Contracts Qs

Question 1

To which of the following situations does the parol evidence rule most likely apply?
A. A party seeks to introduce evidence about a subsequent agreement.
B. A party seeks to introduce the other party’s oral assertion made during the negotiations of the agreement as evidence of mistake.
C. A party seeks to introduce evidence of a written statement made before the written contract was entered into that directly contradicts a provision in that contract.
D. A party seeks to introduce evidence of a second, separate deal.

Answer 1

ANSWER: C

Question 2

With regard to the doctrine of mitigation, which of the following is FALSE?
A. The nonbreaching party must take reasonable steps to reduce the damages from the breach.
B. A failure to mitigate damages prevents the nonbreaching party from recovering any damages.
C. The burden of proving a failure to mitigate damages rests on the breaching party.
D. The mitigation efforts required to prevent loss are subject to a reasonableness standard applied in light of the original contractual duties.

Answer 2

ANSWER: B

Question 3

In a sale of goods for which there was a written offer and a written purported acceptance, if there is not a contract but the parties act as if there is, which of the following is TRUE?

A. The terms contained in the offer govern.
B. The terms contained in the purported acceptance become part of the contract.
C. All terms are supplied by the UCC default rules.
D. Terms on which both writings agree become part of the contract.

Answer 3

ANSWER D

Question 4

Regarding consideration substitutes, which of the following statements is FALSE?

A. A promise to contribute to a charity is enforceable even though the charity has not relied on the promise.
B. A promise that is not supported by consideration cannot be enforced.
C. A promise to pay for benefits that is motivated by a moral obligation generally does not constitute bargained-for consideration.
D. A finding by a court of a contract-implied in law may result in an award of damages based on the fair market value of the benefit conferred by the plaintiff.

Answer 4

ANSWER: B

Question 5

Regarding the waiver of an express condition, which of the following statements is FALSE?

A. An express condition can be waived only by express language.
B. A party may waive an express condition by hindering its occurrence.
C. A party may waive an express condition by wrongfully interfering with its occurrence.
D. When the occurrence of an express condition depends on the actions of a party, the actions undertaken by the party are judged by a good-faith standard.

Answer 5

ANSWER: A

Question 6

Q9832
A maker of handwoven rugs contracted with a supplier to provide yarn made from sheep’s wool. The written contract specified that, for four years, the supplier would provide the rugmaker with 2,000 spools of yarn made from 100% sheep’s wool per month, at $10 per spool, for a total of $20,000. Two years into the contract, the supplier sent the rugmaker 2,000 spools of yarn made from 90% sheep’s wool and 10% synthetic fiber. The rugmaker sent the supplier a check for $15,000 for the shipment, and added a clear note on the check stating that the payment was in full for the shipment but was $5,000 less due to the synthetic fiber in the yarn. The supplier promptly deposited the check, and then four months later filed suit against the rugmaker for the remaining $5,000. The supplier has submitted evidence of the written contract, and the rugmaker has submitted evidence of the deposited check.
What is the rugmaker’s best defense in this situation?
A. By depositing the check, the supplier was estopped from claiming that the rugmaker owed him an additional $5,000.
B. The rugmaker’s and supplier’s good-faith dispute over the yarn composition suspended the rugmaker’s obligation to pay the remaining $5,000.
C. The supplier deposited the check for $5,000 less than the contract price, thereby discharging the rugmaker of any further duty to pay the remaining amount for that month’s shipment.
D. The supplier’s act of knowingly depositing the check for $15,000 was a novation that relieved the rugmaker from any further liability.

Answer 6

ANSWER: C - the rugmaker’s best defense is that there was an accord and satisfaction that discharged the rugmaker of any further duty to pay the remaining $5,000 for the shipment

Key: A contractual obligation is discharged by accord and satisfaction if a party tendered a negotiable instrument with a conspicuous statement that it was tendered as “payment in full” and the other party obtained payment of the instrument.

Question 7

Q 9583 The owner of a restaurant who highlighted local ingredients bought cheese and other dairy products from a local dairy farmer. The owner and the farmer had entered into written requirements contracts each spring for the past 10 years. In the winter of the tenth year, the farmer purchased a substantial amount of new dairy cows and expanded his farming capabilities. He notified all customers that he would have a higher volume and amount of available products the following spring and would adjust deliveries accordingly. The owner responded with a date he wished the products to be delivered, as per custom, but said nothing else. On the agreed-upon date, the farmer delivered substantially more products than he had customarily provided. The owner attempted to accept half of the shipment, as that was roughly his customary quantity, but the farmer stated that the products were already packaged and that the owner should have spoken up after receiving the notice from the farmer. The owner then rejected the shipment in its entirety.

Did the owner breach the contract with the farmer as to this shipment?

A. No, because no contract existed, as the parties did not agree to a quantity.
B. No, because the farmer made a nonconforming tender of goods.
C. Yes, because the owner should have given the farmer time to cure the nonconformity.
D. Yes, because the owner rejected the shipment in its entirety.

Answer 7

ANSWER: B
The owner and the farmer had a requirements contract. However, the farmer delivered substantially more dairy products than the owner reasonably required, thereby making a nonconforming tender of goods. Considering the owner’s past requirements and the shelf life of dairy products, providing roughly double the amount required in one delivery was clearly unreasonable.

Rule: Under the UCC, a requirements contract is a contract under which the buyer agrees to purchase as many goods as the buyer requires from the seller. Under the perfect-tender rule, the goods and the seller’s tender of those goods must fully conform with the terms of the agreement. If the tender of goods in a single delivery would be unreasonable, then the buyer can reject the delivery for imperfect tender.

Question 8

Q 9708: A homeowner entered into a written contract with a contractor to construct an elaborate tree house among the large trees located in the homeowner’s backyard. After commencing construction of the tree house, the contractor discovered that one of the trees intended to be used as support for the tree house had a relatively common fungal infection in its core that would cause the strength of the tree’s branches to falter if left untreated. Neither the homeowner nor the contractor had knowledge of the fungal infection when they entered into the contract, but the contractor knew that such infections were common in the area and did not request an inspection of the trees before entering the contract. The contractor also knew that treatment was available at a high cost, but that even after treatment, he would need to create additional heavy-load-bearing supports for the tree at a substantial cost. When the contractor informed the homeowner that he would not perform under the contract unless the homeowner provided at least 75% of the additional costs needed to make the structure safe, the homeowner refused to pay the additional amount. The homeowner then sued the contractor for breach of contract.
What is the likely result?

A. The contractor wins, because his performance was discharged due to impracticability.
B. The contractor wins, because neither party was aware of the fungal infection.
C. The homeowner wins, because the contractor assumed the risk of the fungal infection.
D. The homeowner wins, because the fungal infection did not render performance impossible.

Answer 8

ANS: C
Here, fungal infections were common in the area, so it was foreseeable that the load-bearing tree would be infected. The contractor knew about the risk of fungal infection but did not inspect the trees. So even though the contract may have been formed under the assumption that the tree was not infected, the contractor’s performance was not discharged by impracticability. Instead, he assumed the risk of encountering the fungal infection when he agreed to construct the tree house.

Question 9

Question 9672

A nature magazine advertised a photography contest in its January issue, offering “$1,000 to any subscriber who sends us a photograph of the rare Florida Grasshopper Sparrow that we use for the cover of our May issue. Only submissions meeting our technical specifications and received by April 1 will be considered.” The only subscriber to respond to the advertised contest sent the magazine a photograph of the sparrow that met the magazine’s technical specifications. The photograph arrived on March 15. However, due to an ecological disaster that occurred in early April, the magazine decided to use a different picture on the cover of its May issue. The magazine used the subscriber’s picture on the cover of its June issue and has refused to pay $1,000 to the subscriber on the ground that it was not used on the May cover.

Is the subscriber likely to prevail in a breach-of-contract action against the nature magazine?

A. No, because the subscriber’s photograph was not used on the cover of the May issue.
B. Yes, because all of the express conditions of the offer have been satisfied.
C. Yes, because the magazine prevented the publication of the photograph.

Answer 9

Answer C

Here, the magazine’s duty to perform was delayed by three conditions:
1) receiving a photograph that meets the magazine’s technical specifications
2) by April 1
3) using the photograph on the May cover
The first two conditions were satisfied when the subscriber delivered the photograph to the magazine on Mar 15. However, the third condition was not met because the magazine failed to cooperate when it chose to use a different picture on the May cover. The magazine’s wrongful interference with the occurrence of this condition excused that condition and triggered the magazine’s duty to pay the subscriber. Therefore, the subscriber will likely prevail.

Question 10

uestion 9582

A homeowner entered into oral contracts with both a painter and a landscaper to perform services at his home. The landscaper was the first to begin the services, and shortly after he began to work, he realized that the projected cost of the project would increase dramatically. After the homeowner learned how high the cost of the landscaping services was going to be, he called the painter to tell her that he could not go through with their contract at that time.
The painter stated that she had already purchased a standard set of paintbrushes to paint his home, as well as glass necessary to create a custom mosaic on a back corner of the house, according to the homeowner’s specifications. She had also paid for a temporary city permit to park her utility van on the residential street where the homeowner lived.

In a suit by the painter against the homeowner, which of the following is the painter LEAST likely to recover?

A. The contract price minus the market cost of performance.
B. The cost of the glass for the mosaic.
C. The cost of the paintbrushes.
D. The cost of the parking permit.

Answer 10

ANSWER: C
(A) is expectation dmgs
(B&D) are reliance dmgs.
BUT, recovery of reliance damages may be reduced by the amount spent by the nonbreaching party on materials that could reasonably be repurposed for another job—e.g., the paintbrushes. Therefore, the painter is least likely to recover that cost.

Note: a nonbreaching party cannot recover both expectation and reliance damages, so the painter can only recover the contract price or the price of the glass and the parking permit.

Rule: Compensatory damages primarily include expectation damages, plus consequential and incidental damages, minus any mitigable damages. If such damages cannot be calculated with reasonable certainty, then the nonbreaching party can recover reliance damages (i.e., expenditures made in reasonable reliance on the contract).

Question 11

A jeweler and a goldsmith signed a written agreement that provided as follows: “For $3,000, the goldsmith shall sell to the jeweler a size six gold ring setting that the jeweler shall select from only the goldsmith’s white gold ring designs. The agreement did not address any other specific terms with regard to the business arrangement between the jeweler and the goldsmith.
When the jeweler arrived to select a ring, he refused to select one of the goldsmith’s white gold ring designs. The jeweler claimed that the goldsmith immediately prior to the execution of the written agreement, had orally agreed to broaden the jeweler’s choices to also include rose gold ring designs. The jeweler also claimed that the goldsmith had, at the same time, orally agreed to include a set of earring settings, valued at $1,000, as ar incentive for the jeweler’s continued business. The goldsmith refused to sell to the jeweler any of his rose gold ring designs or include the earring settings.
If the jeweler sues the goldsmith for damages, how should the court handle the evidence of the alleged oral agreements?
A The court should admit the evidence as to both the promise to include the earring settings and the option to choose a rose gold ring design
B The court should admit the evidence as to the promise to include the earring settings but not the option to choose a rose gold ring design.

Answer 11

ANSWER B

parol evidence rule generally bars evidence of prior or contemporaneous agreements that contradict the terms of an integrated writing.

However, the UCC presumes that a contract for the sale of goods (e.g., jewelry) is only partially integrated. As a result, evidence that supplements a written contract is admissible—but evidence that contradicts the writing is inadmissible.

Question 12

A dancer signed a contract with a traveling circus to travel and perform as an aerialist for six months. The contract provided that the dancer would be paid $500 per week and would be guaranteed employment for the full six months, with an option to renew the contract for the next traveling season. Excited for the opportunity to perform for a traveling circus, the dancer turned down an invitation to dance with a theatre group for the same time period as the circus contract. After two weeks of traveling and dancing for the circus, the dancer sprained her ankle and was briefly hospitalized for one week. The circus was forced to hire another aerialist. After an additional week, the dancer’s doctor gave her approval to return to work, but the circus refused to honor the remainder of the contract.
Can the dancer assert promissory estoppel?

Answer 12

NO. Under the doctrine of promissory estoppel, a party’s detrimental reliance may serve as an alternative basis for recovery when no valid contract was formed. Since the dancer and the circus formed a valid contract, this doctrine does not apply.

Question 13

A licensing agreement provided that a manufacturer could use an inventor’s patent in manufacturing its products for 10 years. Immediately thereafter, the inventor assigned his rights to receive payments pursuant to the licensing agreement to a corporation. The inventor did not receive compensation for this assignment. The inventor, upon his death five years later, devised his stock in the corporation to his daughter and all of his remaining property to his son.
To whom should the manufacturer make its payments under the licensing agreement?

Answer 13

THE SON. If an assignment is not supported by consideration, then it is a gratuitous assignment and is generally revocable. A revocable assignment is automatically revoked upon the death, incapacity, or bankruptcy of the assignor.
Here, the assignment was automatically revoked upon the inventor’s death, and the right to receive payment returned to his estate

Question 14

The owner of a rare eighteenth-century chest offered to sell it to a connoisseur of antiques for $75,000. The connoisseur countered that she would buy the chest for $50,000. The owner rejected this price. The owner and the connoisseur then executed a written agreement for the sale of the chest at a price to be determined only by a particular antiques dealer whose expertise in valuing this rare item they both trusted.
Two weeks later, the agreed-upon antiques dealer examined the chest. He told the owner and the connoisseur that he had to do further research on the chest but that he would let them know his decision in several days. Unfortunately, the dealer died before doing so. A reasonable price for the chest can be established by the court.
Is there likely an enforceable contract?

Answer 14

NO, because the owner and the connoisseur did not intend to be bound unless the dealer set the price of the chest.

Under the UCC, a contract for the sale of goods is formed if both parties intend to contract and there is a reasonably certain basis for giving a remedy in the event of a breach. Intent to contract is judged by outward, objective manifestations of intent, as interpreted by a reasonable person. So when an agreement reflects an intent to be bound only if the price is subsequently set, no contract is formed until the price is set.

Question 15

A student inherited a large tract of land. He advertised a proposed sale of the property, and he was soon contacted by a rancher. The student told the rancher that his car had just broken down and that he was eager to sell the property quickly so that he could repair his car for his commute to class. Although the rancher was fully aware of the fair market value of the property, he offered the student a cash price 80% less than the property was worth. The student, disappointed with the low price but desperate to repair his car, accepted the rancher’s offer.
On these facts, which of the following legal concepts would give the student the best chance of canceling the contract with the rancher?
A Bad faith.
B Duress.
C Equitable estoppel.
D Unconscionability.

Answer 15

D. A court may modify or refuse to enforce a contract on the ground that it is unconscionable. A contract is unconscionable when it is so unfair to one party that no reasonable person in that party’s position would have agreed to it.

Not A - a duty of good faith and fair dealing is imposed on each party in the performance and enforcement of an existing contract—not in contract formation.
Not C - Equitable estoppel generally applies when one party has misrepresented a fact and the other party has injuriously relied on that misrepresentation. Here, the student does not seem to have relied on any misrepresentation—he only accepted an unfair offer.

Question 16

A couple, who wanted to open a pet grooming and supply store, contracted with a developer to lease space in a small strip mall that the developer was constructing. The lease was to begin on July 1, but on June 20, the developer informed the couple that the mall would not be finished, nor would the space be available, until August 1. The developer indicated that the first month’s rent would be waived but that, because the lease did not contain a liquidated damages clause, he was not responsible for any damages attributable to the delay. As a consequence of the delay, the couple incurred storage costs and additional advertising expenses of $3,000. They also estimated in good faith that they lost $10,000 in sales.
What is the couple entitled to recover from the developer for the delay?

Answer 16

$3k. Storage and advertising are commercially reasonable expenses related to opening a store, so the couple can recover $3,000 in incidental damages

The couple estimated it lost $10,000 in sales. However, this is a new business venture without a history of past sales, and it is unclear how much of these sales would constitute profit—the cost of the goods and other expenses would need to be deducted. Without this information, the amount of lost profits is too speculative and would be less than $10,000

A liquidated damages clause is used to designate the amount of damages that are recoverable if the contract is breached. However, failure to include such a clause does not prevent the recovery of contract damages. The court will simply use a different method to calculate damages (as seen here).

Question 17

An honest dispute developed between a condominium owner and a plumber over whether plumbing installed in the kitchen and bathrooms of the condominium satisfied contractual specifications. If the plumbing met those specifications, the condominium owner would owe the plumber $15,000 under the terms of the contract. The condominium owner offered to pay the plumber $10,000 in satisfaction of the owner’s contractual obligations if the plumber replaced the plumbing in the kitchen with another grade of pipe. The plumber accepted the condominium owner’s offer.
After the plumber replaced the kitchen plumbing, the condominium owner refused to pay the plumber.
In a breach-of-contract action brought by the plumber, the fact finder determined that the plumbing originally installed by the plumber did satisfy the contract specifications. The fact finder also determined that the plumber and the condominium owner entered into a substitute agreement under which the owner failed to deliver the required performance.
What is the maximum amount that the plumber can recover in damages from the condominium owner?

Answer 17

Here, the fact finder determined that the plumber and the condominium owner entered into a substitute agreement. This discharged the original contract for $15,000, so the plumber may sue only under the substitute contract.

The substitute contract required that the condominium owner pay $10,000 for the kitchen plumbing, so that is the maximum amount that the plumber can recover

Question 18

A trucker and a manufacturer entered a written contract for the delivery of a farming implement from the manufacturer to a farmer.
Under the terms of the contract, the trucker promised “to deliver a farming implement from the manufacturer to the farmer,” and in exchange, the manufacturer promised “to pay the trucker if the trucker delivers the implement directly to the farmer after picking it up.” The trucker picked up the implement but, instead of driving directly to the farmer, drove 100 miles out of his way to pick up another item from a third party before delivering the implement to the farmer. The manufacturer, unaware that the trucker had failed to deliver the implement directly to the farmer, refused to pay the trucker.
Who has breached this contract?

Answer 18

Here, the trucker fully performed his promise to deliver a farming implement from the manufacturer to the farmer, so the trucker has not breached the contract. However, the manufacturer’s duty to pay the trucker was expressly predicated on the trucker’s direct delivery of the implement to the farmer. The trucker did not fully satisfy this condition precedent because he took a 100-mile detour, so the manufacturer’s performance is not due. Therefore, neither party has breached the contract.*

*Although the manufacturer is not in breach, the trucker is not without remedy. He can still seek restitution for the benefit conferred on the manufacturer by the delivery

Question 19

As part of a divorce settlement, an ex-husband purchased an annuity from an insurance company to be paid to his ex-wife so that she would receive a fixed amount quarterly for the duration of her life. Within a week after the purchase, the ex-wife learned that she had a fatal illness, which had not previously manifested itself but had existed for some time. She died two months later, prior to receiving any payments from the annuity.
The ex-husband has filed suit to rescind the annuity contract.
Will the ex-husband be likely to prevail?
a. No, because the annuity contract was a third-party beneficiary contract.
b. No, because the ex-husband assumed the risk of his ex-wife’s death.
c. Yes, because the ex-wife’s death frustrated the purpose of the annuity.
d. Yes, because the ex-husband and the insurance company made a mutual mistake as to the ex-wife’s health.

Answer 19

b - A mutual mistake may render a contract voidable by the adversely affected party. But a party assumes the risk of the mistake—and cannot void the contract—if the party knew at the time of the contract that he/she had limited knowledge of the facts and accepted this knowledge as sufficient.

not c - Frustration of purpose allows a party to rescind a contract when an unexpected event destroys that party’s purpose in entering the contract. The nonoccurrence of the event must have been a basic assumption of the contract. Since the ex-wife’s eventual death was a basic assumption on which the annuity contract was based, this doctrine does not apply.

Question 20

A private port authority contracted with a company that manufactures and operates cranes to assist with loading and unloading containers from ships docked at the port. One of the company’s cranes was defectively manufactured. Due to this defect, a container was dropped, injuring an individual below.
The individual sued the port authority, alleging negligence. Neither the individual nor the port authority notified the crane company of this lawsuit.
The port authority settled its claim with the individual before trial for a reasonable amount. The port authority seeks to recover the cost of the settlement from the crane company under a breach-of-contract action.
Is the port authority likely to prevail?

Answer 20

Yes, because the settlement was reasonably foreseeable at the time the contract was formed. It was reasonably foreseeable that a defect in the crane might cause personal injury and that the port authority, as the dock operator, would be sued for that injury. Therefore, the port authority will likely prevail in its breach-of-contract suit to recover the settlement cost.

Consequential damages—i.e., losses arising from the parties’ special circumstances—are recoverable only if they were reasonably foreseeable to the breaching party when the contract was entered.

Question 21

The owner of a retail clothing store regularly displayed for-sale works by local artists on a wall in the store. An art collector who came into the store inquired about purchasing a particular work for display at his home. The two agreed upon a price, but the collector was not ready to commit to purchasing it immediately. Confident that the collector would purchase the work, the owner promised in a signed writing to sell the work to the collector at the agreed-upon price at any time before the end of the month. On the last day of the month, the collector sent the owner a check for the agreed-upon price, which the owner received on the tollowing day.
If the owner returns the collector’s check and refuses to sell the artwork to the collector, which of the following best supports the owner’s position that a contract had not been formed?
A. The collector could not accept the owner’s offer by mailing a check.
B. The collector’s acceptance of the owner’s offer was not timely.
C. The firm-offer rule is not applicable because the collector was not a merchant with respect to the artwork.
D. The firm-offer rule is not applicable because the owner was not a merchant with respect to the artwork.

Answer 21

B
Under the mailbox rule, an acceptance that is mailed within the allotted response time is effective when sent unless the offer provides otherwise. However, this rule does not apply to firm offers, options, or other irrevocable offers. Under the UCC, a merchant’s offer to sell goods is firm (i.e., irrevocable) if it is made in a signed writing that assures that the offer will remain open. Acceptance of a firm or otherwise irrevocable offer is effective only if it is received by the offeror before the offer expires.

Question 22

On January 5, a buyer and a seller contracted for the delivery of 100 widgets if they could be delivered by February 20. The agreement was made in a writing signed by both parties and provided that the buyer would pay the contract price of $1,000 upon delivery. On February 3, the buyer and the seller orally agreed to postpone delivery until March 1. However, when the widgets arrived on March 1, the buyer refused to accept or pay for the widgets.
If the seller sues the buyer for breach of contract, who is most likely to succeed in the action?
A The buyer, because any modification of the parties’ contract must satisfy the statute of frauds.
B The buyer, because the agreement on Feb 3 was not supported by consideration.
C The seller, because the contract modification on Feb 3 was immediately binding on both parties.
D The seller, because the oral agreement on Feb 3 waived the Feb 20 delivery date.

Answer 22

D - Nonoccurrence of a condition may be excused if the party who would benefit from the condition waives it by words or conduct. And that waiver cannot be retracted if the other party has detrimentally relied on it.

Not a - The parties’ oral modification was subject to the statute of frauds because the k, as modified, was for the sale of goods for $500 or more. However, the SoF will not prevent the enforcement of an oral modification when, as here, (1) the promisor should have reasonably expected to—and did—induce action or forbearance on the modification and (2) injustice can be avoided only by enforcing the modification.

Not B - Consideration is not needed to modify this contract for the sale of goods under the UCC. However, separate and adequate consideration would be required to modify a contract for services under the common law.

Not C - The contract modification (i.e., the waiver) on February 3 did not become binding until the seller detrimentally relied on it.

Question 23

What can the buyer do if a violation of the UCC’s perfect-tender rule?

Answer 23

A buyer can reject nonconforming goods within a reasonable time after delivery by promptly notifying the seller of the rejection.

After rejection, the buyer has an obligation to take reasonable care of any goods in its possession until the seller has had a reasonable amount of time to retrieve them. When the seller does not retrieve the goods or provide further instructions, the buyer may generally choose to store, reship, or sell the goods on the seller’s behalf.
The buyer is required to sell the goods on the seller’s account if:
- buyer is a merchant or who, by occupation, holds him/herself out as having knowledge or skills unique to the goods involved
- the goods involved are perishable or threaten to speedily decline in value and
- the seller has no local agent to whom the goods can be returned.

Question 24

A general contractor learned that a company was accepting bids for a lucrative construction project involving a high-rise building. The general contractor contacted a number of subcontractors and informed them that he would be accepting bids for the electrical work on the project for the next week. After receiving a number of bids from subcontractors, the general contractor selected a bid from a young subcontractor, which was the lowest bid but still within a reasonable range of the other bids. The general contractor used that sub-bid in calculating his overall bid on the construction project.
Soon after submitting his sub-bid to the general contractor and after the general contractor had submitted his overall bid to the company, the young subcontractor realized that he could have charged more for his services based on their market value. The company ended up choosing the general contractor’s bid for the project, and later that same day, the young subcontractor told the general contractor that he was revoking his sub-bid for the electrical work. As a result, the general contractor had to use a different subcontractor to perform the work at a cost $3,000 higher than the young subcontractors bid.
In a suit to recover the $3,000 from the young subcontractor, is the general contractor likely to prevail?
A. Yes, because an enforceable contract was formed when the general contractor used the young subcontractor’s sub-bid in his overall bid on the project.
B. Yes, because the general contractor detrimentally relied on the young subcontractor’s sub-bid.

Answer 24

B.

Here, the young subcontractor’s sub-bid was irrevocable because he should have reasonably expected the general contractor to rely on it when submitting the overall bid. The general contractor reasonably relied on that sub-bid and, as a result, had to pay an additional $3,000 to another subcontractor. And since the injustice of this substantial detriment can be avoided only by enforcing the offer, the general contractor will likely recover the $3,000.

An offer is binding as an irrevocable option contract if (1) the offeror should have reasonably expected to induce reliance on the offer, (2) the offeree reasonably relied on the offer, (3) reliance caused the offeree to suffer substantial detriment, and (4) injustice can be avoided only by enforcing the offer.

Not A - An enforceable contract was not formed when the general contractor used the young subcontractor’s sub-bid in his overall bid. That is because a subcontractor’s bid is considered a mere outstanding offer that the general contractor can decide to accept if awarded the general contract.

Question 25

A refrigeration-unit manufacturer contracted with a kitchen appliance store to sell and deliver 100 refrigeration units to the store at a price substantially lower than market value. The written and signed contract included the term "F.O.B. kitchen appliance store, on or before March 30." The shipping company that the manufacturer normally used to deliver its refrigeration units experienced an unforeseen strike at the end of March. As a result, the manufacturer personally delivered the units to the store on April 18. The store suffered no material harm due to the delay. The refrigeration appliance industry generally allows appliance manufacturers a 30-day leeway for any contractually specified time of delivery, unless such leeway is expressly prohibited by the contract. If the store brings suit against the manufacturer for breach of contract, which of the following facts provides the manufacturer with the strongest defense to the store's claim? A. The store suffered no material harm from the delay. B. There is evidence of a trade usage in the refrigeration appliance industry allowing a 3o-day leeway for appliance deliveries.

Answer 25

B Under the UCC parol evidence rule, evidence of a prior or contemporaneous agreement cannot be used to contradict the terms of a final written agreement. But evidence of the parties' course of performance, course of dealing, or trade usage can be used to explain or supplement those terms—even when the terms appear unambiguous. Trade usage is any practice or method of dealing in the particular business or industry that is observed with such regularity so as to justify an expectation that it will be observed in the instant case.

Question 26

A tenant rented a small cabin from a landlord. The lease provided that the tenant was permitted to make structural improvements to the cabin but that the tenant must pay for such improvements. Relying on this clause in the contract, the tenant contacted a contractor to install a loft in the cabin for $10,000. The tenant and the contractor agreed in a writing signed by both parties that payment would be due 30 days after the loft was completed. The contractor knew that the tenant was renting the cabin and sent the landlord a letter informing him of the impending construction on his property. The landlord received the letter and did not reply. The contractor completed the loft, which increased the market value of the cabin by $6,000. Ten days later and three months before the end of her lease, the tenant vacated the cabin and disappeared. Thirty days after the loft was completed, the contractor's bill remained unpaid. If the contractor has no remedy quasi in rem under the jurisdiction's mechanic's lien statute, which of the following will give the contractor the best chance of recovery in personam against the landlord? A. An action based on an implied-in-fact contract. B. An action based on promissory estoppel. C. An action in quasi-contract for the benefit conferred on the landlord.

Answer 26

C - A plaintiff can recover under a quasi-contract theory—despite having no contractual relationship with the defendant—if the plaintiff conferred a non-gratuitous benefit on the defendant that resulted in unjust enrichment Not B - Implied-in-fact contracts are formed when the parties manifest assent by conduct rather than spoken or written words. Here, contractor negotiated entirely with the tenant and merely sent the landlord a letter informing him of the impending construction. Not C - Promissory estoppel provides a basis for a party to enforce a promise on which it relied when no valid contract was formed. But promissory estoppel would be ineffective here since the landlord never promised to pay the contractor's bill.

Question 27

On November 1, the owner of a yacht posted a flyer at a local coffee shop reading, "Yacht for Sale: Make me an offer!" The flyer also included the owner's phone number. A buyer called the owner on November 3 to ask how much the owner wanted for the yacht. The owner said, "Well, 'd hate to part with it for less than $55,000, but if you can pay me $50,000 by November 20, Id sell it to you. Ill hold onto the yacht for you until then." Elated, the buyer took steps to obtain a loan by November 20. On November 15, a second buyer called the owner and offered to buy the yacht for $60,000. The owner immediately accepted, and the second buyer picked up the yacht the next day. On November 20, having obtained a loan, the first buyer went to the owner's home and presented the owner with a check for $50,000. The first buyer then learned the owner had already sold the yacht. Can the first buyer bring a successful suit against the owner for breach of contract? A - No, because the owner's statement to the first buyer was only an invitation to deal. B - No, because the second buyer offered more money for the yacht than the first buyer agreed to pay c - Yes, because the owner promised to keep the offer open for a specific period of time. D - Yes, because the owner's offer to the first buyer was still outstanding on November 20.

Answer 27

D the owner offered to sell the yacht to the first buyer and then sold the yacht to a second buyer. However, the owner never revoked the offer made to the first buyer, and the first buyer did not otherwise learn of the sale prior to accepting the offer (Had the first buyer learned of the sale from a reliable source prior to acceptance, then the offer would have been terminated through constructive revocation.)

Question 28

On April 1, a buyer and a seller executed a written contract for the sale of an antique car for $40,000, delivery on May 1. The contract contains a clause indicating that it is a total integration of the parties' agreement. As they each signed the contract, the buyer orally reminded the seller that the buyer's duty to purchase the car was conditioned on his ability to get approval for a loan by April 20 to fund the purchase. The seller orally agreed, though the condition was not noted in the written contract. When the seller contacted the buyer to execute the sale on May 1, he discovered that the buyer had attempted but failed to get a loan and could not afford to purchase the car. The buyer refused to honor the contract. If the seller sues the buyer for breach of contract, will the court likely admit the evidence of the oral condition regarding the buyer's approval for a loan? A - No, because the written contract is a complete integration of the agreement between the parties. B - Yes, as proof of a condition precedent to the buyer's obligation under the contract.

Answer 28

B. The parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the contract as written. However, evidence may be admitted to prove a condition precedent to the existence of the contract. A condition precedent is a condition that must occur to trigger a party's obligation to perform.

Question 29

A manufacturer of T-shirts contracted with a brand-new clothing store to sell the store 1,000 T-shirts per month for a period of two years. The clothing store's signature color for its clothing was an orange-tinted red color, called coquelicot, which is very difficult to replicate on a consistent basis. The final, written contract specified that any T-shirts that were not coquelicot could be returned, but it was silent with regard to the return of T-shirts for other reasons. One year into the contract, the store decided to switch to coquelicot-colored baseball caps instead of T-shirts. As a result, the store returned the most recent shipment of coquelicot-colored T-shirts to the manufacturer and demanded a refund. The manufacturer refused to grant the refund, and the store sued the manufacturer for damages. At trial, the manufacturer introduced the contract, which clearly stated that T-shirts that were not coquelicot could be returned. The store then attempted to introduce evidence that it had returned coquelicot-colored T-shirts to the manufacturer over the past year without objection and received a refund. Is this evidence admissible? A. No, because the express term in the contract regarding the return of T-shirts takes precedence over the course of performance. B. Yes, because the evidence can reasonably establish the parties' course of dealing on this issue. C. Yes, because the evidence is relevant to show that the manufacturer had accepted the return of coquelicot-colored T-shirts in the past.

Answer 29

c - Under the UCC parol evidence rule, course of performance can be used to supplement or explain the terms of a final written agreement. The contract stated that non-coquelicot T-shirts could be returned but was silent with regard to the return of coquelicot T-shirts. This means that the contract's terms can be supplemented with evidence that the store had returned coquelicot T-shirts over the past year without objection and received a refund. Evidence of this course of performance is therefore admissible.

Question 30

A widow offered to sell her small business, together with all of the business's assets, to a nonprofit organization. The organization accepted, and on June 1, it signed and executed a contract providing for the sale of the business for $25,000 at the end of the month. When the organization's agent signed the contract, she orally informed the widow that the organization's duty to purchase the business was conditioned on obtaining approval from a local zoning board to convert the business's primary office into an affordable-healthcare clinic. A week later, the woman received another offer to purchase her business for $35,000. At the end of the month, seeking to accept the other offer, the widow refused to honor the contract with the organization because it had neglected to request the necessary approval from the zoning board The organization sued the widow for breach of contract. The organization presented clear evidence that it had the necessary funds to perform on the contract at the end of the month, and that the zoning board would have routinely approved the organization's plans for the office. Is the organization likely to prevail in its action against the widow? a - No, because the express condition of the zoning board's approval had not occurred by the end of the month. b - No, because the organization's failure to seek approval from the zoning beard was a repudiation of the contract. c - Yes, because the condition of approval by the zoning beard has been waived by the organization. d- Yes, because the condition of approval by the zoning beard was not included in the written

Answer 30

c A party's obligation to perform may be conditioned on an uncertain future event that must occur before performance becomes due (i.e., a condition precedent). However, a party whose duty is subject to the condition can waive the condition by words or conduct. Here, the organization's duty to perform the contract was subject to the condition that it first obtain approval from the local zoning board. Since the organization did not have to perform until this condition occurred, it had the ability to waive the condition. It did so by making no attempt to obtain approval the agent's contemporaneous oral statement that created a condition precedent is admissible and could have been enforced had it not been waived

Question 31

In January, a local farmer contracted with a chef to sell the chef a specified amount of local organic tomatoes to be delivered on August 1. On June 15, the farmer called the chef to tell him that part of his crop was infested with tomato fruitworms and he was unsure that he would be able to deliver the full amount requested by August 1. The chef told the farmer that it was absolutely essential that he receive those tomatoes on time to make organic tomato sauce for a restaurant scheduled to open in late August. The farmer assured the chef that he would do his very best to save the crop and deliver by August 1. Does the chef have valid legal grounds to cancel the contract and order tomatoes from another source? A -No, because the farmer did not state unequivocally that he could not deliver the tomatoes on time. B - No, because the farmer still had more than 3o days to deliver the tomatoes. C - Yes, because the farmer committed an anticipatory repudiation of the contract by causing the chef to feel insecure about the farmer's performance. D - Yes, because the farmer failed to provide adequate assurances to the chef.

Answer 31

A farmer told the chef that he was "unsure" whether he could deliver the full amount of tomatoes by August 1. Since the farmer did not state unequivocally that he could not deliver the tomatoes on time, this did not constitute an anticipatory repudiation (Choice C). However, it did provide the chef with reasonable grounds for insecurity about the farmer's ability to deliver the tomatoes by August 1. The chef then told the farmer that it was absolutely essential that he receive those tomatoes on time. But he did not make a written demand for assurances as required under the UCC, so the farmer was not required to provide such assurances (Choice D). As a result, the chef does not have legal grounds to cancel the contract and order tomatoes from another source. Not b - The 30-day time period would have been relevant had the chef given the farmer a written demand for assurances. However, the chef did not do so.

Question 32

A recent college graduate offered to buy all of the computers from a failing online retailer for which he had been an intern during college, and the retailer accepted. The terms of the written agreement were such that the graduate would pay $10,000 for a "reasonable number of computers" since the retailer was winding up its business and no longer needed them all. Due to his internship with the retailer, the graduate knew that there were 50 computers in the office and that nearly all of them were unused, so he believed that he would receive all 50 computers once the retailer closed. He gave the retailer a check for $10,000 and, in return, took 10 computers from the office that day. With the help of the $10,000 and a sudden upswing in the online retail market, the retailer became profitable. When the graduate demanded the remaining 40 computers, the retailer refused. Instead, the retailer returned the $10,000 to the graduate and demanded the return of the 10 computers that were in the graduate's possession. The graduate sued the retailer for breach of contract. The retailer has moved to dismiss the suit, arguing that no valid contract existed How is the court likely to rule? A. Deny the motion, because the court may supply missing terms in a contract. B. Deny the motion, because the parties formed a requirements contract. C. Grant the motion, because the retailer's increased profitability constituted a supervening event. D. Grant the motion, because there was no agreement as to quantity.

Answer 32

D. The UCC "fills the gap" for missing contract terms other than the parties, subject matter, and quantity. The quantity term must specify an amount that is certain or capable of being made certain by reference to objective facts. Here, the parties did not form a requirements contract since the graduate did not agree to buy all the computers he would require from the retailer—only a reasonable number (Choice B). Additionally, a "reasonable number" is not an objective fact through which the quantity term can be determined. And since the court cannot supply the missing quantity term, the terms were too indefinite to form a contract (Choice A). Therefore, the court will likely grant the retailer's motion to dismiss.

Question 33

Delegation of contractual duties is not permitted when

Answer 33

(1) the other party to the contract has a substantial interest in having the delegating party perform or (2) the contract prohibits delegation.

Question 34

A construction company contracted with a manufacturer to purchase 100 identical prefabricated windows to use while constructing houses in a gated community. The windows were to be delivered in shipments of 25 windows each on April 1, May 15, July 1, and August 15. The written contract, signed by both parties, was silent as to when payment for each shipment would be due. The manufacturer made the first two shipments in conformity with the contract requirements, and the construction company paid one-fourth of the full contract price upon each delivery. However, on June 1, the manufacturer demanded that the construction company pay the entire remainder of the contract price before the manufacturer made any further shipments. Which of the following statements is true? A - The construction company has no duty under the contract to make any payments until the final delivery is made. B - The construction company must pay the manufacturer one-fourth of the contract price upon delivery of each conforming shipment of windows. C - The construction company's failure to pay the requested sum will amount to a repudiation of the contract. D - The manufacturer waived his right to demand immediate payment of the full contract price when he accepted the first payment of one-fourth of the contract price on April 1.

Answer 34

B Under the UCC, an installment contract is defined as a contract in which the goods are to be delivered in multiple shipments, and each shipment is to be separately accepted by the buyer. Payment by the buyer is due upon each delivery unless the price cannot be apportioned (but if K says that payment at end, altho courts prefer to interpret as divisible, they'll uphold what the K says)

Question 35

At the beginning of the week, a homeowner met with a contractor to discuss remodeling a bathroom in her home. At the conclusion of their meeting, the contractor told the homeowner that he would charge her $5,000 to $6,000 for the work, but that he would get back to her with a final price. When he arrived at his office later that day, the contractor opened an email from the homeowner that she had sent earlier. In the email, she stated that she would pay the contractor $5,000 for the job. Two days later, the contractor responded by email that he could not complete the work for less than $5,500. The homeowner replied by email that she couldn't pay $5,500 but that, if the contractor changed his mind about doing the work for $5,000, he could begin work before the end of the week. The contractor received the email but did not respond. The next day, the contractor appeared at the homeowner's house and began remodeling the bathroom. Which statement is most accurate? A. A contract was formed at a reasonable price. B. A contract was formed at the price of $5,000. C. A contract was formed at the price of $5,500. D. No contract was formed.

Answer 35

B Homeowner emailed the contractor an offer to pay $5,000. The contractor rejected that offer by presenting a $5,500 counteroffer, which the homeowner rejected. However, the homeowner revived her original offer for $5,000, which the contractor could accept by beginning work before the end of the week. The contractor did so, thereby forming a contract at the price of $5,000.

Question 36

Does the parol evidence rule bar evidence of prior or contemporaneous communications between contracting parties when the evidence is offered to establish a defense to contract formation (e.g., misrepresentation).?

Answer 36

No, that's allowed

Question 37

A man was moving to another state and decided that he wanted to give away some of his belongings. The man knew that his brother had always expressed interest in the man's antique desk. The man called the brother and said, "I'm going to be moving in two weeks. I would like to give you the antique desk as a gift. I'll drop it off at your house on my way out of town." The brother told the man that he was very grateful for the gift and was looking forward to having the desk in his home office. The brother, in reasonable reliance on the man's promise, immediately disposed of his old desk and made room for the antique one. A couple of days later, an appraiser, who was a friend of the man, visited the man's house for dinner. While at his house, the appraiser saw the antique desk and informed the man that it was worth well over $20,000. The man decided to keep the desk and did not drop it off at the brother's house on his way out of town. The brother brought suit against the man to recover the antique desk. If the court finds in favor of the man on these facts, what is the most likely reason? A. A promise to make a gift in the future cannot be enforced. B. The brother did not rely to his detriment on the man's promise. C. The man's promise was not in writing. D. The man's refusal to give the antique desk did not cause injustice.

Answer 37

D Under the doctrine of promissory estoppel, a party's promise to make a gift is enforceable if (1) the promisor should reasonably expect the promisee to rely on the promise, (2) the promisee detrimentally relies on the promise, and (3) injustice can be avoided only by enforcement of the promise.

Question 38

Under the UCC, a court should presume that a written contract for the sale of goods is ____ integrated.

Answer 38

only partially (not fully) Thus, evidence of additional consistent terms is admissible unless the court concludes that the parties certainly would have included those terms in the writing.

Question 39

Prior to her death, a celebrity commissioned an artist to paint a portrait of her. The celebrity hired this particular artist because he painted using an old-fashioned and rarely used style that required two months of daily appointments during which the subject would sit for a few hours each day. The contract between the parties specified that this live-model method would be used and that the celebrity would deliver increasing payments throughout the process, with the first payment occurring after two weeks of painting. One week into the process, after the painting had begun, the celebrity died. Her family demanded that the artist continue with the painting, using photographs as a substitute for the daily sessions. Is the artist required to complete a painting of the celebrity? A . No, because no payment had yet occurred. B. No, because the celebrity died after only one week. C. Yes, because the artist can complete the painting by relying on photos of the celebrity. D. Yes, because the artist had already begun painting the celebrity.

Answer 39

B. Here, the celebrity's existence was required for the artist to perform because the artist needed the celebrity to sit for a few hours each day to complete a live-model portrait as specified in the contract. Therefore, the artist's continued performance became impracticable upon the celebrity's death. This discharged the artist's duty to perform, so he is not required to complete a painting of the celebrity.

Question 40

A woman sent an offer to sell her office printer to her friend for $450. In her offer, the woman said that the friend was welcome to mail her acceptance to the woman's business address but that the friend had to let the woman know within the next week whether she was interested. The friend needed an office printer, so she immediately accepted the woman's offer by mailing a letter to the woman's home address. Later that same week, thinking that the friend was not interested, the woman sold the office printer to a different person. A few days later, after the one-week deadline had passed, the friend's letter was delivered to the woman's house. The woman called the friend thereafter and told her that the office printer had already been sold Will the friend likely succeed in an action for breach of contract? A. No, because the offeror determines the manner and means by which an offer may be accepted. B. No, because the woman did not receive the friend's acceptance letter until after the one-week deadline had passed. C. Yes, because the offer was irrevocable for at least one week. D. Yes, because the woman did not specify that mailing an acceptance to her business address was the only mode of acceptance.

Answer 40

D Here, the woman did not dictate that an acceptance must be mailed to her business address; she merely welcomed the friend to mail it there. Therefore, the friend could accept the offer by another reasonable means. The friend did so by immediately mailing her acceptance to the woman's home address. Since that acceptance was effective upon dispatch, the friend accepted the woman's offer before the one-week deadline had passed (Choice B). As a result, the friend will likely succeed in her breach-of-contract action. unless the option is supported by separate consideration, the offeror may revoke the offer at any time prior to acceptance. However, that is of no consequence here because the friend accepted the woman's offer before it was revoked

Question 41

On April 1, a buyer agreed in writing to purchase an antique car from a seller for $20,000. The parties met on April 10, the scheduled date of the sale, at which time the buyer accepted the car and gave the seller a check for $15,000. The buyer, seeking to create an accord and satisfaction, had added the following conspicuous notation on the check: "This check is in full and final satisfaction of my obligation under our April 1 agreement." The seller did not realize that the check was for only $15,000 and that it contained the notation until the seller sought to deposit it at her bank later that day. Needing the money, the seller deposited the check anyway. If the seller sues the buyer for breach of contract seeking damages of $5,000, the difference between the amount paid and the contract price, will the buyer's accord and satisfaction defense likely succeed? A. No, because the buyer could not modify the agreement without consideration. B. No, because the buyer did not dispute the initial purchase price of the car. C. Yes, because the notation on the check formed a substituted contract. D. Yes, because the seller deposited the check knowing it was offered in full and final satisfaction of the buyer's obligation.

Answer 41

B, If a debt is disputed in good faith, then the debtor can offer to satisfy the debt by giving the creditor a check with a conspicuous "payment in full" notation. But if the debt is certain and undisputed, then it cannot be satisfied by a check for a lesser amount—even if the creditor cashes the check. Here, the seller (obligee) cashed the buyer's (obligor's) $15,000 check, which contained a conspicuous statement that it was "in full and final satisfaction" of the buyer's obligation to purchase the car for $20,000. However, the buyer did not dispute the initial purchase price of the car for $20,000—a certain amount. Absent a dispute, the check could not have been offered in good faith. Therefore, the buyer's accord and satisfaction defense is unlikely to succeed.

Question 42

UCC - what if when accepting, the person adds a new term?

Answer 42

Under the UCC, an acceptance that contains new or revised terms is still an acceptance so long as assent to the new or revised terms is not required. And if at least one of the contracting parties is a nonmerchant, then the new or revised terms are merely treated as proposed additions to the contract

Question 43

A plastics manufacturer saw an advertisement for a plastic extruding machine. The manufacturer contacted the seller, who was a merchant of plastic extruding machines, and made arrangements to inspect the machine at the seller's place of business. The manufacturer walked around the machine once and stated: "Yes, this looks like what I need." When the manufacturer asked the price, the seller stated a price that was less than half the amount a similar, functioning, used machine commanded on the market. The manufacturer was surprised at the low price but did not inquire as to the reason. The seller encouraged the manufacturer to perform a closer inspection before finalizing the purchase and offered to open the motor housing so that the motor could be examined, but the manufacturer declined. The parties completed the sale. The manufacturer transported the machine to his factory. When it arrived, he first learned that the motor was burned out and required complete replacement, as would have been readily apparent upon visual inspection had the motor housing been opened. Replacing the motor would cost roughly the amount that the manufacturer had paid for the machine. The manufacturer contacted the seller to return the machine, but the seller refused to take it back. The manufacturer then filed suit against the seller. Will the manufacturer likely prevail?

Answer 43

No, because the manufacturer waived any implied warranties by failing to inspect the machine. The UCC provides certain implied warranties for contracts involving the sale of goods (e.g., a machine), including the warranty of merchantability. This warranty applies when the seller is a merchant—i.e., one who regularly deals in goods of the kind involved (as seen here). It ensures that goods are merchantable, meaning that they are fit for their ordinary purpose and conform to the seller's representations. However, this warranty is disclaimed (i.e., waived) for defects that an examination would have revealed if the buyer: the buyer examined the goods as fully as desired OR refused to examine them.

Question 44

Pursuant to its current written contract with a boutique retailer of bath products, a soap maker was to supply 100 bars of soap each month. The contract called for payment upon delivery and specified that failure to pay would trigger an additional interest charge on the amount due. The retailer failed to timely pay for the first and second deliveries, and the soap maker imposed an additional interest charge of 10% of the amount due, which the retailer paid without objection. Under a previous contract between the retailer and the soap maker, which contained a similar clause, the soap maker had imposed an additional interest charge of 5% each of the three times that the retailer had failed to make a timely payment. However, in its dealings with other customers, the soap maker has imposed an interest charge of 6% of the amount due. There is no consistent practice among manufacturers of goods in general or soap in particular as to the rate of interest imposed on the unpaid amount due. This is true regardless of the type of retailer's boutique or otherwise. In a suit by the soap maker against the retailer for the unpaid amount due under the contract, what interest rate will the finder of fact likely determine formed part of the contract?

Answer 44

10% - the fact finder will likely determine that the 10% interest rate reflecting the parties' course of performance formed part of the contract. Under the UCC parol evidence rule, the express terms of a written contract for the sale of goods (e.g., soap) cannot be contradicted by evidence of prior or contemporaneous agreements. However, the UCC permits express terms to be explained or supplemented by evidence of: Course of performance – if (1) the agreement involves repeated occasions for performance by a party and (2) the other party accepts performance without objection (the 10%) Course of dealing – sequence of conduct concerning previous transactions between the parties that establishes a common basis of understanding for interpreting their conduct— ( 5% interest rate) Trade usage – any practice or method of dealing in the parties' business or industry that is practiced with enough regularity to justify an expectation that it will be practiced in the instant case (N/A)

Question 45

On May 1, a clothing manufacturer sent a written offer to a retailer for the sale of 1,000 pairs of designer jeans at a price of $50 per pair, including delivery and transportation costs. The proposed delivery date was June 15. On May 5, the retailer mailed a letter accepting the manufacturer's offer. On May 15, a natural disaster occurred, causing fuel prices to significantly increase. As a result, the manufacturer sent a letter to the retailer requesting an additional $500 to cover the increased delivery and transportation costs for the shipment of the jeans. The retailer considered seeking out a new supplier. However, the retailer hoped to continue doing business with this manufacturer in the future, so she decided against it. The retailer returned a signed letter promising to pay the additional $500. On June 15, the manufacturer delivered 1,000 pairs of jeans to the retailer. The retailer paid the manufacturer $50,000 but refused to pay the additional $500. Can the manufacturer enforce the retailer's promise to pay an additional $500?

Answer 45

Yes, because the manufacturer made its request for the additional $500 in good faith. Article 2 of the UCC governs contracts for the sale of goods (e.g., designer jeans). Unlike the common law, the UCC requires no consideration to modify a contract. All that is required is good faith. Good faith requires honesty in fact and fair dealing between the parties according to reasonable commercial standards. Consequently, if a party extorts or otherwise forces the other party to agree to a modification, then the modification is unenforceable.

Question 46

In June, a local chef learned of a new business that opened. Hoping to attract the business as a new client, the chef sent the business an offer consisting of a catalog of menus available through his catering service and a form letter that he sent to all new businesses in the area. The letter was signed by the chef and included the following language: "I specialize in creating delicious meals. I would like to offer you a 25% discount off any meal order, for up to 100 people, submitted this calendar year." No communication occurred between the parties until the end of November, when the business faxed an order form to the chef requesting a catered meal for 60 people at a promotional event for a 25% discount. The chef refused to provide the business with the catered meals at a 25% discount. As a result, the business sued the chef for breach of contract. The court found that both parties are merchants with respect to this transaction. Is the business likely to succeed in its action? A. Yes, because the chef had not revoked the offer before the end of the calendar year. B. Yes, because the signed promotional letter created a firm offer.

Answer 46

Under the UCC firm-offer rule, an offer to buy or sell goods is irrevocable if the offeror is a merchant and provides a signed writing containing assurances that the offer will remain open. However, the period of irrevocability cannot exceed three months unless the offeree gives consideration. Since the business provided no such consideration, the chef's June offer was irrevocable until September. The chef was then free to revoke the offer but did not do so.

Question 47

A charity, seeking to raise funds, held a raffle for a new automobile. A week before the raffle, the organizer of the raffle contacted a friend who had purchased a raffle ticket. The organizer promised to ensure that the friend would win the raffle if the friend gave the organizer $1,000. The friend agreed and gave the organizer $1,000. On the day before the raffle, the friend began to feel guilty. He went to the organizer, renounced the scheme, and demanded his $1,000 back. The organizer refused. The next day at the raffle, the automobile was awarded to someone else. The applicable jurisdiction makes it a crime to fraudulently conduct a contest, lottery, or prize drawing If the friend sues the organizer for the $1,000, will the friend be likely to prevail?

Answer 47

A contract to perform an illegal act (e.g., fraud) is void and unenforceable. However, restitution damages may be recoverable if the claimant conferred a benefit on the other party and: was justifiably ignorant of the facts that made the contract illegal* was less culpable than the other party (i.e., was not in pari delicto) or withdrew before the contract's illegal purpose was achieved and did not engage in serious misconduct (e.g., shockingly immoral, unethical, or unjust behavior). Here, fraudulently conducting a prize drawing (e.g., raffle) is a crime in this jurisdiction, so the parties' contract to ensure that the friend would win the raffle for $1,000 was illegal and therefore invalid (Choice D). However, the friend withdrew from the transaction prior to the raffle. And since there is no evidence of serious misconduct on his part, the friend is entitled to restitution of the $1,000 that he paid to the organizer

Question 48

A homeowner contracted with a landscaper to tend the extensive gardens around the homeowner's home for $1,000 per month for one year. The landscaper completed the work to the homeowner's satistaction for three months. Two days before the fourth month, the landscaper told the homeowner that he had to leave town unexpectedly. The landscaper asked for the homeowner's permission to assign his rights and delegate his duties under the contract to another gardener for the next two months. The homeowner was frustrated by being given such short notice, but she reluctantly consented. The gardener also consented to the delegation, but he performed very little work for the next two months, and most of the gardens died. Does the homeowner have a viable breach-of-contract claim against the landscaper?

Answer 48

ANS: Yes, because the homeowner's consent to the delegation did not create a novation. A delegator remains liable to the other contracting party if the delegatee fails to perform unless the other party consented to a novation. Mere consent to a delegation does not create a novation. A novation is a substituted contract in which the parties agree to replace an original contracting party with a new party. A novation may be express or implied after delegation if: the delegator repudiates liability to the other party AND the other party accepts the delegatee's performance of the contract without reserving rights against the delegator.

Question 49

A buyer contracted with an owner of commercial property located in a strip mall to purchase the property for $750,000. The contract called for closing and delivery of possession to occur on March 1. At the time of contracting, the owner informed the buyer that the current tenants were wrongfully refusing to vacate the premises and would not do so until March 31. The owner notified the current tenants, who ran a call center on the premises, that they would need to vacate the premises before April 1. Although the current tenants stopped operating the call center before April 1, they were not able to empty the space completely because they had attached numerous cubicles to the floor, and the cubicles occupied the entire space of the property. Shortly after entering the contract, the buyer ordered gymnastic equipment that was to be delivered on March 2. Unbeknownst to the owner, the buyer planned on using the property as a gymnastics studio. Due to the delay, the buyer was forced to rent a storage unit for this equipment for $1,000. By April 1, the fair market value of the property had risen to $755,000. In addition, the monthly fair market rental value of the property was $3,000. If the buyer files an action against the owner for damages, what will she likely recover?

Answer 49

Compensatory damages consist of the following: expectation damages – the difference between the value of performance without the breach (i.e., what was promised) and with the breach (i.e., what was received) consequential damages – damages that do not flow directly and immediately from the other party's breach but are the foreseeable consequence of the breach (i.e., not too speculative) and incidental damages – commercially reasonable expenses incurred due to the other party's breach. Here, the buyer can recover expectation damages, which are measured by the fair market rental value of the property for the month of March that she was denied possession ($3,000). But the storage-unit costs ($1,000) are not recoverable because it was neither foreseeable (consequential) nor commercially reasonable (incidental) to schedule a delivery on March 2 after learning that the current tenants would not vacate until March 31 (Choice A). Therefore, the buyer will likely recover only $3,000 in expectation damages.

Question 50

A restaurant placed an order for 100 pounds of USDA prime beef from a meat packer. The order was to be shipped to the restaurant immediately. The meat packer erroneously shipped 100 pounds of USDA choice beef, rather than prime beef. Which of the following best states the restaurant's rights and duties upon delivery of the beef?

Answer 50

Here, the restaurant requested shipment of 100 pounds of USDA prime beef. The meat packer then shipped 100 pounds of nonconforming choice beef without a notice of accommodation. As a result, the shipment constituted an acceptance (not a rejection and a counteroffer), and a contract was formed (Choice D). But since this shipment of nonconforming goods also constituted a breach, the restaurant can accept or reject the choice beef (Choice B). It is not required to accept the choice beef.