’s duty was owed to a third person.

(B) Collecta wins, because Snoop owed Artistic a preexisting duty to recover the picture if possible.

(D) Collecta wins, because Artistic, Snoop’s employer, had a preexisting duty to return the recovered painting to Collecta.

(A) Snoop wins, because the pre-existing duty rule does not apply if the promisee’s duty was owed to a third person.

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An innkeeper, who had no previous experience in the motel or commercial laundry business and who knew nothing about the trade usages of either business, bought a motel and signed an agreement with a laundry company for the motel’s laundry services. The one-year agreement provided for “daily service at $500/week.” From their conversations during negotiation, the laundry company knew that the innkeeper expected laundry service seven days/week. When laundry company refused to pick up laundry on two successive Sundays and indicated that it would never do so, the innkeeper canceled the agreement. The laundry company sued to innkeeper for breach of contract. At trial, clear evidence was introduced to show that in the commercial laundry business “daily service” did not include service on Sundays.

Will the laundry company succeed in its action?

(A) No, because the laundry company knew the meaning the innkeeper attached to “daily service,” and therefore, the innkeeper’s meaning will control.

(B) No, because the parties attached materially different meanings to “daily service,” and, therefore, no contract was formed.

(C) Yes, because the parol evidence rule will not permit the innkeeper to prove the meaning she attached to “daily service.”

(D) Yes, because the trade usage will control the interpretation of “daily service.”

(A) No, because the laundry company knew the meaning the innkeeper attached to “daily service,” and therefore, the innkeeper’s meaning will control.

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A seller and a buyer have dealt with each other in hundreds of separate grain contracts over the last five years. in performing each contract, the seller delivered the grain to the buyer and, upon delivery, the buyer signed an invoice that showed an agreed upon price for that delivery. Each invoice was silent in regard to any discount from the price for prompt shipment. The custom of the grain trade is to allow a 2% discount from the invoice price for payment within 10 days of delivery. In all of their prior transactions and without objection from the seller, the buyer took 15 days to pay and deducted 5% from the invoice price. The same delivery procedure and invoice were used in the present contract as had been used previously. The present contract called for a single delivery of wheat at a price of $300,000. The seller delivered the wheat and the buyer then signed the invoice. On the third day after delivery, the buyer received the following note from the seller: “Payment in full in accordance with the signed invoice is due immediately. No discounts permitted.” /s/ Seller.

Which of the following statements concerning these facts is most accurate?

(A) Custom of the trade controls, and the buyer is entitled to a 2% discount if paid within 10 days.

(B) Course of dealing controls, and the buyer is entitled to a 5% discount if he pays within 15 days.

(D) The written contract controls, and the PE Rule prevents any discounts.

(B) Course of dealing controls, and the buyer is entitled to a 5% discount if he pays within 15 days.

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A buyer and a seller entered into a contract for the sale of 10,000 novelty bracelets. The seller had the bracelets in stock. The contract specified that the seller would ship the bracelets by a third party carrier. However, the contract did not specify either who was to pay the costs of carriage or the place of tender for the bracelets.

On the above facts, when would the risk of loss to the buyer.

(A) When the contract was made.

(B) When the bracelets were identified to the contract by the seller, assuming the goods conformed to the contract

(D) When the bracelets were unloaded on the buyer’s premises by the carrier.

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A seller owned a single family house. A buyer gave the seller a signed handwritten offer to purchase the house. The offer was unconditional and sufficient to satisfy the statute of frauds, and when the seller signed an acceptance an enforceable contract resulted. The house on the land had been the seller’s home, but he had moved to an apartment, so the house was vacant at all times relevant to the proposed transaction. Two weeks after the parties entered into their contract, one week after the buyer had obtained a written mortgage lending commitment from a lender, and one week before the agreed-upon closing date, the house was struck by lightning and burned to the ground. The loss was not insured because the seller had let his policy lapse after he paid his mortgage in full. The handwritten contract was wholly silent on matters of financing, risk of loss, and insurance. The buyer declared the contract voided by the fire, but the seller asserted a right to enforce the contract despite the loss. There is no applicable statute.

If a court finds for the seller, what is the likely reason?

(A) The contract was construed against the buyer, who drafted it.

(B) The RoL passed to the buyer on the contract date under doctrine of equitable conversion.

(D) The lender’s written commitment to make a mortgage loan to the buyer made the contract of sale fully binding on the buyer.

(B) The RoL passed to the buyer on the contract date under doctrine of equitable conversion.

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On March 1, a homeowner contracted a builder about constructing an addition to the homeowner’s house. The builder orally offered to perform the work for $200,000 if his pending bid on another project was rejected. The homeowner accepted the builder’s terms and the builder then prepared a written contract that both parties signed. The contract did not refer to the builder’s pending bid. One week later, upon learning that his pending bid on the other project had been accepted, the builder refused to perform any work for the homeowner.

Can the homeowner recover for nonperformance?

(A) Yes, because the builder’s attempt to condition his duty to perform rendered the contract illusory.

(B) Yes, because the parol evidence rule would bar the builder from presenting evidence of oral understandings not included in the final writing.

(D) No, because the builder’s duty to perform was subject to a condition.

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A landowner entered into a single contract with a builder to have three different structures built on separate pieces of property owned by the landowner. Each structure was distinct from the other two and the parties agreed on a specific price for each. After completing the first structure in accordance with the terms of the contract, the builder demanded payment of the specified price for that structure. At the same time, the builder told the
landowner that the builder was “tired of the construction business” and would not even begin the other two structures. The landowner refused to pay anything to the builder.

Is the builder likely to prevail in a suit for the agreed price of the first structure?

(A) Yes, because the contract is divisible, but the landowner will be able to deduct any recoverable damages caused by the builder’s failure to
complete the contract.

(B) Yes, because the contract is divisible, and the landowner will be required to bring a separate claim for the builder’s failure to complete the other two
structures.

(D) No, because the builder’s cessation of performance without legal excuse is a willful breach of the contract.

(A) Yes, because the contract is divisible, but the landowner will be able to deduct any recoverable damages caused by the builder’s failure to
complete the contract.

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On March 1, an excavator entered into a contract with a contractor to perform excavation work on a large project. The contract expressly required that the excavator begin work on June 1 to enable other subcontractors to install utilities. On May 15, the excavator requested a 30-day delay in the start date for the excavation work because he was seriously behind schedule on another project. When the contractor refused to grant the delay, the excavator stated that he would try to begin the work for the contractor on June 1.

Does the contractor have valid legal grounds to cancel the contract with the excavator and hire a replacement?

(A) Yes, because the excavator committed an anticipatory repudiation of the contract by causing the contractor to feel insecure about the performance.

(B) Yes, because the excavator breached the implied covenant of good faith and fair dealing.

(D) No, because the excavator did not state unequivocally that he would delay the beginning of his work.

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In a single writing, Painter contracted with Farmer to paint three identical barns on her rural estate for $2,000 each. The contract provided for Farmer’s payment of $6,000 upon Painter’s completion of the work on all three barns.
Painter did not ask for any payment when the first barn was completely painted, but she demanded $4,000 after painting the second barn.

Is Farmer obligated to make the $4,000 payment?

(A) Yes, because the contract is divisible.

(B) Yes, because Painter has substantially performed the entire contract.

(C) No, because Painter waived her right, if any, to payment on a per-barn basis by failing to demand $2,000 upon completion of the first barn.

(D) No, because Farmer has no duty under the contract to pay anything to Painter until all three barns have been painted.

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In a signed writing, Nimrod contracted to purchase a 25-foot travel trailer from Trailco for $15,000, cash on delivery no later than June 1. Nimrod arrived at the
Trailco sales lot on Sunday, May 31, to pay for and take delivery of the trailer, but refused to do so when he discovered that the spare tire was missing. Trailco offered to install a spare tire on Monday when its service department would open, but Nimrod replied that he did not want the trailer and would purchase another one elsewhere.

Which of the following is accurate?

(A) Nimrod had a right to reject the trailer and terminate the contract under the perfect tender rule.

(B) Nimrod was required to accept the trailer, because the defect could be readily cured.

(D) Nimrod had a right to reject the trailer, but Trailco was entitled to a reasonable opportunity to cure the defect.

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Fixtures, Inc., in a signed writing, contracted with Apartments for the sale to Apartments of 50 identical sets of specified bathroom fixtures, 25 sets to be delivered on March 1, and the remaining 25 sets on April 1. The agreement did not specify the place of delivery, or the time or place of payment. On March 1, Fixtures tendered 24 sets to Apartments and explained, “One of the 25 sets was damaged in transit from the manufacturer to us, but we will deliver a replacement within 5 days.

Which of the following statements is correct?

(A) Apartments must accept the 24 sets but is entitled to cancel the rest of the contract.

(B) Apartments is entitled to accept any number of the 24 sets, reject the rest, and cancel the contract both as to any rejected sets and the lot due on April 1.

(C) Apartments is entitled to accept any number of the 24 sets and to reject the rest, but is not entitled to cancel the contract as to any rejected sets or the lot due on
April 1.

(D) Apartments must accept the 24 sets and is not entitled to cancel the rest of the contract, but is entitled to any damage it has incurred as a result of the deficiency
in the installment.

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Buyer, Inc., contracted in writing with Shareholder, who owned all of XYZ Corporation’s outstanding stock, to purchase all of her stock at a specified price per
share. At the time this contract was executed, Buyer’s contracting officer said to Shareholder, “Of course, our commitment to buy is conditioned on our obtaining
approval of the contract from Conglomerate, Ltd., our parent company.” Shareholder replied, “Fine. No problem.” Shareholder subsequently refused to consummate the sale on the ground that Buyer
had neglected to request Conglomerate’s approval of the contract, which was true. Conglomerate’s chief executive officer, however, is prepared to testify that
Conglomerate would have routinely approved the contract if requested to do so. Buyer can also prove that it has made a substantial sale of other assets to finance the stock purchase, although it admittedly had not anticipated any such necessity when it entered into the stock purchase agreement.

If Buyer sues Shareholder for breach of contract, is Buyer likely to prevail?

(A) No, because the express condition of Conglomerate’s approval had not occurred prior to the lawsuit.

(B) No, because obtaining Conglomerate’s approval of the contract was an event within Buyer’s control and Buyer’s failure to obtain it was itself a material breach
of contract.

(C) Yes, because the condition of Conglomerate’s approval of the contract, being designed to protect only Buyer and Conglomerate, can be and has been waived by those entities.

(D) Yes, because Buyer detrimentally relied on Shareholder’s commitment by selling off other assets to finance the stock purchase.

(C) Yes, because the condition of Conglomerate’s approval of the contract, being designed to protect only Buyer and Conglomerate, can be and has been waived by those entities.

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On June 1, a seller agreed, in a writing signed by both the seller and the buyer, to sell an antique car to a buyer for $20,000. The car was at the time on display in a museum
in a different city and was to be delivered to the buyer on August 1. On July 15, before the risk of loss had passed to the buyer, the car was destroyed by fire without fault of
either party. Subsequent to the contract but before the fire, the car had increased in value to $30,000. The seller sued the buyer for the contract price of $20,000, and the
buyer counterclaimed for $30,000.

Which of the following will the court conclude?

(A) Both claims fail.

(B) Only the buyer’s claim prevails.

(D) Both claims prevail.

(A) Both claims fail.

A debtor’s liquidated and undisputed $1,000 debt to a creditor was due on March 1. On March 15, the creditor told the debtor that if the debtor promised to pay the $1,000 on or before December 1, then the creditor wouldn’t sue to collect the debt. The debtor orally agreed. On April 1, the creditor sued the debtor to collect the debt that had become due on March 1. The debtor moved to dismiss the creditor’s complaint.

Should the court grant the debtor’s motion?

(A) No, because there was no consideration to support the creditor’s promise.

(B) No, because there was no consideration to support the debtor’s promise to pay $1,000 on December 1.

(D) Yes, because the debtor was bargaining for the creditor’s forbearance

(A) No, because there was no consideration to support the creditor’s promise.

In a written contract, an architect agreed to draw up the plans for and to supervise construction of a client’s new house. In return, the client agreed to pay the architect a fee of $10,000 to be paid upon the house’s completion.
After completion, the client claimed erroneously but in good faith that the architect’s plans were defective. The client orally offered to pay the architect $7,500 in full settlement of the claim for the fee. The architect orally accepted that offer despite the fact that the reasonable value of his services was in fact $10,000. The client paid the architect $7,500 pursuant to their agreement. The
architect subsequently sued the client for the remaining $2,500. In a preliminary finding, the trier of fact found that there were no defects in the architect’s plans.

Will the architect be likely to prevail in his action against the client for $2,500?

(A) Yes, because payment of $7,500 cannot furnish consideration for the architect’s promise to surrender his claim.

(B) Yes, because the oral agreement to modify the written contract is not enforceable.

(D) No, because the architect’s acceptance of partial payment constituted a novation.

A buyer ordered a new machine from a manufacturer. The machine arrived on time and conformed in all respects to the contract. The buyer, however, rejected the machine because he no longer needed it in his business and returned the machine to the manufacturer. The manufacturer sold many such machines each year and its factory was not operating at full capacity.

In an action by the manufacturer against the buyer for breach of contract, which of the following is NOT a proper measure of the manufacturer’s damages?

(A) The contract price of the machine.

(B) The difference between the contract price and the market price of the machine.

(D) The profit the manufacturer would have made on the sale of the machine to the buyer.

(A) The contract price of the machine.

A homeowner and a contractor entered into a contract for the construction of a home for the price of $300,000. The contractor was to earn a profit of $10,000 for the job. After the contractor had spent $45,000 on labor and materials, including $5,000 on oak flooring not yet installed, the homeowner informed the contractor that the homeowner had lost his job and could not pay for any services. The homeowner told the contractor to stop working immediately. The reasonable market value of the labor and materials provided by the contractor at that point, including the oak flooring, was $40,000. The contractor used the $5,000 worth of oak flooring on another job. In an action by the contractor against the homeowner for damages, which of the following would be the largest amount of damages recoverable by the contractor? (A) $40,000, the reasonable value of the services the contractor had provided. (B) $40,000, the contractor’s construction costs. (C) $50,000, the contractor’s construction costs of $45,000 plus the $10,000 profit minus the $5,000 saved by reusing the oak flooring on another job. (D) $55,000, the contractor’s construction costs of $45,000 plus the $10,000 profit.

(C) $50,000, the contractor’s construction costs of $45,000 plus the $10,000 profit minus the $5,000 saved by reusing the oak flooring on another job.

On March 1, a mechanic contracted to repair a textile company's knitting machine by March 6. On March 2, the textile company contracted to manufacture and deliver specified cloth to a customer on March 15. The textile company knew that it would have to use the machine then under repair to perform this contract. Because the customer's order was for a rush job, the two parties included in their contract a liquidated damages clause, providing that the textile company would pay $5,000 for each day's delay in delivery after March 15. The mechanic was inexcusably five days late in repairing the machine, and, as a result, the textile company was five days late in delivering the cloth to the customer. The textile company paid $25,000 to the customer as liquidated damages and then sued the mechanic for $25,000. Both the mechanic and the textile company knew when making their contract on March 1 that under ordinary circumstances the textile company would sustain few or no damages of any kind as a result of a five-day delay in the machine repair. Assuming that the $5,000-per-day liquidated damages clause in the contract between the textile company and the customer is valid, which of the following arguments will serve as the mechanic's best defense to the textile company's action? (A) Time was not of the essence in the contract between the mechanic and the textile company. (B) The mechanic had no reason to foresee on March 1 that the customer would suffer consequential damages in the amount of $25,000. (C) By entering into the contract with the customer while knowing that its knitting machine was being repaired, the textile company assumed the risk of any delay loss to the customer. (D) In all probability, the liquidated damages paid by the textile company to the customer are not the same amount as the actual damages sustained by the customer in consequence of the late delivery of the cloth.

(B) The mechanic had no reason to foresee on March 1 that the customer would suffer consequential damages in the amount of $25,000.

A janitorial service contracted in writing with a hospital for a one-year term. Under the terms of the contract, the janitorial service agreed to clean the hospital daily in accordance with the hygiene standards of the city's health code. Because the janitorial service did not clean a patient's room in accordance with the required hygiene standards, the patient contracted an infection that required continued hospitalization. In addition to suing the hospital, the patient sued the janitorial service for breach of contract. Which of the following statements is most accurate with respect to the breach of contract claim against the janitorial service? (A) The janitorial service is liable to the patient as a matter of public policy, because it violated the city's health code. (B) The patient has no claim for breach of contract against the janitorial service, because she is an incidental beneficiary. (C) The patient is an intended third-party beneficiary under the contract, because the janitorial service's promise was intended to benefit all hospital patients. (D) The patient cannot sue on the contract, because she was not named in the contract.

(B) The patient has no claim for breach of contract against the janitorial service, because she is an incidental beneficiary.

In exchange for a valid and sufficient consideration, Goodbar orally promised Walker, who had no car and wanted a minivan, "to pay to anyone from whom you buy a minivan within the next six months the full purchase-price thereof." Two months later, Walker bought a used minivan on credit from Minivanity Fair, Inc., for $8,000. At the time, Minivanity Fair was unaware of Goodbar's earlier promise to Walker, but learned of it shortly after the sale. Can Minivanity Fair enforce Goodbar's promise to Walker? (A) Yes, under the doctrine of promissory estoppel. (B) Yes, because Minivanity Fair is an intended beneficiary of the Goodbar-Walker contract. (C) No, because Goodbar's promise to Walker is unenforceable under the suretyship clause of the statute of frauds. (D) No, because Minivanity Fair was neither identified when Goodbar's promise was made nor aware of it when the minivan-sale was made.

(B) Yes, because Minivanity Fair is an intended beneficiary of the Goodbar-Walker contract.

Addle, who has been in the painting and contracting business for ten years and has a fine reputation, contracts to paint Boone's barn. Boone's barn is a standard red barn with loft. The contract has no provision regarding assignment. If Addle assigns the contract to Coot, who has comparable experience and reputation, which of the following statements is correct? (A) Boone is required to accept performance by Coot. (B) Addle is in breach of contract. (C) Boone may refuse to accept performance by Coot. (D) There is a novation.

(A) Boone is required to accept performance by Coot.

On March 1, Mechanic agreed to repair Ohner's machine for $5,000, to be paid on completion of the work. On March 15, before the work was completed, Mechanic sent a letter to Ohner with a copy to Jones, telling Ohner to pay the $5,000 to Jones, who was one of Mechanic's creditors. Mechanic then completed the work. Which of the following, if true, would best serve Ohner as a defense in an action brought against him by Jones for $5,000? (A) Jones was incapable of performing Mechanic's work. (B) On March 1, Mechanic had promised Ohner that he would not assign the contract. (C) Jones was not the intended beneficiary of the Ohner-Mechanic contract. (D) Mechanic had not performed his work in a workmanlike manner.

(D) Mechanic had not performed his work in a workmanlike manner.

1) While waiting in line to open an account with a bank, a customer read a poster on the bank’s wall that said, “New Customers! $25 FOR 5 MINUTES. If you stand in line for more than five minutes, we will pay you $25! We like happy customers!” The customer started timing his wait and just as five minutes was about to pass, the bank manager tore the poster down and announced, “The $25 stand-in-line promotion is over.” The customer waited in line for 10 more minutes before being served. In the customer’s action against the bank for $25, will the customer prevail? (A) No, because the bank withdrew its offer before the customer completed the requested performance. (B) No, because the bank’s statement was a nonbinding gift promise. (C) Yes, because the bank could not revoke its offer once the customer had commenced performance. (D) Yes, because the customer’s presence in line served as notice to the bank that he had accepted.

2) A man died leaving a will that gave his entire estate to charity. The man’s nephew, knowing full well that the man was of sound mind all of his life, and having no evidence to the contrary, nevertheless filed a suit contesting the man’s will on the ground that the man was incompetent when the will was signed. The executor of the man’s estate, offered to pay the nephew $5,000 from the man’s estate to settle the suit, and the nephew agreed. If the executor then repudiates the agreement and the foregoing facts are proved in a suit by the nephew against the executor for breach of contract, is the nephew entitled to recover the $5,000? ``` (A) Yes, because the agreement was a bargained-for exchange. (B) Yes, because the law encourages the settlement of disputed claims. (C) No, because an agreement to oust the court of its jurisdiction to decide a will contest is contrary to public policy. (D) No, because the nephew did not bring the will contest in good faith. ```

(D) No, because the nephew did not bring | the will contest in good faith.

3) Gourmet, a famous chef, entered into a written agreement with his friend Deligor, a well-known interior decorator respected for his unique designs, in which Deligor agreed, for a fixed fee, to design the interior of Gourmet's new restaurant, and, upon Gourmet's approval of the design plan, to decorate and furnish the restaurant accordingly. The agreement was silent as to assignment or delegation by either party. Before beginning the work, Deligor sold his decorating business to Newman under an agreement in which Deligor assigned to Newman, and Newman agreed to complete, the Gourmet-Deligor contract. Newman, also an experienced decorator of excellent repute, advised Gourmet of the assignment, and supplied him with information confirming both Newman's financial responsibility and past commercial success. Is Gourmet obligated to permit Newman to perform the Gourmet-Deligor agreement? (A) No, because Deligor's purported delegation to Newman of his obligations to Gourmet effected a novation. (B) No, because Deligor's duties were of a personal nature, involving his reputation, taste, and skill. (C) Yes, because the agreement contained no prohibition against assignment or delegation. (D) Yes, because Gourmet received adequate assurances of Newman's ability to complete the job.

(B) No, because Deligor's duties were of a personal nature, involving his reputation, taste, and skill.

4) An accountant and a bookkeeper, as part of a contract dissolving their accounting business, agreed that each would contribute $100,000 to fund an annuity for a clerk who was a longtime employee of the business. The clerk's position would be terminated due to the dissolution, and he did not have a retirement plan. The accountant and the bookkeeper informed the clerk of their plan to fund an annuity for him. The clerk, confident about his financial future because of the promised annuity, purchased a retirement home. The accountant later contributed his $100,000 to fund the annuity, but the bookkeeper stated that he could afford to contribute only $50,000. The accountant agreed that the bookkeeper should contribute only $50,000. Does the clerk have a valid basis for an action against the bookkeeper for the unpaid $50,000? (A) No, because the clerk was bound by the modification of the agreement made by the accountant and the bookkeeper. (B) No, because the clerk was only a donee beneficiary of the agreement between the accountant and the bookkeeper, and had no vested rights. (C) Yes, because the clerk's reliance on the promised retirement fund prevented the parties from changing the terms. (D) Yes, because the promises to establish the fund were made binding by consideration from the clerk's many years of employment.

5) A landowner and a contractor entered into a written contract under which the contractor agreed to build a building and pave an adjacent sidewalk for the landowner at a price of $200,000. Later, while construction was proceeding, the landowner and the contractor entered into an oral modification under which the contractor was not obligated to pave the sidewalk, but still would be entitled to $200,000 upon completion. The contractor completed the building. The landowner, after discussions with his landscaper, demanded that the contractor pave the adjacent sidewalk. The contractor refused. Has the contractor breached the contract? ``` (A) No, because the oral modification was in good faith and therefore enforceable. (B) Yes, because a discharge of a contractual obligation must be in writing. (C) Yes, because the parol evidence rule bars proof of the oral modification. (D) Yes, because there was no consideration for the discharge of the contractor’s duty to pave the sidewalk. ```

(D) Yes, because there was no consideration for the discharge of the contractor’s duty to pave the sidewalk.

6) On May 1, a seller and a buyer entered into a written contract, signed by both parties, for the sale of a tract of land for $100,000. Delivery of the deed and payment of the purchase price were scheduled for July 1. On June 1, the buyer received a letter from the seller repudiating the contract. On June 5, the buyer bought a second tract of land at a higher price as a substitute for the first tract. On June 10, the seller communicated a retraction of the repudiation to the buyer. The buyer did not tender the purchase price for the first tract on July 1, but subsequently sued the seller for breach of contract. Will the buyer likely prevail? ``` (A) Yes, because the buyer bought the second tract as a substitute for the first tract prior to the seller's retraction. (B) Yes, because the seller's repudiation was nonretractable after it was communicated to the buyer. (C) No, because the seller retracted the repudiation prior to the agreed time for performance. (D) No, because the buyer's tender of the purchase price on July 1 was a constructive condition to the seller's duty to tender a conveyance. ```

(A) Yes, because the buyer bought the second tract as a substitute for the first tract prior to the seller's retraction.

7) A seller and a buyer entered into a contract obligating the seller to convey title to a parcel of land to the buyer for $100,000. The agreement provided that the buyer's obligation to purchase the parcel was expressly conditioned upon the buyer's obtaining a loan at an interest rate no higher than 10%. The buyer was unable to do so, but did obtain a loan at an interest rate of 10.5% and timely tendered the purchase price. Because the value of the land had increased since the time of contracting, the seller refused to perform. The buyer sued the seller. Will the buyer prevail? ``` (A) No, because an express condition will only be excused to avoid forfeiture. (B) No, because the contract called for a loan at an interest rate not to exceed 10% and it could not be modified without the consent of the seller. (C) Yes, because the buyer's obtaining a loan at an interest rate no higher than 10% was not a condition to the seller's duty to perform. (D) Yes, because the buyer detrimentally changed position in reliance on the seller's promise to convey. ```

(C) Yes, because the buyer's obtaining a loan at an interest rate no higher than 10% was not a condition to the seller's duty to perform.

8) Buyer mailed a signed order to Seller that read: “Please ship us 10,000 widgets at your current price.” Seller received the order on January 7 and that same day mailed to Buyer a properly stamped, addressed, and signed letter stating that the order was accepted at Seller’s current price of $10 per widget. On January 8, before receipt of Seller’s letter, Buyer telephoned Seller and said, “I hereby revoke my order.” Seller protested to no avail. Buyer received Seller’s letter on January 9. Because of Buyer’s January 8 telephone message, Seller never shipped the goods. Under the relevant and prevailing rules, is there a contract between Buyer and Seller as of January 10? ``` (A) No, because the order was an offer that could be accepted only by shipping the goods; and the offer was effectively revoked before shipment. (B) No, because Buyer never effectively agreed to the $10 price term. (C) Yes, because the order was, for a reasonable time, an irrevocable offer. (D) Yes, because the order was an offer that Seller effectively accepted before Buyer attempted to revoke it. ```

(D) Yes, because the order was an offer that Seller effectively accepted before Buyer attempted to revoke it.

9) A buyer sent a seller an offer to buy 50 tons of cotton of a specified quality. The offer contained no terms except those specifying the amount and quality of the cotton. Both seller and buyer are merchants. The seller then sent an acknowledgment by fax. The acknowledgment repeated the terms of the buyer's offer and stated that shipment would occur within five days. Among 12 printed terms on the acknowledgment was a statement that any dispute about the cotton's quality would be submitted to arbitration. Neither the buyer nor the seller said anything further about arbitration. The seller shipped the cotton, and it was accepted by the buyer. A dispute arose between the buyer and the seller as to the quality of the cotton, and the seller asserted that the dispute had to be submitted to arbitration. The buyer instead sued the seller in court. In that suit, which of the following arguments best supports the seller's position that the buyer must submit the dispute to arbitration? (A) The seller's acknowledgment containing a provision for arbitration constituted a counteroffer that was accepted by the buyer when it accepted delivery of the cotton. (B) The provision for arbitration did not contradict any term in the buyer's offer. (C) Arbitration is a more efficient method of resolving disputes than resolving them in court. (D) The provision for arbitration did not materially alter the parties' contract.

(D) The provision for arbitration did not | materially alter the parties' contract.

10) A seller sent an email to a potential buyer, offering to sell his house to her for $150,000. The buyer immediately responded via email, asking whether the offer included the house's front porch swing. The seller emailed back: "No, it doesn't." The buyer then ordered a front porch swing and emailed back to the seller: "I accept your offer." The seller refused to sell the house to the buyer, claiming that the offer was no longer open. Is there a contract for the sale of the house? ``` A) No, because the buyer's initial email was a counteroffer. B) No, because the offer lapsed before the buyer accepted. C) Yes, because the buyer relied on the offer by ordering the swing. D) Yes, because the buyer's initial email merely asked for information. ```

D) Yes, because the buyer's initial email | merely asked for information.

11) By the terms of a written contract signed by both parties on January 15, a corporation, agreed to sell a specific personal computer to a customer for $3,000, and the customer agreed to pick up and pay for the computer at the corporation’s store on February 1. The customer unjustifiably repudiated on February 1. Without notifying the customer, the corporation subsequently sold at private sale the same specific computer to a buyer, who paid the same price ($3,000) in cash. The computer is a popular product. The corporation can buy from the manufacturer more units than it can sell at retail. If the corporation sues the customer for breach of contract, the corporation will probably recover? (A) nothing, because it received a price on resale equal to the contract price that the customer had agreed to pay. (B) nothing, because the corporation failed to give the customer proper notice of the seller's intention to resell. (C) The corporation’s anticipated profit on the sale to the customer plus incidental damages, if any, because the corporation lost that sale. (D) $3,000 (the contract price), because the customer intentionally breached the contract by repudiation.

(C) The corporation’s anticipated profit on the sale to the customer plus incidental damages, if any, because the corporation lost that sale.

12) A bottling company sent a purchase order to a wholesaler that stated, "Ship 100,000 empty plastic bottles at the posted price." Two days after receipt of this purchase order, the wholesaler shipped the bottles and the bottling company accepted delivery of them. A week after the bottles were delivered, the bottling company received the wholesaler's acknowledgement form, which included a provision disclaiming consequential damages. After using the bottles for two months, the bottling company discovered a defect in the bottles that caused its products to leak from them. The bottling company recalled 10,000 of the bottles containing its product, incurring lost profits of $40,000. Assuming all appropriate defenses are seasonably raised, will the bottling company succeed in recovering $40,000 in consequential damages from the wholesaler? ``` (A) Yes, because the wholesaler's acknowledgement did not alter the terms of an existing contract between the parties. (B) Yes, because the disclaimer of consequential damages is unconscionable. (C) No, because buyers are generally not entitled to recover consequential damages. (D) No, because the bottling company's acceptance of the goods also constituted an acceptance of the terms included in the wholesaler's acknowledgement. ```

(A) Yes, because the wholesaler's acknowledgement did not alter the terms of an existing contract between the parties.

13) A carpenter contracted with a homeowner to remodel the homeowner's home for $10,000, to be paid on completion of the work. On May 29, relying on his expectation that he would finish the work and have the homeowner's payment on June 1, the carpenter contracted to buy a car for "$10,000 in cash, if payment is made on June 1; if payment is made thereafter, the price is $12,000." The carpenter completed the work according to specifications on June 1 and demanded payment from the homeowner on that date. The homeowner, without any excuse, refused to pay. Thereupon, the carpenter became very excited, suffered a minor heart attack, and, as a result, incurred medical expenses of $1,000. The reasonable value of the carpenter's services in remodeling the homeowner's home was $13,000. In an action by the carpenter against the homeowner, which of the following should be the carpenter's measure of recovery? ``` (A) $10,000, the contract price. (B) $11,000, the contract price plus $1,000 for the medical expenses incurred because the homeowner refused to pay. (C) $12,000, the contract price plus $2,000, the bargain that was lost because the carpenter could not pay cash for the car on June 1. (D) $13,000, the amount the homeowner was enriched by the carpenter's services. ```

(A) $10,000, the contract price.

14) A homeowner and a landscape architect entered into a written agreement in which the landscape architect agreed to landscape and replant the landowner’s residential property in accordance with a design prepared by the landscape architect and incorporated in the writing. By the terms of the writing, the landowner agreed to pay $10,000 for the work upon its completion. Shortly before the parties signed the agreement, the landowner and landscape architect orally agreed that the writing would not become binding on either party unless the landowner's gardener should approve the landscaping design. If the landowner’s gardener disapproves the design and the landowner refuses to allow landscape architect to proceed with the work, is evidence of the oral agreement admissible in landscape architect's action against landowner for breach of contract? ``` (A) No, because the prior oral agreement contradicted the writing by making the parties' duties conditional. (B) No, because the parol evidence rule bars evidence of a prior oral agreement even if the latter is consistent with the terms of a partial integration. (C) Yes, because the oral agreement required approval by a third party. (D) Yes, because the evidence shows that the writing was intended to take effect only if the approval occurred. ```

``` (C) Yes, because the oral agreement required approval by a third party. AND (D) Yes, because the evidence shows that the writing was intended to take effect only if the approval occurred. ``` Both Correct.

15) A buyer and a seller entered into a written contract for the sale of a copy machine, using the same form contract that they had used a number of times in the past. The contract stated that payment was due 30 days after delivery and provided that the writing contained the complete and exclusive statement of the parties' agreement. On several past occasions, the buyer had taken a 5% discount from the contract price when paying within 10 days of delivery, and the seller had not objected. On this occasion, when the buyer took a 5% discount for paying within 10 days, the seller objected because his profit margin on this particular machine was smaller than on his other machines. If the seller sues the buyer for breach of contract, may the buyer introduce evidence that the 5% discount was a term of the agreement? ``` (A) No, because the seller timely objected to the buyer's proposal for different terms. (B) No, because the writing contained the complete and exclusive agreement of the parties. (C) Yes, because a modification made in good faith does not require consideration. (D) Yes, because evidence of course of dealing is admissible even if the writing contains the complete and exclusive agreement of the parties. ```

(D) Yes, because evidence of course of dealing is admissible even if the writing contains the complete and exclusive agreement of the parties.

16) A mill and a bakery entered into a written contract that obligated the mill to deliver to the bakery 1,000 pounds of flour every Monday for 26 weeks at a specified price per pound. The mill delivered the proper quantity of flour in a timely manner for the first 15 weeks. However, the 16th delivery was tendered on a Tuesday, and amounted to only 800 pounds. The mill told the bakery that the 200-pound shortage would be made up on the delivery due the following Monday. The late delivery and the 200- pound shortage will not significantly disrupt the bakery's operations. How may the bakery legally respond to the nonconforming tender? ``` (A) Accept the 800 pounds tendered, but notify the mill that the bakery will cancel the contract if the exact amount is not delivered on the following Monday. (B) Accept the 800 pounds tendered, but notify the mill that the bakery will deduct from the price any damages for losses due to the nonconforming tender. (C) Reject the 800 pounds tendered, but notify the mill that the bakery will accept delivery the following Monday if it is conforming. (D) Reject the 800 pounds tendered, and notify the mill that the bakery is canceling the contract ```

``` (B) Accept the 800 pounds tendered, but notify the mill that the bakery will deduct from the price any damages for losses due to the nonconforming tender. ```

17) Slalome, a ski-shop operator, in a telephone conversation with Mitt, a glove manufacturer, ordered 12 pairs of vortexlined ski gloves at Mitt's list price of $600 per dozen "for delivery in 30 days." Mitt orally accepted the offer, and immediately faxed to Slalome this signed memo: "Confirming our agreement today for your purchase of a dozen pairs of vortex-lined ski gloves for $600, the shipment will be delivered in 30 days." Although Slalome received and read Mitt's message within minutes after its dispatch, she changed her mind three weeks later about the purchase and rejected the conforming shipment when it timely arrived. On learning of the rejection, does Mitt have a cause of action against Slalome for breach of contract? ``` (A) Yes, because the gloves were identified to the contract and tendered to Slalome. (B) Yes, because Mitt's faxed memo to Slalome was sufficient to make the agreement enforceable. (C) No, because the agreed price was $600 and Slalome never signed a writing evidencing a contract with Mitt. (D) No, because Slalome neither paid for nor accepted any of the goods tendered. ```

(B) Yes, because Mitt's faxed memo to Slalome was sufficient to make the agreement enforceable.

18) In January, a teacher contracted with a summer camp to serve as its head counselor at a salary of $10,000 for 10 weeks of service from the first of June to the middle of August. In March, the camp notified the teacher that it had hired someone else to act as head counselor and that the teacher's services would not be needed. In April, the teacher spent $200 traveling to interview at the only other nearby summer camp for a position as its head counselor. The teacher was not chosen for that job. The teacher then took a position teaching in a local summer school at a salary of $6,000 for the same 10-week period as the summer camp. In a breach-of-contract action against the camp, to which of the following amounts, as damages, is the teacher entitled? A) $4,000 B) $4,200 C) $10,000 D) $10,200

B) $4,200

19) In a written contract Singer agreed to deliver by common carrier to Byer 500 chairs at $20 each “F.O.B. [Singer's place of business]”. Singer placed the chairs on board a carrier on January 30. On February 2 the chairs while in transit were destroyed in a derailment of the carrier's railroad car. In an action by Byer against Singer for breach of contract, Byer probably will... (A) not succeed, because of impossibility of performance. (B) not succeed, because the risk of loss was on Byer. (C) succeed, because the carrier will be deemed to be Singer's agent. (D) succeed, because the risk of loss was on Singer.

(B) not succeed, because the risk of loss | was on Byer.

20) Under the terms of a written contract, a builder agreed to construct a garage for a homeowner for $10,000. Nothing was stated in the parties' negotiations or in the contract about progress payments during the course of the work. After completing 25 percent of the garage according to the homeowner's specifications, the builder demanded $2,000 as a reasonable progress payment. The homeowner refused, and the builder abandoned the job. If each party sues the other for breach of contract, which of the following will the court decide? (A) Both parties are in breach, and each is entitled to damages, if any, from the other. (B) Both parties took reasonable positions, and neither is in breach. (C) Only the homeowner is in breach and liable for the builder's damages, if any. (D) Only the builder is in breach and liable for the homeowner's damages, if any.

(D) Only the builder is in breach and liable | for the homeowner's damages, if any.