Formation of Contracts Flashcards
(18 cards)
A homeowner entered into a contract with a landscaper. The contract specified that the homeowner
would pay the landscaper $10,000 upon completion of a list of projects. The landscaper performed the
work while the homeowner was away on vacation. When the landscaper sought payment, the
homeowner refused, noting that a tree had not been trimmed as required by the contract. The
landscaper responded that, since he would now have to forego other work in order to trim the tree, he
would do it but only if the homeowner agreed to pay him a total of $10,500 for his services. The
homeowner, desperate to have the work completed, agreed. Once the work was completed, however,
the homeowner gave the landscaper a check for $10,000 and refused to pay more. The landscaper sued
for breach of contract.
Is the landscaper likely to succeed in his claim?
(A) No, because an enforceable contract cannot be renegotiated.
(B) No, because there was no consideration for the promise to pay $10,500 and no unanticipated
circumstances arose.
(C) Yes, because there was a valid modification of the contract.
(D) Yes, because the landscaper suffered a detriment by foregoing other work.
(B) No, because there was no consideration for the promise to pay $10,500 and no unanticipated
circumstances arose.
A wholesaler of bicycle chains sent a retailer the following fax on December 1: “Because of your
continued loyalty as a customer, I am prepared to sell you up to 1,000 units of Bicycle Chain Model D at
$7.50 per unit, a 25% discount off our original $10.00 price. This offer will remain open for 7 days.” The
fax lacked a full, handwritten signature, but it was on the wholesaler’s letterhead and had been initialed
by the wholesaler’s head of sales. On December 4, the wholesaler’s head of sales called the retailer and
informed the retailer that the wholesaler had decided to revoke his December 1 offer. On December 5,
the retailer placed an order for 1,000 bicycle chains, stating that he would pay the discounted price of
$7.50 per unit.
What is the correct value of the order placed by the retailer?
(A) $7,500, because the wholesaler’s revocation was not in writing.
(B) $7,500, because the wholesaler was bound to keep the offer open for 7 days.
(C) $10,000, because the offer was not signed by the wholesaler.
(D) $10,000, because the retailer did not provide consideration to hold the offer open.
(B) $7,500, because the wholesaler was bound to keep the offer open for 7 days.
A retailer received a written firm offer signed by a supplier. The offer committed the supplier to
providing the retailer with up to 10,000 tubes of toothpaste over the next 45 days at $1.00 a tube.
Thirty days later, the supplier informed the retailer that the price per tube of toothpaste would be
$1.10. The next day, the retailer ordered 6,000 tubes of toothpaste from the supplier, which the
supplier promptly shipped. Sixty days after the receipt of the offer, the retailer ordered another 4,000
tubes of toothpaste, which the supplier also promptly shipped.
What price is the supplier permitted to charge the retailer for the toothpaste?
(A) $10,000 (10,000 × $1.00), because the supplier’s firm offer was effective for three months
regardless of its terms.
(B) $10,400 ((6,000 × $1.00) + (4,000 × $1.10)), because the supplier’s firm offer was effective for only
45 days.
(C) $11,000 (10,000 × $1.10), because the firm-offer rule does not apply where the buyer is a
merchant.
(D) $11,000 (10,000 × $1.10), because the supplier informed the retailer that the price was increased
to $1.10 before the retailer placed either order.
(B) $10,400 ((6,000 × $1.00) + (4,000 × $1.10)), because the supplier’s firm offer was effective for only
45 days.
On May 10, the coach of a youth-league baseball team sent a letter to a supplier asking the supplier to
promptly ship 20 red jerseys to the coach. On May 15, the supplier received this letter and sent the
coach a reply letter accepting the offer. On May 16, the supplier realized that he had no red jerseys with
which to fill the order and sent the coach 20 blue jerseys with a note that the blue jerseys were
tendered as an accommodation. The coach received the jerseys and accommodation note on May 18
and received the supplier’s acceptance letter on May 19.
On May 20, which of the following is a correct statement of the parties’ legal rights and duties?
(A) The coach can either accept or reject the blue jerseys and, in either event, recover damages, if any,
for breach of contract.
(B) The coach can either accept or reject the blue jerseys, but if he rejects them, he will thereby waive
any remedy for breach of contract.
(C) The supplier’s shipment of nonconforming goods constituted an acceptance of the coach’s offer,
thereby creating a contract for the sale of the blue jerseys.
(D) The supplier’s shipment of the blue jerseys constituted a counteroffer.
(A) The coach can either accept or reject the blue jerseys and, in either event, recover damages, if any,
for breach of contract.
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 rug maker owed him an
additional $5,000.
(B) The rug maker’s and supplier’s good faith dispute over the yarn composition suspended the rug
maker’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
rug maker 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.
(C) The supplier deposited the check for $5,000 less than the contract price, thereby discharging the
rug maker of any further duty to pay the remaining amount for that month’s shipment.
The owner of a restaurant who highlighted local ingredients when creating his menu 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.
(B) No, because the farmer made a nonconforming tender of goods.
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.
(C) The homeowner wins, because the contractor assumed the risk of the fungal infection.
A sister convinced her brother that they should open a small coffee shop. Their friend, a guitarist,
suggested bringing his band to play live music in order to attract customers. He did not request any
payment, saying that the publicity would be good for the band. The siblings agreed, and the band
started playing at the coffee shop weekly. The coffee shop became a success, in no small part due to
the band’s performances. When a businessperson offered to buy the coffee shop from the siblings, they
orally agreed to each pay the guitarist $10,000 out of their share of the sale proceeds for his help in
making the shop popular. The sister told the guitarist about their agreement. He was so delighted with
it that he made a down payment on a new car. By the time the sale of the coffee shop was finalized, the
brother had encountered financial difficulties. After the sale, the siblings signed a written contract
stating that the sister would pay the guitarist $10,000 and her brother would pay him $5,000.
If, after the sale, the brother pays the guitarist only $5,000, will the guitarist have a valid basis for an
action against the brother for another $5,000?
(A) No, because the guitarist was bound by the written modification of the contract made by the
siblings.
(B) No, because the guitarist was only a donee beneficiary of the oral contract between the siblings.
(C) Yes, because the guitarist’s reliance on the promised payment prevented the siblings from changing
the obligations of their oral contract.
(D) Yes, because the oral promise to pay $10,000 to the guitarist was made binding by the guitarist’s
valuable and uncompensated contributions to the business.
(C) Yes, because the guitarist’s reliance on the promised payment prevented the siblings from changing
the obligations of their oral contract.
While attending a rodeo on August 20, a hatmaker entered into a valid, written agreement with the
rodeo manager to make 500 leather cowboy hats for an upcoming rodeo event at a price of $75 per hat.
Per the agreement, the rodeo manager agreed to pay one-fourth of the total purchase price to a
tannery owner to whom the hatmaker owed a debt for a previous leather order. The hatmaker and the
rodeo manager made no mention of the agreement to the tannery owner.
On August 25, the hatmaker changed his mind about paying one-fourth of the purchase price to the
tannery owner. The hatmaker and the rodeo manager subsequently executed a valid modification of
the original agreement. The rodeo manager’s brother had also been present on August 20 when the
original agreement was executed, but he did not know about the August 25 modification of the
agreement to no longer pay the tannery owner. On August 30, the brother, who was friends with the
tannery owner, called and told the tannery owner that his debt from the hatmaker would finally be paid
off. However, the rodeo manager refused to pay one-fourth of the purchase price to the tannery owner.
If the tannery owner sues the rodeo manager for one-fourth of the purchase price, will he likely
recover?
(A) No, because the tannery owner did not rely on the August 20 agreement between the hatmaker
and the rodeo manager.
(B) No, because there was no consideration for the promise to pay the tannery owner by the hatmaker
and the rodeo manager.
(C) Yes, because the tannery owner had the right to sue the rodeo manager to enforce the contract
between the rodeo manager and the hatmaker.
(D) Yes, because the rodeo manager agreed to pay one-fourth of the purchase price to the tannery
owner on August 20.
(A) No, because the tannery owner did not rely on the August 20 agreement between the hatmaker
and the rodeo manager.
A boutique hotel contracted with a seamstress to handmake 500 pillows. The signed contract specified
that the pillows should be filled with down and that the pillow covers should be made with white, 1000-
thread-count cotton fabric. Before the seamstress began making the pillows for the boutique hotel, she
secured another commission for work that would prevent her from making the hotel’s pillows. As a
result, the seamstress informed the boutique hotel that she was passing on the hotel’s contract to her
former business partner, who was comparable in talent and skill at making high-quality pillows. The
boutique hotel did not object to the substitution. The former partner diligently worked on making the
pillows, using white, 1000-thread-count fabric to make the pillow covers. However, instead of using
down to fill the pillows, she used a comparably priced synthetic microfiber. The boutique hotel
subsequently filed a breach-of-contract action against the seamstress.
Will it succeed?
(A) No, because the former partner’s use of a synthetic microfiber instead of down did not reduce the
value of the pillows.
(B) No, because the boutique hotel agreed to the delegation of the seamstress’s duties to her former
partner.
(C) Yes, because the boutique hotel had not released the seamstress from liability under the contract.
(D) Yes, because the seamstress did not give consideration for delegating the contract to the former
partner.
(C) Yes, because the boutique hotel had not released the seamstress from liability under the contract.
A shoe manufacturer contends that the owner of a shoe store called and ordered 50 pairs of Oxford-
style dress shoes at $100 per pair to be shipped within three weeks. The manufacturer promptly sent
the owner a signed, written acknowledgment of the alleged order that reflected the manufacturer as
seller and the owner as buyer, as well as the number and style of shoes. However, the acknowledgment
did not indicate the price of the shoes. The owner admits to receiving the acknowledgment the
following day and taking no action regarding it. Two weeks later, the owner received a shipment of 50
pairs of Oxford-style dress shoes. The owner immediately called the manufacturer and asserted that he
had never ordered the shoes.
Will the statute of frauds prevent the manufacturer from enforcing this contract against the owner?
(A) No, because an oral contract between merchants is enforceable.
(B) No, because the owner received and did not respond to the written acknowledgment in a timely
manner.
(C) Yes, because the acknowledgment did not indicate the price of the shoes.
(D) Yes, because the price of the shoes exceeds the $500 threshold of the statute of frauds.
(B) No, because the owner received and did not respond to the written acknowledgment in a timely
manner.
A baker and a bride-to-be entered into a contract in which the baker agreed to bake the wedding cake
for the bride’s wedding at a cost of $2,500. The contract contained a clause that read: “Bride’s
obligation to perform under the Contract is expressly conditioned upon her complete satisfaction with
Baker’s aesthetic design of her wedding cake.” In keeping with the wedding’s butterfly theme, the baker
constructed an elegant cake accented with colorful butterflies, flowers, and caterpillars. At the wedding
reception, the guests were enthralled by the cake. However, the bride had a genuine aversion to
caterpillars, and she hated the cake. When the bride refused to pay the baker, he sued her for $2,500.
Should the court find that the bride has breached the contract?
(A) No, because no contract was formed between the parties.
(B) No, because the bride was personally and honestly dissatisfied with the cake.
(C) Yes, because the baker substantially performed.
(D) Yes, because the cake was aesthetically pleasing to the wedding guests.
(B) No, because the bride was personally and honestly dissatisfied with the cake.
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 photo was not used on the cover of the May issue.
(B) No, because the subscriber failed to adequately notify the magazine of his acceptance.
(C) Yes, because all of the express conditions of the offer have been satisfied.
(D) Yes, because the magazine prevented the publication of the photograph.
(D) Yes, because the magazine prevented the publication of the photograph.
A homeowner called a septic cleaning company and made arrangements for the company to remove the
waste from the septic tank on the homeowner’s property. After completing the job, the company
mailed the homeowner a bill for $500, the fair market value of the services rendered by the
company. The bill indicated that payment was due in 60 days. Upon receiving the bill, the homeowner
called the company and informed it that, since he had lost his job due to an accident, he would not be
paying the company’s bill. The following day, the company filed suit for breach of contract. Ten days
later, the homeowner moved to dismiss the suit. The court granted the motion, dismissing the suit
without prejudice.
Is the court’s dismissal proper?
(A) No, because the parties’ dealings created an implied-in-fact contract.
(B) No, because the homeowner has repudiated the contract.
(C) Yes, because the vendor failed to demand assurances.
(D) Yes, because the vendor’s complaint is premature.
(D) Yes, because the vendor’s complaint is premature.
A mining company contracted with a railroad to transport 10,000 tons of coal from the company’s mines
to a power company at a cost of $100,000. The railroad told the mining company that the coal would
arrive at the power company on June 1, but the contract contained a clause that the railroad would not
be liable for any losses suffered by the mining company as a result of a late shipment. The railroad was
aware that the mining company had contracted with the power company to deliver the coal on June 1,
and pursuant to standard industry custom, the price to be paid by the power company decreased by $1
per ton for each day that the coal was late. The shipment of coal did not reach the power company until
June 11, and the railroad had no justification for the 10-day delay. Because of the delay, the mining
company lost $100,000 in revenue from the sale. The mining company filed suit against the railroad for
breach of contract, claiming $100,000 in damages.
Is the mining company likely to succeed in its claim?
(A) Yes, because the damages that the mining company would suffer from the railroad’s delay were
known to the railroad prior to shipment of the coal.
(B) Yes, because consequential damages cannot be excluded by a merchant.
(C) No, because the claimed damages are disproportionate to the original contract price between the
railroad and the mining company.
(D) No, because the contract between the mining company and the railroad protected the railroad
from liability for losses suffered by the mining company due to a late shipment.
(D) No, because the contract between the mining company and the railroad protected the railroad
from liability for losses suffered by the mining company due to a late shipment.
A new florist placed a written order with a wholesaler for $15,000 worth of fresh flowers. Delivery was
to be made to the florist’s shop via a national delivery service. Because the florist was a new customer,
the wholesaler accepted the order on the condition that the florist pay $5,000 in advance and the
remaining $10,000 within 20 days of delivery. There was no discussion as to who bore the risk of loss.
The florist paid the wholesaler $5,000, and the wholesaler arranged with a national delivery service to
pick up and deliver the flowers to the florist. The delivery service picked up the flowers, but, due to
malfunction of the temperature controls on the transporting plane, the flowers were worthless upon
arrival. The florist rejected the flowers and notified the wholesaler, who refused to ship other flowers.
The wholesaler filed a claim against the florist for the remaining $10,000. The florist counterclaimed for
the return of his $5,000 payment to the wholesaler.
How should the court rule on these claims?
(A) Deny both claims, because the florist accepted the risk of loss up to the amount he had paid for the
goods.
(B) Grant the florist’s claim for $5,000 and deny the wholesaler’s claim for $10,000 because the risk of
loss remained with the wholesaler.
(C) Grant the wholesaler’s claim for $10,000 and deny the florist’s claim for $5,000, because the risk of
loss passed to the florist.
(D) Offset the two claims against each other and require the florist to pay the wholesaler $2,500,
because each party should bear the loss equally.
(B) Grant the florist’s claim for $5,000 and deny the wholesaler’s claim for $10,000 because the risk of
loss remained with the wholesaler.
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.
(C) The cost of the paintbrushes.
