MBE KAPLAN--CONTRACTS Flashcards
1
Q
- A man who owned a haberdashery placed an order by telephone from a wholesale supplier of cashmere and wool clothing, for “triple-dozen purple cashmere socks, size 10—13 at current resale price.” The supplier’s sales agent orally accepted the order at the agreed price of $250 per dozen. In accordance with the supplier’s customary business practice, the sales agent then mailed the following confirmation letter, which he signed and dated:
“As per your telephone order, this letter serves to confirm the purchase of 36 dozen cashmere socks, color purple, size 10—13, at the agreed price of $250 per dozen. Total sales price: $9,000.”
This letter was received by the man, who briefly glanced at it but failed to notice the “36 dozen” wording or the total price. The man placed the letter in his files and did not respond to it. Three weeks later, the supplier tendered 36 dozen purple cashmere socks, which the man rejected on the grounds that he had ordered only three dozen. The supplier resold the same purple cashmere socks to another buyer for a total price of $8,000.
The supplier sued the man for the $1,000 difference. If the man pleads the statute of frauds as a defense, will such a defense be successful?
(A) Yes, because the statute was not satisfied by the supplier’s tender of the goods, which were rejected by the man, and the supplier did not rely on the oral agreement other than by attempting delivery.
(B) Yes, because the agreed price for three dozen socks was over $500, and the supplier’s written memo incorrectly stated the quantity of goods ordered.
(C) No, because the supplier’s written memo was sufficient to satisf’ the statute as against the supplier, and the man, having reason to know of the memo’s contents, failed to give notice of objection within 10 days of receipt.
(D) No, because the supplier’s written memo operated as an acceptance, with proposals for additional terms that became part of the contract after the man failed to object to such additional terms within a reasonable time.
A
•
1. (C) According to UCC 2-201(2), when a contract is between merchants (which would be the case here), if one merchant, within a reasonable time, sends a writing that is sufficient against the sender confirming the contract, and the other merchant receives it, has reason to know of its contents but fails to object to it within 10 days after receipt, the confirmation is deemed to satisfy the Statute of Frauds. Therefore, the supplier’s letter sent by its sales agent would satisfy the Statute of Frauds, since the man failed to respond to it. Choice (A) is wrong, because the letter sent by the supplier’s sales agent satisfied the statute before the tender of the goods by the supplier. Choice (B) is incorrect, because UCC 2-201 states that a writing is not insufficient to satisfy the statute because it incorrectly states a term. Choice (D) is incorrect, because, in accord with UCC Section 2-207, additional terms that materially alter the original bargain wilL not be included unless expressly agreed to by the other party. Since the man who owned the shop did not expressly agree to the new terms, they did not become part of the contract. However, this would have nothing to do with the interrogatory, which asked only if the Statute of Frauds would be a successful defense. Whether the additional terms are or are not a part of the contract does not have an impact on this question.
2
Q
- A woman hired a builder to build a house according to certain plans and specifications prepared by the woman’s architect. The agreed upon price was $250,000, with construction to be completed within four months. Two weeks after the building contract was formed, the builder contacted a lumber yard to purchase wood necessary for the construction of the house. The builder and the owner of the lumber yard entered into a valid written agreement whereby the lumber yard was to supply the necessary lumber in exchange for $10,000, payable by the builder within 30 days. One week later, a fire destroyed a good portion of the lumber yard’s supply of lumber. As a result, the lumber yard refused to supply lumber to the builder. The builder was unable to find another supplier of lumber and therefore notified the woman that he would be unable to complete her building on time.
If the woman sues the owner of the lumber yard for breach of contract, will she prevail?
(A) Yes, because by operation of law the woman is an equitable assignee of the builder’s claim against the owner of the lumber yard for breach of contract.
(B) Yes, but only if the builder’s contract with the owner of the lumber yard was not discharged by the fire.
(C) No, because privity of contract does not exist between the woman and the owner of the lumber yard.
(D) No, because the woman is only an incidental beneficiary of the contract between the builder and the owner of the lumber yard.
A
- (D) With respect to third-party beneficiary contracts, remember the following rule:
intention to confer a benefit on the third party has always been declared by the courts as essential to the right of the third party to enforce the promise. A useful test to determine the necessary intention is to askyourself “To whom is performance to be rendered?” If performance is to the third party, she is a protected beneficiary and thus entitled to sue. But if the promised performance is to be rendered to the promisee, the contract is for the benefit alone of the parties thereto, and any third party is an incidental beneficiary. In this particular fact pattern, performance was to be rendered to the builder, the promisee. In other words, the builder’s motive in ordering the lumber was to make a profit on the construction contract. Since his primary intent was not to benefit the woman, she is viewed as an incidental beneficiary. Choice (A) is incorrect, because there would be no such creation of an equitable assignment.There is no indication thatthe ownerof the Lumberyard knewthatthe lumber in question was being supplied for use in the woman’s house. The woman, at best, is only incidentally involved in the contract between the builder and the owner of the lumber yard. Choice (B) is wrong, because it does not matter whether the builder’s contract was discharged by the fire. The woman, as an incidental beneficiary, has no right to maintain the suit. Choice (C) is not as good an answer as Choice (D). Even though the woman was not in direct privity with the owner of the lumberyard, she could stiLl sue if she was an intended beneficiary. However, since she was only an incidental beneficiary, she is prevented from suing. Choice (D) better expresses this.
3
Q
- A creditor loaned his friend $15,000 to help pay for the friend’s daughter’s college tuition. Six months later, the friend lost his job and was unable to repay the loan to the creditor. After learning of his friend’s situation, the creditor sent his friend the following letter on June 1:
“I promise to discharge the $15,000 debt which you owe me upon delivery of your autographed baseball bat if you promise to deliver the bat to me by August 1 .“
After receiving this letter, the friend telephoned the creditor and accepted the offer.
The friend’s verbal acceptance of the creditor’s offer most likely effectuated
(A) a bilateral executory accord.
(B) an accord and satisfaction.
(C) a substituted compromise agreement.
(D) a novation.
A
- (A) A bilateral executory accord is “an agreement that an existing claim shalL be discharged in the future by the rendition of a substituted performance.” For example, C (creditor) writes D (debtor), “I promise to discharge the debtyou owe me upon delivery of your black mare if you promise to deliverthe horse to me within a reasonable time.” D promises. Their agreement is a bilateral executory accord. Note, too, that if D delivers the horse and C accepts it, there is an accord and satisfaction. The agreement is the accord. Its performance is the satisfaction. In this fact pattern, choice (B) is wrong, because the accord and satisfaction will not occur until the friend actuay de’ivers the baseball bat. Choice (C) is incorrect, because a substituted compromise agreement usually involves a disputed or unliquidated cLaim, in which case the creditor enters into a new or substituted agreement to discharge the uncertainty on an unliquidated claim. However, an executory bilateral accord generally covers a liquidated and undisputed obligation. Choice (D) is wrong, because a novation is synonymous with a “substituted contract” usually involving at least one obligor or obligee who was not a party to the original contract. There is no substituted party in this question.
4
Q
- A man was the owner of the newly constructed hotel in a city. On March 15, the man received a telephone call from a salesperson who was a distributor of hotel equipment. The salesperson offered to sell the man 1,000 fire extinguishers for his hotel. The salesperson told the man that the cost of the fire extinguishers would be $35,000 (or $35 apiece), payable 90 days after delivery. The salesperson promised to have the fire extinguishers installed no later than April 15.
On March 16, the man telephoned the salesperson and accepted the offer. The following day, the man mailed the following memo to the salesperson:
“Please be advised that I shall take a 15 percent discount for cash payment seven days after installation.” The salesperson received the man’s correspondence on March 20. On April 1, the salesperson sent a telegram to the man, stating: “It’s apparent we don’t have an enforceable contract in effect. I will not be delivering the fire extinguishers on April 15 or any other time.”
The man brings suit against the salesperson for breach of contract. The salesperson asserts the defense of the statute of frauds under the UCC.
Which of the following is the most accurate statement regarding the salesperson’s defenses?
(A) The salesperson’s defense is valid, because the man’s memo was not sufficient to indicate that a contract was formed.
(B) The salesperson’s defense is valid, because the man’s memo was inconsistent with the terms of the salesperson’s oral offer.
(C) The salesperson’s defense is not valid, because the salesperson failed to respond to the man’s memo within a reasonable period of time.
(D) The salesperson’s defense is not valid, because under the UCC the statute of frauds is not applicable in agreements between merchants.
A
- (A) Under the UCC, the only term that must be included in a writing sufficient to satisfy the Statute of Frauds is the quantity term. The price, time and place of payment or delivery, the general quality of the goods, or any particular warranties may all be omitted. (Comment 1, Section 2-201.) Since the man’s March 17 memo did not mention a quantity, it does not satisfy the Statute of Frauds. Choice (B) is incorrect, because the fact that the memo is inconsistent with the offer does not invalidate the memo for purposes of the Statute of Frauds. Since both parties were considered to be merchants, the salesperson could have objected to the different terms in the memo within 10 days to prevent them from being controlling. Choice (C) is not the best choice for a couple of reasons. First, while it is true that a merchant can object to a memo sent by another merchant, the objection must be made within 10 days of receipt, not a reasonable time. Second, since the memo was not sufficient to satisfy the Statute of Frauds, no objection to the memo was needed here. Choice (D) is incorrect. The Statute of Frauds as discussed above is applicable to agreements between merchants.
5
Q
- On June 1, an owner of a business that built mobile homes was visited by a representative of a company that manufactured propane tanks. Propane tanks were an essential component of the mobile homes produced by the builder. The representative told the owner that the company could supply propane tanks at $50 per tank, a substantial savings over what the owner currently paid for propane tanks. The owner asked if the company could supply 1,000 propane tanks by the end of the month, and the representative assured him that they could. The owner stated that he would think about it and decide what to do within a week.
On June 3, the owner sent the following memo to the company headquarters at the address provided by the representative: “I am happy to confirm my order of 1,000 propane tanks, to be delivered by June 30. I have always received a 10 percent discount for cash payment, so I will assume you will grant me the same discount. I will have $45,000 cash ready to give to your representative at the time of delivery.”
On June 30, the company delivered 1,000 propane tanks to the owner. The representative accompanied the delivery and presented the owner with a bill for $50,000. The owner refused to pay any more than
$45,000.
Which of the following accurately states the legal rights of the parties?
(A) The contract price was $45,000, because the June 3 memo was an effective integration of their agreement.
(B) The contract price was $45,000, because the company did not specifically object to the 10 percent discount stipulated by the owner in his June 3 memo.
(C) The contract price was $50,000 if the discount term in the owner’s June 3 memo materially altered the terms of the company’s offer.
(D) The contract price was $50,000 even though the company’s offer did not expressly limit acceptance to the terms contained therein.
A
- (C) In accordance with UCC Section 2-207, when the parties to a contract are both merchants (as is the case here), additional or different terms contained in an acceptance will become part of the contract unless 1) the offer is expressly limited to acceptance on its own terms, 2) the offeror objects to the additional or different terms within a reasonable time after receiving notice of them, or 3) the additional or different terms materially alter the contract. Therefore, if the discount term proposed by the owner is deemed to be a material variation of the contract (a very likely occurrence under these facts), the terms will revert back to those in the offer, making the contract price $50,000. Choice (A) is incorrect, because the June 3 memo would not be deemed an effective integration if it proposed terms that materially alter the contract. Choice (B) is wrong, because the company does not have to specifically object to the additional or different terms if they constitute a material alteration. The additional or different terms would be knocked out by the simple fact that they are a material variation, even in the absence of an objection. Choice (D) is not the best choice, because it does not address the possibility of the additional or different terms being a material variation of the contract.
6
Q
- On September 1, a buyer contracted to purchase
10,000 widgets from a seller for $1 per widget, delivery to be made no later than September 30. On September 15, a worldwide shortage of widgets caused a steep increase in the market price for widgets, so the seller decided not to deliver the widgets to the buyer. The seller sent a letter to the buyer, stating that the widgets would not be delivered. The buyer received the seller’s letter on September 20. On October 15, the buyer filed suit against the seller for breach of contract.
In determining the damages to which the buyer is entitled, which of the following would be taken as the market price of widgets?
(A) The market price on September 1.
(B) The market price on September 15.
(C) The market price on September 20.
(D) The market price on September 30.
A
- (C) According to UCC Section 2-713, the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with incidental (and! or consequential) damages. Choice (A) is wrong, because the date of the making of the contract is not the controlling date for determining damages. Choice (B) is wrong, because it is not the date the seller decided to breach the contract that determines damages but the date the buyer learned of the breach. Choice (D) is incorrect, because the market value on the date delivery was to be made is not the determining factor.
7
Q
- A purchasing agent for a women’s clothing store negotiated a contract with dressmaking company to purchase a specified quantity of khaki garments at a price of $75,000. One week later, the purchasing agent received a telephone call from the vice president of the dressmaking company, who informed her that the dressmaking company’s sales representative had made an error in calculating the contract price. As a result, the vice president said that unless the women’s clothing store agreed to pay an additional $15,000, the garments would not be delivered.
If the purchasing agent should have known that the dressmaking company’s original price term of $75,000 was in error, but agreed to the contract anyway, which of the following is the most accurate statement?
(A) There was an enforceable contract at the original price term, because the mistake resulted from an error in computation, not in judgment.
(B) There was an enforceable contract at the original price term, because the mistake was unilateral.
(C) There was no valid contract formed, because there was no mutuality of assent.
(D) There was a voidable contract, because the purchasing agent should have known of the error.
A
- (D) As a general rule, in all unilateral mistake situations, if the non-mistaken party is aware of the other party’s mistake and takes advantage of the innocent party’s mistake, the contract is voidabLe at the discretion of the mistaken party. Choice (A) is incorrect, because relief is rareLy granted for an error in judgment, but can be granted for a computation error. Choice (B) is wrong, because, as stated above, relief can be granted for a unilateraL mistake when the non-mistaking party is aware of the existence of the mistake. Choice (C) is not the best choice, because mutuaL assent is held to exist; the unilateral mistake could make the contract voidable by the mistaken party.
8
Q
- A law bookstore entered into a written contract to purchase from the publisher 100 copies of the latest edition of a certain casebook for $10 per book. Three days after the contract was formed, but prior to delivery of the casebooks, the publisher called the owner of the law bookstore and informed him that, because of a calculation error, the price for the casebooks should have been $11 per book, and the shipment could not be delivered unless the owner promised to pay that amount. The owner reluctantly agreed.
The owner’s agreement to pay $11 per book is
(A) enforceable, because it was not supported by any new consideration.
(B) enforceable, under the principle of promissory estoppel.
(C) unenforceable, because it is violative of the statute of frauds.
(D) unenforceable, because the error resulted from the publisher’s computational error.
A
- (C) A modification regarding the sale of goods of $500 or more comes within the Statute of Frauds and must be in writing to be enforceable. Since the owner’s agreement was oral and never memorialized in writing, it would be unenforceable. Choice (A) is incorrect. While it is true that underthe Uniform Commercial Code, modifications do not require new consideration, the agreement is nevertheless unenforceable, as it violates the Statute of Frauds. Choice (B) is incorrect, because promissory estoppel is a substitute for missing consideration. Since consideration is not needed here, promissory estoppeL does not apply. Choice (D) is not the best choice. Unless the owner had reason to know of the computational error at the time the contract was formed, no relief would be granted for the pubLisher’s unilateral mistake.
9
Q
- An employee successfully negotiated a lucrative contract for her employer. As a result, her employer orally promised her a $10,000 bonus payable at the end of the year because of the employee’s “good work.” At the end of the year, the employer informed the employee that the company’s profits were not as large as he expected, so the promised bonus would not be paid.
Which of the following is the legal effect of the employer’s promise to pay the bonus to the employee?
(A) It is enforceable, because the employee conferred a material benefit on the employer by negotiating the lucrative contract.
(B) It is enforceable, because the employer was morally obligated to pay the bonus.
(C) It is unenforceable, because it was not supported by legally sufficient consideration.
(D) It is unenforceable, because it was not in writing.
A
- (C) Donative promises generally are not enforceable unless supported by consideration or a consideration substitute (like promissory estoppel). Here, the employer’s promise was made in exchange for work already performed by the employee. Past consideration is not considered to be good consideration, so the empLoyer’s promise to pay the bonus would be unenforceable. Choice (A) is therefore wrong, because no present material benefit was conferred on the employer in exchange for the bonus. Choice (B) is incorrect. While moral obligation can (in some jurisdictions) make a promise supported by past consideration enforceable, this is generally only done when necessary to prevent unjust enrichment or undue hardship, neither of which would be the case here. Choice (D) is wrong, because there would be no reason why the promise would need to be in writing. The duration of the promise would not be for longer than one year, and the only time the amount of the promise can trigger the need for a writing is when the contract involves a sale of goods.
10
Q
- A store published the following advertisement in a local newspaper on Monday, March 12:
“8 Brand New COWBOY HATS Beaver Felt,
selling for $72.50 … out they go … Sat. March 17,
Each… $5.
1 Navajo Turquoise Necklace … worth $125, now selling for $40.
“FIRST COME, FIRST SERVED”
On the following Saturday, a man was the first person to arrive at Store and demanded the necklace. The store clerk refused to sell it to him, because it was a “house rule” that the necklace was intended for women only.
If the man brings suit against the store for its refusal to sell him the necklace, the man will
(A) lose, because the advertisement was intended only as an invitation to make an offer.
(B) lose, because the man did not notii’ the store in writing that he intended to accept the offer.
(C) win, because the advertisement should be construed as a binding offer.
(D) win, because it is immaterial whether the man was the first customer to appear at the store to purchase the necklace.
A
- (C) As a general rule, advertisements for the sale of goods, circular letters, price Lists, and articles displayed on a shelf with a price tag are construed as preliminary proposals inviting offers. However, in certain situations an advertisement for the sale of goods may constitute an offer. In the case of Lefkowitzv. Great Minneapolis Surplus Store [86 N.W.2d 689 (1957)], the court held that an advertisement in a newspaper proposing the sale of a coat “FIRST COME, FIRST SERVED” did in fact constitute an offer because the language in the ad indicated a promise to sell and indicated a quantity of one. Therefore, the store’s advertisement would be considered an offer that was accepted by the man by being the first person to arrive and request to purchase the necklace. Choice (A) is therefore wrong. Choice (B) is wrong, because there would be no reason why the man would have to provide written notice of an intent to accept. The advertisement said nothing about providing notification in writing. Choice (D) is incorrect, because being the first to arrive was a condition of acceptance indicated by the language “First Come, First Served.” Therefore, if the man was not the first customer to appear at the store to purchase the necklace, he would have been unable to validly accept the offer.
11
Q
- A man knew that his neighbor frequently earned extra money by mowing lawns in the area. On Wednesday, the man slipped a note under his neighbor’s door, which said:
“If you will mow my lawn by Saturday I will pay you $25.”
The neighbor mowed the lawn Friday afternoon, but the man refused to pay the $25.
The court, in evaluating the relationship between the man and his neighbor, would most probably find that
(A) the neighbor’s mowing of the lawn created a bilateral contract.
(B) the neighbor’s mowing of the lawn created a unilateral contract.
(C) the note slipped under the door was an acceptance of a standing offer by the neighbor.
(D) the neighbor is only entitled to recover in quasi-contract for the reasonable value of the mowing of the lawn.
A
- (B) The note slipped under the door created an offer for a unilateral contract, one that is accepted by performance of the requested act. The neighbor’s mowing of the lawn therefore created a unilateral contract. Choice (A) is wrong, because a bilateral contract involves an exchange of promises. The note the man slipped under the door did not request a return promise but rather the performance of an act, the mowing of the lawn. Choice (C) is incorrect, because there is no indication that the neighbor made such a standing offer. The facts state only that the neighbor had mowed lawns in the past. This does not mean that he made a standing offer to mow any lawn in the future. Choice (D) is incorrect, because the neighbor would not need to resort to quasi-contract to recover. Quasi-contract is a contract implied at law to prevent unjust enrichment when there is not an enforceable contract between the parties. Here, an enforceable contract was formed when the neighbor mowed the lawn, so quasi-contract would not be needed.
12
Q
- On Wednesday morning the following conversation took place:
A man: “My stereo speakers haven’t been sounding good lately. The owner of a stereo store promised to give me $15 for them, and I think I’ll take him up on the offer.”
A woman: “Don’t do that. In my spare time, I repair stereo speakers. If you promise to pay me $20, I promise to repair them by next Tuesday and they’ll be in tip-top condition.”
The man then handed his speakers and $20 to the woman.
The conversation and events on Wednesday resulted in
(A) a contract for the sale of services governed by the UCC.
(B) a unilateral contract.
(C) a bilateral contract.
(D) an unconscionable contract.
A
- (C) A bilateral contract is a contract in which mutual promises are given as the agreed exchange for each other. In a bilateral, or two-sided contract, each party promises a performance, so each party is both a promisor as to his own promise and a prom isee as to the other’s promise. On the other hand, a unilateral contract is a contract in which a promise is given in exchange for an actual performance by the other party. Here, the woman asked for a return promise from the man, thereby calling for a bilateral contract. The man did not expressly issue a promise to the woman, but instead performed his end of the deal. Performance by the offeree in the presence of the offeror is deemed to create an implied promise that accepts the offer for a bilateral contract. Therefore, a bilateral contract was formed between the parties. Choice (B) is therefore wrong. Choice (A) is wrong, because the Uniform Commercial Code governs sale of goods contracts, not contracts for services. Choice (D) is incorrect, because there is nothing in the facts to even suggest that the deal between the parties should be considered unconscionable.
13
Q
- A man needed to have the oil changed on his car. On Friday, he decided to take his car to the local dealership to have the oil changed and asked his neighbor if she would give him a ride home from the dealership. The neighbor said, “Why pay the high prices a dealership will charge you? I can change the oil in your car for you. If you will agree to pay me $50, I’ll change the oil in your car over the weekend.” The man readily agreed.
On Sunday afternoon, the man noticed that his neighbor still had not started working on the car. He asked his neighbor if the car would be ready for him to drive to work Monday morning. The neighbor replied, “I thought about it and realized $50 is too low a price for the work involved. I don’t think I’m going to change the oil in your car.” The man then said, “Look, I realize $50 is low for the work involved. If you can change the oil in my car by tomorrow morning, I’ll pay you an additional $25. And I won’t sue you in small claims court for your failure to perform your promise.” The neighbor then changed the oil late Sunday afternoon, but the man refused to pay to the neighbor anything more than $50.
In a suit by the neighbor to recover the additional $25 promised by the man, the neighbor will
(A) win, because she performed her part of the bargain.
(B) win, because the second contract for $75 superseded the original $50 contract.
(C) lose, because the $75 contract did not supersede the $50 contract.
(D) lose, because the neighbor had a pre-existing duty to change the oil in the car for $50.
A
- (D) Underthe pre-existing duty rule, neither doing nor promising to do that which one is already legally bound to the promisorto do can furnish consideration for a promise. In such case, neither benefit to the promisor nor detriment to the promisee exists. Thus, the neighbor was under a pre-existing duty to change the oil in the man’s car. Consequently, the man’s subsequent promise to pay higher compensation would be unenforceable. Choices (A) and (B) are incorrect, because there was therefore no consideration to enforce the revised agreement. And note that the man’s promise to forbear to sue would not still furnish the necessary consideration, because it was not given for a bargained-for exchange. Choice (C) is not the best answer. While it is technically a correct statement, it is not as specific as Choice (D), which states why the new agreement did not supersede the first. A more specific answer is always a better choice over a more general answer.
14
Q
- A woman needed to have her microwave repaired. She contacted the local handyman, who said he could repair the microwave for $100. The woman readily agreed and delivered the microwave to the handyman, who promised to have it ready in two weeks.
One week later, the handyman realized that he had so much work to do that he would not be able to repair the microwave on time. He then took the microwave to a repair store. The repair store agreed to repair the microwave for $80 within one week. The owner of the repair store that contracted with the handyman was unaware that the woman actually owned the microwave.
If the repair store fails to repair the microwave, which of the following is the most accurate statement?
(A) The woman has a cause of action against the repair store only.
(B) The woman has a cause of action against the handyman only.
(C) The woman has a cause of action against both the repair store and the handyman.
(D) The woman has no cause of action against either the repair store or the handyman.
A
- (B) It should be emphasized that a delegation of duties will not discharge the delegator’s, herein the handyman’s, Liability under the terms of the original contract. Only a novation assented to by the obligee will have this effect. In failing to make the necessary repairs on the microwave, the handyman breached his duty of performance. Therefore, he would be liable for breach. Choices (A) and (C) are wrong, because the woman would not have a cause of action against the repair store, since the repair store was unaware of the existence of the woman and never assumed the obligation to perform to the woman. A detegatee is not liable to the obligee unless the delegatee has assumed the obligation to perform. Choice (D) is incorrect, because the woman would have a cause of action against the handyman.
15
Q
- A debtor owed a creditor $750 on an old debt. On July 1, the debt was barred by the statute of limitations. On August 1, the debtor ran into the creditor at a party and overheard him telling mutual friends that the debtor “is a deadbeat who weiches on his debts.” Feeling pangs of guilt, the debtor approached the creditor and orally agreed to pay him the $750 debt on September 1. The debtor refused to pay the creditor the $750 as promised on September 1St.
If the creditor sues the debtor to recover the $750 debt, which would provide the strongest grounds that the debtor’s oral promise was unenforceable?
(A) It was not supported by new consideration.
(B) It was violative of the statute of frauds.
(C) The debt was already barred by the statute of limitations.
(D) There was no mutuality of obligation.
A
- (B) An express promise by a debtor to pay a debt barred by the statute of limitations or by a decree in bankruptcy is legally enforceable without new consideration. The promise is supported by the past consideration of the unpaid debt, which is still operative to give validity to the new promise. Although the debtor’s promise is enforceable, here the testmaker wants to know what is the strongest grounds that the promise is unenforceable. This is typical of the mental gymnastics employed on the Multistate. By process of elimination, Choices (A) and (D) are incorrect, because it is well established that a debt created in the past is sufficient consideration for a subsequent promise to pay it. Choice (C) is wrong, because an express promise by a debtor to pay a debt barred by the statute of limitations is legally enforceable without new consideration. Thus, Choice (B) is correct, because most states require the promise (to pay a contractual debt barred by the statute of limitations) to be in a signed writing.
16
Q
- A builder wanted to have security systems installed in a series of homes he was building. He contacted several companies and asked them to submit bids for the installation work. An alarm company decided to submit a bid and, in turn, requested bids from several wholesalers for the burglar alarms it planned to use if it was awarded the job. A supplier submitted a bid to the alarm company that the latter used in computing the bid that it was preparing for the builder.
On September 1, the alarm company sent the builder its bid, in which it proposed to install the security systems for $100,000. On September 9, the supplier notified the alarm company that it would be unable to supply any burglar alarms to them. On September 11, the builder sent the following fax to the alarm company: “I hereby accept your offer to install the security systems for $100,000.”
The alarm company had to pay another wholesaler $10,000 above the price quoted by the supplier for the burglar alarms. As a result, the alarm company advised the builder that the total price for the job would have to be increased to $10,000. The builder replied that he would hold the alarm company to the initially agreed price of $100,000. The alarm company installed the security systems, but the builder has not yet paid them anything.
In an action by the alarm company against the builder for services rendered, the alarm company will probably be able to recover
(A) $100,000, because that was the contract price. (B) $110,000 because of an unanticipated change
of circumstances after the parties had entered into their contract.
(C) only in quantum meruit, because of the doctrine of commercial frustration.
(D) only in quantum meruit, because by demanding $110,000 the alarm company repudiated its contract with the builder.
A
- (A) Here, students must recognize that the alarm company is obligated under the terms of its contract with the builder to install the security system for $100,000. The mere fact that the supplier refused to perform would not excuse the alarm company from its duties under the agreement with the builder. By agreeing to perform the installation work, the alarm company assumed the risks attendant with producing that result. Choice (B) is therefore wrong, because the alarm company has no right to raise the price they were charging the builder to do the requested work. Choices (C)and (D) are incorrect, because there is still an enforceable contract between the parties. Quantum meruit is a remedy that is awarded onLy when there is not an enforceabLe contract and the court needs to imply the existence of a contract at law to avoid unjust enrichment.
17
Q
- A contractor learned that a city intended to open a new grammar school and was going to ask for bids to construct the school. The contractor decided to submit a bid to do the construction. The contractor contacted all of the subcontractors she had worked with in the past, informed them of the specifics of the school construction project, and asked each to submit a bid for the work they would be requested to perform. An insulation company submitted a bid of $25,000 to do the required insulation work in the new school. Based on that and other subcontract bids, the contractor prepared a general bid and submitted it to the city.
Three days after the contractor submitted the bid to the city, the insulation company notified the contractor that it had overbooked its workforce and would be unable to perform the insulation work. The next day, the city notified the contractor that she had won the bid to build the school. The contractor was forced to find another company to do the insulation work. The other company charged the contractor $30,000 to do the insulation.
Which of the following arguments best supports the claim for $5,000 by the contractor against the insulation company?
(A) The contractor had made an offer to the insulation company that the latter accepted when it submitted its bid.
(B) The insulation company had made an offer that the contractor accepted by using the insulation company’s bid in computing the bid it submitted to the city.
(C) The insulation company’s bid was an offer that it was obligated to hold open, because the insulation company and the contractor were merchants.
(D) An option contract was created, because the contractor used the insulation company’s bid in computing the bid it submitted to the city and notified the insulation company of that fact.
A
- (D) When a general contractor, about to submit a bid on a construction project, secures a bid from a subcontractor for a definite part of the proposed work, and uses the bid to determine that part of her cost, she often finds after the principal contract is awarded to her that the subcontractor refuses to go through with the job. She must then find another to do the job, usually at a price much higher than the promised figure. Can she recoup her loss from the defaulting subcontractor? Yes, the subcontractor is bound under the doctrine of promissory estoppel. Thus, a promisor who induces substantial change of position by the promisee in reliance on the promise is estopped to deny its enforceability as lacking consideration. The reason for the doctrine is to avoid an unjust result. Choice (D) is therefore correct, because Restatement of Contracts, 2d, Section 87(2) provides: “An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.” Choice (A) is incorrect, because the initial communication from the contractor was not an offer but just a request for the submission of bids. It was the response by the subcontractor that was the offer. Choice (B) is incorrect, because the act of using the subcontract bid in the general bid was not an acceptance of the offer. Acceptance would take place when the contractor is awarded the bid and then so notifies the subcontractor. Choice (C) is incorrect, because the fact that the parties might be merchants is only relevant when dealing with a sale of goods, since the Uniform Commercial Code has some special rules applicable when one or both of the parties are merchants.
18
Q
- On February 15, a company that manufactures metal sidings for home exteriors received the following order from a builder: “Please ship 300 sheets of 1/4-inch refabricated aluminum siding. Delivery by April 1.”
On March 8, the company shipped 300 sheets of 1/2-inch refabricated aluminum siding, which were received by the builder on March 10. The following day, the builder sent the following fax to the company: “Be advised that your shipment is rejected. Order stipulated 1/4-inch sheets.” This fax was received by the company, but the builder did not ship the nonconforming aluminum sheets back to the company.
Did the builder properly reject the shipment delivered on March 10?
(A) Yes, because the aluminum sheets were nonconforming goods.
(B) Yes, because the company did not notify the builder that the 1/2-inch sheets were for accommodation only.
(C) No, because the builder waived its right to reject the nonconforming goods by not returning them promptly to the company.
(D) No, because the company could accept the builder’s offer by prompt shipment of either conforming or nonconforming goods.
A
- (A) UCC Section 2-601 provides that if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may 1) reject the whole; or 2) accept the whole; or 3) accept any commercial unit or units and reject the rest. Choice (A) is correct, because the March 10 shipment of 1/2” refabricated aluminum siding was nonconforming, since the contract called for 1/4” siding. Therefore, in accordance with subsection (a) above, the builder properly rejected the nonconforming shipment. Choice (B) is wrong, because the builder still could have rejected the shipment even if a notice of accommodation was included. The notice of accommodation would have prevented the shipment from constituting a breach of the contract. Choice (C) is incorrect, because the UCC does not impose upon the buyer a duty to return nonconforming goods. It is the seller’s obligation to retrieve the goods or provide instructions to the buyer as to how the goods are to be returned. While Choice (D) is a correct statement of the law, it does not address the relevant issue being tested in the question.
19
Q
- On September 15, a card shop sent the following fax to a printing company: “Please deliver 100 dozen assorted Christmas cards, delivery by November 1.”
On October 10, the printing company shipped 100 dozen assorted Thanksgiving cards to the card shop, which were received on October 12. The following day, the card shop sent the following fax to the printing company: “Be advised that your shipment is rejected. Order stipulated Christmas cards, not Thanksgiving cards.”
On October 15, the printing company sent the following fax to the card shop: “Will ship 100 dozen assorted Christmas cards by November 1. Please ship the Thanksgiving cards back to our warehouse and bill us for the shipping charges.” This fax was received by the card shop, but the card shop did not respond to it or ship the Thanksgiving cards back to the printing company. On October 25, the printing company attempted to deliver 100 dozen assorted Christmas cards to the card shop, but the latter refused to accept.
Did the card shop properly reject the October 25 delivery?
(A) No, because under the UCC a contract for the sale of goods can be modified without consideration.
(B) No, because the printing company cured the October 10 defective shipment by its tender of conforming goods on October 25.
(C) Yes, because the printing company’s shipping of the Thanksgiving cards on October 10 constituted an anticipatory breach.
(D) Yes, because the printing company’s shipping of the Thanksgiving cards on October 10 constituted a present breach of contract.
A
- (B) In accordance with UCC Section 2-508, “where anytenderordeliverybythe seller is rejected because nonconforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery.” Therefore, choice (B) is correct, because UCC 2-508 permits a seller who has made a nonconforming tender in any case to make a conforming delivery within the contract time upon reasonable notification to the buyer. Choices (C) and (D) are therefore wrong, because the printing company cured any breach by shipping the conforming goods on October 25. Choice (A) is not the best answer. While it is true that a contract for the sale of goods can be modified without consideration, this was not a modification, which is an agreement to change the terms of the contract. No such agreement was ever formed between the parties.
20
Q
- On February 1, a man dispatched the following letter to a mechanic:
“My car has not been running very well lately. I’ll pay you $275 if you will change the oil, replace the oil filter, and adjust the carburetors by February 10.”
The mechanic received the man’s letter on February 3. That same day, he telephoned an auto supply company and ordered the necessary materials to perform the repair work. Two days later, the mechanic met the man at a party and this conversation took place:
The man: “Disregard the letter I sent you last week.”
The mechanic: “No way, man, I already ordered the materials on from the auto supply company.”
The man: “Sorry, but I sold my car yesterday, so forget the repair work.”
If the mechanic initiates suit for breach of contract, which of the following is the man’s strongest argument that no enforceable contract was formed between the parties?
(A) The mechanic had not completed performance before the man revoked his offer.
(B) The man’s offer could only be accepted by a return promise.
(C) Because the man made his offer by letter, the mechanic could accept only in the same manner.
(D) Although the mechanic was preparing to perform the repair work, he had not begun the requested acts of acceptance when the man revoked his offer.
A
- (D) It is important to note that when dealing with an offer for a unilateral contract (as is the case here), part of the actual performance requested must have been given in order to render the offer irrevocable. Mere preparation for performance, no matter how detrimental to the offeree, will not affect the offeror’s power and privilege to revoke a unilateral offer. Note that an offer that invites performance of an act as acceptance, rather than a return promise, becomes irrevocable as soon as the offeree has started to perform the act. However, students must be aware that where a clearly unilateral offer (as in the present example) calls for several acts, it may be interpreted as inviting acceptance by completion of the initial act, performance of the balance being regarded as conditions merely to the offeror’s duty of performance. As a consequence, Choice (A) is incorrect, because where the unilateral offer calls for several acts (e.g., 1) change the oil, 2) replace the oil filter, and 3) adjust the carburetors), an option contract is completed when the offeree has performed one of the requested acts. Thus, in the latter situation, the offeree need not render completed performance (of all the requested acts) in order to recover for breach of contract (where there is a wrongful revocation on the part of the offeror). Choice (B) is incorrect, because a unilateral offer is accepted by a return performance, not a return promise (as in the case of a bilateral contract). Similarly, Choice (C) is incorrect, because a unilateral offer cannot be accepted by communicating a return promise, but rather by completing performance of the requested act(s).
21
Q
- A woman leased a condo from the owner for a period of one year. After six months, the owner gave the woman a written option to purchase the condo for $100,000 before the expiration of the lease. With the owner’s approval, the woman spent $10,000 to have the kitchen remodeled to her personal specifications. One month before the end of the lease, the owner notified the woman that he was revoking the option to purchase the condo. One week later, the woman delivered a written notice of acceptance of the option, but the owner refused to sell.
If the woman initiates suit for breach of contract, which of the following is her strongest argument that an enforceable contract was formed between her and the owner?
(A) Because the woman had until the expiration of the lease to accept the offer, the owner’s revocation would be ineffective.
(B) Because the owner was a merchant, the written offer was irrevocable for a period not exceeding three months.
(C) Because the owner’s offer invited a return promise as acceptance, the woman manifested her intent to accept by remodeling the kitchen.
(D) After the woman paid to have the kitchen remodeled, an option contract resulted, because the owner knew the woman was relying on the offer to her detriment.
A
- (D) Under the Restatement view, a promisor who induces substantial change of position by the promisee in reliance on the promise is estopped to deny its enforceability as lacking consideration. The reason for the doctrine is to avoid an unjust result. Choice (D) is therefore correct, because Restatement of Contracts, 2d, Section 87(2), provides: “An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.” Choice (A) is incorrect, because an offer can be revoked prior to acceptance unless the offer was irrevocable. Simply promising that an offer would be open for a period of time is not enough to make an offer irrevocable. Choice (B) is wrong, because the merchant’s firm offer rule applies only to a sale of goods. Choice (C) is wrong, because the remodeling of the kitchen was not a manifestation of acceptance, but rather evidence of detrimental reliance on the offer.
22
Q
- On Monday, a man told a gardener, “I am having a party on Sunday and I want my house to look good. If you will promise to mow my lawn by Saturday, I will pay you $50.” On Friday, the gardener arrived at the man’s home just as the man was leaving for work and began to mow the man’s lawn. The man said nothing to the gardener but drove off as he saw the gardener unloading his lawn mower. When the man arrived home from work that evening, he noticed that only half of his lawn had been mowed. He then found a note from the gardener slipped into his mailbox. The note said:
“Sorry, but I ran out of gas to power the lawn mower and did not have time to buy more gas to finish the job. I’m taking the weekend off, but I will be back Monday morning to finish the job.”
If the man brings suit against the gardener for breach of contract, who is likely to prevail?
(A) The gardener, because he never accepted the offer made by the man.
(B) The gardener, because he offered to cure the defective performance by finishing the job on Monday morning.
(C) The man, because the gardener’s part performance necessarily implied an acceptance and a promise that he would render complete performance.
(D) The man, because under the doctrine of equitable estoppel, the gardener’s part performance was evidence of his intent to honor the entire contract.
A
- (C) As a general rule, where the offeree (the gardener) begins the performance contemplated, he thereby impliedly promises to complete it. However, in order that the act of part performance may be treated as implying a promise to complete, the following requirements must be present. First, the offer was for an entire contract, and not for a series of separate contracts. Second, that what is begun must be a part of the actual performance bargained for, and not mere preparation for performance. Third, that such implied acceptance is communicated to the offeror, or he had knowledge of it. Since the man saw the gardener beginning to mow his lawn, the gardener will have impliedly promised to mow the lawn by Saturday, and his failure to do so would be a breach. Choice (A) is therefore incorrect, because the implied promise was the acceptance of the offer. Choice (B) is incorrect for two reasons: First, cure is a concept recognized by the UCC and therefore applies only to a sale of goods contract. Second, even if cure was allowed, a cure must take place before the date performance was due under the contract. Since the contract called for the lawn to be mowed by Saturday, waiting until Monday to finish the job would be a breach. Choice (D) is wrong, because estoppel is not needed to make the contract enforceable.
23
Q
- An art collector attended a party on March 15. At the party, the art collector was describing his collection to a woman in attendance. When the art collector described a painting by a well-known artist, the woman indicated she might like to buy that painting. The art collector said, “I’ll sell you the painting for $10,000. I’ll give you 30 days to decide whether you want the painting.” On March 25, the art collector wrote to the woman and stated that the offer of March 15 was withdrawn. The woman received the March 25 letter on March 26. On March 27, the woman wrote the art collector the following letter:
“Please be advised that I hereby accept your offer of March 15.” The art collector received this letter on March28.
Thereafter, the art collector and the woman engaged in several telephone discussions. On April 10, the woman, in a telephone conversation, told the art collector that she would pay $15,000 if the painting was delivered on or before April 15. The art collector agreed to deliver the painting for $15,000.
On April 15, the art collector tendered the painting, but the woman refused to pay more than $10,000.
If the art collector asserts a claim against the woman for breach of contract, which of the following is the most accurate statement?
(A) The art collector is obligated to sell the woman the painting for $10,000, because the woman, as offeree, had the right to accept the initial offer within the 30-day period.
(B) Since the art collector, as offeror, had the power to revoke the original offer before acceptance, the woman is obligated under the terms of their April 10 agreement.
(C) Since the parties entered into a subsequent modification, the woman is obligated to pay the art collector $15,000 for the painting.
(D) An enforceable contract does not exist between the parties, because of mutual mistake of fact.
A
- (B) The woman is obligated under the terms of the April 10 agreement. The art collector effectively revoked his original offer to sell the painting to the woman in the written communication of March 25. The general rule provides that the offeror may, at any time before acceptance, terminate his offer by revoking it. This is true even though the offeror has promised not to revoke for a stated time, unless the promise is 1) under seal or 2) fora consideration. Choice (A) is incorrect, since the original offer was not supported by consideration, e.g., an option contract was not created. In addition, even though the contract involved a sale of goods and the art collector was arguably a merchant, the March 15 offer would not be a merchant’s firm offer, since a merchant’s firm offer must be in writing and this offer was oral. Choice (C) is wrong, because the subsequent agreement cannot be a modification, since no contract had previously been formed. Choice (D) is wrong, because there was no mutual mistake ever made.
24
Q
- A debtor owed a creditor $15,000 on a debt that had been discharged by the debtor’s bankruptcy the previous year. The debtor wrote a letter to the creditor stating that he would pay the creditor $10,000 received from the proceeds of the sale of his house in payment of the discharged debt. One week later, the debtor learned that the person who had contracted to buy his house reneged on the deal. As a result, the debtor refused to pay anything to the creditor.
If the creditor sues the debtor for breach of contract, he should be entitled to recover
(A) nothing.
(B) $10,000.
(C) $10,000, only if the debtor is successful in suing the person who had contracted to buy his house.
(D) $15,000.
A
- (B) The creditor will be entitled to $10,000 from the debtor as per the debtor’s letter. The Restatement of Contracts 2d, Section 83, states that “an express promise to pay all or part of an indebtedness of the promisor, discharged or dischargeable in a bankruptcy proceeding begun before the promise is made, is binding.” Thus, the debtor’s promise is enforceable without consideration. Choice (A) is therefore wrong. Choice (C) is incorrect, because the debtor’s promise was not expressly conditioned on successfully suing the buyer of his house. A conditional promise is usually prefaced by such words as “provided that,”“if,”“on condition that,” etc. Choice (D) is incorrect, because a new promise is enforceable only as to the extent of the new promise. Therefore, the creditor can only enforce the new promise to pay $10,000, not the discharged obligation to pay $15,000.
25
Q
- A woman was hired by a restaurant as a cashier under an at-will employment contract. On the woman’s first day at work, she noticed a sign in the kitchen area that read:
“IMPORTANT NOTICE TO ALL EMPLOYEES
Employees are not permitted to smoke during working hours. Any employee who is found to be in violation of this policy will be fined $50 for the first offense; $100 for the second offense; and fired for the third violation.”
The woman, who was a smoker, read the notice, but did not object or make any comment regarding the restaurant’s nonsmoking policy. For six months, the woman worked at the restaurant and never smoked during business hours. One afternoon, the woman was working when an armed robber stormed into the restaurant. He pointed a pistol at the woman and demanded all the money from the cash register. Frightened and panic stricken, the woman handed over the money and then collapsed. Moments later, she regained consciousness and then smoked a cigarette while she regained her composure. Thereafter, the woman resumed her duties for the rest of the day.
The next week, however, when the woman received her pay check, she noticed that the restaurant had deducted $50 from her check. A note was attached indicating that the woman was being fined for smoking during business hours. Although the woman protested, the restaurant refused to make any waiver and stood by its policy.
In an action by the woman against the restaurant to recover the $50, which of the following is the best argument in the woman’s favor?
(A) The restaurant’s nonsmoking policy concerned a collateral matter that was not incorporated within the terms of their employment contract.
(B) The restaurant impliedly waived the nonsmoking provision by permitting the woman to continue working for the rest of the day.
(C) The nonsmoking provision constituted a constructive condition subsequent that was excused because of temporary impracticability.
(D) The nonsmoking provision concerning disciplinary action is unenforceable, because it attempts to impose a penalty instead of reasonably liquidating the damages, if any, sustained by the restaurant.
A
- (D) By process of elimination, Choice (A) is incorrect, because the restaurant’s nonsmoking policy concerns an issue that is not a collateral matter. In today’s society, many companies are concerned about the health-related consequences of smoking. As such, the restaurant’s nonsmoking policy deals with an important matter. Choice (B) is incorrect, because permitting the woman to continue working did not necessarily constitute a waiver of the nonsmoking provision. Choice (C) is wrong, because there is no impracticability, which would be the creation of an extreme hardship to complete performance of the contract. As a result, the woman’s best argument is that the disciplinary action taken by the restaurant is in the form of a penalty and is in excess of any actual loss suffered by the restaurant. Such a penalty would be an unenforceable liquidated damages provision.
26
Q
- A 25-year-old concert pianist lived in a small studio apartment in a city. The pianist could not keep a piano in her apartment because of its small dimensions. In order to practice each day, she had to travel to a school of performing arts to use its musical facilities. Finally, the pianist decided to move out of her apartment and buy a more spacious home, where she could have her own piano. As she was house hunting, the pianist found a quaint home in the county that she wanted. She put a bid down on the home with the seller’s broker. She was informed that the owner was in Europe on a business trip and would not be entertaining any offers until he returned.
While she was awaiting word on the county property, the pianist’s friend orally agreed to sell his piano to her for $8,000. The pianist explained that she wanted the piano only if she should succeed in her efforts to buy the county home. For this reason, the parties agreed that the piano sale would not take effect unless the pianist bought the county home. The next day, the parties reduced their oral agreement to a signed writing, but did not include in the writing any mention that the sale would not take effect unless the pianist bought the county home. Two weeks later, the owner of the county property returned from a trip and rejected the pianist’s offer.
The friend now brings an action against the pianist for breach of contract to buy the piano. How should the court rule on the pianist’s offer to prove, over the friend’s objection, that she has not been able to buy the county home?
(A) The evidence is admissible, to show that the written agreement did not become a contract.
(B) The evidence is admissible, to show frustration of the purpose of the contract.
(C) The evidence is barred, because the oral agreement is within the statute of frauds.
(D) The evidence is barred, because the oral agreement would contradict the written agreement, which is unconditional on its face.
A
- (A) Generally speaking, the parol evidence rule provides that when a contract is expressed in a writing that is intended to be the complete and final expression of the rights and duties of the parties, parol evidence of prior oral or written negotiations or agreements of the parties (or of their contemporaneous oral agreements), which varies or contradicts the written contract, is not admissible. At the time the pianist and the friend reduced their agreement to a writing, they understood the piano sale would not take effect unless the pianist purchases the county home. Since the pianist did not buy the home, parol evidence is admissible to show the condition did not occur. This is an exception to the parol evidence rule where such evidence is not being admitted to vary (or contradict) the terms of the writing, but rather to show that there is not an agreement at all. That’s why choice (A) is a better answer than choice (D). Choice (B) is incorrect, because frustration of purpose covers situations where a supervening (or unforeseeable) event frustrates the purpose of the contract. Here, at the time the parties entered into their agreement, they were unsure whether the pianist would purchase the county home. Thus, it was not an unforeseeable event. Choice (C) is wrong, because the parties did reduce their agreement to a writing. However, paroL evidence is admissible to show the writing never became a contract.
27
Q
- An owner operated a successful retail business. He decided he wanted to retire and listed his business for sale. A buyer saw the listing and visited the retail business. The buyer told the owner that she was very interested in buying the business, but that she needed to get a loan from the bank to finance the purchase. The parties drafted a contract, signed by both parties, which stated that the buyer agreed to purchase the retail business from the owner for $250,000. The written agreement contained a provision wherein the sale would not take effect “unless the buyer is successful in her bid to obtain a loan from a bank to finance the purchase of the business.” Subsequently, the buyer made no effort to attempt to obtain a loan from a bank so that the sale could be finalized. After several months, the owner filed suit against the buyer for breach of contract.
Which of the following will be the owner’s strongest argument in support of his action against the buyer for breach of contract?
(A) The obtaining of a loan from a bank was not worded as a “condition” to the buyer’s duty to buy the business.
(B) Although obtaining a loan from a bank was a condition to the buyer’s duty to buy the business, the condition should be excused because its non-occurrence would cause a forfeiture to the owner.
(C) Although obtaining a loan from a bank was a condition to the buyer’s duty to buy the business, it should be stricken from the contract because it is an unconscionable term.
(D) The buyer breached an implied promise to make a reasonable effort to obtain a loan from a bank.
A
- (D) Where a party to a contract for an agreed exchange of performances knowingly prevents, hinders, or makes more costly the other’s performance, such conduct is a breach of contract for which an action will lie. The breach is of an implied promise against prevention. Choice (A) is wrong, because the obtaining of a loan from a bank was a condition precedent to the buyer’s duty to buy the business. Choice (B) is incorrect, because the non-occurrence of the condition would not cause a forfeiture to the owner. He could still contract elsewhere and sell the business to another buyer. Similarly, Choice (C) is erroneous, because the condition is not an unconscionable term.
28
Q
- A buyer contracted to purchase a used car from a seller for $10000. On the date the sale was to take place, the buyer tendered a $10,000 cashier’s check to the seller. The seller rejected the tender and refused to deliver the car to the buyer.
If the buyer brings an action for breach of contract against the seller, the buyer is entitled to which of the following remedies?
(A) Damages measured by the difference between the market price and the contract price for the car.
(B) Recovery of the contract price of the car.
(C) Specific performance.
(D) Recovery of the market price of the car.
A
- (A) Choice (A) is correct, because according to UCC Section 2-713, the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages as provided under Section 2-715. Choices (B) and (D) are incorrect, because recovery for the contract (or market) price is inappropriate, since the buyer’s proper remedy is either to “cover” or seek damages measured by Section 2-713. Since damages at law are adequate, specific performance will not be decreed; nothing about the car suggests that the car was unique enough to warrant specific performance to the buyer. Therefore, choice (C) is incorrect.
29
Q
- A third-year law student was the captain of the law school rugby club. One evening, the student and a few of his rugby teammates were drinking beer at a local pub. They were worried that the rugby club would be forced to disband because the law school had withdrawn its sponsorship. While the student was discussing the problem with his teammates, the owner of the tavern approached the players. The owner indicated that he was interested in sponsoring the rugby club because he felt it would help business at the pub. During their ensuing discussion, the owner agreed to sponsor the rugby club. The parties then orally agreed that the owner “would pay for all the usual sponsoring fees” incurred by the club.
The owner had understood the agreement to mean that he would pay for the rugby shirts and supply the keg of beer following each “home” game that the rugby club played. Conversely, the student thought that the owner would be reimbursing the team for (a) the shirts, (b) the keg of beer (following “home” games), as well as (c) transportation expenses for “away” games and (d) equipment expenses (balls, etc.).
Assume that it was the customary practice of the rugby teams in the community to have the sponsors pay for (a) the shirts and (b) beer only. Before the rugby club was to play its first game under the owner’s sponsorship, which of the following is the most accurate statement regarding the legal relationship between the parties?
(A) A contract exists on the terms understood by the owner.
(B) A contract exists on the terms understood by the student.
(C) A contract exists on the terms that are customary for the other teams in the community.
(D) No contract exists.
A
- (D) The first requisite of a contract is that the parties manifest to each othertheirmutual assent to the same bargain at the same time. In the present exampLe, since there was no “meeting of the minds” regarding the essential terms of their purported agreement, choice (D) is the best answer. Choices (A) and (B) are therefore incorrect. Choice (C) is wrong, because the customary practices would factor in when there is ambiguity or uncertainty as to the terms agreed upon. However, here there was a clear difference of opinion, so no meeting of the minds ever took place.
30
Q
- A man entered a local retail store and approached the proprietor. The man explained that he was participating in a local run for charity and wondered if the proprietor would be interested in sponsoring him. The proprietor believed the publicity would be good for his business and agreed, provided the man would wear a shirt with the retail store’s logo on it during the run. The man readily agreed.
The proprietor thought that sponsorship meant paying a set fee for every mile covered during the charity run. However, the man expected the proprietor, in addition to paying the fee for each mile coverçd during the run, to also pay his entrance fee and be in attendance at the finish line to greet the man when he finished the charity run.
Assume that the man and the proprietor entered into an enforceable contract. Which of the following, if true, would not help to establish that the manifestations of the parties were operative according to the meaning adjudged by the proprietor?
(A) The customary practice of the other chrity runs in the community is the same as the proprietor’s understanding, that the sponsor be responsible for paying only a set fee for each mile covered during the charity run.
(B) A reasonably objective individual would have attached the same meaning to the manifestations of the parties as did the proprietor.
(C) At the time the agreement was entered into, the man had reason to know the proprietor’s understanding of what the parties meant, although the proprietor did not know the man’s understanding was different from his.
(D) The proprietor subjectively believed that the man understood that the proprietor would only be obligated to pay a set fee for each mile covered during the charity run.
A
- (D) With regard to contract interpretation, when there is no integration (as in the present hypo), the standard is the meaning that the party making the manifestation should reasonably expect the other party to give it. This is commonly referred to as the standard of reasonable expectation, which is based primarily upon the “objective theory of contracts.” Under this rule, the test is to determine what a reasonable (or objective) person in the position of the person hearing the representations would have concluded. So if a reasonable individual in the proprietor’s position would have attached the same meaning that the proprietor did after hearing the man’s representations, then the meaning would be the one that the hearer attached to it. Since Choice (B) therefore does help the proprietor, it is incorrect. Moreover, since the test is one of what a reasonable person would believe the manifestations to mean, the proprietor’s subjective belief of the man’s meaning is irrelevant if it were unreasonable to believe so. For this reason, Choice (D) is the correct choice, because this argument will not help the proprietor. Choice (C) is also incorrect, because where there is an ambiguity, when one party knows or has reason to know of the ambiguity and the other does not, there is a contract based upon the meaning of the party who was unaware of the ambiguity. So if the proprietor is able to prove that the man knew that the proprietor’s understanding did not match the man’s, this will help the proprietor and make Choice (C) incorrect. In addition, in cases of ambiguity, courts may resort to extraneous aids, such as “course of dealing,”“trade usage,” or “customary practice,” in the interpretation of the agreement. Therefore, Choice (A) will be of help to the proprietor and is also incorrect.
31
Q
- A manufacturer of widgets entered into a written agreement to deliver 500 widgets to a buyer. The contract provided that the widgets would be shipped C.O.D. The manufacturer subsequently delivered 490 widgets, which were accepted and paid for by the buyer.
If the buyer brings suit for breach of contract against the manufacturer, the buyer will most likely
(A) not recover, because under the circumstances the manufacturer substantially performed.
(B) not recover, because the buyer accepted delivery of the 490 widgets.
(C) recover, because the manufacturer failed to perform his contractual obligation.
(D) recover, because the manufacturer’s failure to deliver the additional widgets resulted in a material breach.
A
- (C) Students should take note that the manufacturerwas under a contractual obligation to deliver 500 widgets to the buyer. Since the manufacturer delivered only 490 widgets, he failed to perform part of what was promised in the contract. In this regard, any unjustified failure to perform when performance is due is a breach of contract, which entitles the injured party to damages. If the breach is slight or insubstantial, it is called a partial breach, for which plaintiff’s damages are restricted to compensation for the defective performance. Choice (A) is wrong, because the doctrine of substantial performance does not apply to contracts for the sale of goods under the UCC. Choice (B) is wrong, because acceptance of the goods obligates the buyer to pay for those goods accepted, but does not prevent the buyer from asserting rights as to the goods that were not delivered. Choice (D) is incorrect, because any tender or deLivery that does not conform exactly to the contract is considered to be a material breach.
32
Q
- A woman is engaged in the retail sale of widgets throughout the United States. On March 7, the woman sent the following purchase order to a manufacturer of widgets:
“Promptly ship 1,000 widgets, catalogue #B4-IEU, at the current wholesale price to our warehouse. Thank you for your attention to this matter.”
This order was received by the manufacturer on March 9. The next day, the manufacturer replied by fax:
“Your order has been received. Shipment date will be March 12. Price $50 for each widget delivered. Be advised that these are the last widgets, under catalogue #B4-IEU, that we can deliver, since this variety is no longer being manufactured.”
Upon receipt of the fax, the woman immediately sent the following fax:
“Cancel our previous order for 1,000 widgets under catalogue #B4-IEU. Price too high.”
Assume $50 per widget was the current wholesale market price. Was an enforceable contract in effect between the woman and the manufacturer?
(A) No, because the woman’s order was too indefinite to constitute an offer, since it didn’t contain a price term.
(B) No, because even if the woman’s order was a valid offer, it was effectively revoked prior to acceptance.
(C) Yes, because the woman’s order created a valid option contract.
(D) Yes, because the manufacturer’s fax of March 10 constituted an acceptance of the woman’s offer.
A
- (D) Here, the test maker is aware that many students will not choose Choice (D) because
the woman’s March 7 purchase order called for a “prompt shipment” of goods. As a
result of this language, students might construe the offer as limiting acceptance by
performance only. However, according to UCC 2-206(b), “an order or other offer to
buy goods for prompt or current shipment shall be construed as inviting acceptance
either by a prompt promise to ship or by prompt or current shipment.” Therefore,
the manufacturer’s fax promising to ship the widgets will be a valid acceptance.
Choice (A) is wrong, because the UCC does not view price as an essential term. UCC 2-305 describes how the price is to be determined when the parties fail to designate a price. Choice (B) is incorrect, because the offer was accepted by the March 10 fax prior to the attempted revocation by return fax. Choice (C) is incorrect, because there were no assurances in the woman’s original offer that it would be held open.
33
Q
- On September 1, a buyer contracted to buy 1000 widgets from a seller at $10 per widget, delivery to take place on or before September 15. On September 5, the buyer discovered that another widget seller was selling widgets for $8 per widget. The buyer then sent the following letter to the seller:
“Please cancel our order for 1000 widgets. Your price is too high. We have found another supplier at a cheaper price.”
On receipt of this letter, the seller would be legally justified in pursuing which of the following courses?
(A) Shipping the widgets to the buyer.
(B) Selling the widgets to another buyer by means of a public sale.
(C) Selling the widgets to another buyer by means of either a public or private sale.
(D) Selling the widgets to another buyer, but only if the seller is successful in whatever claims it has against the buyer.
A
- (C) UCC Section 2-703 provides that “where a buyer wrongfully rejects or revokes acceptance of goods on or before delivery…then with respect to the whole undelivered balance, the aggrieved seller may (a) withhold delivery of such goods; (b) stop delivery by any bailee; (c) resell and recover damages; (d) recover damages for non-acceptance; or (e) cancel.” With respect to resale, UCC Section 2-706 entitles the aggrieved seller to sell the goods by either public or private sale. As a result, Choice (C) is the preferred answer. Choice (A) is contrary to UCC Section 2-703(a) and therefore incorrect. Since goods may be resold at either a public or private sale, Choice (B) is not completely accurate. Choice (D) is wrong, because the seller is not required to sell the goods to another buyer only if he is successful in his claim against the buyer. Exam Tip: As a general rule, be leery of any answer choice that is prefaced by such words as “only if,” because it is very restrictive.
34
Q
- A supplier of ink for printers sent the following letter to all of its customers:
“Closeout special! We have decided to no longer stock green ink cartridges. We have on hand a limited supply of green ink cartridges for all printers; when they’re gone, they’re gone! Please submit your orders as soon as possible to make sure your order can be filled.”
One of the regular customers of the supplier sent the following reply by fax:
“Sorry to hear that you will no longer carry green ink cartridges, since that is one of our favorite colors. Please ship 100 green ink cartridges to our office as soon as possible.”
The supplier faxed an acknowledgement of the order to the customer with a promise that the cartridges would be shipped out in one week. The next day, the supplier received the following e-mail from the customer:
“Please cancel our order. We just discovered that we already have plenty of green ink cartridges in inventory.” The supplier proceeded to sell its entire stock of green ink cartridges at its asking price to other customers.
In an action for breach of contract by the supplier against the customer, what is the maximum amount of damages that the supplier should be entitled to recover?
(A) Nothing.
(B) Only incidental damages, if any, that the supplier has incurred in preparing the green ink cartridges for shipment to the customer before receiving the customer’s e-mail.
(C) $5,000, which was the asking price for the 100 green ink cartridges ordered.
(D) Consequential damages, since the green ink cartridges were unique because they were the last of their kind to be offered for sale by the supplier.
A
- (B) In accordance with UCC Section 2-706, a seller may resell goods after the buyer has repudiated or breached the contract. Where the resale is made in good faith and in a commercially reasonable manner, the seller may recover the difference between the resale price and the contract price together with incidental damages.
Since the supplier sold its entire stock of green ink cartridges, this would include the 100 that had been ordered by the customer. Therefore, the supplier can recover only incidental damages. Choice (A) is wrong, because it does not include possible recovery for incidental damages. Choice (C) is incorrect, because the supplierwould have no right to recover the full contract price. The supplier covered its losses by selling its entire inventory to other customers. Choice (D) is wrong for a couple of reasons: First, UCC 2-708 allows an aggrieved seller to sue for incidental damages, but not consequential damages. Second, the ink cartridges were not unique simply because this supplier was deciding to discontinue stocking them. There is no indication that green ink cartridges would not be available from other suppliers.
35
Q
- On September 1, a man mailed a letter to a resort hotel on an island, reserving the “honeymoon suite” for the period from December 24 to January 1. The man explained that he and his fiancée were being married on December 23 and intended to travel by plane to the island on December 24. The resort hotel then sent back a confirmation notice stating that it was reserving the honeymoon suite for the man and his bride from December 24 to January 1 “for the weekly rental of $10,000.”
On December 23, a blizzard struck, blanketing the city with five feet of snow. As a result, the airports were shut down. The man immediately telephoned the manager of the resort hotel and explained his predicament. When the manager requested assurance that the man and his bride would still be making the trip, the man responded, “The airports are scheduled to re-open tomorrow … if they do we hope to make the trip.” The next morning, the manager sent an e-mail to the man, advising him that the honeymoon suite had been rented to another couple for the period from December 24 to January 1.
If the man brings suit against the resort hotel for breach of contract, which of the following will provide the hotel with its best defense’?’
(A) The resort hotel’s duty to hold the honeymoon suite for the man and his bride’s arrival was excused by the apparent impossibility on December 23 of their timely performance.
(B) The resort hotel’s duty to hold the honeymoon suite for the man and his bride’s arrival was discharged by their failure to give adequate assurances of their own agreed performance.
(C) The resort hotel’s duty to hold the honeymoon suite for the man and his bride’s arrival was excused by frustration of purpose.
(D) The man and his bride’s apparent inability on December 23 to make the trip constituted a material breach that excused the resort hotel of any obligation to hold the honeymoon suite for their arrival.
A
- (B) Choice (A) is wrong, because the facts do not indicate that it was impossibLe for the man and his bride to make the trip. Since the airports were scheduled to re-open on December 24, the man and his bride clearly could have made the trip and checked into the hotel on their arrival date. Choice (C) is incorrect, because frustration of purpose excuses performance in situations where the purpose of the contract is destroyed bya supervening event. Since the coronation cases, the American courts have excused the promisor’s duty where the purpose of the contract is wholly frustrated by a fortuitous, unforeseeable event on the theory of failure of consideration. Since it was still possible for the man and his bride to make the trip, their performance in renting the hotel room was not totally frustrated. Choice (D) is incorrect, because the man and his bride’s apparent inability to make the trip on December 23 did not constitute a material breach of contract or an anticipatory breach. In order that an action will lie for anticipatory breach, the repudiation (where it is an express refusal to perform) must be positive and unequivocal. A mere expression of doubt or fear by the promisor that he will or may be unable to perform, when in the future his performance is due, is not the positive repudiation that is necessary before an anticipatory breach will lie. Thus, by process of eLimination, Choice (B) is correct. The manager of the hotel asked for assurance of performance, but the man merely said that if the airports re-opened, he and his bride “hoped to make the trip.” This is not an adequate assurance that they will arrive at the specified time.
36
Q
- For the last 20 years, a husband and wife had taken a vacation during the first week in July. They would fly from their home to the city and spend the week at a hotel in the most luxurious suite. On March 1, the husband mailed a letter to the hotel, reserving the suite for the first week in July. The hotel then sent back a confirmation notice stating that it was reserving the suite for the husband and wife for the first week in July “for the weekly rental of $25,000.”
When the husband and wife arrived at the hotel on July 1, the hotel, without legal excuse, informed the man and his wife that the hotel had rented the suite to another couple for the first week in July. Quite apologetic, the manager of the hotel offered the husband and wife the hotel’s next best accommodation at a weekly rental of $20,000. The manager informed the husband and wife that the other suite was beautifully furnished, “but not quite as luxurious as the suite they reserved.” Visibly upset, the husband and wife rejected the manager’s offer and relocated to another hotel, where they rented the other hotel’s most luxurious suite for the first week in July at a cost of $25,000.
If the husband and wife now sue the first hotel for breach of contract, they will most likely
(A) prevail, because the hotel knew that for the past 20 years the husband and wife always stayed in the most luxurious suite.
(B) prevail, because the substitute accommodations offered by the hotel were not comparable to the suite they reserved.
(C) not prevail, because the hotel did offer substitute accommodations at a $5,000 savings.
(I?) not prevail, because the husband and wife sustained no legal damages in renting a comparable suite at another hotel for the same rental.
A
- (B) First, it is important to point out that the hotel was in breach of contract by not renting the agreed upon suite to the husband and wife. As a consequence, Choices (C) and (D) are incorrect. Note that Choice (C) is wrong because the husband and wife’s “expectation interest” was staying in the suite which was the hotel’s most luxurious accommodations. As a result, the husband and wife were not obligated to accept the manager’s offer, since the other suite was not comparable to the value of the promised performance. By the same token, Choice (D) is wrong, because even though the husband and wife may not have suffered any pecuniary injury, they nonetheless would be entitled to any consequential damages (like the cost of moving to the other hotel) or at least be entitled to nominal damages. Choice (A) is incorrect, because the hotel’s knowledge of past performance has no direct bearing on the cause of action. The hotel was in breach when they failed to rent the most luxurious suite to the husband and wife, and this would be true regardless of whether the husband and wife had ever stayed in the hoteL before. Therefore, Choice (B) is the best answer.
37
Q
- A collector owned a rare 16th-century tapestry. The collector contracted in writing to sell the tapestry to a tapestry dealer for $100,000. The contract stipulated that delivery would be “F.O.B. at the dealer’s shop,” with payment to be made one week after tender.
When the dealer received the tapestry, he noticed that it had been damaged in transit. The dealer immediately contacted the collector and notified him that he was rejecting the tapestry because it had ripped apart and was becoming unwoven. The collector told the dealer that he would get back to him with re-shipping instructions. The collector did not make any further contact with the dealer. After four weeks, the dealer then sold the tapestry to a buyer for $120,000.
If the collector sues the dealer for damages, the collector should recover
(A) $120,000, for conversion.
(B) $108,000, because the dealer is entitled to a reasonable sum not exceeding 10% on the resale.
(C) $100,000, which is the contract price.
(D) $20,000, which covers the difference between the contract price and the sale price.
A
- (B) This fact pattern is governed by UCC Section 2-603, which deaLs with a merchant
buyer’s duties as to rightfully rejected goods. After there has been a rightful rejec
tion of goods, the buyer is under a duty to (a) follow reasonable instructions received
from the seller with respect to the goods and, in the absence of such instructions,
(b) make reasonable efforts to sell them for the seller’s account. When the buyer
sells the goods, he is entitled to reimbursement out of the proceeds for reasonable
expenses of caring for and selling them. This amount, however, should not exceed
10 percent on the gross proceeds. Based upon the facts, the dealer was entitled
to resell the tapestry, since he did not receive any instructions from the collector.
Consequently, choice (B) is correct, because the dealer is entitled to keep 10 per
cent of the resale price ($12,000) for reasonable expenses. Choices (A) and (C) are
therefore wrong. Choice (D) is incorrect, because it speaks to the buyer’s remedy if
the buyer has to cover by purchasing replacement goods from another source. That
is not the situation here.
38
Q
- A collector regularly bought and sold coins. One day, she saw an advertisement in a coin collectors’ magazine advertising for sale a rare coin from 1898 for $10,000. She immediately contacted the seller and asked about the quality of the coin. The seller assured her that the coin was in mint condition. The collector then agreed to purchase the coin for $10,000. The contract stipulated that delivery would be “F.O.B. at the collector’s establishment,” with payment to be made one week after delivery. The seller stated that the coin would be shipped out at the end of the week.
When the collector received the coin, she noticed that the coin had a large scratch across the face. Nonetheless, the collector accepted delivery. Two weeks later, the collector sold the coin to another collector for $12,000. The collector has refused to pay anything to the seller. The seller brought a breach of contract action against the collector, who, in turn, has filed a counterclaim against the seller.
Who is most likely to prevail, and in what amount?
(A) The collector is entitled to nominal damages, because the coin was received in a damaged condition.
(B) Neither party should prevail, because the risk of loss was on the seller, but the collector did not incur any loss, since she sold the coin for a profit.
(C) The seller is entitled to $10,000, because the collector accepted delivery of the coin.
(D) The seller is entitled to $12,000, because the collector’s resale constituted a conversion.
A
- (C) According to UCC 2-607, the buyer must pay at the contract rate for any goods accepted. Acceptance of goods by the buyer precludes rejection of those goods that were accepted and if made with knowledge of a non-conformity, cannot be revoked because of it unless the acceptance was on the reasonable assumption that the non-conformity would be seasonably cured. Here, the facts state that the collector accepted delivery of the coin. Since there was a valid acceptance, she must pay the seller the contract price. Choice (A) is wrong, because the collector accepted the coin knowing that it was damaged, thereby precluding the collector from recovering any damages forthe scratch on the surface of the coin. Choice (B) is wrong, because the seller is entitled to payment, since the collector accepted the coin in its damaged condition. Choice (D) is incorrect, because the seller would have no right to
the profit the collector made on the resale of the coin.
39
Q
- A man mailed a letter to a woman promising to sell her his motorcycle for $1,000. After receiving the letter, the woman sent the man a fax that stated, “The price is a little high, I’ll give you $800.” The man responded by fax, “I will not accept $800.” The next day, the woman telephoned the man and said, “I changed my mind, I will pay $1,000 for the motorcycle.” The man refused to sell the woman his motorcycle.
If the woman sues the man for breach of contract, which of the following defenses would be the man’s best defense?
(A) Since the woman’s purported acceptance was oral, it constituted a different mode of communication from the written offer.
(B) The contract was unenforceable under the statute of frauds, because the woman’s purported acceptance was oral.
(C) The woman’s counter offer terminated her power of acceptance.
(D) The man’s rejection of the woman’s counter offer terminated the woman’s power of acceptance.
A
- (C) This is a very technical Contracts formation question dealing with the issue of when a counter-offer operates as a rejection. An offeree’s power of acceptance is term inated by the making of a counter-offer. Here, when the woman stated that $1,000 was too high but that she would pay $800, she made a counter-offer that rejected the original offer. Therefore, her subsequent attempt to accept that initial offer was not timely. Choice (A) is wrong, because there is no reason why an oral acceptance, if timely, would not be good. An acceptance does not have to be in the same form as the offer, unless specifically stated otherwise. Choice (B) is incorrect, because the dealings between the parties never got that far. The Statute of Frauds does not become an issue until after mutual assent is found to exist. Here, the problem is that mutual assent is lacking, so there is no need to determine whether the contract must be in writing. Choice (D) is incorrect, because it’s not the man’s rejection of the woman’s counter-offer that terminates her power of acceptance; her power to accept the $1,000 price ended much earlier in time when she made the counteroffer, as discussed above.
40
Q
- A man offered to sell his barbecue to his neighbor for $100. After receiving the man’s offer, the neighbor responded, “Let me think it over.” The man then said, “If you say so.” The next day, the man sold the barbecue to his brother for $100. Thereafter, the neighbor decided to accept the man’s offer, but learned from a reliable source that the barbecue had been sold to the brother.
If the neighbor sues the man for breach of contract, judgment for
(A) the man, because the offer to the neighbor terminated when the neighbor learned of the sale to the brother.
(B) the man, because there was no consideration to keep the offer open for an extended period of time.
(C) the neighbor, because the offer became irrevocable for a reasonable time when the man allowed the neighbor to “think it over.”
(D) the neighbor, because, he is a merchant.
A
- (A) An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect. Thus, the man’s offer was effectively revoked when the neighbor learned from a reliable source that the barbecue had been sold to the man’s brother. Choice (B) is not the best answer. The fact that consideration was not paid to keep the offer open speaks to why the offer was not irrevocable, but does not state why the offer was terminated. Choice (A) is therefore a better choice, because it states why the offer was terminated. Choice (C) is incorrect, because simply allowing an offeree to think over an offer for a period of
time does not make the offer irrevocable. Absent consideration, the offeror is not obligated to hold the offer open for that period. Choice (D) is incorrect, because the neighbor’s status as a merchant is irrelevant. If the man had been a merchant and his offer was in writing, that may make the offer irrevocable as a merchant’s firm offer.
41
Q
- A landlord rented an apartment to a tenant for $250 per month in accordance with a month-to-month agreement. On September 3, the landlord mailed the following letter to the tenant:
“September 2 In consideration of one dollar, receipt of which is acknowledged, I hereby give you an option for 20 days from the above date to sign a two-year lease at $225 per month, provided you pay two months’ rent in advance.”
The tenant received the letter on September 4, but did not read it until September 5. On September 23, the tenant telephoned the landlord and said, “I want to give you the $450 and sign the two-year lease as soon as possible.” The landlord replied, “I’ve change my mind. I do not want to sign a lease with you. Moreover, I want you to vacate the apartment immediately.” At no time after receiving the landlord’s letter on September 4 did the tenant pay him the one-dollar consideration.
Did the landlord’s letter constitute an effective offer for a two-year lease?
(A) Yes, because it manifested a willingness to enter into a specific bargain that could be concluded by the tenant’s assent.
(B) Yes, because consideration for the option can be infeffed from the previous month-to-month lease.
(C) No, unless the tenant paid or tendered to the landlord the one-dollar consideration.
(D) No, because it contained a condition precedent to execution of the proposed lease.
A
- (A) According to the Restatement of Contracts 2d, Section 24, “An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” Clearly, Choice (A) is correct, because the landlord’s Letter manifested such a present contractual intent. It is crucial to note that the interrogatory asked only if a valid offer was made by the September 2 letter. Choice (B) is wrong, because consideration is not needed to create a valid offer. Choice (C) is incorrect, because the
offer acknowledged the receipt of the $1 consideration and courts generaLly do not
inquire into the adequacy of consideration. In addition, the significance of whether consideration was paid would determine whether the offer was irrevocable, not whether an offer was initially made. Choice (D) is incorrect, because there was no condition precedent to the offer taking effect.
42
Q
- A buyer sent an e-mail to a retailer of camping supplies inquiring about the possibility of purchasing a tent that would sleep four adults. The buyer explained that he was planning for an upcoming camping trip at the end of the month. The retailer responded by e-mail:
“I can sell you a tent that would sleep four, for $500. This price is good for one week.”
Three days later, the retailer learned from another seller of camping supplies that the same buyer had come to her store the day before and had inquired about purchasing a tent that would sleep four adults. The other seller told the retailer that she had quoted the buyer a price of $600 for a tent that would sleep four adults. The next day, the buyer telephoned the retailer and stated that he wanted to buy the tent for $500. The retailer replied: “I do not want to sell to you. I tried to deal with you in good faith, but I hear you’ve been comparing my prices with other sellers. Why don’t you deal with them!” The retailer then slammed down the phone.
Assume that the retailer’s e-mail created in the buyer a valid power of acceptance. Was that power terminated when the retailer learned from the other seller of the buyer’s conversation with the other seller?
(A) Yes, because the other seller gave factually accurate information to the retailer.
(B) Yes, because it gave the retailer reasonable grounds to believe that the buyer had rejected his offer.
(C) No, because the indirect communication to the retailer was oral.
(D) No, because the buyer’s conversation with the other seller did not constitute a rejection.
A
- (D) Rejection of an offer by the offeree terminates the offer. As a general ruLe, a rejection is the offeree’s refusal to accept the offer as made which is communicated to the offeror. Whether expressed in words or implied from the offeree’s conduct, if it is apparent to the offeror that the offeree declines to accept, the offer is rejected. The mere fact that the buyer talked to the other seller about the possible purchase of a tent is not a clear indication that he intended to reject the retailer’s offer. Choices (A) and (B) are wrong, because the information the retailer learned from the other seller, even if factual, does not imply that the buyer does not want to purchase a tent from the retailer. Choice (C) is wrong, because it would not matterwhetherthe communication was written or oral; it is not sufficient to constitute a rejection of the offer.
43
Q
- On May 2, a woman mailed the following letter to a man:
“May 1
I have two tickets to the concert on July 1 at the auditorium in town. I’ll sell them to you for $60 per ticket, which is $10 above face value. Since the concert has been sold out for months, I think that is a good deal. You have 15 days from the above date to decide whether to accept this offer.”
The man received the letter on May 4, but did not read it until May 6.
On May 18, the man went to the woman’s home and attempted to accept the offer. The woman replied:
“Too late! I sold the tickets last week for $75 each.”
Assume that the woman’s letter created in the man a valid power of acceptance. Was that power terminated by lapse of time before the man went to the woman’s home on May 17?
(A) Yes, because the letter was mailed on May 2.
(B) Yes, because the letter was dated May 1.
(C) No, because the man received the letter on May 4.
(D) No, because the man did not read the letter until May 6.
A
- (B) According to the woman’s letter, the offer was open for a period of 15 days. The question is, from what date do the 15 days run? Since the offer specifically stated that the 15 days run from the date listed on the letter, which was May 1, the man had until May16 to accept the offer. Since the 15 days run from the date on the letter, not the date on which it was sent, Choice (B) is better than Choice (A). Choice (A) focuses on the date the letter was mailed. But since the woman, as offeror, specifically stated that the offer would expire 15 days from the date written on the letter, the last day to accept would have been May 16. Choices (C) and (0) are wrong, because, as explained above, the date of receipt or the date the letter was read do not affect the duration of the offer. The offeror is master of the offer, and the woman expressly stated that the 15 days were to run from the date of the letter.
44
Q
- Two law students were having lunch one afternoon when the first student said to the second, “I’m thinking of selling my car.” The second student replied, “I might be interested in buying your car if the price is reasonable and I can convince my parents to float me a loan.” The first student then grabbed a piece of paper and wrote the following on it:
“I will sell you my car for $1,000. In exchange for $1 received this day, I agree that you can have one month from today’s date to decide whether to accept this offer.”
The first student then signed the paper and handed it to the second student. The second student handed a one dollar bill to the first student and left.
One week later, the second student succeeded in obtaining a $1,000 loan from his parents. He then telephoned the first student to accept the offer. Upon hearing the second student say hello, and before the second student could accept the offer, the first student said, “I’ve changed my mind. I do not want to sell my car.”
Can the second student still accept the first student’s offer?
(A) No, because $1 is inadequate consideration.
(B) No, because the first student’s statement was unequivocal notice that he no longer wished to contract with the second student.
(C) Yes, because the first student’s letter formed a valid option.
(D) Yes, based on the principal of promissory estoppel.
A
- (C) The offer is the proposal to sell the car for $1,000; there is a grant of a one-month option on the deal; and the payment of $1 to the offeror is a valid and adequate way to secure enforcement of the subsidiary promise to keep the offer open. Therefore, the facts present a legitimate option contract, whereby the second student may still accept the first student’s offer, regardless of the first student’s attempt to revoke. Therefore, answer choice (C) is correct, and choices (A) and (B) are incorrect. Choice (D) is incorrect, because under promissory estoppel, courts will sometimes enforce a subsidiary promise to keep an offer open where the offeree has foreseeably and reasonably relied on the option, and injustice can only be avoided by enforcing the promise. However, these facts not only fail to demonstrate a reliance and injustice, but moreover do not necessitate the doctrine of promissory estoppel because the second student has the full legal right to accept under the valid option.
45
Q
- A construction company, in preparing its bid for the construction of a new hospital, received a quotation of $120,000 from a subcontractor who offered to do the kitchen work in the new hospital. This bid was $30,000 lower than the construction company’s next lowest bid for the kitchen work. As a result, the construction company lowered its bid by $20,000 before submitting it to the hospital board. After the construction company was awarded the construction bid and had accepted the subcontractor’s offer, the subcontractor discovered that in his preparation of the quotation, he had overlooked some subsidiary kitchen installments required by the plans.
Immediately thereafter, the subcontractor brought suit for rescission of the contract. It should
(A) prevail, because of the unilateral mistake.
(B) prevail, because the mistake was an essential element of the bargain.
(C) not prevail, unless the construction company knew or should have known of the subcontractor ‘s error.
(D) not prevail, because the computation mistake was antecedent to acceptance of the bid.
A
- (C) In all unilateral mistake situations, if the offeree knows or has reason to know of the offeror’s mistake when he accepts, then the offeror is not bound. In otherwords, if the non-mistaken party is (or should have been) aware of the mistake, he cannot “snap up” the offer. So, if the construction company neither knew nor should have known of the subcontractor’s error, then the contract was enforceable. Choices (A) and (B) are wrong, because the unilateral mistake will not provide the basis for relief unless it is shown that the non-mistaking knew or should have known of the mistake. This is true even if the mistake went to an essential element of the bargain. Choice (D) is incorrect, because the timing of the mistake is not a determining factor.
46
Q
- A homeowner wished to have his house painted. He contacted a number of house painters in his area and asked them to submit bids to do the work. The homeowner received 10 bids. The first nine offered to paint the house for amounts ranging from $10,000 to $12,500. The 10th bid was sent by telegram and was supposed to be for $10,000. However, the telegraph company made a mistake and transmitted the bid as $1,000. The homeowner immediately accepted the 1 0th bid, but the 1 0 painter refused to perform.
The I 0th painter’s best defense in an action for breach of contract by the homeowner would be
(A) that the homeowner should have been aware of the mistaken transmission, because of the disparity between its bid and the others.
(B) that the telegraph company should be liable as an independent contractor.
(C) that the homeowner was under an affirmative duty to investigate all submitted bids.
(D) that the mistake made the contract unconscionable.
A
- (A) If a mistake is made in an offer and the offeree is or should be aware of the mistake, there will be no contract. In the present case, since there was a substantial difference between the tenth painter’s bid and the other bids, the homeowner should have known of the mistake in transmission, thereby precluding him from snapping up the offer. Choice (B) is incorrect, because the telegraph company may have liability for their mistake, but that does not speak to a valid contract defense for the tenth painter. Choice (C) is wrong, because there is no such requirement that an offeree investigate the validity of submitted offers. Unless the offeree has reason to know the offer may be mistake, the offeree is entitled to treat the offer as genuine. Choice (D) is wrong, because the tenth painter chose this form of conveyance of its offer, so the tenth painter cannot now claim the contract is unconscionable because of a mistake by the conveyor. The tenth painter would have to argue that the homeowner should have known of the mistake, to have a valid defense.
47
Q
- A woman awoke one morning to discover that someone had vandalized her home during the night. The woman then published the following notice in the local newspaper:
“REWARD
Any person who supplies information leading to the arrest and conviction of the person who vandalized my home, located at 1223 1st Street, will be paid $5,000.”
The reward notice in the local newspaper proposed a
(A) unilateral contract only.
(B) bilateral contract only.
(C) unilateral contract or bilateral contract, at the offeree’s option.
(D) unilateral contract that ripened into a bilateral contract when someone supplied the information leading to the vandal’s conviction.
A
- (A) A unilateral contract is a contract in which a promise is given in exchange for an actual performance by the other party. The genuine unilateral contract situation will be rare, as it will operate only where the offer expressly and unambiguousLy requires a performance acceptance, or as in the present case, where the offer is an offer to the public (e.g., a reward offer). Choice (B) is therefore wrong. Choice (C) is wrong, because it is the language used by the offeror in creating the offer that determines whether it is for a unilateral or a bilateral contract. Choice (D) is wrong, because a unilateral contract is formed when the requested act is performed.
48
Q
- After the murder of his brother, a man published the following notice in the local newspaper:
“REWARD
Any person who supplies information leading to the arrest and conviction of the murderer of my brother will be paid $10,000.”
An amateur detective, without knowledge of the reward notice, began investigating the matter as a result of his own curiosity kindled by the sensationalism surrounding the brother’s murder. One week later, the detective secured information that led to the arrest and later conviction of the murderer. During the murder trial, the detective found out about the reward and demanded the $10,000 from the man.
In an action by the detective to recover the $10,000 reward, he will
(A) succeed, because his apprehension of the murderer created a contract implied in law.
(B) succeed, because he was unaware of the offer. (C) not succeed, because he did not have knowledge of the reward.
(D) not succeed, because his investigation was not a bargained-for exchange.
A
- (C) As a general rule, a contract can only be formed if the offeree knew of the existence of the offer at the time of the alleged acceptance. So, since the detective was unaware of the reward offer when he performed the requested act, he cannot claim a valid contract had been formed. Choices (A) and (B) are therefore wrong. Choice (D), though arguably correct, is less preferred because this question deals with whether an offeree must know of the offer at the time of his alleged acceptance. The key issue is not whether there is valid consideration (i.e., bargained-for exchange) to support the contract. As such, Choice (C) is preferred, because a reward offer (or other unilateral contract) must be accepted by an offeree who knows of the offer.
49
Q
- A recent law school graduate was hired by a bar review course, under an oral agreement, as an editorial consultant. Her job responsibilities included preparing new course outlines, proofreading and grading student homework assignments. The bar review course agreed to pay the graduate a starting salary of $2,500 a month.
Three months later, the graduate was approached by the regional director of the bar review course, who handed her a newly published 60-page booklet entitled “Employment Manual.” He instructed the graduate to read the manual and indicated that it contained important information concerning company policy considerations and employee benefits.
When the graduate returned home that evening, she started to read the manual. After reading about 30 pages, the graduate became tired and went to sleep. She never got around to reading the rest of the manual.
Six months later, the graduate received a termination notice from the bar review course. The notice indicated that the graduate was being fired for insubordination because she had complained about the poor quality of the bar review course’s materials and refused to work overtime grading papers. Following her dismissal, the graduate brought suit against the bar review course for breach of contract.
Which of the following, if true and provable, would furnish the bar review course with its best defense?
(A) All other bar review course employees worked overtime whenever requested to do so.
(B) When the graduate accepted employment with the bar review course, the company never made any promises regarding job security or duration of employment.
(C) The materials in the bar review course had recently been reviewed by the American Bar Association’s Committee on Legal Education and had received “high acclaim.”
(D) The second page of the bar review course manual contained a paragraph stating that all policies, guidelines and employee benefits are “purely gratuitous and not intended to create any ongoing contractual obligation.”
A
- (D) The bar review course will want to show that the graduate’s employment was “atwill” and could be terminated at any time. The only thing that could potentially change the graduate’s employment from an at-wiLl employment arrangement would be the contents of the employment manual. However, if the manual specifically stated that it did not create “any ongoing contractual obligation,” the graduate’s employment will remain an “at-wilL” employment that can be terminated by the bar review course. Note that choice (B) is less preferred, because it does not address whether the employment manual may create contractual obLigations that could change the graduate’s employment from an at-will employment. Choices (A) and (C) are irrelevant considerations with respect to whether the graduate’s employment was gratuitous or bargained-for.
50
Q
- After a lengthy interview with a company vice president, an employee was hired by the company to work in the company’s accounting department. The parties agreed that the employment would be on an at-will basis. At the end of her first week of work, the employee was given a booklet entitled “Employment Manual,” with instructions to read the book in its entirety by the end of the following week. That evening, the employee began reading the manual. The first few pages described the history of the company and provided a personal biography of its president. On page 20, the manual stated that the company treats its employees “as family” and that employees will be discharged “only with good cause.” The employee finished reading the manual as requested. The employee interpreted the statement on page 20 as insuring continued employment unless good cause existed for termination. Over the next two months, the employee continually complained to her supervisor that the lighting in the accounting department was insufficient. Finally the supervisor, fed up with the complaints, fired the employee. The employee then sued the company, seeking to recover on grounds of promissory estoppel.
Which of the following facts, if true and provable, would be most helpful for the employee’s cause of action?
(A) At the time when the company hired the employee, the company subjectively intended that the employee be given job security.
(B) The employee interpreted the clause in the manual stating that company employees would be treated “as family” to mean that she would have job security and could only be fired for good cause.
(C) Just prior to receiving the manual, the employee seriously considered quitting, but continued to work for the company in reliance on the provisions contained on page 20 of the manual.
(D) The employee’s complaints regarding the insufficient lighting were factually true and justifIable.
A
- (C) Detrimental action or forbearance by the promisee in reliance on a gratuitous promise, within limits, constitutes a substitute for consideration, or a sufficient reason for enforcement of the promise without consideration, under the doctrine of promissory estoppel. To avoid unjust enrichment, the promisor who induces substantial change of position by the promisee in reliance on the promise is estopped to deny its enforceability as lacking consideration. Since the employee is seekingto recover on the basis of promissory estoppel as a substitute for consideration, her best argument must show detrimental reliance. Choice (C), the correct answer, states that instead of quitting her job, she continued to work, “in reliance on the provisions contained on page 20 in the manual.” Choice (B), while factually similar, is not as strong, since it deals with her interpretation of the manual rather than herreliance on it. Choice (A) is wrong, because the subjective intent of a party is not controlling when interpreting the terms of the contract. In addition, it does not address the crucial concern of promissory estoppel. Choice (D) also fails to address the key issue of reliance.
51
Q
- A man placed the following advertisement in his local newspaper:
“Public Auction Sale … without reserve December 7, 10:00 a.m.
110 Walnut St., City, State
Entire furnishings of home must go: antiques, piano, pool table, appliances, tables, stereo system, etc.”
On the morning of December 7, a group of approximately 20 people showed up at the man’s home. The first item the man put up for bid was an antique Baldwin grand piano. The man announced that the bidding would be “without reserve” and said, “What’s the opening bid on this beautiful Baldwin grand piano?” A woman opened the bidding with $100. The man then commented, “This piano is worth at least $5,000. What other bids am I offered?” When the man did not receive any other bids, he informed the woman that he would not accept $100 and was removing the piano from the sale.
If the woman asserts an action against the man for breach of contract, the woman will most likely
(A) prevail, because goods put up at an auction “without reserve” may not be withdrawn.
(B) prevail, because whether or not the auction is “without reserve,” goods cannot be withdrawn after the auctioneer calls for bids.
(C) not prevail, because at an auction “without reserve,” the auctioneer may withdraw goods until he announces completion of the sale.
(D) not prevail, because at an auction “without reserve,” the auctioneer invites offers, which he may accept or reject.
A
- (A) According to UCC 2-328, an auction is deemed to be with reserve unless specifically stated to be without reserve. Here, the man stated in his advertisement and again when he put the piano up for auction that the auction would be without reserve. When goods are put up witho ut reserve, the auctioneer makes an offerto sell at any price bid by the highest bidder, and after the auctioneer calls for bids, the goods cannot be withheld unless no bids are made within a reasonable time. Since the woman made a bid and the auction was without reserve, the woman would be entitled to buy the piano for $100. Choice (B) is wrong, because if the auction was with reserve, the goods can be withdrawn from sale at any time prior to the announced completion of the sale. Choices (C) and (D) are wrong, because they misstate the rule described above, covering an auction without reserve.
52
Q
- A mushroom farmer agreed in a signed writing on January 2 to deliver to a chef at a local restaurant on March 1 a specified quantity of mushrooms at a specified price. The mushrooms on the farmer’s farm were usually picked and packaged by the farmer’s three sons. On February 27, two of the Sons were injured in a fanning accident and hospitalized. As a result, the farmer encountered a manpower shortage and could not process all of the mushrooms for the chef’s order.
On February 28, the farmer telephoned the chef and said, “Because my two sons were injured yesterday, I won’t be able to deliver your mushrooms on March 1. However, I am trying to hire some other farm hands to help process your order. Although I can’t promise it, I should be able to deliver the mushrooms by the end of the week.” The chef, who knew that the fanner’s sons were responsible for the mushroom farming, said, “No problem. I think I’ll be able to get by without them for a few days. However, be advised that I will hold you liable for any loss I sustain as a result of your failure to deliver the mushrooms on March 1 .“ When the chef failed to receive the mushrooms on March 5, he sent the following fax to the fanner:
“I must have the mushrooms no later than March 9.” This fax was received and read by the farmer on the same day.
If the fanner delivers the mushrooms to the chef on March 9 and the chef accepts them, can the chef successfully maintain a contract action against the farmer to recover damages resulting from the delay in delivery?
(A) No, because temporary impracticability excused his duty to deliver the mushrooms on March 1.
(B) No, because the buyer’s statements and acceptance of the mushrooms constituted a waiver of the condition of timely delivery.
(C) Yes, because his statements to the farmer did not constitute a promise to forgo any cause of action he then had or might later acquire.
(D) Yes, because there was no consideration to support his waiver, if any, of timely delivery.
A
- (C) This question deals with a single delivery contract for the sale of perishable goods, i.e., mushrooms. UCC rules thus apply, since this is a sale of goods. The farmer’s performance was due on March 1. Since he failed to deliver the goods at that time, he committed a breach of contract. Under UCC 2-715, an aggrieved buyer such as the chef can recover incidental damages resulting from the seller’s breach: these damages include “expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, and commercially reasonable charges, expenses or commissions in connection with effecting cover and anyother reasonable expense incident to the delay or other breach.” Choice (C) is therefore correct. Where the chef replied to the farmer’s phone call by saying, “…be advised that I will hold you liable for any loss I sustain as a result of your failure to deliver the mushrooms on March 1,” the chef only waived the delivery date, not the farmer’s performance. Choice (B) is therefore incorrect. Choice (A) is wrong, because performance was not objectively impaired; by hiring other workers, the contract could have been performed. In addition, there is no showing that the injuries to the two sons caused severe hardship of performance to the farmer. Choice (D) is incorrect, because under the UCC a waiver does not require new consideration.
53
Q
- Needing a new supply of basketballs for the upcoming season, a basketball coach placed an order with a sporting goods store to purchase 25 regulation basketballs. Since the season was scheduled to begin on November 1, the coach stated that he needed the basketballs delivered no later than October 15. The sporting goods store said it would deliver the basketballs by that date. On October 10, one of the sporting goods store’s employees was moving items in the warehouse and accidentally destroyed a container of basketballs. As a result, the owner of the sporting goods store telephoned the coach on October 11 and said, “We had an accident in our warehouse yesterday, and as a result we do not have enough basketballs to fill all of our orders. Therefore, I won’t be able to deliver your basketballs on October 15. However, I have contacted our supplier to see if they can rush a delivery of basketballs to us. Although I can’t promise it, I should be able to deliver the basketballs you ordered by October 20.” The coach replied, “No problem. I think I’ll be able to get by until then.” When the coach failed to receive the basketballs on October 20, he sent the following e-mail to the sporting goods store:
“I must have the basketballs no later than October 23.” The e-mail was received and read the same day by the owner of the sporting goods store.
If the sporting goods store fails to deliver the basketballs to the coach on October 23, will the coach be entitled to cancel the contract?
(A) Yes, provided both parties are viewed as being merchants.
(B) Yes, provided that the three-day notice afforded the sporting goods store a reasonable time in which to perform.
(C) No, because the coach’s October 11 statement effectuated a waiver of any condition of timely delivery.
(D) No, because the sporting goods store, by its October 11 statement, did not promise to deliver the basketballs by October 20.
A
- (B) This question deals with the buyer’s right to cancel forfailure of timely performance. Where the time set for performance has passed, the party awaiting performance may agree to a new commercialLy reasonable time for performance prior to cancellation. The coach could have cancelled the contract for non-delivery on October 15 in accordance with UCC 2-711, which states that “(1) Where the seller fails to make delivery … the buyer may cancel and … (a) cover … or (b) recover damages for non-delivery …“ The coach nevertheless chose to await performance, although no specific date was set during the October11 telephone conversation. Under UCC 2-309, “(1) The time for shipment or delivery or any other action under a contract if not provided in this Article or agreed upon shall be a reasonable time.” Comment 5 provides: “The obligation of good faith … requires reasonable notification before a contract may be treated as breached because a reasonable time for delivery or demand has expired. This operates both in the case of a contract originally indefinite as to time and of one subsequently made indefinite by waiver.” Therefore, Choice (B) is correct, since the coach will be entitled to cancel provided the e-mail received by the sporting goods store (i.e., 3-day notice) was a reasonable time. Choice (A) is wrong, because the rule described above is not limited to contracts between merchants. Choice (C) is incorrect, because where time of delivery is waived or not provided, a reasonable time is implied in view of good faith commercial dealing. A waiver does not negate any condition of timely delivery. Choice (D) is wrong, because the coach is entitled to cancel the contract on reasonable notice, since the sporting goods store failed to meet the original October15 delivery date.
54
Q
- An owner and operator of a restaurant contracted in writing with a produce distributor to buy 50 pounds of heirloom tomatoes. At the time the contract was signed, the owner orally said to the distributor, “We do have an understanding that our chef must approve the quality of the heirloom tomatoes before I will pay you.” The distributor acknowledged the owner’s request and responded, “If you say so.”
Thereafter, the distributor delivered the heirloom tomatoes to the owner. After inspecting the tomatoes, the chef refused to give his approval, because he felt that the tomatoes were not of sufficient quality. As a result, the owner refused to accept and pay for the tomatoes.
The distributor brought a breach of contract action against the owner because he refused to pay for the tomatoes.
How should the court rule on the owner’s offer to prove, over the distributor’s objection, that the chef refused to approve the tomatoes that were delivered?
(A) The evidence is admissible to show frustration of purpose.
(B) The evidence is admissible to show that the written agreement was subject to an oral condition precedent.
(C) The evidence is barred, because the written contract appears to be a complete and total integration of the parties’ agreement.
(D) The evidence is barred, because the oral agreement is within the statute of frauds.
A
- (B) This Multistate question presents an interesting interplay between Contracts and Evidence. Frequently, paroL evidence questions will involve the admissibility of an oral condition. Where the parties agree that a condition precedent must occur before the contract is effective, it is generally agreed that the failure of the condition to occur may be shown despite what otherwise would be deemed a total integration. Thus, even if there is a merger clause, it may be shown that the instrument was handed over to another with an oral condition attached to delivery. The theory is that the agreement is not to take effect until the condition occurs, and thus there is no contract to be added to or contradicted until that time. In this fact pattern, the owner will be permitted to introduce evidence of the chefs refusal to approve the tomatoes, since the entire agreement was subject to this condition precedent. Choice (C) is therefore wrong. Choice (A) is wrong, because generally a totaL frustration is required to discharge a contract. Here, it was still possible for the tomatoes to be used, so there was not a total frustration. Choice (D) is incorrect, because the facts state that the parties contracted in writing, so there was a sufficient writing to satisfy the Statute of Frauds.
55
Q
- A law student was accepted by a law school for the fall term. Several generations of the law student’s family had attended this prestigious law school. One week before the start of the fall term, at a party to celebrate the law student’s acceptance to the school, his father announced to the law student, in the presence of the partygoers, “Son, it’s your obligation to uphold the family tradition for excellence at the school. In this regard, if you promise to study a minimum of five hours a day, I shall pay you $1,000 for each ‘A’ you achieve during your first year; $2,500 for each ‘A’ you achieve during your second year; and $5,000 for each ‘A’ you achieve during your third year.”
The most accurate statement concerning the father’s promise to reward the law student for achieving “A’s” would be that
(A) the promise constituted an unenforceable, conditional gift.
(B) the promise would not be legally binding, since it was non-detrimental.
(C) the promise would be enforceable if a bargained-for exchange was so intended.
(D) the promise constituted a voidable proposal.
A
- (C) The promise would be enforceable if a bargained-for exchange was so intended. In
the present hypo, the law student’s return promise to study for five hours per day
would constitute adequate consideration, since he was under no legal duty to study
at all. Under Restatement of Contracts 2d, Section 75, to constitute consideration,
a performance or a return promise must be bargained-for. A performance or return
promise is bargained-for if it is sought by the promisor in exchange for his prom
ise and is given by the promisee in exchange for that promise. With respect to the
requirement of consideration, the performance may consist of: (a) an act other than a promise, or (b) a forbearance, or Cc) the creation, modification, or destruction of a legal relation. Choice (A) is incorrect, because the presence of a bargained-for exchange would make this a contract rather than an unenforceable conditional gift. Choice (B) is incorrect, because the bargained-for exchange would provide the legal detriment. The law student was promising to study five hours per day and the father was promising to pay for each “A.” That would be a sufficient legal detriment to each party. Choice (D) is incorrect, because there is no reason why this deal should be considered voidable.
56
Q
- On his 21st birthday, a son enlisted in the army. As he was about to leave for eight weeks of basic training, his father said, “I will buy you a new car at the end of basic training if you promise me not to take illegal drugs or drink alcohol while at basic training.” The son replied, “You can order the new car right away. I promise not to take illegal drugs or drink alcohol, as you requested.”
At the end of basic training, the son was given a leave and returned home. His father asked, “Did you abide by your promise not to take illegal drugs or drink alcohol?” The son replied, “Yes, Father.” The father then told the son that he had already ordered the new car and that it would be available for delivery within one month.
One week later, the son received the tragic news that his father had died suddenly. At the funeral, the executor of the father’s estate told the son that he did not feel compelled to give the son the newly arrived car.
In a suit against the executor of the father’s estate to recover the new car, the son will
(A) succeed, because the son’s promise to refrain from drinking alcohol provided sufficient consideration.
(B) succeed, because the son’s promise to refrain from taking illegal drugs and drinking alcohol provided sufficient consideration.
(C) not succeed, because the father’s promise was only a conditional gift.
(D) not succeed, because the father’s promise was void.
A
- (A) In a bilateral contract, both promises must be legally binding orthe contractisvoid for lack of consideration. This is the doctrine of mutuality of obligation. Since the exchange for a promise must be something of value, and since value is tested in terms of detriment or benefit, it follows that a non-detrimental promise is insufficient consideration. In this regard, if the promise is wholly void for illegality (or is illusory), it is non-detrimental. Thus, suppose A makes a definite legal promise in exchange for a promise by B of an illegal performance or of one so indefinite in terms as to be incapable of enforcement. Here, B’s promise is void for illegality or for uncertainty, so A’s promise lacks consideration. A, the promisor, has received no legal benefit, for she has gained no enforceable right against B; and B has suffered no detriment, for he has undertaken no legal duty to A. This principle is often stated axiomatically, that “both parties must be bound or neither is bound.” However, in this question, note that only part of this promise is illegal; only the promise not to take illegal drugs would be void. The son is of legal drinking age, since he is 21. As a result, the part of the promise to refrain from drinking alcohol will still be enforceable, since the son gave consideration for the father’s promise by not drinking. Because of this, Choice (A) is a better choice than Choice (B). Choice (C) is incorrect, because the son’s promise to refrain from drinking alcohol would provide the necessary consideration to prevent this from being just a conditional gift. Choice (D) is wrong, because the valid consideration to refrain from drinking alcohol prevents the father’s promise from being voidable.
57
Q
- A graduate from law school had decided against taking the bar exam. Her mother, who had always dreamed of having a child who was a lawyer, told the graduate, “It would mean a lot to me if you at least gave the bar exam a try. Tell you what; if you will devote the next two months to studying for the bar exam and then take the exam, I’ll give you $2,000. And if you pass I’ll give you an additional
$2,000.” The graduate replied, “You’ve got a deal! I’m going to get started studying today!” The graduate’s uncle was present when this conversation took place. After the mother had left the room, the uncle said to the graduate, “I want you to know that if anything ever happens to your mother, I’ll pay you as per your mother’s promise.”
The graduate spent the next two months studying diligently for the bar exam. When the graduate returned home after taking the exam, she received the tragic news that her mother had died suddenly. At the mother’s funeral, the uncle approached the graduate and told her that he did not believe that he was obligated to pay anything to the graduate.
The graduate passed the bar exam and wishes to collect from the uncle. The uncle’s promise to the graduate would constitute
(A) an enforceable promise, binding the uncle as a surety.
(B) an unenforceable promise, because the graduate’s mother had a pre-existing duty to pay the graduate.
(C) a voidable promise as violative of the statute of frauds.
(D) a void promise at the time of inception.
A
- (C) The uncle’s promise to answer for the debt of the mother, in the event that the mother did not pay the graduate, would be a voidable promise as violative of the Statute of Frauds. It is important to remember that a contract may be voidable by one party by reason of (a) incapacity, (b) mistake, or, as in the present case, (c) under the Statute of Frauds. A promise to answer for the debt or default of another is required to be in writing under the Statute of Frauds. Since the uncle’s promise (to answer for the mother’s debt) was never reduced to writing, it constituted a voidable promise. Choice (A) is therefore wrong. Choice (B) is wrong, because the pre-existing duty was on the mother, not the uncle. The uncle was not under a preexisting duty to pay, so his promise constituted good consideration. Choice (D) is incorrect, because there is no reason why the promise should be void. It is voidable because of the lack of a writing, but not void from its inception.
58
Q
- A woman owned a 10-acre tract of rural farmland in fee simple absolute. The woman agreed to sell the farmland to a man, and each signed a writing stating that the farmland was beitig sold: “…for $10,000, receipt of which is acknowledged.” In actuality, the man had not yet paid the woman the $10,000. At the date set for closing, the woman transferred a deed to the farmland to the man, who gave the woman a check for $10,000. Howevei, a few days after the woman deposited the check, she received notice from her bank that the check had not cleared, due to insufficient funds in the account.
The woman then brought suit against the man. At trial, the woman seeks to testify that the man did not in fact pay her the $10,000 as recited in their written instrument. The man objects to the woman’s proposed testimony.
Will the trial court judge be correct in sustaining the man’s objection?
(A) No, because the parol evidence rule does not apply to events occurring after the forming of the writing.
(B) No, because the parol evidence rule does not operate to exclude evidence to show lack or want of consideration.
(C) Yes, because the written instrument appears to be a complete integration of the parties’ agreement.
(D) Yes, because the doctrine of promissory estoppel will prevent the woman from denying her own signed acknowledgment that she received the $10,000.
A
- (B) When two parties have made a contract and have expressed it in a writing to which they have both assented as the complete and accurate integration of that contract, evidence, whether parol or otherwise, of antecedent understandings and negotiations will not be admitted for the purpose of varying or contradicting the writing. An exception to this general rule is where the evidence is being introduced to show lack of consideration. Therefore, (B) is the correct answer. Choice (A) is wrong, because this does not involve a post-writing event. This question is whether the woman received the consideration stated in the writing as already having been received. Choice (C) is wrong, because the exception to the parol evidence rule mentioned above would make the evidence admissible even if this were an integrated writing. Choice (D) is incorrect, because promissory estoppel is an argument to enforce a promise that has produced foreseeable detrimental reliance by the promisee. This is not the situation described here.
59
Q
- After retiring from a long career in education, a teacher decided to leave the city and move to a community in the mountains. She began looking for a home to purchase in the mountain community. She found one suitable location offered for sale by the owner. The asking price for the home was $100,000. Although the teacher was very interested in purchasing the home, she told the owner that she was not sure it would fit within her budget. The owner the grabbed a piece of paper and wrote the following:
“December 1
In consideration of one dollar, receipt of which is acknowledged, I hereby offer to sell to you my home for $100,000. This offer shall remain open until 4:00 p.m. December 30.” The owner then signed the paper and handed it to the teacher, who left without paying the $1.
On December 15, the owner sent the teacher a letter in which the owner stated, “Please be advised that I am hereby withdrawing my offer to sell you my home.” This letter was received and read by the teacher on December 16. The next day, the teacher tendered a cashier’s check to the owner in the amount of $100,001 (which included the $100,000 purchase price plus the $1 consideration) and demanded a deed of conveyance to the property. The owner refused to accept the cashier’s check.
The teacher has now brought suit against the owner for specific performance. In her pleadings, the teacher admits that the recited $1 was not in fact paid to the owner when their written agreement was executed.
Assume the teacher lives in a jurisdiction that follows the Restatement of Contracts. As a result, which of the following is the teacher’s best argument that such failure of payment does not bar her claim to specific performance?
(A) The recited consideration was only a sham pretense of bargained-for consideration, and was therefore de minimis and of no legal significance.
(B) The teacher’s inclusion of the $1 in her tendered check on December 17 was a timely cure of an immaterial breach of a bilateral real estate option contract.
(C) By promising to hold the offer open until December 30 in a signed writing, the owner could not revoke the offer prior to December 30.
(D) The written instrument embodied a proposal for a fair exchange within a reasonable time period and was therefore an enforceable option contract, regardless of whether the nominal consideration recited was bargained for or paid.
A
- (D) At common law, an offer is always revocable up to the time of acceptance, even though it contains a promise not to revoke. Where, however, the promise to keep the offer open is supported by consideration (i.e., something of value bargained for and given in exchange for the promise), it becomes legally binding. Choice (A) is wrong, because the overwhelming majority of cases hold that one dollar may be sufficient consideration for an option contract as long as a bargained-for exchange was so intended. The mere fact that the price exacted for the promise was one dollar (or less) will not defeat the contract on the ground of lack of consideration. Choice (B) is wrong, because the option to cure is something that exists under the UCC, which would not apply here. Choice (C) is incorrect, because it refers to the merchant’s firm offer rule, which only applies to a sale of goods. So, that leaves Choice (D). The Restatement of Contracts 2d, Section 87, states: “An offer is binding as an option contract if it is in writing and signed by the offeror, recites a purported consideration for making the offer, and proposes an exchange on fair terms within a reasonable time…” Footnote (c), in discussing this provision, states: “…the option agreement is not invalidated by proof that the recited consideration was not in fact given.” Therefore, the writing prepared by the owner is an enforceable option that cannot be revoked prior to December 30.
60
Q
- A debtor owed a creditor $12,000 under a promissory note. Under the applicable statute of limitations, a suit to collect on the promissory note had to have been filed by September 30 of last year. On June 1 of this year, the creditor received a letter from the debtor stating, “I shall pay you $5,000 on July 1 in full satisfaction of what I owe you.” However, the debtor failed to make the payment on July 1.
If, on August 1, the creditor brings suit against the debtor and the debtor asserts the statute of limitations as an affirmative defense and refuses to pay the creditor anything, which of the following accurately states the creditor’s legal rights against the debtor?
(A) On June 1 the creditor became entitled to a judgment against the debtor for $5,000 only.
(B) On July 1, not June 1, the creditor became entitled to a judgment against the debtor for $5,000 only.
(C) On July 1, not June 1, the creditor will be entitled to a judgment against the debtor for
$12,000.
(D) The creditor is not entitled to anything, on either June 1 or on July 1.
A
- (B) An express promise by a debtor to pay all or part of an antecedent debt barred by the statute of limitations or by a decree in bankruptcy is legally enforceable without new consideration. The majority of jurisdictions require that a promise or acknowledgement of a debt barred by the statute of limitations must be in writing and signed by the debtor, but only a few states require the same formality as to the express promise to pay a debt discharged in bankruptcy. Choice (C) is wrong, because the original promise was barred by the statute of limitations and no longer enforceable. Choice (D) is wrong, because, based on the debtor’s new promise, the creditor is entitled to $5,000. The tough choice is deciding between Choices (A) and (B). However, it is not the date the promise was made that is crucial. The debtor promised to make the payment on July 1. The creditor had no right to collect on that promise until that date. When the debtor failed to make the JuLy 1 payment, a cause of action was created against the debtor to collect on the debtor’s broken promise. Choice (B) is therefore the best answer.
